June 13, 2013 Articles

Mazza's Impact on the Inference of Reliance in Consumer Class Actions

The Ninth Circuit's blockbuster decision continues to have a significant influence on consumer-protection class actions.

By Neal Marder, Stephanie Leonard, and Ali Rabbani – June 13, 2013

More than a year after it was handed down, the Ninth Circuit’s blockbuster decision in Mazza v. American Honda Motor Co., 666 F.3d 581 (9th Cir. 2012), continues to have a significant influence on consumer-protection class actions. In particular, the Ninth Circuit’s narrow interpretation of the presumption of reliance under California’s consumer-protection laws has created numerous obstacles for both plaintiffs and defendants at the class-certification stage.

The Mazza Decision


The plaintiffs in Mazza purchased cars equipped with the so-called Collision Mitigation Braking System (CMBS), an optional feature Honda advertised in product brochures, television commercials, magazine advertisements, and other “smaller-scale marketing efforts” as a way to prevent rear-end collisions.In a class-action complaint filed against Honda, the plaintiffs alleged that these advertisements “misrepresented the characteristics of the CMBS and omitted material information on its limitations” in violation of California’s Unfair Competition Law (UCL), Cal. Bus. & Prof. Code § 17200 et seq., False Advertising Law (FAL), Cal. Bus. & Prof. Code § 17500 et seq., and Consumers Legal Remedies Act (CLRA), Cal. Civ. Code § 1750 et seq.

The district court granted the plaintiffs’ motion for certification of a nationwide class under Rules 23(a) and 23(b)(3). In particular, the district court held that, among other things, common questions of law and fact predominate and the class members were entitled to a presumption of reliance.On interlocutory appeal, the Ninth Circuit vacated the district court’s decision on two key grounds—choice of law and reliance.

The Ninth Circuit first addressed Honda’s assertion that common issues of law do not predominate because California’s consumer-protection statutes cannot be applied to a nationwide class. Applying California’s choice-of-law analysis, the Ninth Circuit agreed, holding that a nationwide class could not be certified.

The Ninth Circuit next addressed Honda’s assertion that common issues of fact do not predominate because the CMBS advertising campaign did not warrant a presumption of reliance. The Ninth Circuit held that even a California-only class could not be certified because Honda’s advertising campaign was not extensive enough to presume reliance by the class as a whole.

In particular, the Ninth Circuit determined that the misrepresentations at issue did not justify a presumption of reliance because “it is likely that many class members were never exposed to the allegedly misleading advertisements, insofar as advertising of the [CMBS] system was very limited.” In so finding, the Ninth Circuit distinguished the CMBS advertising campaign from that in Tobacco II, which was “decades-long” and left “little doubt that almost every class member had been exposed to defendants’ misleading statements.”The Ninth Circuit thus held that, in the absence of “the kind of massive advertising campaign at issue in Tobacco II,” the relevant class must be defined to include only members who were exposed to the allegedly misleading advertising.The court further held that the relevant class must “exclude those members who learned of the CMBS’s allegedly omitted limitations before they purchased or leased the CMBS system.”

Reliance after Mazza


While Mazza declined to presume class-wide reliance in the absence of “massive” and “decades-long” advertising campaigns, several district courts have recently inferred reliance where the evidence demonstrated that a widespread advertising campaign impacted consumers.

For instance, in In re POM Wonderful LLC Marketing and Sales Practices Litigation, the Central District of California certified a nationwide class action alleging violations of California’s UCL, FAL, and CLRA. No. ML 10-02199, 2012 WL 4490860, at *1 (C.D. Cal. Sept. 28, 2012). There, POM advertised that its pomegranate juice products have a variety of health-related benefits supported by tens of millions of dollars in medical research.POM disseminated these claims through radio, billboard, and national print media advertisements over a period of several years. The plaintiffs, purchasers of POM products, alleged that these claims were false and misleading.

In contrast to the advertising campaign in Mazza, where class members “were exposed to quite disparate information from various representatives of the defendant,” the districtcourt inPOM found that any differences in POM’s advertisements were “not dispositive.” Id. at *4 (citing Mazza, 666 F.3d at 596). Among other reasons, the court cited to evidence provided by the plaintiffs and POM’s survey expert demonstrating that POM “succeeded in getting its message out.” The district court thus held that, “[g]iven the wide geographical and temporal scope over which Pom disseminated its health claims and the apparent success of Pom’s marketing efforts, Plaintiffs need not present individualized evidence of reliance at this stage, as reliance can be inferred.”

More recently, in Chow v. Neutrogena Corp., the Central District of California found that class certification was not appropriate where there existed “significant individualized questions as to whether the product worked as advertised for each individual class member.” No. CV 12-04624, at 2 (C.D. Cal. Jan. 22, 2013). There, the plaintiff brought a putative nationwide class action alleging, among other things, that Neutrogena made false and misleading claims in its labeling and advertising of “anti-aging” skin-care products in violation of California’s UCL, FAL, and CLRA, and Neutrogena’s express warranty. Plaintiff’s Motion for Class Certification at 1–2, Chow v. Neutrogena Corp., No. C 12-04624 (C.D. Cal. Aug. 23, 2012). The plaintiff moved to certify a nationwide class of consumers or, in the alternative, a class of California-only consumers asserting, among other things, that common issues of fact predominated over individual issues because each claim was “based on the identical misrepresentations [Neutrogena] uniformly makes” on all of its products.

In declining to certify the class, the district court held that “the class action device is not appropriate in this case because individual issues predominate over common questions of law and fact.” Chow, No. CV 12-04624, at 2. In particular, the court found that determining whether Neutrogena’s products “worked as advertised” for each individual class member would require individualized inquiries into the merits of each class member’s claims. The court also found that the CLRA and breach of warranty claims “suffer[ed] from the additional individualized issue of demonstrating reliance because “a significant portion of consumers who purchased the product were repeat purchasers.” In other words, the court could not “distinguish between repeat purchasers who actually received benefits from the product and repeat purchasers who were deceived again.”

Similarly, in In re Celexa and Lexapro Marketing and Sales Practices Litigation, the District of Massachusetts denied certification of a California class because common issues did not predominate. MDL No. 09-02067, 2013 WL 450148, at *1, 7 (D. Mass. Feb. 5, 2013). There, the plaintiff alleged that defendant Forest Pharmaceuticals illegally promoted Celexa (an anti-depressant drug) for off-label use by minor patients, even though the Food and Drug Administration had approved the drug for adult patients only, in violation of California’s UCL and FAL. In particular, the plaintiff claimed that Forest engaged in “a massive, multi-pronged campaign to promote the use of Celexa to physicians, both generally and in the pediatric population,” leading doctors to believe that the drug was “safe and effective” for minors. Plaintiff’s Wilcox Reply Brief at 13–14, In re Celexa and Lexapro Mktg. and Sales Practices Litig., MDL No. 09-02067 (D. Mass. Nov. 15, 2012).

Citing to Mazza, the district court stated that “California law ‘does not allow a consumer who was never exposed to an alleged false or misleading advertising’ campaign to recover damages.” In re Celexa, 2013 WL 450148, at *7 (quoting Mazza, 666 F.3d at 596). Accordingly, the court stated that the plaintiff must show that each of the doctors who prescribed Celexa to minor patients were actually exposed to Forest’s allegedly misleading advertising campaign.Although the plaintiff provided records indicating that 6,000 sale calls were made by Forest’s sales agents to doctors in California, the court held that it was “not sufficient simply to presume all doctors who prescribed Celexa were recipients of those representations,” and that “individual questions will remain as to whether each doctor relied on those misrepresentations when deciding to prescribe Celexa.”

In line with the focus on consumer exposure in Mazza,district courts in other circuits have also recently emphasized class-wide exposure when considering the issue of reliance.

For example, in Hale v. Enerco Group, Inc., the Northern District of Ohio denied certification of a nationwide class of consumers under Ohio’s consumer-protection laws. 2012 WL 6738698, at *1–2 (N.D. Ohio Dec. 29, 2012). The plaintiffs there alleged that Enerco’s propane heaters had a design flaw because gas flames “flash[ed]” beyond the combustion chamber during the heater’s ignition cycle. According to the plaintiffs, Enerco therefore falsely represented that the heaters were safe by including a seal of compliance with safety standards on its packaging and instruction manuals.The court declined to presume reliance, however, because it found that “it would be impossible to determine the impact of this seal upon any purchase decision without an individual inquiry into the purchaser’s motivations.” Because the seal was inconspicuous on the heater packaging, the court held that “[i]t is entirely possible that a potential class member did not notice the seal prior to purchasing the heater,” and that even “[i]f the seal was noticed, it is equally plausible that it was not interpreted in the manner claimed by Plaintiffs.”Accordingly, the court denied class certification.

Takeaways


While Mazza limited class-wide reliance in false-advertising actions to circumstances where there was a “massive” and “long-term” advertising campaign, both plaintiff and defense counsel now face conflicting district-court decisions interpreting this standard. Defense counsel cannot simply rely on Mazza and variations in advertisements to defeat class certification on reliance grounds. Indeed, recent district-court decisions, such as POM Wonderful, show that class-wide reliance may still be presumed where there is evidence of a common impact on consumers.

To prevent a presumption of reliance, defense counsel must identify any differences in consumer exposure and, as in Chow, show that the plaintiff has not proven that consumers were uniformly deceived by the alleged misrepresentations. Even though district courts have reached different conclusions, the limitations set forth in Mazza may still be a powerful tool to defeat certification on reliance grounds.

Keywords: consumer litigation, reliance, class action, CMBS, POM Wonderful

 

Neal Marder is a partner, and Stephanie Leonard and Ali Rabbani are associates with Winston & Strawn LLP in Los Angeles, California.


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