A recent Ninth Circuit decision imposed substantial commonality restraints on multijurisdictional class actions, restraints that the dissenting judge called "devastating to consumers." The Ninth Circuit decertified a class of automobile buyers in a false advertising lawsuit, holding that (i) differences in state laws precluded certification of a nationwide class and (ii) individual factual issues regarding plaintiffs' reliance on the challenged advertising predominated over common questions.

In Mazza v. American Honda Motor Co., filed in the Central District of California, the plaintiffs allege that Honda violated California law by disseminating advertisements that misrepresented the Collision Mitigating Braking System sold with certain Acura RL automobiles. Specifically, the plaintiffs claim that Honda's advertisements concealed material information about the braking system.

The district court certified a nationwide class of consumers who purchased or leased new or used Acura RL vehicles equipped with the braking system. Although class members purchased or leased their vehicles in 44 different states, including California, Honda's corporate headquarters are in California. The district court determined that California law could be applied to all class members, because Honda had failed to show how differences in the various states' laws were material, how other states had an interest in applying their laws in this case, and how those interests were implicated. The district court also held that common issues predominated and that California, as the forum state, had sufficient contacts to the claims asserted to ensure that the choice of California law would not be arbitrary or unfair to nonresident class members.

The Ninth Circuit agreed that the putative class met the threshold requirements of Rule 23(a). The panel's analysis focused on whether common issues of law and fact predominated for purposes of Rule 23(b)(3). The bulk of this analysis applied California's choice of law rules, which provide that California law may be used on a classwide basis only if the interests of other states do not outweigh California's interest in having its law applied.

The panel first rejected the district court's conclusion that none of the differences in the various states' laws were material. In particular, the court noted that the California laws at issue have no scienter requirement, while the consumer protection laws of some other states do, and that California, unlike some other states, requires named class plaintiffs to demonstrate reliance on the advertisements. The court held that "these are not trivial or wholly immaterial differences," because where scienter or reliance is missing, the requirement "will spell the difference between the success and failure of the claim."

The Ninth Circuit also faulted the district court for failing to recognize the interests of other states in having their consumer protection laws applied to claims brought on behalf of their residents. The district court concluded that no foreign state had an interest in denying its citizens recovery under California's potentially more comprehensive consumer protection laws. The appellate panel, however, held that the district court "erred by discounting or not recognizing each state's valid interest in shielding out-of-state businesses from what the state may consider to be excessive litigation." States are entitled to enforce their own views, the court held, "on the extent to which they will tolerate a degree of lessened protection for consumers to create a more favorable business climate for the companies that the state seeks to attract to do business in the state."

Moreover, according to the panel, the district court erroneously concluded that California's interests in having its law applied outweighed the interests of states with different consumer protection laws. The district court, the panel held, "did not adequately recognize that each foreign state has an interest in applying its law to transactions within its borders and that, if California law were applied to the entire class, foreign states would be impaired in their ability to calibrate liability to foster commerce." While California's choice of law rules recognize that the "place of the wrong" has the predominant interest, the "place of the wrong," under California's choice of law rules, is the place of the last event necessary to make the actor liable. Here, the Ninth Circuit held, this last necessary event was the "communication of the advertisements to the claimants and their reliance thereon in purchasing vehicles," which took place in the state of purchase, not at Honda's headquarters in California.

Finally, the Ninth Circuit held that common issues of fact did not predominate for Rule 23(b)(3) purposes, because in certifying a class that included all purchasers of the product during the relevant time period, the district court improperly presumed that all class members relied on the challenged advertisements. The Ninth Circuit noted that Honda's advertising campaign for the braking system was "very limited," and thus distinguishable from advertising in other cases, such as tobacco litigation, that was so "extensive and long-term" as to permit a presumption of reliance.

The dissent argued that the majority's holding, particularly its refusal to apply California law to all class members' claims, "will prove devastating to consumers" because the $4,000 price of the braking system is too small to motivate individual claims, and thus "Honda becomes free to avail itself of the benefits offered by California without having to answer to allegations by consumers nationwide that it has violated the consumer protection laws of its forum state." The dissent did not explain, however, why only a nationwide class action is sufficient to render Honda accountable. Nothing in the majority's opinion suggests that statewide classes could not be certified—or, for that matter, that the putative nationwide class could not simply be broken down into groupings of states with similar consumer protection laws.

Nevertheless, the panel's holding is ironic, if not illogical. Its rationale is that states with more lenient consumer protection laws than California are entitled to the "business-friendly" atmosphere they have legislated, so that they will attract the business of corporations such as Honda. Yet Honda, while doing business nationwide, chose to house its headquarters under the "consumer-friendly" California regime. Mazza minimizes the impact of this decision—and, in turn, the ability of states to attract businesses through lenient consumer laws—by holding that a company's home state is largely immaterial for choice of law purposes. Wouldn't Honda be more likely to consider relocating to a "business-friendly" state if it knew that that state's law could be applied to a nationwide consumer class?

Mazza does, however, strike yet another in a series of recent blows to consumer class actions. Although Mazza was interpreting California's choice of law rules as much it was interpreting Rule 23, the notion that differing state consumer laws preclude certification of a nationwide class of consumers—at least where the alleged "wrong" occurs in different states, which (under Mazza's logic) will nearly always be the case in false adversiting claims—bodes a significant limitation on consumer class actions.

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