On January 12, 2012, the United States Court of Appeals for the Ninth Circuit decertified a nationwide class in Mazza v. American Honda Motor Co., No. 09-55376, --- F.3d ---, 2012 WL 89176. Although the only named plaintiffs came from Florida and Maryland, they filed suit in California seeking to represent all persons nationwide who had purchased or leased new or used certain model-year Acura RL vehicles equipped with a Collision Mitigation Braking System (CMBS).

The plaintiffs alleged that American Honda Motor Co., Inc. (Honda), Acura’s US distributor, had misrepresented the CMBS in violation of California’s Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumer Legal Remedies Act (CLRA) by failing to explain that (i) the system would not always progress through each of three stages in order, but rather could skip warning stages and apply the brakes in an emergency, and (ii) […] the CMBS would not always function in foul weather. The district court certified a nationwide class on the premise that California law could be applied to class members hailing from 44 jurisdictions.

After accepting Honda’s interlocutory appeal, a divided panel of the Ninth Circuit reversed on two grounds. First, because the law of multiple jurisdictions would apply to any nationwide class, “variances in state law overwhelm common issues and preclude predominance for a single nationwide class.” Second, even if the class was restricted only to California buyers or lessees, “common issues of fact would not predominate” because the class “almost certainly includes members who were not exposed to, and therefore could not have relied on, Honda’s allegedly misleading material.”

California Consumer Protection Laws May Not Be Applied to a Nationwide Class

Judge Ronald M. Gould, writing for the court, explained that California law may be applied extraterritorially on a classwide basis only if “the interests of other states are not found to outweigh California’s interest in having its law applied.” Noting that consumer protection laws concerning both liability and remedies in the other 43 states differed materially from those in California, the court stressed that each state has the right to determine the proper “balance between protecting consumers and attracting foreign businesses.”

The court of appeals held that the district court “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.” The district court’s reasoning “elevated all states’ interests in consumer protection to a superordinate level, while ignoring or giving too little attention to each state’s interest in promoting business.” The Ninth Circuit held that each class member’s claims “should be governed by the consumer protection laws of the jurisdiction in which the transaction took place.”

Class Members Not Entitled to a Presumption of Reliance

Honda’s marketing campaign for the CMBS was limited in both time and scope. The Ninth Circuit distinguished In re Tobacco II Cases, in which the California Supreme Court held that, to establish standing to sue, a class proponent did not need to establish reliance on the part of all absent class members in the context of what the court had characterized as a widespread and long-lasting advertising campaign.

The majority held that a “presumption of reliance does not arise when class members were exposed to quite disparate information from various representatives of the defendant.” They continued that, “[f]or everyone in the class to have been exposed to the omissions, as the dissent claims, it is necessary for everyone in the class to have viewed the allegedly misleading advertising. Here the limited scope of that advertising makes it unreasonable to assume that all class members viewed it.” The class was therefore overbroad because “a consumer who was never exposed” to an alleged false or misleading advertisement could not be included in a valid class, nor could “those members who learned of the CMBS’s allegedly omitted limitations before they purchased or leased the CMBS system cannot recover damages under California law.” 

Judge Dorothy Nelson dissented, believing that a presumption of reliance applied merely because the plaintiffs “allege that everyone in the class was exposed” to the misleading information and that California’s interest in regulating the conduct of corporations based there outweighed the interests of other states in regulating transactions with their citizens and within their borders. 

Mayer Brown partner Donald Falk briefed and argued the appeal, assisted by trial counsel. He can be reached at +1 650 331 2030.

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