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California Court Sets High Bar For Class Certification In False Advertising Cases

The California Court of Appeal recently made it more difficult for plaintiffs to certify class actions based on false advertising or fraud.  In Downey v. Public Storage, Inc., Case No. B291662, ___Cal.App.5th___ (Feb. 6, 2020), the Court of Appeal affirmed an order denying class certification on the grounds that issues of deception and reliance were not susceptible to common proof.

In March 2015, several plaintiffs filed a class action against Public Storage, alleging that its $1 promotional rate was deceptive, violated California’s Unfair Competition Law (Bus. & Prof. § 17200 et seq.), and constituted a false advertisement.  In particular, the plaintiffs alleged that the $1 promotional rate was deceptive because customers had to pay more than $1 for their first month of storage due to (1) having to pay for a new account fee, (2) being charged for a second month’s rent on the first day of the next calendar month, (3) having to pay for a lock for their storage unit, and (4) having to pay for insurance coverage. 

The plaintiffs moved to certify a class of “all California tenants who rented storage units from a California Public Storage facility under the $1 Special [P]romotion from March 6, 2011 through February 8, 2016 and paid over and above the $1 advertised for the $1 Special . . .”

The plaintiffs sought to certify the class for purposes of obtaining restitution and were therefore required to “prove that (1) the class members were exposed to the advertisement, (2) the advertisement was deceptive, and (3) the deception was material.”  The trial court denied plaintiffs’ motion, finding that they had not “show[n] that common issues of fact and law predominate.”

The Court of Appeal affirmed the trial court’s ruling, explaining that “class certification is properly denied . . . when the evidence demonstrates variations in how—and, critically, whether class members were exposed to an allegedly deceptive advertisement.”

First, with respect to the exposure element, the trial court found that the plaintiffs “ha[d] not shown that all class members were exposed to” the $1 promotional rate advertisements, as some customers could “walk in” or reserve a storage unit online without ever having seen an advertisement.

Second, with respect to the deception element, the trial court concluded that whether putative class members had been exposed to deceptive advertisements was not susceptible to common proof.  The Court of Appeal explained that ample evidence supported the trial court’s conclusion, as “Public Storage’s advertisements for its $1 promotional rate varied over time and across different media.”

The plaintiffs argued on appeal that the trial court erred in requiring them to prove that the issues of exposure and deceptiveness are susceptible to common proof.  In support, the plaintiffs relied on the California Supreme Court’s decision in In re Tobacco II, 46 Cal. 4th 298 (2009).  The Court of Appeal rejected plaintiff’s reliance on Tobacco II’s holding as “inapt” because the case dealt with standing requirements for class representatives, not the issue of commonality in the class certification context.  The Court of Appeal explained that Tobacco II merely excused a plaintiff who was exposed to deceptive advertisements from having to specifically allege at the pleading stage which deceptive ad(s) he or she saw or heard.  The trial court in the Public Storage, on the other hand, ruled that not all class members had been exposed to Public Storage’s $1 promotional rate advertisements and therefore individual issues predominated with respect to the issues of exposure.

The Court of Appeal rejected all of the plaintiffs’ additional arguments on appeal and affirmed the trial court’s denial of class certification.

What does this mean? Based on this ruling, class action plaintiffs will have a tougher time proving that common issues predominate where the evidence shows some putative class members may not have been exposed to the allegedly deceptive advertisement and where there have been variations in allegedly deceptive advertisements over time.  This holding should apply to claims of fraudulent misrepresentations generally.

Copyright © 2020, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume X, Number 45

TRENDING LEGAL ANALYSIS


About this Author

Lisa Yun, Trial Practice, Bankruptcy, Attorney, Sheppard Mullin, Law Firm,
Associate

Lisa Yun is an associate in the Business Trial Practice Group in the firm's San Diego office.

Ms. Yun practices in the area of general business litigation and bankruptcy law.  She has experience representing financial institutions in civil and bankruptcy proceedings.  Ms. Yun has also successfully represented clients in class action claims involving the federal Telephone Consumer Protection Act (TCPA).

619-338-6541
Shannon Z. Petersen, Business Trial Legal Specialist, Sheppard Mullin
Partner

Shannon Z. Petersen is a partner in the Business Trial Practice Group in the firm’s Del Mar office and is co-chair of the firm’s consumer class action defense team and the firm’s TCPA class action defense team.

Areas of Practice

Dr. Petersen has substantial trial experience as a business litigator, including consumer class action defense. He has successfully represented clients in claims involving the federal Telephone Consumer Protection Act (TCPA), the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Acting (FCRA), the Truth in Lending Act (TILA), the Real Estate Settlement Procedures Acts (RESPA); California's Unfair Competition Law (UCL), Consumers Legal Remedies Act (CLRA), Rosenthal Act, Automobile Sales Finance Act (ASFA or Rees-Levering), Vehicle Leasing Act, Confidentiality of Medical Information Act (CMIA); breach of contract, insurance bad faith, unfair business practices, false advertising, fraud, breach of fiduciary duty, negligence, wrongful foreclosure, wrongful repossession, unfair debt collection, unfair credit reporting, unjust enrichment, misappropriation of trade secrets, trademark infringement, quiet title, emotional distress, construction defect, privacy, and receiverships, among others.

619-338-6656