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Ninth Circuit Issues Long-Awaited Ruling on False-Advertising Class Actions in Mazza v. American Honda

January 17, 2012

 

In a setback for consumers seeking to bring false-advertising class actions under California law, the Ninth Circuit last week issued its long-awaited ruling in Mazza v. American Honda, No. 09-55376 (Jan. 12, 2012). The 2–1 decision, authored by Judge Ronald M. Gould, vacated a district court’s order that had certified a nationwide class of consumers suing Honda for false advertising under California’s Unfair Competition Law, False Advertising Law, and Consumers Legal Remedies Act. Although the appeal was argued on June 9, 2010, the Ninth Circuit stayed its decision pending the U.S. Supreme Court’s ruling in Wal-Mart Stores, Inc. v. Dukes, -- U.S. -- (2011). The Mazza opinion comes nearly seven months after the Supreme Court rejected certification of a class of 1.5 million employees in its June 2011 Wal-Mart decision.

Mazza concerns Honda’s alleged failure to disclose serious and material limitations of its Collision Mitigation Braking System (CMBS), an optional feature offered on certain of its Acura models. In 2006, Honda ran television commercials and magazine advertisements featuring the CMBS, which it marketed as a defense against rear-end collisions. But in 2007 and 2008 — two-thirds of the three-year class period — Honda limited its CMBS campaign to product brochures, a single consumer magazine, video kiosks at Acura dealerships, and a website designed for Acura owners.

The Ninth Circuit reversed class certification on two key grounds. First, applying California’s “governmental interest” choice-of-law test, the Ninth Circuit concluded that each class member’s claim should be governed by the consumer protection laws of that member’s home state — thus precluding a finding that common issues of law predominate under Rule 23(b)(3). Notably, the Ninth Circuit adopted a version of California’s choice-of-law test that focuses on the “place of the wrong” and found that, in a false-advertising action, the state in which the misrepresentations were communicated to and relied on by class members is the “place of the wrong.”

Second, the Ninth Circuit held that common issues of fact would not predominate even for a California-only class, because such a class of consumers would include members who were never exposed to, and therefore could not have relied on, the alleged misrepresentations. Drawing on the body of California decisional law following the passage of California’s Proposition 64 — In re Tobacco II Cases, 46 Cal. 4th 298, 320 (Cal. 2009), Pfizer Inc. v. Superior Court, 182 Cal. App. 4th 622, 632 (Cal. Ct. App. 2010), and Cohen v. DirecTV, Inc., 178 Cal. App. 4th 966, 980 (Cal. Ct. App. 2009) — the Court reasoned that the limited and varied scope of Honda’s advertising made it unreasonable to presume reliance by all class members. Thus, common questions of fact could not predominate under Rule 23(b)(3) because “an individualized case must be made for each member showing reliance.”

Taken together, Mazza’s key holdings could make it more difficult to certify consumer class actions for false advertising under California law in the absence of a massive, uniform advertising and marketing campaign. The plaintiffs have until January 26, 2012 to petition the Ninth Circuit for rehearing en banc.