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8th Cir. Reverses Nationwide UDAP Class Cert Due to Variations in State Law

The U.S. Court of Appeals for the Eighth Circuit recently reversed certification of a nationwide class involving allegedly deceptive advertising practices, holding that certification of a national class was inappropriate because the consumer protection laws of each class member’s home state governed their claims.

The Eighth Circuit further held that class treatment was inappropriate due to the trial court’s failure to conduct separate choice of law analyses for the consumer class’s breach of warranty and unjust enrichment claims.

A copy of the opinion in Hale v. Emerson Electric Company is available at:  Link to Opinion.

A group of consumers brought claims on behalf of themselves and all others similarly situated (the “consumers”) against a Missouri corporation that manufactures, markets and sells a line of vacuums (the “company”) alleging deceptive advertising practices.  Specifically, the consumers claimed that the company’s marketing emphasizing the maximum potential output of the vacuums’ motors deceived consumers because the company acknowledged that their vacuums only achieved “peak horsepower” in a laboratory, and generated less horsepower than advertised in standard wall outlets.

The consumers’ complaint alleged claims against the company for violations of the Missouri Merchandising Practices Act (MMPA), Mo. Rev. Stat.§ 407.010, et seq., breach of express warranty, breach of implied warranty, unjust enrichment, violations of other states’ consumer protection laws, and redhibition (on behalf of a Louisiana sub-class).  The Judicial Panel on Multidistrict Litigation assigned the consumers’ case to a specific trial court in Missouri as a consolidated action.

At the close of discovery, the consumers sought to certify a nationwide class.  Applying Missouri choice of law rules and determining that all claims should be governed by Missouri law, the class was certified under Fed. R. Civ. P. 23(a) and 23(b)(3).  The instant appeal of the order certifying the consumers’ nationwide class followed.

As you may recall, on appeal, a trial court’s grant of class certification is reviewed for abuse of discretion, but issues of law are reviewed de novo.  In re St. Jude Medical, Inc., 425 F.3d 1116, 1119 (8th Cir. 2005).

Here, the trial court concluded that the consumers satisfied all of the requirements of Rule 23(a) and one subsection of 23(b) as required: Rule 23(b)(3) finding “questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.”  In re St. Jude Medical, 425 F. 3d at 1119 (internal citation omitted); Fed. R. Civ. P. 23(b)(3).

However, the Eighth Circuit noted, “variations in state law may swamp any common issues” and defeat class certification under Rule 23(b)(3). See Castano v. Am. Tobacco Co., 84 F.3d 734, 741 (5th Cir. 1996).

The company argued that the trial court erred in certifying the nationwide class because (i) the claims of non-Missouri residents do not relate to “trade or commerce . . . in or from the state of Missouri” and the MMPA cannot be applied to them, and; (ii) the trial court should have conducted separate choice of law analyses for the breach of warranty and unjust enrichment claims.

Addressing the company’s arguments in order, the Eighth Circuit reviewed the plain language of the MMPA which provides a private right of action for “any deception, fraud, false pretense, false promise, misrepresentation, [or] unfair practice . . . in connection with the sale or advertisement of any merchandise in trade or commerce . . . in or from the state of Missouri.”  Mo. Stat. §§ 407.020.1; 407.025.1.  Certification of a nationwide class under the MMPA is resolved based on the statute’s scope. Perras v. H & R Block, 789 F.3d 914, 917 (8th Cir. 2015).

Although the MMPA covers every kind of unfair practice, the Eighth Circuit has explained that a plaintiff’s claim must involve commerce “in or from the state of Missouri,” and previously held in Perras that a putative class action involving an allegedly fraudulent “compliance fee” that was only created at the defendant’s Missouri headquarters but applied as transactions in each class members’ home state, did not trigger coverage under the MMPA, and that the laws of the states in which the transactions occurred applied.  Perras, 789 F. 3d at 917-918.

In certifying the consumers’ class, the trial court distinguished Perras by citing its ruling in State ex rel. Nixon v. Estes, 108 S.W.3d 795, 801 (Mo. Ct. App. 2003), where a business misleadingly advertised vending machines and promised massive profits to customers, to support its holding that the MMPA could be applied here to claims brought against the company by out-of-state plaintiffs.

However, the Eighth Circuit noted that in Estes, the defendant’s business and fraudulent practices had numerous ties to the State of Missouri: the business was established and operated in the state, placed fraudulent advertisements from company offices in Missouri, received signed sales agreements in Missouri, received wire transfers in payments from victims into Missouri bank accounts and maintained a continuing commercial relationship with those victims from company offices in Missouri.  Estes, 108 S.W.3d at 801.

The Eighth Circuit likened the facts here to those in Perras, rather than Estes, as every part of the challenged transaction — encountering the allegedly misleading advertising, purchasing the vacuum, and being disappointed in its performance — took place in each individual consumer’s home state.

In fact, here, the lone relevant action taking place in Missouri was the company’s design of the advertisement, which the Eighth Circuit held was insufficient for the claims to be governed by the MMPA.

Rather, the Court determined that each class member’s home state governed the consumers’ claims under their own states’ consumer protection statutes; thus, class certification was inappropriate as to those claims. Perras, 789 F.3d at 918; see St. Jude, 425 F.3d at 1120 (“State consumer protection laws vary considerably.”) (quoting In re Bridgestone/Firestone, Inc., 288 F.3d 1012, 1018 (7th Cir. 2002)).

As to the remaining claims, the Eighth Circuit concluded that the trial court also erred by failing to conduct a choice of law analysis to ensure that application of a given state’s “law is neither arbitrary nor fundamentally unfair.” St. Jude, 425 F.3d at 1120 (quoting Allstate Ins. Co. v. Hague, 449 U.S. 302, 313 (1981)).  Because the trial court should have conducted separate choice of law analyses for the consumers’ breach of warranty and unjust enrichment claims, the Eighth Circuit held that class treatment was inappropriate for these claims as well.

Accordingly, the lower court’s order certifying a nationwide class action was reversed and remanded for further proceedings.

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Christopher P. Hahn practices in Maurice Wutscher’s Commercial Litigation, Consumer Credit Litigation and Insurance Recovery and Advisory groups. Prior to joining Maurice Wutscher LLP, he served under the General Counsel at the Florida Office of Financial Regulation. He also obtained extensive experience litigating property insurance claims through all phases of discovery, motion practice and other pre-trial activities. Christopher obtained his Bachelor of Science degree in Business Administration from the University of Southern California, followed by his Juris Doctorate degree from the University of Miami School of Law. He is also a graduate of the University of Miami’s Masters of Business Administration program, completing his degree with an emphasis on finance and mergers and acquisitions.

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