Cindy Adam v. Frank Barone ( 2022 )


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  •                                     PRECEDENTIAL
    UNITED STATES COURT OF APPEALS
    FOR THE THIRD CIRCUIT
    _______________________
    No. 21-2092
    _______________________
    CINDY ADAM, individually and on behalf of all others
    similarly situated,
    Appellant
    v.
    FRANK V. BARONE; KIRILL CHUMENKO; GREEN
    POGO LLC (Delaware);
    GREEN POGO LLC (New Jersey); NATURAL
    BEAUTY LINE LLC; VEGAN BEAUTY LLC;
    IMPROVED NUTRACEUTICALS LLC; FORTERA
    NUTRA SOLUTIONS LLC; ADVANCED BEAUTY
    LLC
    _______________________
    On Appeal from the United States District Court
    for the District of New Jersey
    District Court No. 3-20-cv-10321
    District Judge: Honorable Michael A. Shipp
    __________________________
    Submitted Under Third Circuit L.A.R. 34.1(a)
    March 2, 2022
    Before: MCKEE, AMBRO, and SMITH, Circuit Judges
    (Opinion Filed: July 19, 2022)
    Alexander C. Covey
    Kneupper & Covey
    4475 Peachtree Lakes Drive
    Berkeley Lake, GA 30096
    Bruce D. Greenberg
    Lite DePalma Greenberg & Afanador
    570 Broad Street
    Suite 1201
    Newark, NJ 07102
    Counsel for Appellant
    Joshua S. Bauchner
    Anthony J. D’Artiglio
    Ansell Grimm & Aaron
    365 Rifle Camp Road
    Woodland Park, NJ 07424
    Counsel for Appellees
    __________________________
    OPINION OF THE COURT
    __________________________
    2
    SMITH, Circuit Judge.
    Cindy Adam was charged nearly $100 for what she
    believed were free samples of beauty products. After
    complaining about the charge, she was offered the chance
    to return the items so that she might obtain a refund. Adam
    refused and eventually filed this lawsuit. The United
    States District Court for the District of New Jersey
    dismissed her complaint, concluding that she lacked
    standing because she refused Defendants’ offer of a refund
    in the ordinary course of business. We disagree. We will
    thus reverse the District Court’s order and remand with
    instructions.
    I. Facts1 & Procedural History
    1
    This appeal comes to us from Defendants’ motion to dismiss,
    so we look only to the facts alleged in the operative complaint
    and accept them as true. Warren Gen. Hosp. v. Amgen, Inc.,
    
    643 F.3d 77
    , 90 (3d Cir. 2011) (“[B]ecause standing was
    decided at the motion to dismiss stage, the District Court
    properly limited itself to the pleadings contained in the
    Complaint and the agreements cited therein.”); Siemens USA
    Holdings, Inc. v. Geisenberger, 
    17 F.4th 393
    , 412 n.25 (3d Cir.
    2021) (“Where, as here, the defendants move to dismiss a
    complaint under Rule 12(b)(1) for failure to allege subject
    matter jurisdiction, we treat the allegations in the complaint as
    true and draw all reasonable inferences in favor of the
    plaintiff.” (quoting Plains All Am. Pipeline L.P. v. Cook, 
    866 F.3d 534
    , 538 (3d Cir. 2017))).
    3
    In August 2017, Adam came across an
    advertisement for free samples of “Nuvega Lash” beauty
    products. The advertisement implied that she need only
    pay shipping and handling. So Adam ordered two free
    samples and purchased a third item. She was consequently
    charged: $4.99 for the first sample’s shipping; $4.95 for
    the second sample’s shipping; and $14.99 for the
    purchased item. Adam does not take issue with any of
    these charges; she expected all of them.
    Soon thereafter, Adam was unexpectedly charged
    $94.97. That charge was reversed, but on that same day,
    Adam was also charged $92.94. That unexpected charge
    resulted in an overdraft of her checking account, leading
    to a $34.00 bank fee. It was only her entitlement to an
    annual overdraft-forgiveness opportunity that allowed her
    to avoid paying the fee. But the $92.94 charge remained.
    Adam called the company that marketed and sent
    her Nuvega Lash products, allegedly Defendant Fortera
    Nutra Solutions LLC.            The customer service
    representative told Adam during that phone call that “she
    had agreed at the time of purchase to pay the full amount
    that she had been charged if she kept the ‘free samples.’”
    First Amended Complaint, App’x at A30 ¶ 54. Adam
    responded that she did not agree—and would not have
    agreed—to such an arrangement. She asked to speak to a
    manager during the phone call, but one was never made
    available to her. The representative told Adam that she
    would need to return the items before any refunds could
    4
    be issued. But Adam, not trusting the company that she
    believed was trying to scam her out of nearly $100, refused
    to return the items.
    In the midst of this, Adam called her bank and
    contested the $92.94 charge as fraudulent. Her bank
    temporarily reversed the charge but ultimately reinstated
    it, concluding that it was legitimate. Adam contends that
    her bank was misled by Defendants’ “false-front scheme”2
    and that the charge would have been reversed but for their
    misrepresentations.
    Adam then filed a putative class-action suit in the
    United States District Court for the Northern District of
    California, which transferred the case to the District of
    New Jersey on Defendants’ motion. The operative
    complaint, filed in May 2020, alleges violations of (or
    conspiracy to violate or aiding and abetting violation of):
    multiple California laws; the Electronic Fund Transfer
    Act, 
    15 U.S.C. §§ 1693
    –1693r; the RICO Act, 
    18 U.S.C. §§ 1961
    –1968; and various consumer protection laws, all
    on behalf of a nationwide class. In October 2020,
    Defendants moved to dismiss Adam’s claims pursuant to
    Federal Rule of Civil Procedure 12(b)(1) & (6). The
    District Court concluded the action was non-justiciable
    2
    False-front schemes involve maintaining and showing banks
    a legitimate website that conspicuously displays important
    terms and conditions but funneling customers through
    webpages that do not include such terms and conditions.
    5
    and granted Defendants’ motion to dismiss pursuant to
    Federal Rule of Civil Procedure 12(b)(1). This timely
    appeal followed.
    II. Jurisdiction
    The District Court had subject-matter jurisdiction
    over Adam’s claims through 
    28 U.S.C. §§ 1331
     & 1367.
    Alternatively, the District Court had jurisdiction pursuant
    to 
    28 U.S.C. § 1332
    (d). We have subject-matter
    jurisdiction under 
    28 U.S.C. § 1291
    .
    III.   Standing
    “The Constitution gives federal courts the power to
    adjudicate only genuine ‘Cases’ and ‘Controversies.’ That
    power includes the requirement that litigants have
    standing. A plaintiff has standing only if [s]he can ‘allege
    personal injury fairly traceable to the defendant’s
    allegedly unlawful conduct and likely to be redressed by
    the requested relief.’” California v. Texas, 
    141 S. Ct. 2104
    , 2113 (2021) (citations omitted); see also Lujan v.
    Defs. of Wildlife, 
    504 U.S. 555
    , 560–61 (1992). So if a
    plaintiff does not have standing, courts “lack authority
    under Article III of the Constitution to consider the merits”
    of any claim. In re Boy Scouts of Am., 
    35 F.4th 149
    , 156
    (3d Cir. 2022).
    The District Court relied on Hayes v. Wal-Mart
    Stores, Inc., 
    725 F.3d 349
     (3d Cir. 2013), to conclude that
    Defendants’ refund offer—even though it was rejected—
    6
    mooted Adam’s claim and left the court without authority
    to consider it. A mootness conclusion implies there was
    once standing, but that some event or developments
    occurring after litigation commenced deprived the
    plaintiff of that standing. See Boy Scouts, 35 F.4th at 156
    (“When the requirements necessary for standing at the
    start of a case disappear, it becomes moot and no longer
    satisfies       Article       III’s     case-or-controversy
    requirement[.]”); see also Campbell-Ewald Co. v. Gomez,
    
    577 U.S. 153
    , 160–61 (2016) (“If an intervening
    circumstance deprives the plaintiff of a ‘personal stake in
    the outcome of the lawsuit,’ at any point during litigation,
    the action can no longer proceed and must be dismissed as
    moot.”). Here, the refund offer was made before Adam
    filed her lawsuit, so the relevant inquiry is whether Adam
    had standing at the time she brought her claim. See
    California v. Texas, 141 S. Ct. at 2113. We therefore treat
    the District Court’s conclusion that the refund offer
    mooted Adam’s claim as a conclusion that Adam lacked
    standing at the time she brought her claim.
    With that in mind, the familiar inquiry into Adam’s
    standing shows she had a basis for initiating her lawsuit.
    “To establish Article III standing, a plaintiff must have
    ‘(1) suffered an injury in fact, (2) that is fairly traceable to
    the challenged conduct of the defendant, and (3) that is
    likely to be redressed by a favorable judicial decision.’”
    Mielo v. Steak ‘n Shake Ops., Inc., 
    897 F.3d 467
    , 478 (3d
    Cir. 2018) (quoting Spokeo, Inc. v. Robins, 
    578 U.S. 330
    ,
    338 (2016)). In this analysis, we are limited to “a
    7
    screening for mere frivolity”—“we must carefully
    ‘separate our standing inquiry from any assessment of the
    merits of the plaintiff’s claim.’” 
    Id.
     at 478–79 (quoting
    Cottrell v. Alcon Lab’ys, 
    874 F.3d 154
    , 162 (3d Cir.
    2017)). The District Court did not explicitly conduct such
    a screening, but Adam’s complaint satisfies all three
    standing elements.
    First, we consider whether Adam alleged an injury
    in fact. This requires a showing that she suffered an
    invasion of a legally protected interest, that the harm is
    concrete and particularized to her, and that she actually
    suffered or is imminently going to suffer that harm. Mielo,
    897 F.3d at 478 (quoting Spokeo, 578 U.S. at 338). Adam
    has alleged that she suffered financial harm of nearly
    $100. “[F]inancial harm is a ‘classic’ and ‘paradigmatic
    form’ of injury in fact,” and an allegation of financial harm
    almost always satisfies these requirements. Cottrell, 874
    F.3d at 163 (brackets omitted) (quoting Danvers Motor
    Co. v. Ford Motor Co., 
    432 F.3d 286
    , 291 & 293 (3d Cir.
    2005)). “Indeed, we have explained that where a plaintiff
    alleges financial harm, standing ‘is often assumed without
    discussion.’” 
    Id.
     But the District Court, relying on Hayes,
    appears to have concluded that Adam was not injured.
    In Hayes, a plaintiff purchased an as-is television
    from Sam’s Club and a warranty to cover it. 725 F.3d at
    352–53. But Sam’s Club excluded as-is items from
    warranty protection. Id. at 353. So when Hayes showed
    up seeking a replacement remote control for his as-is
    8
    television under the warranty, Sam’s Club offered him a
    refund of the warranty’s cost. Id. Hayes refused that offer,
    and Sam’s Club then gave him the new remote he sought.
    Id. The end result was a conclusion that Hayes “suffered
    no injury arising from his television warranty purchase,”
    and that he thus lacked standing to pursue his claim.
    Hayes v. Wal-Mart Stores Inc. (Hayes II), Civ. No. 10-
    460, 
    2014 WL 654542
    , at *3 (D.N.J. Feb. 20, 2014)
    (discussing the result of Hayes). The District Court relied
    on this conclusion, applying it to the present case and
    deciding that it lacked jurisdiction to hear Adam’s claim
    because Defendants’ refund offer meant Adam suffered no
    injury. Dist. Ct. Op., App’x at A8 (brackets omitted)
    (quoting Hayes II, 
    2014 WL 654542
    , at *3); 
    id.
     at A11.
    But the District Court erred in its application of Hayes.
    In that case, “[w]e agree[d] with the trial court that
    Hayes’ purchase of a Service Plan for his television set
    [could not] form the basis for class certification because it
    was honored when Sam’s Club replaced the missing
    remote. Sam’s Club also offered to refund Hayes the cost
    of the Service Plan, but Hayes refused to accept the
    refund.” 725 F.3d at 361 n.10 (emphasis added). The
    reason Hayes was no longer injured was because he
    accepted Sam’s Club’s actions in compliance with the
    Service Plan and was made whole, not because Sam’s
    Club alternatively offered to refund him the cost of the
    Service Plan. We thus did not hold that “a refund offer []
    made in the ordinary course of business” would
    9
    categorically deprive a plaintiff of her day in court. Cf.
    Dist. Ct. Op., App’x at A11.
    Here, Adam has not been made whole; she has
    neither received a refund nor accepted any alternative to a
    refund.3 Defendants merely offered what they believed
    would make Adam whole, and “[a]s every first-year law
    student learns, the recipient’s rejection of an offer ‘leaves
    the matter as if no offer had ever been made.’” Campbell-
    Ewald, 577 U.S. at 162 (quoting Genesis Healthcare
    Corp. v. Symczyk, 
    569 U.S. 66
    , 81 (Kagan, J.,
    dissenting)).4 So unlike in Hayes, Adam’s allegations do
    3
    Of course, in Hayes, the plaintiff did not merely accept an
    alternative to a refund. He received exactly what he was
    entitled to—a new television remote control as promised by the
    warranty he purchased. 725 F.3d at 353. Even had Hayes not
    accepted the new remote, the warranty context may be
    distinguishable from the case before us: whether someone is
    injured when they refuse the other party’s performance under
    a contract may be a wholly different question than whether
    somebody remains injured after being offered, but refusing,
    compensation for alleged wrongdoing. But we need not decide
    this because Hayes did accept performance of the warranty
    obligation and thus was not injured. Id.
    4
    Adam insists that Campbell-Ewald governs this case. While
    we acknowledge the observations made by the Supreme Court
    regarding the basic principles of contract law, we need not rely
    on Campbell-Ewald to reach our conclusion. Because we
    independently hold that Adam has standing to pursue her
    claims, we decline to, in this case, extend Campbell-Ewald
    10
    establish that she has actually suffered the concrete and
    particularized harm of having nearly $100 taken from her.
    Consequently, Adam has alleged an injury in fact
    sufficient to satisfy the first element of standing.
    Second, we consider whether that financial harm is
    “fairly traceable to” Defendants’ conduct. Mielo, 897 F.3d
    at 480–81 (quoting Spokeo, 578 U.S. at 338). This is akin
    to but-for causation, not proximate causation.5 Id. at 481
    (quoting Finkelman v. Nat’l Football League, 
    810 F.3d 187
    , 193–94 (3d Cir. 2016)); Toll Bros., Inc. v. Twp. of
    Readington, 
    555 F.3d 131
    , 142 (3d Cir. 2009). Defendants
    appear to argue that Adam failed to meet even that low
    threshold because she was the cause of her own injury, i.e.,
    that she “elected to keep the products” and thus prevented
    Defendants from giving her a refund so that the only
    reason Adam is out $92.94 is because she chose not to take
    the steps required to get a refund. This argument, of
    from strategic attempts to moot a pending case with a Rule 68
    settlement offer to ordinary-course-of-business offers to make
    things right before the specter of litigation arises.
    5
    But-for causation is established whenever an injury would not
    have occurred without the alleged action or event. Univ. of
    Tex. S.W. Med. Ctr. v. Nassar, 
    570 U.S. 338
    , 346–47 (2013).
    Proximate causation, on the other hand, is only established
    when the injury is sufficiently related to the action or event that
    the law deems the injury to have been caused by the action or
    event. See Lexmark Int’l, Inc. v. Static Control Components,
    Inc., 
    572 U.S. 118
    , 132–34 (2014).
    11
    course, assumes that the Defendants were entitled to the
    return of the products, which flies in the face of the
    complaint’s allegations and so is a faulty premise. Adam
    cannot be faulted for standing on the right to freely keep
    what was represented to be a free sample. But accepting
    as true that Adam was not entitled to keep the products and
    that she would not have suffered the $92.94 injury if she
    had returned the items,6 Defendants would be correct that
    Adam’s actions were a but-for cause of her injury. But
    “[t]here may be more than one but for cause of a loss.”
    Loughman v. Consol-Pa. Coal Co., 
    6 F.3d 88
    , 94 (3d Cir.
    1993). So Defendants’ conduct could nevertheless still
    provide but-for causation for Adam’s financial harm.
    That financial harm was allegedly a result of
    Defendants’ actions in misleading her, charging her, and
    lying to her bank about the genuineness of the charge. In
    other words, Adam alleges that, but for Defendants’
    actions, there would be no injury: she would not have been
    injured if the products were not advertised in a deceptive
    manner; she would not have been injured if she had not
    6
    Adam argues that she would not have received the refund
    even if she had returned the items. Defendants argue that
    Clapper v. Amnesty Int’l, 
    568 U.S. 398
    , 416 (2013), precludes
    her from manufacturing standing by speculating that
    Defendants would not honor their word. Because Adam
    satisfies the causation element regardless of whether her
    concerns about receiving a refund were sufficiently
    nonspeculative, we need not resolve that dispute.
    12
    been billed $92.94 without authorization; and she would
    not have been injured if her bank was not lied to during the
    course of its fraud investigation. Accordingly, even if
    Adam’s actions were themselves a but-for cause of her
    financial harm, the alleged actions of Defendants were as
    well. While Adam will have to do more to establish
    causation at the merits stage, her allegations satisfy the
    traceability requirement of standing. Mielo, 897 F.3d at
    481.
    Third, and finally, we consider whether Adam’s
    injury “is likely to be redressed by a favorable judicial
    decision.” Id. (quoting Spokeo, 578 U.S. at 338). As noted
    above, when a plaintiff alleges financial harm, as Adam
    did here, we often assume standing without discussion.
    Cottrell, 874 F.3d at 163 (brackets omitted). We can do
    this because courts routinely provide redress for financial
    harms. The District Court could provide redress for
    Adam’s financial harm by, for example, ordering
    Defendants to pay restitution, as requested in the
    complaint. Uzuegbunam v. Preczewski, 
    141 S. Ct. 792
    ,
    802 (2021) (noting petitioners would satisfy redressability
    by seeking “one dollar in compensation” for their injury).
    So Adam has shown all three elements of standing
    by alleging that Defendants’ actions caused her a financial
    harm of $92.94. Having done so, she has established that
    resolving the present action is within the federal courts’
    constitutional authority to adjudicate cases and
    controversies. And because the parties identify no
    13
    intervening circumstance arising after the lawsuit was
    filed that would deprive Adam of a “personal stake in the
    outcome of the lawsuit,” the claim should not have been
    dismissed as moot. See Campbell-Ewald, 577 U.S. at
    160–61 (quoting Genesis Healthcare, 
    569 U.S. at 72
    ); Boy
    Scouts, 35 F.4th at 156. The District Court thus erred in
    dismissing her claims.7
    IV.    Conclusion
    Cindy Adam had standing to bring her claims
    regardless of Defendants’ unaccepted offer to provide a
    refund before litigation commenced. Accordingly, the
    District Court’s May 31, 2021, order will be reversed and
    the matter remanded for further proceedings consistent
    with this opinion.
    7
    Because Adam has standing on account of the $92.94 debited
    from her account, we need not consider whether the loss of
    Adam’s overdraft-forgiveness opportunity, any cost of
    shipping the items back to the vendor, the lost time-value of
    money, or anything else provides Adam with standing.
    14