Benjamin Berger v. Home Depot U.S.A., Inc. ( 2014 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
BENJAMIN BERGER, individually and No. 11-55592
on behalf of all other similarly
situated and the general public, D.C. No.
Plaintiff-Appellant, 8:10-cv-00678-
SJO-PLA
v.
HOME DEPOT USA, INC., a Delaware OPINION
Corporation, DBA The Home Depot,
Defendant-Appellee.
Appeal from the United States District Court
for the Central District of California
S. James Otero, District Judge, Presiding
Argued and Submitted
August 28, 2013—Pasadena, California
Filed February 3, 2014
Before: Ronald M. Gould and Johnnie B. Rawlinson,
Circuit Judges, and Ivan L.R. Lemelle, District Judge.*
Opinion by Judge Gould
*
The Honorable Ivan L.R. Lemelle, District Judge for the U.S. District
Court for the Eastern District of Louisiana, sitting by designation.
2 BERGER V. HOME DEPOT
SUMMARY**
Jurisdiction / Class Certification
The panel affirmed the district court’s stipulated dismissal
with prejudice of plaintiff’s putative class-action claims
against Home Depot, following the district court’s denial of
plaintiff’s motion for class certification.
The panel held that there was appellate jurisdiction under
28 U.S.C. § 1291 because, in the absence of a settlement, a
stipulation that leads to a dismissal with prejudice does not
destroy the adversity in that judgment necessary to support an
appeal.
The panel affirmed the denial of class certification
because the district court did not abuse its discretion in
holding that the proposed classes that plaintiff was capable of
representing did not meet the requirement that common
questions predominated over individual issues under Fed. R.
Civ. P. 23(b)(3), and that was the only sub-part of Rule 23(b)
on which plaintiff relied.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
BERGER V. HOME DEPOT 3
COUNSEL
Taras P. Kick (argued), The Kick Law Firm, Santa Monica,
California; Thomas A. Segal, The Kick Law Firm, Los
Angeles, California, for Plaintiff-Appellant.
Allan E. Ceran, Burke, Williams & Sorenson, LLP, Los
Angeles, California; Dwight J. Davis, S. Stewart Haskins II
(argued), and Jonathan R. Chally, King & Spalding LLP,
Atlanta, Georgia, for Defendant-Appellee.
OPINION
GOULD, Circuit Judge:
Benjamin Berger appeals from the stipulated dismissal
with prejudice of his putative class-action claims against
Home Depot. He alleges that Home Depot automatically
imposed a ten percent surcharge for a damage waiver on tool
rentals in its California stores, and although that fee was to be
optional, Home Depot’s failure to inform customers of their
ability to decline the surcharge was a violation of California’s
Unfair Competition Law, the California Consumer Legal
Remedies Act, and common-law theories of unjust
enrichment and money had and received. Cal. Bus. & Prof.
Code § 17200; Cal. Civ. Code § 1770.1 We have jurisdiction
under 28 U.S.C. § 1291 because, in the absence of a
settlement, a stipulation that leads to a dismissal with
1
Berger’s original complaint included other state law claims, but the
additional claims were dismissed under Fed. R. Civ. P. 12(b)(6) before the
class certification phase by the district court. That decision was not
appealed, so these other claims are not before us here.
4 BERGER V. HOME DEPOT
prejudice does not destroy the adversity in that judgment
necessary to support an appeal. We affirm the denial of class
certification because the district court did not abuse its
discretion in holding that the proposed classes that Berger is
capable of representing do not meet the requirement that
common questions predominate over individual issues under
Fed. R. Civ. P. 23(b)(3), and that was the only sub-part of
Rule 23(b) on which Berger relied.
I
The District Court denied Berger’s motion for class
certification, concluding that the proposed class and
subclasses were not ascertainable and that Berger did not
meet the commonality, typicality, and adequacy of
representation requirements of Federal Rule of Civil
Procedure (“Rule”) 23(a). Having rejected certification on
grounds of ascertainability of the class and on grounds that
Rule 23(a) was not satisfied, the District Court at first recited
that it declined to reach the requirements of Rule 23(b)(3),
but then discussed those requirements and concluded,
“Accordingly, because independent issues predominate and
it is not clear that class action is a superior means of
adjudication, Plaintiff’s Motion fails for the additional reason
that he cannot satisfy the requirements of Rule 23(b)(3).”
Berger then stipulated with Home Depot to dismiss the
action with prejudice, noting his intent to appeal the denial of
class certification. In the stipulation, Home Depot contested
his ability to appeal. The district court dismissed the action
under Rule 41(a)(2), and Berger filed a timely notice of
appeal.
BERGER V. HOME DEPOT 5
The district court had jurisdiction over Berger’s complaint
under the Class Action Fairness Act, 28 U.S.C. § 1332(d),
because the parties met minimal diversity and the amount in
controversy exceeded $5 million. We have jurisdiction under
28 U.S.C. § 1291 because a dismissal of an action with
prejudice, even when such dismissal is the product of a
stipulation, is a sufficiently adverse – and thus appealable –
final decision.
Home Depot challenges our jurisdiction, relying on our
published order in Seidman v. City of Beverly Hills, 785 F.2d
1447 (9th Cir. 1986). In Seidman, we concluded that we had
no jurisdiction to hear an appeal from a stipulated dismissal
of a putative class action after the lead plaintiff settled his
individual claims against the defendant. Id. at 1447–48.
However, Seidman does not control here. As Seidman
correctly noted, a final judgment must be adverse to a party
in order to be appealable. Id. at 1448. While a stipulated
dismissal pursuant to a settlement does not have the adversity
required for appellate jurisdiction, absent a settlement, a
stipulation alone does not destroy that adversity. See Coursen
v. A.H. Robins, Co., Inc., 764 F.2d 1329 (9th Cir. 1985);
Concha v. London, 62 F.3d 1493, 1507 (9th Cir. 1995)
(distinguishing Seidman and holding that “plaintiffs may
appeal from a voluntary dismissal with prejudice, at least
where the plaintiff is not acting pursuant to a settlement
agreement intended to terminate the litigation.”); Omstead v.
Dell, Inc., 594 F.3d 1081,1085 (9th Cir. 2010) (concluding
that there was appellate jurisdiction in a class action case
after a dismissal pursuant to Rule 41(a)(2)); Laczay v. Ross
Adhesives, 855 F.2d 351, 354 (6th Cir. 1988) (collecting
cases from various circuits for the same proposition). A
leading procedural treatise also takes the position that finality
for appeal purposes can be achieved in this manner. See 7B
6 BERGER V. HOME DEPOT
Charles Allan Wright, Arthur R. Miller, & Mary Kay Kane,
Federal Practice & Procedure § 1802 (3d ed. 2005):
The sixth method of obtaining review
following a court order eliminating the
class-action allegations is tactically risky. If
the district court strikes the class-action
designation with leave to amend so that the
action may proceed on an individual basis, the
party seeking class treatment may refuse to do
so and allow the court to enter a final
judgment dismissing the complaint with
prejudice. An appeal then can be taken since
the adjudication is final and falls within
Section 1291. However, this procedure is a
dangerous one. If the district court’s order is
sustained on appeal, plaintiff may be deemed
to have forfeited the right to present the merits
of the claims by insisting on a review of the
class-action question.
(Internal citations omitted).
Here, there is no allegation that the parties have entered
into a settlement. After receiving the district court’s denial of
class certification, Berger voluntarily stipulated to the
dismissal of his complaint with prejudice so as to reach a
final judgment. We conclude that this stipulated dismissal is
sufficiently adverse to his interests to allow him to appeal.
Concluding that we have jurisdiction over this appeal, we
next address the merits of the district court’s denial of class
certification.
BERGER V. HOME DEPOT 7
II
A
Although Berger filed four distinct legal claims, which
are considered separately below, each claim is based on the
same set of facts. When Home Depot rents tools to
customers, it offers a “damage waiver.” If purchased, the
damage waiver allows the customer to avoid liability if a tool
is damaged during the period of the rental. Berger alleges that
when he rented a tool from Home Depot in April of 2004, he
purchased the damage waiver without notice that the waiver
was optional. Berger further alleges that Home Depot does
not tell customers that this waiver is an optional add-on. He
claims that the cost of the waiver is automatically added to
the rental price by Home Depot’s computer system. Home
Depot does not deny that its computers default to adding the
damage waiver to a customer’s receipt, but says that
customers are told of the optional nature of the waiver in
three ways: 1) by the sales associate, 2) by signs posted in
Home Depot stores, and 3) by the language of the final sales
contract. Berger contests this by alleging that as a matter of
policy, Home Depot employees are not trained to inform
customers of the optional nature of the waiver, and in
practice, even if its policy is to make such a disclosure, the
disclosures are not made.
A salient fact in our view is that over the span of time
covered by this lawsuit, Home Depot has used five different
versions of its tool rental agreement (Version 1: 2002–05;
Version 2: March 2005–May 2006; Version 3: June
2006–August 2008; Version 4: August 2008–April 2010; and
Version 5: April 2010–present), each of which discussed the
damage waiver in a different way. To respond to these
8 BERGER V. HOME DEPOT
changes, Berger proposed subdividing his action into three
subclasses, with the first to include those who rented tools
from July 2002 to February 2005, the second from “March 1,
2005 to June 1, 2006 to the present,” and the third from June
1, 2006 to the present.
B
We review denials of class certification for abuse of
discretion. Stearns v. Ticketmaster, 655 F.3d 1013, 1018 (9th
Cir. 2011) (citing Wolin v. Jaguar Land Rover N. Am., LLC,
617 F.3d 1168, 1171 (9th Cir. 2010)). We review the
discretionary determinations that supported that denial under
the same standard. Id. (citing Yokoyama v. Midland Nat’l
Life Ins. Co., 594 F.3d 1087, 1091 (9th Cir. 2010)). Where
the denial was supported by factual findings, we review those
findings for clear error. Id. A district court abuses its
discretion when it “relies upon an improper factor, omits
consideration of a factor entitled to substantial weight, or
mulls the correct mix of factors but makes a clear error of
judgment in assaying them.” Wolin, 617 F.3d at 1171. In
addition, “an error of law is an abuse of discretion.”
Yokoyama, 594 F.3d at 1091 (emphasis in original).
However, “we may sustain the court’s ruling [on class
certification] on any ground supported by the record.” Hanon
v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992).
Although it was decided in a different context, that of
denial of a motion for a new trial, we think that our circuit’s
en banc decision in Hinkson sheds light on how we should
apply the abuse of discretion standard here. Abdullah v. U.S.
Sec. Assoc., Inc., 731 F.3d 952, 956 (9th Cir. 2013). Hinkson
holds that the “abuse of discretion test requires us first to
consider whether the district court identified the correct legal
BERGER V. HOME DEPOT 9
standard for decision of the issue before it. Second, the test
then requires us to determine whether the district court's
findings of fact, and its application of those findings of fact
to the correct legal standard, were illogical, implausible, or
without support in inferences that may be drawn from facts in
the record.” United States v. Hinkson, 585 F.3d 1247, 1251
(9th Cir. 2009) (en banc); see also id. at 1261–63.
C
Before turning to the merits of Berger’s claims, we
address Berger’s proposed subclasses. Because Berger only
alleges that he took part in one transaction, in April of 2004,
he is not a member of subclasses two or three, which are
defined as beginning in March 2005 and June 2006,
respectively.2 Because he is not a member of those
subclasses, Berger cannot prosecute claims on their behalf.
Gen. Tel. Co. v. Falcon, 457 U.S. 147, 156 (1982) (“We have
repeatedly held that a class representative must be part of the
class.”) (internal quotation marks omitted); Betts v. Reliable
Collection Agency, Ltd., 659 F.2d 1000, 1005 (9th Cir. 1981)
(holding that subclasses must be dismissed because “the
fundamental requirement that the representative plaintiff must
be a member of the class he represents” was not met). For
this reason, we affirm the district court’s denial of class
certification for Berger’s proposed subclasses two and three
with respect to all four causes of action.
2
Presumably, subclass two was intended to run from March 2005 to
June 2006, rather than “to the present” as it was described in Berger’s
motion. However, the precise end-date of subclass two is irrelevant
because, no matter the closing time, Berger’s sole transaction took place
before its opening. He is not a member of subclass two under any reading
of its scope.
10 BERGER V. HOME DEPOT
D
We turn to the requirements of Rule 23, which are the
focus of our opinion. A putative class-action plaintiff has the
burden of showing that his or her claim meets the
requirements of Rule 23. Wal-Mart Stores, Inc. v. Dukes,
131 S. Ct. 2541, 2551 (2011). A class must meet “each of the
four requirements of Rule 23(a) and at least one of the
requirements of Rule 23(b).” Zinser v. Accufix Research Inst.,
Inc., 253 F.3d 1180, 1186 (9th Cir. 2001). The district court
held that Berger’s proposed classes were sufficiently
numerous, and Home Depot does not challenge that ruling
here. However, Berger appeals the district court’s conclusion
that his classes fell short on each of the remaining
requirements of 23(a) and 23(b).
Berger argues that each of his proposed classes fall under
Rule 23(b)(3), which requires him to “demonstrate the
superiority of maintaining a class action and show ‘that the
questions of law and fact common to class members
predominate over any questions affecting only individual
members.’” Mazza v. American Honda Motor Co., Inc.,
666 F.3d 581, 589 (9th Cir. 2012) (quoting Fed. R. Civ. P.
23(b)(3)). To meet this requirement, the common questions
must be “a significant aspect of the case . . . [that] can be
resolved for all members of the class in a single
adjudication.” Id. (quoting Hanlon v. Chrysler Corp.,
150 F.3d 1011, 1022 (1998)).
Although the district court’s order that we are reviewing
here did not do so, we must analyze each of the plaintiff’s
claims separately. Erica P. John Fund, Inc., v. Halliburton
Co., — U.S. —, 131 S. Ct. 2179, 2184, 180 L. Ed. 2d 24
(2011) (“Considering whether questions of law or fact
BERGER V. HOME DEPOT 11
common to class members predominate begins, of course,
with the elements of the underlying cause of action.”)
(internal quotation marks omitted). Each potential class must
be analyzed on its own merits, with consideration given to the
elements of the claim at stake.
1
California’s Unfair Competition Law (UCL) bans
“unlawful, unfair or fraudulent business act[s] or practice[s]
and unfair, deceptive, untrue or misleading advertising.” Cal.
Bus. & Prof. Code § 17200. Unlike common-law fraud
claims that focus on the victim’s reliance or damages, the
UCL focuses on the perpetrator’s behavior: “to state a claim
under either the UCL or the false advertising law . . . it is
necessary only to show that members of the public are likely
to be deceived.” In re Tobacco II Cases, 46 Cal. 4th 298, 312,
207 P.3d 20, 29–30, 93 Cal. Rptr. 3d. 559, 569–70 (2009).
Actual falsehood, the perpetrator’s knowledge of falsity, and
perhaps most importantly, the victim’s reliance on the false
statements – each of which are elements of common-law
fraud claims – are not required to show a violation of
California’s UCL. Id.; see also Stearns v. Ticketmaster
Corp., 655 F.3d 1013, 1020–21 (9th Cir. 2011).
However, the question of likely deception does not
automatically translate into a class-wide question. See
Stearns, 655 F.3d at 1020 (“We do not, of course, suggest
that predominance would be shown in every California UCL
case. For example, it might well be that there was no
cohesion among the members because they were exposed to
quite disparate information from various representatives of
the defendant.”). In two recent cases, we have held that class
certification of UCL claims is available only to those class
12 BERGER V. HOME DEPOT
members who were actually exposed to the business practices
at issue. Stearns, 655 F.3d at 1020–21; Mazza, 666 F.3d at
595–96. In Stearns, we considered a claim against a website
that automatically enrolled its customers in a program that
charged them a monthly fee. Stearns, 655 F.3d at 1017–18.
This decision relied heavily on the California Supreme
Court’s affirmation of a class action against cigarette
companies based on their decades of denials regarding the
addictive nature and health risks of smoking. Id. at 1020
(quoting Tobacco II, 46 Cal. 4th at 312). In Mazza, we
reversed class certification on a claim against a car company
that allegedly made deceptive and misleading claims about a
particular brake system. Mazza, 666 F.3d at 585–88. In
distinguishing Mazza from Stearns (and Tobacco II), we
relied on two crucial facts about Honda’s advertising
program, which was the source of the alleged violation in the
litigation: first, that it “f[e]ll short of the extensive and long-
term fraudulent advertising campaign at issue in Tobacco II”;
and second, that “its advertising materials do not deny that
limitations [to the brake system] exist.” Id. at 596. In both
breadth and content, it was “unreasonable to presume” that all
class members were exposed to Honda’s misleading
statements, and that without such exposure, consumers were
not likely to be deceived. Id. (citing Pfizer, Inc. V. Superior
Court, 182 Cal. App. 4th 622, 632, 105 Cal. Rptr. 795 (Cal.
Ct. App. 2010) and Davis-Miller v. Automobile Club of
Southern California, 201 Cal. App. 4th 106, 125, 134 Cal.
Rptr. 3d 551 (2011)).
This case is similar to Mazza. Berger has not alleged that
all of the members of his proposed class were exposed to
Home Depot’s alleged deceptive practices – and in fact, he
has alleged the opposite. Each of the five contracts used by
Home Depot requires an independent legal analysis to
BERGER V. HOME DEPOT 13
determine whether the language and design of that contract
did or did not suffice to alert customers that the damage
waiver was an optional purchase, and thereby did or did not
expose that group of customers to a potentially misleading or
deceptive statement. It was logical, plausible, and supported
by the record for the district court to determine that any
common questions shared by Berger’s primary class do not
predominate over the individual questions of contract
interpretation. Fed. R. Civ. P. 23(b)(3); Hinkson, 585 F.3d at
1251. Because it was not an abuse of discretion to conclude
that Rule 23(b) was not satisfied in any respect, we affirm the
district court’s dismissal of the UCL claim with respect to the
primary class.
As for Berger’s subclass one, each member of which
rented tools under Home Depot’s first contract, Berger
similarly has not alleged that each individual was exposed to
the same misrepresentations or deceptions. The parties
contest the existence and form of any signs in Home Depot
stores that alert customers to the optional nature of the
damage waiver before April of 2005 – which includes the
duration of subclass one. This variance over time and among
the different Home Depot locations throughout California is
a crucial issue, which the district court reasonably held must
be resolved on an individual rather than a class-wide basis.
Further, any oral notice given by Home Depot employees
about the optional nature of the damage waiver during a
particular rental transaction would necessarily be a unique
occurrence. It was not an abuse of discretion for the district
court to determine that maintaining a cause of action based on
those statements would require each individual consumer to
show that he or she had personally been exposed to
misleading information. See In re LifeUSA Holding, Inc.,
242 F.3d 136, 145–46 (3rd Cir. 2001) (holding that individual
14 BERGER V. HOME DEPOT
questions predominated over common issues in a putative
class action based on multiple independent unscripted
interactions); Wang v. Chinese Daily News, 709 F.3d 829,
835 (9th Cir. 2013) (noting that it is an abuse of discretion to
certify a class based on policies without considering
individual issues), Davis-Miller, 201 Cal. App. 4th at 121
(“[W]hen the class action is based on alleged
misrepresentations, a class certification denial will be upheld
when individual evidence will be required to determine
whether the representations at issue were actually made to
each member of the class.”). For these reasons, we affirm the
dismissal of Berger’s UCL claims as applied to his proposed
subclass one.
2
California’s Consumer Legal Remedies Act (CLRA)
provides a cause of action for “unfair methods of competition
and unfair or deceptive acts or practices” in consumer sales.
Cal. Civ. Code § 1770. Unlike the UCL, the CLRA demands
that each potential class member have both an actual injury
and show that the injury was caused by the challenged
practice. Steroid Hormone Product Cases, 181 Cal. App. 4th
145, 155–56, 104 Cal. Rptr. 3d 329, 337 (2010). However,
if a “material misrepresentation ha[s] been made to the entire
class, an inference of reliance arises as to the class.” Stearns,
655 F.3d at 1022 (quoting In re Vioxx Class Cases, 180 Cal.
App. 4th 116, 129, 103 Cal. Rptr. 3d 83, 95 (2009)).
While materiality is not at stake here – the price of a tool
rental being an undeniably material term – the issue is
whether the allegedly misleading statements were actually
made to the consumers in the class. Because the contracts
used by Home Depot at different times contained distinct
BERGER V. HOME DEPOT 15
terms, the question of whether a material misrepresentation
was made to the entire class requires an individualized
determination that in our view the district court reasonably
found predominates over any common questions, thereby
compelling us to affirm its dismissal of the CLRA claim for
the primary class. Because the signs and oral representations
are a fundamental part of the alleged misrepresentation, in
that explicit signs or explicit verbal advice would negate the
claimed misrepresentation, the district court sensibly held that
the individualized determination of the nature of those
statements supported denial of class certification of the
CLRA claim for Berger’s proposed subclass one. This was
not an abuse of discretion.
3
Berger’s common law claims also are not susceptible to
class treatment. The elements of unjust enrichment are
“receipt of a benefit and unjust retention of the benefit at the
expense of another.” Lectrodryer v. SeoulBank, 77 Cal. App.
4th 723, 726, 91 Cal. Rptr. 2d 881 (2000). This equitable test
does not turn merely on the transfer of money or other
benefits from one party to another – it requires injustice. Doe
I v. Wal-Mart Stores, Inc., 572 F.3d 677, 684 (9th Cir. 2009)
(“The fact that one person benefits another is not, by itself,
sufficient to require restitution. The person receiving the
benefit is required to make restitution only if the
circumstances are such that, as between the two individuals,
it is unjust for the person to retain it.”) (quoting First
Nationwide Sav. v. Perry, 11 Cal. App. 4th 1657, 15 Cal.
Rptr. 2d 173, 176 (1992)). Money had and received is a form
of restitution that applies when the unjust enrichment
occurred thanks to a contract or other transfer of “a definite
sum.” See Walter v. Hughes Commc’ns, Inc., 682 F. Supp. 2d
16 BERGER V. HOME DEPOT
1031, 1047–48 (N.D. Cal. 2010) (citing California cases
regarding money had and received).
Whether Home Depot’s receipt of funds for the damage
waiver was unjust or inequitable, thereby justifying
restitution, depends on whether Home Depot told its tool
rental customers that the waiver was an optional product.
This determination, as explained above, necessarily rests on
individualized determinations about the language of the
contract signed by the customer, the placement and content of
any signs, and the oral representations from Home Depot
employees relating to the damage waiver. As with the UCL
and CLRA claims, the individual issues could reasonably be
found to predominate over the common questions in the
common-law claims, and we affirm the district court’s
dismissal of both the primary class and proposed subclass
one.
III
We conclude that we have jurisdiction over this appeal
despite Berger’s stipulation on dismissal after the negative
class action ruling. We also conclude that the district court
did not abuse its discretion in denying class certification
because the record did not show that the requirements of Rule
BERGER V. HOME DEPOT 17
23(b)(3) were satisfied; common questions did not
predominate over individual issues in any of Berger’s claims.3
AFFIRMED.
3
Because we hold that it was not an abuse of discretion for the district
court to conclude that Berger’s proposed classes do not meet the
requirements of Rule 23(b)(3), and Berger did not rely on any other part
of Rule 23(b), we need not and do not reach the question of whether the
district court abused its discretion in denying certification based on the
threshold ascertainability test. Nor do we reach the question whether Rule
23(a) was satisfied. See Hanon, 976 F.2d at 508 (“[W]e may sustain the
court’s ruling [on class certification] on any ground supported by the
record.”); Zinser, 253 F.3d at 1189 (holding that a putative class did not
meet the requirements of Rule 23(b)(3) before discussing the elements of
Rule 23(a).).