Jason Decarlo v. Costco ( 2018 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS JUL 31 2018
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
JASON DECARLO, individually and on No. 16-56602
behalf of all others similarly situated,
D.C. No.
Plaintiff-Appellant, 3:14-cv-00202-JAH-BLM
v.
MEMORANDUM*
COSTCO WHOLESALE CORPORATION,
a Washington Corporation and MBNR,
INC., a New Mexico corporation,
Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of California
John A. Houston, District Judge, Presiding
Argued and Submitted July 9, 2018
Pasadena, California
Before: PAEZ, FISHER,** and CHRISTEN, Circuit Judges.
Plaintiff-Appellant Jason DeCarlo (“DeCarlo”) appeals the dismissal with
prejudice of his suit against Defendants-Appellees Costco Wholesale Corporation
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable D. Michael Fisher, United States Circuit Judge for the
U.S. Court of Appeals for the Third Circuit, sitting by designation.
(“Costco”) and MBNR, Inc (“MBNR”). We reverse in part, vacate in part, and
remand for further proceedings.
1. We first consider whether DeCarlo has sufficiently alleged Article III
standing, that is, whether he “(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.” Spokeo, Inc. v. Robins, 136 S. Ct.
1540, 1547 (2016). We review de novo the district court’s determination of this
issue. Maya v. Centex Corp., 658 F.3d 1060, 1067 (9th Cir. 2011).
The district court correctly concluded that DeCarlo lacks Article III standing
with respect to his claims under the “unlawful” prong of California’s Unfair
Competition Law (“UCL”), because the harm that DeCarlo alleges is not fairly
traceable to the mere fact that Costco and MBNR allegedly violated certain
provisions of California law regulating their business relationships. But with “no
jurisdiction to reach the merits,” the district court “had no power to dismiss [these
claims] with prejudice.” Hampton v. Pac. Inv. Mgmt. Co. LLC, 869 F.3d 844, 847
(9th Cir. 2017). We therefore vacate the judgment as to these claims and remand
with instructions to dismiss them without prejudice pursuant to Federal Rule of
Civil Procedure 12(b)(1).
As to DeCarlo’s claims based on the allegation that it was misleading to
market Costco-based optometrists as independent—specifically, his claims under
2
California’s False Advertising Law (“FAL”), Consumer Legal Remedies Act
(“CLRA”), as well as the “unfair” and “fraudulent” prongs of the UCL—the
district court erred in concluding that DeCarlo lacks Article III standing. Someone
who alleges that he or she “paid more” for something than he or she “otherwise
would have paid” or “bought [something] when they otherwise would not have
done so” has “suffered an Article III injury in fact.” Hinojos v. Kohl’s Corp., 718
F.3d 1098, 1104 n.3 (9th Cir. 2013) (quoting Mazza v. Am. Honda Motor Co., 666
F.3d 581, 595 (9th Cir. 2012)); accord Maya, 658 F.3d at 1069. DeCarlo has
alleged that he was injured in this way. That alleged injury, moreover, is not
speculative and is traceable to Costco and MBNR because DeCarlo adequately
alleged that his optometrist was not independent even though Costco and MBNR
advertised that he was. DeCarlo’s alleged injury is also redressable, as he could be
compensated for the difference between how much he paid for the eye exam and
how much he valued one from an optometrist who was not independent.
2. We next consider whether DeCarlo has sufficiently alleged statutory
standing under California law with respect to his misrepresentation claims. We
conclude that he has.
Under the UCL and the FAL, “the quantum of lost money or property
necessary to show standing” is the same as that required to show Article III
standing. Van Patten v. Vertical Fitness Grp., LLC, 847 F.3d 1037, 1048–49 (9th
3
Cir. 2017) (quoting Kwikset Corp. v. Superior Court, 246 P.3d 877, 886 (Cal.
2011)). And much like the plaintiffs in Kwikset Corp. v. Superior Court, 246 P.3d
877 (Cal. 2011), who “bargained for locksets that were made in the United States”
but “got ones that were not” made in the United States, id. at 892, DeCarlo
bargained for an eye exam performed by an independent optometrist but got one
performed by an optometrist who allegedly was not independent. Furthermore,
because the California legislature chose to regulate the independence of
optometrists, and because Costco allegedly marketed Costco-based optometrists as
independent, at this stage we can conclude only that the independence of the
optometrist was a material part of DeCarlo’s bargain.1 See id. at 892 (applying
similar reasoning and observing that materiality should rarely be decided at the
pleadings stage).
DeCarlo has also satisfied the UCL’s and the FAL’s causation requirements.
That is because “[p]leading that one would not have otherwise purchased the
product but for the [defendants’ alleged misconduct] . . . satisfies the consumer’s
1
Birdsong v. Apple, Inc., 590 F.3d 955 (9th Cir. 2009), does not counsel
otherwise. There, the plaintiffs admitted that the defendant “provided a warning
against listening to music at loud volumes,” rather than representing that doing so
was safe. Id. at 961. That is why safety from hearing loss “was not part of the
bargain to begin with.” Id. This case is precisely the opposite. Again, Costco
allegedly marketed Costco-based optometrists as independent, making
independence part of the bargain.
4
obligation to plead a causal link between the advertising and the alleged economic
injury.” Hinojos, 718 F.3d at 1104 n.5.
Based on the foregoing, it follows a fortiori that DeCarlo has statutory
standing under the CLRA as well. See id. at 1108.
3. We remand for the district court to consider in the first instance whether
DeCarlo has plausibly stated a claim for relief under Federal Rule of Civil
Procedure 12(b)(6), and for further proceedings not inconsistent with this
disposition.2
REVERSED in part, VACATED in part, and REMANDED.
2
We express no view on the argument that DeCarlo’s CLRA claims fail as
a matter of law due to the CLRA’s reference to “any person in a transaction,” Cal.
Civ. Code § 1770(a), and—with respect to the claim against MBNR—DeCarlo’s
alleged failure to send a notice-and-demand letter.
5