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January 2012

Ninth Circuit Further Curtails Consumer False Advertising Class Actions

The Ninth Circuit recently issued a significant ruling which further curtails consumer false advertising class action litigation in the wake of Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011).  The majority in Mazza et al. v. Am. Honda Motor Co., 2012 U.S. App. LEXIS 626 (9th Cir. 2012) reversed the Central District of California, which had certified a nationwide class of all consumers in the United States who purchased or leased Acura RL vehicles equipped with a Collision Mitigation Braking System ("CMBS") for two reasons.  First, the appellate court held, the district court erred in concluding that California law could be applied to a nationwide class.  Second, it found that the district court improperly ruled that all consumers who purchased or leased the Acura RL vehicles with the CMBS relied on defendant's allegedly misleading advertisements.

In Mazza, the plaintiffs – from 44 different states – alleged that certain of defendant's advertisements misrepresented the characteristics of the CMBS and omitted material information on its limitations.  Plaintiffs' complaint asserted four claims under California Law, viz., California's Unfair Competition Law (UCL), False Advertising Law, Consumer Legal Remedies Act, and a claim for unjust enrichment.  The district court certified plaintiffs' class, and held that California Law could be applied to all class members because Honda failed to prove how differences in the laws of various states are material, or how other states had an interest in applying their laws to the suit.  The district court also held that all class members were entitled to an inference of reliance under California Law. 

In a 2-1 decision, the Ninth Circuit ruled that the district court misapplied California's choice of law rules when it certified the nationwide class under the state's consumer protection and unjust enrichment laws.  The court delineated how different jurisdictions possess materially different consumer protection laws.  For instance, it noted that the California consumer laws at issue have no scienter requirement, whereas other states' consumer protection statutes do require scienter.  The appellate court also highlighted how California requires a named class plaintiff to demonstrate reliance, while some other states' consumer protection statutes do not.  In sum, the court emphasized that each state has an interest in setting the appropriate level of liability for companies conducting business within its territory.  If the Mazza class action were to proceed, the court reasoned, foreign states would be impaired in their ability to successfully calibrate liability to foster commerce.  The court therefore held that each class member's consumer protection claim should be governed by the consumer protection laws of the jurisdiction in which the transaction took place. 

Further, the Ninth Circuit agreed with Honda's contention that the misrepresentations at issue did not warrant a presumption of reliance, primarily so because many class members were never exposed to the allegedly misleading advertisements, insofar as advertising of the challenged system was very limited.  According to the court, Honda's product brochures and TV commercials advertising the CMBS fell short of the "extensive and long-term [fraudulent] advertising campaign" at issue in In re Tobacco II Cases, 46 Cal. 4th 298 (Cal. 2009).

The impact of Mazza will likely result in a marked decrease in the volume of nationwide consumer class action litigation instituted in California, since California's strict consumer protection laws can no longer be applied in the Ninth Circuit to plaintiffs from other jurisdictions.  Mazza, therefore, appears to present an additional hurdle for plaintiffs, who have seen their ability to sue collectively curtailed after the Supreme Court ruling in favor of Wal-Mart stores in Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011) (holding that the commonality requirement is not met by generalized questions that do not meaningfully advance the litigation and is not met where named plaintiffs and putative class members have not suffered the "same injury").


Commercial Litigation

Commercial Litigation