California Federal Court Allows Nationwide UCL Class Action in Pay-Per-Click Suit Against CitySearch
California state courts are reluctant to apply their Unfair Competition Law to a nationwide class. Perhaps it's because they recognize that theirs is one of the most liberal (and standardless) consumer fraud statutes in the nation. Whatever the cause, this reluctance made it all the more notable when Judge Christina A. Snyder held -- with little conflicts-of-law analysis whatsoever -- that the UCL could be applied to a nationwide class of advertisers suing Citysearch. See Menagerie Productions v. Citysearch, 2009 WL 3770668 (C.D. Cal. Nov. 9, 2009).
Plaintiffs sought to represent a nationwide class of advertisers who had elected to have their advertising priced by the number of clicks on their ads. CitySearch recognized that "spiders," "robots," and other tools often try to click on advertisers' ads, and these do not represent potential sales. Thus, CitySearch represented that it employed "industry leading traffic quality systems . . . to detect unusual and fraudulent click behavior. Attempts to artificially drive up an advertiser's clicks, whether manually or via robots or other deceptive tools, will be detected by our systems and automatically thrown out."
Plaintiffs claim CitySearch failed to identify fraudulent clicks, and that they paid too much for their advertising as a result. They asserted breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of the Unfair Competition Law.
The court found that the requirements of Rule 23(a) were met, ignoring the defendant's arguments that plaintiffs had not seen the alleged misrepresentations and that CitySearch had had individual dealings with complaining advertisers, which made the plaintiffs' claims atypical.
The court then analyzed whether the proposed class met the requirements of Rule 23(b)(3). It held that the breach of contract count met the predominance requirement because the language of the contract -- which was the same for all class members -- was unambiguous, and it specified that California law would govern. Even if the language were not unambiguous, the court reasoned, the extrinsic evidence that the court would rely upon would be representations on CitySearch's website that were uniform for all class members. It similarly held that the breach of the covenant of good faith and fair dealing count also met the predominance requirement.
On the UCL claim, the court found that the predominance requirement was met for the "fraudulent" prong of the UCL because, it reasoned, there was no need to adjudicate individual circumstances; rather, applying In re Tobacco II, 46 Cal. 4th 298, 320 (2009), the court concluded that the case would be adjudicated under a "reasonable consumer standard" that focuses on whether members of the public were likely to be deceived." Thus, there would be no individualized proof of deception, reliance, and injury caused thereby.
The court reached a different conclusion for the "unfairness" prong of the UCL. There, the court held that the test for "unfairness" requires a balancing of effects and motives that make the plaintiffs' individual expectations relevant in determining the extent of the harm. As such, the court concluded that the predominance requirement was not met for claims under the "unfairness" prong of the UCL.
Incredibly, the court's entire analysis of whether the UCL could be applied to a nationwide class based on the California residence of defendant CitySearch is contained in this sentence:
Furthermore, the Court agrees that California's UCL can be applied to the nationwide class, as CitySearch has not shown that any "differences between California law and the law of other jurisdictions are material," nor that "other states have an interest in applying their laws to this case."
2009 WL 3770668 at *15 (citation omitted). To begin with, the burden on choice of law is the plaintiffs' as proponents of the class, not CitySearch's. As yesterday's post showed, without an extensive choice of law analysis, plaintiffs cannot even begin to meet that burden. But beyond that, come on: there is no evidence of the differences between the California UCL and other states' UCLs being material? Really?!! How about the fact that every other state requires some sort of proof of actual deception that causes injury -- for each class member? Or the fact that some states, like South Carolina, do not even allow class actions under their consumer fraud statutes?
The CitySearch opinion has a number of points that would appear to present appealable error, including the court's conclusions on superiority in which the proposed trial plan utterly ignores the defendants' individual defenses. But this conclusion -- applying California's UCL to a nationwide class -- is the most wrong and least supported in the opinion, which should make it rife for an appeal to the Ninth Circuit.
