Washington Supremes Reject Playing Host to Nationwide Class Actions and Hold That Washington's Consumer Protection Act Doesn't Apply to Nonresidents' Claims
That Fred Burnside gets TWO gold stars today! First, he informed me that the Ninth Circuit refused to hear the appeal of the decision denying class certification in the Xbox litigation. Now he shares with us a well-written opinion from the Washington Supreme Court holding that a trial court in wireless telephone litigation correctly refused to certify a nationwide class action.
The decision in Schnall v. AT&T Wireless Servs., Inc., No. 80572-5 (Wash. Jan. 21, 2010) (en banc) is particularly timely because its reasoning on the Washington Consumer Protection Act stands in stark contrast to the decision I highlighted on Tuesday, which had effectively read the causation requirement out of Florida's Deceptive and Unfair Trade Practices Act. But I've gotten ahead of myself.
In Schnall, plaintiffs had brought a putative nationwide class action against AT&T Wireless, claiming that its collection of a "universal connectivity charge" violated the customers' contracts and violated Washington's Consumer Protection Act. The trial court had refused to certify the class, but the intermediate appellate court had reversed, reasoning that the challenge to a standardized contract was capable of class adjudication.
The Washington Supreme Court reversed the class certification, making four important points. First, the court held that the trial court had not abused its discretion in holding that the need to apply the law of 50 states made the putative nationwide class fail the predominance requirement. The Washington Supremes observed that the trial court was correct in honoring the choice of law provision in the contracts, which required the application of the law of the place where the customer signed the contract. Further, it cited at length the federal precedents recognizing that the need to apply the law of 50 states generally makes class certification untenable, because the variations in state laws may swamp common issues and defeat predominance. Slip op. at 11. For example, in the context of the Schnall complaint, the court observed that, for those states that recognize it, "[t]he availability of the voluntary payment doctrine alone could abrogate AT&T's liability for all customers who voluntarily paid the [fee] after receiving the informational flyer." Id. at 12.
Second, the Washington Supremes noted in their analysis of the superiority factor that:
Washington has no interest in seeing contracts executed by AT&T representatives in other states with citizens of those states examined and adjudicated in Washington courts. Certified as a nationwide class action, this case would present an unwarranted and unnecessary burden on the state judicial system, all at a large cost to taxpayers. There is no sound reason in this case for this court to force Washington trial courts to entertain the contract claims of citizens from around the nation. Their state courts are equally as prepared, if not better situated to apply the contract laws of their states. The trial court did not abuse its discretion by denying nationwide certification of the plaintiffs' contract claims.
Id. at 15 (citation omitted).
Third, the Washington Supremes recognized that the state's Consumer Protection Act ("CPA") does not apply extraterritorially to provide a cause of action to nonresidents whose claims arose in other states. Id. at 16. This geographic restriction is inherent in the language of the statute, but as the court recognized, it also emanates from the CPA's "history as a tool used by the State attorney general to protect the citizens of Washington." Id. The AG, the court noted, has no power beyond the state's borders and is charged with protecting only Washington residents. Thus, regardless of whether it is the official Attorney General or a "private attorney general" suing to enforce the statute, the jurisdictional limitation applies and a "private claimant cannot state a CPA claim by proving the defendant's practices affect the public interest or the citizens of another state." Id. at 17 (emphasis in original).
Fourth -- and this is where the decision stands in stark contrast to the one I discussed on Tuesday -- the Washington Supremes reiterated that even for Washington plaintiffs, proof of causation is an essential element of a CPA claim. Id. at 18. Indeed, "proximate cause in a class action cannot be established by 'mere payment' of an allegedly injurious charge." Id. Rather, "in the context of private CPA actions where plaintiffs seek damages, more than a mere capacity to deceive must be shown to establish 'some causal link between defendant's unfair act and [consumer's] injury," and, "[i]n the context of private misrepresentation cases, a plaintiff can satisfy the 'but for' causation requirement by showing she relied on the misrepresentation." Id. at 20 (citation omitted). In the context of the Schnall case, that meant that where the plaintiff actually knew that the charge was being levied, the alleged "misrepresentation" had been eliminated as the "but for" cause of the injury. Id. at 21. Accordingly, even for Washington residents to whom the CPA applied, the issue of causation could be an individual issue that would defeat predominance. But because the trial court had not analyzed that question sufficiently, the Washington Supremes remanded the case with instruction to consider the question in the context of a statewide class.
The court's conclusion forcefully shuts Washington's doors to putative nationwide class actions:
In sum, we agree with the trial court that this action should not be certified as a nationwide class action. Washington need not apply its Consumer Protection Act, or its contract laws, to the citizens of other states in order to protect the interests of the citizens of Washington. A nationwide class would be unmanageable and unduly burdensome on the trial court and the state judicial system and serve no real benefit to plaintiffs who are free to bring statewide class actions in their home states.
Id. at 22.
