Summer California Supreme Court Decisions Ease Procedural Thresholds for Consumer Claims


I.  Introduction: An Eased Standing Requirement for Unruh Act Claims against Web-Based Businesses, a Lower Bar to Show a Class is Ascertainable in Class Actions, and What Businesses Need to Know

In two cases decided in July and August of this year, the California Supreme Court struck a balance in consumer claims between easing access to the courts for such claims and protecting defendants’ rights to due process.  In White v. Square, Inc. (Aug. 12, 2019), the Court held that a person who seeks access to an online service but does not attempt to register for it after reading terms that exclude him or her may bring a claim under California’s Unruh Civil Rights Act, even absent an attempt to register for the service.  In Noel v. Thrifty Payless, Inc. (July 29, 2019), the Court settled a split in authority on the requirement in class action suits that the class members be ascertainable, landing on the side of the less stringent interpretation of the requirement.

For companies doing business with California consumers, these holdings mean:

  1. Web-based companies should assure that their terms of service do not unduly exclude consumers or businesses on bases that are not easily justified by reasoning that is consistent with California law requiring non-discriminatory access to accommodations, facilities, privileges or business services.
  2. Consumers in California may seek relief on a class-wide basis against consumer-oriented businesses even where a representative plaintiff cannot identify each individual consumer who is a potential member of the class, provided that members can be identified through objective characteristics and common transactional facts, and the other class certification criteria are met. Therefore, businesses need to assure that low-value high-volume products are marketed truthfully and meet applicable safety and other standards.
  3. If a business is served with an action asserting class claims, then, when the class certification motion is filed, the business may still raise the issue of the feasibility of contacting class members, but must do so in the context of other applicable class action criteria, such as the manageability of the class, and/or the lack of superiority of a class proceeding to alternative means of resolving the claims.

II.  White v. Square, Inc.: A Plaintiff Need not Plead an Attempt to Use a Website to Bring a Claim for Discrimination under the Unruh Act.

Square, Inc. offers an online service through which subscribers, for a per-transaction fee, may accept electronic payments without opening up a merchant account with a Visa or MasterCard member bank.  Its terms of service require a user, when creating an account, to confirm that the user will not accept payments for bankruptcy attorneys or collection agencies.  In White v. Square, Inc., a bankruptcy attorney alleged that Square’s agreement discriminates against bankruptcy attorneys in violation of the California’s Unruh Civil Rights Act.  In his second amended complaint, he claimed that he accessed the Square website intending to register for use of its services for his bankruptcy practice, but after reviewing its terms of services, he did not click the button “Continue” to register, because he believed that he could not do so without committing fraud.

The Unruh Act prohibits discrimination on the basis of 14 enumerated categories, in “accommodations, advantages, facilities, privileges or services in all business establishments,” and authorizes a private right of action for damages, injunctive relief and attorneys’ fees.  The non-discrimination categories in the Act are not exclusive.

The case raised the issue of whether a plaintiff “has standing to bring a claim under the Unruh Civil Rights Act when the plaintiff visits a business’s website with the intent of using its services, encounters terms and conditions that allegedly deny the plaintiff full and equal access to its services and then leaves the website without entering into an agreement with the service provider”.  The Court held that the plaintiff need not have entered into an agreement with the business to bring a claim under the Unruh Act.  The general rule that a person “suffers discrimination under the Act when he or she “presents himself or herself to a business with an intent to use its services but encounters an exclusionary policy or practiced that prevents him or her from using those services,” applies to online businesses.

In reaching this determination, the Court viewed the issue in light of the legislative intent and statutory purpose.  The Court explained that the Unruh Act has a “broad remedial purpose and overarching goal of deterring discriminatory practices by businesses.”  Courts are required to construe the Act liberally to carry out its purpose.

Thus, there is no requirement that a plaintiff ask the business for an exception to the stated restriction or to verify that the restriction applies to him or her.  “Such a requirement would limit a business’s liability only to individuals who inquire and would potentially enable a business to make exceptions to its stated policies in order to avoid suit . . . .”

In pleading a claim under the Unruh Act, a plaintiff “must allege, for purposes of standing, that he or she visited the business’s website, encountered discriminatory terms, and intended to make use of the business’s services.”

III.  Noel v. Thrifty Payless, Inc.: Class Action Plaintiffs Need Not Show that Class Members May Be Individually Identified to Meet the “Ascertainability” Requirement for Certification of the Class, provided objective characteristics can be used to identify class members when necessary.

To seek certification of a class in a class action under section 382 of the California Code of Civil Procedure, a class representative plaintiff must meet criteria established by the courts.  One of the criteria is that the class is ascertainable.  (The other criteria are that the class is “sufficiently numerous, [and has] a well-defined community of interest, and [that] substantial benefits from certification . . . render proceeding as a class superior to the alternatives.”)

California courts had not applied the ascertainability standard consistently – some required that, among other things, the representative plaintiff show that the individual members of the proposed class can be readily identified without unreasonable expense or time, while other courts employed a less stringent requirement that the plaintiff define the class “in terms of objective characteristics and common transactional facts” that make identification of class members possible when that becomes necessary.

Reviewing the California and federal case law on the ascertainability standard, the Court held that the less stringent standard best achieved “the limited but important function of the ascertainability requirement,” to protect “the due process interests of all parties and absent class members without unduly impairing the efficacy of the class action mechanism.”  The Court identified two ways in which the requirement that a class definition be framed in objective terms promotes due process:  First, it “puts members of the class on notice that their rights may be adjudicated in the proceeding, so they must decide whether to intervene, opt out, or do nothing and live with the consequences.”  Second, it supplies “a concrete basis of determining who will and will not be bound by (or benefit from) any judgment.”

An ascertainability requirement that is focused on objective criteria and common transactional facts assures that high-volume low-individual-value claims can proceed without undue administrative burdens that would preclude such claims from being adjudicated – either on an individual or class basis.  Quoting from the case of Mullins v. Direct Digital, LLC, 795 F.3d 654 (7th Cir. 2015), the Noel Court explained the detrimental impact that a heightened ascertainability approach would have on the viability of such class actions:

“‘More broadly,’ the court wrote, ‘the stringent version of ascertainability loses sight of a critical feature of class actions for low-value claims . . . .  In these cases, “only a lunatic or a fanatic” would litigate the claim individually, [citation], so opt-out rights are not likely to be exercised by anyone planning a separate individual lawsuit.  When this is true, it is particularly important that the types of notice that courts require correspond to the value of the absent class members’ interests.  [Citation.] . . . .  [¶] The heightened ascertainability approach upsets this balance.  It comes close to insisting on actual notice to protect the interests of absent class members, yet overlooks the reality that without certification, putative class members with valid claims would not recover anything at all.’”

California case law “has adopted a . . . practical approach” to the question of what notice to class members will be required in a particular case: “the circumstances of each case determine what forms of notice will adequately address due process concerns.”  Therefore, “due process does not demand that the proponent of class treatment demonstrate, as a prerequisite of certification, that (much less how) class members eventually will receive individual notice of the action.”  (Emphasis in original.)  And when the time comes in a case to determine what notice is appropriate, “individual notice may not always be required even for absent class members whose whereabouts are known”.  A representative plaintiff “is not required to notify individually every readily ascertainable member of his class without regard to the feasibility of such notice; he need only provide meaningful notice in a form that ‘should have a reasonable chance of reaching a substantial percentage for the class members.’”

Since due process does not always require personal notice to all members of a class for the class action to proceed or for an individual member of a certified class to be bound by the judgment, “a construction of the ascertainability requirement that presumes such notice is necessary to satisfy due process, and demands that the plaintiff show how it can be accomplished, threatens to demand too much, too soon.”  Therefore, “as a rule, a representative plaintiff in a class action need not introduce evidence establishing how notice of the action will be communicated to individual class members in order to show an ascertainable class.”  As explained above, the representative plaintiff need only define the class based on objective characteristics and common transactional facts.

The impact of the Court’s decision in Noel is unclear because of the Court’s comments that the issue of whether a plaintiff can show a feasible means to identify and contact class members may be raised and considered in reviewing other requirements for class certification, for example, the requirements that the plaintiff show that the proposed class is manageable and that the class proceeding is superior to alternative means of resolving claims.  But based upon the Court’s in depth analysis of the ascertainability requirement and the impact of that requirement on low individual-value claims, it is likely that, even if the feasibility of notifying all class members is raised in connection with other class action criteria, the Court will lower the bar for such claims.

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