California Supreme Court Holds CLRA Anti-Waiver Provision is Preempted

The California Supreme Court issued its ruling this week in Sanchez v. Valencia Holding Co., enforcing an arbitration provision in a class action asserting claims under the Consumer Legal Remedies Act ("CLRA") (Civ. Code §1750 et seq.)

In Sanchez, plaintiff filed a putative class action against defendant car dealer in connection with the purchase of a used car, alleging violations of the Consumer Legal Remedies Act (CLRA) (Civ. Code §1750 et seq.), the Automobile Sales Finance Act (Civ. Code, §§ 2981–2984.6), California's unfair competition law (UCL) (Bus. & Prof. Code, §§ 17200–17210), the Song-Beverly Consumer Warranty Act (Civ. Code, §§ 1790–1795.8), and Public Resources Code section 42885. Defendant moved to compel arbitration pursuant to the sales contract, which included a class arbitration waiver.  The trial court denied the motion, holding the class arbitration waiver unenforceable under the CLRA.  Defendant appealed.  The Court of Appeal affirmed, declining to reach the issue of whether the class arbitration waiver was enforceable, but holding that the arbitration provision itself was unconscionable. The California Supreme Court granted review. 

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Court of Appeal Affirms Denial of Arbitration Petition Based on Waiver

In Oregel v. PacPizza, LLC, the First District California Court of Appeal denied defendant’s motion to compel arbitration, holding defendant had waived arbitration based on substantial conduct inconsistent with its claimed right to arbitrate during the seventeen months between plaintiff’s initiation of the class action and defendant's assertion of the arbitration agreement.

Plaintiff's complaint alleged failure to reimburse delivery drivers for necessary expenses in violation of Labor Code section 2802 and California’s Unfair Competition Law. Plaintiff signed an arbitration agreement as part of his employment contract.  Defendant did not seek to enforce arbitration until more than seventeen months and over 1,300 attorney hours, including extensive class discovery and class certification briefing. The trial court ruled that there was clear and convincing evidence that defendant had waived its right to arbitrate plaintiff’s claims. Defendant appealed.

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One to Watch: Does Offer of Complete Relief Moot TCPA Class Claims?

The U.S. Supreme Court granted a petition for a writ of certiorari to review the Ninth Circuit ruling in Gomez v. Campbell-Ewald Co. The Court granted certiorari to answer the following three questions. Does an offer of complete relief render a named plaintiff’s individual claim moot? Does a class claim become moot if a plaintiff receives an offer of complete relief before any class is certified? Does derivative sovereign immunity for government contractors apply only to claims arising from property damage caused by public works projects?

In Gomez,the U.S. Navy hired defendant to conduct a multi-media recruitment campaign that involved sending recruitment text messages to 150,000 adults. Plaintiff, a recipient of one of the text messages, filed a putative class action alleging violations of the Telephone Consumer Protection Act (“TCPA”). Before class certification, defendant offered to settle the matter by paying plaintiff more than the statutory maximum under the TCPA, but plaintiff declined the offer.

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Song-Beverly Does Not Prohibit Data Collection After Transaction

In Harrold v. Levi Strauss & Co., the First District California Court of Appeal upheld the trial court’s interpretation of the Song-Beverly Credit Card Act, holding that section 1747.08 of the Act does not prohibit stores from collecting personal identification information from customers once a credit card transaction has been concluded.

In Harrold, plaintiff alleged that Levi Strauss & Co. and Levi’s Only Stores, Inc. (Levi’s) violated section 1747.08 of Song-Beverly by requesting and recording email addresses from customers after completing in-store credit card transactions. The trial court denied plaintiff’s motion for class certification, holding that requests for personal identification information only violate the statute if a consumer would reasonably believe that divulging the information is a condition of completing the credit card transaction. Plaintiff appealed.

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Song-Beverly Does Not Prohibit Collection of Personal Information for Online Alcohol Purchase

In Ambers v. Beverages & More, Inc., the Second District California Court of Appeal held that the Song-Beverly Credit Card Act’s prohibition on collecting personal identifying information (PII) during credit card transactions does not apply to online purchases that are later picked up from retail stores if requesting a customer’s PII is necessary to prevent fraud.

In Ambers, plaintiff filed an unverified class action complaint against defendant Beverages & More (BevMo) alleging violations of section 1747.08 of Song-Beverly. BevMo required plaintiff to provide PII as a condition of completing his online purchase of alcohol, which would later be picked up at a BevMo store. Plaintiff alleged that BevMo’s online request for his PII was unnecessary to prevent fraud because he was required to show identification at the retail store before receiving his merchandise. BevMo demurred, arguing that pursuant to its website’s terms and conditions, plaintiff’s transaction was completed at the moment of purchase. Thus, the PII was necessary to prevent fraud and the transaction fell under the exception set forth in subdivision (c)(4) of the Song-Beverly Act. The trial court sustained the demurrer without leave to amend. Plaintiff appealed.

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9th Circuit Analyzes Securities Exception to CAFA Removal

In Eminence Investors, LLLP v. Bank of New York Mellon, the 9th Circuit applied the securities exception to defendant's removal under the Class Action Fairness Act ("CAFA") and dismissed plaintiff's appeal of the remand order.

In Eminence, plaintiff sued defendant in 2011, later amending its complaint to assert class allegations for breach of fiduciary duty and gross negligence, among other things, as holders of bonds on which defendant was the fiduciary, seeking damages in excess of $10 million for each of four causes of action.  Defendant timely removed the amended complaint under CAFA.  The district court granted plaintiff's motion to remand, holding that the removal was untimely, but not reaching the question of whether the securities exception to CAFA applies.  Defendant sought to appeal under 28 U.S.C. 1453(c)(1).

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9th Circuit Holds CAFA Can Provide a Second Removal Period

In Jordan v. Nationstar Mortgage LLC, the 9th Circuit held that the Class Action Fairness Act ("CAFA") provides a 30-day removal period from the date the grounds for removal under CAFA are ascertainable, even if an earlier pleading revealed a basis for federal removal jurisdiction.

In Jordan, plaintiff sued defendant in a putative class action in state court, alleging, among other things, violation of the Fair Debt Collection Practices Act.  The state court certified a class on May 9, 2014.  On June 3, 2014, plaintiff served responses to defendant's discovery that asserted total damages in excess of $25,000,000.  Two days later, defendant removed the case to federal court based on CAFA.  Plaintiff moved to remand, arguing that defendant's removal was untimely because it could have, but did not, remove the original complaint based on federal question jurisdiction when it was filed two years prior.  Defendant asserted that the June 2014 discovery responses were the first paper that revealed grounds for removal under CAFA, and that the prior grounds for removal were not a bar to a later removal once CAFA's requirements had been met.  The district court remanded the case back to state court, and awarded plaintiff attorney's fees for the remand motion.  Defendant applied to appeal under 28 U.S.C. 1453(c), which permits review of remand orders under CAFA.

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9th Circuit: Class Certification Triggered New CAFA Removal Period

In Reyes v. Dollar Tree Stores, Inc., the 9th Circuit held that a state court's order certifying a class that met the requirements of removal under the Class Action Fairness Act ("CAFA") created a new occasion for removal.

In Reyes, defendant removed the wage-and-hour case to federal court in 2012 based on CAFA.  Plaintiff moved to remand, asserting that the narrow definition of the proposed class did not satisfy CAFA's $5 million amount-in-controversy requirement.  The district court granted the motion and remanded the case to state court.  The state court later entered an order certifying a class based on a broader class definition, for which the amount in controversy exceeded $5 million.  Defendant removed again under CAFA.  The district court held that this second removal was untimely because it was based on the same complaint as the first removal.  Defendant applied to appeal under 28 U.S.C. 1453(c), which permits review of remand orders under CAFA.

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CFPB Arbitration Study Revives Consumer Arbitration Policy Debate

The Arbitration Study issued last month by the Consumer Financial Protection Bureau revives a long-standing policy debate over consumer arbitration.

The CFPB Arbitration Study, mandated by Dodd-Frank, analyzes the prevalence of consumer arbitration, consumer knowledge and understanding of arbitration provisions, procedural rules in arbitration, and empirical data on arbitration experiences as compared to federal and state court.  The Study also compares alternatives, including small claims court, class actions, public enforcement actions, and analyzes credit pricing in the context of pre-dispute arbitration clauses.  The stated purpose of the Study is to provide empirical, not evaluative, analysis of consumer arbitration issues.

Court of Appeal Upholds Dismissal of Song-Beverly Class Action

In Lewis v. Safeway, Inc., the First District California Court of Appeal held that collecting and recording a customer's date of birth in connection with the sale of alcohol is not a violation of the Song-Beverly Act's prohibition on collecting personally identifiable information in a credit card transaction.

In Lewis, plaintiff filed a putative class action alleging that defendant collected and recorded his birthdate when he purchased alcohol at the store, in violation of section 1747.08(a)(2) of the Song-Beverly Act.  Defendant demurred, arguing, among other things, that collection of personally identifiable information in connection with the purchase of alcohol fell within an exception to the statute for an obligation imposed by law.  The trial court granted the demurrer, and denied leave to amend.  Plaintiff appealed.

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