No BRIEF IN OPPOSITION

Transcription

1 No In The Supreme Court of the United States TICKETMASTER, ET AL., v. Petitioners, STEPHEN C. STEARNS, ET AL., Respondents. On Petition for a Writ of Certiorari to the United States Court of Appeals for the Ninth Circuit BRIEF IN OPPOSITION Adam Gutride* *Counsel of Record L. Jay Kuo Gutride Safier LLP 835 Douglass Street San Francisco, California Telephone: (415) adam@gutridesafier.com Counsel for Respondents

2 i QUESTION PRESENTED Where the decision below held that each class member had suffered monetary loss fairly traceable to petitioners conduct, for which restitution is available under state law, should this Court grant the petition to consider whether, in the abstract, absent class members must have Article III standing?

3 ii TABLE OF CONTENTS INTRODUCTION...1 STATEMENT OF THE CASE...2 REASONS FOR DENYING THE PETITION...9 I. This case does not present any important question of law yet to be settled by this Court...9 A. The Ninth Circuit found that the absent class members had standing under Lujan...9 B. This Court has approved certification of classes containing members who could not prove deception or reliance...13 II. The Ninth Circuit s opinion is not in conflict with that of any other circuit on an important issue CONCLUSION...26

4 iii TABLE OF AUTHORITIES CASES Adashunas v. Negley, 626 F.2d 600 (7th Cir. 1980)...19 Avritt v. Reliastar Life Ins. Co., 615 F.3d 1023 (8th Cir. 2010)...23, 24 Basic Inc. v Levinson, 485 U.S. 224 (1988)...13, 14 Bates v. United Parcel Serv., Inc., 511 F.3d 974 (9th Cir. 2007) (en banc)...26 Braden v. Wal-Mart Stores, Inc., 588 F.3d 585 (8th Cir. 2009)...24 Brown v. American Honda, 522 F.3d 6 (1st Cir. 2008)...20 Carnegie v. Household Int'l, 376 F.3d 656 (7th Cir. 2004)...18 DG v. Devaughn, 594 F.3d 1188 (10th Cir. 2010)...21 Ellis v. Costco Wholesale Corp., 657 F.3d 970 (9th Cir. 2011)...23

5 iv Erica P. John Fund, Inc. v. Halliburton Co., 131 S. Ct (2011)...14 First Amer. Finan. Corp. v. Edwards, cert. granted 131 S. Ct (2011)...16 In re Tobacco II Cases, 46 Cal. 4th 298 (2009)...7, 11, 15 Kohen v. Pac. Inv. Mgmt. Co. LLC, 571 F.3d 672 (7th Cir. 2009)...17, 18, 19, 20 Kwikset Corp. v. Sup. Court, 51 Cal. 4th 310 (2011)...12 Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992)...1, 8, 10, 11 Mazza v. American Honda Motor Co., 666 F.3d 581 (9th Cir. 2012)...25 McNair v. Synapse Group, Inc., 2012 U.S. App. LEXIS 4593 (3d Cir. Jan. 10, 2012)...22 Messner v. Northshore Univ. Healthsystem, 2012 U.S. App. LEXIS 731 (7th Cir. Jan 13, 2012)...20 Mims v. Stewart Title Guar. Co., 590 F.3d 298 (5th Cir. 2009)...21 Oshana v. Coca-Cola Co., 472 F.3d 506 (7th Cir. 2006)...20

6 v Pella Corp. v. Saltzman, 606 F.3d 391 (7th Cir. 2010)...18 Romberio v. Unumprovident Corp., 385 Fed. Appx. 423 (6th Cir. 2009)...20 Schleicher v. Wendt, 618 F.3d 679 (7th Cir. 2010)...18 Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26 (1976)...11 Sullivan v. DB Investments, Inc., 2011 U.S. App. LEXIS (3d Cir. Dec. 20, 2011) (en banc)...22 Sutton v. St. Jude Med. S.C., Inc., 419 F.3d 568 (6th Cir. 2005)...24 Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct (2011)... 14, 15, 22 Warth v Seldin, 422 U.S. 490 (1975)...16, 22

7 vi STATUTES 15 U.S.C. 1693m(a)(2)(B) U.S.C et seq U.S.C. 1332(d)...13 Cal. Bus. & Prof. Code TREATISES 1 Alba Conte & Herbert Newberg, Newberg on Class Actions (4th ed. 2002)...18

8 1 INTRODUCTION Petitioners assert that the Ninth Circuit adopted a rule permitting persons who lack standing to be part of a Rule 23 class action. Petition at 6-7. But the court below adopted no such rule, nor did it break any new ground. Rather, the court found that all members of the class, both present and absent, satisfied traditional standing requirements under Lujan v. Defenders of Wildlife, 504 U.S. 555, (1992). Petitioners do not challenge the Ninth Circuit s conclusions that each class member was injured by being relieved of money, that the injury was fairly traceable to petitioners conduct, and that the injury is redressable by the statutory right to restitution. Petitioners only response is that the class may contain members who were not actually deceived. Not only did they fail to submit evidence to the district court of even one class member who knowingly enrolled, but their argument does not demonstrate an Article III violation: As this Court and the courts of appeals consistently have held, classes may contain members who did not rely on the defendant s alleged deception. Such classes are quite common, for example, in securities class actions proceeding under a fraud on the market theory. Furthermore, the Ninth Circuit s observation that the standing inquiry keys on the named

9 2 plaintiff, not absent class members, is not necessary to that court s decision, but is in any event fully consistent with language used by this Court and the holdings of every other court of appeal. Although petitioners argue certiorari is needed to correct widespread confusion as to what is required for class standing, the confusion derives from petitioners exposition of the cases, not the cases themselves. But even if there were a split of authority, this case would present no vehicle to settle it, because petitioners do not contest the Ninth Circuit s finding that every class member has standing under Lujan. For these reasons, the petition should be denied. STATEMENT OF THE CASE Beginning in September 2004, petitioners Ticketmaster, Entertainment Publications, Inc. ( EPI ) and IAC/Interactive Corp. ( IAC ) engaged in a scheme to enroll over a million Ticketmaster customers in a paid service that the customers never used. The basic ruse was this: After giving customers only a brief time about two minutes per page to complete the steps needed to make a ticket purchase, a Continue button appeared on the Ticketmaster confirmation page. Rather than continue the transaction, however, that button initiated a new transaction for a different service from another company. The service, called

10 3 Entertainment Rewards, imposed a recurring charge of $9 per month on the card the customer had used at the Ticketmaster site, purportedly in exchange for the right to download coupons from EPI and apply for a rebate on a future Ticketmaster purchase. More than 93% of those enrolled in the program and 100% of class members never downloaded a single coupon or applied for a rebate. From the class members, petitioners collected more than $60 million in monthly membership fees. Substantial evidence was presented to the district court that the Entertainment Rewards enrollment process was likely to deceive reasonable consumers. Ticket purchasers who clicked on the Continue button, or anywhere around it, were taken to another page that bore the Ticketmaster logo at the top but was in fact hosted by EPI. That page had only two fields, which asked the customer to enter and re-enter an address, and a single button, which for most of the class period said only Yes. The page contained what the district court referred to as a series of statements in small print, one of which referenced a monthly fee (Ninth Cir. Pl. App. 25), but it failed to include any of the typical visual indicators that a customer was initiating a new paid transaction, such as a field to enter a credit card number, a checkbox asking the customer to agree to terms and conditions, or even a display of the last four digits of the card that would be charged. Instead, in what petitioners call

11 4 the datapass process, consumers credit or debit card information was automatically and invisibly transferred from Ticketmaster to EPI. After twice typing an address and pressing the enter key or clicking the Yes button, the customer was taken to another page. This page did not say how or when charges would be imposed and also had only one button, at the top, which read Click Here To Start Saving. Although the button implied that customers had not yet started the service, it made no difference whether users pressed the button, navigated back to the prior page, closed the browser window, or shut down their computer: Monthly charges would commence 30 days later. Charges continued until customers noticed them on their bank or credit card statements and contacted EPI to cancel their memberships. The scheme was wildly successful. Both the initial click-through rate and the final conversion rate were more than twelve times the industry average. Petitioners were well aware that their customers were being deceived. When calling to cancel, customers overwhelmingly reported that they had not intended to make, nor had known they were making, the purchase. Indeed, as of August 2006, a full 94% of callers stated they had not intended to enroll or authorize the charges. By a

12 5 year later less than three quarters of the way through the class period over 575,000 customers had made such a statement. More than 1,400 customers separately threatened legal action. Tellingly, EPI internally referred to Entertainment Rewards as a churn & burn product. (Ninth Cir. Pl. App. 251.) Ticketmaster employees reported to the other petitioners that the ad unit as it exists on the site is irresponsible and misleading consumers because the consumer is not clear that the purchase process with TM is complete, which in turn was encouraging consumers to click on the continue button to finish their ticket purchase. (Id. 244.) Petitioners tested less deceptive versions of the enrollment process, such as replacing the initial Continue button with one that said Continue Get $10 Cash Back Offer, Start Saving Money Today or Free 30- Day Trial, but found that enrollment rates were markedly lower. (Id. 237, 272.) The various options were discussed at the highest levels of management. As noted in one from the Ticketmaster CEO to the IAC chairman: Our concern here is that the current ad unit is very aggressive pulls consumers in with an offer of a cash reward that looks like it is an integrated component of the transaction process, rather than a benefit of enrolling in a separate and

13 6 distinct membership program. That said, if we change the unit to look more like a standard advertising unit, we run the risk of dramatically reducing the click thrus which will really hurt us on revenue. (Id. 262.) Petitioners opted to protect revenue and to continue the program. Respondents filed suit seeking, inter alia, certification of a nationwide class of customers under California s Unfair Competition Law ( UCL ). 1 The proposed UCL class comprised all persons who (1) enrolled in the Entertainment Rewards service after a purchase at Ticketmaster, (2) had their card information transferred via the automatic data pass, (3) never downloaded a coupon or applied for the rebate on a future purchase, and (4) were charged for the service. Thus, as the UCL class was defined, 100% of class members paid money but received no product or service. 1 Petitioners online terms of service agreement mandated application of California law to all consumer claims. The suit was filed in state court and initially pled claims only under California state law. After petitioners removed the case to federal court pursuant to the Class Action Fairness Act, 28 U.S.C. 1332(d), additional plaintiffs joined and filed related actions, adding a federal claim under the Electronic Funds Transfer Act, 15 U.S.C et seq. All the cases were consolidated on appeal.

14 7 On a motion for class certification, the district court found nearly all elements of Rule 23 satisfied as to the UCL class, but denied the motion on the ground that the UCL required individualized proof of reliance by each class member. It certified a class, however, for statutory damages under the Electronic Funds Transfer Act, 15 U.S.C. 1693m(a)(2)(B) ( EFTA ) a ruling uncontested here. The Ninth Circuit reversed on the UCL claim. It explained, and petitioners do not dispute, that the named class representatives had established all elements of Article III standing. Citing the intervening California Supreme Court decision in In re Tobacco II Cases, 46 Cal. 4th 298 (2009), the court held that, where the named plaintiffs had established their own reliance, the UCL authorized restitutionary and injunctive relief to absent class members without individualized proof of deception, reliance and injury. Pet. App (quoting Tobacco II, 46 Cal. 4th at 320). The court noted that under Tobacco II, the UCL create[s] what amounts to a conclusive presumption that when a defendant puts out tainted bait and a person sees it and bites, the defendant caused the injury; restitution is the proper remedy. Pet. App n The district court also denied certification of claims under California s Consumer Legal Remedies Act, the common law

15 8 In response to petitioners argument that absent class members would lack standing under Article III, the court found that every member of the class met the standing requirements enunciated by this Court in Lujan: Each alleged class member was relieved of money in the transactions. Moreover, it can hardly be said that the loss is not fairly traceable to the actions of the Appellees within the meaning of the California substantive law. Id. at (citing Lujan, 504 U.S. at 560). Finally, because California law provided absent class members with a restitutionary remedy, their injury was redressable. The court observed that petitioners true objection was that the restitutionary remedy was available without a more particularized proof of injury and causation, of fraud, and for actual damages under the EFTA. The Ninth Circuit reversed in some respects and gave guidance about the possibility of certifying a more narrowly defined class on these claims. Petitioners do not challenge these rulings, and thus any resolution of the UCL standing question would not end the case, not only because of the certification of a statutory damages EFTA class, but also because respondents intend to seek class certification on their other claims based on the Ninth Circuit s guidance.

16 9 but concluded that the objection was not enough to preclude class standing here where each class member had an injury (the loss of money) that derived from the challenged practice (the online enrollment scheme). Id. at 14. The court also explained that petitioners Article III challenge appeared to be misguided because they did not dispute the standing of the named plaintiffs, and Ninth Circuit law keys on [the standing of] the representative party, not all of the class members, and has done so for many years. Id. at 15 (citing cases). Because the district court s denial of class certification was based on an incorrect understanding of the UCL, the Ninth Circuit remanded for reconsideration of the certification question. REASONS FOR DENYING THE PETITION I. This case does not present any important question of law yet to be settled by this Court. A. The Ninth Circuit found that the absent class members had standing under Lujan. Petitioners argue that this Court should use this case to decide whether, in the context of a class

17 10 action, Article III precludes class certification unless all absent class members were injured by the defendants. This case presents no opportunity to resolve that question because the court below found that the absent class members were injured and therefore had standing. Pet App (citing Lujan, 504 U.S. at ). Lujan set forth three elements of constitutional standing: (1) the plaintiff must have suffered an injury in fact that is concrete and particularized and actual or imminent, (2) the injury must be fairly trace[able] to the challenged action of the defendant and (3) it must be likely that the injury will be redressed by a favorable decision. 504 U.S. at 560. The court of appeals found that all three elements were met for the proposed class, as each class member was relieved of money in the transactions through a challenged sales process, and if it was shown that reasonable persons are likely to be deceived, the UCL provided a restitutionary remedy to all purchasers. Pet. App (citations omitted). Contrary to the tenor of the petition, nothing in the decision below purports to soften or alter the rules of standing. Petitioners argue that, as defined, the class may contain members who were not deceived by their website. Not only did petitioners fail to present evidence of even one class member who intended to enroll, but the argument is misguided because constitutional standing does

18 11 not require proof of actual deception. Plaintiffs must show only a concrete, particularized, and redressable injury-in-fact and a causal connection between the injury and the conduct complained of the injury has to be fairly... trace[able] to the challenged action of the defendant, and not... the result [of] the independent action of some third party not before the court. Lujan, 504 U.S. at 560 (quoting Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, (1976)). Here every class member was injured by petitioners conduct: every class member was charged money through an objectively deceptive online enrollment scheme for a service he did not use, and each has a statutory right to restitution. Reliance is not an element of Article III standing, nor do petitioners so assert. Petitioners mistakenly claim that Tobacco II eliminat[ed] the standing requirement for everyone in a UCL class action except the named plaintiff. Petition at 11. To the contrary, Tobacco II simply held that voter-enacted amendments to the UCL which require additional proof of economic injury, reliance and causation are applicable only to the named plaintiff. It explained that the amendments were designed to preclude frivolous private attorney general lawsuits but not to change the scope of restitutionary relief available to all consumers subjected to a deceptive practice, that is, any practice likely to deceive a reasonable consumer. 46 Cal. 4th at (citing Cal. Bus & Prof. Code 17203). Although

19 12 injury and causation within the meaning of California law need not be shown by absent class members, the class members here have still suffered the injury and shown the causation required under Lujan, as all were enrolled through petitioners online scheme and paid money for a service they never used. 3 Petitioners quarrel thus is not really with class members standing, but with the fact that California substantive law does not require absent class members to show actual reliance or deception to recover money paid to a defendant who used an unfair or deceptive scheme. As the court below put it, petitioners real objection is to the policy decision by the California legislature to provide a restitutionary remedy to all persons subjected to a deceptive practice without a more particularized proof of injury and causation. Pet. App. 14. But that objection was not enough to preclude class standing here where each class member paid money to petitioners through the challenged scheme. Id. The petition accordingly should be 3 The injury requirement now imposed by the UCL on named plaintiffs is stricter than would be required by Article III, as the California Supreme Court observed in a more recent case. See Kwikset Corp. v. Sup. Court, 51 Cal. 4th 310, 324 (2011) (the requirement that injury be economic renders standing under [the UCL] substantially narrower than federal standing under [A]rticle III, section 2 of the United States Constitution, which may be predicated on a broader range of injuries ).

20 13 rejected because all absent class members have the requisite Article III standing. 4 B. This Court has approved certification of classes containing members who could not prove deception or reliance. The decision below is also consistent with decisions of this Court permitting class certification even where some class members may not have been actually deceived even where, unlike in this case, such class members would be entitled to no recovery. In Basic Inc. v. Levinson, 485 U.S. 224 (1988), for example, this Court held that a class could pursue claims for securities fraud without proof that each class member relied on the alleged misrepresentations, based on a rebuttable presumption of reliance by each class member who traded in an efficient market. Id. at The defendant had the right after certification to rebut the presumption as to any class member, by 4 Petitioners now admit that California has the right, under principles of federalism, to allow a UCL class action to proceed without individualized proof of reliance or injury by absent class members. Petition at 12. But they add a caveat that the action must be in state court; in federal court, Article III bars it. This argument provides another reason to deny the petition, because it may call into question the constitutionality of the Class Action Fairness Act, 28 U.S.C. 1332(d), which purported to create federal jurisdiction over the case and under which petitioners removed it from state court. That question was not briefed below.

21 14 showing that the class member had not suffered a loss, or that the loss was not caused by the defendant s conduct. Id. at 248. But the right of rebuttal did not preclude certification; rather, the existence of a rebuttable presumption supported findings under Rule 23 of commonality and predominance. Id. at 250. Last term, this Court unanimously reaffirmed and extended Basic in Erica P. John Fund, Inc. v. Halliburton Co., 131 S. Ct (2011), holding that, at class certification, plaintiffs alleging securities fraud do not have to show loss causation that is, actual economic loss directly caused by the defendant s misrepresentation. Rather, they need only show transaction causation i.e. that the plaintiffs purchased stock after a misrepresentation that was presumptively reflected in the market price of the stock. Under Halliburton, classes that contain members who may not have suffered a loss attributable to the defendant s misrepresentation may be certified; as this Court explained, this result was necessary to preserve the class action device. Id. at 2185 (citing Basic, 485 U.S. at 242). Citing Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct (2011), petitioners argue that if a class cannot be certified on the premise that [the defendant] will not be entitled to litigate its statutory defenses to individual claims, then Article III-based defenses should be accorded no

22 15 lesser degree of protection. Petition at 10. Petitioners analogy incorrectly assumes that there is an Article III-based defense to providing restitution to persons who were not actually misled. Petitioners provide no basis for this assumption. Dukes explained that Title VII includes a statutory defense if the defendant took an adverse employment action against [the] employee for any reason other than discrimination. Dukes, 131 S. Ct. at But the UCL provides no such defense; to the contrary, the statute requires that the defendant restore to any person in interest any money or property, real or personal, which may have been acquired by means of the unfair practice. Tobacco II, 46 Cal. 4th at 320 (emphasis original) (quoting Cal. Bus. & Prof. Code 17203). By focusing on the defendant s conduct rather than class members reliance, the UCL is intended to ensure that wrongdoers not retain the benefits of their misconduct. Tobacco II, 46 Cal. 4th at 320. In sum, rather than undermine or turn upside down federal standing requirements (Petition at 13), the decision below is wholly consistent with the concept that Article III provides no barrier to a class comprising all persons who paid money to defendants in connection with a challenged transaction and who are statutorily entitled to restitution. 5 5 In their Application for Extension of Time (at 2), petitioners claimed that the pendency of First Amer. Finan. Corp. v.

23 16 II. The Ninth Circuit s opinion is not in conflict with that of any other circuit. After concluding that every class member had standing under Lujan, the court below observed in dicta that Ninth Circuit law keys on the standing of the representative party in a class action. Pet. App. 15. Dicta is not a basis on which the Court should grant certiorari, and, in any event, the observation is consistent with this Court s own language (see, e.g., Warth v. Seldin, 422 U.S. 490, 502 (1975) ( Petitioners must allege and show that they personally have been injured, not that injury has been suffered by other, unidentified members of the class ), as well as the Committee notes to Rule 23 (certification is appropriate even if the defendant s action has taken effect or is threatened only as to one or a few Edwards, cert. granted 131 S. Ct (2011), made this case a good candidate for a hold or an order granting certiorari, vacating, and remanding once Edwards was decided. With the benefit of additional time, they now have abandoned the argument and omit any mention of Edwards, apparently concluding, correctly, that it will not affect the Ninth Circuit s rulings here. In Edwards, this Court is considering whether a plaintiff who was subjected to a statutory violation for which statutory damages are available has Article III standing if he suffered no other injury. Here, each class member paid money to petitioners, and the UCL claim merely seeks restitution of those payments.

24 17 members of the class, provided it is based on grounds which have general application to the class ), Fed. R. Civ. P. 23(b)(2), 1966 amendment advisory committee note (emphasis added). And contrary to petitioners assertion, the Ninth Circuit s analysis is fully consistent with the practices of all the other courts of appeal. The Seventh Circuit has the most developed case law on the matter. In Kohen v. Pacific Investment Management Co. LLC, 571 F.3d 672 (7th Cir. 2009), a case involving the defendant s alleged cornering of the market for 10-year U.S. Treasury notes, the court addressed the interplay between standing and class certification. The proposed class comprised all persons who had bought futures contracts on such notes between certain dates, presumably to close out short positions in those options. Defendant PIMCO argued that the class necessarily included people who did not lose money from their purchases and, therefore, lacked standing. 571 F.3d at 676. Writing for the Kohen court, Judge Posner observed that a class will often include persons who have not been injured by the defendant s conduct including, in that case, purchasers who were net gainers despite the price manipulation. Id. at This inclusion of such persons is almost inevitable, because at the outset many of the members of the class may be unknown, or if they are known still the facts bearing on their claims

25 18 may be unknown. Id. at 677; see also Pella Corp. v. Saltzman, 606 F.3d 391, 394 (7th Cir. 2010) (affirming certification of defective products class despite need for each class member subsequently to prove individual causation and damages); Schleicher v. Wendt, 618 F.3d 679, 684 (7th Cir. 2010) (securities class permissible even though it contained short sellers who did not suffer losses). Such a possibility or indeed inevitability does not preclude class certification. Kohen, 571 F.3d at 677 (citing Carnegie v. Household Int'l, 376 F.3d 656, 661 (7th Cir. 2004), & 1 Alba Conte & Herbert Newberg, NEWBERG ON CLASS ACTIONS 2:4, pp (4th ed. 2002)). Anticipating the Court s ruling in Halliburton, supra, Judge Posner explained that to require plaintiffs to show injury and causation for all absent class members would vitiate the economies of class action procedure. 571 F.3d at 675. Indeed, while [i]t is true that injury is a prerequisite to standing, requiring a court first to determine which class members had suffered damages would mean in effect the trial would precede the certification. Id. Kohen specifically addressed the Second Circuit s statement in Denney v. Deutsche Bank AG, 443 F.3d 253, 264 (2d Cir. 2006), that no class may be certified containing members lacking Article III standing. That statement had in turn been based on an earlier Seventh Circuit case, Adashunas v. Negley, 626 F.2d 600, 604 (7th Cir. 1980), in which the court had stated that since the

26 19 proposed class is so amorphous and diverse, it cannot be reasonably clear that the proposed class members have all suffered a constitutional or statutory violation warranting some relief. But Kohen explained that Adashunas, Denney, and their progeny focus on the class definition; if the definition is so broad that it sweeps within it persons who could not have been injured by the defendant's conduct, it is too broad. 571 F.3d at 677 (emphasis added). Put another way, the problem arose not with a class that might contain persons without injuries proximately caused by a defendant s conduct, but rather with a class that necessarily included people who by definition could not have been injured. 6 Kohen went on to explain that some cases have held that a class should not be certified if it is apparent that it contains a great many persons who have suffered no injury at a defendant s hands. Id. at 677 (citing Oshana v. Coca-Cola Co., 472 F.3d 506, (7th Cir. 2006), Romberio v. 6 Denney itself approved a class containing some members who might not have been able to prosecute an independent cause of action. All class members had allegedly received improper tax advice, but the court noted that some had never implemented the advice nor been audited. Nevertheless, based only on the allegation that all had paid excessive fees, Denney concluded that such injuries were sufficient for Article III standing, irrespective of whether their injuries are sufficient to sustain any cause of action. 443 F.3d at (emphasis added).

27 20 Unumprovident Corp., 385 Fed. Appx. 423, 431 (6th Cir. 2009), and Brown v. American Honda, 522 F.3d 6, (1st Cir. 2008)). These holdings were not based on Article III, but rather on questions of typicality or class manageability, see Oshana, 472 F.3d. at 514; Romberio, 385 Fed. Appx. at ; Brown, 522 F.3d at 28-29, and were intended to diminish the in terrorem nature of large class actions, where a high potential liability exerts pressure to settle even where few in the class were affected. Kohen, 571 F.3d at 677. Where the evidence submitted to the district court did not establish that a large number of potential class members had been net gainers, certification was appropriate. Id. 7 The Fifth Circuit agreed with Kohen s reasoning. In Mims v. Stewart Title Guar. Co., 590 F.3d 298 (5th Cir. 2009), the defendant argued that 7 The Seventh Circuit has followed Kohen consistently, including recently in Messner v. Northshore Univ. Healthsystem, 2012 U.S. App. LEXIS 731 (7th Cir. Jan 13, 2012). Messner explained the difference between a class where members were not harmed and one where members could not have been harmed. Id. at * Messner further cautioned that efforts to define a perfect class in which every member had suffered injury could result in an improper fail safe class, where members qualify depending on whether they have a valid claim. Such a definition is improper because a class member either wins, or, by virtue of losing, is defined out of the class and is therefore not bound by the judgment. Id. at *55-56.

28 21 the proposed class included plaintiffs who were not injured because, under Texas law, they were not entitled to an insurance discount sought by the representative plaintiffs. Mims held that the class definition, as proposed, set out prerequisites for class membership from which the jury could infer entitlement to the credit, and which defendant was free to rebut. It concluded that [c]lass certification is not precluded simply because a class may include persons who have not been injured by the defendant's conduct. Id. at 308 (citing Kohen, 571 F.3d at 677). The Tenth Circuit is also in accord. In DG v. Devaughn, 594 F.3d 1188 (10th Cir. 2010), the proposed class was comprised of all children who were or would be in the custody of the Oklahoma Commission for Human Services due to a report or suspicion of abuse or neglect. 594 F.3d at Devaughn rejected the defendants argument that, at class certification, Rule 23(a) requires named plaintiffs to prove that all class members actually were exposed to a threat of imminent harm from inadequate monitoring. Rather, it held that only named plaintiffs must demonstrate such a threat. Id. at 1197 (citing Warth, 422 U.S. at 502). Rule 23 s certification requirements, in the court s view, neither require all class members to suffer harm or threat of immediate harm nor Named Plaintiffs to prove class members have suffered such harm. Id. at 1198.

29 22 Petitioners cite a Third Circuit case, Sullivan v. DB Investments, Inc., 2011 U.S. App. LEXIS (3d Cir. Dec. 20, 2011) (en banc), as evidence of serious disagreement on the question of class member standing. Petition at 16. That case did not concern Article III standing, however, and presents no conflict here. Sullivan held that, in a nationwide antitrust class action, the focus should be on the conduct of the defendant and whether such conduct reduced competition. It concluded that common questions raised common answers apt to drive the resolution of the litigation. Id. at *49 (quoting Dukes, 13 S. Ct. at 2551). It rejected the argument that, under Rule 23 s predominance test, all class members must share identical claims, especially where certain rights and remedies varied across jurisdictions. Id. at * Importantly, it held that even if some class members lacked statutory standing in regard to their state-law antitrust claims, their Article III standing was unaffected. Id. at * A more recent Third Circuit case, McNair v. Synapse Group, Inc., 2012 U.S. App. LEXIS 4593 (3d Cir. Jan. 10, 2012), states that under Article III, when a plaintiff seeks prospective relief, he must show that he is likely to suffer future injury from the defendant s conduct and that [i]n the class action context, that requirement must be satisfied by at least one named plaintiff. Id. at *24. In support, McNair cites several cases, including Warth, 422 U.S. at 502 ( Petitioners must allege and show that they personally have been injured, not that injury has been suffered by other, unidentified members of the class to which they belong and which they

30 23 The linchpin of petitioners alleged split of authority is a case from the Eighth Circuit, Avritt v. Reliastar Life Ins. Co., 615 F.3d 1023 (8th Cir. 2010). That case presents no conflict with the law of the Ninth Circuit or any other circuit. In Avritt, the court affirmed the denial of certification where the plaintiff alleged that the defendant had encouraged purchases of annuities by touting an initial, favorable interest rate that was discontinued over time. Id. at Avritt noted that at least one post-tobacco II decision in the California Court of Appeal had required evidence of individual class members reliance and injury and that, in any event, Tobacco II could not have altered federal courts obligation to examine commonality. Id. at It then held that the district court did not abuse its discretion in finding a lack of commonality based on, among other things, the fact that the defendant marketed the annuities through thousands of independent purport to represent. ) and Ellis v. Costco Wholesale Corp., 657 F.3d 970, 978 (9th Cir. 2011) ( Standing exists if at least one named plaintiff meets the requirements. ). McNair at *25. Neither McNair nor the cited cases asked what Article III required of absent class members; McNair went on to hold that the named plaintiffs, who no longer were customers of the defendant, did not have standing because they were not likely to be injured by the defendant s future conduct. Id. at *27-32.

31 24 insurance agents who were not required to follow a particular sales script. Id. at Because in Avritt the absent class members were not subject to a uniform practice that would satisfy Rule 23, the question of their Article III standing was not squarely presented. But in dicta, Avritt observed that to the extent Tobacco II holds that a single injured plaintiff may bring a class action on behalf of a group of individuals who may not have had a cause of action themselves, it is inconsistent with the doctrine of standing as applied by federal courts. Id. at Avritt then cited three cases for this premise. The first two, Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 591 (8 th Cir. 2009), and Sutton v. St. Jude Med. S.C., Inc., 419 F.3d 568, 570 (6th Cir. 2005), recited the Lujan standard and applied it to the named plaintiffs, without examining what rules applied to absent class members. The final case was Denney, which Avritt quoted for the proposition that [a]lthough federal courts do not require that each member of a class submit evidence of personal standing, a class cannot be certified if it contains members who lack standing.... A class must therefore be defined in such a way that anyone within it would have standing. Avritt, 615 F.3d at 1034, (quoting Denney, 443 F.3d at ). In other words, Avritt, like Kohen, viewed Denney as being about the class definition.

32 25 Finally, as even petitioners admit (Petition at 16), the Ninth Circuit had no problem harmonizing the decision below with the law of other circuits, in a subsequent case. In Mazza v. American Honda Motor Co., 666 F.3d 581 (9th Cir. 2012), as here, the defendant contended that because Tobacco II permitted a plaintiff to seek class-wide restitution without individualized proof of reliance by each class member, the class lacked standing. Id. at Mazza quoted Denney for the proposition that no class may be certified that contains members lacking Article III standing, id. at 595, and relied on the decision below for the proposition that such standing had been established because all class members had been relieved of their money by Honda s deceptive conduct. Id. But the court reversed the district court s order certifying a class (even as to those class members to whom California law applied), because many class members were never exposed to the allegedly misleading advertisements, and Tobacco II does not allow a consumer who was never exposed to an alleged false or misleading advertising... campaign to recover damages under California s UCL. Id. at (citation omitted). 9 9 Contrary to petitioners contention, neither Mazza nor the decision below held that we consider only whether at least one named plaintiff satisfies the standing requirements. Petition at 16. Rather, that language comes from a 2007 opinion, Bates v. United Parcel Serv., Inc., 511 F.3d 974 (9th Cir. 2007) (en banc), in which the question was whether a

33 26 Thus, not only is the question academic here because the Ninth Circuit found that all class members met the standing requirements under Lujan, but there also is no conflict among the circuits as to how Article III applies to absent class members. CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted, Adam Gutride* *Counsel of Record L. Jay Kuo Gutride Safier LLP 835 Douglass Street San Francisco, CA (415) adam@gutridesafier.com Counsel for Respondents certified class action could proceed after the named plaintiff s claims became moot. The court answered yes, because at least one other identifiable class member continued to have a ripe claim. Id. at