Appeals Court Limits Consumer Class Actions

Honda LogoConsumers in multiple states may have a much tougher time forging national class actions against companies they accuse of misrepresenting their products or lying to customers.  A federal appeals court, by a 2-1 vote, imposed tough new limits on consumer lawsuits against California companies.

The 9th U.S. Circuit Court of Appeals said the hundreds of consumers who sued California-based American Honda over allegedly misleading claims for an anti-collision braking system can’t join into one national class.  The majority cited laws in other states that are less consumer-friendly and more business-friendly.

The lawsuits stem from allegations that Honda mislead consumers about the capabilities of a $4,000 anti-collision braking asystem.

While this decision will be a blow to consumers, it may not be the last word.  This may be a classic case for full court reconsideration – known as en banc review.

The 9th Circuit majority consisted of Judge Ronald Gould and visiting Judge James S. Gwin, a district judge from Northern Ohio.  In dissent was 9th Circuit Judge Dorothy Nelson.  It is not unusual for the full 27-judge court to vote to rehear a significant precedent when two appeals judges split and the visiting judge casts the winning vote.

Gould held that creation of a national consumer suit based on alleged violation of California consumer protections would interfere with the authority of other states to shield businesses from “excessive litigation.”   He suggests that applying California law to a national class of consumers would discount the interests of other states.

“Maximizing consumer and business welfare, and achieving the correct balance for society, does not inexorably favor greater consumer protection; instead, setting a baseline of corporate liability for consumer harm requires balancing the competing interests.

By contrast, Nelson wrote in dissent that the ruling will be “devastating to consumers.”

She points out that of the 43 other jurisdictions affected by the case, Louisiana, Georgia, Mississippi, Kentucky, Virginia and Alabama prohibit class actions that allege unfair trade practices under state law.   But she added that Hondo had now shown how a state’s general interest in prohibiting class actions translates into an interest in having its laws apply to this litigation.

California does have an interest in deterring California corporations from engaging in tortuous conduct within the state, she said.

And projecting consumers from fraudulent misrepresentations that emanate from California “would override any possible interest of any other state in application of its own laws to its residents’ claims,” she said.

The majority decision overturns class certification granted by Judge Valerie B. Fairbank of Los Angeles.

 Case:  Mazza v. American Honda Motor Co., No. 09-55376

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