Mass Tort Defense

Court Hangs Up On Cell Phone Class Action

A Texas federal court recently denied class certification to a group of cell phone customers who alleged they were sold defective models. See Shane Galitsky et al. v. Samsung Telecommunications America LLC, No. 3:12-cv-04782 (N.D. Tex. 9/11/15).

Plaintiffs brought a putative class action against Samsung on behalf of hundreds of thousands of California consumers who purchased allegedly defective Galaxy S mobile phones. Plaintiffs alleged that four models suffered from a common hardware defect that could cause them to randomly freeze, shut down, reboot, and power off while in standby or sleep mode, rendering the phones unfit for their intended use and purpose.  The suit included claims under federal and California law for breach of express warranty; breach of implied warranty; violations of the Song-Beverly Consumer Warranty Act (“Song-Beverly Act”), Cal. Civ. Code § 1792 (West 2009); violations of the MagnusonMoss Warranty—Federal Trade Commission Improvement Act (“Magnuson-Moss Act”), 15 U.S.C. § 2301 et seq.; violations of the Consumers Legal Remedies Act (“CLRA”), Cal. Civ.
Code § 1750 et seq. (West 2009); violations of the California Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200 et seq. (West 2008); and common law claims for assumpsit and quasi-contract. Several of those claims were kicked out on motions to dismiss.

Plaintiffs then filed for class certification on the remaining warranty and consumer fraud claims. The court's analysis focused on the  Rule 23(b) requirements of “predominance” and “superiority,” which require that common questions “predominate over any questions affecting only individual members,” and that class resolution be “superior to other available methods for fairly and efficiently adjudicating the controversy.” Rule 23(b)(3).  The court noted that the class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only. To come within the exception, a party seeking to maintain a class action must affirmatively demonstrate his compliance with Rule 23. The Rule does not set forth a mere pleading standard. Rather, a party must not only be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, typicality of claims or defenses, and adequacy of representation, as required by Rule 23(a). The party must also satisfy through evidentiary proof at least one of the provisions of Rule 23(b).

“To decide whether there is a class-wide basis for deciding the predominant issues, [the court] must first ascertain which are the predominant issues that must be decided on a class basis.” Gene and Gene LLC v. BioPay LLC, 541 F.3d 318, 326 (5th Cir. 2008). The court must identify the substantive issues that will control the outcome of the case, assess which of these issues will predominate, and determine whether these issues are common throughout the proposed class. Id. A class plaintiff cannot merely point to a so-called “common course of conduct” without also demonstrating whether the common course of conduct provides a class-wide basis for deciding the predominant class issues of fact and law. And in order to predominate, common issues must constitute a significant part of the individual cases.

In analyzing whether a class certification motion satisfies the predominance requirement, the court also “must consider how a trial on the merits would be conducted if a class were certified.” See  Sandwich Chef of Tex., Inc. v. Reliance Nat’l Indem. Ins. Co., 319 F.3d 205, 218 (5th Cir. 2003). “This, in turn, entails identifying the substantive issues that will control the outcome, assessing which issues will predominate, and then determining whether the issues are common to the class, a process that ultimately prevents the class from degenerating into a series of individual trials.” Bell Atl. Corp. v. AT&T Corp., 339 F.3d 294, 302 (5th Cir. 2003) (citation and internal quotation marks omitted). “Considering whether ‘questions of law or fact common to class members predominate’ begins, of course, with the elements of the underlying cause of action.” Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S. 804, 131 S.Ct. 2179, 2184 (2011) (quoting Rule 23(b)(3)).  The failure to satisfy the predominance requirement is sufficient of itself to warrant denying class certification.

Plaintiffs argued that their legal claims focused on defendants' conduct; that all plaintiffs got the same warranty; that the alleged defect was common to all phones. But the facts revealed that certain class members who experienced uninitiated power off or freezing of the phone may not be covered by the Warranty; for each class member whose phone exhibited the alleged power-off issue, Samsung was entitled to introduce evidence that, as to that class member’s phone, there was another, more likely cause of the power-off issue (including a cause not covered by the Warranty). Thus the determinative question of whether the alleged breach can be established via class-wide proof must, given the particular facts of this case, be answered in the negative, said the court.

While plaintiffs alleged a common design issue, the court noted that plaintiffs will not be able to prevail on their breach of express warranty claims merely by presenting class-wide proof that all Galaxy S phones contained the same alleged defect. Rather, under California law, it would be necessary for plaintiffs to prove that each individual class member’s Galaxy S phone experienced the power-off issue as a result of the allegedly defect, and that this occurred during the one-year Warranty period. This showing could not be made through proof of a common design defect that, for any given class member’s phone, may or may not have caused that phone to malfunction at all,
or to have malfunctioned during the one-year Warranty period. Instead, it would be be necessary
for plaintiffs to introduce individual evidence for each member of the proposed class establishing that the alleged defect caused that particular class member’s phone to experience the power-off
defect within Warranty period.

Individual issues also predominated with respect to the Warranty precondition that a phone purchaser return the phone to an “authorized phone service facility” during the applicable warranty period.  Accordingly, no class member could recover for breach of the Samsung Warranty unless the member first established that he or she returned the phone to an authorized phone service facility during the warranty period. Any trial of plaintiffs’ express warranty claims would require the jury to determine, for each individual class member, whether and when that class member returned the phone to an authorized phone service facility.

Although the presence of individualized issues will not necessarily prevent certification, there must be some underlying common question whose resolution would constitute a significant part of the individual cases. Only mini-trials can determine the issues, so the court held that the predominance requirement of Rule 23(b)(3) was not satisfied regarding the warranty claims.

On the UCL claims, the court held that plaintiffs could not establish through class-wide proof the amount that Samsung should disgorge from profits earned from sales of the Galaxy S phones, because Samsung would be entitled to present at trial that most class members received some benefit from their phones—indeed, that many class members received the full benefit from their phones. Plaintiffs could not establish that awarding class members the full amount by which Samsung profited from its sale of the phones correlated, in any way, to the amount necessary to restore to each class member that which Samsung obtained by its allegedly unfair practices. Awarding class members the full amount that Samsung profited could possibly be achieved on a class-wide basis, but this method would result in the award of non-restitutionary disgorgement for many of plaintiffs’ proposed class members, which California law does not permit. 

The court also concluded that plaintiffs had not met their burden of establishing that the award of restitution damages presented a common issue that can be determined on a class-wide basis. The methods that plaintiffs proposed for awarding restitution damages to individual class members actually would require the jury to decide, inter alia, for each individual class member, whether he or she received any value from his or her Galaxy S phone.

Certification motion denied.

 

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Sean P. Wajert of Shook, Hardy & Bacon LLP