Defendant Seeks Review of Trial by Formula Decision

Defendant Google has filed a powerful cert petition, asking the U.S. Supreme Court to review a controversial Ninth Circuit decision reviving a putative class action. See Pulaski & Middleman LLC, et al. v. Google Inc., No. 15-1101 (U.S. petition filed 3/1/16).

 

This case presents the issue whether plaintiffs may use a formula that relies on a uniform measure of harm derived from the average experience of all class members as common proof of damages.

Google AdWords is an online advertising service. During the class period, AdWords allowed advertisers to place ads alongside Google search results or on other webpages that were part of Google’s advertising network. The ads generally were matched to Internet users based on the search queries the users entered on Google (or other search engines) or the subject-matter of the websites they viewed. The ads typically were short strings of text with hyperlinks that, when clicked, took the user to the advertiser’s website.  Advertisers paid Google each time an Internet user clicked on an advertisement link. Plaintiffs in this suit all purchased advertising services from Google AdWords. They alleged that Google misled them in violation of California law by showing their ads on two types of websites: “parked domains” and “error pages.”

 

 

The plaintiffs moved for class certification, and the district court denied this motion for a Rule 23(b)(3) class. The court found that while the issue whether Google’s alleged omissions were misleading to a reasonable AdWords customer could be seen as common, the individual nature of the restitutionary relief sought predominated. Plaintiffs’ theory rested on what AdWords customers would have paid but forthe alleged misstatements or omissions.  Yet, any effort to determine what advertisers would have paid requires a complex and highly individualized analysis of advertiser behavior for each particular ad that was placed.

A panel of the Ninth Circuit reversed, concluding that the predominance requirement was satisfied. In
reaching that conclusion, the court of appeals concluded  that any differences in calculating
the amount of restitution could not predominate. That is because, the court declared, damage calculations alone cannot defeat certification.  Applying that categorical rule, the court did not even consider whether, in the particular circumstances of this case, there were any individual issues of damages—much less whether those issues overwhelmed questions common to the class. 

The Ninth Circuit embraced a general, one-size-fits-all formula to resolve damages for the whole class, because it did “not turn on individual circumstances.”  But the Supreme Court has expressly disapproved just that “novel project” of computing class damages by a formula “without further individualized proceedings.” Wal-Mart, 131 S. Ct. at 2561. Wal-Mart’s holding on that point directly follows from the Rules Enabling Act, 28 U.S.C. § 2071,  which “forbids interpreting Rule 23 to ‘abridge, enlarge or modify any substantive right.’ ” Wal-Mart, 131 S. Ct. at 2561 (quoting 28 U.S.C. § 2072(b)). “Trial by Formula” forecloses individual defenses and sets damages for plaintiffs at amounts divorced from their particular circumstances, thereby giving plaintiffs greater substantive rights than they would have in individual proceedings. 

Consistent with the Rules Enabling Act, the Second, Fourth, Fifth, and Seventh Circuits have all
held that damages in class actions cannot be computed using an abstract analysis of averages. E.g., Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331, 343 (4th Cir. 1998). The Ninth
Circuit’s decision erroneously joins the minority viewof the Eighth and Tenth Circuits, contrary to WalMart’s instruction. 


In short, argues the petition, the Ninth Circuit’s decision conflicts with Comcast and Wal-Mart, and it creates and deepens divisions among the circuits regarding class certification standards. This is actually not the only case raising this issue with the Court.  One to watch.

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