The Ninth Circuit recently affirmed the United States District Court for the Central District of California’s denial of class certification of a Plaintiff’s California consumer law claims based primarily based on the predominance of individualized issues. Case No. 11-55592 (9th Cir. Feb. 3, 2014). Notably, the Ninth Circuit also determined that it had jurisdiction to consider the appeal despite the recent trend among other circuit appellate courts, which have held that voluntary dismissal of a case by stipulation destroys the adversity necessary for appellate jurisdiction.

Plaintiff Benjamin Berger rented a tool from a California Home Depot in April 2004.  The store charged him a ten percent surcharge as a damage waiver, which absolved him of liability if the tool was damaged during the rental period.  Plaintiff alleged that the store automatically imposed this ten percent surcharge and, although that fee was to be optional, the store failed to inform customers of their ability to decline.  Plaintiff filed a class action suit against the store alleging violations of California’s Unfair Competition Law (“UCL”); the California Consumer Legal Remedies Act (“CLRA”); and common-law theories of unjust enrichment.

The district court denied Plaintiff’s motion for class certification, concluding that Plaintiff’s proposed class and subclasses were not ascertainable and that Plaintiff did not meet the commonality, typicality, and adequacy of representation requirements of F.R.C.P. 23(a).  The district court also found that Plaintiff failed to satisfy the requirements of F.R.C.P. 23(b)(3) because independent issues predominated over common questions and because it was not clear that a class action was a superior means of adjudication.  Following the district court’s ruling, Plaintiff filed a stipulation with the store agreeing to voluntarily dismiss the action with prejudice.  Plaintiff also stated his intent to appeal the denial of class certification.  The store contested Plaintiff’s ability to appeal, arguing that the appellate court lacked jurisdiction to hear the appeal because the stipulation negated the adversity necessary to support appellate jurisdiction.  The district court dismissed the action under Rule 41(a)(2).  Plaintiff filed a timely notice of appeal.

As a preliminary matter, the Ninth Circuit held that it had jurisdiction over the appeal, even though the final judgment in the district court resulted from a stipulated dismissal of the action with prejudice.  The court reasoned, “We have jurisdiction under 28 U.S.C. § 1291 because a dismissal of an action with prejudice, even when such dismissal is the product of a stipulation, is a sufficiently adverse – and thus appealable – final decision.”  The court also noted that a different result might have happened if the dismissal was the product of a settlement, rather than a stipulation.

Next, the panel observed that the store had altered the rental agreement several times during the relevant period.  In light of the variation among the contracts, Plaintiff proposed the use of several subclasses based on the differing language of the rental agreement.  The first of those classes included individuals who rented tools from July 2002 to February 2005 (including the Plaintiff), the second from March 2005 to June 2006, and the third from June 2006 to the present.  The panel affirmed the district court denial of class certification for subclasses two and three because Plaintiff only alleged that he took part in one transaction in April 2004.  Therefore, according to the court, he was not a member of those subclasses and could not prosecute claims on their behalf.

Finally, the court reasoned that, although the contracts each customer signed were similar, the posted signs, which varied from store to store, and employees’ oral representations, which likely varied employee to employee, were a fundamental part of the store’s alleged misrepresentations and inequitable conduct.  Thus, the panel decided, the district court reasonably found that these variances over time and among different store locations necessitated individualized determinations of the nature of those statements rather than class-wide adjudication.

This case is an important piece of precedent for defeating class certification, especially when plaintiff’s suggest that the certification of sub-classes can alleviate the variations in the factual basis for their claims. Additionally, this case may lead to more and more stipulated and voluntary dismissals so that parties are able to get an appellate ruling on the denial of class certification without first proceeding to trial on the individual claim that survived the denial of the class claims.