Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Cal. App.: Class certification denied for claims of inadequate installment contract disclosures, (Oct 24, 2014)

By Edward L. Puzzo, J.D.

Automobile purchasers, challenging the adequacy of disclosures on their vehicle installment sale contracts, were not capable of representing a class of purchasers, the California Court of Appeals has held. A prior ruling had determined that the purchasers were not required to arbitrate their claims, whereas other proposed class members remained subject to that defense (Barnes v. Bakersfield Dodge, Inc., October 23, 2014, Hill, B.).

Lyle and Karen Barnes, on behalf of a putative class, brought claims against Bakersfield Dodge, alleging that their vehicle retail installment sale contract failed to properly itemize and disclose license, registration, transfer, and titling fees, in violation of the California Unfair Competition Law (UCL), Consumers Legal Remedies Act (CLRA), and Automobile Sales Finance Act.

Class action waivers. After litigation commenced, the U.S. Supreme Court issued its opinion in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), which held that California’s Discover Bank rule invalidating class action waivers in consumer contracts (Discover Bank v. Superior Court (2005) 36 Cal.4th 148) was preempted by the Federal Arbitration Act. Based on the Concepcion holding, Bakersfield Dodge moved to compel arbitration, pursuant to an arbitration clause in the sales contract under which plaintiffs allegedly gave up their right to proceed by class action. The trial court granted defendants’ motion, but the appellate court reversed and remanded, ruling that defendants had already waived their right to compel arbitration by commencing litigation. The scope of the appellate court’s ruling would later become an issue.

Class certification. Back at the trial court level upon remand, plaintiffs sought certification of a class which would include all persons who purchased a vehicle for personal use from Bakersfield Dodge between July 21, 2006, and July 21, 2010 and signed a Retail Installment Sale Contract (RISC) that included the disclosure "N/A" as the amount due for "registration/transfer/titling fees" within the Itemization of Amount Financed Section of the RISC. Plaintiffs asserted this class as defined consisted of approximately 4,000 members with common questions of law. They asserted that they had claims typical of the class and were qualified to represent the class.

Bakersfield Dodge opposed class certification, arguing that, according to the appellate court’s earlier ruling in this case, the unnamed proposed class members were still subject to arbitration and had waived their right to proceed as a class. According to Bakersfield Dodge, this rendered plaintiffs’ claims atypical, raised issues that plaintiffs did not share in common with the proposed class, and rendered plaintiffs’ representation of the proposed class inadequate, because they lacked standing to challenge the arbitration clauses of the proposed class members.

The trial court denied class certification. The court stated that the appellate court’s earlier decision found only that defendant waived its right to arbitration as to plaintiffs’ claims, not as to all proposed class members’ claims. As a result, the proposed class members’ claims were subject to defenses to which plaintiffs’ claims were not subject; common questions of law and fact did not predominate; and plaintiffs did not share with the proposed class members a well-defined community of interest in questions of law and fact. Plaintiff appealed the denial of class certification, thus requiring the appellate court to clarify the scope of its earlier ruling.

Class claims not addressed. In its earlier ruling, the appellate court explained, the only contract before the court was the one between the Barnes and Bakersfield Dodge, and the only arbitration agreement was that contained in the Barnes’ contract. At that time, Barnes contested Bakersfield Dodge’s motion to compel arbitration as to their individual claims, and the appellate court ruled for the Barneses, concluding that Bakersfield Dodge had waived its right to arbitrate the claims by litigating in trial court.

"We did not rule on any issue of waiver of the right to arbitrate any class claims; that issue was not before the court in the prior appeal," the appellate court explained. Consequently, the trial court had correctly interpreted the opinion in the prior appeal to establish only that Bakersfield Dodge waived their right to compel arbitration of the Barnes’ individual claims and not to extend that waiver to the class claims.Thus, the Barnes’ claims were not representative of the class, and the appellate court affirmed the trial court’s decision denying certification of the class.

The case is Civil Action No. F067495.

Attorneys: Hallen D. Rosner, Christopher P. Barry and Lacee B. Smith (Rosner, Barry & Babbitt) for Lyle L. Barnes. Robert W. Thompson and Charles S. Russell (Callahan, Thompson, Sherman & Caudill) for Bakersfield Dodge, Inc.

Companies: Bakersfield Dodge, Inc.

Cases: StateUnfairTradePractices CaliforniaNews