Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: Class certification denied in suit over office space rental fees, (Mar 14, 2016)

By Michael Menzhuber, J.D., LL.M.

The federal district court in San Francisco has denied class certification, for lack of predominance, in an action against a commercial office rental firm for failure to adequately disclose certain office rental fees to its clients (Circle Click Media LLC v. Regus Management Group LLC, March 11, 2016, Chen, E.).

California Click Media LLC (CCM) rented office space from Regus in California. CTNY Insurance Group rented office space from Regus in New York. In May 2012, CCM and CTNY brought suit against Regus, alleging violations of California’s Unfair Competition Law (UCL)) and False Advertising Law (FAL). The plaintiffs claimed that Regus failed to adequately disclose the following three required service fees prior to their entering into a lease agreement: (1) a kitchen amenities fee (KAF); (2) an office restoration fee (ORS); and (3) a business continuity fee (BCS).

After previously having their motion for class certification denied, the plaintiffs filed a renewed motion for class certification, which included a California class and a New York class.

Rule 23(a). First, the court found that the following prerequisites of Federal Rule of Civil Procedure 23(a) were satisfied. The “numerosity” requirement was met because the estimated number of members in the class was 23,000. The court assumed that the “commonality” requirement was met because many of the fifteen common questions alleged by the plaintiffs would drive the resolution of the class action. The “typicality” requirement was generally met. Additionally, the “adequacy” requirement was met because there was no evidence of a conflict of interest or issues of credibility and the plaintiffs did not propose to waive elements of damage on behalf of the class to the detriment of other class members.

Rule 23(b). In addition to satisfying Rule 23(a), a proposed class must also satisfy Federal Rule of Civil Procedure 23(b), which requires that: (1) common questions of law and fact predominate over individualized issues; and (2) class adjudication is superior to individual litigation of the plaintiffs’ claims.

Since the plaintiffs’ UCL and FAL claims were based on Regus’s failure to adequately disclose the KAF, ORS, and BCS fees, the court determined that the predominance inquiry needed to focus on the degree of uniformity by which the class members were exposed to the alleged deceptive conduct. With respect to the contract documents, the court determined that uniformity was not present because: (1) the documents, including the Terms and Conditions (incorporated by reference on the Office Service Agreement) and the Services Price Guide, changed over time; and (2) the plaintiffs disclaimed any reliance on the unreadability of the Terms and Conditions.

With respect to the way the documents were presented, the plaintiffs relied on the training materials, arguing that: (1) sales people were trained to separate the service fees from the monthly office price; and (2) the training materials were silent about the need to disclose the ORS and BCS fees. However, the court found that, even if the training materials sought to implement a common global practice, there was significant variability as to whether Regus’s salespeople took the training and whether they acted consistent with the training. Thus, the plaintiffs failed to demonstrate predominance in the case.

The case is No. 12-cv-04000-EMC.

Attorneys: Ali Ari Aalaei (Ari Law, PC) and S. Chandler Visher (Law Offices of S. Chandler Visher) for Circle Click Media LLC and CTNY Insurance Group LLC. Meryl Macklin (Bryan Cave LLP) for Regus Management Group LLC, Regus Business Centre LLC and Regus PLC.

Companies: Circle Click Media LLC; CTNY Insurance Group LLC; Regus Management Group LLC; Regus Business Centre LLC; Regus PLC

Cases: Advertising StateUnfairTradePractices CaliforniaNews