A California appeals court May 30 reversed a trial court's denial of class certification in a suit alleging a roof tile manufacturer failed to disclose that the tiles would fade in color (McAdams v. Monier Inc., Cal. Ct. App., 3d Dist., No. C051841, 5/30/07).
The California Court of Appeal, Third District, certified classes under both the Consumer Legal Remedies Act (Civ. Code § 1750) and the Unfair Competition Law (Bus. & Prof. Code § 17200), finding that an "inference of common reliance" can b applied in cases alleging failure to disclose a material fact.
The court based is inference of common reliance analysis on an earlier court of appeal ruling, Massachusetts Mutual Life Ins. Co. v. Superior Court, 97 Cal. App. 4th 1282 (Cal. App. 2002). 3 CLASS 322, 05/24/02. It also concluded that the Proposition 64 changes to the UCL did not prevent the plaintiffs from relying on the inference of common reliance in those suits as well.
Knowing Failure to Disclose. The plaintiffs alleged that tile manufacturer Monier Inc. represented that its tiles:
- Are free from manufacturing defects and will remain sound for 50 years;
- Have a permanent color glaze that requires no resurfacing and will maintain their color; and
- Need neither care nor maintenance.
However the plaintiffs said Monier "knew but failed to disclose... that the color composition of its tiles would erode away well before the tiles represented 50-year life," the court said.
They moved to certify two classes - one under the CLRA covering California individuals who own homes equipped with Monier tiles for personal and family use, and one under the UCL that also included "individuals or entities" that owned structures with the tiles. The classes included all those who had tiles sold by Monier between Jan. 1, 1978, and Aug. 14, 1997, and all those who paid to replace the tiles.
The trial court refused to certify the proposed classes, concluding that the class members would have to prove the particular misrepresentation on which they relied and that the named plaintiff, Tim McAdams, was not typical of the class, since he bought his tiles from an independent distributor.
Inference of Common Reliance. In overturning the trial court's certification denial, the appeals court pointed out that, under Massachusetts Mutual, the CLRA causation requirement "can be satisfied if the record permits an 'inference of common reliance' to the class." Here it found one, pointing out that the plaintiffs allege Monier "made a single, material misrepresentation to class members that consisted of a failure to disclose a particular fact regarding its roof tiles." If the plaintiffs can prove this, it will be sufficient for an inference of common reliance among the class members, the court said.
The court noted in particular that the material fact the plaintiffs allege Monier failed to disclose is "misleading in light of other facts (affirmative representations) that Monier did disclose."
The court also found that, since the allegations were based on Monier's failure to disclose a fact that contradicted its affirmative representations, McAdams qualified under typicality. "[T]he alleged material misrepresentation in this case, properly viewed, does not encompass an array of varying transactions and misrepresentation, but a single failure to disclose a particular known fact" - a claim that McAdams can represent. The court found no need to distinguish between those who bought their tiles from an independent distributor, those who bought directly from Monier, and those who bought homes equipped with the tiles from a builder or other homeowner.
The fact that some form of individual damages process may be required does not prevent certification on the key issue of liability, the court also concluded.
Proposition 64. While the court concluded that the UCL class was also entitled to the inference of common reliance, it also analyzed certification in light of the requirements of Proposition 64, which limited the use of the UCL. Plaintiffs using the UCL must now show not only that a defendant's conduct was deceptive, but also that the deception caused them harm.
Again applying Massachusetts Mutual, the court said the "'inference of common reliance' could arise as to an entire class if a material misrepresentation was made to the class members."
The court went on: "We conclude, then, that the Proposition 64-amended standing requirement for private plaintiffs under the UCL... may be satisfied by an ' inference of common reliance' that renders a UCL claim unsuitable for class treatment. We do not construe that amendment to section 17204 as requiring a showing in a UCL class action that each class member ' actually relied' on the misrepresentation and, as a result, was injured thereby."
The court point out that both the CRLA and the UCL are consumer protection laws, which traditionally require less proof than common law fraud. It also said the purpose of Proposition 64 was to close a loophole that allowed anyone - regardless of injury - to bring suit on behalf of the general public.