The New Jersey Appellate Division has issued a strong published decision in the case of Ellen Baskin v. P.C. Richard & Son, LLC. The opinion by Judge Firko, sitting with Judges Yannotti and Hoffman, clarified and strengthened “superiority” and “predominance” requirements for class certification – affirming the trial court’s order finding plaintiffs had failed to establish that a class action was the superior means to resolve the claims, or that the alleged class had been damaged in a way that would be representative of the whole.
The panel also affirmed the trial court’s decision to dismiss claims brought by New York residents, arising out of sales transactions that occurred in New York, finding the New Jersey courts lacked personal jurisdiction over a New York LLC or Delaware corporation with a principal place of business in New York.
No-Injury Class Action
Plaintiffs had claimed credit or debit card’s expiration dates and last four digits of card numbers had been printed on receipts in violation of FACTA, and that printing the information on their receipts subjected them to “an increased risk of identity theft and/or credit card fraud.” None of the plaintiffs suffered identity theft or fraud.
Court noted the purpose of the statute is to ensure consumers “suffering from any actual harm to their credit or identity are protected while simultaneously limiting abusive lawsuits that do not protect consumers but only result in increased cost to business and potentially increased prices to consumers.”
Thecourt applied the reasoning of Local Baking Products v. Kosher Bagel Munch, an appellate division decision from 2011 involving the Telephone Consumer Protection Act (TCPA). Local Baking held that the superiority requirement for class certification implies “a comparison with alternative procedures.” The statutory penalty of $500, obtainable by individual consumers in small claims court, eliminated the need for class action treatment.
Because FACTA provides up to $1,000 for individuals proceeding in small claims section – a penalty comparable to the damages under TCPA – this panel concluded that “the benefit of a class action has been conferred on a litigant.” The “cost of litigating for an individual is significantly less than the potential recovery.
The court also held the putative class failed to meet the predominance requirement for class certification.
Because FACTA was enacted to ensure that consumers suffering from “any actual harm” are protected, the disparate nature of “damages that may or may not have been suffered by consumers” would require the courts to “adjudicate defendants’ liability on a case by case basis,” cutting “directly against the purpose of [the Rule’s] class certification predominance and superiority prongs.” The court concluded that the plaintiffs had failed to allege that the class had been “damaged in such a way that would be representative of the whole.”
Notably, the court declined to follow several federal cases that have concluded a class action would be the superior means to adjudicate FACTA claims as not binding on state courts. Judge Firko noted that these particular plaintiffs had already had their claims dismissed in federal court for failure to state a claim under FACTA and lack of Article III standing, having failed to allege anything that would actually “raise a material risk of identity theft.”
Finally, the court addressed the jurisdictional problems with the putative class. The claims were filed against P.C. Richard & Son, LLC and P.C. Richard & Son, Inc., a New York based limited liability company and a Delaware corporation. The court noted explained that although defendants conduct business in New York, New Jersey, Pennsylvania, and Delaware, they “clearly cannot be considered to be ‘at home’ in all four states,” and “more than three-quarters of their business is conducted outside of the State of New Jersey.” The panel concluded that the New Jersey courts could not exercise general jurisdiction over defendants and lacked specific jurisdiction to consider the claims of plaintiffs who were not residents of New Jersey.
All three elements of this decision clarify and strengthen the standards for bringing class actions in New Jersey state courts. The superiority analysis is a useful reminder that statutory penalties are themselves the mechanism by which an individual consumer can seek redress, obviating the need for a class wide mechanism. The predominance analysis is likely to be broadly beneficial in deterring putative classes that seek an end run around demonstrating actual harm. And finally, the jurisdiction analysis is a reminder that plaintiffs are not free to forum-shop into jurisdictions perceived to be more favorable. The question of when a corporation is subject to jurisdiction in a given state is a hot topic, with two cases set to be argued at the U.S. Supreme Court in April. It’s nice to see New Jersey courts carefully applying the law.