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Class Action Defense Cases-McAdams v. Monier: California Circuit Holds Class Action May Be Certified Based On "Inference" Of Reliance By Class Members So Trial Court Erred In Denying Motion To Certify Class Action

“Concept of Interest of Common Reliance” Applies to Class Action Alleging Violations of CLRA (Consumers Legal Remedies Act) and UCL (Unfair Competition Law) and Supports Certification of Class Action California Appellate Court Holds

Plaintiff filed a putative class action in California state court against Monier alleging violations of the state’s Consumers Legal Remedies Act (CLRA) and Unfair Competition Law (UCL) arising out of its “failure to disclose that the color composition of its roof tiles would erode away, leaving bare concrete, well before the end of the tiles’ represented 50-year life.” McAdams v. Monier, Inc., 151 Cal.App.4th 667, 60 Cal.Rptr.3d 111, 112-13 (Cal.App. 2007), reh’g den. and opn. mod. (June 25, 2007). The class action complaint alleged that Monier warranted its roof tiles for 50 years, and represented that it had a permanent color glaze and required no care. McAdams, at 113. The class action claims were based on the allegation that, contrary to the above, Monier knew that the tiles lose their color “well in advance of their warranted 50-year useful life,” id. Plaintiff sought to prosecute a class action on behalf of a “CLRA” class, consisting of all people who own homes with Monier tile roofs or who paid to replace or repair such tiles, and an “ownership” class, consisting of people who own buildings other than homes with Monier tile roofs or who paid to replace or repair such tiles. Id., at 113-14. In denying plaintiff’s class certification motion, the trial court explained that each class member would be required to prove actual reliance, raising individual fact issues as to the particular representations relied on and the damage suffered, and that plaintiff claims were not “typical” of class because he purchased his tiles through a third party distributor rather than through Monier directly. Id., at 114. Plaintiff appealed, and the appellate court reversed.

The Court of Appeal first addressed class action certification under the CLRA, which is governed by Civil Code section 1781. The appellate court readily concluded that the class action complaint sufficiently alleged a violation of the CLRA, McAdams, at 115, the issue was whether the trial court correctly determined that individual issues predominated. The appellate court found, “The class action is based on a single, specific, alleged material misrepresentation: Monier knew but failed to disclose that its color roof tiles would erode to bare concrete long before the life span of the tiles was up.” Id. With respect to the trial court’s conclusion that class members must individually prove reliance and consequent damage, thus defeating commonality as required by section 1781(b)(2), the appellate court recognized the CLRA requires a plaintiff show both that the defendant’s statements were deceptive and that the representations caused them damage, id., at 116 (citation omitted), but held that under the facts of this case reliance by members of the putative class could be “inferred” based on the allegation that “Monier made a single, material misrepresentation to class members that consisted of a failure to disclose a particular fact regarding its roof tiles” when Monier allegedly knew “that the color composition of its roof tiles would erode to bare concrete well before the end of the tiles’ represented 50-year life.” Id., at 117. The appellate court found that, if these allegations were true, the failure to make the requisite disclosure “would have been material to any reasonable person who purchased tiles in light of the 50- year/lifetime representation, or the permanent color representation, or the maintenance-free representation” so as to “permit an inference of common reliance among the class on the material misrepresentation comprising the alleged failure to disclose.” Id. The Court of Appeal further held that this conclusion meant plaintiff did not have to purchase his tiles directly from Monier in order to prosecute a CLRA class action claim against it on behalf of the class. See id., at 118-19.

Finally, the appellate court explained that the existence of questions concerning individual damages does not defeat a class certification motion: “‘A class action can be maintained even if each class member must at some point individually show his or her eligibility for recovery or the amount of his or her damages, so long as each class member would not be required to litigate substantial and numerous factually unique questions to determine his or her individual right to recover.’” McAdams, at 119 (citation omitted). The Court explained at page 119,

To obtain damages, each class member will have to show the representation made to him or her that accompanied this failure to disclose (e.g., 50-year warranty/lifetime, permanent color, maintenance-free, or the like), and will have to show the amount of his or her damages. But these two showings do not invoke “substantial and numerous factually unique questions to determine [the] individual right to recover” damages, and therefore are not a proper basis on which to deny class certification.

The appellate court also held that an inference of reliance applied to the UCL class action claim. The Court noted that plaintiff’s UCL claim was premised on the same alleged failure to disclose as his CLRA claim, McAdams, at 120, but California law now requires that a representative action under the UCL comply with the class action requirements of Code of Civil Procedure section 382, id., at 121. The trial court denied class action treatment because it found “that individual questions of liability, reliance and damage were predominant, and that plaintiff’s claim was typical of only one of the four different kinds of roof tile purchasers.” Id. Because its liability and damage analysis would track its analysis under the CLRA class action claim, the appellate court explained at page 121, “The real nub of the issue of UCL class suitability here turns on the element of reliance (causation).” In this regard, the Court noted that California law now requires that “[e]ach class member must have standing to bring the suit in his own right,” id. (citations omitted), but it nevertheless concluded that the “concept of ‘inference of common reliance’” satisfied this requirement and rendered the action “suitable for class treatment.” Id., at 121-22. Specifically, the appellate court held that “the Proposition 64-amended standing requirement for private plaintiffs under the UCL – i.e., ‘suffered injury in fact and … lost money or property as a result of such unfair competition’ (§ 17204) – may be satisfied by an ‘inference of common reliance’ that renders a UCL claim suitable for class treatment.” Id., at 123. Because the Court also concluded that plaintiff’s claims were “typical” of the other class members’ claims, id., at 123-24, it concluded that the trial court erred in denying class action treatment to the UCL claim, id., at 124.

NOTE: The trial court had refused to infer reliance reasoning that if “Monier made no representation to an owner, why would that owner think the color lasts for 50 years? Concealment of a fact is merely the flip side of every affirmative misrepresentation, and … [p]laintiff[‘]s claims are actually based upon affirmative representations that allegedly mislead them.” McAdams, at 117.

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