Opinion
Civil Action No: SA-00-CA-385-EP.
February 9, 2001
ORDER
On this date the Court considered the Plaintiffs motion for class certification and the Defendant's motion to dismiss and opposition to the Plaintiff's motion. After careful consideration, the Court finds that the motion to dismiss should be denied and certification granted.
FACTS AND PROCEDURAL HISTORY
Plaintiff Thomas Crosley ordered prescription contact lenses from Defendant Lens Express, Inc., a company that provides contact lenses to customers through the mail. According to Crosley, he ordered only one supply of lenses. Lens Express claims that Crosley enrolled to be a member of its New and Fresh program, under which Lens Express automatically renews orders at regular, predetermined intervals and charges the new supply to its customers' credit cards. When Crosley received the lenses sent to him under the New and Fresh program, he immediately called Lens Express. A representative offered to credit Crosley's credit card if Crosley returned the lenses, at his expense. Crosley refused and brought this lawsuit, raising state law trade practices claims and violation of a federal statute that states that consumers who receive unordered goods may keep them. Crosley seeks to have a class of Lens Express customers from five states certified. Defendant has opposed that motion and also seeks dismissal on the ground that the federal statute that forms the basis of Crosely's federal claim does not create a private cause of action. The Court finds that the statute does create a private cause of action and that certification is appropriate.
PRIVATE CAUSE OF ACTION
Crosley argues that Lens Express violated a section of the Postal Reorganization Act that provides that unordered goods that are shipped to a recipient may be treated as gifts by the recipient, "who shall have the right to retain, use, discard, or dispose of [them] in any manner he sees fit without any obligation whatsoever to the sender." Crosley contends that the language "who shall have the right" suggests that, in enacting this statute, Congress intended to bestow on individuals a private right of action. The Court finds that the Supreme Court's reasoning in Transamerica Mortgage Advisors, Inc. (TAMA) v. Lewis, 444 U.S. 11 (1979), compels the conclusion that section 3009 does create such a right.
Determining whether Congress has created a statutory private cause of action involves divining congressional intent. The United States Supreme Court, in Cort v. Ash, 422 U.S. 66 (1975), established a four-part inquiry for making this determination. While the validity of the full application of the Cort factors has been questioned, see Noe v. Metropolitan Atlanta Rapid Transit Authority, 644 F.2d 434, 438 (5th Cir. Unit B 1981), this Court concludes that, under Cort or the more direct inquiry proposed in Noe, a private cause of action has been created by section 3009. In the interest of caution and completeness, the Court will apply the Cort factors to illustrate why this is so.
Under Cort, a reviewing court must determine (1) whether the plaintiff is one of the class for whose benefit the statute was enacted; (2) whether there is any indication of a legislative intent, explicit or implicit, to create a remedy or to deny one; (3) whether it is inconsistent with the underlying purposes of the legislative scheme to imply such a remedy; and (4) whether the cause of action is one that is traditionally relegated to the states. Cort, 422 U.S. at 78. Crosley argues that each of these factors militates in favor of recognizing a private cause of action under this provision. The Court agrees. See Kipperman v. Academy Life Ins. Co., 554 F.2d 377 (9th Cir. 1977) (finding section 3009 creates limited private cause of action).
The Court will not dwell on Cort's first factor. It is clear that section 3009, like the Federal Unfair Trade Practices Act that it references, is designed to protect consumers from the unfair trade practices. That conclusion does not dispose of this matter, however. See Noe, 644 F.2d at 438. As the Fifth Circuit noted in Noe, even if the four-factor test retains continuing vitality in light of the United States Supreme Court's opinion in TAMA, the primary focus of the inquiry is whether Congress intended to create a private cause of action. Id.
Certainly, there is no explicit indication, in either section 3009 itself or its legislative history that Congress intended to create a private cause of action. Thus, the Court must look at the spare language of the provision itself to discern whether there is an implicit indication of congressional intent. The first subpart of section 3009 sets forth the conduct it seeks to proscribe and names the statutory provision that such conduct violates: "Except for (1) free samples clearly and conspicuously marked as such and (2) merchandise mailed by a charitable organization soliciting contributions, the mailing of unordered merchandise or of communications prohibited by subsection (c) of this section constitutes an unfair method of competition and an unfair trade practice in violation of section 45(a)(1) of title 15." See 35 U.S.C. § 3009(a). Lens Express correctly notes that 15 U.S.C. § 45, or section five of the Federal Trade Commission (FTC) Act, empowers the Federal Trade Commission to bring administrative actions to enjoin unfair trade practices, but does not create a private cause of action. See Fulton v. Hecht, 580 F.2d 1243, 1248 n. 2 (5th Cir. 1978). Certainly, if section 3009 had ended with subsection (a), it could not be said to create a private cause of action.
Lens Express suggests that this finding ends the inquiry, as the Fifth Circuit requires some "affirmative action" from Congress demonstrating its intent to create a private cause of action. The Court agrees with Crosley that implicit demonstrations of intent may satisfy this requirement.
However, subsection (b) of section 3009 gives recipients of unordered goods the right to keep those gifts. The Court finds that this language implies the ability to enforce such a right. This conclusion, the Court believes, is compelled by the United States Supreme Court's reasoning in TAMA. In that case, the United States Supreme Court reviewed provision remarkably like that at issue here. That provision, section 215 of the Investment Advisors Act (IAA), provided that any contract made in violation of the Act "shall be void . . . as regards the rights of any person" who violated the IAA. The Supreme Court began with the assumption that Congress, in contemplating this provision, at least anticipated that the issue of voidness would be raised defensively "to preclude the enforcement of an investment advisers contract." TAMA, 444 U.S. at 246. However, the Court also acknowledged that the legal consequences of voidness extend to such offensive matters as suits for recision or restitution. Id. Based on the Court's interpretation of the language of section 215, the Court concluded that Congress must have anticipated such lawsuits. Id. at 247.
Like section 215 of the IAA, section 3009 creates a right that at the very least might be used defensively. Moreover, based on the Supreme Court's reasoning in TAMA, the Court finds that the language reflects an implicit congressional intent that the right may be enforced offensively, in some cases. Here, some of the putative plaintiffs argue that Lens Express's conduct has cost them shipping charges. More significantly, some of the proposed class may assert damages for overcharges on accounts that they claim were charged without their permission. At least one proposed plaintiff informed Lens Express that she was unable to purchase airplane tickets at a reduced rate because her charge card was ineffective. These damages, caused by an asserted violation of section 3009, may be redressed in federal court. See Kipperman, 554 F.2d at 380.
The third Cort factor asks this Court to consider whether inferring a private cause of action is consistent with the overall legislative scheme. The Court concludes, for the same reasons discussed above, that it is consistent. Section 3009 seeks to prohibit unconscionable business practices and seeks to limit the harm created by such practices. As the Court has noted above, some of that harm may exist in the form of real, albeit limited, monetary damage.
Finally, the fourth Cort factor requires consideration of whether the requested relief is relief that is traditionally offered by the states. Like the Supreme Court in TAMA, the Court declines to adopt the "anomalous" suggestion that Congress created a right that it intended to be enforced only by the states. TAMA, 444 U.S. at 247 n. 8.
Focusing primarily on evidence of congressional intent, but also applying the four-pan test of Cort, this Court concludes that section 3009 creates a limited private right of action that would encompass the claims for damages sought in this lawsuit. Accordingly, the Court must turn to the question of whether class certification is appropriate.
Those damages, Crosley stipulates, are limited to a declaration of the right to keep any unordered lenses and any restitution that may be proved.
Class Certification
The Court concludes that this case is particularly suited to class resolution.
Rule 23 sets forth four threshold prerequisites to any class certification: numerosity, commonality, typicality, and adequacy of representation, see FED. R. Civ. P. 23(a). Crosley bears the burden of demonstrating that these prerequisites have been met, Only two of the Rule 23(a) criteria are disputed — whether there is a common issue of fact and whether Crosley claims are typical of those of the putative class.
Prerequisites
1. Commonality
Class certification will not be granted unless the party moving for certification can demonstrate that there are "questions of law or fact common to the class." Washington v. CSC Credit Serv., Inc., 199 F.3d 263, 265 (5th Cir. 2000). Crosley claims that Lens Express violated state and federal law by sending unordered goods to customers. Specifically, Crosley contends that even if Lens Express did "pitch" the New and Fresh program to customers, its pre-determined "script" did not require clear and unambiguous consent from the customer.
Lens Express argues that, in order for the Court to determine whether it should be held liable for such conduct, the Court would have to assess whether each class member heard, understood, and responded to the sales "pitch." Thus, according to Lens Express, no common question of fact exists. However, Lens Express has misunderstood the commonality requirement. The test for commonality is not stringent; it is met "where there is at least one issue, the resolution of which will affect all or a significant number of the putative class members." Lightbourn v. County of El Paso, 118 F.3d 421, 426 (5th Cir. 1997). The question of whether Lens Express is engaging in conduct that results in the shipping of unsolicited goods is common to a class of Lens Express customers. That question, aside from the issue of individual damages, is certainly one that affects all Lens Express customers equally. Further, since Lens Express employees apparently communicate with their customers through the use of written scripts, there is little to Lens Express's contention that "the questions of what each person was actually told and whether that person was actually misled cannot be answered without individual inquiry." The Court finds that commonality has been satisfied. See In re Nasdaq Market-Makers Anti-Trust Litigation, 169 F.R.D. 493, 510 (S.D.N.Y. 1996) (commonality exists even where there are varying factual situations, as long as common legal question is presented),
2. Typicality
Crosley contends that his claims are typical of claims to be asserted by potential class members. Lens Express counters that, because Crosley has asserted that he was not read the New and Fresh "script," his claim is different from class members who were read the script but allegedly were not give the opportunity to demonstrate their unequivocal consent.
A plaintiffs claim is typical of the class if it arises from the same event or practice or course of conduct that gives rise to the claims of the other class members and if the claims are based on the same legal theories. In re Lease Oil Antitrust Litigation, 186 F.R.D. 403, 420-21 (S.D. Tex. 1999). Crosley's claim is that Lens Express is sending unordered merchandise to its clients. This practice is prohibited by law. According to Crosley's theory, even if he were read the script, Lens Express's conduct would be illegal. Assuming Crosley's complaint is accurate, small variations in how Lens Express violates the law will not defeat typicality. See In re Nasdaq, 169 F.R.D. at 510 (typicality exists where representatives have incentive to prove all elements of the cause of action that would be presented by the class members if those members had initiated their own suits).
One of the strongest advantages to class certification is that it encourages individuals who have suffered small harms to join together to seek redress. Motivation for pursuing these complaints individually would be very weak.
Rule 23(b)(2)
Crosley seeks certification under Rule 23(b)(3), which permits class action lawsuits where class resolution is preferable to individual resolution. This rule mandates that common issues predominate, that certification is superior to bringing individual suits, and that the case is manageable as a class. FED. R. Civ. P. 23(b)(3).
Whether Common Issues Predominate
In the United States Court of Appeals for the Fifth Circuit, in order to `predominate,' common issues "must constitute a significant part of the individual cases." Mullen v. Treasure Chest Casino, 186 F.3d 620, 626 (5th Cir. 1999), cert. denied — — S.Ct. — — (Feb. 22, 2000); see also Ramsey v. Arata, 406 F. Supp. 435, 439 (N.D. Tex. 1975) (question is whether common or individual questions will be the object of most of the efforts of the litigants and the Court). The question focuses not so much on the quantity of the common issues as it does on the quality of those issues. See id. (noting that district court conducted proper inquiry by weighing the issues rather than counting them).
Lens Express argues that common claims do not predominate here for two reasons: because customers whose lenses were not shipped through the U.S. Mail are not eligible for protection under section 3009 and because Crosley's state law claims are not uniform. The Court rejects both arguments.
Lens Express also reurges the arguments it made contesting the presence of common issues under Rule 23(a). The Court has already rejected these arguments.
Lens Express contends that because section 3009 is located within the Postal Reorganization Act, it applies only to goods sent by United States Mail. However, as Crosley points out, the explicit purpose of the section is to prohibit the unfair trade practice of shipping unordered goods. In other words, the statute's reason for being is not the postal service; rather, it is the need to protect consumers from dishonest business persons. See Kipperman, 554 F.2d at 379 (section 3009 does not relate to operation of postal service). Moreover, as Crosley also notes, there is no evidence in this record that the myriad of shipping options available to consumers today was available at the time section 3009 was passed. The Court concludes that, because section 3009 was aimed at the conduct of tradespersons and not the use of the U.S. Mail, persons who received lenses via other shipping services are entitled to join this class.
Remaining, then, is the question of whether the presence of five different state deceptive trade practices acts should be the basis for denying the motion for class certification. The Court concludes that it should not. The issue here is whether Lens Express is liable for the shipment of unsolicited goods. Each state to be represented in this lawsuit — Texas, California, Florida, New York, and Michigan — has a statute that specifically prohibits this conduct. See TEX. BUS. COM. CODE § 35.45; CAL. CIV. CODE § 1584.5; FLA. STAT. ANN. § 570.545; N Y GEN. BUS. L. § 396(2); MICH. COMPILED LAW ANN. § 445.131. There is no evidence or claim that application of these statutes varies from state to state. Not one of the five states' courts, in fact, has any interpretative case law on the statutes. The laws are sufficiently similar to be susceptible to classwide proof.
Two variations do exist that will have to be addressed in conducting this case. The first is that Texas's statute provides the affirmative defense of bona fide mistake. The court has considered this issue and has determined that, at this stage of these proceedings, it will not require the formation of a subclass. It appears from the evidence before the Court thus far that, while bona fide mistake may be an issue Lens Express will want to raise, it will likely be part of the entire body of evidence a jury will hear in this case, even in the absence of an explicit defense.
The second difference that is immediately apparent to the Court is the availability and amount of damages from state to state, as well as the standards applied when assessing damages. It is apparent to the Court that subclasses will need to be formed, and separate hearings held, on the questions of damages. This is an issue that can be resolved definitively as this case nears trial. Toward that end, the Court will ask that, within sixty days from the date of this Order, Crosley provide the names of proposed damages subclass representatives for each state. of course those representatives must meet the requirements of Rule 23. Prior to a damages hearing, the Court will request briefing on the damages issues presented by the various state provisions.
Superiority
This suit is preferable to individual suits because costs of litigation are always high and, in his case, individual damages promise to be small or even negligible. See Castano v. American Tobacco Co., 84 F.3d 734, 748 (5th Cir. 1996) (best reason for finding class action is superior is lack of financial incentive to bring individual suits).
CONCLUSION
The Court here makes no comment on the merits of this lawsuit. Those merits have been extensively briefed in the parties' filings but have no place in a court's determination of whether to certify a class. No doubt, the merits of this case will be raised again, prior to trial, as is appropriate. Here, the Court merely decides that section 3009 does create a limited private right of action and that this case is appropriate for class certification.
ACCORDINGLY, it is ORDERED that the motion for class certification is GRANTED and the Defendant's motion to dismiss is DENIED. It is further ORDERED that, within sixty days of the date this Order is filed, Plaintiff submit the names of the proposed damages subclass representatives.