Monday, April 02, 2012

Class Action on Sam’s Club’s Service Agreement for “As Is” Product Is Certified

This posting was written by Jody Coultas, Editor of CCH State Unfair Trade Practices Law.

A federal district court in Camden, New Jersey certified a class action of Sam’s Club members that brought suit against Wal-Mart under the New Jersey Consumer Fraud Act (CFA) for allegedly failing to disclose that its service agreement for “as-is” products actually excluded “as-is” products from coverage.

Sam’s Club, a membership-only retail warehouse club owned by Wal-Mart, offered its members the option of purchasing service plans. The service plans expressly excluded products sold as-is. However, employees offered the service plans on every product sold despite the “as-is” products exclusion from those plans. Members sought certification of a class of Sam’s Club members that purchased “as-is” products as well as service plans after January 26, 2004.

Class Definition

The proposed definition of the class enumerated by the members’ attorney at oral argument was readily ascertainable, according to the court. The class identified a particular group, specified a particular time frame and location, and enumerated a particular way that the retailer’s conduct purportedly caused the class members harm.

The class included all consumers who, from January 26, 2004 to the present, purchased from Sam's Clubs in the State of New Jersey, a Sam's Club Service Plan to cover “as-is” products. Excluded from the class are consumers whose “as-is” product was covered by a full manufacturer's warranty, was a last-one item, consumers who obtained service on their product, and consumers who have previously been reimbursed for the cost of the service plan.

Federal Rule of 23(a) required the purported class representative to show numerosity, commonality, typicality, and adequacy of representation.

The class was potentially as large as 3,500 members, which would satisfy the numerosity requirement. As with the absent class members, the class representative was sold a service plan to cover an as-is product without being informed that the service plan excluded as-is products. Finally, the class representative’s attorney was experienced with class actions and the class members and representative suffered harm from the same alleged course of conduct.

Predominance of Common Questions

Federal Rule of 23(b)(3) states that a class action may be maintained only if questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action was the superior method of adjudication. The predominance requirement tests whether the proposed class is sufficiently cohesive to warrant adjudication by representation.

All three elements of the CFA claim could be proven by common proof since the harm alleged arose from the same company-wide conduct, according to the court.

The decision is Hayes v. Wal-Mart, D N.J., CCH State Unfair Trade Practices Law ¶32,423.

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