New Ninth Circuit opinion on CAFA and standing: Polo v. Innoventions International, LLC

In Polo v. Innoventions International, LLC, ___ F.3d ___ (9th Cir. Aug. 18, 2016), the plaintiff brought UCL, CLRA, and other claims, alleging that she purchased the defendant's allegedly mislabeled diabetes medication, and that taking the medication made her diabetes worse.   The district court held that Article III standing was lacking, and dismissed the case.  The plaintiff appealed as to the CLRA class claim only, arguing that instead of being dismissed, the case should have been remanded back to state court, where it was initially filed before the defendant removed it under CAFA.  Slip op. at 4.  The Ninth Circuit agreed:

The rule that a removed case in which the plaintiff lacks Article III standing must be remanded to state court under § 1447(c) applies as well to a case removed pursuant to CAFA as to any other type of removed case.

Slip op at 7. The court then explained that the CLRA class claim might be viable in state court even if the plaintiff did not suffer "injury in fact" for Article III purposes: 

A plaintiff who purchased goods in light of deceptive practices has standing to sue pursuant to the CLRA if she alleges (a) that she purchased a product from the defendant, and (b) that “the purchase would not have been made but for the misrepresentation.” Kwikset Corp. v. Superior Court, 246 P.3d 877, 890 (Cal. 2011); see also Hinojos v. Kohl’s Corp., 718 F.3d 1098, 1108 (9th Cir. 2013). The injury Polo asserts with respect to her CLRA claim fits these requirements:

Plaintiff and California Class members suffered injuries caused by Defendants’ misrepresentations about DiabeStevia because: (a) Plaintiff and the California Class members would not have purchased DiabeStevia on the same terms had they known the true facts; (b) Plaintiff and the California Class paid a premium price due to the false and misleading advertising of DiabeStevia; and (c) DiabeStevia did not have the level of safety, quality, effectiveness or value as promised.

Polo’s standing to bring her CLRA claim does not depend upon her allegation that taking DiabeStevia made her diabetes worse. Indeed, with respect to Polo’s CLRA claim, when Polo ceased taking her diabetes medication—or whether she had diabetes at all—is irrelevant. What matters are her allegations that she thought she had diabetes; that Innoventions marketed DiabeStevia as a treatment for diabetes; and that but for that marketing, she would not have bought DiabeStevia.

Were that the end of the allegations, Polo would likely have standing under Article III. See Hinojos, 718 F.3d at 1104 n.3. But the district court held that because Innoventions fully compensated Polo for “her entire purchase price,” her CLRA claim is moot.⁵ Under California law, however, that sort of “picking off” of class plaintiffs is ineffective: “[O]nce a person has been the victim of a proscribed practice under the CLRA and makes a demand on behalf of a class, remedying the plaintiff’s individual complaint does not disqualify her as class representative.” Meyer v. Sprint Spectrum, L.P., 200 P.3d 295, 300 (Cal. 2009). Instead, to defeat a class action based on practices proscribed under the CLRA, the defendant “must adequately notify the members of the class and provide an opportunity for an appropriate remedy for the defective goods or services.” Id. (citing Cal. Civ. Code § 1782(c)).

Polo made a demand on behalf of a class on April 6, 2012. Innoventions refunded Polo’s purchase price on May 11, 2012, but does not contend that it provided the notice and remedy to class members required by the CLRA. See Cal. Civ. Code § 1782(c); Meyer, 200 P.3d at 300. Thus, Polo likely retains standing under California law. At a minimum, we cannot say with “absolute certainty” that remand would be futile. Therefore, the district court should have remanded this case to state court pursuant to 28 U.S.C. § 1447(c).

⁵ This conclusion is questionable, see Chen v. Allstate Ins. Co., 819 F.3d 1136, 1141–43 (2016), but Polo expressly waived any argument to the contrary on appeal. ....

Slip op. at 10-12 (footnote 4 omitted). 

It seems to me that the district court erred by dismissing the action in the first place. The "no-pickoff" rule applies in federal court, too.  See Gomez v. Campbell-Ewald Co., 768 F.3d 871, 874-75 (9th Cir. 2014) (discussed here); Diaz v. First American Home Buyers Protection Corp., 732 F.3d 948 (9th Cir. 2013) (discussed here); Pitts v. Terrible Herbst, Inc., 653 F.3d 1081 (9th Cir. 2011) (discussed here).  Even if the medication did not worsen plaintiff's diabetes, if she purchased the mislabeled product, she probably has a viable CLRA claim, and if she doesn't, the defendant can't eliminate the case by picking her off, regardless of whether the case is in federal or state court.  The good news is the plaintiff can now proceed with the case in state court, which is where she wanted to be in the first place. It's too bad about all the wasted time and effort in federal court, though.