KATIE VAN V. LLR, INC., ET AL, No. 21-36020 (9th Cir. 2023)
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Defendant LuLaRoe, a multilevel-marketing company that sells clothing to purchasers across the United States through “fashion retailers” located in all fifty states, allegedly charged sales tax to these purchasers based on the location of the retailer rather than the location of the purchaser. LuLaRoe eventually refunded all the improper sales tax it collected, but it did not pay interest on the refunded amounts. Plaintiff, an Alaska resident who paid the improperly charged sales tax to LuLaRoe, brought this class action under Alaska law on behalf of herself and other Alaskans who were improperly charged, for recovery of the interest on the now-refunded amounts collected and for recovery of statutory damages. The district court certified the class under Rule 23(b)(3) and LuLaRoe appealed under Rule 23(f).
The Ninth Circuit vacated the district court’s order certifying the class of Alaska purchasers and remanded for further proceedings. The panel first rejected LuLaRoe’s argument that class certification was improper because the small amount of money currently owed to some class members was insufficient to support standing and the presence of these class members in the class made individualized issues predominant over class issues. The panel next rejected LuLaRoe’s assertion that some purchasers knew that the sales tax charge was improper but nevertheless voluntarily paid the invoice which contained the improperly assessed sales tax amount, and thus, under applicable Alaska law, no deceptive practice caused any injury for these purchasers. Finally, the panel held that LuLaRoe’s third argument, that class certification should be reversed because some fashion retailers offset the improper sales tax through individual discounts, had merit.
Court Description: Class Certification. The panel vacated the district court’s order certifying a class of Alaska purchasers pursuant to Rule 23(f) of the Federal Rules of Civil Procedure, and remanded for further proceedings. Defendant LuLaRoe, a multilevel-marketing company that sells clothing to purchasers across the United States through “fashion retailers” located in all fifty states, allegedly charged sales tax to these purchasers based on the location of the retailer rather than the location of the purchaser, which resulted in some online purchasers being charged, and having paid, sales tax when none was owed. LuLaRoe eventually refunded all the improper sales tax it collected, but it did not pay interest on the refunded amounts. Plaintiff Katie Van, an Alaska resident who paid the improperly charged sales tax to LuLaRoe, brought this class action under Alaska law on behalf of herself and other Alaskans who were improperly charged by and paid sales tax to LuLaRoe, for recovery of the interest on the now-refunded amounts collected and for recovery of statutory damages in the amount of $36 million ($500 per transaction). The district court certified the class under Rule 23(b)(3) and LuLaRoe appealed under Rule 23(f). The panel first rejected LuLaRoe’s argument that class certification was improper because the small amount of KATIE VAN V. LLR, INC. 3 money currently owed to some class members was insufficient to support standing and the presence of these class members in the class made individualized issues predominant over class issues. The panel held that any monetary loss, even one as small as a fraction of a cent, was sufficient to support standing. Thus, the presence of class members who suffered only a fraction of a cent of harm did not create an individualized issue that could predominate over the class issues. The panel next rejected LuLaRoe’s assertion that some purchasers knew that the sales tax charge was improper but nevertheless voluntarily paid the invoice which contained the improperly assessed sales tax amount, and thus, under applicable Alaska law, no deceptive practice caused any injury for these purchasers. The panel held that it had jurisdiction to consider the issue of voluntary payment because it was both factually and legally part of the district court’s class certification decision. The panel determined that LuLaRoe’s minimal proffers of evidence supporting this defense were insufficient to raise individualized questions that could predominate over the common questions raised by Van. Finally, the panel held that LuLaRoe’s third argument, that class certification should be reversed because some fashion retailers offset the improper sales tax through individual discounts, had merit. Both parties and the district court agreed that any class member who received a discount in an amount greater than or equal to the improper sales tax for the purpose of offsetting the improper sales tax had no claim against LuLaRoe. The panel determined that LuLaRoe invoked an individualized issue—that retailer discounts left some class members uninjured—and provided evidence that at least some class members lacked 4 KATIE VAN V. LLR, INC. meritorious claims because of this issue, thus raising the spectre of class-member-by-class-member adjudication. When a defendant substantiates such an individualized issue in this way, the district court must determine whether the plaintiff has proven by a preponderance of the evidence that the questions of law or fact common to class members predominate over any questions affecting only individual members—that is, whether a class-member-by-class- member assessment of the individualized issue will be unnecessary or workable. To afford the district court a new opportunity to weigh the predominance of class issues against this individualized issue, the panel vacated the district court’s order certifying the class and remanded for further proceedings. Concurring in part and concurring in the judgment, Judge Christen agreed that class members who suffered negligible losses of money, or who were deprived of their money for negligible periods of time, suffered concrete injuries sufficient for Article III standing. Judge Christen also agreed with the majority that LuLaRoe did not show that individualized questions related to its voluntary payment defense will predominate over common questions, and that remand was necessary because it appeared the district court may have overlooked LuLaRoe’s Exhibit E, which showed eighteen transactions with customers in Alaska who received discounts for the express purpose of offsetting LuLaRoe’s improperly assessed sales tax. Judge Christen wrote separately to briefly address the majority’s conclusion that it had interlocutory jurisdiction to consider the voluntary payment issue merely because LuLaRoe re-briefed this previously rejected defense at the class certification stage and to address the majority’s impression that the district court somehow misunderstood the way Rule 23 operates KATIE VAN V. LLR, INC. 5 when it considered LuLaRoe’s evidence that some fashion retailers offset the sales tax with discounts. Judge Christen agreed that remand was required, but only because the district court appeared to have overlooked an exhibit, and one could not say that the failure to consider it was harmless.
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