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William Hayes, On Behalf of v. Wal-Mart D/B/A Sam's Club

March 12, 2012

WILLIAM HAYES, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
WAL-MART D/B/A SAM'S CLUB DEFENDANT.



The opinion of the court was delivered by: Hon. Jerome B. Simandle

OPINION

SIMANDLE, Chief Judge:

I. INTRODUCTION

This matter is before the court on Plaintiff William Hayes' ("Plaintiff") motion for class certification [Docket Item 27]. The Defendant, Wal-Mart Stores Inc. d/b/a Sam's Club ("Defendant" or "Sam's Club") filed opposition to this motion. Following oral argument, the motion was temporarily stayed at the request of the parties, and the stay was recently lifted.

In this action, Plaintiff alleges that Sam's Club marketed, represented and sold to its members Sam's Club Service agreements for as-is products without disclosing to the purchaser that as-is products were expressly excluded from coverage. The Plaintiff alleges violations of the New Jersey Consumer Fraud Act, N.J.S.A. § 56:8-2, as well as causes of action for breach of contract and unjust enrichment.

For the reasons set forth below, the Plaintiff's motion for class certification will be granted.

II. BACKGROUND

A. Factual and Procedural History

Defendant Sam's Club is an American chain of membership-only retail warehouse clubs which sell groceries and general merchandise, which includes as-is products. (Patulak Dep. at 22:15-24:1.) As-is products are marked with an orange sticker and the sale of these as-is products results in a price override. (Patulak Dep. at 25:7-11; 26:9-11.) A price override is performed at the checkout register to ensure that the price charged the customer equals the marked-down price on the orange sticker. (Patulak Dep. at 26:2-11.) Aside from marking down the price of an as-is item, price overrides are used at the checkout register if the price of a scanned item is different from the posted price, a competitor is offering the same item for less; or a member purchases an item and later discovers it is on sale. (Patulak Dep. at 26:15-22; 63:6-64:-19.) A price override can be made by a member of management for a number of reasons aside from the item being sold as-is. (Patulak Dep. at 63:25-64:4.)

Every Sam's Club store is required to keep track of as-is orange-sticker items in a Claims Orange Sticker Price Override Log ("Orange Sticker Log") which is maintained at the store level pursuant to a company-wide policy. (Patulak Dep. at 54:14-57:17.) The Orange Sticker Log records the designation of products as as-is but does not track the sale of those items. (Patulak Dep. at 56:8-57:12.) Sam's Club has no method of identifying which Members purchased as-is products. [Patulak Dep. at 53:18-23.]

Defendant Sam's Club offers its members the option of purchasing Service Plans through National Electronics Warranty Corp. ("N.E.W."). (Quinn Dep. at 11:17-19.) The terms and conditions of the Service Plan are the same at each Sam's Club location. (Quinn Dep. at 39:3-11.) The Service Plan expressly excludes "products sold 'as is' including but not limited to floor models (unless covered by a full manufacturer's warranty on your date of purchase) and demonstration models." (Lapinski Cert. Ex. E "Sam's Club Service Agreements Terms and Conditions".)

N.E.W. is responsible for training Sam's Club employees on the sale of service plans. (Lapinski Ex. E.) In addition, Sam's Club has instructed its employees to "Offer Every Time" when selling Service Plans. (Quinn Dep. at 62:7-23; 63:22-25.) In 2006, the sale of Service Plans comprised a portion of the Defendant's profit. (Lapinski Cert. Ex. H.)

Plaintiff William Hayes is currently and has been a member of Sam's Club for more than ten years. (Hayes Dep. at 10:14-21.) Plaintiff purchased an as-is power washer from Defendant on August 7, 2008. (Hayes Dep. at 12:8-11.) At the time of purchase, the Sam's Club cashier offered Plaintiff a Service Plan, despite the product being sold as-is. Plaintiff purchased the Service Plan for $5.26. (Hayes Dep. at 20:22-21:12.) Plaintiff was never informed by anyone that the Service Plan specifically excluded as-is products. (Hayes Dep. at 121:11-15.) There is no evidence in the record that the Plaintiff was ever offered a refund for the Service Plan or that the Plaintiff ever had the power washer serviced pursuant to the warranty.

Similarly, on July 1, 2009, Plaintiff purchased a Vizio television from the Defendant. (Hayes Dep. at 31:12-16.) The television was sold to Plaintiff as an as-is product. (Hayes Dep. at 35:15-22; 36:10-21.) At the time of purchase, the Sam's Club cashier again offered Plaintiff a Service Plan, despite the product being sold as-is. Plaintiff purchased the Service Plan for $39.85. (Hayes Dep. at 42:7-44:21.) Plaintiff was never informed by anyone that the Service Plan specifically excluded as-is products. (Hayes Dep. at 121:11-15.)

When the Plaintiff brought the television home, he noticed the remote was missing, as well as other things. (Hayes Dep. at 40:24-41:19; 52:15-53:20.) Plaintiff returned to Sam's Club and was given a remote control that did not work. (Hayes Dep. at 57:6-58:2.) Plaintiff returned again to Sam's Club and was advised by a Sam's Club employee that the Service Plan he purchased did not cover as-is products. (Hayes Dep. at 62:9-63:16; 69:1-70:8.)

The Defendant offered a refund of the cost of the Service Plan; however, the Plaintiff declined. Instead of refunding the service plan, the Defendant then gave the Plaintiff a new remote control. (Hayes Dep. at 74:4-13.)

On January 26, 2010, the Plaintiff filed the instant Class Action Complaint against Defendant on behalf of himself and all other persons in the State of New Jersey who had purchased a Service Plan on as-is products from January 26, 2004 to the present in the State of New Jersey. (Docket Item 1.) The Complaint alleges violations of the New Jersey Consumer Fraud Act, breach of contract and unjust enrichment as a result of Defendant's practice of selling Service Plans to cover as-is products without first informing Plaintiff or Class members that the Service Plans do not cover such products.

B. The Instant Motion

In his motion, the Plaintiff argues that class certification is appropriate because he has satisfied all the prerequisites under Rule 23. The Plaintiff seeks to certify his New Jersey Consumer Fraud Act Claim, breach of contract and unjust enrichment claims on behalf of the following class:

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 Agreement to cover as-is products.

The general premise underlying Plaintiff's complaint is that the Defendant's practice of selling Service Plans to cover as-is products without first informing the Plaintiff and other class members that the Service Plans exclude as-is products is unlawful.

The Plaintiff maintains that he has satisfied all four factors under Rule 23(a) as well as the predominance and superiority requirements of Rule 23(b) to warrant class certification in this matter. First, the Plaintiff argues that numerosity has been met because discovery has shown that Service Plans were sold to members in 3,500 price override transactions in the State of New Jersey from January 2004 to the present.

(Pl.'s Brief at 12.) Plaintiff contends that this high number of transactions makes joinder difficult and impracticable. Therefore, a class action is more efficient and expedient.

Second, the Plaintiff maintains that the typicality requirement is satisfied. The Plaintiff states that his claim arises from the same course of conduct as all other class members, namely being sold a Service Plan on an as-is product by a Sam's Club cashier at time of purchase without being informed that the Service Plan excludes as-is products from coverage. Here, Plaintiff argues that his claim and the class's claims arise out of the Defendant's uniform course of conduct and therefore, the typicality requirement is met.

Third, the Plaintiff contends that he will fairly and adequately protect the interests of the class. The Plaintiff argues that his claims are essentially identical to the class and his interests are not antagonistic to the class. In addition, the Plaintiff maintains that his attorneys are qualified and have experience litigating class action cases.

Finally, the Plaintiff argues that he satisfies both the commonality requirement of Rule 23(a) as well as the predominance and superiority requirements of Rule 23(b)(3). The Plaintiff maintains that common questions of law and fact predominate and contends that the elements of his New Jersey Consumer Fraud Act claim, breach of contract claim and unjust enrichment claim can be satisfied through common proofs. In addition, Plaintiff relies on Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997) and Elias v. Unger's Food Products, 252 F.R.D. 233 (D.N.J. 2008) for the proposition that predominance is readily met in cases alleging consumer fraud.

Therefore, the Plaintiff argues that his motion for class certification should be granted and that a Rule 23(b)(3) class be certified.

The Defendant opposes this motion on four main grounds. First, the Defendant contends that the Plaintiff's definition of the proposed class is overbroad and includes class members who suffered no harm. Therefore, the Defendant argues that the Plaintiff's proposed class lacks standing to bring suit.

Second, the Defendant argues that Plaintiff's proposed class is not ascertainable because there is no way to determine which proposed class members purchased service plans for ineligible asis items. The Defendant states that it only knows whether a Member purchased an item subject to a price override and cannot ascertain whether the price override was because the product was sold as-is. (Patulak Dep. at 26:15-22; 53:18-23; 57:7-12; 63:6-20; 63:25-64:4.) Consequently, the Defendant maintains that individual inquiries would be necessary to determine whether a particular member purchased a Service Plan for an as-is item. Since there is no class-wide method for determining who is or is not a class member, Defendant argues that Plaintiff's motion be denied.

Next, the Defendant disputes whether the Plaintiff has satisfied his burden to show by a preponderance of the evidence that the class is sufficiently numerous to warrant class certification. The Defendant does not dispute that Service Plans were sold on 3,500 price override transactions. However, the Defendant points out that price override transactions occur for a number of reasons and that it is uncertain whether as-is items were sold during any of those 3,500 transactions.*fn1 Defendant maintains that a finding of numerosity in this case would be mere speculation because the Plaintiff has failed to identify one other class member besides himself that purchased a Service Plan with an as-is product.

Finally, the Defendant argues that individual issues predominate and the Plaintiff has not satisfied Rule 23(b)(3). The Defendant argues that there are individual questions with regard to whether a loss actually occurred. Specifically, the Defendant argues that there is no way to determine if the price override was due to an as-is product, if the as-is product was covered by a full manufacturers warranty or whether the member was denied reimbursement of the Service Plan or coverage. These individualized questions, the Defendant argues, prevent class certification.

III. DISCUSSION

Plaintiff's claims are based on two separate Service Plans the Plaintiff purchased for two as-is products. The first Service Plan was purchased in conjunction with a power washer. There is no evidence in the record or the pleadings indicating that the power washer was in need of service and the Plaintiff was denied service despite his purchase of a Service Plan. There is also no evidence in the record that the Plaintiff was offered a refund for his purchase price of the Service Plan on the power washer prior to the filing of this litigation. Rather, it is apparent from the record that the Plaintiff paid $5.26 for a Service Plan that expressly excluded his as-is product from coverage. The Court will analyze the Plaintiff's class certification motion with reference to this first Service Plan. The Court will address the Plaintiff's second Service Plan on his as-is television infra at Section B.

A. Class Certification

"District courts have discretion under Rule 23 to certify a class." Beck v. Maximus, Inc., 457 F.3d 291, 297 (3d Cir. 2006). To certify a class, the Court must find that the proposed class meets the prerequisites to a class action; "plaintiffs must establish that all four requisites of Rule 23(a) and at least one part of Rule 23(b) are met." In re Chiang, 385 F.3d 256, 264 (3d Cir. 2004). As the Court of Appeals recently emphasized:

[T]he requirements set out in Rule 23 are not mere pleading rules. The court may delve beyond the pleadings to determine whether the requirements for class certification are satisfied . . . .

Class certification requires a finding that each of the requirements of Rule 23 has been met. See [Unger v. Amedisys Inc., 401 F.3d 316, 320 (5th Cir. 2005)] ("The plain text of Rule 23 requires the court to 'find,' not merely assume, the facts favoring class certification."). Factual determinations necessary to make Rule 23 findings must be made by a preponderance of the evidence. In other words, to certify a class the district court must ...


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