Martinelli et al v. Petland, Inc. et al

Filing 170

ORDER denying 129 , 137 Motions for Class Certification and Appointment of Class Representative and Class Counsel. FURTHER The Court will set a case management conference by separate order. Signed by Judge David G Campbell on 4/12/11. (MAP)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 JoDell Martinelli, et al., Plaintiffs, 10 11 12 No. CV-09-529-PHX-DGC ORDER vs. Petland, Inc.; and The Hunte Corporation, Defendants. 13 14 15 Plaintiffs have filed a motion for class certification pursuant to Rules 23(a) and 16 23(b)(3) of the Federal Rules of Civil Procedure. Docs. 129 (sealed), 137 (redacted). 17 The motion is fully briefed. Docs. 152, 162, 164, 166. Oral argument was heard on 18 April 7, 2011. For reasons stated below, the Court will deny the motion. 19 I. Background. 20 Petland, Inc. is a large retailer of pets. Through company-owned stores and 21 franchisees, Petland sells puppies at more than 100 locations throughout the United 22 States. The puppies are supplied directly by individual breeders and through various 23 brokers. 24 In March 2009, six purchasers of Petland puppies filed this action against Petland 25 and one of its suppliers, The Hunte Corporation. Plaintiffs claimed that they bought 26 Petland puppies with the understanding that they were bred under safe and humane 27 conditions by a reputable breeder, but the puppies actually were bred at “puppy mills.” 28 1 A puppy mill, according to Plaintiffs, is a dog breeding operation in which the health of 2 the dogs is disregarded in order to maintain a low overhead and maximize profits. 3 Plaintiffs alleged that their puppies were sick at the time of purchase or became ill shortly 4 thereafter. The complaint asserted claims under the Racketeer Influenced and Corrupt 5 Organizations Act (“RICO”), 18 U.S.C. § 1962, predicated on alleged violations of the 6 federal mail and wire fraud statutes, 18 U.S.C. §§ 1341 and 1343 (counts one and two), 7 claims for violations of consumer protection laws from many states (counts three and 8 five), and a claim for unjust enrichment (count four). Doc. 1. On August 7, 2009, the Court granted Defendants’ motions to dismiss because the 9 10 complaint failed adequately to plead fraud and causation. Doc. 49. An amended 11 complaint filed one month later asserted the same claims as the original complaint, but 12 added 25 new plaintiffs. Doc. 54. In an order dated January 26, 2010, the Court 13 dismissed the claims of all but two plaintiffs, Elliot Moskow and Karen Galatis, on the 14 ground that only those individuals sufficiently alleged damages proximately caused by 15 Petland. Doc. 68. The Hunte Corporation was dismissed because it did not supply the 16 puppies purchased by Moskow and Galatis. Id. at 10. 17 The claims that remain in this case are (1) Plaintiffs Moskow and Galatis’ count- 18 one RICO claim, (2) Plaintiffs Moskow and Galatis’ unjust enrichment claim based on 19 fraud, and (3) Plaintiff Moskow’s claim under the Maine Unfair Trade Practices Act. 20 Doc. 68 at 17. These are the claims for which Plaintiffs seek class certification. 21 II. Rule 23 Requirements. 22 Plaintiffs bear the burden of showing that the four Rule 23(a) requirements are met 23 and, under Rule 23(b)(3), that questions of law or fact common to all class members 24 predominate over issues affecting only individual members. Zinser v. Accufix Research 25 Inst., Inc., 253 F.3d 1180, 1186 (9th Cir. 2001). This Court must “rigorously analyze” 26 the proposed class to ensure that it comports with the requirements of Rule 23. Gen. Tel. 27 Co. of Sw. v. Falcon, 457 U.S. 147, 161 (1982). This analysis often will “require looking 28 -2- 1 behind the pleadings, even to issues overlapping with the merits of the underlying 2 claims.” Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571, 581 (9th Cir. 2010). “Falcon’s 3 central command requires district courts to ensure that Rule 23 requirements are actually 4 met, not simply presumed from the pleadings.” Id. at 582. 5 Plaintiffs seek certification of a class defined as all persons who purchased a 6 puppy from a Petland store since November 20, 2004, supplied by a Class B licensee who 7 acquired the puppy from a breeder not previously inspected by Petland. 8 certification should be denied, Petland argues, because the class definition is overbroad, 9 common questions do not predominate over individual issues, and the need for individual Class 10 trials makes the class unmanageable. Because the proposed class clearly fails the 11 predominance requirement of Rule 23(b)(3), the Court need not address Petland’s other 12 challenges to class certification. 13 III. Causation. 14 The RICO statute makes it unlawful for any person associated with an enterprise 15 to participate in the conduct of such enterprise’s affairs through a pattern of racketeering. 16 18 U.S.C. § 1962(c). The alleged pattern of racketeering in this case is mail and wire 17 fraud under 18 U.S.C. §§ 1341 and 1343. Doc. 54 ¶ 135. To plead a violation of those 18 statutes, Plaintiffs must allege that Defendants formed a scheme to defraud, used the 19 United States mails and wires in furtherance of that scheme, and did so with the specific 20 intent to defraud. See Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 21 1400-01 (9th Cir. 1986). Plaintiffs also must allege facts showing that the fraudulent 22 scheme proximately caused Plaintiffs’ injuries. See Poulos v. Caesars World, Inc., 379 23 F.3d 654, 664 (9th Cir. 2004). 24 Plaintiffs’ motion for class certification addresses only their RICO claim. See 25 Doc. 129. Plaintiffs agree that the claim requires proof of proximate cause. Id. at 13-19.1 26 27 28 1 Although Plaintiffs do not address their other claims, those claims also require proof of proximate cause. Maine’s Unfair Trade Practices Act grants a private remedy to any person who purchases goods or services through an unfair trade practice and suffers -3- 1 The Court previously found that this is a case where proof of reliance is “‘a mile 2 post on the road to causation.’” Doc. 49 at 7 (quoting Poulos, 379 F.3d at 664). Stated 3 differently, “individualized reliance issues related to [P]laintiffs’ knowledge, motivations, 4 and expectations bear heavily on the causation analysis.” Poulos, 379 F.3d at 665. The 5 “complete absence of reliance [will] prevent [Plaintiffs] from establishing proximate 6 cause.” Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639, 658-59 (2008). 7 Plaintiffs do not dispute that reliance constitutes a component of causation in this 8 case; they do not contend that causation can be established by some other means. 9 Plaintiffs argue instead that reliance can be established by both first-party and third-party 10 reliance, and that common questions will predominate over individual questions for both 11 types of reliance if the class is certified. 12 A. First-Party Reliance. 13 First-party reliance, as used by the parties in this motion, refers to direct reliance 14 by the class members on Petland’s allegedly false representations. Plaintiffs argue that 15 such reliance can be established by showing that Petland engaged in a pervasive, 16 centrally-orchestrated scheme to misrepresent the quality of puppies sold at its stores. 17 This scheme, according to the amended complaint, included “misrepresenting that the 18 puppies sold at Petland retail stores across the nation to Plaintiffs and the Class were 19 ‘healthy,’ ‘the finest available,’ and by deliberately misrepresenting puppy mills who 20 bred the dogs as ‘professional and hobby breeders who have years of experience in 21 raising quality family pets,’ and by deliberately misrepresenting that the puppies were 22 from USDA-licensed breeders, thereby misrepresenting the true origin and value of the 23 24 25 26 27 28 loss “as a result” of the unfair practice. 5 MRSA § 213(1). A claim under the Maine statute therefore requires proof of proximate cause. See Millett v. Atl. Richfield Co., No. Civ.A. CV-98-555, 2000 WL 359979, at *13 (Me. Super. Ct. Mar. 2, 2000) (“to prevail on their claims for . . . violation of the Unfair Trade Practices Act, plaintiffs must prove a causal link between [their injury] and defendants’ misrepresentations and omissions”). Plaintiffs’ unjust enrichment claim asserts that Petland has “profited and benefited from their scheme to defraud purchasers of puppies from Petland.” Doc. 54 ¶ 173. Because it is predicated on fraud, Plaintiffs must establish the proximate cause required for fraud. See Docs. 49 at 9, 68 at 15-16. -4- 1 dogs sold at Petland.” Doc. 54 ¶ 137. Petland’s misrepresentations purportedly were 2 made through Petland’s “uniform standards for selling puppies through a written health 3 certificate and/or warranty provided at the time of sale” (id. ¶ 3) and in statements made 4 on Petland’s website and in written brochures “mailed and/or provided to consumer[s] in 5 its retail locations” (id. ¶¶ 5, 64, 71-72, 92). 6 The Court previously dismissed the claims of all but two of the named Plaintiffs 7 because the amended complaint contained no allegation that they relied on a written 8 health certificated or warranty, visited Petland’s website, read Petland’s brochures, or 9 heard and relied on oral representations by Petland sales personnel. Doc. 68 at 3-8. The 10 claims brought by Moskow and Galatis survived dismissal because it reasonably could be 11 inferred that they relied on specific oral representations about the origin and health of 12 Petland puppies. Doc. 68 at 9. 13 Moskow that Petland puppies did not come from puppy mills (Doc. 54 ¶ 31), while a 14 Petland employee purportedly assured Galatis, among other things, that her puppy was 15 healthy and had never been sick (id. ¶ 33). See Docs. 132-11 at 11, 132-14 at 19. A Petland representative is alleged to have assured 16 Plaintiffs now essentially argue that the Court should assume all class members 17 relied on Petland’s fraudulent scheme because it was pervasive. Doc. 129 at 18 (“This 18 common evidence, coupled with Plaintiffs’ allegations that class members would not 19 have purchased puppies at a premium price had they known that PLI’s representations 20 were false, establishes proximate causation at the certification stage.”). And yet a class 21 member who never heard the allegedly fraudulent sales pitch, never visited Petland’s 22 website, and never read its written materials could not be said to have relied on the false 23 statements in those communications. If a class member did not rely on the alleged 24 fraudulent scheme, that class member cannot prove that the scheme caused his or her 25 purchase and his or her injury. 26 Plaintiffs submit declarations of eight potential class members asserting that they 27 received and relied on oral representations (Docs. 133-6 through 133-13), but the very 28 -5- 1 fact that Plaintiffs must turn to individual class members to muster this proof 2 demonstrates that the evidence of reliance is necessarily individual – each class member 3 must be shown to have received and relied on Petland’s alleged misrepresentations. The 4 Court simply cannot assume that all class members, who purchased puppies over a six or 5 seven year period at some 100 different stores, heard and relied on Petland’s alleged 6 misstatements. Indeed, Plaintiffs previously failed to allege that 29 of the 31 named 7 Plaintiffs relied upon any such communications, even after being put on notice by the 8 Court that such reliance would be necessary to sustain their claims. Doc. 68 at 4-5. If the 9 class were certified, a purchaser-by-purchaser inquiry would be necessary to prove 10 causation. Individual issues would predominate. 11 As the Court noted in a prior order, class members may have purchased puppies 12 from Petland for a variety of reasons. A person might buy a puppy because he falls in 13 love with it in the store window, he has heard it will make a good guard dog, he likes the 14 price, he is referred to the store by a friend, or he finds the store convenient. It is not 15 necessarily true that every purchaser would read or hear the allegedly false statements, or 16 even that he or she would base a purchase decision on the fact that the puppy was “the 17 finest available” or was bred by professional, hobby, or USDA-approved breeders – key 18 misrepresentations identified in the amended complaint. Doc. 54 ¶¶ 5, 137. Nor is it 19 necessarily true that every puppy purchaser would rely on representations concerning the 20 dog’s health. Although rational people generally would not pay hundreds of dollars for a 21 sick puppy, a person who falls in love with a puppy in the store window might well 22 purchase the puppy in the absence of any representation concerning its health. However 23 unwise, some people might even buy a sick puppy in order to provide it a good home and 24 nurse it back to health. 25 Because the Court and a jury could not simply assume that every class member 26 relied on Petland’s alleged representations in making his or her purchase decision, 27 individual proof of reliance would be necessary. Each class member would need to prove 28 -6- 1 that he or she received and relied on communications made as part of the RICO 2 fraudulent scheme in order to prove that the scheme proximately caused his or her loss. 3 Individual issues would predominate. 4 Plaintiffs rely heavily on In re American Continental Corp., 140 F.R.D. 425 5 (D. Ariz. 1992) (“ACC”), to support their argument that class-wide reliance can be 6 proved by evidence of a pervasive fraudulent scheme. But ACC was a securities fraud 7 case that relied on the fraud-on-the-market theory to establish a “presumption of 8 reliance.” Id. at 429. This is not a securities fraud case and Plaintiffs have not asserted a 9 fraud-on-the-market theory. Although ACC also relied on the “centrally orchestrated” 10 fraud perpetrated by Lincoln Savings and American Continental Corporation, it noted 11 that purchasers of the securities were “consistently informed” of the fraudulent 12 representations. Id. at 430; see also In re First Alliance Mortg. Co., 471 F.3d 977, 991 13 (9th Cir. 2006) (noting that ACC “involved a scheme that included, among other things, 14 the sale of debentures to individual investors who relied on oral representations of bond 15 salespersons who in turn had received from defendants fraudulent information about the 16 value of the bonds” (emphasis added)). 17 Such class-wide reliance could be accepted in ACC because of the unique facts of 18 that case. Purchasers of the bonds in ACC were customers of Lincoln Savings and Loan 19 who entered a Lincoln branch to conduct banking business. Once in the savings and 20 loan, class members were confronted by sales people selling bonds in American 21 Continental, a Lincoln affiliate. As the evidence recited at length in Judge Bilby’s order 22 makes clear, these class members were persuaded by the sales people that the enormous 23 size and resources of American Continental made the bonds a very safe investment. 24 ACC, 140 F.R.D. at 437-40. The class members succumbed to the sales pitch and 25 purchased the bonds, which later turned out to be worthless. There was no disputing that 26 class members in ACC were persuaded by the sales pitches to buy the bonds. The ACC 27 defendants instead argued that individual issues would predominate because the sales 28 -7- 1 pitches were not uniform – that individual inquiries concerning the pitches would be 2 necessary. 3 misrepresentations . . . is not the predominant issue” because the oral sales pitches, which 4 were heard and relied on by every class member, “were sufficiently uniform to warrant 5 class treatment.” Id. at 431, 430. Judge Bilby disagreed, finding that “[t]he exact wording of the oral 6 Class members in this case are not like the bond purchasers in ACC. The ACC 7 purchasers entered a savings and loan to do banking business – to deposit money, make a 8 withdrawal, or take out a loan. While there, they were persuaded by oral sales pitches to 9 do something different – buy bonds in ACC. Class members in this case, by contrast, 10 entered pet stores to see possible pets. They were not, like the ACC class members, 11 diverted from one endeavor (banking) to another (buying corporate bonds) by a 12 persuasive sales pitch. Although it may be true that some class members in this case 13 were persuaded to buy a puppy by the sales pitch of a Petland employee, it simply cannot 14 be said that all of them were. Indeed, as already noted, the vast majority of the named 15 Plaintiffs in this case could not allege that they relied on any sales pitch or written 16 material when they purchased their dog. Thus, to show that the alleged fraudulent 17 scheme caused their losses, class member in this case would be required to show that they 18 heard and relied on the scheme’s misrepresentations. Such reliance was universally true 19 in ACC. In this case it would require purchaser-by-purchaser proof. 20 Plaintiffs also rely heavily on In re First Alliance Mortgage Company, 471 F.3d 21 977 (9th Cir. 2006), but this case also concerned a centrally-orchestrated scheme of oral 22 sales representations that induced class members to act – to accept detrimental mortgage 23 loans. The parties in First Alliance did not dispute that class members received the oral 24 sales pitch. The defendant instead argued that class members should not have relied on 25 the pitch because it was contrary to the fine print in the loan documents they signed. Id. 26 at 992 (“Lehman also attempts to undermine the class-wide fraud determination by 27 focusing on the reliance element, arguing that the borrowers could not have justifiably 28 -8- 1 relied upon oral misrepresentations when they signed documents that contradicted those 2 oral statements.”). 3 scheme “was built on inducing borrowers to sign documents without really understanding 4 them.” Id. As in ACC, all class members received and relied on the oral sales pitch. The Ninth Circuit rejected this argument, noting that the entire 5 Plaintiffs’ reliance on Negrete v. Allianz Life Insurance Company of North 6 America, 238 F.R.D. 482 (C.D. Cal. 2006), fares no better. Each class member in 7 Negrete had read and understood the defendant’s alleged misrepresentations regarding 8 the value of deferred annuities, and it reasonably could be assumed that no rational class 9 member would have purchased the annuities had he or she known the truth about the 10 product’s actual value. Id. at 492. 11 In summary, Plaintiffs rely on cases where the class members admittedly received 12 and relied on fraudulent materials when making their purchase decisions. Plaintiffs’ own 13 failure to allege that 29 of the 31 named Plaintiffs received and relied on fraudulent 14 materials in this case distinguishes it from ACC, First Alliance, and Negrete. Because 15 individual inquiries concerning each class member’s reliance on the allegedly fraudulent 16 scheme would be necessary, individual issues would predominate over common issues 17 and class treatment is not appropriate under a first-party reliance theory.2 18 B. Third-Party Reliance. 19 “[C]ourts have permitted a plaintiff directly injured by a fraudulent 20 misrepresentation to recover even though it was a third party, and not the plaintiff, who 21 relied on the defendant’s misrepresentation.” Bridge, 553 U.S. at 656 (citations omitted). 22 Plaintiffs allege that Petland uniformly misrepresents to its franchisees that Petland 23 inspects and approves all breeders who supply puppies to the franchisees and would 24 never support puppy mills, and that Petland puppies are healthy and the finest available. 25 26 27 28 2 Plaintiffs argue that because it would be illogical to purchase a sick puppy absent a representation as to its health, first-party reliance may be inferred through a “common sense” link between Petland’s alleged misrepresentations and the class members’ actions. The Court rejected this argument in a previous order. Doc. 68 at 6-7. -9- 1 Reliance on these misrepresentations by franchisees, Plaintiffs contend, constitutes third- 2 party reliance sufficient under Bridge to establish proximate cause without individual 3 issues predominating. The Court disagrees for several reasons. 4 First, although Plaintiffs assert in their motion that franchisees relied on Petland’s 5 alleged scheme to defraud (Doc. 137 at 14), the amended complaint disavows any such 6 reliance. The complaint affirmatively alleges that franchisees are part of the RICO 7 enterprise (Doc. 54 ¶ 125), that they are aware of the “plan of promoting the puppies as 8 being bred at a breeder that was not a puppy mill” (id. ¶ 126), and that “Petland and its 9 franchisees sell puppy mill puppies to an unsuspecting public at premium prices” (id. ¶ 10 128) (emphasis added). If the franchisees are complicit in Petland’s fraud as the 11 amended complaint alleges, they cannot be said to rely on that fraud and thereby satisfy 12 the reliance requirement of causation. Moreover, as the Supreme Court noted in Bridge, 13 such knowledge and culpability by the third party “would constitute an intervening cause 14 breaking the chain of causation between [Petland’s] misrepresentations and [Plaintiffs’] 15 injury.” Bridge, 553 U.S. at 658-59. 16 Second, even if Plaintiffs were permitted to assert reliance on the part of the 17 franchisees, reliance would need to be determined on a franchisee-by-franchisee basis. 18 Again, the evidence Plaintiffs present demonstrates the individualized nature of the 19 reliance inquiry. See Docs. 130-7 (former franchisee’s declaration), 131-14 through 132- 20 4 (declarations of former Petland employees). 21 showing that a franchisee’s purchasing decision is based on a host of factors other than 22 what Petland allegedly represents, including the availability, selection, and cost of the 23 puppies, the relationship with and proximity to the supplier, the supplier’s history of 24 providing healthy puppies, the warranty provided by the supplier, discussions with other 25 franchisees, and the franchisee’s own independent inspections. Doc. 152-5 at 10-21. 26 Contrary to Plaintiffs’ assertion, third-party reliance may not be determined on a class- 27 wide basis. 28 - 10 - Petland has also presented evidence 1 Plaintiffs’ reliance on Friedman v. 24 Hour Fitness USA, No. CV 06-6282 AHM 2 (CTx), 2009 WL 2711956 (C.D. Cal. Aug. 25, 2009), is misplaced. Causation in that 3 case was premised on two electronic payment processors’ reliance on the defendant’s 4 representation in its written payment instructions that charges were valid and authorized. 5 2009 WL 2711956, at *9. Given the uniform and consistent manner in which the 6 representation was made, the defendant did not dispute that reliance on the part of the 7 payment processors could be proven on a class-wide basis. Id. This case, by contrast, 8 involves scores of franchisees in locations throughout the country with varying business 9 experience and practices. The Court cannot assume that each of them obtained puppies 10 from suppliers for the same reason – because of Petland’s alleged misrepresentations. 11 Third, the Supreme Court explained in Bridge that third-party reliance can satisfy 12 the causation requirement of RICO only if there is “‘some direct relation between the 13 injury asserted and the injurious conduct alleged.’” 553 U.S. at 654 (quoting Holmes v. 14 Sec. Investor Protection Corp., 503 U.S. 258, 268 (1992)). 15 characterized this “direct relation” requirement as a “demand” warranting “particular 16 emphasis.” Id. The Court explained: 17 18 19 20 21 22 23 24 25 26 27 The Supreme Court The direct-relation requirement avoids the difficulties associated with attempting to ascertain the amount of a plaintiff’s damages attributable to the violation, as distinct from other, independent, factors; prevents courts from having to adopt complicated rules apportioning damages among plaintiffs removed at different levels of injury from the violative acts, to obviate the risk of multiple recoveries; and recognizes the fact that directly injured victims can generally be counted on to vindicate the law as private attorneys general, without any of the problems attendant upon suits by plaintiffs injured more remotely. Id. (citations and quotation marks omitted). The direct relation requirement clearly was met in Bridge. The defendant misrepresented to the county that it was using a single source to bid on tax liens when in fact it was using several. Reliance on this misrepresentation by the county permitted the defendant to procure more tax liens than the plaintiff, who was bidding only through a 28 - 11 - 1 single source. The defendant’s false statement to the county was directly related to the 2 plaintiff’s loss. Id. at 658. 3 Plaintiffs in this case have not shown that they could establish such a direct 4 relation on a class-wide basis. As already noted, class members may have purchased 5 puppies for a variety of reasons unrelated to any fraud Petland allegedly perpetrated on its 6 franchisees. Moreover, Plaintiffs seek to recover damages for veterinary costs incurred 7 when their puppies became sick. Doc. 164 at 13. The source of the puppies’ sicknesses, 8 however, could not be shown to bear a “direct relation” to Petland’s fraud on franchisees. 9 Some puppies might have become sick for reasons entirely unrelated to the allegation that 10 Petland failed to inspect a breeding facility. They may have been healthy when they left 11 the breeder and become sick due to exposure in the franchisee’s store or exposure that 12 occurred after they were purchased. Trying to determine the cause of the sickness for 13 each class member’s puppy would present the very problem the “direct relation” demand 14 is designed to avoid – “difficulties associated with attempting to ascertain the amount of a 15 plaintiff’s damages attributable to the violation, as distinct from other, independent, 16 factors.” Id. Stated differently, third-party reliance would be available under Bridge only 17 if all of the class members’ damages could be attributed directly to Petland’s alleged 18 fraud on its franchisees, something that clearly is not possible given the variety of 19 potential causes for the puppies’ illnesses and the variety of reasons for the class 20 members’ purchase decisions.3 21 In summary, Plaintiffs have not shown that common issues will predominate over 22 individual issues if this case is tried on a third-party reliance theory. The franchisee’s 23 alleged involvement in the fraud forecloses their reliance, individual issues will arise 24 concerning the level of each franchisee’s reliance, and individual issues will also arise 25 when trying to determine whether a class member’s injuries are directly related to 26 27 28 3 The Court also notes that Plaintiffs’ class definition does not even require that the class members’ puppies became sick. See Doc. 129 at 1-2. Thus, even determining what kind of injury is claimed would require an inquiry of each class member. - 12 - 1 Petland’s fraud on the franchisees. 2 IV. Injury. 3 Plaintiffs’ alleged injuries include the unreimbursed premium prices they paid for 4 their puppies and unreimbursed veterinary expenses they incurred. See Doc. 54 ¶¶ 143, 5 159, 170(1). Petland argues that proof of injury, including both the loss amount and a 6 causal connection between the loss and the alleged scheme to defraud, must be 7 established on a class-member-by-class-member basis. The Court agrees. 8 Plaintiffs fail to address the argument that, with respect to veterinary expenses, 9 each class member must prove that his or her puppy became sick as a result of being 10 whelped at a puppy mill. If a class member’s puppy became sick for reasons other than 11 where it was bred, the class member could show no injury attributable to the alleged 12 scheme. 13 Plaintiffs assert that veterinary expenses are merely “incidental” damages 14 (Doc. 164 at 13), but the veterinary costs sought by Moskow and Galatis are greater than 15 the purchase price damages they seek (Doc. 129-1 at 6-7), and those costs are likely to 16 increase given Plaintiffs’ request for both past and future veterinary expenses 17 (Doc. 129-1 at 17, 134-11 at 3). The amount of each class member’s unreimbursed 18 veterinary expenses, as well as any causal connection between those expenses and the 19 alleged scheme to defraud, are individual issues that cannot be established through 20 common proof. 21 The same is true with respect to the purchase price damages. Plaintiffs propose to 22 establish those damages class-wide through an unidentified expert who purportedly will 23 develop a “simple damage model” from the puppy’s selling price. Doc. 164 at 13. That 24 model consists of determining the percentage of the full value of a Petland puppy class 25 members did not receive on account of Petland’s failure to inspect breeding operations, 26 and then multiplying this percentage value by the average price for each particular breed. 27 Id. at 13-14. But this approach fails to take into account variations in price paid by 28 - 13 - 1 different class members at different times and in different locations. 2 Plaintiff Galatis received her puppy at a discounted price. Doc. 132-14 at 9. This 3 approach also fails to account for class members whose puppies were in fact bred at a 4 reputable and approved breeder. 5 because Plaintiff’s definition requires only that the breeder not have been inspected by 6 Petland. And yet purchasers who received high-quality dogs would have suffered no 7 injury from Petland’s failure to inspect the breeder or its allegedly fraudulent 8 representations concerning the quality of the dogs sold. Thus, an inquiry into the origin 9 and pedigree of each puppy would be needed to determine whether the class member in 10 For example, Such individuals would be members of the class fact received a puppy with a poorer history than represented. 11 Plaintiffs note, correctly, that where common questions predominate as to liability, 12 courts generally find the predominance requirement to be met even though individual 13 damage issues remain. Doc. 164 at 12 (citing Negrete, 238 F.R.D. at 494). The task in 14 this case, however, will not be limited to simple damages calculations. Determinations 15 will need to be made concerning where the puppy was bred, whether the puppy satisfied 16 the standards set forth in Petland’s representations, where and how the puppy became ill, 17 and what expenses are attributable to illnesses contracted at the breeder as opposed to 18 elsewhere. Such issues relate to more than damages; they relate to liability – whether 19 class members were in fact injured by the alleged fraudulent scheme. And they simply 20 cannot be determined class-wide. Individual issues would overwhelm any trial of this 21 proposed class action. 22 IT IS ORDERED: 23 1. Plaintiffs’ motions for class certification and appointment of class representative and class counsel (Docs. 129, 137) are denied. 24 25 2. The Court will set a case management conference by separate order. 26 Dated this 12th day of April, 2011. 27 28 - 14 -

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