Circle Click Media LLC v. Regus Management Group LLC et al

Filing 335

ORDER by Judge Samuel Conti denying #311 Motion to Exclude Expert Reports ; denying without prejudice #238 Motion to Certify Class; denying #271 Motion to Dismiss; denying #272 Motion for Summary Judgment; denying #273 Motion for Bond; finding as moot #283 Motion for Sanctions. Plaintiffs may file a revised Motion to Certify Class within thirty (30) days of the filing date of this order. (sclc1, COURT STAFF) (Filed on 10/30/2015)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

United States District Court

For the Northern District of California

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CIRCLE CLICK MEDIA LLC, a
)
California limited liability
)
company, and CTNY INSURANCE
)
GROUP LLC, a Connecticut limited )
liability company, on behalf of )
themselves and all others
)
similarly situated,
)
)
Plaintiffs,
)
)
v.
)
)
REGUS MANAGEMENT GROUP LLC, a
)
Delaware limited liability
)
company; REGUS BUSINESS CENTRE )
LLC, a Delaware limited
)
liability company; REGUS plc, a )
Jersey, Channel Islands public )
limited company; HQ GLOBAL
)
WORKPLACES LLC, a Delaware
)
limited liability company, and )
DOES 1 through 50,
)
)
Defendants.
)
)

Case No. 3:12-CV-04000-SC
ORDER DENYING (1) MOTION TO
DISMISS, (2) MOTION FOR SUMMARY
JUDGMENT, (3) MOTION FOR
SANCTIONS, (4) MOTION TO
EXCLUDE EXPERT REPORT, and (5)
MOTION FOR SECURITY FOR COSTS;
AND DENYING WITHOUT PREJUDICE
(6) MOTION FOR CLASS
CERTIFICATION

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Now before the Court are (1) Motion to Dismiss for lack of

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subject matter jurisdiction, ECF No. 271 ("MTD"), filed by

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Defendants Regus Management Group LLC, Regus Business Centre LLC,

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Regus plc, and HQ Global Workplaces LLC (collectively "Regus") (2)

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Regus's Motion for Summary Judgment on its counterclaim for breach

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of contract, ECF No. 272 ("MSJ"), (3) Regus's Motion for Sanctions

Exclude Expert Reports of Mark Vogel and James Pampinella, ECF No.

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311 ("Mot. to Excl."), filed by Plaintiffs Circle Click Media LLC

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("Circle Click") and CTNY Insurance Group Inc. ("CTNY")

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(collectively "Plaintiffs"), (5) Plaintiffs' Motion for Class

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Certification, ECF No. 238 ("Mot. for Cert."), and (6) Regus's

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Motion for Security for Costs, ECF No. 273 ("Mot. for Sec.").

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United States District Court

under Rule 37, ECF No. 283 ("Mot. for Sanc."), (4) Motion to

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For the Northern District of California

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Motions are fully briefed and suitable for disposition without oral

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argument per Local Rule 7-1(b).

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The

For the reasons set forth below,

the Court finds as follows:

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

Regus's Motion to Dismiss is DENIED.

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

Regus's Motion for Summary Judgment on its counterclaims is
DENIED.



Regus's Motion for Sanctions is DENIED AS MOOT.

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

Plaintiffs' Motion to Exclude Testimony is DENIED.

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

Plaintiffs' Motion for Class Certification is DENIED WITHOUT
PREJUDICE. Plaintiffs may, if they choose, file a revised
motion for class certification within thirty (30) days of the
filing date of this order.



Regus's Motion for Security for Costs is DENIED.

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I. BACKGROUND

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A.

Facts

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Regus is in the business of leasing commercial office space

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throughout California and New York.

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represented that it provides customers with fully equipped offices

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for one all-inclusive monthly price.

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that its services are "simple, easy, and flexible," that its one-

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page contract -- the Office Service Agreement ("OSA") -- "takes

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///

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Through its website, Regus has

Regus has also represented

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just 10 minutes to complete," and that it provides a "single

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monthly invoice."

ECF No. 65 ("2AC") ¶¶ 34-41.

The OSA is in fact one page, and it merely identifies the

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location of the office space, the monthly office fee, the term of

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the agreement, and the parties to it.

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however, routinely exceed the monthly payment amount indicated on

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the OSA due to various mandatory fees disclosed in other documents.
One of these documents is the Terms and Conditions, which the

United States District Court

For the Northern District of California

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Regus's monthly invoices,

OSA incorporates by reference.

The Terms and Conditions is also

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only one page, but it is printed in five-point font, which is

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almost illegible.

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printed on the reverse side of the OSA.

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customers have to download them.

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online version, though a customer can, of course, change the

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settings on their computer to increase the size.

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signs the OSA, they affirm that they have read and understood the

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Terms and Conditions.

In hardcopy, the Terms and Conditions are
In the online version,

The font is equally small in the

When a customer

The Terms and Conditions reference another document, the

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"House Rules."

The House Rules also reference a "Service Price

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Guide," which lists the prices for a variety of services, including

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kitchen amenities and phone and IT services.
There are four allegedly unfair, illegal, or deceptive fees at

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issue in this case.

None of them are disclosed on the OSA.

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is a comments box on the OSA, however, where Regus employees can

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add additional information to the standard OSA form.

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of executed OSA's, Regus employees have made a note in the comments

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box of one or more of the mandatory fees.

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///

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There

In a minority

The first fee at issue is the Kitchen Amenities Fee ("KAF").

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unlimited beverages.

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mandatory; thus, all Regus tenants pay the KAF.

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disclosed in the OSA nor the Terms and Conditions.

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mention of the KAF is in the House Rules, which states that it is

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mandatory but does not list the amount.

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United States District Court

The KAF is a monthly fee charged by Regus for the provision of

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For the Northern District of California

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listed in the Services Price Guide.

The service -- and therefore the fee -- is
The KAF is neither
The first

The amount of the KAF is

The second mandatory fee at issue is the Office Restoration

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Services fee ("ORS").

The ORS is a mandatory fee charged upon a

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tenant's departure for "normal cleaning and testing and to return

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the accommodations to its original state."

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Opp'n") at 12.

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fee is not provided -- in the Terms and Conditions and House Rules.

ECF No. 279-1 ("Cert.

The ORS is disclosed –- though the amount of the

The third mandatory fee at issue is the Business Continuity

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Services fee ("BCS").

The BCS is a mandatory fee charged upon the

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client's departure for services such as answering phone calls and

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forwarding mail.

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and House Rules; those disclosures, however, merely indicate that

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the BCS is "three months of the Virtual Office fee," without

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providing the amount of the Virtual Office fee.

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9.

The BCS is disclosed in the Terms and Conditions

Mot. for Cert. at

The final fee in dispute is the amount that Regus charges

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clients for taxes on certain services.1

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and Conditions disclose that quoted fees are "excluding tax,"

Although the OSA and Terms

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Whether Plaintiffs plan on pursuing restitution for taxes is not
entirely clear. Although they are mentioned in their Motion on
Class Certification, they are not included as part of the proposed
class definitions. Upon a renewed Motion for Class Certification,
Plaintiffs should provide additional clarification.
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Plaintiffs claim that "Circle Click was charged furniture and phone

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handset taxes that were excessive."

Id.

The content and form of Regus's invoices for telephone

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allege that the invoices that Regus provides for telephone services

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do not comply with California Public Utilities Code ("CPUC")

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section 2890, which sets forth a number of requirements for the

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United States District Court

services are also at issue in this case.

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For the Northern District of California

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contents of telephone bills.
B.

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Specifically, Plaintiffs

The Named Plaintiffs

Circle Click is a California company with its principal place

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of business in San Francisco, California.

Circle Click executed an

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OSA with Regus for two offices in San Francisco for a period

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starting in May 2011 and ending in May 2012.

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into the OSA, Circle Click's principal viewed Regus's website and

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allegedly relied on Regus's advertisements indicating Regus offered

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fully-equipped office space for a single low monthly price.

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signing the OSA online, Circle Click's principal opened and read

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the Terms and Conditions linked to the OSA on her computer.

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Although the OSA indicated that Circle Click's total monthly

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payment was to be $2,461, Regus invoiced Circle Click for

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significantly more than that due to additional fees that were not

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listed on the OSA.

Prior to entering

Before

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CTNY is a Connecticut company doing business in New York.

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CTNY entered into a Regus OSA for New York office space in May

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2012.

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Regus's website and allegedly relied on Regus's advertisements

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indicating Regus offered fully-equipped office space for a single

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low monthly price.

Prior to entering into the OSA, CTNY's principal viewed

CTNY also allegedly relied on oral

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monthly payment per the list price included all the required

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charges and constituted the total monthly payment.

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the OSA online, CTNY's principal was unable to open a link to

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Regus's Terms and Conditions.

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confirmed that he had read and understood the Terms and Conditions.

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Soon after executing the agreement, CTNY complained about the KAF

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United States District Court

representations made by Regus's sales representatives that the

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For the Northern District of California

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and other services it allegedly thought were included in the OSA

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price.

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While reviewing

Nevertheless, CTNY's principal

CTNY moved out of the Regus space within a few weeks of

moving in.

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C.

Procedural History

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In July 2012, Plaintiffs filed this action against Defendants

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in California state court.

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removed, and several rounds of pleading followed.

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Plaintiffs' Second Amended Complaint ("2AC"), Plaintiffs' operative

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pleading, is that Regus and the other Defendants routinely assessed

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Plaintiffs for charges that were not disclosed in the OSA.

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65 ("2AC").

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monthly fee listed in Circle Click's OSA was $2,461, but Circle

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Click received monthly invoices ranging from $2,559.67 to

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$6,653.79.

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ECF No. 1.

The action was subsequently
The gravamen of

ECF No.

For example, according to Plaintiffs' complaint, the

Id. ¶ 49.

The Court's April 22, 2013 Order, ECF No. 77 ("4/22/13 MTD

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Order"), dismissed several of Plaintiffs' claims with prejudice.

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The following causes of action were left undisturbed: violation of

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California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code

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§ 17200, et seq.; violation of California's False Advertising Law

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("FAL"), id. § 17509; and unjust enrichment.

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claim, Plaintiffs allege violations of the unfair, fraudulent, and

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As part of the UCL

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unlawful prongs of the UCL.

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Plaintiffs assert violations of California Business and Professions

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Code section 17509 and CPUC section 2890.

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As part of their FAL and UCL claims,

Regus asserted a variety of counterclaims in their Answer.

Regus filed a Second Amended Counterclaim.

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Regus's SACC alleges that CTNY breached the OSA by: (1) failing to

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United States District Court

After the Court dismissed those counterclaims with leave to amend,

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For the Northern District of California

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make its full monthly office payments, plus applicable taxes, in an

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amount of $12,209.01; (2) failing to pay the KAF, plus applicable

ECF No. 101 ("SACC").

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taxes, in an amount of $391.92; (3) failing to pay the office set-

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up fee, plus applicable taxes, in an amount of $81.66; (4) failing

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to pay the BCS fee in an amount of $987; (5) failing to pay the ORS

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fee, plus applicable taxes, in an amount of $239.45; and (6)

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failing to pay late payment fees.

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exception of the basic monthly office fee, none of these fees are

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described in the OSA.

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among other things, damages and attorney's fees.

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10, 2014 Order, however, the Court dismissed with prejudice Regus's

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request for attorney's fees, as well as Regus's breach of contract

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counterclaim to the extent that it was predicated on CTNY's failure

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to pay a BCS fee.

SACC ¶¶ 33-38.

With the

In its prayer for relief, Regus sought,
In its December

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II. MOTION TO DISMISS
Pursuant to Federal Rule of Civil Procedure 12(b)(1), Regus

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moves the Court to dismiss Plaintiffs' case for lack of subject

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matter jurisdiction on the grounds that Plaintiffs lack standing.

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First, Regus argues that Plaintiffs lack standing to assert their

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claims under Cal. Bus. & Prof. §§ 17200, 17500, and 17509 because

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Regus argues that Plaintiffs' unjust enrichment claim should be

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dismissed because it is duplicative of its UCL and FAL claims.2

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Third, Regus argues that Plaintiffs lack standing to bring claims

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based on alleged "unauthorized fees" that Regus claims were not

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charged, not paid, or otherwise reimbursed.

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that Plaintiffs lack standing to seek injunctive relief because

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United States District Court

Circle Click is neither a consumer nor Regus's competitor.

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For the Northern District of California

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Plaintiffs do not allege a threat of future harm.
A.

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Second,

Finally, Regus argues

Legal Standard

Standing is an element of subject matter jurisdiction.

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Therefore, Regus moves to dismiss for lack of subject matter

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jurisdiction under Fed. R. Civ. P. 12(b)(1).
Generally, on a 12(b)(1) motion, a court need not defer to a

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plaintiff's factual allegations regarding jurisdiction.

But the

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Supreme Court has held that where a 12(b) motion to dismiss is

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based on lack of standing, the Court must defer to the plaintiff's

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factual allegations and must "presume that general allegations

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embrace those specific facts that are necessary to support the

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claim."

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"[G]eneral factual allegations of injury resulting from the

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defendants' conduct may suffice."

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12(b)(1) motion to dismiss for lack of standing can only succeed if

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the plaintiff has failed to make "general factual allegations of

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injury resulting from the defendant's conduct."

Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992).

Id. at 560.

In short, a

Id. at 561.

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Although Regus brings this as part of their motion to dismiss for
lack of standing, it is properly understood as a motion to dismiss
for failure to state a claim under Federal Rule of Civil Procedure
12(b)(6).
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B.

Discussion
1.

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3

Standing to Assert UCL and FAL Claims

Regus first asks the Court to dismiss Plaintiffs' UCL and FAL

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claims.

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protect consumers and competitors, Circle Click, which is neither a

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consumer nor Regus's competitor, lacks standing.

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Regus argues that because the UCL and FAL were enacted to

Not so.

California's UCL and FAL apply to any "person who has

United States District Court

For the Northern District of California

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suffered injury in fact and has lost money or property as a result"

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of the alleged wrongful conduct.

See Cal. Bus. & Prof. Code §§

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17204, 17535.

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Bus. & Prof. Code §§ 17201, 17506.

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within the scope of protection afforded by the UCL and FAL.

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The term "person" includes "corporations."

Cal.

Accordingly, Circle Click falls

Regus relies on the following language from Linear Tech. Corp.

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v. Applied Materials, Inc.: "where a UCL action is based on

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contracts not involving either the public in general or individual

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consumers who are parties to the contracts, a corporate plaintiff

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may not rely on the UCL for the relief it seeks."

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4th 115, 135 (2007) (citing Rosenbluth Int'l, Inc. v. Super. Ct.,

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101 Cal. App. 4th 1073 (2002)).

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court's holding in Linear Tech. does not prevent any corporate

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plaintiff from proceeding under the UCL in a case arising from a

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contract that does not involve either the public or individual

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consumers.

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case on which Linear Tech. relied) turn less on the fact that the

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alleged victims in those cases were businesses, and more on the

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fact that these entities were sophisticated and individually

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capable of seeking relief.

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were large corporations who had "the resources to seek damages or

152 Cal. App.

Read in context, however, the

The holdings of both Linear Tech. and Rosenbluth (the

The alleged victims in Linear Tech.

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UCL plaintiffs in Rosenbluth were "sophisticated corporations, most

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in the Fortune 1000 . . ."

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The court in Rosenbluth noted in particular that the plaintiff's

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effort to act as the self-appointed representative of these alleged

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corporate victims raised due process concerns because, given UCL

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plaintiffs are limited to injunctive and restitutionary relief, "it

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United States District Court

other relief should [they] choose to do so."

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For the Northern District of California

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Id.

The potential

may well leave the victims worse off than they would be if they

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filed individual [contract or tort] actions."

Rosenbluth, 101 Cal. App. 4th at 1078.

Id.; see also Linear

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Tech., 152 Cal. App. 4th at 135 ("Thus, to the extent that Linear

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purports to represent other customers, permitting its UCL claim

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would raise serious fundamental due process considerations.").

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Here, by contrast, the proposed class of plaintiffs is not so

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uniformly sophisticated and capable of seeking relief against

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Regus.

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two individuals.

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contracts, not individually negotiated contracts between

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sophisticated entities.

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Rosenbluth and Linear Tech., moreover, are not relevant here given

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that upon class certification class members would be given notice

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and have the opportunity to opt out.

Plaintiff Circle Click, for example, is comprised of only
In addition, this action deals with form

The due process concerns raised in

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The UCL claim in this case also differs from the cases cited

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by Regus insofar as the allegedly unfair, deceptive, and unlawful

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acts committed by Regus are not limited to the parties' contractual

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relationship.

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(harm was a result of "contracts specifically with the plaintiff");

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Dollar Tree Stores, Inc. v. Toyama Partners LLC, 875 F. Supp. 2d

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1058 (N.D. Cal. 2012) (harm based on breach of contract); In re

Cf. Linear Tech. Corp., 152 Cal. App. 4th at 135

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02040 RMW, 2011 U.S. Dist. LEXIS 40471 (N.D. Cal., Apr. 13, 2011))

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(harm as a result of inadequate disclosures in a franchise

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agreement).

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are a central aspect of this case, Plaintiffs' claims are broader:

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Plaintiffs allege that they and other similarly situated businesses

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were harmed as a result of a scheme by Regus to collect

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United States District Court

ConocoPhillips Co. Service Station Rent Contract Lit., No. 09-CV-

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For the Northern District of California

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unreasonable penalties and unauthorized charges from tenants.

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alleged scheme encompasses actions beyond the parties' contractual

Although allegedly inadequate disclosures in the OSA

This

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relationship, including publishing deceptive advertisements,

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printing documents in illegible fonts, hiding fees in ancillary

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documents, and other unfair, deceptive, or unlawful business

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practices.

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As to Plaintiffs' FAL claim, Regus's only argument as to why

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Plaintiffs do not have standing is that the Court in a prior Order

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dismissed a similar claim alleged pursuant to the laws of New York

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State -- specifically, N.Y. Gen. Bus. Law §§ 349-350.

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59 at 23-25.

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law which applied only to "those who purchase goods and services

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for personal, family or household use."

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Ins. Co., 709 N.Y.S. 2d 72, 73 (N.Y. App. Div. 2000).

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FAL, however, does not have the same limitation.

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See ECF No.

The dismissed claim, however, was based on a New York

Sheth v. New York Life
California's

Accordingly, Regus's motion to dismiss Plaintiffs' claims
under the UCL and FAL for lack of standing is DENIED.
2.

Unjust Enrichment Claim

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Regus argues that Circle Click's unjust enrichment claim fails

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because it is duplicative of its UCL and FAL claims and, even if it

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is not duplicative, it cannot survive as a standalone claim.

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As

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the Court already found in its January 3, 2013 Order: "[C]laims for

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restitution or unjust enrichment may survive the pleading stage

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when pled as an alternative avenue of relief."

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26.

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2AC a claim for unjust enrichment in the alternative to its UCL and

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FAL claims.

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unjust enrichment claim is DENIED.

Pursuant to the Court's ruling, Circle Click asserted in its

3.

United States District Court

For the Northern District of California

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ECF No. 59 at 25-

Accordingly, Regus's motion to dismiss Plaintiffs'

Standing to Sue for Unauthorized Fees

Regus claims that Circle Click did not suffer any harm as a

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result of being charged allegedly unauthorized fees.

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Regus asserts that (1) Plaintiffs lack standing under Article III

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to bring any claims based on those fees, and (2) Plaintiffs lack

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standing to bring claims under the UCL and FAL pursuant to

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California Proposition 64 which requires named plaintiffs to show

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individualized harm.

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As a result,

To establish Article III standing, a plaintiff must show (1) a

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legally recognizable injury (i.e. "injury-in-fact"), (2) caused by

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the named defendant, (3) that is capable of legal or equitable

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redress."

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279 F.3d 817, 820-21 (9th Cir. 2002).

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prong, the injury alleged must be actual or imminent, not

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conjectural or hypothetical."

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Ninth Circuit, 382 F.3d 990, 992 (9th Cir. 2004) (citations

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omitted).

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Schmier v. U.S. Court of Appeals for the Ninth Circuit,
"Under the 'injury-in-fact'

Loritz v. U.S. Court of Appeals for

Since the passage of Proposition 64 in November 2004, "only

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plaintiffs who have suffered actual damage may pursue a private UCL

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action.

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must demonstrate injury in fact and a loss of money or property

A private plaintiff must make a twofold showing: he or she

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1

caused by unfair competition."

Cal. Bus. & Prof. Code § 17204;

2

Peterson v. Cellco Partnership, 164 Cal. App. 4th 1583, 1590

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(2008).
Plaintiffs have pleaded and provided evidence showing that

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and FAL violations.

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certain amounts from Plaintiffs' retainers for unpaid fees, that

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United States District Court

they have suffered injury-in-fact as a result of the alleged UCL

6

For the Northern District of California

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Plaintiffs in fact paid the fees in question, and that Plaintiffs

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would not have entered into the OSA's with Regus if not for Regus's

For example, they note that Regus deducted

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allegedly deceptive acts.

ECF Nos. 295 ("MTD Opp'n") at 4; 296 ¶¶

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69, 87; 251 ¶ 41.

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have demonstrated injury-in-fact sufficient to establish Article

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III standing.

Accordingly, the Court finds that Plaintiffs

For the same reasons, Plaintiffs have also demonstrated a loss

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of money or property caused by unfair competition.

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Defendants' argument, therefore, Plaintiffs do not lack standing

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pursuant to California Proposition 64.
Thus, Defendants' motion to dismiss claims based on allegedly

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Contrary to

"unauthorized" fees is DENIED.
4.

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Standing to Sue for Injunctive Relief

Finally, Regus argues that Plaintiffs lack standing to seek

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injunctive relief because they have not alleged a threat of future

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harm.

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have not alleged that they intend to rent office space from Regus

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in the future.

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28

Specifically, Defendants point to the fact that Plaintiffs

In Henderson v. Gruma Corp., the court rejected a similar
argument, reasoning that
[i]f the Court were to construe Article III standing for
FAL and UCL claims as narrowly as the Defendant
13

1
2
3

advocates, federal courts would be precluded from
enjoining false advertising under California consumer
protection laws because a plaintiff who had been injured
would always be deemed to avoid the cause of the injury
thereafter ("once bitten, twice shy") and would never
have article III standing.

Apr. 11, 2011).

6

have met the requirements for standing and may seek injunctive

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relief in this action.

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United States District Court

2011 U.S. Dist. LEXIS 41077, 2011 WL 1362188, at *19-20 (C.D. Cal.

5

For the Northern District of California

4

for injunctive relief is therefore DENIED.

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C.

For the same reasons, the Court finds Plaintiffs

Defendants' motion as to Plaintiffs' prayer

Conclusion on Motion to Dismiss

For the foregoing reasons, Defendants' Motion to Dismiss is
DENIED.

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III. DEFENDANTS' MOTION FOR SUMMARY JUDGMENT ON DEFENDANTS'
COUNTERCLAIMS
The Court now turns to Regus's Motion for Summary Judgment on
its counterclaim for breach of contract against CTNY.

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A.

Legal Standard

18

Entry of summary judgment is proper "if the movant shows that

19

there is no genuine dispute as to any material fact and the movant

20

is entitled to judgment as a matter of law."

21

56(a).

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party must either produce evidence negating an essential element of

23

the nonmoving party's claim or defense or show that the nonmoving

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party does not have enough evidence of an essential element to

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carry its ultimate burden of persuasion at trial."

26

Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 1102 (9th

27

Cir. 2000).

28

all justifiable inferences are to be drawn in his favor."

Fed. R. Civ. P.

"In order to carry its burden of production, the moving

Nissan Fire &

"The evidence of the nonmovant is to be believed, and

14

Anderson

1

v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

Summary judgment

2

should be entered against a party that fails to make a showing

3

sufficient to establish the existence of an element essential to

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its case.

Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

5

B.

Discussion

6

Regus argues that the Court should enter summary judgment in

United States District Court

its favor on its breach of contract counterclaim against CTNY

8
For the Northern District of California

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because (1) a valid contract exists between Regus and CTNY, (2)

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Regus fully performed its obligations under the contract, and (3)

10

CTNY breached its obligations under the contract by failing to pay

11

all amounts due.

12

Regus brings its counterclaim under New York law.

Plaintiffs make various arguments as to why Regus's motion

13

ought to be denied.

14

affirmative defense, CTNY asserts that it was fraudulently induced

15

into signing the OSA.

16

plaintiff must demonstrate each of the following elements: (1) the

17

defendant made a representation; (2) as to a material fact; (3)

18

which was false; (4) and known to be false by the defendant; (5)

19

for the purpose of inducing the other party to rely on it; (6) the

20

other party rightfully relied on it; (7) in ignorance of its

21

falsity; and (8) to his or her injury.

22

F. Supp. 2d 130, 142 (N.D.N.Y. 2002).

23

The Court focuses on one in particular.

As an

To establish fraud in the inducement, a

Clarke v. Max Advisors, 235

CTNY has presented evidence that Regus employees made oral

24

representations during CTNY's walkthrough of the property that the

25

monthly payment per the list price included all the required

26

charges and constituted the total monthly payment.

27

("Fullerton Decl.") ¶ 15.

28

material fact as to whether CTNY was fraudulently induced into

ECF No. 251

Accordingly, there are genuine issues of

15

1

signing the OSA -- specifically, (1) whether those representations

2

were false, (2) whether they were known to be false by Regus, (3)

3

whether the representations were made by Regus for the purpose of

4

inducing CTNY to enter into the OSA, and (4) whether CTNY

5

rightfully relied on the foregoing representations.

6

Although there may be other issues of material fact, the Court

United States District Court

need not address them.

8
For the Northern District of California

7

For the forgoing reasons, the Court DENIES

Defendants' Motion for Summary Judgment.

9
10
11

IV. MOTION FOR CLASS CERTIFICATION
Plaintiffs ask the Court to certify two proposed classes

12

"consisting of a California class pursuing claims on all . . .

13

causes of action and a New York class pursuing the unjust

14

enrichment cause of action."

15

class is defined as:

16
17
18
19
20
21
22
23
24
25
26
27
28

Mot. for Cert. at 1.

The California

All persons (except those persons who entered into the
Regus enterprise form of agreement or whose office
accommodation agreement contained a class action waiver)
who, on or after May 8, 2008, on account of an office
located in California, either (1) entered into an Office
Service Agreement or Online Service Agreement with Regus
using one of the Regus standard physical office space
forms of agreement or (2) were charged by Regus a Kitchen
Amenities Fee, Office Restoration Service fee or Exit fee
or equivalent, or a Business Continuity Service fee or
equivalent.
Mot. for Cert. at 11.

The New York class is defined as:

All persons (except those persons who entered into the
Regus enterprise form of agreement or whose office
accommodation agreement contained a class action waiver)
who, on or after September 24, 2006, on account of an
office located in New York, either (1) entered into an
Office Service Agreement or Online Service Agreement with
Regus using one of the Regus standard physical office
space forms of agreement or (2) were charged by Regus a
Kitchen Amenities Fee, Office Restoration Service fee or
Exit fee or equivalent, or a Business Continuity Service
fee or equivalent.

16

1

These classes, according to Plaintiffs, satisfy the prerequisites

2

of Rule 23(a) and fulfill the requirements for class certification

3

under Rule 23(b)(3).

4

A.

Legal Standard

5

All class actions must meet the four criteria set forth in

6

Federal Rule of Civil Procedure 23(a).

In addition, the class must

7

meet one of the three categories of Rule 23(b).

United States District Court

For the Northern District of California

8

Rule 23(a) provides four threshold criteria which must be met

9

in order for a class to be certified: (1) the class is so numerous

10

that joinder of all members is impracticable; (2) there are

11

questions of law or fact common to the class; (3) the claims or

12

defenses of the representative parties are typical of the claims or

13

defenses of the class; and (4) the representative parties will

14

fairly and adequately protect the interests of the class.

15

Civ. P. 23(a).

16

numerosity, commonality, typicality, and adequacy of

17

representation.

18

(1980).

19

Fed. R.

These requirements are generally referred to as

See Gen. Tel. Co. v. EEOC, 446 U.S. 318, 330

Rule 23(b)(3) provides that a class action may be maintained

20

if Rule 23(a) is satisfied and if: "(3) the court finds that

21

questions of law or fact common to class members predominate over

22

any questions affecting only individual members, and that a class

23

action is superior to other available methods for fairly and

24

efficiently adjudicating the controversy."

25

23(b)(3).

26

Fed. R. Civ. P.

Plaintiffs have the burden of proving that the Rule 23

27

requirements have been met.

28

U.S. 591 (1997).

Amchem Products Inc. v. Windsor, 521

Plaintiffs need not, however, show that they are

17

class certification.

3

178 (1974).

4

may be necessary to ascertain satisfaction of the commonality and

5

typicality requirements of Rule 23(a), it is improper to advance a

6

decision on the merits to the class certification stage."

7

Hughes Helicopters, Inc., 708 F.2d 475, 480 (9th Cir. 1983); see

8

United States District Court

likely to prevail on the merits of their claims at the stage of

2

For the Northern District of California

1

also Staton v. Boeing Co., 327 F.3d 938, 954 (9th Cir. 2003).

9
10

B.

Eisen v. Carlisle & Jacquelin, 417 U.S. 156,

"Although some inquiry into the substance of a case

Moore v.

Evidentiary Objections

As a preliminary matter, the Court addresses the parties'

11

evidentiary objections styled as a Motion for Sanctions and a

12

Motion to Exclude Expert Reports filed by Regus and Plaintiffs,

13

respectively.

14

On a motion for class certification, the court makes no

15

findings of fact and announces no ultimate conclusions on

16

Plaintiffs' claims.

17

take on a substantially reduced significance, as compared to a

18

typical evidentiary hearing or trial."

19

Chem. Corp., 238 F.R.D. 273, 279 n.7 (S.D. Ala. 2006); see also id.

20

at 279 ("the Federal Rules of Evidence are not stringently applied

21

at the class certification stage because of the preliminary nature

22

of such proceedings"); Selzer v. Bd. of Ed. of City of New York,

23

112 F.R.D. 176, 178 (S.D.N.Y. 1986) (motion for class certification

24

is not a mini-trial on the merits).

25

As a result, "the Federal Rules of Evidence

Fisher v. Ciba Specialty

Further, on a motion for class certification, the court may

26

consider evidence that may not be admissible at trial.

27

Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 178 (1974) (describing

28

a court's determination of class certification as based on

18

See, e.g.,

and describing a class certification procedure as "of necessity

3

. . . not accompanied by the traditional rules and procedures

4

applicable to civil trials").

5

ultimate admissibility of the parties' proffered exhibits,

6

documents, and testimony at this stage, and may consider them where

7

necessary for resolution of the motion for class certification.

8

United States District Court

"tentative findings, made in the absence of established safeguards"

2

For the Northern District of California

1

re Hartford Sales Practices Litig., 192 F.R.D. 592, 597 (D. Minn.

9

1999).

10

1.

The court need not address the

In

Regus's Motion for Sanctions Under Rule 37

11

Regus filed a Motion for Sanctions under Rule 37 to exclude

12

from evidence eight declarations filed in support of Plaintiffs'

13

Motion for Class Certification.

14

257, 258, 259, 260.

15

identify each of these declarants in their initial disclosures and

16

in response to Regus's interrogatories requesting identification of

17

any putative class members of which they were aware.

18

See ECF Nos. 252, 253, 254, 256,

Regus argues that Plaintiffs were obligated to

Declarants' testimony adds very little value to Plaintiffs'

19

Motion for Class Certification.

Cited testimony from these former

20

Regus tenants includes that it was the declarants' understanding

21

that they would be provided "with a fully furnished office," that

22

they expected their contract to be "a simple one page document,"

23

and that they "were shocked by [Regus's] unfair charges and unfair

24

business practices."

25

statements have any relevance to the key legal and factual issues

26

being considered by the Court on Plaintiffs' Motion for Class

27

Certification.

28

disputed testimony in making its decision, Regus's Motion for

Mot. for Sanc. at 4.

None of these

Because the Court has not relied on any of the

19

1

Sanctions is DENIED AS MOOT.

2

associated with this Motion.

3

2.

4
5

The parties will pay their own costs

Plaintiffs' Motion to Exclude the Expert Reports of
Mark Vogel and James Pampinella

Plaintiffs filed a Motion to Exclude the Expert Reports of

declaration should be excluded because it is "(1) irrelevant to the

8

United States District Court

Mark Vogel and James Pampinella.

7

For the Northern District of California

6

Plaintiffs claim that Mr. Vogel's

issues presented at the class certification stage; and (2) based on

9

unsound methodologies and applied to unverified survey results and

10

opinions . . . .

11

opinions of Mark Vogel are relevant and reliable as required by

12

Rule 702."

13

Pampinella's declaration should be excluded because his opinions

14

regarding whether the proposed class members are similarly situated

15

"consist of legal conclusions relating to Plaintiffs' Motion for

16

Class Certification (namely, commonality) and are based on an

17

unreliable data sample."

18

Accordingly, Defendants cannot establish that the

Mot. to Excl. at 1.

Plaintiffs claim that Mr.

Id.

Having reviewed the reports of Regus's experts, the Court

19

finds that they meet the criteria for admissibility at this stage

20

in the proceedings.

21

that could be inadmissible at a trial, their objections are

22

OVERRULED.

23

rather than a jury, the judge's gatekeeper role is "significantly

24

diminished . . . because . . . there is no risk of tainting the

25

trial by exposing a jury to unreliable evidence."

26

Block, Inc., 831 F. Supp. 2d 27, 36 (D.C. Cir. 2011); see also U.S.

27

v. Oracle Corp., 331 F. Supp. 2d 1098, 1158 (N.D. Cal. 2004)

To the extent Plaintiffs point to material

Where an expert's opinion is being presented to a judge

28

20

U.S. v. H&R

1

(holding that the judge can give the evidence the weight that it

2

deserves without being "tainted" by it).

3

Accordingly, Plaintiffs' Motion to Exclude is DENIED.

4

C.

1.

5
6
7

Discussion
Rule 23(a) Requirements

Rule 23(a) requires numerosity, commonality, typicality, and
adequacy of representation.
a.

United States District Court

For the Northern District of California

8

See Mazza, Inc., 666 F.3d at 588.

Numerosity

9

Federal Rule of Civil Procedure 23(a)(1) requires that the

10

proposed classes be "so numerous that joinder of all members is

11

impracticable."

12

considered sufficiently numerous."

13

F.R.D. 582, 587 (C.D. Cal. 2011).

14

Plaintiffs' motion satisfies the numerosity requirement.

15

the California class potentially includes 20,992 persons, and the

16

New York class potentially includes 11,333 persons.
b.

17
18

Generally, "classes of forty or more are
Delarosa v. Boiron, Inc., 275
Regus does not dispute that
Indeed,

Commonality

Commonality requires that "there are questions of law or fact

19

common to the class."

Fed. R. Civ. P. 23(a)(2).

The Supreme Court

20

noted that this requirement is easy to misread, "since '[a]ny

21

competently crafted class complaint literally raises common

22

questions.'"

23

(2011).

24

"of such a nature that it is capable of classwide resolution --

25

which means that determination of its truth or falsity will resolve

26

an issue that is central to the validity of each one of the claims

27

in one stroke."

28

questions -- even in droves -- but rather the capacity of a

Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551

The claims must depend upon a "common contention" that is

Id.

What matters "is not the raising of common

21

1

classwide proceeding to generate common answers apt to drive the

2

resolution of the litigation."

3

Id.

The Court need not address this issue.

Rule 23(b)(3) includes

predominate over questions affecting only individual class members.

6

"The commonality preconditions of Rule 23(a)(2) are less rigorous

7

than the companion requirements of Rule 23(b)(3)."

8

United States District Court

a related, but additional, requirement that these common questions

5

For the Northern District of California

4

Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998).

9

for the purposes of this motion, the Court assumes arguendo that

Hanlon v.
Consequently,

10

there are questions of law or fact common to the class.

11

discussed in Part IV.C.3.a, below, the Court finds that the

12

questions Plaintiffs cite as common to the classes do not

13

predominate over individual concerns.
c.

14
15

But, as

Typicality

Typicality requires that "the claims or defenses of the

16

representative parties are typical of the claims or defenses of the

17

class."

18

interpreted the typicality requirement permissively.

19

although class representatives' claims must be "reasonably co-

20

extensive with those of absent class members[,] they need not be

21

substantially identical."

22

determining whether typicality is met, the focus should be on the

23

defendants' conduct and plaintiff's legal theory, not the injury

24

caused to the plaintiff.

25

class members suffer the same injury as the named class

26

representative."

27

391, 396 (N.D. Cal. 2005).

28

when "[a] named plaintiff who proved his own claim would not

Fed. R. Civ. P. 23(a)(3).

The Ninth Circuit has

Hanlon, 150 F.3d at 1020.

For example,

"In

Typicality does not require that all

Simpson v. Fireman's Fund Ins. Co., 231 F.R.D.
Typicality is not satisfied, however,

22

1

necessarily have proved anybody else's claim."

2

Motors Corp., 133 F.3d 388, 399 (6th Cir. 1998).

3

"[c]ourts of appeal have held that unique defenses bear on . . .

4

typicality."

5

(D. Kan. 2008) (citing Beck v. Maximus, Inc., 457 F.3d 291, 296

6

(3rd Cir. 2006)).

7

Sprague v. Gen.
Moreover,

In Re Hurethane Antitrust Litig., 251 F.R.D. 629, 642

Plaintiffs argue that the claims of the named plaintiffs are

United States District Court

For the Northern District of California

8

typical of the class because, like the absent class members, named

9

Plaintiffs entered into an OSA, were subject to mandatory fees

10

without adequate notice, were misled by the representations on

11

Regus's website, and suffered injury from Regus's allegedly unfair

12

tax practices.

13

claims.

14

are typical as to Plaintiffs' claim that the font size of the Terms

15

and Conditions constitutes a fraudulent business practice.

16

The Court agrees with Plaintiffs as to most of its

As explained below, however, neither Circle Click nor CTNY

As Regus points out, Plaintiffs are alleging that Regus was

17

unjustly enriched, in part, because Plaintiffs "were deceived

18

because they were unable to read the miniscule font used in

19

Defendants' Terms and Conditions."

20

However, Circle Click's principal admits to reading the Terms and

21

Conditions after enlarging the font on her computer.

22

280, Ex. A ("Ward Depo.") at 290:15-17.

23

failure to read the Terms and Conditions was not a result of

24

"miniscule font."

25

because CTNY's principal was unable to download them from Regus's

26

website.

27

Plaintiffs, for their part, do not even attempt to respond to this

28

challenge in their Reply.

Mot. for Cert. at 17, 22.

See ECF No.

Furthermore, CTNY's

CTNY failed to read the Terms and Conditions

See ECF No. 280, Ex. B ("Fullerton Depo") at 93:15-94:8.

23

action must demonstrate individualized reliance, deception, and

3

injury.

4

However, since Circle Click read the Terms and Conditions and CTNY

5

never even downloaded the Terms and Conditions, neither named

6

plaintiff can show that it was deceived or injured by the small

7

font in the manner they allege on behalf of the class.

8

United States District Court

Per California's Proposition 64, named plaintiffs in a UCL

2

For the Northern District of California

1

result, Plaintiffs do not satisfy the typicality requirement as to

9

this claim.

See In re Tobacco II Cases, 46 Cal. 4th 298, 314 (2009).

d.

10
11

As a

Adequacy of Representation

This requirement ensures that plaintiff "will fairly and

12

adequately protect the interests of the class."

Fed. R. Civ. P.

13

23(a)(4).

14

the adequacy of class representation.

15

plaintiffs and their counsel must not have conflicts of interest

16

with other class members.

17

and their counsel must prosecute the action vigorously on behalf of

18

the class.

19

2003).

The Ninth Circuit applies a two-part test to determine
First, the representative

Second, the representative plaintiffs

Staton v. Boeing Co., 327 F.3d 938, 957 (9th Cir.

20

Regus argues that CTNY is not an adequate representative

21

because it is facing over $10,000 in potential liability from

22

Regus's counterclaims.

23

"counterclaims do not defeat class certification."

24

Vision Airlines, Inc., No. 209-CV-00117-RLH-RJJ, 2009 WL 4893185,

25

at *5 (D. Nev. Dec. 16, 2009) (quoting Davis v. Cash for Payday,

26

Inc., 193 F.R.D. 518, 522 (N.D. Ill. 2000).

27

"litigation respecting individual counterclaims, if successful,

28

would only reduce damage awards; it would not affect a finding of

It is well established, however, that

24

Hester v.

This is because

1

liability."

2

1161, 1165 n.4 (7th Cir. 1974)).

3

Id. (quoting Haynes v. Logan Furniture Mart, 503 F.2d

There is no indication that named plaintiffs or their counsel

action vigorously on behalf of the class as they have for about

6

three years now.

7

has extensive class action litigation and unfair business practices

8

United States District Court

have any conflicts of interest or that they will not prosecute this

5

For the Northern District of California

4

experience.

9

their counsel will provide adequate representation.

11

Accordingly, the Court finds that named plaintiffs and

2.

10

Further, one of the principal attorneys involved

Rule 23(b)(3) Requirements

Rule 23(b)(3) requires the Court to find that "questions of

12

law or fact common to class members predominate over any questions

13

affecting only individual members, and that a class action is

14

superior to other available methods . . . ."

15

23(b)(3).
a.

16
17

Fed. R. Civ. P.

Predominance

"The predominance test of Rule 23(b)(3) is 'far more

18

demanding' than the commonality test under Rule 23(a)(2)."

19

Villalpando, 303 F.R.D. at 607 (quoting Amchem Prods., Inc., 521

20

U.S. at 624).

21

aspect of the case and they can be resolved for all members of the

22

class in a single adjudication [is] there clear justification for

23

handling the dispute on a representative rather than individual

24

basis."

25

of demonstrating that common questions predominate lies with the

26

party seeking class certification.

27

Inst., Inc., 253 F.3d 1180, 1188 (9th Cir. 2001).

Only where "common questions present a significant

Hanlon, 150 F.3d at 1022 (citations omitted).

28

25

The burden

Zinser v. Accufix Research

1

In their motion, Plaintiffs organize the common issues

2

important in this case according to the categories of claims that

3

survived the Court's April 22, 2013 Order on Regus's Motion to

4

Dismiss for failure to state a claim.

5

Order").

6

analyzes whether common questions predominate as to each claim in

7

turn.

The Court agrees with Plaintiffs' approach, and it

i.

United States District Court

8
For the Northern District of California

See ECF No. 77 ("4/22/13 MTD

9

Fraudulent Business Practices in
Violation of the UCL: Terms and
Conditions Printed in Small Font

In its April 22, 2013 Order, the Court found that Plaintiffs'

10
11

allegations that Plaintiffs "were deceived because they were unable

12

to read the miniscule font used in Defendants' Terms and Conditions

13

. . . are sufficient to state a claim for fraudulent practices

14

under the UCL."

15

4/22/13 MTD Order at 12-13.

To state a claim under the fraudulent prong of the UCL,

16

Plaintiffs need to demonstrate that members of the public were

17

likely to be deceived by the business practice at issue.

18

Super. Court, 91 Cal. App. 4th 1128, 1146 (2001).

19

class members, however, Plaintiffs do not need to show that they

20

relied on, were deceived by, or were injured by the practice.

21

re Tobacco II Cases, 46 Cal. 4th at 319-20.

Prata v.

As to absent

In

Plaintiffs argue that common questions of law and fact

22
23

predominate with respect to this claim because "[a]ll class members

24

received the tiny type Terms and Conditions in which the complained

25

of fees are either mentioned for the first time in the contract

26

documents (ORS and BCS) or omitted entirely (KAF)."

27

at 17.

28

///

26

Mot. for Cert.

1

Regus argues that common questions do not predominate because

and Conditions, did not even attempt to view the Terms and

4

Conditions (for example, because they did not download them when

5

completing an online version of the OSA), or were able to enhance

6

the size of the font if viewing the Terms and Conditions from their

7

computer.

8

United States District Court

many of the proposed class members had no trouble viewing the Terms

3

For the Northern District of California

2

OSA's disclosed the mandatory fees at issue in the comments section

9

of the OSA itself, making the font size of the Terms and Conditions

10
11

Further, Regus has presented evidence that some of the

irrelevant.
Regus's argument that common questions do not predominate

12

because at least some class members read the Terms and Conditions

13

is unavailing because whether printing the Terms and Conditions in

14

small font is likely to deceive the public is a question common to

15

the class even if certain class members successfully read the Terms

16

and Conditions notwithstanding their small font.

17

mentioned, whether absent class members were actually deceived is

18

immaterial to Plaintiffs' ability to prove its UCL claim.

19

re Tobacco II Cases, 46 Cal. 4th at 319-20.

20

As already

See In

Regus's second argument -- that the font size of the Terms and

21

Conditions could not have been a fraudulent business practice with

22

regard to OSA's that disclosed the mandatory fees in the comments

23

section of the OSA -- is more promising.

24

small font size of the Terms and Conditions was fraudulent because

25

the Terms and Conditions disclosed mandatory fees or referred

26

customers to other documents which disclosed mandatory fees.

27

Insofar as the mandatory fees were disclosed on the face of the OSA

28

itself, however, the font size of the Terms and Conditions is

27

Plaintiffs claim that the

1

irrelevant to whether class members were deceived.

2

proposed class definitions are therefore overbroad insofar as they

3

encompass OSA's that disclosed mandatory fees in the comments

4

section of the OSA itself.

5

fact and law do not predominate as to this claim.

6

ii.

7

Plaintiffs'

For that reason, common questions of

Unfair Business Practices in Violation of
the UCL: Failure to Adequately Disclose
Fees

United States District Court

For the Northern District of California

8
9

In its April 22, 2013 Order, the Court found that Plaintiffs'

10

allegations that Defendants failed to adequately disclose certain

11

fees without justification states a claim for violation of the

12

unfairness prong of the UCL.

13

4/22/13 MTD Order at 14.

"The test of whether a business practice is unfair involves an

14

examination of [that practice's] impact on its alleged victim,

15

balanced against the reasons, justifications and motives of the

16

alleged wrongdoer."

17

Acceptance Corp., 72 Cal. App. 4th 861, 886 (1999).

South Bay Chevrolet v. General Motors

18

Plaintiffs argue that common questions of fact and law

19

predominate on this issue because "[w]hatever justification Regus

20

had [if any] for its practice of hiding fees in the . . . Terms and

21

Conditions . . . would apply equally to all class members."

22

for Cert. at 19.

23

Mot.

Regus counters that common questions do not predominate

24

because some of the OSA's signed by potential class members --

25

albeit a minority -- disclosed one or more of the mandatory fees in

26

the comments section of the OSA.

27

the same reasons provided in the Court's discussion in the previous

28

section: Plaintiffs' class definitions are overbroad because they

The Court agrees with Regus for

28

1

encompass potential class members whose OSA disclosed the mandatory

2

fees in the comments section of the OSA itself.

3

Court finds that common issues of law and fact do not predominate

4

as to this claim.

5

iii.

6
7

Accordingly, the

Unlawful Business Practice in Violation of
the UCL: Failure to Comply with the CPUC

In its April 22, 2013 Order, the Court found that Plaintiffs'

United States District Court

For the Northern District of California

8

allegations that Regus failed to comply with the requirements set

9

forth in CPUC section 2890 for the contents of telephone bills

10

states a claim for violation of the unlawful prong of the UCL.

11

4/22/13 MTD Order at 14-15.

12

Plaintiffs argue that common questions of law and fact

13

predominate as to this claim because whether Regus's standard

14

invoicing system complied with the CPUC is a matter of law that

15

would apply equally to all class members.

16

As Plaintiffs acknowledge, however, "not all class members

17

purchased phone service and so not all of them were damaged by the

18

claimed practice."

19

finds that Plaintiffs' proposed classes are overbroad as to this

20

claim insofar as they encompass potential class members who were

21

not exposed to the allegedly unlawful telephone bills.

Mot. for Cert. at 20.

As a result, the Court

22
iv.
23
24
25

False Advertising Claims in Violation of
the UCL and FAL: Representations on
Regus's Website

In its April 22, 2013 Order, the Court found that the

26

representations allegedly made on Regus's website "that their

27

Office Agreements are one page, their offices are fully equipped,

28

and their bills are all inclusive" may be false and misleading in

29

1

violation of Cal. Bus. & Prof. Code section 17500.

4/22/13 MTD

2

Order at 20-21.

3

violated Cal. Bus. and Prof. Code section 17509 if it "advertised

4

office space [on its website] while failing to disclose that

5

renters would also be required to purchase kitchen amenities,

6

office restoration, and business continuity service in connection

7

with that office space."

The Court further found that Regus would have

Id. at 22-23.

United States District Court

For the Northern District of California

8

In the context of false or misleading advertisement claims, a

9

class definition will be considered overbroad insofar as it is not

10

"defined in such a way as to include only members who were exposed

11

to [the allegedly deceptive] advertising . . . ."

12

American Honda Motor Co., 666 F.3d 581, 596 (9th Cir. 2012); see

13

also In re Clorox Consumer Litig., 301 F.R.D. 436, 444 (N.D. Cal.

14

2014) (denying certification where plaintiffs sought to certify an

15

"all purchasers" UCL class on the basis of an allegedly misleading

16

advertisement where the evidence showed that a substantial portion

17

of class members likely never saw the advertisement); Davis-Miller

18

v. Automobile Club of S. Cal., 201 Cal. App. 4th 106, 125 (2011)

19

("An inference of classwide reliance [under the UCL] cannot be made

20

where there is no evidence that the allegedly false representations

21

were uniformly made to all members of the proposed class.").

22

Mazza v. American Honda Motor Co. is instructive.

Mazza v.

In Mazza,

23

the Ninth Circuit reversed a district court's decision to certify a

24

class of all consumers who purchased or leased Acura RLs equipped

25

with a Collision Mitigation Braking System ("CMBS").

26

alleged that certain advertisements misrepresented the

27

characteristics of the CMBS and omitted material information on its

28

limitations in violation of UCL and other statutes.

30

Plaintiffs

Plaintiffs

1

further argued that class certification was appropriate because

2

reliance as to the class as a whole could be inferred in a UCL

3

class action.

4

definition was overbroad insofar as it was not "defined in such a

5

way as to include only members who were exposed to [the]

6

advertising . . . ."

The Ninth Circuit, however, held that the class

Mazza, 666 F.3d at 596.

United States District Court

Plaintiffs argue that common questions of fact and law

8
For the Northern District of California

7

predominate on this claim because "Plaintiffs evidence regarding

9

the Regus web site is inherently applicable to the whole class."

10

Mot. for Cert. at 21.

Regus counters that the proposed class is

11

hopelessly overbroad because it includes individuals who never saw

12

Regus's website.

The Court agrees with Regus.

Plaintiffs point out that where a named plaintiff alleges

13
14

exposure to a long-term advertising campaign,3 "the plaintiff is

15

not required to plead with an unrealistic degree of specificity

16

that the plaintiff relied on particular advertisements or

17

statements."

18

California Supreme Court has held that absent class members do not

19

need to show individualized injury, deception, or reliance.

20

315-316.

21

plaintiffs -- including absent class members -- must have at least

22

been exposed to the allegedly deceptive advertisement at issue.

23

See Mazza, 666 F.3d at 596; In re Clorox Consumer Litig., 301

Tobacco II, 46 Cal. 4th at 328.

Furthermore, the

Id. at

These points are inapposite, however, because all

24
25
26
27
28

3

The Court is highly skeptical that the alleged advertising
campaign at issue in this case is sufficiently widespread to fall
within the exception set out in Tobacco II. In any case, all
plaintiffs -- including absent class members -- must have been
exposed to a deceptive advertisement even if (by operation of the
exception set out in Tobacco II) named plaintiffs are not required
to state specifically which deceptive advertisements or statements
they relied upon.
31

1

F.R.D. at 444; Davis-Miller, 201 Cal. App. 4th at 125 (2011); see

2

also In re Tobacco II Cases, 46 Cal. 4th at 324 (presuming reliance

3

where "[t]he class, as certified, consists of members of the public

4

who were exposed to defendants' allegedly deceptive advertisements

5

and misrepresentations").
Here, Plaintiffs admit that many members of the proposed class

6

United States District Court

did not see the alleged representations on Regus's website.

8
For the Northern District of California

7

Further, Regus has presented evidence that none of the alleged

9

misrepresentations were on the website between December 2007 to

10

March 2009 and from December 2010 to June 2014.

11

11.

12

to this claim and common questions of fact and law do not

13

predominate.

14
15

See Cert. Opp'n at

As a result, the class definition is overbroad as it pertains

b.

Superiority of Class Action

The final Rule 23(b)(3) requirement is that a class action is

16

superior to other available methods for fairly and effectively

17

adjudicating the controversy.

18

superiority of the class action are: (a) the class members'

19

interests in individually controlling the prosecution or defense of

20

separate actions; (b) the extent and nature of any litigation

21

concerning the controversy already begun by or against class

22

members; (c) the desirability or undesirability of concentrating

23

the litigation of the claims in the particular forum; and (d) the

24

likely difficulties in managing a class action. Fed. R. Civ. P. 23;

25

see also Jones v. ConAgra Foods, Inc., No. C 12-01633 CRB, 2014 WL

26

2702726, at *23-24 (N.D. Cal. June 13, 2014).

Relevant to determining the

27

Here, the individual claims are expected to be less than

28

$3,000 each and the expected recovery in an individual action would

32

1

likely not be more than available through a class action.

2

addition, because of the small size of each claim compared to the

3

costs of litigating the issues, having the matter handled in a

4

single forum has distinct economies of scale.

5

desirable for all parties to have a single adjudication of the

6

legal question so multiple suits would not be advantageous to

7

either side.

United States District Court

For the Northern District of California

8
9

In

Further, it is

At present, the Court is unaware of any other litigation
concerning the issues raised by this case.

No other cases,

10

therefore, influence the Court's decision of whether a class action

11

is the preferable method of handling the issues presented.

12

There are limited class management issues in this case.

13

amount each class member paid and for what fees, the identity and

14

address of each class member, and most of the relevant evidence is

15

in Regus's records.

16

create significant management issues.

17

The

Thus, the large size of the class does not

For the foregoing reasons, the Court concludes that a class

18

action is superior to other available methods for fairly and

19

effectively adjudicating this controversy.

20

D.

Conclusion on Motion for Class Certification

21

For the reasons detailed in Part IV.C.2.a on predominance and

22

Part IV.C.1.c on typicality, the Court cannot certify Plaintiffs'

23

proposed classes as currently defined.

24

Motion for Class Certification is DENIED WITHOUT PREJUDICE.

25

Plaintiffs may, if they choose, file a revised motion for class

26

certification within thirty (30) days of this order.

27

motion and class definitions cannot be overbroad, and the claims of

28

the named Plaintiffs must be typical of the class as a whole.

33

As a result, Plaintiffs'

The revised

1
2

V. MOTION FOR SECURITY FOR COSTS
Regus has moved the Court for an order requiring out-of-state

$76,825 to secure an award of costs.

5

doubling the taxable costs Regus has incurred to date in defending

6

this lawsuit, which Regus claims is "a reasonable estimate of the

7

total amount of costs Regus will incur should this case proceed to

8

United States District Court

Plaintiff CTNY to furnish a written undertaking in the amount of

4

For the Northern District of California

3

trial."

9
10
11
12
13
14
15

This amount was calculated by

Mot. for Sec. at 3.

The Ninth Circuit has addressed the framework for the relief
sought herein:
There is no specific provision in the Federal Rules of
Civil Procedure relating to security for costs. However,
the federal district courts have inherent power to
require
plaintiffs
to
post
security
for
costs.
"Typically federal courts, either by rule or by case-tocase determination, follow the forum state's practice
with regard to security for costs, as they did prior to
the federal rules; this is especially common when a nonresident party is involved."

16
Simulnet E. Assocs. v. Ramada Hotel Operating Co., 37 F.3d 573, 574
17
(9th Cir. 1994) (quoting 10 Wright, Miller & Kane, Federal Practice
18
and Procedure: Civil 2nd § 2671).

Accordingly, the application of

19
California procedure is a matter within the Court's discretion.
20
Here, the Court is guided by California Code of Civil
21
Procedure section 1030.

Section 1030 provides,

22

25

[w]hen the plaintiff in an action . . . resides out of
the state, or is a foreign corporation, the defendant may
at any time apply to the court by noticed motion for an
order requiring the plaintiff to file an undertaking to
secure an award of costs and attorney's fees which may be
awarded in the action . . . .

26

"The purpose of the statute is to enable a California resident sued

27

by an out-of-state resident to secure costs in light of the

28

difficulty of enforcing a judgment for costs against a person who

23
24

34

1

is not within the court's jurisdiction and to prevent out-of-state

2

residents from filing frivolous lawsuits against California

3

residents."

4

(2009) (quoting Yao v. Superior Court, 104 Cal. App. 4th 327, 331

5

(2002)).

6

Alshafie v. Lallande, 171 Cal. App. 4th 421, 428

A defendant seeking to require a plaintiff to file a bond must

United States District Court

establish a "reasonable possibility that the moving defendant will

8
For the Northern District of California

7

obtain judgment in the action or special proceeding."

9

Civ. Proc. § 1030(b).

Cal. Code of

The "reasonable possibility" standard is

10

relatively low.

11

U.S. Dist. LEXIS 24782, 2014 WL 793526, at *3 (N.D. Cal. Feb. 26,

12

2014).

13

possibility" that plaintiff would win at trial, "but only that it

14

[is] reasonably possible that the defendant will win."

Baltayan v.

15

Estate of Getemyan, 90 Cal. App. 4th 1427, 1432 (2001).

However,

16

the Court "declines to read section 1030 so broadly as to require

17

every out-of-state litigant who brings a non-frivolous suit in

18

California to post a bond simply because there is a reasonable

19

chance the defendant may prevail."

20

Yahoo! Inc., 2014 U.S. Dist. LEXIS 47157, 2014 WL 1351210 (N.D.

21

Cal. Apr. 4, 2014).

22

See GeoTag, Inc. v. Zoosk, No. C13-0217 EMC, 2014

Thus, a defendant need not show that there is "no

Wilson & Haubert, PLLC v.

As the Ninth Circuit has noted, "'[w]hile it is neither unjust

23

nor unreasonable to expect a suitor to put his money where his

24

mouth is, toll-booths cannot be placed across the courthouse doors

25

in a haphazard fashion.'"

26

Aggarwal v. Ponce Sch. of Medicine, 745 F.2d 723, 727-28 (1st Cir.

27

1984)).

28

plaintiff of access to the federal courts."

Simulnet, 37 F.3d at 576 (quoting

This is because courts must take care "not to deprive a

35

Id.

Accordingly, the

held that, in applying section 1030, a court must consider the

3

"degree of probability/improbability of success on the merits, and

4

the background and purpose of the suit."

5

2010 U.S. Dist. LEXIS 98229, 2010 WL 3718848, at *2; see also

6

Susilo v. Wells Fargo Bank, N.A., No. CV 11-1814 CAS (PJWx), 2012

7

U.S. Dist. LEXIS 166638, 2012 WL 5896577 (C.D. Cal. Nov. 19, 2012)

8

United States District Court

Court agrees with those district courts in California which have

2

For the Northern District of California

1

(same); Plata v. Darbun Enterprises, Inc., No. 09cv44-IEG(CAB),

9

2009 U.S. Dist. LEXIS 89608, 2009 WL 3153747, at *12 (same).

10

Gabriel Technologies,

First, as detailed in Part II, the Court rejects Regus's

11

argument that Plaintiffs lack standing to assert their claims.

12

Second, to the extent that the parties dispute whether Regus

13

adequately disclosed the mandatory fees at issue, Regus has shown a

14

possibility of success on the merits.

15

appears no greater on this record than any other case where the

16

parties' proffered facts are mutually disputed."

17

PLLC, 2014 U.S. Dist. LEXIS 47157, at *10-11.

18

shown a possibility of success on the merits which warrant the

19

posting of a bond.

20

98229, 2010 WL 3718848, at *2 (stating that courts should consider

21

the "degree of probability/improbability of success on the merits,

22

and the background and purpose of the suit").

23

showing that the background or purpose of this suit is improper.

24

However, "this possibility

Wilson & Haubert,

Thus, Regus has not

See Gabriel Technologies, 2010 U.S. Dist. LEXIS

Nor is there any

Finally, while not expressly articulated in section 1030, the

25

Court finds significant the fact that Regus has not demonstrated

26

that there is a risk that it would be unable to recover costs from

27

Plaintiff CTNY in the event it prevails in this action.

28

Susilo, 2012 U.S. Dist. LEXIS 166638, 2012 WL 5896577, at *2

36

See

defendants being unable to recover costs and attorney's fees to

3

which they are entitled, there is simply no basis on which to

4

require plaintiff to post a bond."); Plata, 2009 U.S. Dist. LEXIS

5

89608, 2009 WL 3153747, at *12 (denying a section 1030 motion, in

6

part, because "Defendant has not set forth any details regarding

7

its legitimate need for the prophylaxis of a bond in its moving

8

United States District Court

("Without any particularized showing that there is a real risk of

2

For the Northern District of California

1

papers").
Accordingly, Defendants Motion for Security Costs is DENIED.

9
10
11

VI. CONCLUSION
For the forging reasons, the Court finds as follows:

12
13



Regus's Motion to Dismiss is DENIED.

14



Regus's Motion for Summary Judgment on its counterclaims is
DENIED.

15



Regus's Motion for Sanctions is DENIED AS MOOT.

16



Plaintiffs' Motion to Exclude Testimony is DENIED.

17



Plaintiffs' Motion for Class Certification is DENIED WITHOUT
PREJUDICE. Plaintiffs may, if they choose, file a new motion
for class certification with revised class definitions within
thirty (30) days of this order.



Regus's Motion for Security for Costs is DENIED.

18
19
20
21
22

IT IS SO ORDERED.

23
24

Dated: October 29, 2015

25

UNITED STATES DISTRICT JUDGE

26
27
28

37