Hennessey v. Kohls Corporation et al

Filing 160

MEMORANDUM AND ORDER - IT IS HEREBY ORDERED that the motion of defendants to deny class certification and to strike class allegations (Doc. 65 ) is sustained. IT IS FURTHER ORDERED that the motion of plaintiff for class certification (Doc. 88 ) is denied. IT IS FURTHER ORDERED that the motion of defendants for leave to submit supplemental authority (Doc. 159 ) is denied as moot. Signed by Magistrate Judge David D. Noce on 11/19/2021. (JMP)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
JILL HENNESSEY, Individually and on
Behalf of Others Similarly Situated,

)
)
)
Plaintiffs,
)
)
v.
)
)
KOHL’S CORPORATION and
)
KOHL'S DEPARTMENT STORES, INC., )
)
Defendants.
)

No. 4:19 CV 1866 DDN

MEMORANDUM AND ORDER
This matter is before the Court on (1) the motion of defendants Kohl’s Corporation
and Kohl’s Department Stores, Inc., to deny class certification and strike class allegations
(Doc. 65) and (2) the motion of plaintiff Jill Hennessey for class certification (Doc. 88).
For the following reasons, defendants’ motion is sustained, and plaintiff’s motion is denied.
BACKGROUND
Plaintiff Jill Hennessey has brought this action individually and on behalf of all
others similarly situated, invoking diversity of citizenship subject matter jurisdiction
granted by 28 U.S.C. § 1332. Plaintiff alleges two claims under Missouri state law: (1)
unlawful practices in violation of the Missouri Merchandising Practices Act, Mo. Rev. Stat.
§ 407.020(1) (“MMPA”) and (2) unjust enrichment under Missouri common law.
In her Amended Complaint, plaintiff alleges the following facts. (Doc. 61.) Kohl’s
markets its merchandise to the public by making false and misleading price comparisons
in connection with the advertisement and sale of its private brand merchandise that is
available “only at Kohl’s” and its exclusive brands that are developed and marketed
through agreements with nationally-recognized brands. The false and misleading price
comparisons appear on price tags affixed to items, on signs posted in Kohl’s retail stores,
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in print advertisements, in mailing circulars, and on Kohl’s website Kohls.com. Plaintiff
alleges defendants represent that customers can buy Kohl’s private and exclusive brand
products “on sale” at a substantial discount from its advertised former prices, which
defendants refer to as the “regular” or “original” prices. In reality, the “sale” discounts are
illusory, fictitious, and in violation of Missouri law, because the “regular” and “original”
prices are not actual bona fide recent former prices of the products. Defendant actually
sells less than 5% of its private and exclusive branded products at regular or original prices.
Additionally, defendant has not sold substantial quantities at the regular or original prices
in the recent past, nor has it offered to sell merchandise for a reasonable and substantial
period of time preceding the advertised “sale.” (Id. at ¶24.) At checkout, defendant
perpetuates the deception by providing customers with a receipt that shows an item’s
original advertised item price, its lower sale price, and “the total amount the customer
purportedly saved in the transaction.” (Id. at ¶ 23.)
Plaintiff further alleges that defendant offers a constant array of promotions, such
as storewide sales, “Kohl’s Cash,” coupons, and discounts associated with credit card sales,
such that the actual selling price and related market value of each item is often less than
the purported “sale price.” Plaintiff alleges that customers who buy products at the
advertised “sale price” are “likely” paying more than the actual fair market value of the
item by more than what most people pay for the same item. (Id. at ¶ 25.) Additionally,
through its use of fictitious regular and original former prices, Kohl’s intentionally and/or
negligently misrepresented and/or failed to disclose material information concerning the
actual value of its products. (Id. at ¶ 27.)
Plaintiff alleges that defendant advertises former prices that “materially overstate
the actual market value and worth” of the products. Because of this, customers like plaintiff
and the class suffer damages because they do not receive items that have the value or worth
that defendant represents the products have. (Id. at ¶ 26.) Plaintiff alleges that by concealing
the true information, defendant intended to induce plaintiff and members of the class to
purchase its products at prices they would not have otherwise agreed to pay. (Id. at ¶ 27.)

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Plaintiff alleges that defendant knew or should have known that its pricecomparison advertisements conveyed false information to consumers about the value of
the merchandise it sells. Defendant knew or should have known that as the discount sizes
increase, customers’ perceptions of value and willingness to buy increase, while their
intention to seek lower prices decreases. (Id. at ¶ 29.)
Plaintiff alleges she has been a frequent Kohl’s shopper, both at its stores and online.
She alleges that, after being exposed to and influenced by defendants’ “price-comparison
advertising scheme,” she purchased numerous Kohl’s private and exclusive branded
products. She alleges that she was misled as to the higher value of the products that Kohl’s
advertised and “did not receive products worth the amount that Kohl’s represented she
would receive through its false and misleading price-comparison advertising scheme.” (Id.
at ¶¶ 32, 33.)
Plaintiff’s Amended Complaint provides examples of plaintiff’s purchases with data
that include location, dates, quantity, SKU number, item description, advertised former
price, advertised sale price, additional discount, and price paid for these purchases. (Id. at
¶¶ 34, 42, 49.) These transactions occurred between September 5, 2016, and May 27, 2019.
(Id.) The complaint also includes historical sales data, produced by Kohl’s, for each of the
items plaintiff purchased, including total number of units sold, advertised “regular” or
“original” price, number and percentage of units sold at “regular” or “original” price, total
number of days offered, and number and percentage of days that units were sold at
“regular” or “original” price. (Id. at ¶¶ 37, 45, 52.) The sales data also include the
prevailing market price, measured by the most common or “mode” price, the average or
“mean” price, and the 50th percentile or “median” price. (Id. at ¶¶ 38, 46, 53.)
Plaintiff alleges that she and the proposed class were exposed to and were victims
of defendant’s false comparisons. As a result of the alleged practices, plaintiff and the class
have not received the benefit-of-the-bargain, because the products they purchased do not
have the higher value and worth that defendant represented through its false and misleading
regular and original price comparisons. (Id. at ¶ 58.)
Plaintiff seeks certification of the following class:
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All persons who, while in the state of Missouri, and any time
between the date that is five years immediately preceding the
filing of this lawsuit and the date of any judgment in this case
(the “Class Period”), purchased from Kohl’s (either at a Kohl’s
retail store or from its website) for personal, family or
household purposes one or more private or exclusive branded
items advertised with a “Sale” price of 20% or more below a
stated “Original” or “Regular” price and who have not received
a refund or credit for their purchase(s).
(Id. at ¶ 60.) “Excluded from the Class are Defendants, as well as their officers, directors,
employees.” (Id.) Plaintiff seeks certification of this class under Fed. R. Civ. P. 23(a) and
23(b)(3), because the number of class members is so numerous that joinder would be
impracticable; there are twelve questions of law and fact common to the members of the
class; plaintiff’s claim is typical of the claims of the other class members; plaintiff will
fairly and adequately protect the interest of the class; plaintiff’s counsel is experienced in
this type of allegation; the prosecution of the claims by the members individually would
foster inconsistent adjudication; and individual damages are insufficient to justify the cost
of litigation. (Doc. 1 at 21-24.)
DEFENDANTS’ MOTION TO DENY CLASS CERTIFICATION
In their motion to deny class certification, defendants argue that plaintiff, by
creating online shopping and loyalty program accounts with defendants and accepting their
terms and conditions, voluntarily waived her right to pursue a class action. (Doc. 66 at 1.)
Defendants contend that plaintiff entered into a contract with defendants and that her claims
fall squarely within the scope of the contract. Defendants further argue that the contract is
valid and enforceable because the terms of the contract are neither procedurally nor
substantively unconscionable. Defendants argue that, as a result of her class action waiver,
plaintiff cannot adequately represent any putative class.
On July 4, 2017, plaintiff simultaneously created an online account on defendants’
website and enrolled in their Yes2You Rewards loyalty program. (Doc. 66 at 1-2.) On the
“Create an Account” page, above where the customer inputs his or her name and email
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address, the text states, “By creating an account, you agree to Kohl’s Security & Privacy
Policy and Legal Notices.” (Doc. 66-3 at 6.) The underlined phrases hyperlink to the
respective terms. On the same page, under the Yes2You Rewards enrollment fields and
above the “Save” button, the text states, “By enrolling in Yes2You Rewards, you are
agreeing to the Terms and Conditions of the program and certify that you are over 13 years
old.” (Id.) The underlined phrase hyperlinks to the relevant terms. Defendants’ Legal
Notices contain a section entitled “CLASS ACTION WAIVER:”
TO THE FULLEST EXTENT PERMISSIBLE BY
APPLICABLE LAW, NO DISPUTE MAY BE JOINED
WITH ANOTHER LAWSUIT OR WITH A DISPUTE OF
ANY OTHER PERSON/CUSTOMER AND ALL PARTIES
TO THE SUIT MUST BE INDIVIDUALLY NAMED. TO
THE FULLEST EXTENT PERMISSIBLE BY APPLICABLE
LAW, THERE SHALL BE NO RIGHT OR AUTHORITY
FOR ANY DISPUTE TO BE LITIGATED ON A CLASS
ACTION OR CONSOLIDATED BASIS OR BASES
INVOLVING A DISPUTE BROUGHT IN A PURPORTED
REPRESENTATIVE CAPACITY ON BEHALF OF THE
GENERAL PUBLIC (SUCH AS A PRIVATE ATTORNEY
GENERAL ACTION), OTHER PERSONS/CUSTOMERS,
OR OTHER PERSONS/CUSTOMERS SIMILARLY
SITUATED.
(Id. at 10.) Defendants’ Terms and Conditions include a link in section XI(b) to their Legal
Notices. (Doc. 66-2 at 6).
The benefits of the loyalty program included (1) one point for every dollar spent,
with 100 points equaling $5 in “Kohl’s Cash;” (2) an annual birthday gift; and (3)
additional special savings offers throughout the year. (Doc. 66-2 at 3, ¶ 5.) As a result of
her enrollment in the loyalty program, plaintiff received at least $75 in Kohl’s Cash
rewards. (Id. at ¶ 6.) The benefits of creating an online shopping account included the
ability to use express check-out, save billing and shipping information, and review pending
and past online orders. (Doc. 66-3 at 4, ¶ 7.)
In their motion to deny class certification, defendants argue that plaintiff, by
creating online shopping and rewards accounts with defendants and accepting their terms
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and conditions, voluntarily waived her right to pursue class action. (Id. at 1.) Defendants
contend that plaintiff entered into a contract with defendants and that her claims fall within
the scope of the contract. (Id. at 6, 8.) Defendants further argue that the contract is valid
and enforceable because the terms of the contract are neither procedurally nor substantively
unconscionable. (Id. at 10.) Defendants argue that, as a result of her class action waiver,
plaintiff cannot adequately represent any putative class. (Id. at 13.)
In response, plaintiff advances five arguments.

First, plaintiff argues that

defendants’ motion is untimely, as defendants filed the instant motion six months after the
scheduling order’s February 28, 2020, deadline to file a motion for summary judgment
regarding the plaintiff’s ability to represent the class. (Doc. 72 at 3.) Plaintiff also argues
that defendants failed to disclose the Legal Notices and witnesses in discovery. (Id. at 5.)
Plaintiff contends that the Terms are not a valid agreement because they lack consideration
and acceptance.

(Id. at 7.)

Further, plaintiff argues that the Legal Notices are

unconscionable and therefore unenforceable. (Id. at 10.) Lastly, plaintiff argues that
Kohl’s has waived the Legal Notices by not seeking to enforce their provisions regarding
venue and choice of law, as well as by proposing and agreeing to class discovery and a
class certification briefing schedule. (Id. at 15.)
A.

Contract Formation

Courts presented with the issue of the legal effect of online agreements “apply
traditional principles of contract law and focus on whether the plaintiff had reasonable
notice of and manifested assent to the online agreement.” Major v. McCallister, 302
S.W.3d 227, 229 (Mo. Ct. App. 2009). Defendants’ site was a “browsewrap,” which is a
site where users need not click to accept the terms, but the site indicates “in some fashion
that use of the site constitutes acceptance of its terms.” Id. at 230. The validity of a
browsewrap agreement “depends on whether there is adequate notice to create actual or
constructive knowledge of the website’s terms and conditions.” Foster v. Walmart, Inc.,
No. 20-1787, 2021 WL 4697952 at *3 (8th Cir. Oct. 8, 2021).
Notice comes in two forms: actual notice and inquiry notice. Actual notice “occurs
when the user is actually aware of the terms of use, most commonly after clicking on a
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hyperlink and reviewing them.” Id. Inquiry notice “depends on whether the website puts
a reasonably prudent user on inquiry notice of the terms.” Id. (quoting Nguyen v. Barnes
& Noble, Inc., 763 F.3d 1171, 1177 (9th Cir. 2014)). “Critical is the website’s overall
design and content, including whether the existence of the relevant terms are reasonably
conspicuous to the user.” Id. Courts have refused to enforce browsewrap agreements
where the link to a website’s terms of use is buried at the bottom of the page or tucked
away in obscure corners of the site, where users are unlikely to see it. Nguyen at 1177; see
also Van Tassell v. United Marketing Group, LLC, 795 F.Supp.2d 770, 793 (N.D. Ill.
2011). “On the other hand, where the website contains an explicit textual notice that
continued use will act as a manifestation of the user’s intent to be bound, courts have been
more amenable” to enforcing the agreements. Id. If the terms are reasonably conspicuous,
“then the user is deemed to have notice of all facts that reasonable inquiry would disclose,
including the terms themselves.” Foster at *3.
The essential elements of any contract are offer, acceptance, and bargained for
consideration. Baker v. Bristol Care, Inc., 450 S.W.3d 770, 774 (Mo. 2014) (en banc).
“Consideration consists of either a promise (to do or refrain from doing something) or the
transfer or giving up of something of value to the other party.” Id.
Defendants contend, and plaintiff does not dispute, that plaintiff agreed to
defendants’ Legal Notices when she created an online account on defendants’ website.
However, plaintiff argues that she did not agree to the Legal Notices when she enrolled in
the loyalty program. The disclosure in the loyalty program portion of the site states, “By
enrolling in Yes2You Rewards, you are agreeing to the Terms and Conditions of the
program and certify that you are over 13 years old.” (Doc. 66-3 at 6.) Plaintiff contends
that, in connection with her enrollment in the loyalty program, she did not have
constructive knowledge of the Legal Notices because they were only viewable by clicking
a hyperlink within the Terms and Conditions.
In the context of plaintiff’s enrollment in the loyalty program, the Court concludes
that plaintiff did not have constructive knowledge of the Legal Notices. The hyperlink to
the Legal Notices is buried at the bottom of defendants’ Terms and Conditions, in a
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subsection of the last section, entitled “Additional Terms.” The multi-step process required
to reach the Legal Notices from the text means that the even a reasonably prudent user is
unlikely to see the content of the notices.
Though plaintiff did not have constructive knowledge of Legal Notices in
connection with the loyalty program, plaintiff had constructive knowledge of the Legal
Notices when she created her online account. On the online account enrollment page, as it
appeared when plaintiff created her account, the text notifying customers of defendants’
Legal Notices is explicit. The text regarding defendants’ Legal Notices appears under the
“Create an Account” heading and above the fields where a customer would input his or her
personal information. The font size of the notice is smaller than other text on the page, but
not so small that the notice is inconspicuous. Because the text notifying users of the Legal
Notices is sufficiently conspicuous to constitute inquiry notice, plaintiff is deemed to have
constructive knowledge, and the browsewrap agreement is valid.
In creating an online account, plaintiff received consideration. Creating an online
account on defendants’ website benefited plaintiff by giving her the ability to use express
check-out, save billing and shipping information, and review pending and past online
orders.

The benefits that plaintiff received are sufficient to establish consideration

supporting her agreement to defendants’ Legal Notices. Therefore, a valid contract existed
between the parties.
B.

Unconscionability

Defendants contend that the class action waiver is neither procedurally nor
substantively unconscionable.

Defendants argue that the waiver is procedurally

conscionable because the Legal Notices were conspicuously disclosed, and plaintiff’s
creation of an online account was not mandatory. (Doc. 66 at 12.) They contend that the
waiver is substantively conscionable because plaintiff’s rights can still be effectively
vindicated by litigating her individual claims. (Id. at 14.)
Plaintiff argues that the Legal Notices are substantively unconscionable because
they require customers to agree exclusively to the application of Wisconsin law,
eliminating rights under the MMPA. (Doc. 72 at 17.) They also exculpate defendants for
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all claims based in tort, contracts, or statutes; they limit aggregate remedies to $10,000;
and they require consumers to waive class actions. (Id. at 17-18.) Plaintiff contends that
the Legal Notices are oppressively one-sided, citing the rights that defendants reserve while
purporting to eliminate the rights of consumers. (Id. at 18.) Plaintiff also argues that the
Legal Notices are procedurally unconscionable because they are an adhesion contract
offered by a large company in a superior bargaining position, and the class waiver was
buried in multiple pages of fine print. (Id.)
In order to deem a contract unenforceable on the grounds of unconscionability, “a
court applying Missouri law must find it both procedurally and substantively
unconscionable.” Cicle v. Chase Bank USA, 583 F.3d 549, 554 (8th Cir. 2009). The two
types of unconscionability are balanced against one another, such that if there is gross
procedural unconscionability, then there is not much substantive unconscionability needed,
and vice versa. Id. “Procedural unconscionability in general is involved with the contract
formation process, and focuses on high pressure exerted on the parties, fine print of the
contract, misrepresentation, or unequal bargaining position.”

Whitney v. Alltel

Communications, Inc., 173 S.W.3d 300, 308 (Mo. Ct. App. 2005).

Substantive

unconscionability means an undue harshness in the terms of the contract themselves. Id.
Missouri courts have described an unconscionable agreement
as one in which no man in his senses and not under delusion
would make, on the one hand, and as no honest and fair man
would accept on the other, or one where there is an inequality
so strong, gross, and manifest that it must be impossible to state
it to one with common sense without producing an exclamation
at the inequality of it.
Pleasants v. Am. Exp. Co., 541 F.3d 853, 857 (8th Cir. 2008) (quoting Smith v. Kriska, 113
S.W.3d 293, 298 (Mo. Ct. App. 2003)).
1.

Procedural Unconscionability

Plaintiff argues that the Legal Notices are procedurally unconscionable because they
are presented to the customer as an adhesion contract on a “take it or leave it” basis and are
proffered by a large company that is in a superior bargaining position. (Doc. 72 at 18.)
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Plaintiff also contends that the class waiver is buried in multiple pages of fine print. (Id.)
She argues that, based on the totality of the circumstances, the Legal Notices are difficult
for the average consumer to understand and are therefore procedurally unconscionable.
(Id.)
As the Eighth Circuit noted in Cicle, “these sorts of take-it-or-leave-it agreements
between businesses and consumers are used all the time in today’s business world.” 583
F.3d 549, 555.

Adhesion contracts are not inherently sinister and automatically

unenforceable. Swain v. Auto Services, Inc., 128 S.W.3d 103, 107 (Mo. Ct. App. 2003).
The Court acknowledges that defendants are in a superior bargaining position, and plaintiff
did not have the opportunity in the ordinary course to negotiate defendants’ Legal Notices.
However, plaintiff does not allege that defendants engaged in high-pressure sales tactics to
induce plaintiff’s agreement. Additionally, as discussed above, the Legal Notices were not
so inconspicuous as to rise to the level of being procedurally unconscionable. While the
text of the Legal Notices is small, the lines and sections are well spaced, and the text is
legible. See Woods v. QC Fin. Servs., Inc., 280 S.W.3d 90, 96 (Mo. Ct. App. 2008).
Plaintiff is charged with inquiry notice of the Legal Notices because the hyperlink was
reasonably conspicuous when she created her online account. Therefore, the Court finds
that the agreement is not procedurally unconscionable.
2.

Substantive Unconscionability

Plaintiff argues that the Legal Notices are substantively unconscionable because
they purport to eliminate consumers’ rights under the MMPA by requiring them to agree
exclusively to the application of Wisconsin law. (Doc. 72 at 17.) Plaintiff contends that
the Legal Notices impermissibly exculpate defendants for claims based in tort, contracts,
and statutes, and that the $10,000 damage cap removes the incentive to pursue claims
against defendants because it includes attorneys’ fees and punitive damages. (Id. at 1718.) Plaintiff argues that the class action waiver further removes the incentive for attorneys
to litigate consumers’ claims against defendants due to economic infeasibility, providing
the declaration of another consumer attorney in support of its contention. (Doc. 74.)
Lastly, plaintiff contends that the Legal Notices are oppressively one-sided and totally
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imbalanced because defendants purport to limit consumers’ rights while retaining all rights
for themselves. (Doc. 72 at 17.)
a.

Applicable Law and Limitation of Liability

The protections of the MMPA cannot be waived by contract. See Huch v. Charter
Comm., Inc., 290 S.W.3d 721, 727 (Mo. 2009) (en banc); High Life Sales Co. v. BrownForman Corp., 823 S.W.2d 493, 498 (Mo. 1992) (en banc). As defendants point out, they
have not sought to enforce the choice of law provision in this case. To the extent that it is
applicable, the choice of law provision in the agreement is unenforceable.
The “Limitation of Liability” section of the Legal Notices states that it “applies
whether a claim is based in contract, negligence, statute or tort.” (Doc. 66, Ex. 3 at 9.) It
also includes a savings clause, stating that “if any part of this limitation of liability is
determined to be unenforceable or invalid for any reason, [the consumer agrees] that the
aggregate liability” of defendants shall not exceed $10,000. (Id.) As stated above, the
MMPA cannot be waived by contract, so the limitation of liability is unenforceable as to
the MMPA claims.
b.

Class Waiver

Plaintiff cites Woods and Whitney in support of her argument that the class waiver
is substantively unconscionable. (Doc. 72 at 15-17.) Both cases involved a challenge to
an arbitration provision that contained a class action waiver. In Whitney, the plaintiff
challenged a telephone company’s charging of a “Regulatory Cost Recovery Fee” as
deceptive under the MMPA. 173 S.W.3d at 304. The court determined that the arbitration
provision with class action waiver was substantively unconscionable because it precluded
incidental, consequential, punitive, or exemplary damages, as well as attorney’s fees;
prohibited class actions; and required the consumer to bear the costs of arbitration. Id. at
311. It emphasized that the requirement that the consumer bear the costs of arbitration
limited consumers to a forum “where the expense of pursuing most claims . . . would far
exceed the amount in controversy.” Id. at 313. The court determined that the terms of the
arbitration provision and the class action waiver, when taken together, effectively granted

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the telephone company “immunity from claims related to improper billing where hundreds
of dollars are not involved.” Id. at 311.
Woods involved a challenge to a payday loan company’s arbitration provision,
which included a class action waiver. 280 S.W.3d at 92-93. The Missouri Court of Appeals
determined that the arbitration provision and class action waiver were both substantively
and procedurally unconscionable.

Id. at 96, 98.

In reaching its holding regarding

substantive unconscionability, the court noted that the company’s customers were “forced
by dire personal economic circumstances to patronize [the] business and incur interest rates
of up to 400 percent.” Id. at 97. The court determined that the class action waiver would
reduce the possibility of attracting competent counsel, despite the availability of attorney’s
fees and costs, leaving consumers with no meaningful avenue of redress through the courts.
Id. The court also noted that individualizing each claim in arbitration insulated the payday
loan company from rulings with precedential effect, such as collateral estoppel, and
disincentivized the company from avoiding the type of conduct that might lead to class
action litigation in the first place. Id.
Conversely, the Eighth Circuit in Pleasants upheld a class action waiver within an
arbitration provision. In Pleasants, the plaintiff brought a class action against American
Express, alleging that the company failed to make disclosures required by the Truth in
Lending Act, and the company moved to compel the plaintiff to arbitrate her claim on an
individual basis, pursuant to the arbitration provision and class waiver. 541 F.3d at 855.
In upholding the agreement, the court emphasized that the arbitration clause allowed the
plaintiff to “recover attorney’s fees, costs, statutory damages (up to $2,000), and actual
damages.” Id. at 858. It distinguished Whitney, wherein the Missouri Court of Appeals
relied heavily on the concern that because the arbitration clause
prohibited an award of attorney’s fees or “any incidental,
consequential, punitive, or exemplary damages,” and because
most of the disputes arising out of the contract would involve
small dollar values, any “award could not possibly approach
the amount that would have to be expended in arbitrating the
action.”

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Id. at 858-59 (quoting Whitney, 173 S.W.3d at 313-14). The Eighth Circuit determined
that the plaintiff’s total recovery of attorney’s fees, costs, and statutory damages would
likely exceed the costs of pursuing her claim; therefore, enforcement of the agreement
would not lead to an unconscionable result. Id. at 859.
The facts of the present case diverge from Woods, Whitney, and Pleasants in that
the class action waiver is not contained within an arbitration provision. However, the Court
determines that similar considerations apply here: whether bringing an individual claim is
economically feasible; whether attorneys’ fees and costs are recoverable; and whether the
waiver impermissibly insulates and disincentivizes defendants from avoiding the type of
conduct that might lead to class action litigation in the first place.
Contrary to plaintiff’s assertion, the Legal Notices do not include attorneys’ fees in
the $10,000 damage cap. The Legal Notices limit defendants’ liability for “any general,
direct, indirect, incidental, special, consequential, exemplary or punitive damages.” (Doc.
66, Ex. 3 at 9.) As in Pleasants, plaintiff can recover attorneys’ fees, costs, and actual
damages in pursuing her claims. 541 F.3d at 859. “The MMPA allows for class actions,
but does not suggest that public policy favors class actions or that the wrongs sought to be
remedied by the MMPA would continue unabated without the availability of class actions.”
Cicle, 583 F.3d at 556 (emphasis in original). While the class waiver may discourage
attorneys seeking to litigate via class action, it does not make all vindication of consumers’
rights economically infeasible. Enforcing the agreement as to the class action waiver,
therefore, does not lead to economic infeasibility and an unconscionable result.
Additionally, the class action waiver does not impermissibly insulate defendants
from liability. In addition to actual and punitive damages, plaintiff seeks a permanent
injunction restraining defendants from continuing their alleged violations of the MMPA.
(Doc. 62 at ¶ 83.) Neither the Legal Notices nor proceeding as an individual litigant rather
than a class representative prevents plaintiff from seeking injunctive relief. Therefore, the
class action waiver at issue is not such an unfair agreement “as one in which no man in his
senses and not under delusion would make, on the one hand, and as no honest and fair man
would accept on the other.” Pleasants, 541 F.3d at 857.
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c.

Mutuality

Plaintiff argues that the Legal Notices are oppressively one-sided because
defendants reserved the right to seek all remedies available by law and in equity; sue in
any court without any waiting period; seek complete indemnification from a consumer;
update or modify its Legal Notices at any time; and recover the maximum damages
permitted by law. (Doc. 72 at 12-13; Doc. 66, Ex. 3 at 8-11.) “Mutuality of contract means
that an obligation rests upon each party to do or permit to be done something in
consideration of the act or promise of the other; that is, neither party is bound unless both
are bound.” Eaton v. CMH Homes, Inc., 461 S.W.3d 426, 433 (Mo. 2015). Mutuality is
satisfied if there is consideration as to the whole agreement. Id. at 434; see also State ex
rel. Vincent v. Schneider, 194 S.W.3d 853, 859 (Mo. 2006) (en banc) (“As long as the
requirement of consideration is met, mutuality of obligation is present, even if one party is
more obligated than the other.”)
As discussed above, there is consideration as to plaintiff’s agreement to the Legal
Notices. In return for agreeing to defendants’ Legal Notices, plaintiff received access to
an online account and the ability to use express check-out, save billing and shipping
information, and review pending and past online orders. Even if plaintiff is “more
obligated” than defendants, mutuality of contract is present because both parties are bound
by the contract. Therefore, plaintiff’s argument that the contract is oppressively one-sided
fails.
The Legal Notices bear “some indicia of both procedural and substantive
unconscionability.” Sprague v. Household Intern., 473 F.Supp.2d 966, 977 (W.D. Mo.
2005). However, the indicia of unconscionability in this case are not so strong as to render
the agreement “one where there is an inequality so strong, gross, and manifest that it must
be impossible to state it to one with common sense without producing an exclamation at
the inequality of it.” Pleasants, 541 F.3d at 857. Plaintiff may still vindicate her rights
under the MMPA as an individual litigant, and it is not economically infeasible for her to
do so. Therefore, the Court concludes that the Legal Notices are not unconscionable.
C.

Enforceability
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Defendants argue that class action waivers, within or without an arbitration
provision, are regularly enforced like any other contracts. (Doc. 66 at 10.) Plaintiff argues
that all of the cases enforcing a class waiver outside of an arbitration clause are easily
distinguishable from a consumer case, as they were in the contexts of maritime,
employment, and commercial law. (Doc. 72 at 19.)
While “a vast majority of cases that address class action waivers do appear within
the context of arbitration agreements, there is no logical reason to distinguish a waiver in
the context of an arbitration agreement from a waiver in the context of any other contract.”
Palmer v. Convergys Corp., 2012 WL 425256 at *2 (M.D. Ga. Feb. 9, 2012). Rather, they
are to be analyzed and enforced like any other kind of contract provision. Additionally,
the argument that other courts have upheld class action waivers in other contexts, though
not yet in the consumer context, does not persuade the Court that the waiver is
unenforceable in the present case. As discussed above, plaintiff entered into a valid
contract with defendants, and the terms of the contract are not unconscionable. The Court
therefore concludes that the class action waiver is enforceable.
D.

Timeliness of Defendants’ Motion

Plaintiff argues that defendants’ motion is untimely because the December 4, 2019
Case Management Order (CMO) stated that defendants “may file a motion for summary
judgment regarding the plaintiff’s ability to represent the Class, no later than February 28,
2020.” (Doc. 72 at 8; Doc. 37 at 2.) Defendants filed their motion to deny class
certification and strike class allegations on September 23, 2020. (Doc. 66.) Plaintiff argues
that she will suffer extreme prejudice if the motion is heard now due to the substantial time
and expense already expended on the case. (Doc. 72 at 9-10.) Defendants argue that their
motion is not untimely because the CMO permitted, but did not require, defendants to file
a motion for summary judgment; that the Court’s dismissal of the complaint on February
21, 2020 (Doc. 50) meant that there was not an operative complaint to challenge; and that
the challenge to plaintiff’s fitness as class representative is procedural, not substantive, so
it could not be the subject of a motion for summary judgment. (Doc. 82 at 2-3.)

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“A schedule may be modified only for good cause and with the judge’s consent.”
Fed. R. Civ. P. 16(b)(4). The Court “has broad discretion in establishing and enforcing the
deadlines.” Marmo v. Tyson Fresh Meats, Inc., 457 F.3d 748, 759 (8th Cir. 2006). “To
establish good cause, a party must show its diligence in attempting to meet the progression
order.” Id. The Court may also consider “the existence or degree of prejudice to the party
opposing the modification.” Id. “On motion or on its own, the court may issue any just
orders, including those authorized by Rule 37(b)(2)(A)(ii)-(vii), if a party or its attorney . .
. fails to obey a scheduling order.” Fed. R. Civ. P. 16(f)(1).
The Court concludes that defendants established good cause for the timeliness of
the motion at bar.

At the Rule 16 conference on November 19, 2019, defendants

contemplated that their early summary judgment motion would discuss “any basis on
which judgment could be entered as a matter of law.” (Doc. 49 at 12.) The Court issued
the first CMO on December 4, 2019. (Doc. 37.) On December 11, 2019, the Court granted
the first joint motion to amend the CMO, extending the deadline for plaintiff’s motion for
class certification. (Doc. 40.) On February 21, 2020, seven days before defendant’s early
summary judgment motion was due, the Court dismissed plaintiff’s complaint. (Doc. 50.)
The Court entered the second and third amended CMOs on April 2 and May 7, 2020,
respectively; the third amended CMO extended the time for plaintiffs to file their motion
for class certification to November 2, 2020, and for either party to file dispositive motions
to April 2, 2021. (Docs. 57, 59.) Plaintiff filed her Amended Complaint on June 1, 2020,
and defendants filed their motion to deny class certification and strike class allegations on
September 23, 2020. (Docs. 61, 66).
As discovery continued and upon joint motions of the parties, the Court made
several changes to the CMO. Almost no deadline remained unchanged from the first CMO
to the third amended CMO, including plaintiff’s deadline for filing her motion for class
certification. Additionally, a week before defendants’ early motion for summary judgment
was due, the Court dismissed plaintiff’s complaint, so there was no operative complaint to
challenge. Defendants filed the instant motion after plaintiff filed her Amended Complaint

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but before she filed her motion to certify the class. Therefore, the Court concludes that
defendants were diligent in meeting the deadlines in the CMO, and their motion is timely.
The Court also concludes that plaintiff was not prejudiced by the timing of
defendants’ filing. Plaintiff also sought and received extensions, including for her motion
to certify the class. The time and money that plaintiff has spent litigating this case will not
go to waste, as plaintiff may move forward as an individual litigant.
E.

Discovery Disclosure

Plaintiff argues that defendants violated Federal Rule of Civil Procedure 26(a) when
it failed to disclose the Legal Notices and witnesses in its initial disclosures. (Doc. 72 at
10.) Plaintiff contends that defendants also violated Rule 34 by failing to produce the Legal
Notices and exhibits in response to her document requests, and that defendants failed to
designate its two witnesses in response to her Rule 30(b)(6) Notice of Deposition regarding
affirmative defenses. (Id. at 11.) Defendants argue that they were not required to identify
witnesses and documents under Rule 26 because the disclosure requirements focus on the
merits of a party’s claim. 1 (Doc. 82 at 4.)
Rule 26 provides that
[A] party must, without awaiting a discovery request, provide
to the other parties: (i) the name and, if known, the address and
telephone number of each individual likely to have
discoverable information--along with the subjects of that
information--that the disclosing party may use to support its
claims or defenses . . . ; [and] (ii) [] all documents,
electronically stored information, and tangible things that the
disclosing party has in its possession, custody, or control and
may use to support its claims or defenses.
Fed. R. Civ. P. 26(a)(1)(A)(i)-(ii). Rule 34 states that a party may request that another
party produce and permit the requesting party to inspect any designated documents or
electronically stored information. Rule 30(b)(6) directs a party named as a deponent to
designate persons to testify on its behalf.
Defendants do not state specifically why the disclosures were not required under Rule
26(a).

1

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Defendants do not address plaintiff’s argument that they were required to produce
the witnesses and documents because class waiver is one of their affirmative defenses.
Rather, citing to the comments to the 1993 and 2000 amendments to Rule 26, defendants
argue that they were not required to disclose the waiver because it is not relevant to the
factual disputes or merits of plaintiff’s claim, and the failure to disclose is therefore
justified or harmless. However, they acknowledge that the 2000 amendments state that the
“Committee intends that the parties and the court focus on the actual claims and defenses
involved in the action.” Fed. R. Civ. P. 26 advisory committee’s note to 2000 Amendment.
Defendants were required to disclose the Legal Notices and witnesses thereof because it is
relevant to their Seventeenth Affirmative Defense. Defendants’ failure to make the
required disclosures makes them subject to sanctions.
Plaintiff argues that defendants failed to produce the Legal Notices in response to a
request for all documents concerning plaintiff, including those “related to her participation
or inclusion in a loyalty, membership or frequent shopper program.” (Doc. 72 at 11; Doc
73, Ex. 3 at 8.) Defendants respond that they timely produced documents concerning
plaintiff’s loyalty program membership and online account. (Doc. 82 at 5.) However, as
discussed above, defendants knew that plaintiff had agreed to the Legal Notices and that
they intended to use the class action waiver as a defense. Defendants’ failure to provide
the Legal Notices in response to plaintiff’s document request violates Rule 34 and makes
defendants subject to sanctions.
Lastly, plaintiff argues that defendants failed to designate their two witnesses in
response to a Rule 30(b)(6) notice of deposition regarding defendants’ affirmative
defenses. (Doc. 72 at 11.) Defendants contend that the notice involved almost 50 topics,
that it was served only weeks before their motion to strike was filed, and that the parties
were continuing to meet and confer regarding the notice at the time defendants filed their
response. (Doc. 82 at 3, fn. 1.) Because the notice of deposition was the subject of
continuing meet and confer efforts at the time the instant motion was being briefed, the
Court concludes that defendants’ alleged Rule 30(b)(6) violation was not ripe for review
at the time that defendants’ motion was filed.
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F.

Waiver of Legal Notices by Defendants

Plaintiff argues that defendants have waived enforcement of the Legal Notices by
acquiescing to the venue and jurisdiction of the Court; proposing and agreeing to class
discovery and a class certification schedule; and arguing that Missouri law, rather than
Wisconsin law, applies. (Doc. 72 at 20.) Defendants respond that they have provided clear
and repeated notice of their intent to enforce the waiver. (Doc. 82 at 6.)
The Court finds plaintiff’s waiver argument unconvincing. Defendants can choose
to enforce all, some, or none of their rights under the contract. Failure to assert some of
their rights does not constitute a waiver of the entire agreement. Therefore, the Court
concludes that defendants did not waive enforcement of the Legal Notices.
G.

Sanctions

Fed. R. Civ. P. 37(c)(1) provides that, “if a party fails to provide information or
identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that
information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the
failure was substantially justified or is harmless.” In addition to or instead of this sanction,
the court may, on motion and after giving an opportunity to be heard, “order payment of
the reasonable expenses, including attorney’s fees, caused by the failure,” “inform the jury
of the party’s failure,” or impose other appropriate sanctions. Fed. R. Civ. P. 37(c)(1)(A)(C). The Court has “wide discretion to fashion a remedy or sanction as appropriate for the
particular circumstances of the case,” and it may “exclude the information or testimony as
a self-executing sanction unless the party’s failure to comply is substantially justified or
harmless.” Wegener v. Johnson, 527 F.3d 687, 692 (8th Cir. 2008.) When fashioning the
remedy, the Court should consider, “inter alia, the reason for noncompliance, the surprise
and prejudice to the opposing party, the extent to which allowing the information or
testimony would disrupt the order and efficiency of the trial, and the importance of the
information or testimony.” Id. The Court’s “discretion narrows as the severity of the
sanction or remedy it elects increases.” Id.
The Court concludes that defendants’ failure to provide the Legal Notices in
discovery was not substantially justified or harmless. As plaintiff argues and defendants
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fail to rebut, the class action waiver contained in the Legal Notices is an element of an
affirmative defense, and defendants should have provided the Legal Notices during initial
disclosures and upon plaintiff’s Rule 34 document request. Similarly, the failure to
disclose the Legal Notices was not harmless. Plaintiff continued to conduct discovery
without a key document upon which defendants seek to rely.
Defendants’ stated reason for noncompliance with Rules 26(a) and 34 is that they
were not required to disclose the Legal Notices. (Doc. 82 at 4.) Defendants argue that
plaintiff does not suffer from surprise and prejudice because defendants repeatedly gave
plaintiff notice regarding the class action waiver, and plaintiff’s counsel previously moved
to strike defendants’ class action waiver in another case. (Id. at 8.) Defendants contend
that plaintiff is not prejudiced because she made no effort to conduct any discovery
regarding the class waiver issue once defendants notified her of the Legal Notices. (Id.)
Defendants have not offered support for their contention that they were not required
to produce the Legal Notices during initial discovery or subsequent document requests, so
there is not good reason in the record for their noncompliance. However, defendants have
advanced an argument for lack of surprise and prejudice to plaintiff. Plaintiff’s counsel
has encountered defendants’ class action waiver in a past case, and defendants similarly
asserted an affirmative defense of the basis of the waiver. Chowning v. Kohl’s Dep’t
Stores, Inc., 2:15-cv-08673-RGK-SP (C.D. Cal.). The late revelation of the class action
waiver did not and will not affect the order and efficiency of subsequent proceedings,
including the trial, as the Court had not yet certified the class and discovery is ongoing.
Lastly, the Legal Notices and defendants’ invoking of the class action waiver are crucial
pieces of information in their argument against class certification.
Having taken into consideration the above factors, the Court concludes that the
appropriate sanction for defendants’ failure to provide the Legal Notices in their initial
disclosures and in subsequent document requests does not include exclusion of the class
action waiver. While defendants offer no persuasive justification for their failure to
provide the Legal Notices, the other factors weigh against exclusion. As shown by
defendants’ assertion of the class action waiver in this case and previous cases, the waiver
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is an important affirmative defense. Plaintiff cannot claim surprise and prejudice for the
late revelation, as plaintiff’s counsel has encountered defendants’ class action waiver in a
past case when defendants similarly asserted it as an affirmative defense. Additionally,
defendants repeatedly gave plaintiff notice of the class action waiver through both
correspondence between counsel and defendants’ assertion of the affirmative defense in its
answer. Lastly, the late revelation of the class action waiver will not affect the order and
efficiency of future proceedings, as the Court had not yet certified the class and discovery
is ongoing. Therefore, the Court will not exclude the class action waiver.
CONCLUSION
For the foregoing reasons,
IT IS HEREBY ORDERED that the motion of defendants to deny class
certification and to strike class allegations (Doc. 65) is sustained.
IT IS FURTHER ORDERED that the motion of plaintiff for class certification
(Doc. 88) is denied.
IT IS FURTHER ORDERED that the motion of defendants for leave to submit
supplemental authority (Doc. 159) is denied as moot.

/s/ David D. Noce
j
UNITED STATES MAGISTRATE JUDGE
Signed on November 19, 2021.

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