By Gerald L. Maatman, Jr., Jennifer A. Riley, Tiffany E. Alberty, and Ryan T. Garippo
Duane Morris Takeaways: On May 30, 2024, In Re HomeAdvisor, Inc. Litigation, No. 16-CV-01849 (D. Colo. May 30, 2024), Chief Judge Philip Brimmer of the U.S. District Court for the District of Colorado denied a motion for reconsideration of his prior order denying of class certification of a putative nationwide and states-specific classes. This decision further illuminates plaintiffs’ substantial burden of maintaining a nationwide class action, particularly when state law claims are involved.
Case Background
Plaintiffs are eleven individuals, and one corporation (collectively “Plaintiffs”), who sued HomeAdvisor, Inc. and similar entities (collectively “HomeAdvisor”) for misrepresentations of the quality of the leads it sells to its home service professionals. HomeAdvisor operates an online marketplace that helps connect home service professionals with homeowners in need of home improvement services, by collecting information from homeowners, and selling that information onto the home service professionals as a “lead.” Id. at 1. Plaintiffs, however, claim that HomeAdvisor misrepresents the quality of the leads that it sells. HomeAdvisor advertises that its leads are “high quality” and from “project-ready customers.” Id. at 2. Yet, Plaintiffs claim that they often receive leads that are valueless because they lead to “wrong or disconnected phone numbers, contain “wrong contact information,” relate back to individuals who “never even heard of HomeAdvisor” or who are “not homeowners,” or are for “customers” who completed the project months before the lead was received. Id.
Consequently, Plaintiffs sued HomeAdvisor seeking to recover damages, claiming that the “leads were ‘garbage,’” and ultimately moved for class certification. Id. at 3. In January 2024, the Court granted Plaintiffs’ motion for class certification in part, and denied it in part. The Court certified a nationwide misappropriation class and three state misappropriation classes. At the same time, the Court denied Plaintiffs’ request to certify a nationwide deceptive practices class and nine state deceptive practices classes. These state-specific classes arose out of claims under California, Colorado, Florida, Idaho, Illinois, Indiana, New Jersey, New York, and Ohio state law.
The Court’s denial was based upon the finding that Plaintiffs failed to establish the predominance and superiority requirements under Rule 23(b)(3). The Court held that plaintiffs failed to present any analysis to support certification of the state law claims, and because the Tenth Circuit case law requires claim-specific analysis, Plaintiffs’ failure to do so was fatal to their request for class certification. Shortly thereafter, Plaintiffs filed a motion for reconsideration asking, in part, for the Court to reconsider its ruling on the state law claims. Plaintiffs claimed that the Court did not adequately consider a choice-of-law provision within HomeAdvisors’ terms and conditions, and that they would have prevailed under the laws of all the state-specific claims.
The Court’s Opinion
While it observed that the federal rules do not specifically provide for motions for reconsideration, the Court considered both of Plaintiffs’ requests raised in the motion.
As to the choice-of-law provision, which purportedly specifies that Colorado law applies, Plaintiffs argued that the Court erred in its choice of law analysis by not considering that provision. Plaintiffs contended that either under a theory of estoppel, or based on HomeAdvisors’ contractual terms and conditions, that the choice-of-law provision should apply to all the state law claims. The Court, however, rejected Plaintiffs’ argument because they failed to make the estoppel argument in their original class certification motion, and only provided a two-sentence argument in a “perfunctory matter” without any supporting legal authority. Id. at 8. The Court refused to entertain these new arguments. Similarly, because Plaintiffs failed to raise the terms and conditions choice-of-law provision in their original motion, and contradicted the enforceability of the terms and conditions in their pleadings, the Court found these arguments unpersuasive. As a result, the Court declined to reconsider its decision, which refused to certify a nationwide deceptive practices class applying Colorado law.
Further, with regard to the state-specific analysis, Plaintiffs attempted to revive their arguments for certification by arguing that the Court erred in not applying an alternative deceptive practices theory under nine states’ deceptive practices laws. However, vital to Plaintiffs’ deceptive practices claim was the Rule 23 predominance requirement, which in the Tenth Circuit, requires a “claim-specific analysis.” Id. at 9. Accordingly, the Court held that Plaintiffs are required to identify (1) “which elements would be subject to class-wide proof;” (2) “which elements would be subject to individual proof;” and (3) “determine which of these issues would predominate.” Id. (citing Brayman, Sherman and CGC Holding Co., LLC v. Broad & Cassel, 773 F.3d 1076 (10th Cir. 2014)). Yet, Plaintiffs never identified these elements and alleged 43 common law and statutory claims under states’ laws. The Court opined that barebones allegations of “fraud, unjust enrichment and breach of implied contract” were insufficient to identify the elements of each unique states’ laws, as the Court recognized significant variations in each state law. Explicitly, the Court noted, “it is not the Court’s job to research the elements of [43] laws when plaintiffs failed to undertake the analysis in their motion.” Id. at 10.
Finally, and as a practical matter, the Court reasoned that even if the predominance element existed, the docket would be unmanageable as Plaintiffs presented no evidence as to how the Court would conduct a single trial, for nine state classes, with 43 claims.
Implications For Companies
The holding in In Re HomeAdvisor, Inc. Litigation highlights the required specificity for class action plaintiffs to certify nationwide deceptive practices claims. If they cannot proceed on a nationwide theory, plaintiffs must identify the elements of each and every states law, if they want to prevail at the certification stage. Where these elements are not identified, employers have an opportunity to raise these deficiencies with the Court, and that can ultimately change the landscape of which (if any) class claims will survive through the certification stage. Corporate counsel, therefore, should take note of these developments and ensure (where applicable) that similar arguments are raised at this stage of the proceedings.