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From Antitrust Law Daily, April 19, 2017

Class action alleging automotive sales course made false job promises proceeds

By Glenn Sulzer, J.D.

Allegations in a consumer class action complaint that an automotive sales training course made false promises regarding costs, certifications, and prospective job placement were sufficient to survive motions to dismiss, according to a federal district court in Los Angeles (Sloan v. 1st American Automotive Sales Training, April 17, 2017, Wright, O.).

Sales training offered "nothing of benefit." According to the plaintiff, 1st American Automotive Sales Training (1st Auto) advertised a three-day automotive sales training course on its website that suggested that trainees would be placed with dealerships and working within the "the first few days." A separate advertisement on Craigslist.com further promised comprehensive training with national certification, $2000/month or very liberal commissions, general incentives and bonuses, a 5-day work-week, and medical and dental benefits.

An individual who responded to the advertisement, however, was charged $695 for the course, did not receive national certification, was not offered employment at the course’s conclusion, and was essentially provided with "nothing of benefit." In response, the individual filed a putative class action in federal court, pursuant to the Class Action Fairness Act (CAFA), alleging violations of California’s False Advertising Law, Unfair Competition Law, and Consumer Legal Remedies Act. 1st Auto filed motions to dismiss under Federal Rules of Civil Procedure 12(b)1) and 12(b)(6).

CAFA jurisdiction. Initially, the court noted that, under CAFA, courts have original jurisdiction over a class action if: (1) the parties are minimally diverse, (2) the proposed class has more than 100 members, and (3) the aggregate amount in controversy exceeds $5 million. A plaintiff may satisfy the amount-in-controversy requirement by merely alleging in good faith that the claimed damages exceed the jurisdictional threshold. The defendant would then be charged with proving to a "legal certainty" that the claim did not satisfy the requisite jurisdictional amount.

1st Auto argued that 7,195 respondents would have needed to take the $695 course in order for the $5 million threshold to be satisfied. However, the court, taking into account actual damages, punitive damages, and attorney fees, ruled that the complaint properly alleged the required amount. Moreover, 1st Auto did not offer any evidence sufficient to prove to a legal certainty that the amount could not be met. Therefore, the 12 (b)(1) motion was denied.

Predominance of class. 1st Auto’s 12(b)(6) motion to dismiss for failure to state a claim charged that the putative class lacked the requisite "predominance" under Fed. Rule of Civ. Proc. 23(b)(3) because some members may have suffered less damages than others. The plaintiffs countered that the motion was premature because the parties had not undertaken discovery.

The court agreed with the plaintiffs, noting that a 12(b)(6) motion to dismiss a class action was rarely appropriate prior to discovery. 1st Auto further did not proffer any evidence that would indicate that any member of the prospective class received a refund, later obtained a job in which the training had value, or otherwise undermine the predominance of the damages throughout the class. However, the court primarily stressed that allowing Rule 23(b)(3) class actions to be dismissed for lack of predominance based on individualized or differential damages would render most consumer class actions impossible. Accordingly, the 12(b)(6) motion to dismiss was denied.

The case is No. 2:16-cv-05341-ODW (SK).

Attorneys: Adrian Robert Bacon (Law Offices of Todd Friedman PC) for Alex Sloan. Robert C. Baker (Baker Keener & Nahra LLP) for 1st American Automotive Sales Training.

Companies: 1st American Automotive Sales Training

MainStory: TopStory Advertising StateUnfairTradePractices CaliforniaNews

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