The Ninth Circuit recently held that a class could be certified with class members who lost less than a penny of interest.  But it also held that where some class members may have lost nothing at all, the district court must take a hard look at whether the predominance requirement has been met. 

In Van v. LLR, Inc., 2023 WL 2469909, at *4 (9th Cir. Mar. 13, 2023), the plaintiff and putative class members had been improperly charged sales tax on clothing purchases.  Although they were all eventually reimbursed for the sales tax amount, they argued they were owed interest to account for their lost use of that money.  Id.  For the named plaintiff, this lost interest amounted to $3.76.  Id.  The district court originally held that this amount was too small to support standing and dismissed the case, but the Ninth Circuit reversed, holding that a few dollars is enough for standing.  Id. at *5.  On remand, the district court granted class certification, including for class members who were owed “less than $0.01 in interest.”  Id. at *7.  The Ninth Circuit affirmed that part of the ruling, holding that “[a]ny monetary loss, even one as small as a fraction of a cent, is sufficient to support standing.”  Id.

Although the Ninth Circuit agreed that losing even a fraction of a penny is good enough for standing, it took issue with a different aspect of the district court’s decision: the court certified a class containing some members who were not injured at all.  Id. at *11–12.  In its class certification opposition, the defendant showed that for 13,680 of the 72,373 clothing transactions at issue in the case, the retailer had discounted the transaction at the time of sale, sometimes with the intention of completely offsetting the improper sales tax.  Id. at *3.  For 18 of those 13,680 discounted transactions, in particular, the defendant was able to show that the discount did, in fact, completely offset any improper sales tax.  Id. at *11–12.  For that reason, the class members in that situation had suffered no injury at all.  Id. at *11.  Despite this showing, the district court still certified the entire class, writing off the issue as “de minimis.”  Id.  The Ninth Circuit disagreed.  Id. at *12.

As the Ninth Circuit noted, because it was unclear why a discount was given in any particular case, “an inquiry into the circumstances and motivations behind each of the 13,680 discounts might be necessary” to determine whether the discount had been intended to offset the improper sales tax.  Id. at *12.  Because getting to the bottom of that issue could “potentially involve up to 13,680 depositions and months of trial,” the Ninth Circuit held that it “certainly cannot be described as de minimis.”  Id.  For that reason, the court remanded to the district court to determine whether, in light of this issue, common issues of fact and law predominate over individualized issues.  Id.  In a footnote, the Ninth Circuit also left for the district court to decide whether it was ever proper to certify a class if any of the class members lack standing, given that “The Supreme Court expressly held open the question whether every class member must demonstrate standing before a court certifies a class.”  Id. at *11 n.12 (internal marks omitted).

There are two key takeaways coming out of the Van decision.  The first is that if a company is seeking to avoid class-action litigation by reimbursing potential class members, it should consider throwing in at least a few extra cents to ensure each class member is fully refunded.  Without that buffer, even class members who accept the full reimbursement may still have standing to sue by claiming they are entitled to recover lost interest.  The second takeaway is that at the class certification stage, a defendant should be on the lookout for arguments that certain class members—even if only a handful—may not have been injured.  Where it is difficult to identify which class members were injured (or not), that issue may create a roadblock to proof of predominance for the entire class.