United States District Court, W.D. Texas, Austin Division
LIANNA KABBASH on behalf of herself and all others similarly situated, Plaintiff,
THE JEWELRY CHANNEL, INC. USA d/b/a Liquidation Channel, Defendant.
SPARKS UNITED STATES DISTRICT JUDGE
REMEMBERED on the 7th day of April 2017, the Court held a
hearing in the above-styled cause and the parties appeared in
person or through counsel. Before the Court are Plaintiff
Lianna Kabbash (Plaintiff)'s Motion to Certify Class
[#121], Defendant The Jewelry Channel, Inc. USA d/b/a
Liquidation Channel (LC)'s Response [#126] in opposition,
and Plaintiffs Reply [#131] in support as well as Plaintiff s
Amended Class Definition and Scope [#136], LC's
Objections [#138] thereto, and Plaintiffs Reply [#144] in
support. Having reviewed the documents, the arguments of
counsel, the relevant law, and the file as a whole, the Court
now enters the following opinion and order DENYING class
operates a web-based home shopping network that sells
jewelry, gemstones, and related items on its website. Am.
Compl. [#89] ¶ 6. LC's corporate headquarters,
offices, and employees are all located in Austin, Texas.
Order of Feb. 22, 2016 [#53] at 3.
website, all of LC's products are advertised in a
standard manner. Am. Compl. [#89] ¶¶ 14-15. All
items are displayed with photographs, general descriptions,
an estimated retail value (ERV), LC's price, and a bolded
black or red box describing the percent savings. Id.
¶ 15. When a customer clicks on a product, the ERV,
LC's price, and percentage saved appear on a new webpage.
Id. ¶ 16. The ERV is often over eighty percent
higher than LC's Price. Id. When a customer
places an item in his or her shopping cart and checks out,
the "Order Confirmation" screen lists the total
cost and a notice in bold displaying how much money the
customer saved (e.g., "You saved $ 130.00 today!").
Id. ¶ 17.
first created a customer account with LC via the website on
November 21, 2014. Order of Feb. 22, 2016 [#53] at 1. Before
creating her account, Plaintiff was required to click on a
box affirming she had read and accepted LC's Terms and
Conditions (TOC). Id. The TOC provided that:
accordance with the laws of the State of Texas and the United
States of America, without giving effect to any principles of
conflicts of law or the United Nations Convention on
Contracts for the International Sale of Goods. You agree that
any action at law or in equity arising out of or relating to
only in the state or federal courts located in Austin, Travis
County, Texas, USA and you hereby consent and submit to the
personal jurisdiction of such courts for the purposes of
litigating any such action.
Dugar Decl. [#47-7] Ex. 7 (TOC) at 41.
November 21, 2014, and November 30, 2014, Plaintiff, a
California resident, purchased approximately fifteen items
from LC at a total cost of approximately $522.40. Mot.
Certify Class [# 121 ] at 7-8. After receiving the jewelry
and wearing the items, Plaintiff claims the items began to
fall apart. Id. at 8.
28, 2015, Plaintiff Lianna Kabbash filed a complaint on
behalf of herself and all others similarly situated in
federal district court in California. Compl. [#2]. According to
Plaintiff, LC inflates the ERV of its products to
artificially increase the percentage savings LC advertises.
Am. Compl. [#89] ¶ 25. Plaintiff asserts LC's prices
are not discounted at all and the ERV is part of a pricing
scheme used to induce purchases. Id. ¶¶
particular, Plaintiff claims LC reverse engineers its ERV to
mislead consumers through the following process. Mot. Certify
Class [#121] at 5. First, LC determines its price for an
item. Id. Second, LC calculates an ERV for the item
based on specific, predetermined multipliers; items with
greater LC prices have larger multipliers. Id.
Third, LC employees conduct a review of other products to
collect comparable products in confirmation of the calculated
ERV. Id. at 5.
s original complaint alleged the following claims for a
nationwide class: (1) negligent misrepresentation, (2)
intentional misrepresentation, (3) and unjust enrichment.
Id. Plaintiff also alleged the following claims for
a California class: (1) violation of California's False
Advertising Law (FAL), Cal. BUS. & Prof. Code §
17500, et seq.\ (2) violation of the California
Consumer Legal Remedies Act (CLRA), CAL. Civ. CODE §
1750, et seq.; (3) violation of California's
Unfair Competition Law (UCL), CAL. BUS. & PROF. CODE,
§ 17200 et seq.; (4) negligent
misrepresentation; and (5) intentional misrepresentation.
filed a motion to dismiss, arguing in part its ERVs and
percentage savings displays were non-actionable puffery under
California law. Mot. Dismiss [#23] at 9 (citing/«
re Century 21-RE/MAX Real Estate Advert. Claims
Litig., 882 F.Supp. 915, 927 (CD. Cal. 1994)). LC also
argued Plaintiff failed to allege justifiable reliance for
her FAL, CLRA, UCL, and misrepresentation claims.
Id. at 14. Finding LC's ERV and percentage
savings displays were statements of fact and whether reliance
is justified was a question of fact for the California
claims, the California district court denied the motion to
dismiss. Order of Nov. 2, 2015 [#41] at 5-6.
filed a motion to transfer venue to the Western District of
Texas, asking the California district court to honor the
forum selection clause in the TOC. Mot. Transfer [#46] at
1-2. The California district court granted the motion to
transfer, conveying the case to this Court. Order of Feb. 22,
2016 [#53] at 8.
transfer, Plaintiff filed an amended complaint asserting the
same claims as in her original complaint for a nationwide
class and a California class. See Am. Compl. [#89]
at ¶¶39-109. Following limited discovery for class
certification purposes only, Plaintiff filed a motion to
certify class. Mot. Certify Class [#121].
April 7, 2017, this Court held a hearing, entertaining
argument from both parties on choice of law and the motion
for class certification. Postponing ruling on Plaintiffs
motion for class certification in light of representations
made by counsel, the Court authorized Plaintiff to submit an
amended class definition and permitted supplemental briefing.
Orderof Apr. 7, 2017 [#133]. Plaintiff subsequently filed an
amended class definition and the parties have now filed
supplemental briefing in response. Plaintiffs motion for
class certification is now ripe for consideration.
submits the following amended class definition for
All persons who, while in California and during the four-year
period preceding the initiation of this litigation, purchased
an item on LC's website that LC's business records
show was advertised with an estimated retail
Pl's Scope Definition of Class [#136]. Plaintiff also
seeks to have herself appointed as the class representative
and her counsel appointed as class counsel. Mot. Certify
Class [#121] at 2.
Choice of Law
considering Plaintiffs motion for class certification, the
Court must decide what law will govern Plaintiffs claims and
therefore those of a purported class. LC argues Texas law
governs Plaintiff s claims because the TOC contain a
choice-of-law provision endorsing Texas law. In contrast,
Plaintiff argues the TOC do not require the application of
Texas law to Plaintiffs substantive claims, which sound in
tort and not contract. Instead, Plaintiff claims California
law should apply.
this is a diversity case, Texas law governs the choice-of-law
analysis. Smith v. EMC Corp., 393 F.3d 590, 597 (5th
Cir. 2004) ("District courts sitting in diversity apply
the choice-of-law rules of the forum state.").
courts apply the Second Restatement of Conflict of Laws'
(Restatement) "most significant relationship" test
to decide choice-of-law issues unless there is a valid
choice-of-law clause. Benchmark Elecs., Inc. v. J.M.
Huber Corp., 343 F.3d 719, 727 (5th Cir. 2003) (citing
Hughes Wood Prods., Inc. v. Wagner, 18 S.W.3d 202,
205 (Tex. 2000)). "Texas law gives effect to choice of
law clauses regarding construction of a contract."
Id. (citing In re J.D. Edwards World Sols.
Co., 87 S.W.3d 546, 549 (Tex. 2002)). However,
"[w]hen dealing with narrow choice of law provisions,
Texas law requires an issue-by-issue choice of law
analysis." Id. at 727 (citing Stier v.
Reading & Bates Corp., 992 S.W.2d 423, 433 (Tex.
choice-of-law provision in the TOC provides: "These
with the laws of the State of Texas and the United States of
America, without giving effect to any principles of conflicts
of law" TOC at 41. Such a contractual choice-of-law
clause is narrow because it governs the construction and
interpretation of the contract and does not address the
parties' entire relationship. See Benchmark Elecs.,
Inc., 343 F.3d at 726 (considering a choice-of-law
provision stating "Agreement shall be governed by, and
construed in accordance with, the internal laws of the State
of New York" and finding the provision to be narrow,
applying only to the construction and interpretation of the
Plaintiffs claims and those of the purported class do not
appear to require construction or interpretation of the TOC.
See Id. (holding claims of fraud and negligent
misrepresentation were not governed by the narrow
choice-of-law provision). Although LC alleges Plaintiff is
merely pleading around a contract claim by asserting tort
claims, the essence of Plaintiff s claim sound in tort rather
than contract. See Hr' g Tr. [# 13 7] at
13:7-15:1. Plaintiff s allegation LC s ERVs are misleading is
the crux of her complaint. See Am. Compl. [#89] at 1
(summarizing Plaintiffs allegations that LC misrepresents the
nature and value of its items through its ERV and percentage
saved). As a result, the Texas choice-of-law provision in the
TOC does not govern Plaintiffs tort claims. See Floyd v.