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Schellenbach v. Godaddy.Com, LLC

United States District Court, D. Arizona

July 7, 2017

Mark Schellenbach and William Ryder, Plaintiffs,
v.
GoDaddy.com, LLC, Defendants.

          ORDER

          David G. Campbell United States District Judge.

         Plaintiffs Mark Schellenbach and William Ryder, on behalf of themselves and a proposed class and subclass, bring this action against Defendant GoDaddy.com, LLC. Docs. 1, 33. Plaintiffs move to certify a class and subclass of persons who purchased a “Dedicated Server” from GoDaddy, alleging that GoDaddy failed to disclose that the server was virtualized and not a free-standing machine. Doc. 127 at 10.[1] The motion is fully briefed (Docs. 127, 128, 129), and the Court heard oral argument on June 14, 2017 (Doc. 125). For reasons stated below, the Court will deny class certification.

         I. Plaintiffs' Proposed Class and Sub-Class.

         Plaintiffs seek certification of the following class: “All persons who, between October 23, 2014 and March 18, 2017, purchased GoDaddy Dedicated Servers through the GoDaddy.com website or who purchased Dedicated Servers after viewing the GoDaddy.com website. Excluded from the Class are purchasers who purchased via the https://www.godaddy.com/servers webpage.” Doc. 127 at 6. Plaintiffs further move to certify a California subclass: “All persons in the state of California who, between October 23, 2014 and March 18, 2017, purchased GoDaddy Dedicated Servers through the GoDaddy.com website or who purchased Dedicated Servers after viewing the GoDaddy.com website. Excluded from the Class are purchasers who purchased via the https://www.godaddy.com/servers webpage.” Id. The definitions of these two classes are identical, except that the subclass includes only California residents. For the sake of simplicity, the Court will refer to both classes as “the class” throughout this order, except where a distinction between the class and subclass is necessary.

         II. Rule 23 Requirements.

         Under Rule 23(a), a district court may certify a class only if (1) it is so numerous that joinder of all members is impractical, (2) there are questions of law or fact common to the class, (3) the claims of the representative parties are typical of the claims of the class, and (4) the representatives will fairly and adequately protect the interests of the class. Fed.R.Civ.P. 23(a)(1)-(4). The Court must also find that one of the requirements of Rule 23(b) has been met. Plaintiffs rely primarily on Rule 23(b)(3), which requires that questions of law or fact common to the class predominate over questions affecting only individual class members, and that a class action is superior to other available methods for resolving the controversy. Fed.R.Civ.P. 23(b)(3). Plaintiffs also contend, briefly, that the class can be certified under Rule 23(b)(2). The Court must rigorously analyze the proposed class to ensure it comports with Rule 23. See Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351 (2011) (“Dukes”).

         III. Individual Issues Prevent Certification Under Rule 23(b)(3).

         GoDaddy opposes class certification under Rule 23(b)(3) on the grounds that (1) the class does not satisfy the commonality, typicality, or adequacy requirements of Rule 23(a); (2) the class is overbroad and unascertainable, and putative class members lack standing to assert a claim; and (3) the class does not satisfy the predominance requirement of Rule 23(b)(3). Doc. 128. The Court finds that the class does not satisfy the predominance requirement of Rule 23(b)(3), and need not address GoDaddy's other arguments.

         A class may be certified under Rule 23(b)(3) only if questions of law or fact common to the class will predominate over questions affecting only individual class members. This predominance inquiry “asks whether proposed classes are sufficiently cohesive to warrant adjudication by representation.” In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953, 957 (9th Cir. 2009) (internal quotation marks and citation omitted). “This calls upon courts to give careful scrutiny to the relation between common and individual questions in a case.” Tyson Foods, Inc. v. Bouaphakeo, 136 S.Ct. 1036, 1045 (2016). “An individual question is one where ‘members of a proposed class will need to present evidence that varies from member to member, ' while a common question is one where ‘the same evidence will suffice for each member to make a prima facie showing [or] the issue is susceptible to generalized, class-wide proof.'” Id. (quoting Newberg on Class Actions, § 4:50 (5th ed. 2012)). “If the main issues in a case require the separate adjudication of each class member's individual claim or defense, a Rule 23(b)(3) action would be inappropriate.” Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1189 (9th Cir. 2001) (citation omitted).

         A. The Nature of Plaintiffs' Claims.

         The predominance inquiry begins with the elements of the underlying cause of action. Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S. 804, 809 (2011). Plaintiffs allege violations of the Arizona Consumer Fraud Act (“ACFA”), California Unfair Competition Law (“CUCL”), and California False Advertising Law (“CFAL”). Doc. 127. Because these are all state law claims, the Court must look to state law to determine whether individual issues will predominate over common issues. See Yokoyama v. Midland Nat'l Life Ins. Co., 594 F.3d 1087, 1089 (9th Cir. 2010) (holding that the “dispositive issue is thus an issue of Hawaii state law, namely whether Hawaii's Deceptive Practices Act requires a showing of individualized reliance”).

         The ACFA prohibits fraudulent, deceptive, or misleading conduct in connection with the sale or advertisement of consumer goods and services. A.R.S. § 44-1522(A). To prevail under the ACFA, a plaintiff must establish that (1) the defendant made a misrepresentation or omission in violation of the Act, and (2) the defendant's conduct proximately caused the plaintiff to suffer damages. Parks v. Macro-Dynamics, Inc., 591 P.2d 1005, 1008 (Ariz.Ct.App. 1979). It is not necessary for the plaintiff to show that the defendant made an affirmative misstatement. Material omissions are actionable under the AFCA. Maurer v. Cerkvenik-Anderson Travel, Inc., 890 P.2d 69, 72 (Ariz.Ct.App. 1994).

         The CUCL provides civil remedies for unfair competition, which it defines as “any unlawful, unfair or fraudulent business act or practice.” Cal. Bus. & Prof. Code § 17200. It protects “both consumers and competitors by promoting fair competition in commercial markets for goods and services.” Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 320 (2011) (citations omitted). The California legislature framed the CUCL's provisions in “‘broad, sweeping language.'” Id. (citing Cel-Tech Commc'ns., Inc. v. Los Angeles Cellular Tel. Co., 20 Cal.4th 163, 181 (1999)). The CFAL “is equally comprehensive within the narrower field of false and misleading advertising.” Id. (citations omitted). The CFAL prohibits advertising that “is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading.” Cal. Bus. & Prof. Code § 17500. A party wishing to bring a claim under the CUCL or CFAL must show: (1) “a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) [] that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.” Kwikset, 51 Cal.4th at 322.

         B. Plaintiffs' Key Omission and the Need for Individual Inquiries.

         Plaintiffs' case rests on a single omission. Plaintiffs allege that class members were not told that the Dedicated Servers were virtual - that the servers were not standalone boxes, but instead were portions of physical servers shared by others and “dedicated” to the class member only through virtualization software. This is the material omission Plaintiffs allege under the ACFA and the unfair practice they allege under the CUCL and CFAL. Plaintiffs do not claim that GoDaddy made any other misrepresentations or omissions. Plaintiffs assert that this omission was highly relevant because, according to their expert, virtualized servers function less effectively than standalone servers and Plaintiffs therefore paid too much for their Dedicated Servers.

         The primary webpage for the Dedicated Servers was www.godaddy.com/pro /dedicated-server. This page will be referred to this order as the “/pro/dedicated-server webpage.” GoDaddy concedes that this webpage did not disclose at the beginning of the class period, October 23, 2014, that the Dedicated Servers were virtual. But as of December 15, 2015, it did describe the servers as “Single-Tenant VM.” Doc. 127 at 9. GoDaddy's Rule 30(b)(6) witness testified that a person with technical knowledge, such as a web designer or web developer, would know that VM stood for “virtual machine.” Doc. 127-1 at 67.

         Plaintiffs acknowledge that another GoDaddy webpage - www.godaddy.com /servers - did disclose throughout the class period that the servers were virtualized. This page will be referred to in this order as the “/servers webpage.” From the beginning of the class period, it described the Dedicated Server as “Your very own single-tenant virtual machine.” Doc. 116-2, ¶ 5 (emphasis added). Paul Bindel, a Senior Director of Web Marketing for GoDaddy, submitted a declaration explaining that this webpage was accessible directly from the main GoDaddy webpage from August 2014 to September 2015, and thereafter was accessible through various other GoDaddy webpages, 13 of which are listed in his declaration. Id., ¶ 8. In addition, searches for “GoDaddy” and “server” on widely-used search engines such as Google or Yahoo! would return the /servers webpage as one of the top two non-paid hits. Id., ¶¶ 7-9.

         Because the virtual nature of the servers was disclosed on the /servers webpage, Plaintiffs define the class to exclude all persons “who purchased via” the /servers webpage. Doc. 127 at 6. Plaintiffs made clear during oral argument that this exclusion applies to persons who actually used the /servers webpage as the method for purchasing the Dedicated Servers. The class does not exclude persons who visited the /servers webpage but purchased their Dedicated Server through another method, such as by phone or through another webpage.

         Paul Bindel states that the /servers webpage had 373, 114 unique visitors between October 1, 2014 and November 4, 2016, a time period that largely overlaps Plaintiffs' proposed class period. Doc. 116-2, ¶ 11; see also Doc. 127-8 at 14. The /pro/dedicated-server webpage - from which Plaintiffs allege material information was omitted - received 881, 763 unique visitors during the class period. Id. at 13. Thus, of the 1, 254, 877 visits to these two webpages during the relevant time frame, 30% visited the page where the virtualized nature of the Dedicate Servers was clearly disclosed. And if most visitors to the /servers webpage also visited the /pro/dedicated-servers webpage, as is likely, then the percentage would be even higher. If the more conservative 30% figure is applied to the proposed class, which Plaintiffs describe as potentially including 10, 039 purchasers of Dedicated Servers (Doc. 127 at 12), then approximately 3, 000 class members visited the webpage where the virtual nature of the servers was disclosed. Such class members would not have been exposed to the omission on which Plaintiffs' case rests. And yet because Plaintiffs' class definition excludes only those who actually made their purchases through the /servers webpage, not those who visited it and purchased through other means, a class-member by class-member inquiry would be required to determine which class members actually were subjected to the key omission.

         In addition, because the /pro/dedicated server webpage on which Plaintiffs rely included the phrase “Single-Tenant VM” for more than half of the class period, an individualized inquiry would be needed to determine whether class members understood this to mean that they were acquiring a virtualized machine. Plaintiffs argue that the VM acronym was never defined, and note that GoDaddy's Rule 30(b)(6) witness stated that understanding the acronym would require someone with technical knowledge. Doc. 127 at 9. But the class almost certainly includes persons with technical knowledge. Dedicated Servers were marketed to persons with web-design expertise. The October 23, 2014 press release that launched the Dedicated Server marketing effort (and triggered the start of the class period) referred to the Dedicated Server as an “Advanced Hosting Product[]” and said it was “designed specifically for Web designers and developers.” Doc. 109-3 at 2. The Dedicated Servers webpages “specifically catered to tech-savvy developers and designers.” Id. Given this target market, it is likely that the class includes sophisticated computer users, and an individualized inquiry would be required to determine whether class members had the sophistication to understand that VM meant virtualized machine even if they did not visit the /servers webpage.

         And these are not the only ways class members could have learned that the servers were virtualized. Prospective purchasers could also talk with a GoDaddy representative by phone or web chat. GoDaddy provided live customer service representatives 24 hours a day, seven days a week. Doc. 128 at 60, ¶ 5. Evidence in the record shows that GoDaddy representatives did disclose in conversations with customers that Dedicated Servers were virtualized. Id. at 82, 94. Evidence also shows that GoDaddy fielded more than 31 million phone calls and participated in over 8 million web chat sessions with customers and potential customers during the class period. Id. at 60, ¶ 6. This amounts to an average of 35, 556 calls and 8, 772 web chats per day. Id. Thus, even if a class member did not visit the /servers webpage, an individualized inquiry would be required to determine whether she spoke with a GoDaddy representative and learned that the servers were virtualized.

         A GoDaddy manager, Noah Madieros, explained the ways in which potential customers could use the GoDaddy call-in resources:

A large number of GoDaddy customers . . . utilize the customer service line and chat feature to discuss and/or initiate new purchase transactions. In my experience, it is common for GoDaddy customers to call the customer service line or initiate a chat discussion after reviewing GoDaddy's website, in order to inquire about the specifications of a certain product prior to purchase. It is also common for GoDaddy customers to call the customer service line or initiate a chat discussion to request a consultation related to the customer's current needs, without having reviewed a specific product offering on GoDaddy's website. It is also my experience that customers will frequently call GoDaddy's customer service line with questions about our server products but will eventually purchase on their own through the website at a later time.

Doc. 128 at 60.

         The named Plaintiffs in this case, Mark Schellenbach and William Ryder, provide apt examples of the varied means by which purchasers could acquire Dedicated Servers. Plaintiffs operate SetMySite.com, a business involved in website design and management. Id. at 12, 98 (Zechinni Declaration), 170-71 (Schellenbach Declaration); 194-95 (Ryder Declaration). Plaintiffs researched dedicated server options using Google and GoDaddy's website. Id. at 177-78, 182-83, 199. Although they viewed webpages on GoDaddy's website before making their purchase, they made the purchase over the phone and discussed the Dedicated Server with a GoDaddy agent during that call. Id. at 202.

         In short, GoDaddy customers do not have a uniform buying experience when purchasing Dedicate Servers, and many would have been exposed to information beyond that contained in the /pro/dedicated-servers webpage on which Plaintiffs wish to rely. And this does not even account for other means by which class members could have learned that the servers were virtualized, such as word of mouth or trade publications.

         Consequently, on the very first element of Plaintiffs' claims - the existence of a material omission - individual issues would predominate if the class were certified. The class therefore cannot be certified under Rule 23(b)(3). See Berger v. Home Depot USA, Inc., 741 F.3d 1061, 1069 (9th Cir. 2014), abrogated on other grounds by Microsoft Corp. v. Baker, 137 S.Ct. 1702 (2017) (finding class certification inappropriate because plaintiff could not show “that all of the members of his proposed class were exposed to Home Depot's alleged deceptive practices”); McKinnon v. Dollar Thrifty Auto. Grp., Inc., No. 12-cv-04457-SC, 2015 WL 4537957, at *9 (N.D. Cal. July 27, 2015) (denying certification because there was no evidence all class members were exposed to deceptive conduct when claims were based upon individual transactions at the rental counter); Herskowitz v. Apple, Inc., 301 F.R.D. 460, 481 (N.D. Cal. 2014) (rejecting class certification in case involving “Apple's variable conduct in the course of diverse, individualized transactions”); Mahfood v. QVC, Inc., No. SACV 06-0659-AG(ANx), 2008 WL 5381088, at *4-5 (C.D. Cal. Sept. 22, 2008) (denying certification because “there exists far too much variation in individual purchasing experiences”).

         C. ...


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