A Ninth Circuit panel reversed a district court’s order denying certification of a putative nationwide class of internet advertisers, holding that the district court erred in finding that plaintiff failed to satisfy Rule 23(b)(3)’s predominance requirement.  Plaintiff’s class action complaint alleged that Google violated California’s Unfair Competition Law and Fair Advertising Law by failing to disclose that some of Google’s AdWords ads would appear on parked domains and error pages.  Through Google’s AdWords program, advertisements were placed onto Google-defined categories of websites, and the advertisers paid Google each time their ad was clicked on.  Although Google listed several categories of websites on which these ads may appear, it failed to disclose that ads may also be placed on parked domains or error pages.  Thus, plaintiff sought certification of a class of advertisers who “were charged for clicks on advertisements appearing on” these websites.

The district court denied plaintiff’s motion for class certification, holding that plaintiff failed to satisfy Rule 23(b)(3)’s predominance requirement.  The district court held that, even if the class could prevail on liability, common questions did not predominate on the issues of entitlement to restitution and the amount of restitution owed to each putative class member.  The district court questioned whether entitlement to restitution could be determined on a classwide basis given that some plaintiffs “have no legal claim to restitution because they derived direct economic benefits from ads placed on parked domains and error pages.”  The district court also determined that the Ninth Circuit’s opinion in Yokoyama v. Midland National Life Insurance Co., 594 F.3d 1087 (9th Cir. 2010), “which held that damages calculations alone cannot defeat class certification,” did not apply because plaintiff’s proposed damages models were unworkable due to the difficulty in determining what each advertiser “would have paid ‘but for’ the alleged misstatements or omissions.”  The district court further held that plaintiff failed to satisfy the predominance requirement under Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), because the proposed damages models were “arbitrary.”  The Ninth Circuit granted permission to appeal and reversed.

First, the Ninth Circuit held that the district court erred in determining that individual questions regarding entitlement to restitution would predominate because restitution is available on a classwide basis once plaintiff makes the threshold showing of liability under the Unfair Competition Law and Fair Advertising Law.  The panel further held that the district court abused its discretion in denying certification because Yokoyama purported did not apply.  The panel explained that, under Yokoyama, which “remains the law of this court,” even after Comcast, “damages calculations alone  . . . cannot defeat certification.”

The Ninth Circuit concluded that plaintiff’s principal damages model was not “arbitrary” under Comcast and, therefore, satisfied the predominance requirement.  The appellate court noted that plaintiff’s principal proposed model used Google’s own Smart Pricing ratio, which adjusted advertisers’ bids “to the same levels that a ‘rational advertiser’ would bid if the rational advertiser had sufficient data about the performance of ads on each website.”  Under this method, restitution would be determined by calculating the difference between what an advertiser paid and what a “rational advertiser” would have paid according to Google’s Smart Pricing ratio.  The Ninth Circuit held that using this ratio “is both targeted to remedying the alleged harm and does not turn on individual issues” and, therefore, plaintiff’s principal method for calculating restitution “measures the monetary loss ‘resulting from the particular . . . injury’ alleged” as required by Comcast.

Pulaski & Middleman, LLC v. Google, Inc., No. 12-16752 (Sept. 21, 2015).