Highlights:  Long-awaited Washington Supreme Court decision clarifies scope of Washington Consumer Protection Act and Washington's rules for certification of class actions, rejecting plaintiffs' proposed nationwide class against company "headquartered" in Washington.

In a landmark and divided ruling, the Washington Supreme Court declined an invitation to turn Washington into "a locus of nationwide class action litigation."  Schnall v. AT&T Wireless, Inc., Case No. 80572-5 (Wash. Jan. 21, 2009).

The Schnall case was filed by individuals who claimed that certain charges violated their contracts with AT&T Wireless (by increasing a charge without notice) and violated the Consumer Protection Act (by misrepresenting the nature of the charge).  Plaintiffs proposed that a class of AT&T Wireless's customers from across the country be certified on these claims.  The trial court declined to certify such a class, and the Court of Appeals reversed that decision.  The Washington Supreme Court ruled that the trial court got it right. 

The Washington Supreme Court first decided that the choice of law clause in the contracts—requiring disputes to be governed by the law of the state where the customer signed the contract—is enforceable.  In so ruling, the Court rejected the notion that Washington law should apply to all of these customers, no matter where located, simply because AT&T Wireless is "headquartered" in the State of Washington.  This aspect of the decision obviously has great importance for companies based in the State of Washington, particularly companies whose contracts with consumers provide that the law of the consumer's home state applies. 

Second, and of equal—if not greater—significance to Washington-based companies, the Court ruled that Washington's Consumer Protection Act does not apply "extraterritorially," i.e., beyond the borders of the State of Washington.  Thus, the Court ruled, simply because a company is based in Washington, does not mean that Washington's Consumer Protection Act applies to the company's transactions with consumers across the country.  Instead, the Washington Consumer Protection Act is limited to misrepresentations or other misdeeds against Washington residents. 

Third, the Court decided that certification of a nationwide class of AT&T Wireless's customers would be inappropriate.  In so ruling, the Court relied on federal court decisions interpreting the federal class action rule on which Washington's rule is based.  Both rules require that "common" issues of the class "predominate" over issues of individual class members in order to certify a class.  The Court's conclusion that AT&T Wireless's customers' claims are governed by the law of their various home states was therefore the death knell of plaintiffs' quest for a nationwide class.  Because a different body of contract law would apply to each state's citizens, the Court was not persuaded that use of "subclasses" or "special master's hearings" would make such a 50-state class manageable.  As a result, according to the Washington Supreme Court, such lawsuits should be litigated state by state, across the country.  For plaintiffs' class action lawyers and the companies that they sue, this will greatly reduce the potential monetary damages and scope of other relief available in such a class action filed in Washington.  But it may also increase the logistical burdens and costs on litigants if claims are litigated in multiple jurisdictions at once.

Finally, the Washington Supreme Court clarified the amount of evidence required to establish a violation of the Washington Consumer Protection Act, specifically proof that the plaintiff's alleged injury was caused by the defendant's misrepresentation or "unfair" act.  This aspect of the ruling applies to and will significantly affect Consumer Protection Act claims in class action cases and in suits by individual private plaintiffs.  Reiterating the Court's ruling in Indoor Billboard/Washington, Inc. v. Integra Telecom of Washington, Inc., 162 Wn.2d 59, 170 P.3d 10 (2007), the Court confirmed that causation is not established by the mere fact that plaintiffs paid the charge that they now complain about.  Nor is causation established by evidence of a "mere capacity to deceive."  Rather, under the Washington Consumer Protection Act, plaintiffs must show that they "were actually deceived" and that they would not have "purchased [the] service, or paid the [charge] but for" the defendant's representations. (Emphasis added.)  In light of this causality requirement, the Washington Supreme Court remanded the case to the trial court to determine whether such evidence of causation would be so individualized that even a statewide class would not be warranted on plaintiffs' claims that AT&T Wireless misrepresented the nature of a particular charge.

Though the Court's decision may fall short of the "disaster for plaintiffs"—as the dissenting opinion characterized the result—it is a sea change for plaintiffs and defendants in class action and Consumer Protection Act litigation in Washington courts.