Adam v. Barone

41 F.4th 230

Cindy ADAM, individually and on behalf of all others similarly situated, Appellant

v.Frank V. BARONE; Kirill Chumenko; Green Pogo LLC (Delaware); Green Pogo LLC (New Jersey); Natural Beauty Line LLC; Vegan Beauty LLC; Improved Nutraceuticals LLC; Fortera Nutra Solutions LLC; Advanced Beauty LLC

No. 21-2092

United States Court of Appeals, Third Circuit.

Submitted Under Third Circuit L.A.R. 34.1a March 2, 2022

Opinion Filed: July 19, 2022

Alexander C. Covey, Kneupper & Covey, 4475 Peachtree Lakes Drive, Berkeley Lake, GA 30096, Bruce D. Greenberg, Lite DePalma Greenberg & Afanador, 570 Broad Street, Suite 1201, Newark, NJ 07102, Counsel for Appellant

Joshua S. Bauchner, Anthony J. D'Artiglio, Ansell Grimm & Aaron, 365 Rifle Camp Road, Woodland Park, NJ 07424, Counsel for Appellees

Before: MCKEE, AMBRO, and SMITH, Circuit Judges

OPINION OF THE COURT

SMITH, Circuit Judge.

Cindy Adam was charged nearly $100 for what she believed were free samples of beauty products. After complaining about the charge, she was offered the chance to return the items so that she might obtain a refund. Adam refused and eventually filed this lawsuit. The United States District Court for the District of New Jersey dismissed her complaint, concluding that she lacked standing because she refused Defendants' offer of a refund in the ordinary course of business. We disagree. We will thus reverse the District Court's order and remand with instructions.

I. Facts¹ & Procedural History

In August 2017, Adam came across an advertisement for free samples of "Nuvega Lash" beauty products. The advertisement implied that she need only pay shipping and handling. So Adam ordered two free samples and purchased a third item. She was consequently charged: $4.99 for the first sample's shipping; $4.95 for the second sample's shipping; and $14.99 for the purchased item. Adam does not take issue with any of these charges; she expected all of them.

Soon thereafter, Adam was unexpectedly charged $94.97. That charge was reversed, but on that same day, Adam was also charged $92.94. That unexpected charge resulted in an overdraft of her checking account, leading to a $34.00 bank fee. It was only her entitlement to an annual overdraft-forgiveness opportunity that allowed her to avoid paying the fee. But the $92.94 charge remained.

Adam called the company that marketed and sent her Nuvega Lash products, allegedly Defendant Fortera Nutra Solutions LLC. The customer service representative told Adam during that phone call that "she had agreed at the time of purchase to pay the full amount that she had been charged if she kept the ‘free samples.’ " First Amended Complaint, App'x at A30 ¶ 54. Adam responded that she did not agree—and would not have agreed—to such an arrangement. She asked to speak to a manager during the phone call, but one was never made available to her. The representative told Adam that she would need to return the items before any refunds could be issued. But Adam, not trusting the company that she believed was trying to scam her out of nearly $100, refused to return the items.

In the midst of this, Adam called her bank and contested the $92.94 charge as fraudulent. Her bank temporarily reversed the charge but ultimately reinstated it, concluding that it was legitimate. Adam contends that her bank was misled by Defendants' "false-front scheme"² and that the charge would have been reversed but for their misrepresentations.

Adam then filed a putative class-action suit in the United States District Court for the Northern District of California, which transferred the case to the District of New Jersey on Defendants' motion. The operative complaint, filed in May 2020, alleges violations of (or conspiracy to violate or aiding and abetting violation of): multiple California laws; the Electronic Fund Transfer Act, 15 U.S.C. §§ 1693 – 1693r ; the RICO Act, 18 U.S.C. §§ 1961 – 1968 ; and various consumer protection laws, all on behalf of a nationwide class. In October 2020, Defendants moved to dismiss Adam's claims pursuant to Federal Rule of Civil Procedure 12(b)(1) & (6). The District Court concluded the action was non-justiciable and granted Defendants' motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1). This timely appeal followed.

II. Jurisdiction

The District Court had subject-matter jurisdiction over Adam's claims through 28 U.S.C. §§ 1331 & 1367. Alternatively, the District Court had jurisdiction pursuant to 28 U.S.C. § 1332(d). We have subject-matter jurisdiction under 28 U.S.C. § 1291.

III. Standing

"The Constitution gives federal courts the power to adjudicate only genuine ‘Cases’ and ‘Controversies.’ That power includes the requirement that litigants have standing. A plaintiff has standing only if [s]he can ‘allege personal injury fairly traceable to the defendant's allegedly unlawful conduct and likely to be redressed by the requested relief.’ " California v. Texas , ––– U.S. ––––, 141 S. Ct. 2104, 2113, 210 L.Ed.2d 230 (2021) (citations omitted); see also Lujan v. Defs. of Wildlife , 504 U.S. 555, 560–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). So if a plaintiff does not have standing, courts "lack authority under Article III of the Constitution to consider the merits" of any claim. In re Boy Scouts of Am. , 35 F.4th 149, 156 (3d Cir. 2022).

The District Court relied on Hayes v. Wal-Mart Stores, Inc. , 725 F.3d 349 (3d Cir. 2013), to conclude that Defendants' refund offer—even though it was rejected—mooted Adam's claim and left the court without authority to consider it. A mootness conclusion implies there was once standing, but that some event or developments occurring after litigation commenced deprived the plaintiff of that standing. See Boy Scouts , 35 F.4th at 156 ("When the requirements necessary for standing at the start of a case disappear, it becomes moot and no longer satisfies Article III's case-or-controversy requirement[.]"); see also Campbell-Ewald Co. v. Gomez , 577 U.S. 153, 160–61, 136 S.Ct. 663, 193 L.Ed.2d 571 (2016) ("If an intervening circumstance deprives the plaintiff of a ‘personal stake in the outcome of the lawsuit,’ at any point during litigation, the action can no longer proceed and must be dismissed as moot."). Here, the refund offer was made before Adam filed her lawsuit, so the relevant inquiry is whether Adam had standing at the time she brought her claim. See California v. Texas , 141 S. Ct. at 2113. We therefore treat the District Court's conclusion that the refund offer mooted Adam's claim as a conclusion that Adam lacked standing at the time she brought her claim.

With that in mind, the familiar inquiry into Adam's standing shows she had a basis for initiating her lawsuit. "To establish Article III standing, a plaintiff must have ‘(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.’ " Mielo v. Steak 'n Shake Ops., Inc. , 897 F.3d 467, 478 (3d Cir. 2018) (quoting Spokeo, Inc. v. Robins , 578 U.S. 330, 338, 136 S.Ct. 1540, 194 L.Ed.2d 635 (2016) ). In this analysis, we are limited to "a screening for mere frivolity"—"we must carefully ‘separate our standing inquiry from any assessment of the merits of the plaintiff's claim.’ " Id. at 478–79 (quoting Cottrell v. Alcon Lab'ys , 874 F.3d 154, 162 (3d Cir. 2017) ). The District Court did not explicitly conduct such a screening, but Adam's complaint satisfies all three standing elements.

First, we consider whether Adam alleged an injury in fact. This requires a showing that she suffered an invasion of a legally protected interest, that the harm is concrete and particularized to her, and that she actually suffered or is imminently going to suffer that harm. Mielo , 897 F.3d at 478 (quoting Spokeo , 578 U.S. at 338, 136 S.Ct. 1540 ). Adam has alleged that she suffered financial harm of nearly $100. "[F]inancial harm is a ‘classic’ and ‘paradigmatic form’ of injury in fact," and an allegation of financial harm almost always satisfies these requirements. Cottrell , 874 F.3d at 163 (brackets omitted) (quoting Danvers Motor Co. v. Ford Motor Co. , 432 F.3d 286, 291 & 293 (3d Cir. 2005) ). "Indeed, we have explained that where a plaintiff alleges financial harm, standing ‘is often assumed without discussion.’ " Id. But the District Court, relying on Hayes , appears to have concluded that Adam was not injured.

In Hayes , a plaintiff purchased an as-is television from Sam's Club and a warranty to cover it. 725 F.3d at 352–53. But Sam's Club excluded as-is items from warranty protection. Id. at 353. So when Hayes showed up seeking a replacement remote control for his as-is television under the warranty, Sam's Club offered him a refund of the warranty's cost. Id. Hayes refused that offer, and Sam's Club then gave him the new remote he sought. Id. The end result was a conclusion that Hayes "suffered no injury arising from his television warranty purchase," and that he thus lacked standing to pursue his claim. Hayes v. Wal-Mart Stores Inc. (Hayes II ), Civ. No. 10-460, 2014 WL 654542, at *3 (D.N.J. Feb. 20, 2014) (discussing the result of Hayes ). The District Court relied on this conclusion, applying it to the present case and deciding that it lacked jurisdiction to hear Adam's claim because Defendants' refund offer meant Adam suffered no injury. Dist. Ct. Op., App'x at A8 (brackets omitted) (quoting Hayes II , 2014 WL 654542, at *3 ); id. at A11. But the District Court erred in its application of Hayes .

In that case, "[w]e agree[d] with the trial court that Hayes' purchase of a Service Plan for his television set [could not] form the basis for class certification because it was honored when Sam's Club replaced the missing remote. Sam's Club also offered to refund Hayes the cost of the Service Plan, but Hayes refused to accept the refund." 725 F.3d at 361 n.10 (emphasis added). The reason Hayes was no longer injured was because he...