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Fejzulai v. Sam's West, Inc.

United States District Court, D. South Carolina, Greenville Division

September 7, 2016

Myriam Fejzulai, et al. Plaintiffs,
Sam's West, Inc., et al. Defendants.


          Bruce Howe Hendricks, United States District Judge.

         This matter is before the Court on Defendants' Motion to Dismiss Class Claims for Alleged Violation of the South Carolina Unfair Trade Practices Act (“SCUTPA”) (ECF No. 47). For the reasons set forth in this Order, Defendants' Motion is granted and the SCUTPA claim is dismissed to the extent it is brought in a representative capacity.


         Plaintiffs filed this putative class action on September 10, 2014, alleging a breach of contract claim founded on certain terms and conditions of the Sam's Club Membership Agreement (“Membership Agreement”). (ECF No. 1.) Specifically, Plaintiffs allege that Defendants have, on divers occasions, breached the “200% Freshness Guarantee” (“Guarantee”) found in the Membership Agreement by failing to refund 200% of the purchase price of any returned item subject to the Guarantee (or alternatively refund 100% of the purchase price and replace the item, as provided in the Guarantee). (Id. ¶¶ 28-31.) The operative pleading in this case is now Plaintiffs' Second Amended Complaint, which includes the original breach of contract claim, as well as claims for injunctive and declaratory relief and violation of SCUTPA, all premised on the same putative failures to honor the Guarantee. (ECF No. 41 ¶¶ 33-42, 48-57.) An in-depth summary of the alleged facts is not necessary to the resolution of the pending Motion, which turns on a purely legal issue.


         A plaintiff's complaint should set forth “a short and plain statement . . . showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Rule 8 “does not require ‘detailed factual allegations, ' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Id. (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (quoting Twombly, 550 U.S. at 556). In considering a motion to dismiss under Fed.R.Civ.P. 12(b)(6), a court “accepts all well-pled facts as true and construes these facts in the light most favorable to the plaintiff . . . .” Nemet Chevrolet, Ltd. v., Inc., 591 F.3d 250, 255 (4th Cir. 2009). A court should grant a Rule 12(b)(6) motion if, “after accepting all well-pleaded allegations in the plaintiff's complaint as true and drawing all reasonable factual inferences from those facts in the plaintiff's favor, it appears certain that the plaintiff cannot prove any set of facts in support of his claim entitling him to relief.” Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999).


         Plaintiffs' cause of action for violation of SCUTPA seeks to represent a South Carolina subclass. (ECF No. 41 ¶¶ 49 (“For those class members such as Plaintiffs who are, or were, residents of South Carolina during the applicable class period, Plaintiffs allege that with respect to those class members, Defendants have violated the South Carolina Unfair Trade Practices Act, SC Code § 39-5-10, et seq.”).) In their Motion, Defendants seek dismissal of the SCUTPA claim to the extent it is asserted on behalf of a putative subclass. (ECF No. 47-1 at 2.) Because the Court agrees with Defendants that SCUTPA claims may not be brought by a private party in a representative capacity, the Court grants the Motion to Dismiss, as more fully set forth below.

         The text of SCUTPA expressly prohibits the pursuit of class action claims:

Any person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment by another person of an unfair or deceptive method, act or practice declared unlawful by § 39-5-20 may bring an action individually, but not in a representative capacity, to recover actual damages.

         S.C. Code § 39-5-140(a) (emphasis added). Various courts have confirmed that SCUTPA claims cannot be pursued on a representative basis. See, e.g., Gunnells v. Healthplan Servs., 348 F.3d 417, 423 (4th Cir. 2003) (affirming by implication the district court's refusal to certify a SCUTPA suit as a class action pursuant to S.C. Code § 39-5-140); In re TD Bank, N.A., 150 F.Supp.3d 593, 634-35 (D.S.C. 2015) (dismissing the plaintiffs' SCUTPA class claims); In re Bldg. Materials Corp. of Am. Asphalt Roofing Shingle Prod. Liab. Litig., No. 3:11-CV-02784-JMC, 2013 WL 1316562, at *9 (D.S.C. Mar. 27, 2013) (“Although similar in purpose [to the New Jersey Consumer Fraud Act], South Carolina's statutory consumer fraud claims based on deceptive trade practices may not proceed in a representative capacity.”); Stalvey v. Am. Bank Holdings, Inc., No. 4:13-CV-714, 2013 WL 6019320, *4 (D.S.C. Nov. 13, 2013) (granting motion to dismiss the plaintiff's representative claims under SCUPTA); In re MI Windows & Doors, Inc. Prod. Liab. Litig., No. 2:11-CV-00167-DCN, 2012 WL 5408563, at *5 (D.S.C. Nov. 6, 2012) (“[P]laintiffs cannot bring their SCUTPA claim on behalf of a putative class.”); Harris v. Sand Canyon Corp., 274 F.R.D. 556, 565 (D.S.C. 2010) (“It seems clear from the language of SCUTPA that class action suits are forbidden under the Act, and the South Carolina Supreme Court has held as such.”); Harris v. Option One Mortgage Corp., 261 F.R.D. 98, 111 (D.S.C. 2009) (“It seems clear from the language of SCUTPA that class action suits are forbidden under the Act, and the Fourth Circuit has acknowledged this rule in [Gunnells].”); Dema v. Tenet Physician Servs.-Hilton Head, Inc., 678 S.E.2d 430, 434 (S.C. 2009) (“[B]ecause SCUTPA claims may not be maintained in a class action lawsuit, the trial court properly dismissed Appellant's claim.”). Accordingly, a rather straightforward application of the statutory text and relevant case law dictates dismissal of Plaintiffs' SCUTPA claim to the extent it is pursued in a representative capacity.

         Plaintiffs respond that the U.S. Supreme Court's decision in Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393 (2010), dictates that Federal Rule of Civil Procedure 23, and not S.C. Code Ann. § 39-5-140, governs whether a class action may be maintained under SCUTPA in a federal court sitting in diversity jurisdiction. (See ECF No. 48 at 2-5.) Plaintiffs further argue, either explicitly or by implication, that the various decisions by courts in this district applying Shady Grove to SCUTPA have done so incorrectly.[1] (See Id. at 5-8.) Finally, Plaintiffs urge the Court to adopt the Eleventh Circuit's analysis in Lisk v. Lumber One Wood Preserving, LLC, 792 F.3d 1331 (11th Cir. 2015), which held that class claims under the Alabama Deceptive Trade Practices Act (“ADTPA”) were permissible because the statutory prohibition on private class actions in the ADTPA was superseded by Rule 23 after Shady Grove. See Lisk, 792 F.3d at 1334-38.

         In Shady Grove, the Supreme Court stated in a plurality opinion, “Rule 23 unambiguously authorizes any plaintiff, in any federal civil proceeding, to maintain a class action if the Rule's prerequisites are met. We cannot contort its text, even to avert a collision with state law that might render it invalid.” 559 U.S. at 406 (emphasis in original). Moreover, “Congress itself has created the possibility that the same case may follow a different course if filed in federal instead of state court.” Id. at 416. Accordingly, the Shady Grove court held that a New York law that broadly prohibited class actions in suits seeking penalties or statutory minimum damages conflicted with Rule 23 and was preempted such that it would not apply in a federal court sitting in diversity. Id. at 398-401. The Shady Grove court further held that Rule 23 was not ultra vires under the Rules Enabling Act, 28 U.S.C. § 2072, in this context; in other words, Rule 23 did not impermissibly “abridge, enlarge or modify any substantive right.” Id. at 406-410; see 28 U.S.C. § 2072(b).

         The decision in Shady Grove was issued by a severely fragmented court, which has presented rather confusing questions of interpretation for federal courts seeking to enforce the Shady Grove ruling. Nonetheless, under standard rules of interpretation applied to plurality opinions like Shady Grove, a majority of courts have concluded that Justice Stevens' concurring opinion is controlling in view of the “narrowest grounds” principle.[2]Stalvey, 2013 WL 6019320 at *4; see, e.g., In re Packaged Ice Antitrust Litig., 779 F.Supp.2d 642, 660 (E.D. Mich. 2011) (referencing multiple cases); James River Ins. Co. v. Rapid Funding, LLC, 658 F.3d 1207, 1217 (10th Cir. 2011) (noting that the Tenth Circuit has understood Justice Stevens' opinion to be ...

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