McBurnie v. Acceptance Now, LLC

Background

Shannon McBurnie and April Spruell sought certification of a class against RAC Acceptance East, LLC (RAC). The opinion states that the plaintiffs sued RAC under the name Acceptance Now, LLC, but that RAC Acceptance East, LLC is the correct legal entity for the lawsuit. RAC leases durable goods, including furniture and appliances, to consumers on a rent-to-own basis. Its customers sign rental-purchase agreements that include a $45 processing fee.

The plaintiffs alleged that the processing fee violates the California Karnette Rental-Purchase Act, the Consumer Legal Remedies Act, and the Unfair Competition Law. They proposed a class consisting of:

All individuals who entered into a Rental-Purchase Agreement with RAC in California at any time between December 11, 2016, and June 30, 2021 and who were charged a Processing Fee.

The plaintiffs initially also challenged a $1.99 expedited-payment fee, but they withdrew both their individual and classwide challenge to that fee. The court therefore addressed only the $45 processing fee.

Arbitration Issue

Earlier in the case, the court denied RAC’s motion to compel arbitration. RAC appealed, and the Ninth Circuit affirmed the denial, concluding that RAC’s arbitration agreement was unenforceable under California law and that California law was not preempted by the Federal Arbitration Act. RAC did not dispute that this decision eliminated the need to consider its argument that arbitration provisions prevented class certification. The court therefore did not address the arbitration arguments in the class-certification briefing.

Class-Certification Standards

The plaintiffs proceeded under Federal Rule of Civil Procedure 23(b)(3). They had to prove, by a preponderance of the evidence, all four requirements of Rule 23(a)—numerosity, commonality, typicality, and adequacy—and the Rule 23(b)(3) requirements of predominance and superiority.

The court explained that class certification may involve considering merits-related issues when those issues are relevant to the Rule 23 requirements. But certification is not a substitute for summary judgment and does not require a trial on the merits.

Numerosity

The plaintiffs submitted evidence that tens of thousands of California consumers entered tens of thousands of rental-purchase agreements with RAC during the relevant period. RAC did not contest numerosity. The court found this requirement satisfied.

Typicality

McBurnie and Spruell each signed rental-purchase agreements containing the challenged $45 fee. The court found that the proposed class members’ claims arose from the same rental agreements and RAC policies and involved the same alleged injury. It rejected RAC’s arguments that the named plaintiffs’ individual circumstances created a unique defense or otherwise defeated typicality. The court found typicality satisfied.

Adequacy

The court found that McBurnie and Spruell could fairly and adequately protect the class’s interests. It rejected RAC’s arguments based on Spruell’s other class-action lawsuits, her alleged joint retention of counsel with her sister, and speculation concerning plaintiffs’ counsel. The court found no showing that either named plaintiff had a conflict with the class or was subject to a defense that uniquely applied to that plaintiff.

Commonality and Predominance

The Karnette Act claim relies on California Civil Code § 1812.624(a)(7), which prohibits a rental-purchase agreement from requiring a consumer to pay a fee that is not reasonable and actually incurred by the lessor. The statute places on the lessor the burden of proving that a fee was reasonable and reflected an actual cost.

The parties disputed the meaning of “actual cost.” The plaintiffs argued that RAC could not charge a fee unless it could prove that the fee was no greater than the incremental actual cost caused by the particular transaction. RAC argued that it could charge any actual costs related to processing a rental-purchase agreement, including labor, software depreciation, cellular service, device depreciation, and certain indirect store and corporate costs.

The court expressly declined to resolve that merits question at the class-certification stage. It found instead that, under either party’s interpretation, the necessary proof would be predominantly common. The plaintiffs could rely on the standardized rental-purchase agreement and evidence concerning whether the $45 fee reflected costs actually incurred as a result of individual transactions. RAC’s proposed cost calculations also used aggregate California costs divided among rental-purchase agreements.

RAC identified time spent by each consumer in a store as a potential individual difference. The court concluded that this issue did not defeat predominance because the central issues were common and individual issues, including potentially individualized damages, did not outweigh them. The court reached the same conclusion for the Consumer Legal Remedies Act and Unfair Competition Law claims because the parties agreed those claims were derivative of the Karnette Act claim.

Superiority

The court found that a class action was superior to other methods of resolving the dispute. It relied on the plaintiffs’ position that the core claim could be decided using common proof and that individual recoveries were relatively small, making individual lawsuits difficult for most class members to pursue. RAC did not dispute superiority.

Order

The court certified the proposed class for the Karnette Act, Consumer Legal Remedies Act, and Unfair Competition Law claims. It appointed McBurnie and Spruell as class representatives and Zach Dostart of Dostart Hannink LLP and Michael Rubin of Altshuler Berzon LLP as lead class counsel. The plaintiffs were ordered to submit a proposed plan for notifying the class by June 30, 2025, after conferring with RAC. The court also set deadlines for dispositive and Federal Rule of Evidence 702 motions, a pretrial conference, and a jury trial.