Stemmelin v. Matterport, Inc.

Background

John Stemmelin brought a false- and deceptive-advertising action against Matterport, Inc., and its officers concerning the Matterport Service Partner (MSP) program. Matterport marketed the program as a potentially lucrative, self-owned business for people who purchased Matterport 3D cameras. Stemmelin alleged that Matterport misrepresented or failed to disclose information about the cameras, training, business profitability, customer leads, business resources, and Matterport’s competition with MSPs.

Stemmelin sought certification of two damages classes under Federal Rule of Civil Procedure 23(b)(3): an Illinois class of people who purchased specified Matterport cameras and a cloud-service plan and became MSPs since December 2, 2016, and a national class with similar requirements during the applicable limitations period. He asserted Illinois Consumer Fraud and Deceptive Business Practices Act and Illinois Business Opportunity Sales Law claims for the Illinois class, along with other state-law claims for the national class. The order identifies California unfair-competition and false-advertising claims, the California Seller-Assisted Marketing Plan Act claim, and breach-of-implied-covenant claims among the remaining claims.

Class-Certification Standards

Rule 23(a) requires numerosity, commonality, typicality, and adequacy of representation. A damages class under Rule 23(b)(3) must also satisfy predominance and superiority. Predominance asks whether common legal or factual questions outweigh questions affecting only individual class members. The plaintiff bears the burden of showing that these requirements are met.

The court found that the proposed Illinois class had 61 MSPs and the national class had 2,377 MSPs, so the numerosity requirement was satisfied. It also rejected Matterport’s argument that Stemmelin’s repeated purchases and use of Matterport products created unique defenses defeating typicality or adequacy. The court concluded that the defenses concerning reliance and causation were not unique to Stemmelin and that no class conflict or inadequate advocacy had been shown.

Standing

The court held that, at the class-certification stage, Stemmelin—not every absent class member—had to establish Article III standing through evidentiary proof. Matterport did not contest that Stemmelin had adequately established standing. The court therefore left future questions about the standing of other class members for another day.

Commonality and Predominance

The court identified a central problem with the proposed classes: joining the MSP program was optional and occurred only after a person had already purchased a camera and met additional requirements. The proposed classes nevertheless included all MSPs, including people who may have bought cameras for reasons unrelated to the MSP program and only later joined it.

For the California unfair-competition and false-advertising claims, the court held that the proposed classes were not reasonably limited to people exposed to the alleged misleading advertising before buying their cameras. Cameras could be purchased from third-party vendors or through Matterport without visiting the webpages containing the alleged misrepresentations. The record also included proposed class members who said they were unaware of the MSP program when they bought their cameras or bought them for other reasons. The court further held that individualized questions would determine whether members saw the advertisements, relied on them to purchase cameras, or relied on them only to join the free MSP program. Those questions defeated predominance, including for the California unfair-competition claim based on alleged violations of the California Seller-Assisted Marketing Plan Act.

For the Illinois Consumer Fraud and Deceptive Business Practices Act claim, the court similarly found that individual questions about proximate cause predominated. Although actual reliance is not required under that statute and reliance on a material omission may be presumed, class members still had to show a communication or advertisement from Matterport and damage proximately caused by the deception. The proposed classes included people who never saw the alleged statements or who joined the MSP program for reasons unrelated to purchasing a camera.

For the breach-of-implied-covenant claims, the court recognized that the effect of the MSP terms’ disclaimer concerning the number of leads could present a common issue. But it held that determining whether Matterport’s alleged interference actually harmed each member would require individualized inquiries. Some proposed class members did not offer scanning services, and leads were concentrated in particular geographic areas, meaning some members may not have had leads for Matterport to divert. The court also found that Stemmelin’s proposed damages model was inconsistent with his liability theory because he alleged a breach involving the MSP terms of service but sought to recover the purchase price of the cameras.

For the California Seller-Assisted Marketing Plan Act and Illinois Business Opportunity Sales Law claims, the court held that statutory exceptions and exemptions required individualized evidence. The California claim would require examining how each class member used the camera in business and, in some circumstances, the member’s gross sales. The Illinois claim would require reviewing each member’s net worth for an exemption. The court concluded that common questions did not predominate for either claim.

Because Stemmelin failed to establish predominance, the court did not address superiority.

Disposition

Judge Alsup denied the motion for class certification. The court also denied as moot Stemmelin’s evidentiary objections and denied as moot Matterport’s evidentiary objections because the order did not rely on the challenged materials. The order did not decide the underlying claims in favor of either side.