Chen v. Target Corporation

Background

The plaintiffs alleged that Target sold Apple iTunes gift cards whose activation codes could be copied or otherwise tampered with by third parties before purchase. According to the First Amended Complaint, the plaintiffs bought the cards at Target stores between 2017 and 2020, loaded money onto them, and later discovered that third parties had depleted the funds. The plaintiffs alleged that Target had received numerous complaints about the problem but continued selling the cards without adequate warnings or safeguards.

The plaintiffs asserted 163 counts, including claims under consumer-protection and unfair-trade statutes in many states and the District of Columbia, as well as claims for unjust enrichment, negligent misrepresentation, fraud by omission, breach of contract, breach of implied contract, and negligence. They sought to represent a nationwide class of purchasers whose cards were used without authorization after purchase but before their first authorized use.

Target moved under Federal Rules of Civil Procedure 12(b)(1), 12(b)(6), and 12(f). Those rules address subject-matter jurisdiction, whether a complaint states a legally sufficient claim, and whether material should be removed from a pleading. Target argued that the plaintiffs lacked standing for claims under states without named plaintiffs, failed to satisfy certain pre-suit notice requirements, inadequately pleaded their statutory and common-law claims, and could not maintain the proposed nationwide class.

Rulings on dismissal arguments

The court deferred the standing question for claims under states without a named plaintiff, finding that class certification logically preceded that issue on the allegations presented. It also held that Mississippi and Texas pre-suit notice requirements were procedural and therefore did not prevent those claims from proceeding in this federal class action. The court did not dismiss the common-law nationwide claims based on standing or choice of law, concluding that those issues were premature before discovery.

The court held that the plaintiffs adequately pleaded their consumer-protection claims. Their allegations that Target knew or should have known about tampering, failed to protect the cards, and failed to warn purchasers were sufficient under the heightened pleading rule for fraud-related allegations. The court also found sufficient allegations of causation, reliance, actual damages, and Target’s duty to disclose.

The court declined to dismiss the implied-warranty claims. It held that a gift card compromised before purchase and unable to hold value when activated could be unfit for its ordinary purpose. It also found that the plaintiffs adequately alleged reliance on Target’s representations about the cards’ value and use for purposes of their implied-warranty-of-fitness claims.

The court declined to dismiss the nationwide claims for unjust enrichment, negligent misrepresentation, fraud by omission, breach of contract, breach of implied contract, and negligence. It found the unjust-enrichment allegations sufficient and allowed alternative pleading at this stage. It found the negligent-misrepresentation and fraud-by-omission allegations sufficiently detailed under the heightened pleading rule. It further found that the plaintiffs plausibly alleged contracts with Target, including an implied contract, and that Target’s own alleged conduct could have created a foreseeable risk supporting a negligence duty under Minnesota law.

For the Georgia Uniform Deceptive Trade Practices Act claim, the court agreed that the plaintiffs’ allegations of past harm did not support injunctive relief based on likely future harm. However, because the statute allows possible attorneys’ fees and costs, the court did not dismiss that count entirely. It limited any potential relief under Count 33 to attorneys’ fees and costs available under that statute.

Class allegations and final disposition

The court declined to strike the proposed nationwide class allegations. It found that the alleged class was not shown at this stage to be an impermissible “fail-safe” class, meaning a class defined in a way that depends on winning on the merits. It also found that manageability, choice of law, and compliance with Federal Rule of Civil Procedure 23 required a more developed factual record and should not be resolved from the pleadings alone.

The court found that the parties had insufficiently briefed whether certain class-action restrictions in Kentucky, Mississippi, Georgia, Ohio, and Utah were procedural or substantive. It directed the parties to meet and confer and, if necessary, propose a supplemental briefing schedule within 30 days. The court denied as moot the plaintiffs’ oral motion for time to conduct limited discovery concerning Rule 23, stating that discovery would proceed at the same time.

The order granted in part and denied in part Target’s Motion to Strike and Dismiss. It granted the motion only insofar as it limited potential relief under Count 33 to attorneys’ fees and costs; it required additional briefing on the identified state-law class-action restrictions; and it denied the motion in all other respects. The order did not decide class certification or the ultimate merits of the claims.