Rodman v. Safeway Inc.

Citations: 125 F. Supp. 3d 922; 2015 U.S. Dist. LEXIS 115705; 2015 WL 5117616Docket: Case No. 11-cv-03003-JST

Court: District Court, N.D. California; August 31, 2015; Federal District Court

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The Court issued an order addressing motions for summary judgment in a certified class action regarding a breach of contract by Safeway, Inc. The following rulings were made: 

1. Defendant Safeway's motion for partial summary judgment was denied.
2. Plaintiff's motion for partial summary judgment concerning class members who registered prior to 2006 was also denied.
3. Plaintiff's motion for summary judgment regarding damages was granted.

The case concerns Safeway's online grocery delivery service, Safeway.com, which began operating in 2006. The Court had previously determined that Safeway breached its contractual obligation to charge online prices equivalent to those in physical stores, barring certain exceptions. Safeway argued for a limitation of liability in the contract but sought to leave other damages determinations to a jury. In contrast, the Plaintiff contended that no factual disputes existed concerning damages, asserting that they should receive compensation equal to the total difference between the online prices and the in-store prices for the same products.

The background details included that, despite the contractual promise, Safeway implemented a markup on online prices starting in April 2010, varying based on item prices, without disclosing the in-store prices to customers. This led to the lawsuit initiated by Plaintiff Rodman in June 2011 after he discovered the discrepancies in pricing. The contract's 'Limitation of Liability' provision restricted Safeway's liability to the total amount paid by the customer during their last use of the online service prior to the claim.

On November 15, 2011, Safeway amended its Special Terms to state that prices, promotions, and offers may differ between online and physical stores, but did not inform registrants of this change. The Court ruled that class members could seek damages for purchases made after this amendment due to the lack of notice, concluding that continued use of Safeway.com did not imply assent to the revised terms. On August 29, 2012, Safeway sent an email to some customers about potential differences in grocery delivery pricing, which also did not reference the Special Terms. The Court similarly found that this email did not establish assent to the revised terms for damages claims. On March 10, 2014, the Court certified a class for breach of contract claims but denied certification for statutory claims, emphasizing that any need to assess individual waivers could be managed collectively. The defined class includes individuals who registered on Safeway.com before November 15, 2011, and made purchases subject to a price markup. On December 10, 2014, the Court granted partial summary judgment for the Plaintiff, confirming that Safeway's pricing practices breached the Special Terms starting in 2006. Following a motion for reconsideration, the Court clarified that the breach was established from 2006 onward. On December 21, 2014, Safeway added an informational notice to its ordering process regarding changes to its Special Terms. Safeway later sought decertification, arguing that individualized damages issues had arisen, but the Court disagreed, stating that the legal implications of Safeway's defenses could still be addressed on a classwide basis. Jurisdiction is established under the Class Action Fairness Act, as there are over 100 class members, the amount in controversy exceeds $5 million, and there is diversity of citizenship between parties.

Summary judgment is granted when the available evidence, including pleadings and affidavits, demonstrates that there are no genuine disputes regarding material facts and that the moving party is entitled to judgment as a matter of law, per Federal Rule of Civil Procedure 56(c). The party seeking summary judgment must first establish the absence of a genuine issue related to an essential element of the opposing party’s claim. If successful, the burden shifts to the opposing party to present specific facts indicating a genuine issue for trial. Courts must draw all reasonable inferences in favor of the non-moving party and are not permitted to weigh evidence at this stage.

In the case at hand, Safeway requests that the court limit its liability to each class member to the total amount of their most recent online order before December 23, 2014, the date when customers had to expressly consent to the current Special Terms. Safeway cites a provision in the Special Terms that limits liability for damages to the amount paid for the last online order prior to any claimed injury. Safeway argues that December 23, 2014, should be the operative date for assessing claims, as it marks the last opportunity for class members to incur losses due to Safeway's alleged breach.

The plaintiff contends that this limitation does not affect damages, asserting that each purchase’s markup, made in violation of the Special Terms, constitutes a separate injury and that these amounts are less than what class members paid for their purchases. The court aligns with the plaintiff’s interpretation of the limitation provision. It notes that limitation of liability clauses are generally enforceable unless deemed unconscionable or contrary to public policy. Such clauses will be strictly construed, with ambiguities resolved against the party seeking to limit liability. Safeway argues that its interpretation indicates that class members cannot recover damages exceeding their most recent order amount prior to the specified date, characterizing its liability limitation as broadly applicable to multiple injuries or losses arising from an ongoing business relationship.

Safeway's interpretation of its contract, which asserts that damages for injuries from using the online store are limited to the most recent purchase, is not supported by the contract's language. The limitation provision specifies that damages for "any liability" are capped at the total amount paid by the individual during their last use of the online shopping service before the injury occurred. This means that if a customer experiences multiple injuries or claims, the contract does not restrict their recoverable damages to the last order made. Safeway argues that the phrase "strictly limited to the aggregate dollar amount paid by you" indicates a clear intent to limit damages; however, this interpretation would render the phrase "immediately prior to the claimed injury, loss, or damage" meaningless. The plaintiffs' interpretation, which maintains that damages are limited to the last purchase linked to the claim, does not eliminate the strict limitation Safeway intended, as it still restricts damages to the amount paid under the contract. Additionally, the plaintiffs' view protects Safeway from liability for any consequential damages beyond the purchased amount, in line with California law. Ultimately, the wording of the provision does not support Safeway's argument, as it could have drafted the provision more clearly if that was its intent. For example, if a customer bought wine worth $479.90 that was not delivered, the relevant transaction for damages would be the purchase that caused the claim, not a general limitation based on the last order made.

The customer can pursue separate breach of contract claims for each undelivered purchase, with the most recent use of the online service defining the claim in relation to the breach. Class members using Safeway.com multiple times can recover for each breach of contract, as the limitation of liability applies per claim, allowing recovery up to the amount paid for each transaction. Since the markup for each breach is minimal compared to the total payment, the limitation of liability does not hinder recovery. 

The plaintiffs seek summary judgment for damages equivalent to the full markup charged for items online versus in-store prices. According to California Civil Code § 3300, damages should compensate for detriment caused by the breach. The court found that Safeway's Special Terms guaranteed that prices online would match those in the physical store. Safeway acknowledges breaching the 'price parity promise' but disputes that this entitles class members to recover the total markup, asserting that customers accepted the prices, including the markup, at checkout. Safeway claims the benefits derived from the price parity promise are complex to quantify and cannot be simply calculated as a straightforward difference.

Safeway contends that the Plaintiffs' damages model, which suggests awarding class members the total price difference between online and physical store prices, is flawed. Instead, Safeway proposes a model that utilizes diverse data and statistical analysis to assess the benefit class members derived from the price-parity promise and the damages incurred due to its breach, estimating total damages between $3.8 million and $15.4 million. Safeway asserts the existence of competing damages models is a factual issue for trial; however, the Court disagrees, finding that Safeway’s model does not align with the case facts. Notably, Safeway did not make an "absolute price promise" to online customers, as indicated in the Special Terms that described the displayed prices as "estimated prices only" likely to vary from physical store prices at the fulfillment time. The only commitment made to online customers was a price parity promise, ensuring they would be charged the physical store prices at checkout, which Safeway breached by applying a markup to online prices. Safeway argues that its pricing structure might have been different had it known it would be held to this promise, suggesting that the Plaintiffs' model overlooks benefits from online shopping and could result in a windfall to class members. The Court notes that Safeway's cited cases pertain to food labeling class actions, which are not relevant to breach of contract cases like this one. The appropriate measure of damages under statutes requiring actual reliance should reflect the fraction of the price that represents the value customers placed on the products corresponding to their representations, rather than the total retail or wholesale prices paid.

The case involves a breach of contract regarding the principle that plaintiffs are entitled to damages reflecting the benefit of their contractual bargain. Plaintiffs claim that class members should receive damages equal to the difference between the price they agreed to pay in-store and the inflated prices charged online. Safeway's attempt to introduce offsets based on alleged additional benefits is rejected, as these were not included in the original bargain. Class members are entitled to recover the total markup charged during the specified class period.

Plaintiffs propose a damages calculation using Safeway's "query run," a data query developed by a former analyst, to track the markup on products. The expert, Joseph Anastasi, calculated an aggregate markup of $31,188,492 charged to class members from the implementation date of the markup until the date when Safeway provided notice of it. Safeway disputes the accuracy of this calculation, citing instances where the query run did not reflect the pick store price but instead estimated it based on the charged online price. The query run methodology involves verifying if an item was promotional to determine if a markup should apply, consistent with prior court rulings.

In April 2010, Safeway implemented a new pricing model for regular retail items sold on Safeway.com, introducing a markup based on the price range of items in physical stores. The markup structure applied an additional charge depending on the item’s price: $0.10 for prices between $0.00 and $0.99, $0.20 for $1.00 to $1.99, and $0.30 for $2.00 to $2.99, progressing similarly for higher prices. Campbell's deposition revealed he was unaware of any alternative methods for calculating markups when the pick store price was unknown. Safeway contended that in some cases, no markup was charged, but provided no evidence to support this claim, relying solely on Campbell’s testimony. The court determined that mere speculation could not counter a summary judgment motion.

Safeway also claimed that markups were not consistently applied across all geographic regions or stores, with potential delays in activating the online price zone when new stores opened. However, the plaintiff pointed out that Safeway failed to produce any documentation of this issue during discovery. Campbell estimated that such delays occurred on 10 to 15 occasions, yet Safeway did not identify which stores had delayed markups or which class members were affected, leaving this information undisclosed during discovery.

Both parties agreed that refunds should be deducted from the class award for items returned. While Safeway's expert estimated refunds of $187,131, the plaintiff’s expert calculated $209,230. The plaintiff agreed to a deduction based on his expert’s estimate, resulting in a total recovery of $30,979,262 for Safeway's breach of the price parity promise. Regarding Safeway’s affirmative defenses of waiver, consent, and mutual mistake, the plaintiff argued that Safeway lacked the evidence to support these defenses, warranting full summary judgment for the markup amount.

Safeway conducted multiple surveys between 2009 and 2014 to gather evidence for its affirmative defenses regarding online pricing strategies. In August 2009, prior to implementing an online markup, Safeway surveyed 3,442 customers, revealing that 83% expected equal prices online and in-store, while 10% anticipated higher online prices. Following the markup in 2010, Safeway surveyed online shoppers, finding that 14.2% of respondents expressed dissatisfaction with price equality compared to in-store prices. A separate survey in late 2010 involved 1,139 customers, with 75% of online trial users agreeing they received equivalent prices/promotions. Additionally, a survey linked at the checkout screen in 2010 and 2011 showed that 35% and 37.97% of respondents, respectively, felt prices were not equivalent to local stores.

Safeway also submitted an expert report by Dr. David Lewin, who analyzed the survey data. His first opinion highlights that many surveyed customers were aware of pricing differences and that those aware of higher online prices continued to shop online, suggesting acceptance of the price disparity. Dr. Lewin proposed that further rigorous surveys could be conducted to quantify customer awareness and satisfaction regarding pricing. The plaintiffs have moved to strike Dr. Lewin’s first opinion, arguing that he did not establish the validity and reliability of the surveys used to support his conclusions.

Dr. Lewin's report has been criticized by the Plaintiff for not addressing the low response rate to Safeway's surveys and for employing vague questions not aligned with Safeway's affirmative defenses. While the Plaintiff does not dispute Dr. Lewin's qualifications, they challenge the validity of the survey data he used. Under Federal Rule of Evidence 702, expert testimony is admissible if it aids the trier of fact, is based on adequate data, follows reliable principles, and applies those principles accurately to the case's facts. The Ninth Circuit has ruled that issues with survey methodology affect the weight of the evidence rather than its admissibility. The Court finds Dr. Lewin's report admissible, despite concerns about the surveys' foundations, as previous cases have established that low response rates impact weight, not admissibility. Dr. Lewin has acknowledged the surveys' limitations in his deposition, noting they were not primarily designed to assess customer satisfaction regarding product pricing. The Court will consider the Plaintiff's critiques when evaluating the sufficiency of Safeway's evidence for its affirmative defenses. Additionally, the Plaintiff seeks to strike Dr. Lewin's suggestion for a new survey on customer pricing knowledge, arguing that he did not conduct it before the expert discovery deadline of June 5, 2015. Parties must disclose expert opinions and supporting facts according to court schedules, and non-compliance may result in sanctions under Federal Rule of Civil Procedure 37(b).

The court has the discretion to impose sanctions under Rule 37, which may include precluding late-filed evidence unless the failure to provide information is "substantially justified" or deemed "harmless." Disruption to the court's schedule, however, is not considered harmless. In this case, the plaintiff argues that Safeway has not justified its delay in conducting a necessary survey, which is critical to the motion for summary judgment regarding damages, especially since the case has been pending for four years. Safeway claims the plaintiff's criticism of the proposed survey is premature, but the plaintiff contends that proposing additional discovery after the close of expert discovery is inappropriate. The court will strike Dr. Lewin's second opinion on the survey because Safeway has not demonstrated that the late introduction of such evidence is justified or harmless.

Regarding the sufficiency of evidence for Safeway's affirmative defenses of mutual mistake, waiver, and consent, Safeway argues that factual disputes exist that warrant denial of summary judgment on damages. Specifically, it asserts that a significant portion of the class was aware of the price differential. The plaintiff counters that Safeway lacks sufficient evidence to support these defenses, bearing the burden of proof at trial. In summary judgment proceedings, the plaintiff must initially demonstrate the absence of a genuine issue of material fact, after which the nonmoving party must present facts to show a genuine issue for trial. A party cannot create a genuine issue of material fact merely through assertions in legal memoranda. 

In addressing the mutual mistake defense, the court finds that Safeway has not presented evidence to support this claim. According to California law, a written contract is presumed to reflect the true intent of the parties, but it may be revised if it can be shown that it does not accurately express that intent due to fraud or mutual mistake.

Safeway's opposition to the Plaintiffs' motion for summary judgment lacks any argument regarding the defense of mutual mistake. Safeway contends that if class members continued to purchase items after recognizing the price discrepancies between online and in-store prices, a jury could determine that they are barred from claiming damages for orders placed post-discovery of this difference. To establish mutual mistake, Safeway must demonstrate that both the class members and Safeway intended to contract for the online prices to be higher than those in-store. However, Safeway failed to present any evidence about the class members' intent during contract formation, nor did it disclose the pricing algorithm at the time of signing the Special Terms. Consequently, the court concludes that no class member could have intended to agree to higher prices they were unaware of, leading to the granting of the Plaintiffs' motion for summary judgment on this defense.

Similarly, Safeway has not provided sufficient evidence to support a waiver defense against any class member. Waiver requires proof of an existing right, knowledge of that right, and intention to relinquish it, or conduct that leads to a reasonable belief of relinquishment. The burden of proof lies with the party claiming waiver, who must provide clear and convincing evidence. Safeway has not shown that any class member knowingly relinquished a contractual right to price parity, as its 2009 survey occurred before the markup and thus lacks relevance; its 2010 survey indicated that a significant percentage of customers expressed dissatisfaction with pricing parity.

Customer dissatisfaction does not imply awareness of a markup or the right to price parity. Customers may have mistakenly believed that promotional prices differed online versus in stores or expected online prices to be lower. Safeway lacks evidence that dissatisfied survey respondents from a 2010 email survey placed subsequent online orders. The survey targeted randomly selected customers post-delivery, and no follow-up orders by dissatisfied respondents were documented. 

In a separate 2010 interview survey of 200 prior users, 150 agreed they could obtain the same prices online and in-store, yet 50 did not completely agree and potentially expressed uncertainty or did not respond. This does not demonstrate knowledge of the markup or price parity rights. Additionally, surveys from 2010 and 2011 asking customers about price similarities did not clarify customer intentions regarding relinquishing price parity rights. A negative response does not indicate awareness of online price differences, markup extent, or violations of price parity in the Special Terms.

Dr. Lewin's assertion that survey results reflect a "practical cognitive acceptance" of price differentials is insufficient to counter summary judgment regarding waiver of rights. Even with acceptance of his claim based on the flawed surveys, there is no evidence that customers were aware of or intended to waive their price parity rights while using the online store.

Safeway has not provided adequate evidence to demonstrate that class members knowingly waived their contractual rights. The voluntary payment doctrine, which prevents recovery of funds paid with full knowledge of the facts, does not apply here, as excessive payments made without knowledge of their excessiveness can be recovered. The determination of whether a payment was excessive relies on what the plaintiff knew at the time, not on their ability to discover the information. Safeway lacks evidence that class members were aware of online price markups compared to in-store prices or that these markups violated the price parity promise in the Special Terms. Furthermore, the online pricing algorithm was not disclosed, limiting class members' ability to obtain necessary information. Consequently, survey evidence does not convincingly support Safeway's voluntary payment defense.

Additionally, Safeway's claim that class action procedures hinder its ability to present affirmative defenses is addressed. The class action mechanism cannot infringe upon a party’s substantive rights, and a defendant is entitled to present defenses, even if they complicate litigation. Examples illustrate that difficulties in calculating defenses on a classwide basis do not negate a defendant's right to assert them. The Court has not granted summary judgment against Safeway due to the complexity of its defenses but rather because it has failed to provide competent evidence needed to prove the state of mind of individual class members at relevant times.

Safeway has opposed class certification and sought decertification, yet failed to demonstrate how decertification would facilitate proving that individual class members were aware of the price markup at the time of their orders. Safeway's concealment of the markup during the class period makes it unsurprising that no evidence shows class members had knowledge of it. Additionally, Safeway's attempts to seal information regarding how the online markup was calculated undermine its argument that the public was informed. The court’s certification order highlighted that Safeway's defenses incorrectly assume class members irrationally chose to pay a fee they were not contractually obliged to. A party cannot create a genuine issue of material fact solely through assertions in legal documents. Without evidence that class members knowingly accepted unwritten terms, Safeway cannot avoid summary judgment for breaching a written contract.

The plaintiff is entitled to prejudgment interest of 10% per annum from the time of breach under California Civil Code Section 3289(b). Furthermore, the plaintiff filed a second summary judgment motion regarding Safeway’s liability to class members who registered before 2006. Safeway contends this motion violates Civil Local Rules and the Court’s Standing Order, which limit motions for summary judgment without prior leave of court. The plaintiff argues that the Court implicitly granted permission for this motion during a reconsideration order related to earlier summary judgment motions. However, the Court clarified that the reconsideration order did not permit the filing of a new motion and did not address class members who registered before 2006.

The order clarifies that the Plaintiff is not barred from seeking future summary judgment on specific issues. However, the court distinguishes this from granting permission for an additional motion, emphasizing that the Plaintiff had alternatives—such as incorporating arguments in existing filings or seeking leave for a second motion—but did not pursue these options. Consequently, the court is typically reluctant to consider the merits of the current motion. Nevertheless, given the court's previous ruling on damages, the only remaining issue pertains to Safeway's liability for class members who registered before 2006. To avoid prolonged litigation on this extensively briefed issue, the court decides to address it directly.

The court concludes that the Plaintiff is not entitled to summary judgment regarding the claim that pre-2006 class members paid the same prices online as they did in physical stores. The previous motion for summary judgment focused on members who registered starting in 2006, when Safeway's grocery delivery service began online, and established that these customers had to agree to specific Terms and Conditions, including a price parity promise. Prior to 2006, Safeway's delivery was managed by GroceryWorks, which it asserts was a separate entity. Although the Plaintiff presented evidence that similar price parity terms were posted online before 2006, they failed to prove these class members assented to those terms, which is essential for establishing a contract under California law. The lack of evidence showing that pre-2006 customers agreed to the Terms and Conditions prevents the granting of summary judgment.

Plaintiff argues for summary judgment based on circumstantial evidence indicating that the registration process remained unchanged before and after 2006, citing historical FAQs from Safeway’s website that referenced the ability to view terms during registration. A declaration from Safeway’s corporate designee, Steve Guthrie, supports the claim that users must check a box to register. Although this evidence could suggest that users prior to 2006 agreed to the Special Terms, it is insufficient to fulfill Plaintiff's burden for summary judgment. As a secondary argument, Plaintiff contends that the visibility of the Special Terms on the registration page meets the preponderance standard for contract formation through a "browse-wrap" agreement, where users are assumed to assent by using the website. The determination of such an agreement depends on whether the site reasonably informs users about the terms, which involves evaluating the conspicuousness and placement of the terms hyperlink. However, the Court finds that no valid browse-wrap agreement was formed for users registering before 2006 due to a lack of evidence regarding the registration page's layout and the link to the Special Terms. Consequently, Plaintiff's motion for summary judgment regarding Safeway’s liability to pre-2006 registrants is denied. The Court grants Plaintiff's motion for breach of contract damages related to class members and denies Defendant's motion on limitation of liability. The Plaintiff is instructed to submit a judgment form detailing amounts due to resolved class members. The Court does not address Plaintiff's arguments regarding the unconscionability of the limitation of liability provision since it does not accept Safeway’s interpretation of that provision.

Safeway asserts in its reply brief that the Plaintiff's interpretation of the limitation of liability provision conflicts with the Court's previous partial summary judgment ruling. Safeway claims that the Plaintiff previously maintained that the Special Terms constituted a single contract for all class member purchases, and thus cannot now assert that each order is a separate contract. Generally, new arguments introduced in a reply brief are not considered by the Court. However, even if considered, Safeway's argument would fail because the Court has not ruled out the formation of a new contract with each order. The summary judgment indicated that class members who registered under the original Special Terms and made subsequent purchases, without notice of changes, were not bound by uncommunicated terms.

The limitation of liability provision applies to damages per claimed injury rather than per contract, meaning class members incurred an injury each time they were overcharged in violation of the agreed-upon Special Terms. The Plaintiff seeks to exclude certain opinions from Safeway's expert, Joseph Anastasi, regarding the damages calculation, including assertions that some class members placed no material value on price parity, that those aware of the markup should be excluded from damages, and that the damages theory did not account for special promotional discounts. Anastasi's model, which does not award the total markup to class members, is deemed legally irrelevant by the Court.

Additionally, Safeway's argument that the prices charged were consistent with delivery receipts is countered by the fact that these receipts were provided post-delivery, and therefore did not constitute a price promise at the time of sale. The Court notes that reliance is not necessary for a breach of contract claim. Initially, the Plaintiff included claims under UCL, FAL, and CLRA, but these claims are no longer part of the case.

The Court declined to certify a class based on liability theories requiring "actual reliance," noting that most $afeway.com customers likely did not see the alleged misrepresentations during registration. Safeway's evidence presented was incomplete, cutting off mid-question regarding prices and promotions. Safeway criticized the Plaintiff for opposing a case management conference intended to discuss trial planning and damages, despite Safeway's indication of a potential expert survey to support its defenses. The burden to prove these defenses lies with Safeway, and the Plaintiff was not obligated to aid in obtaining an expert. Safeway reported that a notable percentage of customers responded "No" to certain inquiries, but these figures were unverified by the Court and did not clarify the respondents' intent regarding contract claims. The Plaintiff's brief argued that there was no genuine dispute over which version of the Special Terms governed the class members' contracts, a matter previously left open by the Court. The Court deemed it unnecessary to determine which version was operative at any given time, and the Plaintiff later withdrew this argument. A motion submitted by the Plaintiff to supplement the summary judgment record with a declaration from a former employee was denied, as it was filed too late without prior approval, with the Plaintiff citing inadequate preparation leading up to the summary judgment hearing. The Court did not address whether the former employee could testify at trial.