Class Actions Brief Blog

A recent North Carolina Supreme Court decision, Jackson v. Home Depot U.S.A. Inc., 919 S.E.2d 199 (N.C. 2025), highlights the importance of choice of law issues underlying putative class actions.

Plaintiff bought a home water treatment system from Carolina Water Systems while the company was offering rebates if customers made referrals. Carolina Water Systems was the authorized provider for these treatment systems through Home Depot in North and South Carolina. After plaintiff was sued by his credit card company to collect the amount owed for his system installation, plaintiff filed a putative class action seeking to invalidate all sales by Carolina Water Systems while the referral program was in place. Both North and South Carolina have statutes that prohibit offering rebates or discounts contingent upon referral of other customers. N.C.G.S. § 25A-37; S.C. Code Ann. § 37-2-411.

The trial court certified a class, noting that although the class included both North and South Carolina residents, the claims did not differ between class members across states. The defendants appealed.

On appeal, the North Carolina Supreme Court held that there is no explanation that would support applying North Carolina’s referral statute to transactions occurring in South Carolina. North Carolina law cannot regulate activity that took place in other states, and any choice of law provision in a South Carolina contract would be evaluated by South Carolina law and subsequently invalidated by the referral statute. Claims by class members of each state must, therefore, be evaluated under their state’s respective referral statute.

The Court further held while both states prohibit referrals, South Carolina’s statute contains an inducement requirement – that the referral benefit actually induced the customer to purchase the product. North Carolina’s referral statute does not. Because some class members’ claims would require individual trials on inducement, the North Carolina Supreme Court held that the predominance prong was no longer satisfied. The Court therefore vacated the trial court’s class certification order.

Consequently, parties should pay particular attention to the elements of state law claims when seeking to combine plaintiffs across states. While standards may seem similar, slight variations in state law may make or break class certification.