Question

R. J. Reynolds Tobacco Company (RJR) operated a customer rewards program, called Camel Cash, from 1991 to 2007. Under the terms of the program, RJR urged consumers to purchase Camel cigarettes, to save Camel Cash certificates included in packages of Camel cigarettes, to enroll in the program, and, ultimately, to redeem their certificates for merchandise featured in catalogs distributed by RJR.

The plaintiffs were 10 individuals who joined the Camel Cash program by purchasing RJR’s products and filling out and submitting signed registration forms to RJR. RJR sent each plaintiff a unique enrollment number that was used in communications between the parties. These communications included catalogs RJR distributed to the plaintiffs, containing merchandise that could be obtained by redeeming Camel Cash certificates.

From time to time, RJR issued a new catalog of merchandise offered in exchange for Camel Cash, which it either sent on request or mailed to consumers enrolled in the program. The number of Camel Cash certificates needed to obtain merchandise varied from as few as 100 to many thousands, and this encouraged consumers to buy more packages of Camel cigarettes and to save Camel Cash certificates to redeem for more valuable items.

RJR honored the program from 1991 to 2006, and, during that time, Camel’s share of the cigarette market nearly doubled, from approximately 4 percent to more than 7 percent. In October 2006, however, RJR mailed a notice to program members announcing that the program would terminate on March 31, 2007. The termination notice stated: “As a loyal Camel smoker, we wanted to tell you our Camel Cash program is expiring. C–Notes will no longer be included on packs, which means whatever Camel Cash you have is among the last of its kind. Now this isn’t happening overnight—there will be plenty of time to redeem your C–Notes before the program ends. In fact, you’ll have from OCTOBER ’06 through MARCH ’07 to go to camelsmokes.com to redeem your C–Notes. Supplies will be limited, so it won’t hurt to get there before the rush.”

Beginning in October 2006, however, RJR stopped printing and issuing catalogs and told consumers that it did not have any merchandise available for redemption. Several of the plaintiffs attempted, withoutPage 198 success, to redeem C–Notes or obtain a catalog during the final six months of the program. The plaintiffs had saved hundreds or thousands of Camel Cash certificates that they were unable to redeem.

In November 2009, the plaintiffs filed a class action complaint against RJR. They alleged breach of contract and promissory estoppel, among other claims, because RJR’s actions had made the plaintiffs’ unredeemed certificates worthless. The defendant argued that it had no bilateral contract to breach because the plaintiffs had not promised to do anything. The trial court agreed and dismissed the complaint. The plaintiffs appealed. How do you think the appellate court ruled, and why? [Sateriale v. R.J. Reynolds Tobacco Co., 697 F.3d 777, C.A.9 (Cal. 2012).]

Answer 1