My sincere and eternal thanks to the reader who attended this morning's oral argument in the Petrini Van & Storage case, and provided this detailed summary:
Petrini Van & Storage v. Superior Court,
Third Appellate District, case no. C049042
Oral argument on Friday, August 26, 2005, 9:30 a.m.
Panel: Justices Richard Sims, Rod Davis, Tani Cantil-Sakauye
Attorneys: Stephen C. Tedesco, Littler Mendelson, San Francisco argued for Petitioner. Kimberley Owens appeared only for Petitioner. Matthew J. Gauger, Weinberg Roger & Rosenfeld, Sacramento, argued for Real Party in Interest.
Writ from Sacramento Superior Court, Judge Loren McMaster's denial of defendant Petrini Van and Storage's Motion for Judgment on the Pleadings.
Summary of Oral Argument:
Justice Sims expressed awareness that whomever loses the decision by the Third District Court would petition for review before the Supreme Court, which counsel for petitioner acknowledged.
The sole issue addressed was whether Prop. 64 was applicable to pending cases. The focus was on whether it affected a vested right. Petitioner contended that the right to bring a representative action was purely statutory, and did not exist at common law. Tedesco contended that the substantive rights in this action, the prevailing wage laws, were not affected by Prop. 64.
Each of the three Justices suggested that the matter might be returned to the trial court to cure the standing defect by allowing the Union or a plaintiff with a cognizable injury to substitute in as plaintiff. Tedesco said that is a different lawsuit, the public withdrew this plaintiff's right to proceed with this suit by enacting Prop. 64.
Gauger, attorney for real party plaintiff/respondent Munoz, contended that the trial court's tentative ruling was well reasoned. Munoz had arranged his affairs to pursue a Business & Professions Code section 17200 suit. Justice Cantil questioned how an uninjured plaintiff could "arrange his affairs". Gauger responded that he did so by deciding to file individually, as a representative of the public, rather than as the carpenter's union, to make sure that the carpenters are paid the prevailing wage. He asked that the stay be lifted, and Munoz be permitted leave to amend, or alternatively, that another individual replace Munoz as the plaintiff.
Justice Sims interjected that everyone in the lawsuit has a substantive right at stake. He stated that this was "just a procedural standing issue". It was very hard for him to believe that the people of California cannot change standing in the middle of a suit. He read portions of Prop. 64, which referred to cases being "prosecuted", stating he understood the use of the word "prosecuted" to meant that the voters intended to change standing midstream. If Prop. 64 was only intended to apply in the future, the drafters would not have to say "and prosecuted", just writing "filed" would be enough.
Justice Davis inquired at the end of the argument, whether the case could be remanded to secure the cooperation of a public prosecutor. Tedesco responded that the prosecutor has not filed, and the right to bring a suit, includes the right not to sue.
It appears that the Third District will find that Prop. 64 is procedural only, and does not affect substantive rights, and it was written to reflect an intent that it be applied to pending cases. The Court may reverse and remand, to permit plaintiff leave to amend.
Tomorrow at 9:30, the Third District will hear oral argument in Petrini Van & Storage v. Superior Court, no. C049042. As you may recall, the trial judge in this case (Loren McMaster) issued one of the most detailed and best-reasoned orders holding that Prop. 64 does NOT apply retroactively to pending cases. The order specifically invited appellate review under Code of Civil Procedure section 166.1, and the Third District issued an alternative writ in March. With all the recent activity in the Supreme Court, the Prop. 64 question might not be as important to the appellate panel as it would have been a few months ago, but the argument should still be quite interesting. This will be the first ruling from the Third District on Prop. 64 retroactivity. Calling all Sacramento practitioners: if you attend and send me a report, I'd love to put it up.
The case involved the scope of the Attorney General's power to obtain UCL remedies against an insolvent insurance company whose assets were under control of the Insurance Commissioner. In 1999, the AG intervened in a qui tam action against the insolvent insurer, which was later removed to federal court. The Ninth Circuit asked the California Supreme Court to decide whether the AG's suit could proceed concurrently with another action (also removed to federal court) that the Insurance Commissioner was pursuing. (Slip op. at 1-5.) The Supreme Court separately addressed each UCL remedy that the AG sought (restitution, civil penalties, and injunctive relief).
The opinion (authored by Justice Moreno) mentions Prop. 64 several times, but does not breathe a word about retroactivity, which is logical, since Prop. 64 did not really change anything for public prosecutors. A few things are interesting about the opinion from the perspective of private UCL litigation.
First, the Court quotes the post-Prop. 64 language about "injury in fact" even though there was no reason to mention it given that the AG's suit was based, of course, on the public prosecutor provisions:
"Through the UCL a plaintiff may obtain restitution and/or injunctive relief against unfair or unlawful practices in order to protect the public and restore to the parties in interest money or property taken by means of unfair competition." (Kraus v. Trinity Management Services, Inc. (2000) 23 Cal.4th 116, 126 (Kraus); see Bus. & Prof. Code, § 17204.) A UCL action may be prosecuted by the Attorney General, by certain specified local law enforcement officials, "or by any person who has suffered injury in fact and has lost money or property as a result of such unfair competition.” (Ibid.)
(Slip op. at 19-20; see also id. at 25-26 (also quoting Prop. 64).) The quotation from Kraus suggests that the Court believes that the underlying definition of "restitution" is unchanged, and that Prop. 64 only affected who can file the suit.
Next, the Court held:
Business and Professions Code section 17205 provides: "Unless otherwise expressly provided, the remedies or penalties provided by [the UCL] are cumulative to each other and to the remedies or penalties available under all other laws of this state." Therefore, the fact that there are alternative remedies under a specific statute does not preclude a UCL remedy, unless the statute itself provides that the remedy is to be exclusive. (See Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 573 (Stop Youth Addiction).) We conclude that Insurance Code section 1037, subdivision (f) is such an express limit on the authority of the Attorney General to seek a restitutionary remedy under the UCL.
(Slip op. at 20.) Such express limits are relatively rare; most published cases involve less clear-cut situations. As the Court observed: "We have left open the question whether Business and Professions Code section 17205 precludes the Legislature from impliedly repealing a UCL remedy if the two are 'clearly repugnant and so inconsistent that the two cannot have concurrent operation.' (Stop Youth Addiction, supra, 17 Cal.4th at p. 574.) Because we decide the limit on UCL remedies is express in the present case, we need not decide that question." (Slip op. at 20 n.6.)
Consider the following fact pattern. An unaffected plaintiff filed a UCL "general public" action several years ago and has been litigating it ever since. After the November election, the defendant moved for judgment on the pleadings based on Prop. 64. The trial court held that Prop. 64 applies retroactively to pending cases, granted the motion, and dismissed the action with prejudice. The defendant, as the prevailing party, filed a memorandum of costs, seeking several thousand dollars in expenses incurred litigating the case over the past few years. Assume the case was meritorious when filed. The trial court denies the plaintiff's motion to tax, and makes a significant costs award.
A reader has suggested to me that Prop. 64, so applied, is an unconstitutional bill of attainder. The argument would go like this. If Prop. 64 applies to cases filed before its effective date, then it simply amounts to a decree that unaffected UCL plaintiffs shall lose their cases and shall become liable for the prevailing parties' costs. Moreover, the ballot materials and the proponents' advertising demonstrate that the intent of the amendment was to single out unaffected plaintiffs (and their lawyers) and punish them for the UCL cases they filed in the past. Once the amendment passed, there was nothing they could do to avoid becoming liable for costs.
I have to reserve final judgment on this until I look more closely at the caselaw on bills of attainder, but it does sound compelling. What do others think?
This article begins: "If you are not yet using RSS, you are missing out on the single best way to get news and updated information via the Internet. An acronym for really simple syndication, RSS is a standard that enables delivery of Web content directly to your desktop." The article is by Robert Ambrogi, author of the blog LawSites. My blog's RSS feed is here.
California Wage Law has an interesting post about Prop. 64 this week. It says that the amendments to the UCL have not stopped so-called "shakedown" suits. Coincidentally, a reader emailed me a copy of the complaint in the new 17200 case that is mentioned in that post. I'll see if I can put it up over the weekend. UPDATE: The pdf file includes the complaint itself but also some handwritten notes, which I can't really post online. In any event, the complaint is well-described in the Wage Law post. I express no view on whether it's a "shakedown" suit or not, but I do agree that Prop. 64 was far broader than necessary to remedy the problems it was meant to fix. A simple amendment requiring court approval of all settlements in UCL cases would have done the trick.
On Wednesday, the Supreme Court issued a "grant and hold" order in Schulz v. Neovi Data Corp. (case no. S134073) (previously published at 129 Cal.App.4th 1 (2005)). What's interesting about this is that the discussion of Prop. 64 retroactivity is in the unpublished portion of the Schulz opinion. Regular readers may recall that I filed (as did counsel for Mr. Schulz) a request for partial publication of other parts of the Schulz opinion, relating to aider and abettor liability under the UCL. This is the first case in which the Supreme Court granted review of an intermediate appellate ruling in which the Prop. 64 retroactivity analysis was unpublished. It could be that the Court granted review because of two explanatory sentences in the introduction and in the conclusion that reveal the outcome of the unpublished Prop. 64 analysis (which was that Prop. 64 applies to pending cases). Many thanks to the reader who alerted me to this development. The case has been added to my list of pending Prop. 64 appeals.
Yesterday's Daily Journal reported on an oral argument before the Ninth Circuit on Monday in which Judge Harry Pregerson rebuked the appellant's counsel for filing an "arrogant" brief that insulted the district judge. Thanks to über-blogger Howard Bashman, the brief in question is available online, along with a further summary of press coverage of the oral argument. According to the Daily Journal:
"Do you regard this as an effective way to present written advocacy?" Circuit Judge Harry Pregerson asked nationally recognized appellate specialist Theodore J. Boutrous Jr. of Gibson, Dunn & Crutcher in Los Angeles. "You slam the district judge?" .... "I was a district judge for 12 years and if I read all that, I wouldn't like it," said Pregerson .... "I think you ought to apologize to the district judge."
Sometimes the line between advocacy and insult can be a fine one (although apparently not in this case). When you represent the appellant, your job is to argue that the trial judge made a mistake, plain and simple. I've always assumed that trial judges understand this reality, and won't take it personally (or retaliate against your client later) if you forcefully argue for reversal. It will be interesting to read a brief that Judge Pregerson believes crosses the line. You can also listen to the oral argument at this link (thanks again to Howard Bashman).
In Pfizer, Inc. v. Lott, ___ F.3d ___ (7th Cir. Aug. 4, 2005), the Seventh Circuit rejected another attempt to remove a case to federal court based on the Class Action "Fairness" Act. But before getting to the CAFA issues, the court (Judge Posner) neatly explained the Supreme Court's holding in Exxon Mobil Corp. v. Allapattah Service, Inc., 125 U.S. 2611 (2005) in a single sentence:
The named plaintiffs stipulated that they would not seek or even accept damages in excess of $75,000, and while the stipulation would not bind the other members of the class, the likelihood that [any class member] had damages in excess of $75,000 was sufficiently remote to cast on [the defendant] the burden of presenting some evidence or argument to establish the plausibility of an inference that at least one member of the class could cross the $75,000 threshold, which would establish jurisdiction over the entire class.
Slip op. at 2 (citations omitted). (I'm glad to find I got it right after my quick read of Exxon when it came down in late June.) (UPDATE: An anonymous commenter points out that I was too quick to endorse Judge Posner's reading of Exxon. Exxon held that if "at least one named plaintiff" (not just any class member) meets the $75,000 jurisdictional threshold, then diversity jurisdiction is present. Thanks to Mr./Ms. Anonymous for pointing this out.)
After determining that diversity jurisdiction was not present under Exxon, the court turned to CAFA. The case was filed in state court on the day before CAFA was enacted, and was removed within thirty days after that. The court rejected the argument that the word "commenced" in CAFA meant the date of removal. Slip op. at 3. It's interesting that the court employed the state-law definition of the word "commenced" in determining its meaning for purposes of CAFA. In Illinois, the filing of the complaint "commenced" the case, so CAFA did not apply. Slip op. at 3. This means that, potentially, CAFA might operate differently in some states than in others. The opinion ended with these words:
This is not to belittle Pfizer's indignation at the plaintiffs' having beat the statute by one day, but their gamesmanship actually hurts its argument. Pharmaceutical and other companies that pressed for the enactment of the Class Action Fairness Act were doubtless acutely aware, as the bill that became the statute was wending its way through Congress en route to enactment, that the prospect of its enactment would spur the class action bar to accelerate the filing of state-law class actions in state courts. Doubtless the companies made their concerns known to Congress. The fact that Congress did not respond by writing "removed" (or "removed after the date of enactment but within 30 days of the orignal filing") instead of "commenced" is telling.
Slip op. at 4. Is it "gamesmanship" to file suit based on the law in effect on the filing date? I would argue not. As the opinion observes, Congress could have made CAFA retroactive if it wished to. Nor should a defendant be "indignant" about being sued if, in fact, it violated the law. But in any event, thanks to the reader who forwarded this case to me. And for more interesting reading, check out the Becker-Posner Blog, which Judge Posner writes with Professor Gary Becker (winner of the Nobel Prize in Economics).
On November 10-11, 2005, Mealey's will present "California Section 17200 Conference: A New Era" at the Four Seasons Resort in Santa Barbara. I was invited to be a speaker, but I have a case scheduled for trial on November 7, three days before the conference begins. That means I won't be able to attend the conference at all, much less speak. I'm disappointed, because it looks like it will be a great event. Many thanks to the organizers, especially co-chair Kirk Patrick, for the invitation.
The Business Section of today's Chronicle has this article on Discover Bank v. Superior Court, ___ Cal.4th ___ (Jun. 27, 2005), which addressed the unconscionability of no-class-action arbitration clauses in consumer contracts. My original posts on Discover Bank are here and here. The article also discusses yesterday's Supreme Court opinion in Grafton Partners, L.P. v. Superior Court, ___ Cal.4th ___ (Aug. 4, 2005), which held that contractual agreements to waive the right to a jury trial are void as contrary to public policy (except in the context of arbitration clauses or other statutorily authorized waivers).
In the published portion of Alan v. American Honda Motor Co., ___ Cal.App.4th ___ (Aug. 2, 2005), the Court of Appeal (Second Appellate District, Division Three) reaffirmed the rule that an order denying certification of an entire class is appealable.
The unpublished portion of the opinion is much more interesting. There, the Court addressed the plaintiff's argument that, given the passage of Proposition 64, a pre-Prop. 64 order denying certification of the CLRA claim, but not the UCL claim, was only a partial denial of class certification, and therefore not appealable:
Plaintiff asserts ... that the order denying plaintiff’s motion for class certification was not the death knell of the class action allegations. According to plaintiff, the trial court’s order was tantamount to a partial denial of class certification, and therefore was not appealable. (See, e.g., Shelley v. City of Los Angeles, supra, 36 Cal.App.4th 692; General Motors Corp. v. Superior Court (1988) 199 Cal.App.3d 247.)
Specifically, plaintiff asserts ... that the recently enacted Proposition 64 transformed the cause of action under Business and Professions Code section 17200 from a representative action to a class action.
Based upon these considerations, plaintiff claims the trial court order denying class certification was only a partial denial of certification, and therefore not immediately appealable. Plaintiff explains that this was a cautionary appeal and that this court should exercise its discretion to consider the premature appeal as a petition for a writ of mandate. (SeeSzetela v. Discover Bank (2002) 97 Cal.App.4th 1094, 1098.) We reject these assertions.
On this record, the trial court order denying certification cannot be construed as a partial denial of class certification. ....
[A]t the time the trial court ruled on plaintiff’s motion for certification, Proposition 64 had not been approved by the electorate. (Berger v. California Ins. Guarantee Assn. (2005) 128 Cal.App.4th 989, 1007, fn. 17 [Proposition 64 took effect on November 3, 2004.].) Thus, none of the class claims were based upon Proposition 64’s modifications of Business and Professions Code section 17200. In any event, plaintiff has offered no explanation as to how the newly-enacted Proposition 64 would broaden the potential class. Plaintiff has offered no explanation as to whether a proposed class under section 17200 of the Business and Professions Code would be comprised of a different class of persons or whether such a class would present different claims.
The trial court’s January 2, 2003, order was the final disposition of all class claims at issue and presented in this litigation. Thus, the trial court order denying plaintiff’s motion for class certification was the death knell of the class claims presented under the Consumer Legal Remedies Act. The order was therefore immediately appealable.
Last Thursday, the Court of Appeal (Second Appellate District, Division Two) handed down People's Choice Wireless, Inc. v. Verizon Wireless, ___ Cal.App.4th ___ (July 28, 2005), and held that the trial court properly sustained the defendant's demurrer to the plaintiff's UCL claim. Because it was an action between competitors, the Court applied the post-Cel-Tech formulation of "unfair." This case probably represents the most detailed exposition of the post-Cel-Tech formulation in a competitor action since Cel-Tech itself was decided.