On Friday, in R&B Auto Center, Inc. v. Farmers Group, Inc., ___ Cal.App.4th ___ (Jun. 9, 2006), the Court of Appeal (Fourth Appellate District, Division Three) reinstated a UCL claim for injunctive relief, holding that the trial court had improperly employed the motion in limine procedure to dismiss that cause of action. The opinion has several interesting components:
First, the Court held that the plaintiff's UCL claim was separate and distinct from its insurance bad faith/breach of contract claim:
After the trial court ruled on the motions in limine and held that there was no coverage as a matter of law, it also dismissed the three causes of action suggested by [defendant] Truck Insurance — those for breach of contract, bad faith and unfair competition. We cannot see why a ruling that the insurance contract provided no coverage for the Peralta litigation claim should translate into a ruling that [plaintiff] R & B cannot state a cause of action seeking to enjoin unfair business practices. Whether the insurance contract provided for lemon law coverage for used car sales was a question of law that the court readily answered by reviewing that contract. But the fact that the insurance contract limited lemon law coverage to new car sales hardly proves that Truck Insurance does not engage in unfair business practices in the sale of its new car lemon law coverage to used car dealerships. The court erred in disposing of the unfair business practices cause of action just because it held that the insurance contract did not provide coverage for the Peralta litigation.(Slip op. at 33-34.)
Second, the Court reaffirmed its holding that Prop. 64 applies retroactively to pending cases, in part because the plaintiff conceded the point:
We invited the parties to file supplemental briefs on the retroactivity of Proposition 64 and the effect of any retroactive application on the case before us. The parties all agreed that the proposition is retroactive, citing this court’s opinion in Benson v. Kwikset Corp. (2005) 126 Cal.App.4th 887, review granted April 27, 2005, S132443. The Supreme Court granted review of Benson, and several other cases addressing the retroactivity of Proposition 64, after the filing of the supplemental letter briefs in the matter before us. Pending a Supreme Court decision on the question of retroactivity, the trial court is directed to apply the Proposition 64 statutory amendments to this case.(Slip op. at 38-39.)
Third, the Court interpreted the "suffered injury in fact and lost money or property" language of Prop. 64:
Truck Insurance says that R & B lacks standing, under Business and Professions Code section 17204, to maintain the unfair competition cause of action because it has not alleged that it has “lost money or property as a result of unfair . . . competition.” With this assertion, we certainly disagree. R & B alleges that it paid premiums for illusory coverage and it had to make payment on a lemon law claim that it would not have had to pay had the Truck Insurance policy said what it was represented to say. This is an allegation of loss caused by the purported misrepresentations concerning the scope of coverage. The standing requirement is met.(Slip op. at 39-40 (emphasis added).)
Fourth, the Court addressed (without deciding) whether a UCL claim seeking injunctive relief only must satisfy the class certification requirements of Code of Civil Procedure section 382:
Next, Truck emphasizes that R & B cannot seek injunctive relief on behalf of the general public unless it meets the requirements of Code of Civil Procedure section 382, with reference to class actions. .... Truck Insurance states that R & B may only seek class action injunctive relief if it can demonstrate compliance with these requirements. However, Truck Insurance does not assert that R & B cannot do so.(Slip op. at 40.)
R & B contends that it can meet the class certification requirements and points us to its offer of proof with respect to the anticipated testimony of Fena, Rusich and Sweet. R & B requests that this court remand the matter so that it will have an opportunity to show that it can satisfy the requirements of Code of Civil Procedure section 382. It is only fair to grant this request, since at the time R & B filed its third amended complaint it was not required to comply with Code of Civil Procedure section 382.
Evidently, the plaintiff chose not to raise the argument that an injunctive-relief-only UCL claim should not have to satisfy section 382, and to argue instead that it can meet section 382's requirements (which is probably the better strategy in many situations). This case could be an example of the "be careful what you wish for" aspect of Prop. 64. On remand, the plaintiff will seek formal class certification of the injunctive relief claim, and based on the opinion alone, I see no reason why the plaintiff should not also amend to seek restitution (at least for itself, if not on a classwide basis). Overall, the amended UCL claim could enhance, not lessen, the defendant's potential exposure.