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« Law review articles of interest on class actions and CAFA | Main | "Class Actions Hamstrung in Prop 64 Cases" »

Wednesday, July 12, 2006

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John Hurley

If the Supreme Court holds that Prop. 64 applies to cases pending at the time of passage, how would this implicitly overrule Pfizer?

Kimberly

Unless the decision is based on mechanical application of the so-called "statutory repeal rule," the only way the Supreme Court could hold that the amendments apply to pending cases is by concluding either that (a) the amendments are merely procedural or (b) the voters intended retroactive application. Prop. 64 has no express retroactivity language, or any other unambiguous indicia of retroactive intent. Therefore, if the Supreme Court holds that the amendments apply to pending cases, its reasoning will have to be that the amendments are not substantive, but merely procedural. Pfizer cannot be reconciled with such a holding.

John Hurley

Thanks. I see what you are saying now.

One thing to note is that the reliance element described in the Pfizer case is only an actual reliance requirement, not a reasonable reliance requirement. Since the "likely to decieve" standard is out the window, it seems that the "reasonable person" touchstone is also gone.

Unlike common-law fraud, so long as a plaintiff actually relied on a false statement, it seems that a case could be stated even if that reliance was unreasonable. The individual showing required for reliance might cause problems in certifying class actions, but the law could still be very plaintiff-friendly in the case of an individual plaintiff suing for fraudulent business practices.

Kimberly

Interesting thought. So the remaining differences between the UCL's "fraudulent" prong according to Pfizer and common-law fraud are (1) the reliance can be unreasonable, so long as it is actual; (2) the strict liability element remains unchanged (in other words, intent to defraud need not be proven); and (3) monetary relief remains limited to "restitution." Any others?

John Hurley

I think that's right.

But to refine my previous thought a little bit, I suspect that at some point reasonableness of reliance may get inserted back into the equation.

Reading Pfizer and the new "as a result of" causation element in the UCL, there is no language requiring that a plaintiff's reliance be reasonable. So reasonableness of reliance does not appear to be an element that a plaintiff would have to plead and prove.

But since (following Cortez) equities can be considered by the courts in deciding whether or not to impose UCL remedies, defendants could try to show that a plaintiff's reliance was unreasonable. It wouldn't necessarily defeat a finding of liability, but it might be considered in a balancing of equities on the availability of remedies.

Unreasonable conduct by the plaintiff could effectively become an affirmative defense, even if reasonable reliance is not an element of a prima facia case of fraudulent business practices.

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