The UCL Practitioner

"The UCL's 'Unfair' Prong: Recent Case Law Muddies the Waters Even More"

The July/August 2007 issue of Forum (the magazine of Consumer Attorneys of California) has an article by yours truly called "The UCL's 'Unfair' Prong: Recent Case Law Muddies the Waters Even More" (members-only link; login required). It is my first in a regular monthly column that I'm going to be writing for Forum called "The UCL/Class Action Zone."

If you are a plaintiffs' attorney (or a judge, judicial research attorney, etc.) and would like to receive a copy of the article, please email me at uclpractitioner@gmail.com and I'll be happy to send it to you.

Thoughts on Gentry from Wage Law

Michael Walsh of Wage Law has a detailed post on Gentry. Also, tomorrow's Recorder reports that "Bosses Lose on Class Waivers."

Supreme Court reverses Court of Appeal opinion upholding "no class action" arbitration clause: Gentry v. Superior Court

The decision is up. The Supreme Court held 4-3 that the Court of Appeal erred by upholding the "no class action" arbitration clause, notwithstanding the fact that the clause appeared in an employment contract, rather than a consumer contract:

Yet the above quoted passage in Discover Bank was not intended to suggest that consumer actions involving minuscule amounts of damages were the only actions in which class action waivers would not be enforced. Rather, Discover Bank was an application of a more general principle: that although “[c]lass action and arbitration waivers are not, in the abstract, exculpatory clauses” (Discover Bank, supra, 36 Cal.4th at p. 161), such a waiver can be exculpatory in practical terms because it can make it very difficult for those injured by unlawful conduct to pursue a legal remedy. Gentry argues persuasively that class action waivers in wage and hour cases and overtime cases would have, at least frequently if not invariably, a similar exculpatory effect for several reasons, and would therefore undermine the enforcement of the statutory right to overtime pay.

Gentry v. Superior Court, ___ Cal.4th ___ (Aug. 30, 2007) (slip op. at 12.) The case has been remanded for the trial court to redetermine in the first instance whether the arbitration clause should be upheld. I will endeavor to post more on the decision later today and/or tomorrow.

BREAKING NEWS: Gentry to be decided tomorrow

The Supreme Court announced today that it will be handing down its opinion in the Gentry case tomorrow at 10:00 a.m.:

GENTRY (ROBERT) v. SUPERIOR COURT
S141502 (B169805 – Los Angeles County Superior Court – BC280631)
Argued in Los Angeles 6-05-07

This case presents issues regarding the enforceability of an arbitration provision that prohibits employee class actions in litigation concerning alleged violations of California’s wage and hour laws.

When the opinion is posted online, it will be available at this link.

Walsh v. IKON distinguished: Krzesniak v. Cendant Corp.

In Krzesniak v. Cendant Corp., 2007 WL 1795703 (N.D. Cal. June 20, 2007), the court (Magistrate Judge Maria-Elena James) distinguished Walsh v. IKON Office Solutions, Inc., 148 Cal.App.4th 1440 (2007), and granted class certification in a misclassification case:

Finally, in Walsh, the trial court had certified a class of managers, but later decertified the class. Walsh, 148 Cal.App.4th at 1445, 1447, 56 Cal.Rptr.3d 534. The appellate court upheld the decision to decertify based on the lower court's finding that common questions of law and fact did not predominate over individual issues. In decertifying the class, the lower court found that post-certification discovery showed that "the circumstances of each class member's employment differs significantly from every other member of the class." Id. at 1447, 56 Cal.Rptr.3d 534. Here, as discussed above, the Court can make no such finding at this stage in the proceedings. Unlike the plaintiff in Walsh, Plaintiff is not arguing that Defendants could be liable without regard to the work SMs perform. Id. at 1461, 56 Cal.Rptr.3d 534. Further, the proposed class in this case is relatively small and, if such an issue arises after certification, the Court has the ability to manage individual issues through case management procedures, including decertification if deemed necessary. As stated above, there is no "requirement that the courts assess an employer's affirmative exemption defense against every class members' claim before certifying an overtime class action." Sav-On Drug Stores, 34 Cal.4th at 336-37, 17 Cal.Rptr.3d 906, 96 P.3d 194.

Id. at *17.

Reading the Gentry tea leaves

Any day now, the Supreme Court can be expected to hand down its decision in Gentry, the no-class-action arbitration clause case that was argued on June 5th. Meanwhile, the Court continues to issue more "grant and hold" orders in no-class-action arbitration clause cases. Its two most recent such orders were in two cases in which the lower courts struck down the no-class-action provisions. Massie v. Ralph's Grocery Co., no. S153059 (review granted 08/08/07) (blog post on Massie); Firchow v. Citibank (South Dakota), N.A., no. S150386 (review granted 4/26/07) (blog posts on Firchow). This was a break from the Court's prior pattern, which was to grant review in cases in which the lower courts upheld the provisions (presumably so that the error could be corrected) and to deny review in cases invalidating them (which were, of course, correctly decided).

An alert blog reader noticed, however, that in Massie v. Ralph's Grocery, the most recent of these cases, the Supreme Court granted review, but then denied the accompanying request for an immediate stay. Massie v. Ralph's Grocery Co., no. S153159 (order filed 08/08/07). Presumably, the denial will allow the class action to proceed apace in the court system.

So, what does all this mean? Does any of this activity tell us where the Court is headed in Gentry? I confess I'm about ready to give up on my attempts to predict this kind of thing. Comments welcome.

New UCL/class certification decision: Estrada v. FedEx Ground Package System, Inc.

In Estrada v. FedEx Ground Package System, Inc., ___ Cal.App.4th ___ (Aug. 13, 2007), the Court of Appeal (Second Appellate District, Division One) affirmed a judgment in favor of a class of FedEx delivery truck drivers, holding that the trial court correctly determined that the drivers were FedEx employees, not independent contractors, and that their expenses should have been reimbursed pursuant to Labor Code section 2802. The Court also held that some of the expenses were improperly disallowed, and remanded for redetermination of the amount (as well as for recalculation of attorneys' fees under Code of Civil Procedure section 1021.5).

The Court also rejected FedEx's post-trial challenge to the trial court's order granting certification and its approval of plaintiffs' use of representative ("anecdotal") testimony to establish their claims classwide:

The decision whether to certify a class is one within the trial court’s discretion and will be set aside only upon a showing of abused discretion. (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326-327; Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435-436.) On this record, FedEx cannot make the required showing because it is clear that common issues -- whether the drivers were employees and, if so, which expenses would be reimbursable -- predominated. The anecdotal evidence was admitted to show FedEx’s power to interpret the Operating Agreement and was relevant to the class as a whole, not just to the drivers who happened to be the subject of a particular anecdote. FedEx’s failure to raise this point below suggests it understood that it would fail (it did not at any time during the nine-week trial move for decertification on the basis of the anecdotal evidence). (Telles Transport, Inc. v. Workers’ Comp. Appeals Bd. (2001) 92 Cal.App.4th 1159, 1166-1167; Mesecher v. County of San Diego (1992) 9 Cal.App.4th 1677, 1685-1686.)

Slip op. at 15-16 (emphasis added).

Supreme Court extends time to grant or deny review in McAdams v. Monier, Inc.

On Friday, August 24, 2007, the Supreme Court gave itself until October 3, 2007 to grant or deny review in McAdams v. Monier, Inc., no. S154088. If it hadn't, it would have had to grant or deny review during next week's conference. Thanks to the blog reader who emailed me with the tip. Here is my original post on the pending review petition in this case, in which the Court of Appeal reversed an order denying class certification of UCL and CLRA claims.

New CLRA decision: Fairbanks v. Superior Court

In Fairbanks v. Superior Court, ___ Cal.App.4th ___ (Aug. 23, 2007), the Court of Appeal (Second Appellate District, Division Three) held that insurance is not a "good" or a "service" within the meaning of the CLRA. An article in today's Daily Journal, "Appellate Ruling Puts Insurers Outside Consumer Remedies Act" (subscription), reports that a petition for review is planned.

Statement of issues on review in Meyer v. Sprint Spectrum

Late last week, the Supreme Court posted the statement of issues on review in Meyer v. Sprint Spectrum, no. S153846:

This case presents the following issues: (1) Has a person suffered "damage" within the meaning of the Consumer Legal Remedies Act (Civil Code, § 1780, subd. (a)), such as to allow that person to bring an action under the Act if that person is a party to an agreement containing an unconscionable term (see Civil Code, § 1770, subd. (a)(19)), even though no effort has been made to enforce the unconscionable term? (2) Did plaintiffs have standing to seek declaratory relief?

Although the docket does not indicate that the order granting review limited the Court's review to specific issues, it appears that the CLRA claim, not the UCL claim, will be the focus of this case. As I observed here (with a hat tip to Jim Sturdevant), in Meyer, the CLRA claim kind of got pulled down into the Prop. 64 quicksand along with the UCL claim. If the Supreme Court reiterates the distinctions between the two claims, that will be helpful for lower courts and litigants alike. My original post on the grant of review is here.

Supreme Court upholds dismissal of Labor Code and UCL claims: Prachasaisoradej v. Ralph's Grocery

In Prachasaisoradej v. Ralph's Grocery Co., ___ Cal.4th ___ (Aug. 28, 2007), the Supreme Court held 4-3 that the plaintiff employee had not stated a claim for certain alleged Labor Code violations or for violation of the UCL's "unlawful" prong. The majority opinion (by Justice Baxter, with Chief Justice George and Justices Chin and Corrigan concurring) says nothing substantive about the UCL per se, focusing instead on the Labor Code provisions at issue. The opinion begins:

We confront a significant question of California wage law. Defendant Ralphs Grocery Company, Inc. (Ralphs), a supermarket chain, implemented a written incentive compensation plan (ICP or Plan) whereby certain employees of each store were eligible to receive, over and above their regular wages, supplementary sums based upon how the store’s actual Plan-defined profits, if any, for specified periods compared with preset profitability targets. For both target and actual purposes, profits were determined by subtracting store operating expenses from store revenues. Plaintiff claims the Plan’s formula for calculating these supplemental profit-sharing payments thus violated California statutes, rules, and decisions that prohibit an employer from shifting certain of its costs to employees by withholding, deducting, or recouping them from wages or earnings, or otherwise obliging employees to contribute to them.

Slip op. at 1. It concludes:

[W]e hold that Ralphs’ profit-based supplementary ICP, designed to reward employees beyond their normal pay for their collective contribution to store profits, did not violate the wage protection policies of Labor Code sections 221, 400 through 410, or 3751, or Regulation 11070, insofar as the Plan included store expenses such as workers’ compensation costs, cash and merchandise shortages, breakage, and third party tort claims in the profit calculation. The derivative claim of liability under Business and Professions Code section 17200 thus also fails. Accordingly, we will reverse the decision of the Court of Appeal, which reversed the judgment of dismissal entered after the trial court sustained Ralphs’s demurrer to plaintiff’s complaint without leave to amend.

Slip op. at 32.

Supreme Court to hand down UCL-related decision tomorrow: Prachasaisoradej v. Ralph's Grocery Co.

Today, the Supreme Court announced that it will hand down its decision in this case tomorrow:

PRACHASAISORADEJ (EDDY) v. RALPHS GROCERY COMPANY, INC.
S128576 (B165498/B168668 – Los Angeles County Superior Court – BC254143)
Argued in Los Angeles 6-06-07

Does an employee bonus plan based on a profit figure that is reduced by a store’s expenses, including the cost of workers’ compensation insurance and cash and inventory losses, violate (a) Business and Professions Code section 17200; (b) Labor Code sections 221, 400 through 410, or 3751; or (c) California Code of Regulations, title 8, section 11070?

When the decision is posted at 10:00 a.m., it should be available at this link. My prior posts on the case are here, here, and here. The Court of Appeal's opinion is Prachasaisoradej v. Ralphs Grocery Co., 122 Cal.App.4th 29 (2004).

Petition for review filed: McAdams v. Monier, Inc.

On July 5, 2007, a petition for review was filed in McAdams v. Monier, Inc., no. S154088. The petition challenges the Court of Appeal's reversal of a trial court order denying certification of UCL and CLRA claims in a non-disclosure case. McAdams v. Monier, Inc., 151 Cal.App.4th 667 (2007). My original blog post on McAdams is here.

The petition has already been fully briefed. The answer to the petition was filed on July 25, 2007, and the reply was filed on August 2, 2007. Also, I've received copies of three amicus letters in support of the petition (none of which appears on the Supreme Court's docket as of this writing):

• Amicus Letter of CJAC and California Bankers Association (dated 08/16/07)
  

• Amicus Letter of Intel Corporation (dated 08/10/07)
  

• Amicus Letter of VeriSign, Inc. and DENTSPLY International, Inc. (dated 08/17/07)

All of the letters argue that, at a minimum, the Supreme Court should issue a "grant and hold" order pending resolution of In re Tobacco Cases II and Pfizer. They also argue that California law forecloses any possibility of establishing predominance through a classwide presumption of reliance in either a CLRA or a UCL case. But the doctrine of presumed reliance in a fraud-type claim has been well established since Vasquez v. Superior Court, 4 Cal.3d 800 (1971), and no later case has repudiated the doctrine, particularly in a case (like McAdams) that rests on the defendant's failure to disclose material information known to it about the product it was selling. None of the case authorities cited in the letters supports the notion that presumed reliance no longer exists in California jurisprudence in cases involving such facts (which is what the letters basically say). Mirkin v. Wasserman, 5 Cal.4th 1083 (1993), on which the letters rely, was not an omissions case, but instead involved the "fraud on the market" theory, which would have rested on a presumption of reliance by persons who may never have heard the defendants' affirmative misprepresentations at all. The Court refused to adopt the "fraud on the market" theory, but expressly reaffirmed that "actual reliance can be proved on a class-wide basis when each class member has read or heard the same misrepresentations." Id. at 1095. Similarly, "to prove reliance on an omission[, o]ne need only prove that, had the omitted information been disclosed, one would have been aware of it and behaved differently." Id. at 1093. Under Vasquez, this proof can be made on a classwide basis if the same material information was withheld from each class member. Nothing in Mirkin is to the contrary.

Unless the Court gives itself an extension of time, it has until approximately September 4, 2007 to grant or deny review. Therefore, we can expect some action during either today's conference or next week's.

UPDATE: The Supreme Court took no action on this case during its conference on Wednesday, August 22, 2007, so we will have to wait until next week. Also, thanks to the reader who emailed me to point out that the link to the VeriSign amicus letter was broken. The link has now been fixed.

New Ninth Circuit no-class-action arbitration clause decision: Shroyer v. New Cingular Wireless

In Shroyer v. New Cingular Wireless, ___ F.3d ___ (9th Cir. Aug. 17, 2007), the Ninth Circuit struck down a class action waiver in an arbitration clause, concluding "that under the test set forth in Discover Bank v. Superior Court of Los Angeles, 36 Cal. 4th 148 (Cal. 2005), the waiver is both procedurally and substantively unconscionable and, therefore, unenforceable." Slip op. at 10002. The opinion provides this interesting distillation of California law on the subject:

The California Courts of Appeal have construed Discover Bank as providing for a three-part inquiry in order to determine whether a class action waiver in a consumer contract is unconscionable. See Cohen v. DirecTV, Inc., 142 Cal. App. 4th 1442, 1451-53 (2006); Klussman v. Cross Country Bank, 134 Cal. App. 4th 1283, 1297 (2005); Aral v. EarthLink, Inc., 134 Cal. App. 4th 544, 556-57 (2005). Under this three-part inquiry, courts are required to determine: (1) whether the agreement is “ ‘a consumer contract of adhesion’ ” drafted by a party that has superior bargaining power; (2) whether the agreement occurs “ ‘in a setting in which disputes between the contracting parties predictably involve small amounts of damages’ ”; and (3) whether “ ‘it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money.’ ” Cohen, 142 Cal. App. 4th at 1151-53 (quoting Discover Bank, 36 Cal. 4th at 162-63); see also Klussman, 134 Cal. App. 4th at 1297 (summarizing the three parts identified in Discover Bank). Although there are most certainly circumstances in which a class action waiver is unconscionable under California law despite the fact that all three parts of the Discover Bank test are not satisfied, it is unnecessary to explore those circumstances here because the instant action satisfies them all and cannot be distinguished from Discover Bank. Cohen, 142 Cal. App. 4th at 1455.

Slip op. at 10005-06.

California Attorney Guidelines for Civility and Professionalism

On July 30, 2007, the State Bar Board of Governors adopted a new set of California Attorney Guidelines for Civility and Professionalism (pdf). As explained in the introduction, "These voluntary Guidelines foster a level of civility and professionalism that exceed the minimum requirements of the mandated Rules of Professional Conduct as the best practices of civility in the practice of law in California. .... Attorneys are encouraged to comply with both the spirit and letter of these guidelines, recognizing that complying with these guidelines does not in any way denigrate the attorney’s duty of zealous representation." (Via JD Bliss Blog.)

New federal decision re catalyst theory: Trew v. Volvo Cars of N. Am., Inc.

In Trew v. Volvo Cars of North America, LLC, E.D. Cal., Civ. No. S-05-1379 RRB EFB (order filed 07/31/07), United States District Judge Ralph R. Beistline granted final approval of a class action settlement and awarded attorneys' fees under the catalyst theory. The court found that a CLRA notice letter (see Civ. Code § 1782) satisfied the pre-litigation demand requirement of Graham v. DaimlerChrysler Corp., 34 Cal.4th 553 (2004). Thanks to the blog reader who emailed me this order.

Supreme Court grants review in another Prop. 64 "injury in fact" case: Meyer v. Sprint Spectrum

Yesterday, the Supreme Court granted review in Meyer v. Sprint Spectrum, no. S153846. In that case, the Court of Appeal (Fourth Appellate District, Division Three) said that Prop. 64 created a "two-part, statutory standing test," and held that the plaintiffs lacked Prop. 64 standing to challenge unconscionable provisions in their cellular telephone contracts because the defendant had not enforced or threatened to enforce the provisions against them. The Court also held that the plaintiffs' CLRA claim failed. Meyer v. Sprint Spectrum L.P., 150 Cal.App.4th 1136 (2007). My original post on the Meyer decision is available at this link.

This case was decided the day before the State Bar's UCL conference in Los Angeles, at which I spoke on May 18, 2007. Those of you who attended may recall that a copy was handed out to all attendees.

New Ninth Circuit FLSA collective action case: McElmurry v. U.S. Bank Nat'l Assn.

In McElmurry v. U.S. Bank Nat'l Assn., ___ F.3d ___ (Aug. 8, 2007), the Ninth Circuit held that a district court order denying plaintiffs' motion to issue notice of a collective action under section 16(b) of the Fair Labor Standards Act ("FLSA") (29 U.S.C. §216(b)) was not immediately appealable under the collateral order doctrine. The opinion contains this useful explanation of the difference between a class action and a FSLA "collective action":

A “collective action” differs from a class action. See generally CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, 7B FED. PRAC. & PROC. § 1807 (3d ed. 2005). In a class action, once the district court certifies a class under Rule 23, all class members are bound by the judgment unless they opt out of the suit. By contrast, in a collective action each plaintiff must opt into the suit by “giv[ing] his consent in writing.” 29 U.S.C. § 216(b). As result, unlike a class action, only those plaintiffs who expressly join the collective action are bound by its results. See 29 U.S.C. § 256; Partlow v. Jewish Orphans’ Home of S. Cal., Inc., 645 F.2d 757, 758-59 (9th Cir. 1981), abrogated on other grounds by Hoffman-LaRoche Inc. v. Sperling, 493 U.S. 165 (1989). Because non-parties to a collective action are not subject to claim preclusion, giving notice to potential plaintiffs of a collective action has less to do with the due process rights of the potential plaintiffs and more to do with the named plaintiffs’ interest in vigorously pursuing the litigation and the district court’s interest in “managing collective actions in an orderly fashion.” Hoffmann-LaRoche, 493 U.S. at 173. Although § 216(b) does not require district courts to approve or authorize notice to potential plaintiffs, the Supreme Court held in Hoffman-LaRoche that it is “within the discretion of a district court” to authorize such notice. Id. at 171; see Does I thru XXIII v. Advanced Textile Corp., 214 F.3d 1058, 1064 (9th Cir. 2000) (a district court “may authorize the named plaintiffs . . . to send notice to all potential plaintiffs”).

Slip op. at 9453-54. The court held that it lacked appellate jurisdiction over the trial court's order denying the motion for notice to the potential plaintiffs, and that post-judgment appellate review provided an adequate remedy. In particular, it cited the federal rule governing the appealability of class certification orders (which differs from the California rule):

[I]t is well-established that there is no collateral order jurisdiction over a district court decision to certify or not to certify a class action under Rule 23. See Coopers & Lybrand, 437 U.S. at 477 (no collateral jurisdiction over appeal from order refusing to certify the class); Blackie v. Barrack, 524 F.2d 891, 895 (9th Cir. 1975) (no collateral jurisdiction over appeal from order certifying the class).

Slip op. at 9457.

"Engineer vs. lawyer in SUV suit: Court sparring focusses on claims that Ford hid its worries the Explorer was prone to tipping over"

On Saturday, the Sacramento Bee had this article on the Ford Explorer trial. Thanks to the blog reader who emailed me with the link.

Also, today's Recorder has a profile of Judge David De Alba (subscription), who is presiding over the Ford trial. An excerpt:

The Sacramento County Superior Court judge is in the midst of overseeing a three-month long, potentially multibillion-dollar class action against Ford Motor Co. The counsel tables are teeming with lawyers, the briefs are thick, the exhibits are many, and the lengthy testimony about the Ford Explorer's alleged rollover danger can be technical, if not tedious.

And after the plaintiffs surprised everyone by waiving their right to a jury on the first day of trial, De Alba became the center of attention.

"It's a fascinating trial," the judge said recently, declining to say more, given the trial's ongoing status.

....

De Alba will face another new challenge soon. Chief Justice Ronald George has assigned him to a "strike team" of retired and active judges that will temporarily relocate to Riverside County courts to try to whittle away at the backload of cases there. De Alba will leave when the Ford class action ends.

Another no-class-action arbitration clause case: Clark v. First Union Securities, Inc.

In Clark v. First Union Securities, Inc., ___ Cal.App.4th ___ (Aug. 10, 2007), the Court of Appeal (Second Appellate District, Division Three) interpreted the arbitration rules in the Code of Arbitration Procedure of the National Association of Securities Dealers ("NASD"). Those rules expressly make class action and representative claims inarbitrable:

Subdivision (d) of Rule 10301 is entitled “Class Action Claims.” It makes ineligible for arbitration class actions claims submitted as a class action and claims filed by members of a putative or certified class action “if the claim is encompassed by a putative or certified class action filed in federal or state court, or is ordered by a court to an arbitral forum . . . .” (Rule 10301(d)(1)(2).) A party or class member may be compelled to arbitrate if class certification is denied, the class is decertified, the party or class member is excluded from the class by the court or the party or class member elects “not to participate in the putative or certified class action, or, if applicable, has complied with any conditions for withdrawing from the class prescribed by the court.” (Rule 10301(d)(2)(3).)

Pursuant to Rule 10301(d)(2) the arbitration panel may decide if a dispute is “encompassed by a putative or certified class action.” However, “[e]ither party may elect instead to petition the court” to resolve such disputes. Any such petition to the court must be filed within ten business days of receipt of notice that the Director of Arbitration is referring the dispute to a panel of arbitrators.” This rule also prohibits submission of class claims to “an arbitral forum sponsored by a self-regulatory organization for classwide arbitration.”

Slip op. at 3-4 (emphasis in original). The plaintiff argued that the arbitration provisions were unconscionable, but the Court of Appeal did not need to reach that issue because it held, instead, that the arbitration rules, while banning classwide arbitrations, did not make the class and representative claims inarbitrable in any forum. Rather, they could be brought in state court. Slip op. at 18-21, passim. "Simply put, there was no agreement between the parties, nor an intent by the SEC through its Code, that putative and class claims would have no forum for resolution." Id. at 21. Notably, this case involved a pre-Prop. 64 UCL representative cause of action. See id. at 14 n.11.

Supreme Court issues another "grant and hold" order in a no-class-action arbitration case: Massie v. Ralph's Grocery

On Wednesday, August 8, 2007, the Supreme Court issued a "grant and hold" order in another case involving a no-class-action arbitration clause. Massie v. Ralph's Grocery Co., no. S153059. Briefing is deferred pending resolution of Gentry v. Superior Court, no. S141542. In Massie, the Court of Appeal (Second Appellate District, Division Seven) affirmed an order denying an employer's petition to enforce the arbitration clauses in its company dispute resolution policies, citing Discover Bank. Here are the Court of Appeal's unpublished opinion dated 05/14/07 and its modification order dated 05/15/07.

Gentry was argued on June 5, 2007. We should be getting an opinion soon. Another case argued on June 6, 2007, In re Tobacco Cases II, has already been decided. The Court's 90-day period to decide Gentry will expire on or about September 4, 2007.

Some briefs, orders, and an update from the Ford trial

Many thanks to the blog reader who emailed to update me on the Ford bench trial in Sacramento (Ford Explorer Cases, JCCP nos. 4266 & 4270). I'm told that the plaintiffs rested their case yesterday, on the 31st day of trial; that the judge took Ford's motion for judgment under submission; and that Ford began presenting its defense yesterday afternoon.

I've also received some interesting materials from the case. These trial briefs provide a roadmap to a monetary award under the UCL, offering "three alternative models of calculating the amount of money that Ford acquired, by its wrongful conduct, from members of the class":

• Plaintiffs' Corrected Trial Brief (06/06/07)

• Supplement to Plaintiffs' Corrected Trial Brief Re: Disgorgement of Unjust Profits (07/26/07)

The briefs will be very useful to anyone pursuing a UCL case based on non-disclosures or misleading advertising. Also, here are several of Judge David De Alba's orders, including his orders denying Ford's motions to decertify the class and for summary adjudication:

• Order Granting Class Certification (02/08/05)

• Order Correcting Class Definition and Certifying Corrected Class (05/26/05)

• Order Regarding Class Action Notice Issues (08/29/05)

• Ruling on CLRA "No Merit" Motion (03/07)

• Ruling on Motion for Decertification (03/07)

• Ruling on Motion for Partial Summary Adjudication (03/07)

Thanks again to the blog reader who provided these materials.

New UCL public prosecutor decision: People ex rel. Brown v. PuriTec

In People ex rel. Brown v. PuriTec, ___ Cal.App.4th ___ (Aug. 7, 2007), the Court of Appeal (Third Appellate District) addresses a public prosecutor action for civil penalties under the UCL.

New UCL economic abstention decision: Alvarado v. Selma Convalescent Hosp.

In Alvarado v. Selma Convalescent Hospital, ___ Cal.App.4th ___ (Aug. 1, 2007), the Court of Appeal applied the "economic abstention doctrine" in holding that the trial court properly declined to hear a UCL claim predicated on alleged violations of certain Health and Safety Code provisions governing the operation of nursing homes:

The trial court did not abuse its discretion by abstaining from adjudicating this lawsuit. Adjudicating the alleged controversy would have required the trial court to become involved in complex health care matters concerning the staffing of skilled nursing and intermediate care facilities and assume regulatory functions of the Department of Health Services (DHS). In addition, granting and enforcing the requested relief would place an unnecessary burden on the trial court given the power of the DHS to monitor and enforce compliance with [the Health and Safety Code provision in question].

Slip op. at 2.

Press coverage of In re Tobacco Cases II

Today's Daily Journal reports that "State Justices Let Tobacco Precedent Fall" (subscription). The Recorder reports that "Justices Snuff Suit Aimed at Joe Camel" (subscription). The San Francisco Chronicle's coverage is titled, "State high court rules California can't restrict cigarette ads aimed at kids." And the Los Angeles Times reports that "Suit by tobacco ad foes tossed."

More thoughts on Tobacco II preemption decision

The Supreme Court's opinion in In re Tobacco Cases II, ___ Cal.4th ___ (Aug. 2, 2007), has very little to say about the UCL, but much to say about preemption. One notable thing is that the Court relied entirely on pre-Prop. 64 precedents in its single-paragraph description of the UCL:

The state unfair competition law (Bus. & Prof. Code, § 17200 et seq.) authorizes civil suits for “unfair competition” (id., § 17204), which it defines to “include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.” (id., § 17200). “It governs ‘anti-competitive business practices’ as well as injuries to consumers, and has as a major purpose ‘the preservation of fair business competition.’ ” (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.) “By defining unfair competition to include any ‘unlawful . . . business act or practice’ [citation], the [unfair competition law] permits violations of other laws to be treated as unfair competition that is independently actionable.” (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 949.)

Slip op. at 6-7 (alterations in original).

The UCL "unlawful" prong claim in this case was predicated on alleged violations of Penal Code section 308, which prohibits sale of tobacco to minors. Id. at 3. The Supreme Court determined that it was bound by Lorillard Tobacco Co. v. Reilly, 533 U.S. 525 (2001), which held that the Federal Cigarette Labeling and Advertising Act ("FCLAA") (15 U.S.C. §§1331 et seq.) preempted state regulations enacted based on "concerns about smoking and health." Slip op. at 12-13, 16. In so holding, the Supreme Court overruled its prior contrary conclusion in Mangini v. R.J. Reynolds Tobacco Co., 7 Cal.4th 1057 (1994).

The Court explained that the particular UCL claim that these plaintiffs sought to pursue was based on "concerns about smoking and health" and thus preempted under Lorillard:

The state unfair competition law is a law of general application, and it is not based on concerns about smoking and health. Therefore, the FCLAA does not preempt that law on its face; nor would the FCLAA preempt a claim under that law that sought to impose only content-neutral restrictions on cigarette advertising—such as a requirement that the advertising not contain false statements of fact—that were unrelated to concerns about smoking and health. To the extent we so concluded in Mangini, supra, 7 Cal.4th 1057, we were correct, and we reaffirm those conclusions.

Here, however, as in Mangini, plaintiffs’ claim is based not only on the state unfair competition law but also on Penal Code section 308, which prohibits sales of tobacco products to minors and possession of tobacco products by minors. The purpose of Penal Code section 308 is to prevent minors from smoking or otherwise using tobacco products. ....

Plaintiffs’ unfair competition claim here seeks to impose on defendant tobacco companies a duty not to advertise in a way that could encourage minors to smoke. That is precisely the duty that the United States Supreme Court in Lorillard, supra, 533 U.S. 525, held subject to FCLAA preemption because it is necessarily and inherently based on concerns about smoking and health. Accordingly, plaintiffs’ unfair competition claim is preempted ....

Slip op. at 15-17. This language led me to wonder if the outcome would have been different if the UCL claim had been predicated on the "unfair" or "fraudulent" prongs, instead of the "unlawful" prong coupled with Penal Code section 308. On reflection, I don't think it would have. Any argument that marketing to minors was "unfair" because it was either (a) unscrupulous or (b) contrary to a legislatively-declared public policy (to briefly summarize the pre- and post-Cel-Tech formulations of "unfair") would have to be "based on concerns about smoking and health." As for the "fraudulent" prong, "plaintiffs have not alleged that [the advertising directed to minors] was misleading." Slip op. at 19.

This case, which I will call "Tobacco II (preemption)," does not appear to affect the other Tobacco case now pending before the Supreme Court, which I will call "Tobacco II (Prop. 64)." In re Tobacco II Cases, no. S147345. According to the Court of Appeal's opinion, Tobacco II (Prop. 64) involves both CLRA and UCL claims "that the tobacco companies had made false and misleading statements denying or disputing the health hazards and addictiveness of cigarette smoking" in addition to "their targeting of minors." In re Tobacco II Cases, 142 Cal.App.4th 891, 896 (2006) (review granted). In other words, Tobacco II (Prop. 64) is predicated on allegedly misleading advertisements, not on the problem of truthful marketing to minors. According to the Supreme Court in Tobacco II (preemption), the FCLAA does not preempt state-law claims that "[seek] to regulate cigarette advertising on the basis that it contained false assertions of fact—a content-neutral basis—and [that] sought to impose a duty—the duty not to deceive—that was broader and more general than concerns about smoking and health." Slip op. at 14 (citing Cipollone v. Liggett Group, Inc., 505 U.S. 504, 528-29 (1992); Lorillard, 533 U.S. at 552).

Also, the representative plaintiffs in Tobacco II (Prop. 64) (Willard R. Brown, Damien Bierly and Michelle Denise Buller-Seymore) are different from those in Tobacco II (preemption) (Devin Daniels, Bryce Clements, Daimon Fullerton, Nicole Morrow, and Maren Sandler), indicating that these are wholly separate cases.

In sum, the two cases appear to involve different claims and, indeed, different cases from among the group coordinated under J.C.C.P. no. 4042. Nothing on the face of the two opinions suggests that Tobacco II (preemption) will moot any of the issues pending on review in Tobacco II (Prop. 64).

Supreme Court holds UCL claim preempted: In re Tobacco Cases II

I've only very quickly skimmed the opinion, but the bottom line is that the Supreme Court held that the UCL claim is preempted:

We summarize: Plaintiffs’ cause of action against defendant tobacco companies is based on two laws: Penal Code section 308 (which does not itself regulate advertising but is based on concerns about smoking and health) and the state unfair competition law (which does regulate advertising but is not itself based on concerns about smoking and health). By combining these two laws in a single claim, plaintiffs seek to regulate cigarette advertising on the ground that it targets minors and encourages them to begin smoking. As the United States Supreme Court made clear in Lorillard, supra, 533 U.S. 525, the FCLAA preempts any state law or cause of action that seeks to regulate cigarette advertising on that basis. To the extent it concluded otherwise, our opinion in Mangini, supra, 7 Cal.4th 1057, has been superseded by the high court’s later decision in Lorillard, and Mangini is therefore overruled.

In re Tobacco Cases II, ___ Cal.4th ___ (Aug. 2, 2007) (slip op. at 20). I do not know what impact, if any, this ruling will have on the other Tobacco II case pending in the Supreme Court.

BREAKING NEWS: Supreme Court to decide UCL preemption case tomorrow

Today, the Supreme Court announced that its opinion in In re Tobacco Cases II (no. S129522) will be posted online tomorrow morning at 10:00 a.m. This is the UCL preemption case, not the Prop. 64 case:

IN RE TOBACCO CASES II
S129522 (D041356 – San Diego County Superior Court – 719446/JCCP No. 4042)
Argued in Los Angeles 6-06-07

This case presents the following issue: Does the Federal Cigarette Labeling and Advertising Act (15 U.S.C. § 1331 et seq.) preempt claims under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) for advertising that allegedly targeted minors?

When the opinion is posted, it will be available at this link. The Court of Appeal's opinion is In re Tobacco Cases II, 123 Cal.App.4th 617 (2004), and my prior posts on the case are here, here, and here.

CLRA article in Plaintiff magazine

The August 2007 issue of Plaintiff, which just arrived in the mail, has an article by James Sturdevant and Alexius Markwalader called "The Consumer Legal Remedies Act: Restoring the traditional pleading and proof requirements for claims of deception under Civil Code section 1750." The article points out that CLRA claims have been caught in the Prop. 64 quicksand, and that in both Tobacco and Pfizer, the Court of Appeal applied the same causation and reliance standards to the CLRA claims as to the UCL claims—even though the language and precedents governing the claims differ. The article also discusses two of the most recent CLRA decisions, Meyer v. Sprint Spectrum LP, 150 Cal.App.4th 1136 (2007) and McAdams v. Monier, Inc., 151 Cal.App.4th 667 (2007).

Petitions for review have been filed in both of these two recent cases. On June 26, 2007, a review petition was filed in Meyer v. Sprint Spectrum (no. S153846), followed by an answer to the petition on July 16 and the reply last Friday, July 27. On July 5, 2007, a petition for review was filed in McAdams v. Monier (no. S154088), followed by an answer on July 25.

My original post on Meyer is here, and my original post on McAdams is here.