Last Wednesday, September 25, the Supreme Court denied review and depublication in Juarez v. Arcadia Financial, no. S155139. The Court of Appeal's opinion is at Juarez v. Arcadia Financial, Ltd., 152 Cal.App.4th 889 (2007).
When that case was first handed down, I didn't have time to write much about it, but it is a significant decision. The Court of Appeal (Fourth Appellate District, Division One) allowed discovery intended to uncover the profits the defendant earned on the money wrongfully withheld from the plaintiffs, and reasoned as follows:
The situation in this case differs from that in Day [v. AT & T Corp., 63 Cal.App.4th 325 (1998), on which the trial court relied in denying the motion to compel,] in significant respects. First, unlike in Day, in this case there is a certified class, which means that a fluid recovery fund is possible pursuant to the class action statute, despite not being available under the UCL. (See Kraus v. Trinity Management Services (2000) 23 Cal.4th 116, 137 ["In sum, the Legislature has not expressly authorized monetary relief other than restitution in UCL actions, but has authorized disgorgement into a fluid recovery fund in class actions"].)
Second and more important, in this case the plaintiff class is alleged to have suffered a measurable loss. Thus, if the plaintiffs succeed in establishing UCL liability, it will be clear that Arcadia obtained something to which it was not entitled, and that the plaintiff class gave up something its members were entitled to keep. In Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1149 (Korea Supply), the Supreme Court concluded that "restitutionary disgorgement" is available under the UCL. This may include monies that were not necessarily in the plaintiff's possession: "We have stated that '[t]he concept of restoration or restitution, as used in the UCL, is not limited only to the return of money or property that was once in the possession of that person.' [Citation.] Instead, restitution is broad enough to allow a plaintiff to recover money or property in which he or she has a vested interest." (Korea Supply, supra, 29 Cal.4th at p. 1149, citing Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 178.)
The acknowledgement in Korea Supply that the concept of restitution is broader than simply the return of money that was once in the possession of the person from whom it was taken is not surprising. The basic premise of this type of remedy is that "[a] person who has been unjustly enriched at the expense of another is required to make restitution to the other." (Rest., Restitution, § 1.) "Ordinarily, the measure of restitution is the amount of enrichment received . . . , but as stated in Comment e, if the loss suffered differs from the amount of benefit received, the measure of restitution may be more or less than the loss suffered or more or less than the enrichment." (Id. at § 1, Com. a, p. 12, italics added.)
In this case, the plaintiffs arguably have an ownership interest in any profits Arcadia may have gained through interest or earnings on the plaintiffs' money that Arcadia wrongfully held. This case is distinguishable from the cases Arcadia cites for the proposition that "[e]very case that has considered the issue has denied recovery of defendant's profits under the UCL," because in none of those cases did the plaintiff or plaintiffs establish a measurable loss or a vested interest in the profits to be disgorged.
Id. at 914-15 (footnote omitted). What the Court is saying is that the profits of which disgorgement was sought in this particular case were restitutionary, rather than non-restitutionary. The Court also observed in a footnote that "although the UCL has been interpreted to permit relief in the form of restitution, but not damages, the concept of restitution that courts have applied in the UCL context appears to bear some relationship to the historical function of 'damages,' rather than the historical function of 'restitution.'" Id. at 913 n.14.