In an unpublished opinion, Vroegh v. Eastman Kodak Co., 2007 WL 4217144 (Nov. 30, 2007), the Court of Appeal (First Appellate District, Division Five) affirmed the trial court's order approving a class action settlement, including an attorneys' fees award, and rejected all of the objectors' fairness arguments. According to the docket, on December 12 and 18, 2007, rehearing petitions were filed by two of the objectors.
My latest article, which appears in the December November 2007 issue of CAOC Forum, is called "Three Evolving Facets of UCL Restitution." The three facets of restitution that the article discusses are "money taken" restitution; "vested interest" restitution; and restitutionary disgorgement. If you're interested in receiving a copy, please send me an email at firstname.lastname@example.org
On August 10, 2007, the Court of Appeal issued this order (quoted from the docket): "To make non-substantive changes to the opinion, the Court grants rehearing on its own motion. No further briefing is required." On December 4, 2007, the Court of Appeal issued its new opinion: Ticconi v. Blue Shield of California Life & Health Ins. Co., ___ Cal.App.4th ___ (Dec. 4, 2007). As indicated in the docket, the new opinion does not appear to include any substantive changes.
In a new unpublished opinion, Lanier v. Norfolk Southern Corp., 2007 WL 4270847 (4th Cir. Dec. 05, 2007), the Fourth Circuit denied a motion to remand under CAFA and refused to consider the plaintiffs' argument that the "local controversy exception" applied because that argument was raised for the first time on appeal. Slip op. at 7 n.2. [Via Federal Civil Practice Bulletin.]
Personally, I use Bloglines to quickly keep track of the blogs and other feeds that I follow. The Law.com article says that the Ohio Supreme Court has a case activity notification service that uses RSS. The Eleventh Circuit also has an RSS feed for new opinions, which I subscribe to via Bloglines. Note to the fine people at the California courts website: Please publish an RSS feed for new published appellate opinions!
I'm pleased to announce that I will be a member of the Board of Governors of Consumer Attorneys of California in 2008. I'm looking forward to working more closely with CAOC over the coming year, and I would encourage all plaintiffs' attorneys to join. CAOC works very hard to advance and protect our collective interests and those of our clients. Being a CAOC member has been more rewarding to me than any other professional association that I've joined to date.
Additionally, I am on the CAOC amicus curiae committee. If you represent the plaintiffs and need amicus support in a pending appellate matter, particularly in the California Supreme Court, please visit the amicus committee page for more information on the CAOC's amicus program and how to submit your request for amicus assistance.
On October 19, 2007, a petition for review was filed in Shersher v. Superior Court (Microsoft Corp.)., no. S157482. On December 6, 2007, the Supreme Court gave itself an extension of time, through January 17, 2008, to grant or deny review.
In Shersher, the Court of Appeal (Second Appellate District, Division Five) held that the use of the word "directly" in Korea Supply does not mean that restitution is unrecoverable in cases in which money passed from the plaintiff, through a retail intermediary, to a defendant who violated the UCL by misrepresenting or making or material omissions concerning the goods it was selling:
Nothing in Korea Supply conditions the recovery of restitution on the plaintiff having made direct payments to a defendant who is alleged to have engaged in false advertising or unlawful practices under the UCL.
Yesterday, the Ninth Circuit withdrew its opinion from February in the Wal-Mart gender discrimination case, Dukes v. Wal-Mart, Inc., 474 F.3d 1214 (9th Cir. 2007), and issued a new, slightly revised opinion, Dukes v. Wal-Mart, Inc., ___ F.3d ___ (Dec. 11, 2007). The panel also denied the petition for en banc rehearing as "moot," and indicated that the "parties may file a new petition for rehearing or suggestion for rehearing en banc as provided for by Federal Rule of Appellate Procedure 40."
I have not yet had an opportunity to read the new opinion and compare it to the prior one. Today, however, in an article called "Ninth Circuit Limits Wal-Mart Class," the Recorder reports that "[t]he largest substantive change involved standing within the class: The panel instructed U.S. District Judge Martin Jenkins to consider dropping class members who were no longer employed by Wal-Mart at the time the complaint was filed. However, the circuit shot down Wal-Mart's argument that this standing issue should tank the entire class." From the article, it sounds like the new opinion more thoroughly discusses whether the primary relief sought is declaratory and injunctive, vs. monetary, which is relevant to class certification under Federal Rule of Civil Procedure 23(b)(2).
Yesterday, in County of Santa Clara v. Superior Court (ARCO), no. H031540, the Court of Appeal (Sixth Appellate District) scheduled oral argument for Thursday, January 17, 2008 at 9:30 a.m. in San Jose. The issue in this case is whether public entities may retain outside counsel to represent them on a contingency-fee basis. While this specific case is an action for nuisance, the reasoning and outcome may apply more broadly to other types of actions, such as UCL public prosecutor actions.
Copies of some of the appellate briefs in the case are available at these twoposts. As I previously explained, at the trial-court level, Santa Clara County Superior Court Judge Jack Komar ruled that a public entity (specifically, the County of Santa Clara) may not hire private lawyers to represent it on a contingency-fee basis. County of Santa Clara v. Atlantic Richfield Co., Santa Clara County Superior Court case no. 1-00-CV-788657, Order Regarding Defendants' Motion to Bar Payment of Contingent Fees to Private Attorneys, April 4, 2007. A writ petition was promptly filed, and the Court of Appeal issued an OSC soon thereafter.
Do claims adjusters employed by insurance companies fall within the administrative exemption (Cal. Code Regs, tit. 8, section 11040) to the requirement that employees are entitled to overtime compensation?
In Barbara's Sales, Inc. v. Intel Corporation, ___ N.E.2d ___ (Nov. 29, 2007), the Illinois Supreme Court applied Illinois choice-of-law principles and declined to apply California law (including the UCL and CLRA) in a putative nationwide class action against Intel:
[T]he parties concede that Illinois and California laws conflict and this conflict may have an outcome-determinative difference. In short, plaintiffs need not prove actual deception of the named plaintiffs under California law as found in California’s Unfair Competition Law, as they would under Illinois law as found in the Illinois Consumer Fraud Act. Compare 815 ILCS 505/10a (West 2002); Shannon v. Boise Cascade Corp., 208 Ill. 2d 517, 525 (2005) (“deceptive advertising cannot be the proximate cause of damages under the Act unless it actually deceives the plaintiff”); with Cal. Bus. & Prof. Code §17200 (Deering 2007); Massachusetts Mutual Life Insurance Co. v. Superior Court, 97 Cal. App. 4th 1282, 1288, 119 Cal. Rptr. 2d 190, 193 (2002) (individualized proof of deception and reliance is not required under the Unfair Competition Law). Stated differently, specific class members proceeding under California law need prove only an inference of “common reliance” on the part of the class as opposed to actual reliance on any particular deception. Massachusetts Mutual Life Insurance Co., 97 Cal. App. 4th at 1293, 119 Cal. Rptr. 2d at 198. Because California and Illinois law conflict, we next look to the conflicts law of our forum state, Illinois. Esser v. McIntyre, 169 Ill. 2d 292, 297 (1996); Nelson v. Hix, 122 Ill. 2d 343 (1988); Restatement (Second) of Conflict of Laws §122 (1971).
[A]s to the policies and interests of California, it is undoubtedly true that California has an interest in regulating Intel, as its principal place of business is located there. Further, it is also true that California has a consumer-friendly consumer protection law–as a suit may be brought alleging “common reliance” rather than “actual deception”–which may inure to the benefit of plaintiffs. However, neither California consumers, nor the interests of California in regulating Intel, will necessarily suffer if Illinois law is applied in the instant matter. California has no interest in extending its laws to noncitizens and to actions that occurred outside of California borders. Norwest Mortgage, Inc. v. Superior Court, 72 Cal. App. 4th 214, 222, 85 Cal. Rptr. 2d 18, 23 (1999). Moreover, the courts of California will likely have the opportunity to decide this issue under its own law. The record reveals another putative nationwide class action with allegations similar to those advanced in this case. This class action seeks a nationwide application of California’s consumer protection statutes and is currently pending in California state court. Skold v. Intel Corp., Case No. RG 04 145635 (Cal. Super. Ct. Alameda County).
Slip op. at 12, 14-15. The Illinois Supreme Court affirmed the trial court's decision to apply Illinois law and to limit the class to Illinois residents, but then determined that class certification was not appropriate. The opinion does not mention Proposition 64 or the two pending California Supreme Court cases, Tobacco and Pfizer, in which the "reliance" question is expected to be addressed.
My sincere thanks to Kelly Chen, who just passed the bar (congratulations, Kelly!), for attending Tuesday's argument in Farm Raised Salmon Cases, no. S147171, and for providing the following detailed report (complete with an outcome prediction):
Case Name: FARM RAISED SALMON CASES California Supreme Court Case No.: S147171
December 4, 2007 -- 9 a.m.
This morning in Los Angeles, the California Supreme Court heard oral argument in Farm Raised Salmon Cases. The issue presented before the court is: Does the Federal Food, Drug, and Cosmetic Act (“FDCA”) impliedly preempt plaintiffs' state law claims, including claims based on the UCL and CLRA?
Craig R. Spiegel argued on behalf of the plaintiffs (i.e., consumers). Rex S. Heinke argued for the defendants. Justice George recused himself from the case, and Justice Mihara from the court of appeal was assigned as justice pro tempore for this case. Justice Kennard took over the role as chief justice in this session.
Mr. Spiegel started his argument by discussing the reasoning behind the court of appeal’s holding that section 337(a) of the FDCA preempts plaintiffs’ state claims. Citing to the history of the regulation on the use of coloring on food, Mr. Spiegel discussed how California enacted regulations concerning this area as early as in 1905, long before the FDCA (which was enacted in 1938).
Justice Kennard then interjected and asked: Isn’t there another section of the FDCA that would help the argument against preemption? Specifically, Kennard referred to section 343-1, which permits states to establish standards concerning the use of coloring on food so long as those standards are “identical” to those imposed by FDCA. She asked: “Am I right to say that the language of these provisions helps your position?” Mr. Spiegel affirmed.
Note: Congress enacted section 343-1 in the Nutrition Labeling and Education Act of 1990 (“NLEA”).
Mr. Spiegel then discussed how Congress enacted section 337 in 1938, but in 1990, Congress via the enactment of section 341-1 permitted the states to establish and continue in effect regulations that are identical to the federal requirements.
Justice Moreno then jumped in and asked: “Are you relying on any of the FDCA violations?” Spiegel: “No.” Spiegel then explained that plaintiffs are relying on UCL violations, and that plaintiffs are only claiming that Congress via the enactment of section 341-1 says that states may establish or continue in effect regulations that are identical to the FDCA requirements.
Justice Kennard interjected and asked whether Spiegel’s reasoning is based on the language in section 341-1, which says that no states may establish or continue in effect a requirement for labeling of food “that is not identical to the requirement” of FDCA. Spiegel affirmed.
Justice Kennard continued: “So section 343-1 expressly preempts only non-identical state labeling requirements?” Spiegel: “Yes.”
Justice Kennard then asked: “What about the police power … as being another argument?” Spiegel agreed that the police power is another argument against preemption.
At this time, Justice Mihera jumped in (but I missed the question). Mr. Spiegel’s response talked about two cases that were cited against plaintiffs’ position, one of which is Buckman (where the USSC held that section 337(a) is clear evidence that Congress intended FDCA be enforced exclusively by the federal government). Spiegel nicely distinguished Buckman from the present case, explaining that the plaintiff in Buckman alleged “fraud on the FDA” -- thus, there was no police power argument in Buckman, because fraud on a federal agency is not within the realm of the police power.
Justice Moreno asked Spiegel whether FDA has a position regarding state enforcement. Spiegel was very prepared to answer this question. He cited a 1993 official rule and quoted “nothing in this act will preclude the states from enforcing their own requirement under their own [law].”
Spiegel then went on to talked about the interplay between sections 343 and 343-1 and 337(b), noting that 343 and 343-1 were adopted as part of the FDCA in 1990. I think his main idea was that if Congress meant to create FDCA preemption in section 337, then why did Congress bother to enact section 343-1, which permits states to “establish or continue in effect” state requirements?
Justice Mihera noted that barring non-identical state requirements seems to infer that identical state requirements will be okay. He then asked about defendants’ argument based on NLEA section 343-1, subsection 6(c)(3).
At this point, Justice Kennard pointed to subsection 6(c) of section 343-1 which states that NLEA “shall not be construed to preempt any provision of State law, unless such provision is expressly preempted….” Justice Kennard asked: “Is there any express preemption in the statute?” Response: “No.”
Mr. Heinke then argued on behalf of the defendants.
Justice Baxter jumped in with his first question: “Why wouldn’t Congress want private enforcement of these requirements?” Justice Chin then asked about the plain language of NLEA which seems to say there is no preemption if state requirements are identical to those required by NLEA. Mr. Heinke responded by explaining that the question presented is whether there can be private enforcement, citing section 337. Mr. Heinke noted that Congress in 1938 via section 337 said there is no private enforcement of FDCA. He added: “Did Congress really intend to change that by section 334-1? If yes, then Congress would have just said that it overturned the bar on private enforcement instead.”
Mr. Heinke then emphasized that section 334-1 didn’t say anything about “private enforcement.”
Justice Kennard, at this point, interjected and asked about the language in NLEA. She specifically asked why this court should agree with defendants’ arguments? Mr. Heinke’s response was that NLEA is not the basis for defendants’ argument. Instead, he noted that defendants are arguing section 337 as the basis for preemption. He then argued that Congress didn’t change a word in section 337 (since its enactment).
Justice Mihera jumped in: “But they added section 334-1!” Mihera then asked: “Who bears the burden?” Response: “There is no burden.” Mihera: “There is!”
Justice Mihera then explained that because there is no express preemption, the defendants are relying on “implied” preemption -- which means that the defendants will need to establish an “obstacle to a federal objective.” He then asked what is the obstacle that will result in the private enforcement of state law that is identical & parallel to FDCA?
In response, Heinke cited the preamble of NLEA and talked about legislative history of what Congress is doing concerning private enforcement.
Justice Kennard then asked about the two USSC cases cited by the plaintiffs (i.e., Bates and Medtronics, in both cases the USSC upheld state private actions as long as they are not inconsistent to the federal requirement). Mr. Heinke’s response focused on 337 and the idea that there is no private enforcement of FDCA. First, he indicated Bates is not about FDCA. Second, he noted Medtronics was an FDCA case, but Medtronics did not discuss section 337, and therefore is not controlling here. Heinke then noted it is Buckman that should be looked at here.
Justice Moreno asked: “But one of the principles of Medtronics is to allow private enforcement of claims?” Response: “Yes, but that’s without looking at section 337.”
Justice Mehera and Mr. Heinke then had some discussion back and forth about the language in 334-1. Mr. Heinke said that Congress changed the language to “state enforcement” and not “private enforcement.” Justice Mehera corrected him by noting that section 334 does not use the word “enforcement” -- rather, it only talks about state “establishment” of it own requirements.
At this point, Justice Werdegar asked her first question: “What’s the policy reason [for no private enforcement]?” Response: Congress wants to ensure expertise -- private parties don’t have expertise in this area (and I think he mentioned something about plaintiffs’ lawyers and fees!).
Justice Baxter then said: “Congress did not provide private enforcement in the federal courts?” Response: “Exactly.”
Justice Kennard then jumped in: “You were saying you are not relying on NLEA, right? But just a moment ago you cited Congressman Waxman's comment which started out with ‘The NLEA….’” Justice Kennard was basically saying that in one context Mr. Heinke is relying on NLEA; whereas, in another context, he chose not to rely on NLEA.
At this time, it was Mr. Spiegel’s turn again. He started out indicating that the defendants had mischaracterized plaintiffs’ argument. Spiegel clarified that plaintiffs are basically arguing that defendants’ claim concerning section 337 is incorrect.
He then talked about how defendants are arguing Congress in 1938 through section 337 basically decided that there should be no more state law claims (without saying a word about it in the statute). He also noted that the cases defendants have cited all concerned FDA “approval” process and that states have never regulated such approval processes.
Justice Werdegar then asked questions that focused on “private enforcement” and the policy reason of whether private enforcement is a problem. Mr. Spiegel indicated the issue of private enforcement of FDCA has nothing to do with this case.
Justice Baxter then asked why shouldn’t section 334(b)[??] control? Mr. Spiegel explained because that section says “enforcement of FDCA.” Justice Baxter followed up with a question on section 337. Spiegel’s response talked about Buckman. He again explained that the claim in Buckman is preempted because the plaintiff there only relied on FDCA violations (and not state claims).
Predictions: Mihera, Kennard, Chin, Moreno: for the plaintiffs. Werdgar, Baxter: for defendants. Corrigan: not sure.
Thank you, Kelly, for providing such a detailed and interesting report of the argument! Yesterday's Daily Journal also had a (much less detailed) report on the argument, and also predicted that the plaintiffs are the likely winners: "Court Backs Salmon-Labeling Suit" (subscription). The decision is due by early March.
I hope to have a report on the Farm Raised Salmon Cases argument by tomorrow, but meanwhile, here is an interesting new decision. In Ortiz v. Lyon Management Group, Inc., ___ Cal.App.4th ___ (Dec. 3, 2007), the Court of Appeal (Fourth Appellate District, Division Three) held that after winning summary judgment as to the named plaintiff's claims, the defendant may not move for class certification in hopes of obtaining a judgment that will be res judicata as to all of the absent class members:
We hold defendant could not obtain class certification after the court decided the merits of plaintiff’s individual claim. As a general procedural rule, class certification should be determined before the merits are adjudicated. And as a general substantive rule, a precertification decision on the merits against a named plaintiff does not bind absent class members. The court did not abuse its discretion by holding defendant to these general rules.
Slip op. at 3. The opinion calls this question "a novel class action issue" and said several times that there is "no case in which a defendant has even tried this tactic." Id. at 2, 15. Indeed, I have never heard of a defendant moving for class certification in any context.
The Court of Appeal began its analysis by construing Fireside Bank v. Superior Court, 40 Cal.4th 1069 (2007), and holding that such a procedure would violate Fireside Bank's directives absent changed circumstances justifying the delayed class certification motion:
Fireside sets forth a strict rubric for postmerits certification. “If a party seeks and obtains a merits ruling before moving for class certification, it must demonstrate changed circumstances to justify its belated motion for class certification. [Citation.] Absent a showing of changed circumstances, the trial court may not consider the motion; absent a further finding of a compelling justification, it may not grant it.” (Fireside, supra, 40 Cal.4th at p. 1088.)
This rubric provides a procedural reason to affirm the court’s denial of defendant’s class certification motion. Defendant, having “s[ought] and obtain[ed] a merits ruling before moving for class certification,” failed to “demonstrate changed circumstances to justify its belated motion for class certification.” (Fireside, supra, 40 Cal.4th at p. 1088.) The record suggests no practical reason why defendant could not have moved for class certification sooner, other than to maximize its strategic advantage.
Slip op. at 16-17.
The Court of Appeal then held that "postmerits certification would wrongly give binding effect to a non-binding judgment":
Despite 50-plus pages of exhaustively researched briefing covering 30 years of federal and California class action jurisprudence, defendant cannot cite a single case in which a defendant obtained class certification after first obtaining summary judgment against the named plaintiff’s individual claim. This lack of precedent is telling.
None of [the cases on which defendant relies] allowed a defendant to seek postmerits certification. None allowed precertification summary judgment against the plaintiff’s individual claim to bind absent class members. None support defendant’s attempt to foist a binding judgment against absent class members by seeking postmerits certification. ....
.... Rather than seeking postmerits certification, defendant must resort to some other doctrine to combat the onslaught it fears of subsequent litigation by absent class members. Possible doctrines may include res judicata or stare decisis. But defendant must wait to assert these doctrines in subsequent litigation, if any; we express no opinion on their viability. We note only that they do not support postmerits certification in this case.
This morning at 9:00 a.m. in Los Angeles, the Supreme Court will hear oral argument in Farm Raised Salmon Cases, no. S147171. In that case, the Court of Appeal held that federal law preempted the plaintiffs' UCL claims, which alleged that the defendants failed to disclose to consumers that they used artificial coloring to turn grey-fleshed farm-raised salmon pink. Yesterday's Recorder reported that "State High Court Arguments to Get Fishy" (subscription).
A blog reader who is attending the argument has promised to provide a report for posting here tomorrow or the next day. Meanwhile, the Court of Appeal's opinion is here: Farm Raised Salmon Cases, 142 Cal.App.4th 805 (2006) (Second Appellate District, Division Three).
Last Friday the Sacramento Beereported on the terms of the settlement in the Ford case (Ford Explorer Cases, JCCP nos. 4266 & 4270):
Under the proposal, Ford would provide vouchers worth up to $500 each toward the purchase of a new Explorer or $300 toward another Ford vehicle to owners of Explorers purchased in the 1990s.
During a trial that began in June in Sacramento's downtown courthouse, plaintiffs' lawyers argued that Ford had misled car buyers by falsely claiming the Explorers built in the 1990s were safe, all-purpose family vehicles.
"They were peddling it as a safe vehicle that you could run up and down the highway at 70 mph," said lead plaintiffs' attorney Tab Turner. "But this vehicle does not perform as a safe and stable soccer mom kind of vehicle."
Ford knew the Explorer's high, narrow build made it prone to rollover in emergency maneuvers at highway speeds, the lawyers claimed.
When the dangerous defects came to light after a nationwide recall of the Explorers' Firestone tires in August 2000, each Explorer lost about $1,000 in value, the plaintiffs' lawyers argued.
They sued under California's false-advertising and unfair-competition laws, asking a judge to order Ford to disgorge more than $2 billion in profits.
"People are stuck with these vehicles after the value has dropped and cannot use them safely," Turner said Wednesday.
Turner said he'd agreed to the settlement in part because Ford's current financial weakness made it unable to afford a large cash payout. .... "Ford's not in a position to write a check for $500 million."