Yesterday morning, the Supreme Court heard oral argument in In re Tobacco II Cases, no. S147345. Attorney Mark P. Robinson of Robinson Calcagnie & Robinson argued for the plaintiffs. Attorney Daniel P. Collins of Munger, Tolles & Olson argued for the defendants. Court of Appeal Justice Eileen C. Moore sat in place of Chief Justice Ronald M. George, who was recused.
Mr. Robinson began his argument by saying that with the UCL, the Legislature and the Supreme Court, for the past 35 years, have sought to protect consumers from deceitful marketing practices by use of the "likely to deceive" standard. Case law, including Chern and Justice Tobriner in Fletcher, has not required individualized proof of reliance. That is because, as the court in Fletcher pointed out, it is often impossible to prove in a class setting. The lightened burden of proof is part of the damages trade-off noted by the Court in Bank of the West. The purpose of the lightened burden is to effectuate the intent of the Legislature. Proposition 64 changed who can sue, it changed standing.
Justice Kennard was the first justice to speak and she wanted to get right to "the threshold inquiry." She asked whether the class was decertified because of the trial court's belief that the heightened standing requirement pertained to every class member. Mr. Robinson said that Judge Prager read Proposition 64 to require individualized proof of reliance for every member of the class. Justice Kennard: So your short answer is yes. Robinson: Yes.
Justice Moreno then jumped in and asked whether the Court should make a distinction between the standing of the class representatives and the standing of the class members. Robinson said that Prop. 64 changed the standing requirement for the class representative. It also requires use of Code of Civil Procedure section 382 [the class action statute]. The inference would be "the same standing" for the class representative. Justice Baxter said, "The same standing?" [And I confess I didn't get it either.] Robinson said under Korea Supply, in order to recover, there has to be money "acquired by means of" the deceptive practice. [I think he meant this means the same thing as "lost money or property as a result of" the deceptive practice.]
Justice Baxter then asked whether there has to be "symmetry" between the class representatives and the class members. Robinson said Prop. 64 only changed the standing requirement for the class representative. Justice Kennard then asked, What support do you have for that? Is there plain language?
At this point, Mr. Robinson began talking about the language in Prop. 64's findings and declaration of purpose. But what I was waiting for him to point out (and what I thought Justice Kennard was getting at) was that section 17203 says that "[a]ny person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of Section 17204 ...." (emphasis added). That said, the findings and declarations of purpose also supported Robinson's argument. They refer repeatedly, he pointed out, to "filing" of lawsuits. The legislative analyst's report talks about "initiating" lawsuits. The findings talk about preventing suits where "no client was injured." It wasn't drafted well, he said, but when you look at the text, it talks about "the client," that is, the class representative.
Justice Kennard then asked what approach the federal courts had taken in this regard. Robinson replied that the Lujan case talks about injury in fact being an invasion of a legally-protected interest. And in another section of that case they talk about causation being an act fairly traceable to the defendant. Justice Kennard then said that federal cases hold that standing under federal law applies solely to the named plaintiff and not the class members.
At this point, Justice Chin asked Mr. Robinson what he meant when he said "yes" to Justice Baxter's question about symmetry. Robinson said that Judge Prager found the class representatives' claims not only typical, but identical. His problem was not that. He read Prop. 64 as changing the reliance requirement, for every individual class member. In Fletcher, this Court addressed this, Justice Tobriner was interpreting "acquired by means of," which is the same as "as a result of," and said under the UCL it's impossible to prove individualized reliance (and unnecessary).
Justice Chin asked, In this case what is sufficient to show reliance? Robinson said that from Fletcher and Chern on down, it's "likely to deceive." The reason for this is there was a trade-off; as said in Kraus, damages are not allowed.
Justice Moreno then threw out a couple of softballs: Is there any indication in the initiative's history that it was doing away with the UCL substantively? Robinson said no, nothing, it said nothing about the elements of proof or standards of liability. Justice Moreno asked what was Prop. 64 aimed at deterring? Robinson said Trevor Law Group shakedowns where an unaffected plaintiff files and tries to settle without court supervision. So Prop. 64 changed standing. The class representative has to be affected; has to have injury in fact; and has to follow section 382. This changes standing only; it doesn't change the elements of proof or the guts of the UCL. Robinson then said that Judge Selna in the Anunziato case said you'd change the UCL to common-law fraud if you adopted any other rule. You'd be abandoning the purposes of the UCL. Nothing in Prop. 64 says this was intended.
Justice Moreno then asked whether the ballot materials said how Prop. 64 might affect the UCL. Robinson said the ballot materials reaffirmed that the UCL protects consumers. Then the materials said that it's going to stop frivolous lawsuits but also make sure that legitimate claims can be brought. Then the materials talk about standing, but they make no mention of the elements of proof or repealing the class action standards of Fletcher.
Justice Baxter said that this case involves false advertising; does this mean that the class would be defined to include those who may never have heard the ads? Robinson said that here the class is defined as those who were exposed to the ads. The test is whether those ads were likely to deceive members of the public or a reasonable consumer. Under Fletcher, it's up to the trial judge to decide who will be class members.
Justice Baxter said, We have to weigh in on the definition of the class it seems to me. One issue is whether the injury of the claimant would also pertain to members of the class; in other words, symmetry; must there be symmetry. Robinson replied that in Vasquez and Massachusetts Mutual, the court used inferred reliance to determine damages. The focus for the liability standard is likely to deceive, were the statements likely to deceive? You're going to take us back to common-law fraud, which is not appropriate because of the purpose of the UCL and the tradeoff it represents.
Justice Baxter then said, What if you had a prospective class member whose deposition testimony said yes I was exposed to the ads, but that's not why I bought the cigarettes. Would this person be eligible because they were exposed? Robinson cited a case called Boekan v. Philip Morris, in which an expert testified that the individual plaintiffs' inability to recall being exposed to any particular ad doesn't mean it didn't cause them to buy cigarettes. That's the cleverness of advertising. It's called associative learning. This is the problem Justice Tobriner was talking about in Fletcher. The standard is still whether the general public is likely to be deceived.
Mr. Robinson then mentioned that under Branick, the class representative can be changed if he or she isn't proper.
Justice Werdegar then said, You've been talking about the ultimate showing. Have we addressed what showing the class representative has to make, what "as a result of" means? Robinson: Justice Tobriner said it best. It means "acquired by means of." It's a mirror image, depending on the perspective. One is from the manufacturer's perspective; the other is from the consumer's.
Justice Werdergar then asked are you saying that the showing for the representative and the class members is the same? Robinson said yes, as Mervyn's said, Prop. 64 did nothing to change the substance. That was the law under Justice Tobriner's opinion in Fletcher. Justice Werdeger said I'm trying to figure out the relevance of Fletcher. After Prop. 64, the class rep has to have injury in fact standing as a consequence of an advertisement that was likely to deceive? Robinson: Yes.
And that was the end of Mr. Robinson's time. He reserved seven minutes for rebuttal.
Mr. Collins pointed out, first of all, that Prop. 64, by requiring that the named class representatives must satisfy standing and section 362, establishes a requirement that both the class representatives and the class members must share. Justice Kennard asked where do you get that from? Mr. Collins replied it comes from settled class action principles. We need to look at the language. "Claimant" means the person bringing the suit. The source of the requirement comes from settled class action law. First, that all class members must have standing. Second, that the claim can’t look different when looked at through the class action lens. This is settled law under City of San Jose: when you aggregate claims, you can’t transform them.
Justice Moore then spoke for the first time. She asked, whatever we hold on the issue of class member standing, does the Court have to take into account the possibility that a lawsuit may be filed just for injunctive relief? Mr. Collins said that in such a case, "as a result of" still has to be shown.
Justice Moore pointed out that there was a lot of back and forth in the ballot materials about a suit for an injunction only. (And here she gave an example of such a case involving tobacco products.) It seems as though "as a result of" may be different in that situation. For example, in a suit brought by the parents of a minor (they might have paid for an addiction program for their child), for members of the class they would be seeking an injunction only. Do your arguments apply in cases where only injunctive relief is sought?
Mr. Collins said yes, there's no exception for injunctive relief cases. The plaintiff must have lost money or property "as a result of" to obtain any relief under the UCL. The theory presented in this case is that the plaintiff lost money by paying for cigarettes. Trial court correctly found this is an individualized issue.
Justice Moore then said that the statute does not say that defendant has acquired anything. It says “lost” money or property. Mr. Collins said that plaintiffs are incorrect in saying that the standard for causation is the same as in Fletcher. There, Court relied on the “may have been acquired by means of” language from the UCL [section 17203]. This would not preclude certification in Fletcher. The "as a result of" requirement is present in many statutes. This is an ordinary causation requirement.
Justice Moreno said, You cite Massachusetts Mutual in which the court said no individualized proof was required. Does Prop 64 change this? Mr. Collins said that the substantive standard -- "likely to deceive" -- is unchanged under Mervyn’s. The proposition was not intended to affect the Attorney General’s authority in any respect. So the substantive standards are not changed. Prop. 64 only changed the standing requirements for private parties.
Mr. Collins explained that Judge Prager made four class certification rulings in this case. He initially denied certification; then, he granted certification of the UCL claim and denied the CLRA claim; then he decertified the UCL claim. If causation is an element it will overwhelm any common issues. The trial court initially found causation wholly outside the scope of the UCL. When Prop 64 passed, that put the issue of causation into the case. Then he went back to his analysis on the CLRA—a ruling clearly supported by substantial evidence.
Justice Kennard asked whether the misrepresentation must be a substantial factor in causing plaintiff’s injury? Mr. Collins said yes, it means ordinary causation, proximate, legal causation. Does this devolve into an issue of reliance into some cases? Some courts say it does. He said you don’t have to reach that here because causation was analyzed separately. It’s academic on these facts whether reliance is also required. Judge Prager held that causation applied to all members of the class, so it was "in the bucket of issues" to be considered. There are still some cases in which class action would be appropriate, like Mass Mutual. [That argument is a stretch in my opinion and not consistent with the overall thrust of the defense position.]
Justice Kennard asked whether the plaintiffs have to show reliance on a specific misrepresentation? A case called Whiteley v. Philip Morris was mentioned. Collins said that Judge Prager didn’t decertify based on that. Justice Kennard: But it is your view plaintiffs would have to show that? Collins said that plaintiffs would have to show they received information by exposure and it had a causal effect on the purchasing decision. Prager said that’s individualized. Differences on the question of exposure; whether plaintiffs believed the ads; then with causation you have the influence of other factors. Information about the effects of tobacco use comes from sources other than the ads. Prager looked at all those issues and his decision was supported by substantial evidence.
Justice Moreno asked whether it was Collins' argument that class members must have injury in fact based on section 382 not section 17204? Mr. Collins said the statute says "as a result of" and "the claimant," which means the person who filed. Our position comes from section 382 and settled class action case law. One of the justices then asked at what point do the absent class members have to show they have standing? When ascertained? When they prove their damages? Collins replied when class certification is decided; that issue is in the bucket of issues that have to be decided.
Justice Chin asked what is your response to the argument that “the claimant” means the class rep.? Collins said I've conceded that. But it says that the claimant must satisfy section 17203 and section 382, and that’s where the standing requirement comes from. This is part of what it means to bring a UCL claim. That requirement can’t be sheared off when you bring a class action. He mentioned that some of the amici argued otherwise, but that's wrong because section 382 also addresses associational actions. This was what Prop. 64 was meant to address. Associational standing is no longer permitted after Prop. 64. It’s not a redundancy for Prop. 64 to refer to section 382; different language would have had different meaning.
Justice Baxter said, so if an individual can’t satisfy standing, than that same individual should not be allowed to proceed as part of a class? Mr. Collins said yes, this comes from the rule that the class action procedure can’t transform the claims it aggregates. Justice Baxter then said when the class action cases talk about symmetry, is this what they mean? [Not sure what cases he's referring to here.] Collins said yes, otherwise there would be an odd atypicality. This court's decision in Meyer and the decisions of other courts show that at the least, it's proximate or legal causation.
He then mentioned that the question is whether the trial court abused its discretion under Sav-on. He said the findings were supported by substantial evidence. He said that the Whiteley case makes clear and confirms the individualized nature of the issue. On page 39 of Whiteley, it says the plaintiff didn’t rely on any presumption of reliance. The requirement was still there that information had to get through to her and did it change her behavior. Whiteley supports the view that this is highly individualized.
And that was the end of Mr. Collins' time.
In rebuttal, Mr. Robinson said that on pages 680 to 681 of Whiteley, the court said defendants contended that the plaintiff did not show that she heard any of the misrepresentations. Whiteley did not have to prove that she saw or heard the misrepresentations. It is sufficient that they went to the public.
Justice Kennard said, Turning to this case, on causation, I assume you disagree that causation is akin to proximate cause. What is your view on this issue? He said Mr. Collins relies on Collins v. Safeway, a case at law, not an equitable case. He cites the CLRA, which is not applicable. Justice Kennard: What must be shown in your view? Mr. Robinson: Likely to deceive; then it is up to the trial court to decide who is in the class. Justice Baxter: How would you define it? Mr. Robinson: Altria v. Good gives us the right to reopen the preemption argument in our light cigarettes case. [In other words, Robinson was saying that in Altria v. Good, the U.S. Supreme Court interpreted federal preemption less broadly than did the Cal. Supreme Court in the other Tobacco case, In re Tobacco Cases II, 41 Cal.4th 1257 (2007).] Experts will testify to what proportion of people were likely to be affected by the fraud. This is the way it has to be because otherwise you let it become common-law fraud.
Justice Corrigan: How would you define the class? Mr. Robinson: Those likely to be deceived by the representation. Then it's up to the trial court. Justice Kennard: Isn’t that a broad standard? Mr. Robinson: Yes it is, since Korea Supply. Otherwise the UCL becomes common-law fraud, but with no right to damages. Justice Baxter: But you would include likely to deceive [in the class definition]? Robinson: Yes, as a causation standard. That’s been the law. And you said in Mervyn’s nothing previously prohibited is now permitted. Also Fletcher.
Justice Werdegar then asked, what does it mean to you when it says the claimant must comply with section 382? Mr. Robinson: They didn’t want representative actions. They wanted to eliminate those. Justice Werdegar: And what does section 382 require? Mr. Robinson: it depends on the underlying claim—e.g., UCL versus CLRA. Justice Wendegar: What are the practical differences between a class action and a representative action? Mr. Robinson: The practical impact is what it was in Fletcher. No individualized proof of reliance. [At this point, it might have been helpful to explain that, with a pre-Prop. 64 representative action, class notice was not required; court approval of any settlement was not required; the res judicata effect was different; etc. The argument could have been that those are the changes Prop. 64 meant to impose by incorporating section 382, not to create a standing requirement that otherwise expressly applies only to "the claimant"; leads to imposition of new substantive elements (such as actual reliance instead of likely to deceive); and would, as a practical matter, eliminate the possibility that section 382 could ever apply to any UCL "fraudulent" prong case.]
Mr. Robinson then invoked Branick, and asked that he be permitted to seek leave to amend and revisit the preemption issue.
The final question was from Justice Kenard: Must the misrepresentations be a substantial factor in causing the plaintiff’s conduct? Mr. Robinson replied that the misrepresentation had to be material and likely to deceive the general public. He cited Harper v. 24 Hour Fitness, then concluded it’s up to the trial court to decide how the class is defined.
And that was the end of the argument.