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Friday, May 29, 2009

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Comments

AndytheLawyer

Let's assume for a moment that a UCL plaintiff who has a claim for damages but not for restitution has standing to sue under the UCL for the reasons Kimberly posits. After a successful trial, the plaintiff would be entitled to nothing of value -- because damages are not a UCL remedy. This plaintiff's standing would only be useful to UCL plaintiffs' counsel who, post-Propsition 64, no longer can use any random person to act as a plaintiff as a wedge into the courthouse door and towards a fat fees award -- presumably based on a restitution-based settlement or verdict for the plaintiff class members.

But here's the problem. If the class claim is for restitutionary relief to which the plaintiff class representative is not entitled, then there's no commonality or typicality and thus no basis to certify the class.

The state Supreme Court didn't confront this issue in Tobacco II. But eventually, it will. By then, it will become even more obvious than now that the bulk of traditional UCL standing analysis breaks down when viewed agaisnt the certification requirements of FRCP 23.

I suspect that the federal courts in which UCL claims are filed will be taking the lead in sorting out this mess for the forseeable future. Meanwhile, plaintiffs UCL counsel should try to avoid this problem by finding class representatives whose claims are for restitution, not damages.

Kimberly A. Kralowec

You're missing my point. Such a plaintiff would be able to obtain an injunction, which can be of critical importance. The issue is likely to come up in UCL actions between competitors, rather than UCL class actions. Suppose a firm is engaging in unfair practices that take business away from another, law-abiding competitor. The law-abiding competitor has suffered damages (in the form of lost customers and profits), but no money ever passed from his or her pocket to the wrongdoer's. The law-abiding competitor could not recover "restitutution" under the UCL. However, the law-abiding competitor has standing (because the competitor suffered injury in fact and lost money as a result of the unlawful practices) to bring suit under the UCL to seek an injunction to halt the wrongdoer's harmful conduct. The interpretation you are advancing would foreclose such a suit, which certainly was not the purpose of Prop. 64.

AndytheLawyer

But Proposition 64 had no impact on competitor v. competitor UCL lawsuits, which need not be brought as class actions. So the standing and class certification issues I raised above aren't implicated in non-consumer suits.

Kimberly A. Kralowec

Prop. 64 was not supposed to have had any impact on competitor actions, but they have been a casualty of the amendment. The new standing rules apply to UCL cases whether they are brought as individual or class cases. (UCL cases are not required to be brought as class actions, as some people seem to erroneously believe.) If the competitor must, to satisfy the standing requirements, have suffered harm that amounts to "restitution" rather than "damages," there may no longer be any such thing as a UCL competitor action because most competitors won't have suffered the right kind of harm.

The injunctive relief remedy is what's important for purposes of this discussion -- whether the case is a class action or not.

Daniel

Kimberly, do you see any chance that this issue could be decided if Kwikset is taken up for review by the Cali Supreme Court? I recognize Kwikset is a consumer case, but it addresses the same statutory language in the context of standing requirements.

Kimberly A. Kralowec

The court probably would not need to decide the issue, because the plaintiff in Kwikset suffered a loss that would be recoverable as restitution. In that case, the plaintiff paid money for a product (a lock mislabeled "Made in the USA"), and some of that money wound up in the defendant's coffers. Under Shersher v. Superior Court, 154 Cal.App.4th 1491 (2007), that loss would be recoverable as restitution under the UCL. The problem in Kwikset was not that the plaintiff suffered the wrong type of loss, but rather that the Court of Appeal didn't consider the loss severe enough. It reasoned that the plaintiff got what he paid for -- a functioning lock -- so although he suffered "injury in fact," he did not "lose money or property" for standing purposes.

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