In Plascencia v. Lending 1st Mortg., ___ F.R.D. ___, 2009 WL 2569732 (N. D. Cal. Aug. 21, 2009), the Court (Judge Claudia Wilken) granted class certification of a UCL claim under Federal Rule of Civil Procedure 23(b)(3), finding that common questions predominated and applying Tobacco:
Prior to 2004, any person acting on behalf of the general public could bring suit under the UCL; standing “did not depend on a showing of injury or damage.” Californians For Disability Rights v. Mervyn's, LLC, 39 Cal.4th 223, 228 (2006). However, Proposition 64, approved by the voters in 2004, amended the UCL to permit suits only by the Attorney General and certain other government attorneys, or by individuals who have “suffered injury in fact and ha[ve] lost money or property as a result of unfair competition.” Id. (quoting Cal. Bus. & Prof.Code § 17204).
The degree to which the UCL claim involves individual issues turns on whether Proposition 64 imposed a new standing requirement that all class members must satisfy, or whether it is sufficient for Plaintiffs to show that they have standing. The California Supreme Court recently answered this question in In re Tobacco II Cases, 46 Cal.4th 298 (2009). The court clarified that only the named plaintiff in a UCL class action need demonstrate injury and causation.
Plaintiffs may prove with generalized evidence that Defendants' conduct was “likely to deceive” members of the public. The individual circumstances of each class member's loan need not be examined because the class members are not required to prove reliance and damage. Common issues will thus predominate on the UCL claim. Moreover, although Proposition 64 requires that Plaintiffs themselves must demonstrate reliance on Defendants' omissions, the court in In re Tobacco II Cases set out a liberal approach to the reliance inquiry:
While a plaintiff must show that the misrepresentation was an immediate cause of the injury-producing conduct, the plaintiff need not demonstrate it was the only cause. It is not necessary that the plaintiff's reliance upon the truth of the fraudulent misrepresentation be the sole or even the predominant or decisive factor influencing his conduct. It is enough that the representation has played a substantial part, and so had been a substantial factor, in influencing his decision. Moreover, a presumption, or at least an inference, of reliance arises wherever there is a showing that a misrepresentation was material. A misrepresentation is judged to be “material” if a reasonable man would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question, and as such materiality is generally a question of fact unless the fact misrepresented is so obviously unimportant that the jury could not reasonably find that a reasonable man would have been influenced by it.
Id. at 326-27 (internal quotation marks, alteration marks and citations omitted). Just as the materiality of the interest rate and negative amortization terms permits a presumption of reliance in connection with the fraud claim, it also permits a presumption of reliance for the purposes of Proposition 64 standing.
The Court concludes that common issues will predominate on the UCL claim and that Plaintiffs have made a sufficient showing of reliance to serve as class representatives.
Id. at *10-*11. This is precisely how the class certification analysis should work post-Tobacco.
The Court also granted class certification of the common-law fraud claim, which was based on an omissions theory. The Court applied the doctrine of presumed reliance from Vasquez:
Defendants argue that, even though their own actions may involve common questions of fact, proof of the fourth element of Plaintiffs' fraud claim--that class members were unaware of the undisclosed loan terms and would not have acted as they did if they had known of the terms--will require looking at the individual circumstances of each class member and will cause individual questions to predominate. However, courts have recognized that this element, which is often phrased in terms of reliance or causation, may be presumed in the case of a material fraudulent omission. As the Supreme Court has held, in cases “involving primarily a failure to disclose, positive proof of reliance is not a prerequisite to recovery.” Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 153 (1972). Rather, “[a]ll that is necessary is that the facts withheld be material,” in the sense that a reasonable person “might have considered them important” in making his or her decision. Id. at 153-54. Similarly, the California Supreme Court has held that class certification is appropriate even where there may be individual issues of reliance because “it is not necessary to show reliance upon false representations by direct evidence.” Vasquez v. Superior Court, 4 Cal.3d 800, 814 (1974). Rather, “reliance upon alleged false representations may be inferred from the circumstances attending the transaction which oftentimes afford much stronger and more satisfactory evidence of the inducement which prompted the party defrauded to enter into the contract than his direct testimony to the same effect.” Id. (internal quotation marks omitted).
Here, a jury may find that the initial interest rate and negative amortization features of the loans were material in the sense that a reasonable person would have wanted to know about them. The jury thus may presume that class members would not have agreed to purchase their loans if Defendants had clearly disclosed that the initial one percent rate was ephemeral and that negative amortization was certain to occur if only the minimum payments were made. Defendants, of course, may attempt to rebut this presumption at trial by introducing evidence that particular class members were either aware of the loan terms or would have purchased the loans even if the terms were clearly disclosed in the documents. Defendants have pointed to evidence, for example, suggesting that Plaintiffs themselves did not carefully read the loan documents they were given, and Defendants have argued that any omission in the documents was not the cause of Plaintiffs' injury.FN5 Although evidence of this sort is individualized in nature, the issue of damages suffered by class members “is invariably an individual question and does not defeat class action treatment.” Blackie v. Barrack, 524 F.2d 891, 905 (9th Cir.1975).
FN5. This evidence goes to the merits of Plaintiffs' individual fraud claim and is not so clear as to negate, as a matter of law, the reliance element of that claim.
Because the fraud claim arises from a common course of conduct on Defendants' part, the Court concludes that common issues will predominate and the claim may be certified under Rule 23(b)(3).
Id. at *8-*9.