Another opinion interpreting Tobacco II has been published this week: Cohen v. DIRECTV, Inc., ___ Cal.App.4th ___ (Sept. 28,2009; pub. ord. Oct. 28, 2009). Those of you who attended the Consumer Attorneys of San Diego Class Action Symposium last week may remember that my co-panelist, Ray Bertrand, presciently mentioned this (then-unpublished) opinion during our segment.
In Cohen, the Court of Appeal (Second Appellate District, Division Eight) affirmed the trial court's denial of class certification of CLRA and UCL claims. In so doing, the Court misinterpreted Tobacco II.
The case alleged that DIRECTV advertised its HD satellite television service "without the intent to provide the customers" with the advertised levels of resolution, and "that DIRECTV switched its HDTV channels to a lower 'resolution,' reducing the quality of the television images it transmits to its subscribers." Slip op. at 3. The trial court denied certification of both the CLRA and the UCL claims because (among other reasons) it determined that actual reliance was an element of both claims. Id. at 7.
As for the UCL claim, the trial court held (in November 2007):
Prior to Prop 64 the standard for fraud was "likely to be deceived." However since Prop 64, amendments require the plaintiff to have suffered injury in fact and lost money or property. A conclusion may be drawn that class members must have actu[a]lly been deceived.
Id. (alteration in original; emphasis added). This, of course, is precisely the opposite of the Supreme Court's holding in Tobacco II. Yet, in Cohen, the Court of Appeal held that the trial court "did not apply an improper criterion in addressing the class certification issue." Slip op. at 16. That holding is, respectfully, wrong.
This is how the Court of Appeal described Tobacco II in Cohen:
... Tobacco II held that, for purposes of standing in context of the class certification issue in a “false advertising” case involving the UCL, the class members need not be assessed for the element of reliance. Or, in other words, class certification may not be defeated on the ground of lack of standing upon a showing that class members did not rely on false advertising. In short, Tobacco II essentially ruled that, for purposes of standing, as long as a single plaintiff is able to establish that he or she relied on a defendant’s false advertising, a multitude of class members will also have standing, regardless of whether any of those class members have in any way relied upon the defendant’s allegedly improper conduct.
Slip op. at 15 (italics in original; bold added).
That is not what Tobacco II held. As you may remember, both the trial court and the intermediate appellate court in Tobacco II had held that, "post Proposition 64, individual issues of exposure to the allegedly deceptive statements and reliance upon them, predominated over class issues." Tobacco II, 46 Cal.4th at 311 (describing lower courts' holding). In Tobacco II, class certification was not denied "on the ground of lack of standing," but rather because common questions would not predominate on the issue of reliance. That is the ruling Tobacco II expressly reversed. Tobacco II goes far beyond standing (as will be discussed in more detail below).
Nor did Tobacco II hold that if the class representative has standing, "a multitude of class members will also have standing." Slip op. at 15. On the contrary, Tobacco II holds that "standing requirements are applicable only to the class representatives, and not all absent class members." 46 Cal.4th at 306 (emphasis added). In other words, the class representative's standing does not confer standing on the unnamed class members; rather, the unnamed class members need not meet the standing requirements at all: "[A]ccepted principles of class action procedure ... treat the issue of standing as referring only to the class representative and not the absent class members.” Id. at 321.
Cohen also held that the UCL does not "authorize an award for injunctive relief and/or restitution on behalf of a consumer who was never exposed in any way to an allegedly wrongful business practice." Slip op. at 14. The Supreme Court held the opposite in Tobacco II:
[Business and Professions Code section 17204], construed in light of the “concern that wrongdoers not retain the benefits of their misconduct” (Fletcher v. Security Pacific National Bank, supra, 23 Cal.3d 442, 452, 153 Cal.Rptr. 28, 591 P.2d 51) has led courts repeatedly and consistently to hold that relief under the UCL is available without individualized proof of deception, reliance and injury. (E.g., Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1267, 10 Cal.Rptr.2d 538, 833 P.2d 545; Committee on Children's Television, Inc. v. General Foods Corp., supra, 35 Cal.3d at p. 211, 197 Cal.Rptr. 783, 673 P.2d 660.)
Tobacco II, 46 Cal.4th at 321 (emphasis added).
Let me repeat that for emphasis. Under the UCL, "relief" may be ordered "without individualized proof of deception, reliance and injury." Id. (emphasis added).
The reason for this is simple. Actual deception, reliance and injury are not elements of a UCL claim. Id.; see also id. at 312 (UCL "fraudulent" prong claim requires proof only that “members of the public are likely to be deceived"); Morgan v. AT&T Wireless Services, Inc., 177 Cal.App.4th 1235, 1253 (2009) ("[P]re-Proposition 64 caselaw that describes the kinds of conduct outlawed under the UCL is applicable to post-Proposition 64 cases such as the present case. The only difference is that, after Proposition 64, plaintiffs (but not absent class members in a class action) must establish that they meet the Proposition 64 standing requirements." (citing Tobacco II)).
Contrary to the Cohen court's perception, Tobacco II addresses far more than just standing. The Supreme Court held that the standing requirement ("suffered injury in fact and lost money or property as a result of") could not be imposed on unnamed class members because doing so would serve to change these long-established elements of a UCL claim -- something the Court had previously held, in Mervyn's, Prop. 64 did not do:
[T]o hold that the absent class members on whose behalf a private UCL action is prosecuted must show on an individualized basis that they have “lost money or property as a result of the unfair competition” (§ 17204) would conflict with the language in section 17203 authorizing broader relief -- the “may have been acquired” language -- and implicitly overrule a fundamental holding in our previous decisions, including Fletcher, Bank of the West and Committee on Children's Television.
Had this been the intention of the drafters of Proposition 64 -- to limit the availability of class actions under the UCL only to those absent class members who met Proposition 64's standing requirements -- presumably they would have amended section 17203 to reflect this intention. Plainly, they did not.
[It] would undermine the guarantee made by Proposition 64's proponents that the initiative would not undermine the efficacy of the UCL as a means of protecting consumer rights, because requiring all unnamed members of a class action to individually establish standing would effectively eliminate the class action lawsuit as a vehicle for the vindication of such rights.
Tobacco II, 46 Cal.4th at 320, 321.
The Cohen opinion expresses the view that UCL claims are incompatible with class certification principles unless each class member proves reliance and injury:
[W]e find Tobacco II to be irrelevant because the issue of "standing" simply is not the same thing as the issue of "commonality." .... We see no language in Tobacco II which suggests to us that the Supreme Court intended our state's trial court's to dispatch with an examination of commonality when addressing a motion for class certification.Slip op. at 15-16. Cohen overlooks the fact that Tobacco II necessarily addressed not only standing, but also commonality, because in Tobacco II, the Supreme Court expresssly reinstated an order granting class certification of a UCL "fraudulent" prong claim. The Supreme Court did not direct lower courts to dispense with commonality when analyzing class certification; but what it did do is direct lower courts to assess commonality in light of the actual elements of the claim ("likely to deceive" consumers) rather than non-existent ones (actual reliance and injury).
For a case in which the court employed precisely that approach to commonality, and found the element satisfied, see Plascencia v. Lending 1st Mortgage, ___ F.R.D. ___, 2009 WL 2569732 (N.D. Cal. Aug. 21, 2009) (discussed in this blog post.) Even the Court of Appeal in Kaldenbach (published on Monday) employed that approach.
The Cohen opinion concludes:
In short, ... factual questions associated with [unnamed class members'] reliance on DIRECTV’s alleged false representations was a proper criterion for the court’s consideration when examining “commonality” in the context of the subscribers’ motion for class certification, even after Tobacco II.Slip op. at 16 (emphasis added). This holding takes us back to pre-Mervyn's and pre-Tobacco II days, when lower courts had (erroneously) held that Prop. 64 changed the UCL's substantive elements by importing a "reliance" requirement. The Supreme Court held in no uncertain terms that Prop. 64 "was not intended to have any effect on absent class members.” Tobacco II, 46 Cal. 4th at 319 (emphasis added). If Cohen stands, the effect will be major and substantive.
As defendants like to point out, the class action statute is a procedural device that is not to be employed to alter the underlying claim's substantive elements. See, e.g., Tobacco II, 46 Cal.4th at 312 (citing City of San Jose v. Superior Court, 12 Cal.3d 447, 462 (1974) ("Class actions are provided only as a means to enforce substantive law.")). The Cohen opinion uses the class action device to impose a "reliance" element that the Supreme Court has (twice) held Prop. 64 did not impose and is not part of the UCL. The opinion should either be depublished or taken up for review.