The UCL Practitioner

New Ninth Circuit class certification opinion: Yokoyama v. Midland National Life Ins. Co.

In Yokoyama v. Midland National Life Ins. Co., ___ F.3d ___ (9th Cir. Feb. 8, 2010), the Ninth Circuit reversed an order denying class certification of claims brought under Hawaii's consumer protection law, which bears a strong resemblance to the UCL. 

Like the UCL's "fraudulent" prong, Hawaii's Deceptive Practices Act (Haw. Rev. Stat. § 480.2) does not require proof of actual reliance or deception; rather, "the capacity to deceive is sufficient."  Slip op. at 2131 (citation omitted).  Hence, "there is no reason to look at the circumstances of each individual purchase" in assessing whether common questions predominate under Rule 23.  Id.  Instead, "the fact-finder need only determine whether [the defendant's marketing] brochures were capable of misleading a reasonable consumer."  Id.

This opinion should be useful for practitioners handling UCL "fraudulent" prong cases in federal court under CAFA. 

New class certification opinion: Jaimez v. DAIHOS USA, Inc.

In Jaimez v. DAIHOS USA, Inc., ___ Cal.App.4th ___ (Jan. 12, 2010; pub. ord. Feb. 8, 2010), the Court of Appeal (Second Appellate District, Division One) reversed an order denying class certification of various wage and hour claims.

Court of Appeal adds new section to opinion: Steroid Hormone Product Cases

On February 8, 2010, the Court of Appeal (Second Appellate District, Division Four) issued a modification order adding a new, three-page section to its opinion in Steroid Hormone Product Cases, ___ Cal.App.4th ___ (Jan. 21, 2010).  As my post on the original opinion explained, this panel correctly interpreted Tobacco II (in a manner directly contrary to the Court of Appeal in Cohen). 

Evidently, a rehearing petition was filed on February 2, urging the Court to follow Cohen and Vioxx.  The quickly-issued modification order (which also denied rehearing with no change in the judgment) makes the panel's disagreement with those opinions clear.  It is reasonable to assume that a review petition will be filed. 

In other appellate activity of note, a rehearing petition was filed on January 22 and denied on January 26 in the Weinstat case (see this post).  Again, a petition for review would not be surprising.  And we still await opinions in the two "grant and hold" cases, Pfizer and McAdams. 

UPDATE:  Many thanks to the blog reader who wrote to advise that a petition for review was already filed last Thursday, February 11, in the Weinstat case.  Weinstat v. Dentsply Int'l., no. S180179.  I have also received copies of the petition for review and the rehearing petition, which will go up in a later post. 

New UCL economic abstention doctrine decision: Acre v. Kaiser Foundation Health Plan, Inc.

In Acre v. Kasier Foundation Health Plan, Inc., ___ Cal.App.4th ___ (Jan. 27, 2010), the trial court sustained a demurrer to a UCL action without leave to amend based on: (a) the economic abstention doctrine; and (b) the conclusion that the complaint failed to allege a sufficient community of interest for class certification purposes.   Slip op. at 5-6.

The Court of Appeal (Second Appellate District, Division Seven) determined that the economic abstention doctrine did not apply (id. at 25-33) and also that the trial court had erred by dismissing the class certification allegations at the pleading stage (id. at 11-25).  The opinion is quite interesting and worth a full read. 

New UCL class certification decision: Steroid Hormone Product Cases

Another case interpreting Tobacco II has been handed down, and this one, like Weinstat a couple of weeks ago, refutes the Cohen court's interpretation.

In Steroid Hormone Product Cases, ___ Cal.App.4th ___ (Jan. 21, 2010), the Court of Appeal (Second Appellate District, Division Four) reversed an order denying class certification of UCL and CLRA claims.  The case alleged that the defendant (GNC) sold nutritional supplements containing a controlled substance that was illegal to sell or possess without a prescription, and that the defendant failed to disclose to consumers that its product contained this illegal ingredient.  Slip op. at 3-4.  The plaintiff class consisted of all those who purchased the supplements.  See id., passim.

The trial court denied class certification "on the ground that, with regard to both the UCL claim and the CLRA claim, an individualized inquiry would have to be conducted into whether the illegality of androstenediol products was material to each purchaser, to determine whether GNC’s alleged conduct caused injury to that purchaser." Id. at 8.

The Court of Appeal disagreed.  Under Tobacco II made clear that "the standing provision added by Proposition 64 'was not intended to have any effect at all on unnamed class members.'"  Id. at 10 (quoting Tobacco II, 46 Cal.4th at 321.)   "Therefore, while a named plaintiff in a UCL class action now must show that he or she suffered injury in fact and lost money or property as a result of the unfair competition, once the named plaintiff meets that burden, no further individualized proof of injury or causation is required to impose restitution liability against the defendant in favor of absent class members." Id. (emphasis added). 

This holding is directly contrary to Cohen.

The defendant raised the argument that the Cohen court found persuasive, namely, that Tobacco II merely addressed "standing" and was not relevant to class certification.  This panel did not read Tobacco II that way:

GNC tries to avoid the required reversal by arguing in its respondent’s brief that the trial court’s ruling does not conflict with Tobacco II because Tobacco II addressed standing, while the trial court specifically stated that standing was irrelevant to the certification analysis. Although the court did state that standing was irrelevant, it nevertheless found that Proposition 64 added actual injury as an element of a cause of action for restitution under the UCL, and therefore injury must be established for each class member. Tobacco II made clear, however, that Proposition 64 only affected the named plaintiff’s standing in a UCL class action seeking restitution; it did not add an additional element to be satisfied by all class members.

Id. at 10-11 n.8 (citing Tobacco II, 46 Cal.4th at 321) (emphasis added).  In other words, the Steroid Hormone Product Cases court recognized that because reliance and injury are not elements of a UCL claim, they are irrelevant to class certification.  The court concluded that class certification should have been granted because common questions predominated:

Martinez’s UCL claim presents two predominate issues (other than Martinez’s individual standing), both of which are common to the class: (1) whether GNC’s sale of androstenediol products was unlawful; and if so, (2) the amount of money GNC “may have . . . acquired by means of” those sales that must be restored to the class (Bus. & Prof. Code, § 17203).

Id. at 11.

As for the CLRA claim, the doctrine of presumed reliance based on the materiality of the undisclosed information warranted class certification of that claim as well:

[Plaintiff] correctly argues that he is entitled to show that GNC’s alleged deceptive conduct caused the same damage to the class by showing that the alleged misrepresentation was material, even if GNC might be able to show that some class members would have bought the products even if they had known they were unlawful to sell or possess without a prescription. [Citation.] In other words, if Martinez can show that “‘material misrepresentations were made to the class members, at least an inference of reliance [i.e., causation/injury] would arise as to the entire class.’”

Id. at 13 (citing Vasquez v. Superior Court, 4 Cal.3d 800 (1971); Massachusetts Mutual Life Ins. Co. v. Superior Court, 97 Cal.App.4th 1282 (2002)) (footnote omitted). 

The court then reaffirmed the "reasonable consumer" standard for CLRA cases, explaining:

the question that must be answered in this case is whether a reasonable person would find it important when determining whether to purchase a product that it is unlawful to sell or possess that product. It requires no stretch to conclude that the proper answer is “yes” -- we assume that a reasonable person would not knowingly commit a criminal act.

Id. at 14 (citing Civ. Code § 3548; Garnette v. Mankel, 71 Cal.App.2d 783, 787 (1945)).  Finally, the court rejected the argument that a "reasonable bodybuilder" standard should apply instead, as well as the argument that "as a rule, bodybuilders care less about legality than non-bodybuilders."  Id.  Bodybuilders as a class will no doubt appreciate the vindication. 

Oral argument scheduled in McAdams v. Monier, Inc.

The Court of Appeal for the Third Appellate District has scheduled oral argument in the McAdams case for Monday, January 25, 2010 at 2:00 p.m. in Sacramento.  McAdams v. Monier, no. C051841.  McAdams is one of the three Tobacco II "grant and hold" cases. 

Another "grant and hold" case, Pfizer v. Superior Court (Galfano), no. B188106, was argued on December 7, 2009, and we still await the Court of Appeal's opinion. 

If you are in Sacramento and would like to attend the McAdams argument on the 25th and provide a report for posting here, please let me know. 

Three recent decisions of interest

The decisions below are on my "to blog" list: 

• United Steel, Paper & Forestry, Rubber, Manufacturing Energy, Allied Industrial & Service Workers International Union, AFL-CIO, Inc. v. ConocoPhillips Co., ___ F.3d ___ (9th Cir. Jan. 6, 2010) (reversing order denying class certification of meal period claims)
  
• Rodriguez v. Hayes, ___ F.3d ___ (9th Cir. Jan. 4, 2010) (order denying panel rehearing and en banc rehearing) (amended opinion reversing order denying class certification of claims brought in habeas corpus proceeding; see this prior blog post on original Rodriguez opinion) 
  
• Cellphone Termination Fee Cases, ___ Cal.App.4th ___ (Dec. 31, 2009) (First Appellate District, Division Five) (affirming final approval of class action settlement and attorneys' fees award)

New opinion interpreting Tobacco II: Weinstat v. Dentsply International, Inc.

In Weinstat v. Dentsply International, Inc., ___ Cal.App.4th ___ (Jan. 7, 2010), the Court of Appeal (Fourth First Appellate District, Division Four) reversed an order decertifying UCL and breach of warranty claims.

A group of dentists sued the manufacturer of an "ultrasonic scaler," which is a device used to clean teeth.  According to the manufacturer, the device was also safe and appropriate for use as an irrigant/coolant during oral surgery.  Slip op. at 1-3, passim.  In fact, however, the device was unsafe for surgical use because it could not be adequately sterilized.  Id. at 4. 

Initially, the trial court granted class certification of the plaintiffs' UCL and breach of warranty claims.  Id. at 5.  After the Pfizer decision was handed down in 2006, however, the defendant moved to decertify the classes.  Pfizer held -- erroneously, as it turned out -- that after Prop. 64, each class member would have to establish standing by proving that he or she individually relied on the defendant's misrepresentations.  The trial court followed Pfizer in decertifying the UCL claim, and for good measure, reconsidered the breach of warranty claim and decertified that claim as well.  Id. at 5-6.

The Court of Appeal reversed the decertification order:

Here it is abundantly clear that the trial court incorrectly believed that each class member must establish standing, thereby requiring the court to delve into individual proof of material[ity], reliance and resulting damage. Tobacco II has dispatched that reasoning and therefore reversal is appropriate.

Id. at 9. And that was essentially the end of the analysis.

Notably, unlike the court in Cohen, the Weinstat court considered it wholly unnecessary to address whether individualized reliance issues might impact the commonality element of class certification.   Instead, pursuant to Tobacco II, the court simply reversed the decertification order and remanded for redetermination of a single question:  "whether the named representatives can meet the UCL standing requirements announced in Tobacco II and if not, whether amendment should be permitted."  Id.  The Supreme Court did exactly the same thing in Tobacco II itself.  In re Tobacco II Cases, 46 Cal.4th 298, 306 (2009). 

In other words, Weinstat correctly followed Tobacco II as it was bound to do.  Cohen misinterpreted Tobacco II and reached the wrong result. 

The opinion also includes a lengthy footnote further interpreting Tobacco II and confirming that, even after Prop. 64, the substantive liability standard in a UCL "fraudulent" prong case is whether "the representations or nondisclosures in question would likely be misleading to a reasonable consumer.  The question of materiality, in turn, is whether a reasonable person would attach importance to the misrepresentation or nondisclosure in deciding how to proceed in the particular transaction -- in other words, would a reasonable dentist attach importance to Dentsply's claim that the [device] was safe for use in surgery."  Slip op. at 8 n.8 (citation omitted). 

Next, the Court of Appeal turned to the breach of warranty claim, and held that that claim should not have been decertified, either. 

As a procedural matter, the Court held that a decertification motion may be granted only upon proof of changed circumstances, such as a change in law or newly-discovered facts.  Slip op. at 11-12.  Because the defendant had presented none with respect to the warranty claim, the trial court had no power to decertify that claim:

In the case at hand, Dentsply’s motion for decertification was accompanied by changed circumstances, most notably the Pfizer decision. However, this circumstance only pertained to the UCL cause of action. Nevertheless, the trial court went on to address Dentsply’s reassertions as to why the breach of warranty class should be decertified as well. Decertifying one theory should not sanction decertifying another absent some commonality with the changed circumstance or some other situation justifying reconsideration. Here there was none.

Id. at 12. 

Then, the Court held that, "even if the trial court correctly reconsidered its certification of the breach of warranty class, its substantive decision was wrong." Id.  In an interesting and lengthy discussion, the Court determined that "reliance plays no role" in a claim for breach of express warranty.  Id. at 12-17.  And even if it did, none of the variations in the wording of defendants' misrepresentations would defeat certification.  Id. at 17-21.  "[T]he finding that the [misrepresentations] were not uniform does not imply that the variations were material to the claims ...."  Id. at 19.  On the most material question -- "biofilm infection risk" -- defendants "were silent."  Id.  (Here, the Weinstat court departs from Kaldenbach.)  And finally, the defendant's hypothetical defenses to the warranty claim (specifically, its right to present "clear affirmative proof" that the misrepresentations in question did not go "to the essence of the agreement") could not defeat the predominance finding.  Id. at 21-23.

Many thanks to everyone who wrote to alert me to this new decision. 

Two new class certification decisions: Keller v. Tuesday Morning, Inc. and In re Vioxx Class Cases

Two new class-certification-related opinions have been handed down in the past twelve days:

• In re Vioxx Class Cases, ___ Cal.App.4th ___ (Dec. 15, 2009) (Second Appellate District, Division Three)
  
• Keller v. Tuesday Morning, Inc., ___ Cal.App.4th ___ (Nov. 4, 2009; pub. ord. Dec. 4, 2009) (Second Appellate District, Division Six)

In both cases, the Court of Appeal affirmed an order denying class certification.  Check back here for more on these opinions later. 

Class certification order by Judge Velasquez: In re Complete® Cases

Here is a copy of the order granting class certification issued by Orange County Superior Court Judge David C. Velasquez on November 30, 2009 in In re Complete® Cases, JCCP No. 4521.  This order was mentioned in a National Law Journal article a couple of weeks ago as well as in this blog post. 

The order grants class certification of both UCL and CLRA claims.  The UCL part of the ruling is largely based on In re Tobacco II, while the CLRA claim was certified based on a Vasquez theory of presumed reliance.  Order at 7.   

Many thanks to counsel who forwarded the order.

"Calif. Contact Lens Class is Certified"

Yesterday's National Law Journal had an article reporting on a recent class certification decision issued by Orange County Superior Court Judge David C. Velasquez in a UCL case.

UPDATE:  Here is a copy of the class certification order referenced in the article.

New class certification decision: Evans v. Lasco Bathware, Inc.

In Evans v. Lasco Bathware, Inc., ___ Cal.App.4th ___ (Oct. 13, 2009; pub. ord. Nov. 6, 2009), which was ordered published last Friday, the Court of Appeal (Fourth Appellate District, Division One) affirmed an order denying class certification in a product defect case seeking economic damages for negligence and strict products liability.  Evidently, no UCL claim was raised, and the opinion does not mention Tobacco II.

I have not read it carefully, but the outcome of this opinion appears contrary to the well-established principle that "a class action is not inappropriate simply because each member of the class may at some point be required to make an individual showing as to his or her eligibility for recovery or as to the amount of his or her damages." Sav-on Drug Stores, Inc. v. Superior Court, 34 Cal.4th 319, 333 (2004).   "Individualized damages issues" appears to be the only basis for the trial court's denial of certification and the Court of Appeal's affirmance. 

Unpublished opinion applies Tobacco II to common-law fraud claim: Whiteley v. R.J. Reynolds Tobacco Co.

In a recent unpublished opinion, the Court of Appeal (First Appellate District, Division Two) applied Tobacco II's discussion of actual reliance in a non-class common-law fraud case.  Whiteley v. R.J. Reynolds Tobacco Co., Nos. A119345, A121027 (nonpub. Oct. 14, 2009).  

This is interesting because there has been discussion of whether Tobacco II might make common-law fraud class actions easier to certify.  This unpublished decision shows, at least, that Tobacco II is going to be instructive in such cases. 

New class certification decision: Ali v. U.S.A. Cab Ltd.

In Ali v. U.S.A. Cab Ltd., ___ Cal.App.4th ___ (Aug. 24, 2009), the Court of Appeal (Fourth Appellate District, Division One) affirmed an order denying class certification in a case involving alleged misclassification of workers as independent contractors.

Oral argument preview: Dukes v. Wal-Mart, Inc.

This afternoon at 2:00 p.m. in San Francisco, an eleven-judge en banc panel of the Ninth Circuit will hear oral argument on rehearing in Dukes v. Wal-Mart, Inc. (see this blog post for more).  In 2007, a three-judge panel (with one judge dissenting) affirmed the trial court's order granting class certification under Rule 23(b)(2) of plaintiffs' Title VII claims for gender discrimination. Dukes v. Wal-Mart, Inc., 509 F.3d 1168 (9th Cir. 2007).

Time permitting, I'm going to attend the Ninth Circuit argument today and provide a report here tomorrow. 

UPDATE:  This morning's Daily Journal reports on the upcoming argument and provides the names of the eleven judges on the en banc panel: Alex Kozinski; Stephen Reinhardt; Marsha Berzon; Michael Daly Hawkins; Barry G. Silverman; Susan P. Graber; Richard A. Paez; Raymond C. Fisher; Pamela Ann Rymer; Carlos T. Bea; and Sandra S. Ikuta.

According to the article, seven were appointed by Democratic presidents.  Kozinski, Rymer, Bea, and Ikuta are "[t]he conservatives on the panel."  John Roemer, "Wal-Mart Will Try (Again) to Block Class Action," Daily Journal (Mar. 24, 2009).   

Judge Hawkins was part of the two-judge majority in the original proceeding. Neither Judge Harry Pregerson, who wrote the majority opinion, nor Andrew J. Kleinfeld, who dissented, is part of the en banc panel.

EEOC files amicus brief supporting class certification in Dukes v. Wal-Mart

Today's Recorder reports that yesterday, the EEOC filed an amicus brief supporting class certification in Dukes v. Wal-Mart.  The case is still scheduled for argument before the Ninth Circuit en banc panel next Tuesday, March 24. 

"Wal-Mart Cuts Class Off at the Pass in Pet Food Case"

This article from Wednesday's Recorder provides an example of a federal case in which the court granted a defense motion to preemptively deny class certification. 

In Picus v. Wal-Mart Stores, Inc., No. 2:07-CV-00682 (order filed 03/16/09), a district judge in Nevada construed the Nevada Deceptive Trade Practices Act ("NDTPA"), and in denying certification, distinguished Wiener v. Dannon Co., ___ F.R.D. ___, 2009 WL 383650 (C.D. Cal. Jan. 30, 2009) (discussed in this blog post), in which a district judge in California granted class certification of UCL and CLRA claims based on alleged misrepresentations about the defendants' products.  The Nevada judge concluded that the Nevada Supreme Court would not adopt substantive elements of California law (specifically, presumed reliance based on materiality of the misrepresentation or nondisclosure) when construing the NDTPA.  Slip op. at 11-12.

The opinion also asserts that California law "require[s] individual proof of reliance and causation."  Id. at 13.  That's not correct.  Even if proof of reliance and/or causation is required under the UCL or CLRA, that proof is not necessarily, categorically, individualized, as the court seemed to conclude.  The opinion itself cites California case law (namely, the Supreme Court's decision in Vasquez) holding that reliance can sometimes be presumed on a classwide basis, even in cases involving common-law fraud. 

It's not clear why this decision warranted such extraordinary coverage in the Recorder. 

Another "no-class-action" arbitration clause bites the dust: Franco v. Athens Disposal Co.

In Franco v. Athens Disposal Co., ___ Cal.App.4th ___ (Mar. 10, 2009), the Court of Appeal (Second Appellate District, Division One) applied Gentry in a case for meal period and rest break violations:

[T]he primary issue on appeal is whether Gentry applies to claims for meal and rest periods under the Labor Code (§§ 512, 226.7) and the Wage Order (§§ 11, 12). We conclude it does. Discover Bank, a consumer case, laid the foundation for Gentry, an overtime case. And it is but a small step from the overtime claims in Gentry to the meal and rest period claims here. Although overtime compensation is undoubtedly important (see Gentry, supra, 42 Cal.4th at p. 456), the state has a significant interest in making sure that the drivers of commercial vehicles receive sufficient food and rest while on the job.

Slip op. at 11. After a detailed analysis, the court concluded that the entire arbitration clause (not just the class action ban) was unenforceable and that the claims would proceed "in a court of law." Id. at 27.

Other holdings of note: 

• An order enforcing a "no-class-action" arbitration clause, and ordering the claims to proceed on an individual basis, was "the 'death knell' of class litigation" and was therefore appealable under the general rule that orders denying certification of an entire class are final.  Slip op. at 8.  This is an important rule for litigants to remember because it means that to preserve your appellate rights, you have to file your notice of appeal mid-case whether you want to or not.
  
  
• The trial court contravened Linder by ruling on the merits of plaintiffs' overtime claim (and then disregarding that claim) in the course of deciding whether the arbitration clause was enforceable: "Here, the trial court granted a de facto summary adjudication motion on the overtime claim in determining the enforceability of a class arbitration waiver. That was error. Absent a demurrer or dispositive motion — [the defendant] brought none — Franco’s overtime claim had to be considered as part of the case in deciding the validity of the class arbitration provision."  Slip op. at 11; see id. at 20 (citing Linder and Gentry). 
  
  
• Contrary to the defendant's position, the laws governing meal periods and rest breaks are not waivable.  Slip op. at 14-16.  Therefore, "to the extent [if any] Gentry may be limited to unwaivable statutory rights [such as the right to overtime implicated in Gentry], under [Labor Code] section 219, the meal and rest period laws cannot be waived."  Id. at 16.  The court said in no uncertain terms that Labor Code section 226.7(a) "requires employers to comply with the meal and rest period provisions of the Wage Order[s]."  Slip op. at 15 (emphasis added). 
  
  
• The trial court incorrectly determined that the meal period and rest break claims would be "so individualized as to render class arbitration treatment significantly less effective than individual arbitrations."  Slip op. at 21.  To the contrary:

  At this early stage in the litigation, we know that [the defendant] uses a computer and an electronic timecard system to keep track of its employees’ work hours. By law, an employer must maintain time records showing an employee’s (1) “total daily hours worked” and (2) meal periods, unless “operations cease” during meals. (Wage Order, § 7(A)(3).) Further, [the defendant] allegedly engaged in a systematic course of illegal payroll practices and policies in violation of the Labor Code and subjected all of its hourly employees to the same unlawful conduct. As a result, common questions of law and fact predominate over individualized issues.

  Id.   (Incidentally, all of the Wage Orders, not just the one construed here, contain that same recordkeeping requirement.)
  
  
• The Wage Orders provide civil penalties for violation of section 226.7(b)'s requirement that employers pay premium wages for missed meal periods and rest breaks.  Slip op. at 25-27.  Those civil penalties are recoverable under the Private Attorney General Act ("PAGA").  Id. at 26.   The defendant's arbitration agreement "sought to nullify the PAGA" and purported to preclude all employees "from seeking civil penalties on behalf of other current and former employees, that is, from performing the court function of a private attorney general."  Id. at 27.  Hence, the entire agreement was "tainted with illegality" and "unenforceable."  Id.

Ninth Circuit sets Dukes v. Wal-Mart for en banc argument on March 24

As I reported in February (see these two posts), the Ninth Circuit granted en banc rehearing to revisit the 2-1 panel decision in Dukes v. Wal-Mart, Inc., 509 F.3d 1168 (9th Cir. 2007). 

Pursuant to paragraph (3) of the Circuit Advisory Committee Note to Ninth Circuit Rules 35-1 to 35-3, the eleven-judge en banc court decided to hear further argument, but apparently decided not to order further briefing (which appears to be the usual practice).  The argument will take place on Tuesday, March 24, 2009 at 2:00 p.m. in San Francisco (limited to thirty minutes per side).  I'm going to try to attend and report on it here. 

Dukes is currently the second case listed on the Ninth Circuit's "Status of Pending En Banc Cases" page.  The members of the en banc court will soon be listed there.  At this link, you can download a huge, 421-page pdf file with copies of the petition for en banc rehearing, the opposition, the reply, and the extensive amicus filings on both sides. 

Recent federal decision on classwide reliance: Wiener v. Dannon Co.

In Wiener v. Dannon Co., ___ F.R.D. ___, 2009 WL 383650 (C.D. Cal. Jan. 30, 2009), the court (Judge S. James Otero) held that common questions predominated on plaintiffs' UCL and CLRA claims, which were predicated on alleged misrepresentations about the defendants' products (Activia, Activia Light, and DanActive yogurt). The key question was whether reliance (assuming reliance is an element of these claims) could be established through common proof. The court determined that it could:

It is undisputed that reliance is an element of Plaintiff's causes of action based on breach of warranty, see Williams v. Beechnut Nutrition Corp., 229 Cal.Rptr. 605, 608 (Cal.Ct.App.1986), and the CLRA, see True v. Am. Honda Motor Co., Inc., 520 F.Supp.2d 1175, 1182 (C.D.Cal.2007). As both parties recognize, the issue of whether reliance is an element of Plaintiff's cause of action under the UCL, however, is currently pending before the California Supreme Court, as there is a split of authority on the issue. See Cattie v. Wal-Mart Stores, Inc., 504 F.Supp.2d 939, 947 (S.D.Cal.2007) (noting split of authority but finding that, with recent Proposition 64 reforms, the UCL now requires reliance); Anunziato v. eMachines, Inc., 402 F.Supp.2d 1133, 1137-39 (C.D.Cal.2005) (declining to read a reliance requirement into the UCL); In re Tobacco II Cases, 146 P.3d 1250 (2006) (granting petition for review on issue of whether UCL requires reliance); Def.'s Opp'n n. 5; Pl.'s Reply n. 7. “Nevertheless, most courts that have confronted this issue since the passage of Proposition 64,” a recent amendment to the UCL, have concluded that the UCL now requires reliance. True, 520 F.Supp.2d at 1182 (internal citations omitted). Although the Court finds the majority view, which requires reliance, more persuasive, see id. at 1182; Cattie, 504 F.Supp.2d at 947-49, the Court need not determine the issue because even if reliance is required under the UCL, an inference of reliance for all class members applies to this case, making class treatment appropriate.

Courts have found that an inference of reliance may be appropriate for claims for violations of the UCL and the CLRA, see True, 520 F.Supp.2d at 1182, as well as for breach of express warranty, see Osborne, et al., 243 Cal.Rptr. at 823. An inference of reliance arises if material misrepresentations were “made to persons whose acts thereafter were consistent with reliance upon the representation.” Occidental Land, Inc. v. Superior Court, 556 P.2d 750, 754 (1976); Osborne, et al. v. Subaru of America, et al., 243 Cal.Rptr. 815, 823 (Cal.Ct.App.1988) (internal citations omitted). For a class action, an inference of reliance arises as to the entire class only if the material misrepresentations were made to all class members. See Vasquez v. Superior Court, 484 P.2d 964, 973 (1971) (“It is sufficient for our present purposes to hold that if the trial court finds material misrepresentations were made to the class members, at least an inference of reliance would arise as to the entire class.”); Osborne, et al., 243 Cal.Rptr. at 823 (internal citations omitted). In order for a misrepresentation of fact to be material, the misrepresentation must have “induced the plaintiff to alter his position to his detriment. Stated in terms of reliance, materiality means that without the misrepresentation, the plaintiff would not have acted as he did.” True, 520 F.Supp.2d at 1182 (quoting Caro v. Procter & Gamble Co., 22 Cal.Rptr.2d 419, 433 (1993)). The defendants may introduce evidence to rebut the inference of reliance. Vasquez, 484 P.2d at 973.

In this case, Plaintiff's CLRA, UCL, and breach of express warranty claims satisfy the requirements for an inference of reliance: material representations were made to all potential class members who then, with their purchase of one of the Products, acted in a manner “consistent with reliance upon the representation.” See Occidental Land, Inc., 556 P.2d at 754; Osborne, et al., 243 Cal.Rptr. at 823. Regardless of whether every class member was exposed to Dannon's television, print, and internet advertisements, the record clearly establishes that Dannon's alleged misrepresentations regarding the clinically proven health benefits of the Products are prominently displayed on all of the Products' packaging, a fact that Dannon has never contested. (See, e.g., First Am. Compl. ¶¶ 23-25, 38-39; Def. Dannon Company, Inc.'s Answer Patricia Wiener & Steven R. Berube's First Am. Putative Class Action Compl. ¶¶ 23-25, 38-39; Blood Decl., Ex. 6.) Because, by definition, every member of the class must have bought one of the Products and, thus, seen the packaging, Plaintiffs have succeeded in showing that the alleged misrepresentations were made to all class members. See Vasquez, 484 P.2d at 973; Osborne, et al., 243 Cal.Rptr. at 823. Furthermore, the Court finds that the misrepresentations at issue were material. The record clearly establishes that the characteristic that distinguishes the Products from others on the market is their respective alleged health benefit. (See, e.g., Pl's Mot. 2-11; Def.'s Opp'n 2-3; First Am. Compl. ¶¶ 23-45, 38-39; Blood Decl., Exs. 5-7; Freitas Decl. ¶¶ 3-4; Jove Decl. ¶¶ 2-6.) Dannon has not pointed to any meaningful difference in flavor, serving size, or the like that might influence consumers' purchases. Rather, Dannon's advertisements, promotions, and labels for the Products explicitly and continually emphasize only the health benefits of Bifidus Regularis in Activia and L. Casei Immunitas in DanActive. (See, e.g., Pl's Mot. 2-11; Def.'s Opp'n 2-3; First Am. Compl. ¶¶ 23-45, 38-39; Blood Decl., Exs. 5-7; Freitas Decl. ¶¶ 3-4; Jove Decl. ¶¶ 2-6.) The Court is aware that many factors influence all consumers' purchasing decisions, a point which Dannon emphasizes, yet given that the alleged misrepresentations are the distinguishing characteristic of the Products, the Court finds that these representations induced consumer purchases because without the alleged misrepresentations, there is no reason, even with sales, coupons, or other promotions, to suggest that purchasers would have selected the Products over other Dannon products or similar, generally less expensive, products by other brands. See True, 520 F.Supp.2d at 1182 (quoting Caro, 22 Cal.Rptr.2d at 433). Finally, “the purchases made by plaintiffs were acts consistent with their reliance on” Dannon's alleged misrepresentations regarding the health benefits of the Products. See Occidental Land, Inc., 556 P.2d at 754. Thus, the Court finds that the evidence presently before the Court allows for an inference of reliance in this case. Accordingly, reliance may be established on a common basis.

Id. at *8-*9.  The court denied class certification with leave to substitute a new class representative who satisfied the adequacy requirement.  Id. at *13.

"Wal-Mart wins chance to block class-action suit"

Saturday's San Francisco Chronicle reported on the Ninth Circuit's order granting en banc rehearing in Dukes v. Wal-Mart (discussed in this blog post from Friday). 

Now that en banc rehearing has been granted, what happens next?  Paragraph (3) of the Circuit Advisory Committee Note to Ninth Circuit Rules 35-1 to 35-3 provides the answer:

(3) Grant of Rehearing En Banc. When the court votes to rehear a matter en banc, the Chief Judge will enter an order so indicating. The vote tally is not communicated to the parties. The three-judge panel opinion shall not be cited as precedent by or to this court or any district court of the Ninth Circuit, except to the extent adopted by the en banc court.

After the en banc court is chosen, the judges on the panel decide whether there will be oral argument or additional briefing. If there is to be oral argument, the Chief Judge (or the next senior active judge as the case may be) will enter an order designating the date, time and place of argument. If no oral argument is to be heard, the Chief Judge will designate a date, time, and place for a conference of the en banc court. That date will ordinarily be the submission date of the case. If any issues have been isolated for specific attention, the order may also set forth those issues and additional briefing may be ordered. The opinion of the three-judge panel shall not be cited as precedent by or to this court or any district court of the Ninth Circuit, except to the extent adopted by the en banc court.

(Emphasis added.) 

In this case, en banc rehearing was granted under Circuit Rule 35-3, which provides for a "limited en banc" court consisting of the Chief Judge plus 10 other judges selected at random by the clerk.  The random selection is to take place on "the working day after" en banc rehearing is granted (here, Tuesday, February 17).  The Ninth Circuit has 27 active judges, so, apparently, this means that the limited en banc panel might not include any of the members of the original three-judge panel (Judges Pregerson, Kleinfeld (who dissented), and Hawkins).  It might also include judges who voted to deny the petition for en banc rehearing (which explains why the vote tally is not disclosed).

It should take at least a few weeks for the newly-chosen 11-judge en banc panel to decide whether to order oral argument or further briefing.  Circuit Rule 35-3 also authorizes, "[i]n appropriate cases," full-court rehearing after limited en banc rehearing.  Wal-Mart is likely to seek full-court rehearing, and/or U.S. Supreme Court review, if the class certification order is again affirmed, so this case will probably be with us for a long time to come. 

BREAKING NEWS: Ninth Circuit grants en banc rehearing in Dukes v. Wal-Mart, Inc.

Today, the Ninth Circuit granted en banc rehearing in Dukes v. Wal-Mart, Inc., in which the three-judge panel (with one judge dissenting) affirmed an order granting class certification of plaintiffs' gender discrimination claims under Title VII. Dukes v. Wal-Mart, Inc., 509 F.3d 1168 (9th Cir. 2007). The order granting rehearing reads:

Upon the vote of a majority of nonrecused active judges, it is ordered that this case be reheard en banc pursuant to Circuit Rule 35-3. The three-judge panel opinion shall not be cited as precedent by or to any court of the Ninth Circuit.

Judges McKeown, Rawlinson and Bybee did not participate in the deliberations or vote in this case.

Supreme Court activity this week: Harper v. 24 Hour Fitness and Kullar v. Foot Locker Retail

This week, the Supreme Court took action in two cases involving class certification issues.  In both cases, it allowed the Court of Appeal opinions to stand:

• The Court denied review in Harper v. 24 Hour Fitness, Inc., 167 Cal.App.4th 966 (2008).  In Harper, the Court of Appeal (Second Appellate District, Division Seven, with one justice dissenting) reversed an order decertifying UCL and FAL claims for class treatment. Here is my original blog post on Harper.
  
• The Court denied a depublication request in Kullar v. Foot Locker Retail, Inc., 168 Cal.App.4th 116 (2008).  There, the Court of Appeal reversed an order granting final approval of a class action settlement, holding that the trial court's factual findings were insufficient respecting the proposed settlement's value, and hence its fairness and adequacy. Here is my original blog post on Kullar.

I have been told that Alameda County Superior Court Judge Steven A. Brick has a handout for litigants on complying with Kullar when filing final approval motions.

New class-certification-related opinion: Cristler v. Express Messenger Systems, Inc.

In Cristler v. Express Messenger Systems, Inc., ___ Cal.App.4th ___ (Jan. 23, 2009; pub. ord. Feb. 11, 2009), the Court of Appeal (Fourth Appellate District, Division One) declined to reverse an order denying the plaintiff's motion to amend the class definition post-certification because, as it turned out post-trial, the denial was neither prejudicial nor a miscarriage of justice. Slip op. at 8-12.

"Hydrogen Bomb"

Professor Linda S. Mullenix of the University of Texas School of Law has an article in today's Recorder on the Third Circuit's recent class certification decision, In re Hydrogen Peroxide Antitrust Litigation, ___ F.3d ___, 2008 WL 5411562 (3d Cir. Dec. 30, 2008). In my original blog post on this case, I pointed out that the standards it enunciates do not reflect California (or even Ninth Circuit) law, but the decision is nonetheless quite interesting.

New class certification decision: Ghazaryan v. Diva Limousine, Ltd.

In Ghazaryan v. Diva Limousine, Ltd., ___ Cal.App.4th ___ (Dec. 22, 2008; pub. ord. Jan. 12, 2009), the Court of Appeal (Second Appellate District, Division Seven) reversed an order denying class certification of certain wage and hour claims. 

New federal nationwide class certification decision: Mazza v. American Honda Motor Co.

The court (Judge Valerie Baker Fairbank) granted nationwide class certification of UCL and CLRA claims in an auto defect action, Mazza v. American Honda Motor Co., ___ F.R.D. ___, 2008 WL 5256432 (C.D. Cal. Dec. 16, 2008). Many thanks to the blog reader who forwarded the order.

"3rd Circuit Remands Price-Fixing Class Action"

Today's Legal Intelligencer reports on a Third Circuit class certification decision handed down yesterday, In re Hydrogen Peroxide Antitrust Litigation, ___ F.3d ___ (3d Cir. Dec. 30, 2008). Suffice it to say that the standards for certification enunciated in this decision do not parallel California law or even Ninth Circuit standards.

I'm looking forward to resuming more regular blogging after the new year. I have a whole stack of material in my blog pile, and hope to have a post next week with more thoughts on the Troyk decision. Meanwhile, I hope everyone's holidays were merry, and Happy New Year!

Supreme Court grants review in UCL/antitrust case: Clayworth v. Pfizer, Inc.

Yesterday, the Supreme Court granted review in Clayworth v. Pfizer, Inc., no. S166435. In Clayworth, the Court of Appeal held that the "pass-on" defense applied to a price-fixing case brought by intermediate purchasers under California's Cartwright Act, and also that if the plaintiffs have passed on the entirety of their losses, they can no longer recover restitution under the UCL. Clayworth v. Pfizer, Inc., ___ Cal.App.4th ___, 83 Cal.Rptr.3d 45 (2008) (review granted). See this blog post for more on Clayworth.

In addition, the Supreme Court denied review in Medrazo v. Honda of North Hollywood, no. S167170. In Medrazo, the Court of Appeal (Second Appellate District, Division Four) reversed an order denying class certification of UCL and CLRA claims predicated on the defendant's violation of certain Vehicle Code provisions. Medrazo v. Honda of North Hollywood, 166 Cal.App.4th 89 (2008). See this blog post for more on Medrazo.

Finally, the Supreme Court will be handing down its decision this morning at 10:00 a.m. in the Vasquez attorneys' fees case. When it does, the opinion will be available at this link. Time permitting, I will post a summary of the holding later today.

New Seventh Circuit class certification decision: Thorogood v. Sears, Roebuck & Co.

Last week, in an opinion replete with gratuitous attacks on the entire class action process, the Seventh Circuit directed the district court to reverse an order granting class certification in a consumer false advertising case.  Thorogood v. Sears, Roebuck & Co., ___ F.3d ___ (7th Cir. Oct. 28, 2008).  The penultimate paragraph by itself would have been almost enough to explain the court's conclusion that the commonality element could not be met: 

The difficulty of determining the relief to which the individual class members are entitled, though serious, is not the deal breaker. If it were proved that X thousand buyers of Kenmores had been deceived, a settlement that provided each with an amount equal to an estimate of the average damages they had sustained would be a sensible and legally permissible alternative to remitting all the buyers to individual suits each of which would cost orders of magnitude more to litigate than the claims would be worth to the plaintiffs. “Aggregate class proof of monetary relief may . . . be based on sampling techniques or other reasonable estimates, under accepted rules of evidence.” 3 Herbert B. Newberg & Alba Conte, Newberg on Class Actions § 10.3, p. 480 (4th ed. 2002); see also id., § 10.5; Stewart v. General Motors Corp., 542 F.2d 445, 452-53 (7th Cir. 1976); United States v. City of Miami, 195 F.3d 1292, 1299-1300 (11th Cir. 1999); Pettway v. American Cast Iron Pipe Co., 494 F.2d 211, 259-63 (5th Cir. 1974). The deal breaker is the absence of any reason to believe that there is a single understanding of the significance of labeling or advertising clothes dryers as containing a “stainless steel drum.”

Slip op. at 12. But no, the opinion includes several pages of fulmination against class actions—none of which was necessary to the analysis or the outcome. Id. at 3-6. For example, the opinion points out the "enhanced risk of costly error" presented by class actions, which

is asymmetric when the number of claims aggregated in the class action is so great that an adverse verdict would push the defendant into bankruptcy, for then the defendant will be under great pressure to settle even if the merits of the case are slight. In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293, 1298-99 (7th Cir. 1995); Hay, “ ‘Sweetheart’ and ‘Blackmail’ Settlements in Class Actions,” supra, at 1391-92; Barry F. McNeil & Beth L. Fancsal, “Mass Torts and Class Actions: Facing Increased Scrutiny,” 167 F.R.D. 483, 489-90 (1996). It is true that in principle and often in practice, shareholders whose shares in a particular company are part of a diversified portfolio of securities are indifferent to the fortunes of a particular stock in their portfolio. But corporate managers—-the shareholders’ imperfect agents—are not indifferent to bankruptcy and so they are unwilling to bet their company on the outcome of a trial. This, however, is not such a case, as the aggregate claims are well within Sears Roebuck’s ability to pay.

Id. at 5-6 (emphasis added). If that is so, why mention this issue at all? But what bothers me the most about this opinion is its assumption that class counsel are going to breach their fiduciary duties to the class:

But the class action device has its downside, or rather downsides. There is first of all a much greater conflict of interest between the members of the class and the class lawyers than there is between an individual client and his lawyer. The class members are interested in relief for the class but the lawyers are interested in their fees, and the class members’ stakes in the litigation are too small to motivate them to supervise the lawyers in an effort to make sure that the lawyers will act in their best interests.

The defendants in class actions are interested in minimizing the sum of the damages they pay the class and the fees they pay the class counsel, and so they are willing to trade small damages for high attorneys’ fees.... The result of these incentives is to forge a community of interest between class counsel, who control the plaintiff’s side of the case, and the defendants. The judge who presides over the class action and must approve any settlement is charged with responsibility for preventing the class lawyers from selling out the class, but it is a responsibility difficult to discharge when the judge confronts a phalanx of colluding counsel.

Id. at 3-4 (citations omitted) (emphasis added).  Let's suppose, for the sake of argument, that there are some "class lawyers" who "sell out" every class they represent.  Is there any evidence that the lawyers in this particular case are among them?  The district judge evidently did not think so, as he found them adequate to represent the class members' interests and certified the class.  Nor was their adequacy apparently challenged on appeal.  So why use this opinion as a vehicle for this kind of attack?  Why not simply analyze the commonality element and be done with it? 

I have no problem with attacks on lawyers who have displayed actual dishonesty, but it is particularly unbecoming of a judicial panel to use a published opinion to gratuitously vilify half the profession.  It calls the holding's very integrity into question. 

Plaintiff-side class action attorneys constantly hear this refrain—that even though we are officers of the court, bound by the rules of ethics and under a fiduciary obligation to our clients, all of us going to breach those obligations in the most despicable way.  I take it personally, and I am tired of it. 

[Via How Appealing.]