Adam Liptak had another interesting article on the U.S. Supreme Court two days ago in The New York Times.
According to Liptak, "Chief Justice Roberts has proved adept at persuading the court’s more
liberal justices to join compromise opinions, allowing him to cite their
concessions years later as the basis for closely divided and deeply
polarizing conservative victories."
On April 3, 2013, the Supreme Court heard oral argument in Sonic-Calabasas A, Inc. v. Moreno, S174475. Ordinarily, the opinion would be due within 90 days thereafter, which would be next week.
However, last week, on June 21, 2013, the Supreme Court issued this order:
The parties are requested to serve and file supplemental briefs addressing the significance, if any, of the United States Supreme Court's recent decision in American Express Co. v. Italian Colors Restaurant (June 20, 2013) ___ U.S. ___ [2013 WL 3064410]. Those briefs are to be served and filed on or before July 12, 2013. Upon the filing of those briefs, each party will then have until July 19, 2013, to serve and file a response to the brief submitted by the opposing party. Submission of the cause is vacated. (See Cal. Rules of Court, rule 8.524(h)(1) [submission runs from expiration of the time in which to file briefs, including supplemental briefs].) The cause will be resubmitted on July 19, 2013.
(Hyperlink added.) With this order, we can expect an opinion by mid-October.
Although this case is not a class action, it is expected to be the first in which the Supreme Court substantively construes Concepcion -- and now AmEx.
According to the summary at SCOTUSblog, the Court held 5-3 that the arbitration clause was enforceable even though an arbitration proceeding would provide no effective means to vindicate the plaintiffs' statutory rights under the federal antitrust laws.
In Hinojos v. Kohl's Corp., ___ F.3d ___ (9th Cir. May 25, 2013), the plaintiff's UCL and CLRA action challenged Kohl's practice of claiming that its prices are discounted off a "regular" or "original" price. The district court dismissed the claim, finding that the plaintiff had not alleged that he had "lost money or property" sufficient for Prop. 64 standing. Slip op. at 4-6.
The Ninth Circuit disagreed, and reversed.
The opinion observed, first of all, that California law explicitly prohibits advertising former prices "unless the alleged former price was the prevailing market price ... within three months next immediately preceding the publication of the advertisement." Slip op. at 7 (quoting Bus. & Prof. Code § 17501). The complaint alleged that Kohl's advertising violated this requirement. See id. at 5.
The Court then addressed standing and Kwikset, and concluded:
Hinojos has done everything Kwikset requires to allege an economic injury under the UCL and FAL. He alleges that the advertised discounts conveyed false information about the goods he purchased, i.e., that the goods he purchased sold at a substantially higher price at Kohl’s in the recent past and/or in the prevailing market. He also alleges that he would not have purchased the goods in question absent this misrepresentation. This is sufficient under Kwikset.
Slip op. at 10.
The opinion takes pains to debunk the defendant's argument (and the district court's holding) that Kwikset applies "only in cases involving 'factual misrepresentations about the composition, effects, origin, and substance of advertised products.'" Id. at 11. According to the defendant, "when a merchant misrepresents the 'regular' price of his wares, it does not misrepresent the innate value of those wares so the misled consumer has suffered no economic injury; he gets the product he expected at the price he expected." Id.
The Ninth Circuit found this line of argument unsupported by Kwikset:
Kwikset cannot be so easily limited. It is true that Kwikset itself involved misrepresentations regarding how the merchandise in question was produced; the defendant in Kwikset was a manufacturer of locksets, which it falsely labeled as having been “Made in [the] U.S.A.” It is also true that Kwikset described a number of other examples of misrepresentations concerning a product’s origin or composition that would be actionable under the UCL and FAL: meat falsely labeled as kosher or halal, wine labeled with the wrong region or year, blood diamonds mislabeled as conflict-free, and goods falsely suggesting they were produced by union labor. Kwikset, 216 P.3d at 889–90. Nothing in Kwikset, however, suggests that these examples were intended to be exhaustive instead of illustrative. ....
The district court’s “composition, effects, origin, and substance” test ignores the fact that, to other consumers, a product’s “regular” or “original” price matters; it provides important information about the product’s worth and the prestige that ownership of that product conveys. See Dhruv Grewal & Larry D. Compeau, Comparative Price Advertising: Informative or Deceptive?, 11 J. of Pub. Pol’y & Mktg. 52, 55 (Spring 1992) (“By creating an impression of savings, the presence of a higher reference price enhances subjects’ perceived value and willingness to buy the product.”); id. at 56 (“[E]mpirical studies indicate that as discount size increases, consumers’ perceptions of value and their willingness to buy the product increase, while their intention to search for a lower price decreases.”). Misinformation about a product’s “normal” price is, therefore, significant to many consumers in the same way as a false product label would be. See Kwikset, 246 P.3d at 890 (recognizing that falsely labeling a watch as a Rolex would be an actionable misrepresentation even if the watch was a “functional equivalent” of a Rolex). That, of course, is why retailers like Kohl’s have an incentive to advertise false “sales.” It is also why the California legislature has prohibited them from doing so. In fact, the deceived bargain hunter suffers a more obvious economic injury as a result of false advertising than the Kwikset consumer who was duped into buying foreign-made goods, because the bargain hunter’s expectations about the product he just purchased is precisely that it has a higher perceived value and therefore has a higher resale value.
Slip op. at 12-13 (emphasis in original) (footnote omitted).
"In sum," the discussion concludes, "price advertisements matter." Id. at 16.
The rest of the opinion's analysis of this issue is quite interesting and worth a careful read. The panel reversed the dismissal of the CLRA claim for similar reasons. Id. at 16-17.
Last Monday, the U.S. Supreme Court handed down its opinion in a post-Stolt-Nielsen arbitration case, Oxford Health Plans LLC v. Sutter, ___ U.S. ___ (Jun. 10, 2013). The Court affirmed the arbitrator's determination that the parties had agreed to class arbitration, even though the contract made no explicit mention of class arbitration. Slip op. at 4-9.
Oxford maintained that under Stolt-Nielsen, class arbitration could not be compelled absent the parties' consent, but the problem for Oxford was that it "agreed with Sutter that an arbitrator should determine what their contract meant, including whether its terms approved class arbitration." Id. at 8. The arbitrator's determination on that point therefore "holds, however good, bad, or ugly." Id. The Court did not decide whether, absent such a concession, the question should be resolved by the arbitrator or the district judge.
This is the third recent U.S. Supreme Court decision on class-action-related issues in which a party concession significantly impacted the analysis and result.
In Comcast Corp. v. Behrend, ___ U.S. ___ (Mar. 27, 2013), it was "uncontested" by the parties that predominance under Rule 23(b)(3) requires a common method of proving and measuring damages -- even though the ordinary and long-established rule is that common questions predominate notwithstanding any individualized damages issues. The Court then held that the plaintiffs' proposed common method of proving damages (and liability) was inadequate for various fact-specific reasons. (Comcast is discussed in this blog post.)
In Genesis Healthcare Corp. v. Symczyk, ___ U.S. ___ (Apr. 16, 2013), the parties agreed that the defendant's Rule 68 offer of judgment mooted the plaintiff's FLSA claim. The Court then addressed whether a plaintiff with a moot claim could proceed with a FLSA collective action, and decided she could not. The opinion provides little or no guidance on whether defense-initiated "pick-off" attempts are effective in collective (or class) litigation.
In Stolt-Nielsen itself (as the Court noted in Oxford Health), the parties "had entered into an unusual stipulation that they had never reached an agreement on class arbitration." Oxford Health, slip op. at 6 (citing Stolt-Nielsen, 559 U. S. at 668-69, 673).
In another recent, non-class-action case, the opinion also turned on an issue that had been conceded. In US Airways, Inc. v. McCutchen, ___ U.S. ___ (Apr. 16, 2013), handed down the same day as Genesis Healthcare, the four dissenting justices complained that "[t]he Court has no business deploying against petitioner an argument that was neither preserved, [citation], nor fairly included within the question presented." Scalia, J., dissenting, slip op. at 2.
The irony is that those dissenters did precisely the same thing in Comcast, as Justice Ginsburg took pains to point out in her dissent in that case. Surely this was not lost on Justice Kagan, who authored the US Airways majority opinion, as well as the dissent in Genesis Healthcare, where she said that the Genesis Healthcare majority decision "resolve[d] an imaginary question, based on a mistake," and recommended that the opinion be "relegate[d] ... to the furthest reaches of your mind: The situation it addresses should never again arise." Kagan, J., dissenting, slip op. at 1-2.
It would be nice if the Court took up some clean cases in which party concessions played less of a role. Opinions in concession-driven cases are of limited value and can lead to confusion in the lower courts.
In Las Canoas Co. v. Kramer, 216 Cal.App.4th 96 (May 7, 2013), the Court of Appeal (Second Appellate District, Division Six) affirmed dismissal of UCL "unlawful" and "unfair" prong claims predicated on alleged violations of Code of Civil Procedure section 2025.510, which, among other things, requires the fees charged by court reporters for copies of deposition transcripts to be "reasonable."
The Court of Appeal observed that the statute allows a motion to be brought in the original action to enforce this requirement. Slip op. at 3. The Court then held that this mechanism is the exclusive remedy, and that a later UCL "unlawful" (or "unfair") prong claim is barred. Id. at 3-4. It concluded that:
non-noticing party who does not move for such an order in the pending action
may not bring a subsequent action to obtain restitution for
"unreasonable" copy charges or obtain injunctive relief setting a
"reasonable rate" to be charged by that court reporter in all future
Id. at 1.
I think this case was incorrectly decided. The decisional law is very clear that any statute may form the predicate of a UCL "unlawful" prong claim, regardless of whether the law carries its own, separate private enforcement mechanism. The UCL "borrows" the statute's liability standards, engrafts the UCL's own more streamlined procedures and limited remedies, and disregards any remedies that may be written into the "borrowed" statute. Here, the statute contains no explicit safe harbor or exclusive remedy language, which are, under Cel-Tech, the only things that should preclude a UCL claim for its violation.
The Supreme Court is considering similar arguments in Zhang and Rose, which were heard last month. The opinions in those cases are due to be handed down by approximately the first week of Augusut. Las Canoas would be a good candidate for a "grant and hold" order pending resolution of one or both of those cases.
UPDATE: On behalf of CAOC, I filed a request for depublication of this opinion, as well as an amicus letter urging the Court to issue a "grant and transfer" order following issuance of its opinions in Zhang and Rose. On July 3, 2013, the Court granted itself an extension of time through September 4, 2013 to grant or deny review on its own motion. Las Canoas Co. v. Kramer, No. S211651. The time to grant review (or depublish) otherwise would have expired that week. Ultimately, the Court may not depublish or take any other action, but I thought it was worth a try. Counsel for the defendant filed response letters opposing both depublication and review.
UPDATE: On August 14, 2013, the Supreme Court denied the depublication request and declined to grant review on its own motion.
In Fuller v. First Franklin Financial Corp., ___ Cal.App.4th ___ (May 1, 2013; pub. ord. May 29, 2013), the Court of Appeal (Third Appellate District) reinstated the plaintiffs' UCL and other claims, all of which the trial court had dismissed on the pleadings as barred by the statute of limitations. The Court held that the complaint adequately alleged facts sufficient to bring the case within the doctrine of fraudulent concealment, as construed in Aryeh v. Canon Business Solutions, Inc., 55 Cal.4th 1185 (2013) (discussed in this blog post).
The case is not a class action. It involves alleged misrepresentations by a lender and broker in connection with a home purchase.
In Bluford v. Safeway Stores, Inc., ___ Cal.App.4th ___ (May 8, 2013; partial pub. ord. May 24, 2013), the Court of Appeal (Third Appellate District) reversed an order denying class certification of rest break, meal period, and wage statement claims. Only the rest break part of the analysis (pp. 7-10) was published, but according to the docket, requests for publication of the balance of the opinion remain pending.
UPDATE: The requests for publication of the balance of the opinion were denied.
Two new opinions addressing arbitration issues were handed down last Tuesday, June 4, 2013.
In Brown v. Superior Court (Morgan Tire & Auto, LLC), ___ Cal.App.4th ___ (Jun. 4, 2013), the Court of Appeal (Sixth Appellate District) followed the lead of the other Brown case, and held that a "no-class-or-representative-action" arbitration clause could not defeat the plaintiffs' statutory right to bring a representative PAGA claim and seek penalties on behalf of the state. Slip op. at 13-20 (citing Brown v. Ralphs Grocery Co., 197 Cal.App.4th 489 (2011)).
This case is likely to be taken up as a "grant and hold" pending resolution of Iskanian v. CLS Transportation, case no. S204032 (review granted 09/19/12). The latest in Iskanian is that a significant number of amicus curiae briefs were filed in mid-May. An extension of time was granted for the parties to file their consolidated answers to the amici briefs. The answers are now due on July 15, 2013.
In Vargas v. SAI Monrovia B, Inc., ___ Cal.App.4th ___ (Jun. 4, 2013), the Court of Appeal (Second Appellate District, Division One) struck down a no-class-action arbitration clause in a vehicle installment sales contract as "permeated by unconscionability" under Armendariz. The opinion allows the action to proceed in court as a class action for violation of the UCL, CLRA and other statutes.
This case could well be taken up as a "grant and hold" pending resolution of Sanchez v. Valencia Holding Co., case no. S199119 (review granted 03/21/12). Sanchez has been fully briefed since last year, and could be set for oral argument at any time. The next argument dates on the Supreme Court's calendar are not until the first week of September. The cases to be heard that week should be announced by early August.
The opinion in Sonic-Calabasas, case no. 174475, which was argued on April 3, 2013, must be filed no later than July 2, 2013. Because that's a Tuesday, and the Supreme Court issues opinions on Mondays and Thursdays, we'll have it by Monday, July 1, 2013.
On June 3, 2013, the U.S. Supreme Court granted cert., vacated the opinion, and remanded for reconsideration in a third post-Comcast case: Sears, Roebuck & Co. v. Butler, no. 12-1067.
Butler is a consumer case in which the Seventh Circuit reversed the district court's order denying class certification of a breach of warranty claim involving mold growth in front-load washing machines. Butler v. Sears, Roebuck & Co., 702 F.3d 359 (7th Cir. 2012) (Posner, J.). My original post on the opinion is here.
Whether a state's parens patriae action is removable as a "mass action" under the Class Action Fairness Act when the state is the sole plaintiff, the claims arise under state law, and the state attorney general possesses statutory and common-law authority to assert all claims in the complaint.
The case arose out of the LCDs price-fixing litigation. The Fifth Circuit reversed the remand order, finding the public prosecutor action removable under CAFA. Mississippi ex rel. Hood v. AU Optronics Corp., 701 F.3d 796 (5th Cir. 2012).
On May 29, 2013, the Daily Journal had a story on the Ninth Circuit's opinion last week in Leyva v. Medline Industries, Inc., ___ F.3d ___ (9th Cir. May 28, 2013), which reversed the district court's order denying class certification of certain wage and hour claims, and remanded with directions to certify the class.
As I mentioned to Laura Hautala of the Daily Journal, the most important thing about the opinion is its recognition that Comcast did not change the rule that individualized damages issues do not defeat class certification. Slip op. at 7-9. The opinion affirmed the general rule, which is that class certification can and should be granted in Rule 23(b)(3) cases not withstanding the need to calculate damages individually for each class member:
The district court denied certification because for each sub-class “the damages inquiry will be highly individualized.” But damages determinations are individual in nearly all wage-and-hour class actions. Brinker Rest. Corp. v. Superior Court, 273 P.3d 513, 546 (Cal. 2012) (“In almost every class action, factual determinations of damages to individual class members must be made. Still we know of no case where this has prevented a court from aiding the class to obtain its just restitution. Indeed, to decertify a class on sound the death-knell of the class action device.”) (internal citation and quotation marks omitted). Thus, “[t]he amount of damages is invariably an individual question and does not defeat class action treatment.” Blackie v. Barrack, 524 F.2d 891, 905 (9th Cir. 1975); see also Yokoyama, 594 F.3d at 1089 (“The potential existence of individualized damage assessments . . . does not detract from the action’s suitability for class certification.”). In deciding otherwise, the district court abused its discretion by applying the wrong legal standard. See Hinkson, 585 F.3d at 1263.
Indeed, the Supreme Court clarified in Dukes that “individualized monetary claims belong in Rule 23(b)(3).” 131 S. Ct. at 2558. Thus, the presence of individualized damages cannot, by itself, defeat class certification under Rule 23(b)(3). ....
Slip op. at 7-8. The panel's citation of Brinker and Dukes in support of its ruling is notable, as is its reliance on Yokoyama (discussed in this blog post) and Blackie, which reconfirms the continuing vitality of both opinions post-Dukes and post-Comcast.
This week, the Rutter Group will present "Class Action Litigation: New Strategies for California Practitioners." The program will take place in San Francisco at Hotel Nikko on Wednesday, May 22, 2013 from 6:00-9:15 p.m. (registration begins at 5:30) and in Los Angeles at L.A. Hotel Downtown (formerly the Marriott) on Thursday, May 23, 2013 at the same time.
The program features a particularly good panel of presenters. The co-moderators are Los Angeles County Superior Court Judge Lee Smalley Edmon and San Francisco Superior Court Judge Richard A. Kramer. Elizabeth Cabraser will speak at the San Francisco program, while Richard Goetz of O'Melveny & Meyers will be the practitioner-panelist in Los Angeles.
The Ninth Circuit has handed down two opinions in recent weeks addressing class action settlements.
In Radcliffe v. Experian Information Solutions Inc., ___ F.3d ___ (9th Cir. Apr. 22, 2013; mod. May 2, 2013), the court reversed final approval because some of the class representatives' incentive awards were made conditional upon their support of the settlement, which undermined their adequacy (and that of their counsel).
In In re: HP Inkjet Printer Litigation, ___ F.3d ___ (9th Cir. May 15, 2013), the court reversed final approval and the attorneys' fees award, finding that the award did not comport with the provisions of CAFA governing attorneys' fees in "coupon" settlement cases. Judge Berzon dissented.
On a related note, on February 26, 2013, the Court denied en banc rehearing of the panel opinion in Lane v. Facebook, Inc., 696 F.3d 811 (9th Cir. 2012). This is the case in which the court approved a class action settlement with a significant cy pres component. The order denying rehearing, and a strenuously-worded dissent by six judges, were both published: Lane v. Facebook, Inc., 709 F.3d 791 (9th Cir. Feb. 26, 2013).
Last Friday, in Faulkinbury v. Boyd & Associates, Inc., ___ Cal.App.4th ___ (May 10, 2013), the Court of Appeal (Fourth Appellate District, Division Three) reversed the trial court's order denying class certification of overtime, meal period, and rest break claims brought by a class of security guards. The opinion directs the trial court to enter a new order granting certification of all three claims.
Faulkinbury was a Brinker "grant and hold" case. In the original opinion, handed down in 2010, the Court of Appeal affirmed denial of certification as to the the meal period and rest break claims, but reversed as to the overtime claim. The new opinion has been substantially re-worked, and it has an extensive discussion of Brinker.
The merits briefing is complete in Duran v. U.S. Bank National Association, no. S200923 (review granted May 16, 2012). Numerous amicus briefs have been filed, and the due date for the parties' answers to those briefs has not yet passed.
After the answers to the amicus briefs are filed, the next step is oral argument. It's hard to predict when the case may be set for argument. If past history is any guide, it could be as long as a couple of years. (Disclosure: I am representing CELA as amicus curiae in this case.)
UPDATE: The parties' answers to the amici briefs were filed on August 6, and 7, 2013. Links to the briefs have been added to the list above.
Emily Green of the Daily Journal had a story on the Zhang argument in last Thursday's paper. An excerpt:
Plaintiffs lawyers and insurance companies have waited more than three years for the state Supreme Court to take up the case of Yanting Zhang, a homeowner who sued her insurance company for false advertising after it repeatedly stalled her efforts to get recovery after an apartment fire.
But at oral argument Wednesday, ... the questions posed by the justices suggested the court is inclined to rule in favor of Zhang, who wants to move forward with her claim.
The backdrop to the case is a prior California Supreme Court decision that says private citizens can't privately sue insurers who commit unfair practices under the state's Unfair Insurance Practices Act. Only the insurance commissioner can do that. Moradi-Shalal v. Fireman's Fund Ins. Companies, 46 Cal.3d 287 (1988).
Much of oral argument centered on whether Moradi-Shalal affected Zhang's case. ....
[Justice] Corrigan questioned why Zhang should be precluded from suing the company for false advertising. If one of the parties has no intention of living up to its side of the contract, she said, then the contract is "fraudulently induced."
Justice Corrigan is one of the more conservative members of the Court, so if her questions favored the plaintiff, that is a strong signal that the plaintiff may ultimately prevail.
I have seen no press coverage of Rose, but an attorney present reported that the questioning in that case also seemed to favor the plaintiffs' position. The attorney said that from the questioning, it appeared that the justices were accepting the argument that the repeal of the private right of action for violations of the Truth in Savings Act (12 U.S.C. § 4301
et seq.) did not
affect the Act's preemption language or establish a federal policy precluding state enforcement of its provisions.
Both opinions are due to be filed no later than the week of August 5, 2013.
On May 6, 2013, the San Francisco City Attorney's office commenced a UCL action against Monster Beverage Corp. The press release and a copy of the complaint, filed in San Francisco Superior Court, are available at this link.
The complaint alleges that the company "aggressively markets" its Monster Energy drinks to children and teenagers, notwithstanding the known health risks to young people of consuming the high levels of caffeine that the drinks contain. The complaint contains detailed factual allegations followed by a single cause of action for violation of the UCL, and seeks injunctive relief, restitution, and civil penalties.
Issues: (1) Can an insured bring a cause of action
against its insurer under the unfair competition law (Bus. & Prof.
Code, § 17200) based on allegations that the insurer misrepresents and
falsely advertises that it will promptly and properly pay covered claims
when it has no intention of doing so? (2) Does Moradi-Shalal v. Fireman's Fund Ins. Companies (1988) 46 Cal.3d 287 bar such an action?
For more on the case, see this blog post. The opinion will be due in ninety days, or by August 6, 2013.
It appears that the Supreme Court sees the issues raised in this case as somewhat related to those presented in in Rose v. Bank of America, no. S199074, which was argued yesterday. In Rose, review was granted in March 2012, barely a year ago. Zhang, on the other hand, has been pending since February 2010. It could be coincidence, but I think there must be a reason for the setting on adjacent days. The issues appear to be substantively related, as I explained here.
Unfortunately, the press of business has prevented me from attending either of the arguments. If you attended yesterday (or are planning to attend today) and would like your report to appear here, please drop me a line.
This morning at 9:00 a.m. in San Francisco, the Supreme Court will hear oral argument in Rose v. Bank of America, no. S199074:
Issue: Can a cause of action under the Unfair
Competition Law (Bus. & Prof. Code, § 17200 et seq.) be predicated
on an alleged violation of the Truth in Savings Act (12 U.S.C. § 4301
et seq.), despite Congress's repeal of the private right of action
initially provided for under that Act?
This morning the U.S. Supreme Court handed down its opinion in Genesis Healthcare Corp. v. Symczyk, ___ U.S. ___ (Apr. 16, 2013), which involves whether a defendant may "pick off" the representative plaintiff in a collective action brought under the Fair Labor Standards Act.
I will have more on the opinion in a later post. My original post on the grant of cert. is here. SCOTUSblog with its three-hour advantage already has a detailed summary of the decision, which apparently includes a strongly-worded dissent by Justice Kagan.
In its original three-judge panel opinion last year, the Ninth Circuit held in no uncertain terms that under Concepcion, "the FAA preempts the Broughton-Cruz rule." Kilgore v. KeyBank, N.A., 673 F.3d 947, 951 (9th Cir. 2012) (hyperlinks added).
We hold that the Broughton-Cruz rule does not survive Concepcion because the rule "prohibits outright the arbitration of a particular type of claim"—claims for broad public injunctive relief. Concepcion, 131 S.Ct. at 1747. Therefore, our statement in Davis—that Broughton and Cruz prohibit the arbitration of public injunctive relief claims in California—is no longer good law. See 485 F.3d at 1082.
Id. at 960.
In its opinion handed down last week, the en banc panel did not reach the issue. Kilgore v. KeyBank, N.A., ___ F.3d ___ (9th Cir. Apr. 11, 2013). The rewritten en banc opinion reads:
The UCL authorizes broad injunctive relief to protect the public from unfair business practices. Cal. Bus. & Prof. Code § 17203. The Supreme Court has suggested that claims arising from a statute whose underlying purpose creates an “inherent conflict” with the federal policy favoring arbitration may be exempt from the FAA. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991). Relying on Gilmer, the California Supreme Court has found an inherent conflict between the FAA policy favoring arbitration and California statutes authorizing “public” injunctive relief. Broughton v. Signa Healthplans of Cal., 988 P.2d 67, 73, 78 (Cal. 1999).
The Broughton plaintiffs “were covered by Medi-Cal, which had negotiated a contract with Cigna ... for health care coverage.” Id. at 71. They sued Cigna under California’s Consumer Legal Remedies Act (“CLRA”), Cal. Civ. Code §§ 1750–85, seeking damages for medical malpractice and injunctive relief against Cigna’s allegedly deceptive advertising. Broughton, 988 P.2d at 71. The California Supreme Court held the damages claim subject to the arbitration clause in the Cigna policy because “[s]uch an action is primarily for the benefit of a party to the arbitration, even if the action incidentally vindicates important public interests.” Id. at 79. But the Court also found that because the plaintiffs were “functioning as a private attorney general, enjoining future deceptive practices on behalf of the general public,” id. at 76, their injunction claims were not arbitrable, id. at 75–78.
The California Supreme Court expanded upon Broughton in Cruz v. PacifiCare Health Systems, Inc., 66 P.3d 1157 (Cal. 2003). .... Extending the reasoning of Broughton to claims brought under the UCL and Business and Professions Code, the Cruz court found “the request for injunctive relief is clearly for the benefit of health care consumers and the general public” and therefore not subject to arbitration. Id. at 1164.
We applied the Broughton-Cruz framework in Davis, 485 F.3d at 1081-84. ....
Defendants argue that Davis was vitiated by Concepcion, and the Broughton-Cruz rule no longer exempts a public injunction claim from arbitration. We need not reach that broad argument. Even assuming the continued viability of the Broughton-Cruz rule, Plaintiffs’ claims do not fall within its purview.
Public injunctive relief “is for the benefit of the general public rather than the party bringing the action.” Broughton, 988 P.2d at 78. A claim for public injunctive relief therefore does not seek “to resolve a private dispute but to remedy a public wrong.” Id. at 76. Whatever the subjective motivation behind a party’s purported public injunction suit, the Broughton rule applies only when “the benefits of granting injunctive relief by and large do not accrue to that party, but to the general public in danger of being victimized by the same deceptive practices as the plaintiff suffered.” Id.
The claim for injunctive relief here does not fall within the “narrow exception to the rule that the FAA requires state courts to honor arbitration agreements.” Cruz, 66 P.3d at 1162.
Slip op. at 14-17 (footnote omitted).
The opinion concludes, as did the original opinion, that the arbitration clause was not unconscionable under Armendariz. Id. at 10-14.
Judge Pregerson dissented. His opinion provides some additional factual context and includes the plaintiffs' fine-print contracts (for tuition loans for an education they never received) as an appendix. Slip op. at 18-26 & Appx. A.
The new opinion is not the legal watershed as it could have been. The California Supreme Court has denied review in two cases holding that the Broughton/Cruz rule remains good law. The dissent is worth reading.
In article on the opinion Friday, the San Francisco Chronicle reported that "[s]tudents at an Oakland helicopter pilot school that folded in 2008 can't
sue a bank for relief from unpaid loans and must take their cases to
arbitration, a federal appeals court ruled Thursday. .... In an indignant dissent, Judge Harry Pregerson said the [arbitration] fee, a
confidentiality requirement and other arbitration provisions were
one-sided and unfair. KeyBank 'participated in the fraud that Silver
State [Helicopters] perpetrated on unwitting students' and should be held accountable
in court, Pregerson said."
Today is the one-year anniversary of the Supreme Court's issuance of its opinion in Brinker. It is an opportune day for me to publicly congratulate my co-counsel, Tracee Lorens and Michael Rubin, who were both selected by California Lawyer magazine as recipients of 2013 CLAY Awards in Employment Law for their work on behalf of the employees in Brinker. (I was also an honoree.) The Awards were announced in the March 2013 issue of the magazine.
I am so proud of them, as I am of Michael Singer and Dave Mara, whose contributions were invaluable and who really should have been honored too. With three lawyers from the plaintiffs' team already selected by the editors of California Lawyer for our work, however, it seems not everyone could be named.
As I have saidbefore, we could not be happier with the Supreme Court's ruling that employers may not simply "offer" meal periods, but rather must take affirmative steps to actually relieve workers of all duty, while at the same time refraining from doing anything to interfere with employees' ability to actually take their meal periods. We are pleased that the editors of California Lawyer saw fit to recognize our work.
Congratulations also to the rest of the 2013 CLAY Award recipients. My co-counsel in LCDs, Fran Scarpulla, received a well-deserved award for his work on that antitrust class action, and Michael Rubin's partner Danielle Leonard was the first attorney ever to receive two CLAY Awards in the same year (Education Law and Voting Rights). Contratulations to her and to all.
The webinar should be very interesting. It will feature the two attorneys who argued the case in the United States Supreme Court: Barry Barnett of Susman Godfrey (for Ms. Behrend and the class) and Miguel Estrada of Gibson Dunn (for Comcast). The moderator will be Christopher Handman of Hogan Lovells.
This is the program description:
Comcast v. Behrend is the latest word from the United States Supreme
Court on class certification. Hear the attorneys who argued the case
before the Supreme Court discuss the Court’s opinion – and the impact it
will have on class action litigation.
Barry Barnett writes a weblog called Blawgletter where he had this post on the Comcast decision. He says that he and his co-counsel "look forward to satisfying the Court's narrow methodological concerns
on remand to the trial court and to trying the case on the merits as
soon as practicable."
you can see clear trends developing in legal ethics. We are seeing an explosion
of unfair competition law claims against lawyers, by lawyers, and against
online legal service providers. By the way, according to insurance mavens, your
coverage should include UCL claims, since they are incurred in the performance
of legal services.
The article does mention a pending bill that would allow the State Bar to recover the civil enforcement penalties authorized by the UCL for public prosecutor actions. The bill does not add the State Bar to the list of public prosecutor offices permitted to bring UCL claims; rather, it would allow the State Bar to bring civil enforcement actions for violations of some of the Business & Professions Code provisions governing lawyers, and to recover the civil penalties of the UCL (Bus. & Prof. Code section 17206) in such actions.
In other words, if passed, the new law would "borrow" the UCL's civil penalty provisions.
On Tuesday, May 7, 2013 at 9:00 a.m., the Court will hear Rose v. Bank of America, no. S199074. Justice Louis R. Mauro
of the Third Appellate District will sit in place of Justice Chin, who is recused. Links to the briefs in this case are available here.
Then, on Wednesday, May 8, 2013 at 1:30 p.m., the Court will hear Zhang v. Superior Court (Cal. Cap. Ins.), no. S178542. Review was granted in Zhang in February 2010 and the briefing was completed in August 2010. It is one of the oldest civil cases on the Court's docket.
The issues raised in these cases are somewhat related. The usual rule is that a statutory violation can lead to UCL liability regardless of whether the underlying, "borrowed" statute carries a private right of action.
In Zhang, the Court of Appeal considered whether Moradi-Shalal, in which the Supreme Court held that the legislature did not intend to create a private right of action for violations of the Unfair Insurance Practices Act, also barred UCL "unlawful" prong claims for violations of the Act. An earlier case said it did, but in Zhang the Court of Appeal held that if the defendant's conduct not only violates the Act but is also otherwise unlawful, it can be pursued under the UCL. Zhang v. Superior Court (Cal. Cap. Ins. Co.), 178 Cal.App.4th 1081 (Oct. 29, 2009).
Rose involved the Truth in Savings Act (12 U.S.C. § 4301 et seq.), a federal statute that used to carry a private right of action, but Congress allowed it to sunset. The Court of Appeal reasoned that permitting a UCL "unlawful" prong claim would contravene Congress's intent to preclude the statute's private enforcement. Rose v. Bank of America, N.A., 200 Cal.App.4th 1441 (2011). Rose, unlike Zhang, has federal preemption implications.
Both arguments will take place in San Francisco. I hope to be able to attend at least one of them.
Here is the first report on yesterday's argument in n Sonic-Calabasas A, Inc. v. Moreno, No. S174475. My sincere thanks to Eric Kingsley of Kingsley & Kingsley in Encino for attending the argument and taking the time to summarize it for us. Here is Eric's report:
California Supreme Court heard oral argument in Sonic-Calabasas, Inc. v.
Moreno on Wednesday morning, April 3, 2013, regarding the issue of whether
or not ATT v. Concepcion would affect the prior order of the Court that
held that a Berman hearing process with the Labor Commissioner’s office should
take place before submitting a matter to arbitration. By way of
background, the first Sonic case was decided 4-3 by this Court and was
subsequently remanded by SCOTUS after Concepcion to reconsider in light
of that opinion. Two of the majority justices have since departed but
none of the dissenters. As such all eyes were on the Chief Justice and Justice
Liu who have since joined the Court. True to this Justice Liu took center
stage at the proceedings and dominated the discussion between the lawyers.
was interesting about the arguments is that all sides suffered from some major
deficiencies. It was clear that Justice Liu and his colleagues were not
buying into to the plaintiff’s arguments that Concepcion had no effect;
clearly it did. Justice Liu, who is brilliant by the way, made it clear
that in his view unconscionability analysis is not eliminated by Concepcion
but it must yield if it gets in the way of the FAA. There was much
discussion by Cliff Palefsky and Miles Locker about policy considerations but
the justices did not want to deal with those points. If the FAA was
offended it was clear they had no choice but to send the matter to
arbitration. Justice Baxter began the proceeding by asking Miles Locker
if this was a class action, so any tea leaves are unlikely to be had in Iskanian.
Whether Gentry remains good law or not may be gleaned from this opinion
but it doesn’t appear likely it will be clearly stated. I would wager Gentry
won’t appear in the opinion at all. Justice Liu was primarily focused at
the beginning of the case about the concept of speediness and indicated that
the Berman hearing likely slows down the process significantly so that
speediness is not achieved as a goal. While Locker did indicate that a
Berman process only takes 4½ months by statute (this may be true in theory but
not in practice; interestingly defendants did not refute this), Justice Liu was
clearly not convinced. Once Locker left the podium Cliff Palefsky who
argued for CELA emphasized the intertwining of rights in the Berman hearing,
specifically, one-way fee shifting could be lost, as would a free lawyer and/or
bonding of the award. In a weaker moment for him he claimed Concepcion
helped the plaintiffs. This clearly fell flat. In his defense the
bench was not buying into his American Express v. Italian Colors
vindication of statutory rights type argument. About half-way through
Palefsky’s argument there was a murmur on the Court by Justice Chin, the Chief
Justice and Justice Liu to potentially remand the case to the trial court to
examine the unconscionability analysis. Later Justices Corrigan, Kennard
and Baxter joined in this chorus.
Liu made clear at this point in the argument that Sonic I will not
survive. That point did not change. The question then becomes what
to do next. Justice Liu admitted that the Sonic agreement clearly had shortcomings
but the general principle of Sonic I could not survive. He even
quoted Justice Scalia’s comments in Concepcion regarding the fact that
rights won’t be vindicated, “Too bad.” For the liberal wing of the
California Supreme Court to be quoting Justice Scalia from the bench was
amicus for defense Felix Shafir was next and his argument devolved into arguing
the distinction between unconscionability and constitutional due process
limitations. Justice Liu schooled the young man on this point but I
believe this entire discussion was not germane to the issue at hand and what to
do with this case.
John Boggs, attorney for Sonic, took the podium the discussion moved. I
must say of all the advocates that presented arguments today, clearly Mr. Boggs
had the most compelling case. Before he took the podium it appeared to me
there was a strong consensus on the bench to remand the matter to the trial
court. I believe he may have turned them in a different direction.
Sonic, win lose or draw should be happy with his performance at the Court.
Kennard began her questioning by trying to determine what standard should be
used for unconscionability, listing three alternatives. Justice Liu then asked
a series of questions and he and Boggs were in complete agreement on what Concepcion
held. Boggs then brought up three very important points. Remand would not
make sense because the issue was not addressed below, or in the Court of
Appeal and therefore waived. Furthermore, he continued, this agreement’s
identical language has been “vetted” (my word not his) by this Court in Little
v. Auto Stiegler. He further argued that plaintiffs conceded
the agreement was enforceable and the only issue was the Berman waiver, and in
fact none exists.
moved further in arguing that all rights and protections inside the Berman
hearing process would apply in the arbitration such as one-way fee
shifting. The court was confused and surprised by this concession and
perhaps Boggs played too much of his hand when he did not need to. In his
defense though it seemed clear to me he was trying to convince the Court that the
employee would be no worse off and would have the same protections in
arbitration as if the Berman process had occurred. In many ways if that’s
the law that might not be a bad thing for employees. If the
Berman/arbitration allowed for one-way fee shifting and government lawyers,
there might not be a dissuasion of employees to move forward. I think
likely this is not the real motivation behind this case and I think Justice Liu
was aware of this fact. Boggs appears to me, though I must say I’m
reading into his motivations, to be using a factual situation like ATT that
seems fair to the plaintiff and not causing undue burden, to create a rule that
in the end will be very harmful to plaintiffs and employees. The Chief
Justice and Justices Liu and Baxter cross-examined Boggs on these points as his
time expired as to the rights in a Berman hearing that would be protected in
rebuttal, Locker may have saved the day, I don’t think so though if I had to
bet on it. He pointed out in no uncertain terms that there was a Berman
waiver if not in name but in effect. Further, he indicated that Little
did not deal with the Berman issue and while there was an acknowledgment at the
trial court level it is the denial of Berman rights that makes the agreement
line: Two possible outcomes. Either way Sonic I dies.
They could punt and remand the unconscionability analysis in light of Concepcion
back to the trial court and articulate a standard for them to
consider. Justice Baxter was concerned at the outset about how much the
plaintiff earned per hour so a modified Gentry
test could be established without citing Gentry.
This would likely be a split decision 4-3 perhaps. The other option is
for them to order the matter to arbitration in a narrow 7-0 ruling though Justice
Wederger might dissent. It’s hard to say as she was so quiet. In
this view of the case I don’t think defense lawyers get a big ruling but rather
the ruling would speak of the protections the arbitration agreement provided
that were identical to the protections in the Berman hearing. Since the
plaintiff waived his right to contest this in any event they would be forced to
send the case to arbitration. Either way I don’t expect a sweeping ruling
and I don’t think it will change much in arbitration jurisprudence. We
must wait for Iskanian, unless as Cliff Palefsky said at the conclusion
of his argument “I beg you, don’t do it, don’t read tea leaves.” I don’t
think they will. This plaintiff will likely lose but it won’t be that
bad. On the broader point of whether Gentry is a dead letter, I
fear many of Justice Liu’s comments and he may be inclined to strike it
down. It’s hard to tell but I would not want to bet on it.
Thank you again, Eric. I was promised one other report on the argument, which will go up when received.
This morning at 9:00 a.m., the Supreme Court will hear oral argument in Los Angeles in Sonic-Calabasas A, Inc. v. Moreno, S174475. This is an arbitration-related case, and while not a class action, it should be of interest because the Supreme Court is expected to construe Concepcion for the first time.
The Court granted requests of both parties to share their argument time. Ten minutes of the employee's alloted argument time will go to CELA, and ten minutes of the employer's time will be shared with the California New Car Dealers Association.
I am expecting to receive at least one report on the argument. Check back here later for those.