In Animal Legal Defense Fund v. Mendes, ___ Cal.App.4th ___ (Feb. 15, 2008), the Court of Appeal (Fifth Appellate District) held that the plaintiffs—two consumers of dairy products—lacked standing to pursue a UCL claim against ranchers who allegedly confined dairy calves in isolation crates without an "adequate exercise area," in violation of Penal Code section 579t. The plaintiffs, the Court held, had not suffered "loss of money or property": "Here, the consumers had the benefit of their bargain—that is, they received dairy products that were not of inferior quality. Any injury they suffered upon learning 'the truth' about industrial dairy farming was not economic." Slip op. at 11.
The Court also held that the Penal Code provision that the defendants allegedly violated carries no private right of action. Id. at 4-9.
On January 3, 2008, the Supreme Court granted itself an extension of time, through February 1, 2008, to grant or deny review in Buckland v. Threshold Enterprises, Ltd., no. S157919. In Buckland, the Court of Appeal (Second Appellate District, Division Four) held that the plaintiff failed to adequately allege post-Prop. 64 standing because she could not allege actual reliance. The discussion of Prop. 64's "injury in fact" language is extensive. Buckland v. Threshold Enterprises, Ltd., 155 Cal.App.4th 798 (2007). My original post on Buckland is here.
Given the apparent overlap in issues, it would not be surprising to see a "grant and hold" order in this case pending resolution of In re Tobacco II Cases. In light of the Supreme Court's conference schedule, as a practical matter review will have to be either granted or denied no later than the conference on January 30. A depublication request was also filed.
UPDATE: On January 16, 2008, the Supreme Court denied review and depublication.
In Hall v. Time Inc., ___ Cal.App.4th ___ (Jan. 8,
2007 2008), the Court of Appeal (Fourth Appellate District, Division Three) construed Prop. 64's "injury in fact" language and held that "causation" must also be pleaded to meet Prop. 64's standing requirement. Respecting "injury in fact," the Court explained:
Few cases since Proposition 64’s passage have directly addressed what constitutes injury in fact or loss of money as a result of unfair competition for purposes of determining standing. Cases decided since Proposition 64 changed the language of Business and Professions Code section 17204 have concluded a plaintiff suffers an injury in fact for purposes of standing under the UCL when he or she has:
(1) expended money due to the defendant’s acts of unfair competition (Aron v. U-Haul Co. of California (2006) 143 Cal.App.4th 796, 802 803 [plaintiff alleged he was required to purchase excess fuel when returning rental truck]; Monarch Plumbing Co. v. Ranger Ins. Co. (E.D.Cal., Sept. 25, 2006, No. Civ. S 06 1357) 2006 U.S.Dist. Lexis 68850, *20 [plaintiff alleged he paid higher insurance premiums because of defendant insurer’s settlement policies]; Witriol v. LexisNexis Group (N.D.Cal., Feb. 10, 2006, No. C05 02392) 2006 U.S.Dist. Lexis 26670, *18 19 [plaintiff incurred costs to monitor and repair damage to his credit caused by defendants’ unauthorized release of private information]; Southern Cal. Housing v. Los Feliz Towers Homeow. (C.D.Cal. 2005) 426 F.Supp.2d 1061, 1069 [housing rights center lost financial resources and diverted staff time investigating case against defendants]; Laster v. T Mobile USA, Inc. (S.D.Cal. 2005) 407 F.Supp.2d 1181, 1194 [defendants advertised cellular phones as free or substantially discounted when purchased with cellular telephone service, but plaintiffs were required to pay sales tax on the full retail value of the phones]);
(2) lost money or property (Huntingdon Life Sciences, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (2005) 129 Cal.App.4th 1228, 1240, 1262 [plaintiff’s home and car were vandalized by animal rights protestors]); or
(3) been denied money to which he or she has a cognizable claim (Progressive West Ins. Co. v. Superior Court (2005) 135 Cal.App.4th 263, 269-270, 285, fn. 5 [insurance company paid insured’s medical bills, then sued to recover that money when insured collected damages from the third party who caused his injuries; insured had standing to bring UCL claim against insurance company]; Starr Gordon v. Mass. Mut. Life Ins. Co. (E.D.Cal., Nov. 7, 2006, No. Civ. S 03 68) 2006 U.S.Dist. Lexis 83110, *1, *18 19 [plaintiff challenged the process by which defendant terminated her disability benefits]).
In this case, Hall did not allege he suffered an injury in fact under any of these definitions. He expended money by paying Time $29.51—but he received a book in exchange. He did not allege he did not want the book, the book was unsatisfactory, or the book was worth less than what he paid for it.
Slip op. at 8-9. In discussing "causation," the Court explained in a footnote that:
We use the word “causation” to refer both to the causation element of a negligence cause of action (Ladd v. County of San Mateo (1996) 12 Cal.4th 913, 917), and to the justifiable reliance element of a fraud cause of action (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974). In a fraud case, justifiable reliance is the same as causation, thus, “[a]ctual reliance occurs when a misrepresentation is ‘“an immediate cause of [a plaintiff’s] conduct, which alters his legal relations,”’ and when, absent such representation,” the plaintiff “‘“would not, in all reasonable probability, have entered into the contract or other transaction.”’” (Engalla v. Permanente Medical Group, Inc., supra, 15 Cal. 4th at p. 976; see Mirkin v. Wasserman (1993) 5 Cal.4th 1082, 1092 [“specific pleading is necessary to ‘establish a complete causal relationship’ between the alleged misrepresentations and the harm claimed to have resulted therefrom”].) Cases construing the Proposition 64 amendments to the UCL often use the terms “causation” and “reliance” together or interchangeably. (E.g., Laster v. T Mobile USA, Inc., supra, 407 F.Supp.2d at p. 1194.)
Slip op. at 9-10 n.2.
The Court then cited three federal district court decisions, but no California appellate decisions, to construe causation/reliance in the UCL context. Id. at 10-12 (citing Cattie v. Wal-Mart Stores, Inc. 504 F.Supp.2d 939 (S.D. Cal. 2007); Brown v. Bank of America, N.A., 457 F.Supp.2d 82 (D. Mass. 2006); Laster v. T Mobile USA, Inc., 407 F.Supp.2d 1181 (S.D. Cal. 2005)). This is probably because the Supreme Court has taken up most of the California decisions addressing UCL reliance, making them uncitable under Rule of Court 8.1105(e)(1). It could also be that we are seeing more UCL cases in federal court due to CAFA. The Court also distinguished Anunziato v. eMachines, Inc., 402 F.Supp.2d 1133 (C.D. Cal. 2005), on which the plaintiff relied. Slip op. at 13.
In conclusion, the Court held that "the representative UCL plaintiff must plead he or she suffered an injury in fact caused by, or in justifiable reliance on, the alleged acts of unfair competition"; that the plaintiff's allegations "did not satisfy the injury in fact and causation requirements either expressly or by reasonable inference"; and that the trial court properly denied leave to amend the complaint. Id. at 14 (emphasis added).
Somehow I missed the Court of Appeal's opinion in Overstock.com, Inc. v. Gradient Analytics, Inc., 151 Cal.App.4th 688 (2007), which the First Appellate District, Division Four handed down on May 30, 2007.
Overstock.com was decided in the context of an anti-SLAPP motion and contains several noteworthy rulings relating to the UCL. First, the Court of Appeal determined that conduct "likely to deceive a reasonable consumer" was actionable under the UCL even if the reasonable consumer is someone other than the plaintiff — in this case, potential investors in the plaintiff's stock. Overstock.com, 151 Cal.App.4th at 714.
Second, the Court of Appeal determined that securities transactions are not excluded from the UCL's coverage, declining to follow Bowen v. Ziasun Technologies, Inc., 116 Cal.App.4th 777 (2004), on this point:
"The UCL contains no language supporting an exclusion for securities, and under the plain language of the UCL, we cannot create such an exclusion." .... Indeed the sweeping language of the UCL is intended " ' to permit tribunals to enjoin on-going wrongful business conduct in whatever context such activity might occur.' "
Id. at 715-16 (quoting Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal.4th. 163, 181 (1999); Roskind v. Morgan Stanley Dean Witter & Co., 80 Cal.App.4th 345, 355 (2000)). (For more discussion of the UCL and securities claims, see this blog post.)
The Court also noted that "the California UCL contains no directive to interpret our consumer protection statute consistently with the FTC Act." Id. at 715. This holding tends to undermine Camacho v. Automobile Club of Southern California, 142 Cal.App.4th 1394, 1403 (2006), in which the Court of Appeal relied on the FTC Act in adopting a third formulation of the UCL's "unfair" prong.
Finally, the Court of Appeal held that the plaintiff satisified the Prop. 64 "injury in fact" requirement by alleging that the defendant's unfair, unlawful and fraudulent conduct "result[ed] in diminution in value of its assets and decline in its market capitalization and other vested interests. This meets the statutory requirement of 'injury in fact' resulting from defendants' misconduct." Overstock.com, 151 Cal.App.4th at 716. This holding is directly contrary to at least one federal decision, Walker v. USAA Casualty Ins. Co., 474 F.Supp.2d 1168 (E.D. Cal. 2007), in which the court held that to qualify as "injury in fact," the monetary loss must also be recoverable as "restitution" under the UCL. As I have explained before, that holding seemed to me contrary to the plain language of Prop. 64, and Overstock.com confirms this.
Yesterday, the Court of Appeal (Fourth Appellate District, Division Two) handed down an unpublished opinion, Freeman v. Mattress Gallery, no. E039614. The unpublished opinion warrants comment because of its summary of recent case law construing Prop. 64's "injury in fact" language, which concludes with this paragraph:
[C]ases published since the most recent amendments to Business and Professions Code sections 17204 and 17535 have concluded, either directly or through implication, that in order to have standing under those sections a plaintiff must allege either (1) that money was expended by the plaintiff due to the defendant's acts of unfair competition (Aron, supra, 143 Cal.App.4th at pp. 802-803; R & B Auto Center, Inc v. Farmers Group, Inc., supra, 140 Cal.App.4th at p. 360; Monarch Plumbing Co. v. Ranger Ins. Co. (E.D.Cal., Sept. 25, 2006, No. Civ. S-06-1357) 2006 U.S.Dist. Lexis 68850, [p. 20]; Witriol v. LexisNexis Group (N.D.Cal., Feb. 10, 2006, No. C05-02392) 2006 U.S.Dist. Lexis 26670, [pp. 18-19]; Southern Cal. Housing v. Los Feliz Towers Homeow. (C.D.Cal. 2005) 426 F.Supp.2d 1061, 1069; Laster v. T-Mobile USA, Inc. (S.D.Cal. 2005) 407 F.Supp.2d 1181, 1194), (2) that money or property was lost or suffered a diminution in value (Overstock.com, Inc. v. Gradient Analytics, Inc. (2007) 151 Cal.App.4th 688, 716 (Overstock.com, Inc.); Huntingdon Life Sciences, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (2005) 129 Cal.App.4th 1228, 1240, 1262), or (3) that plaintiff was denied money to which plaintiff had a cognizable claim (Progressive West Ins. Co. v. Superior Court (2005) 135 Cal.App.4th 263, 269-270, 285, fn. 5; Filiti v. USAA Casualty Ins. Co. (E.D.Cal., June 20, 2007, No. Civ. S-06-2694) 2007 U.S.Dist. Lexis 44691, [p. 6]; Starr-Gordon v. Mass. Mut. Life Ins. Co. (E.D.Cal., Nov. 7, 2006, No. Civ. S-03-68) 2006 U.S.Dist. Lexis 83110, [pp.1, 18-19]).
Slip op. at 15-16. What's also very interesting is that the Court of Appeal held that the plaintiff's allegation that he suffered "loss of the cost of gasoline and accompanying wear and tear on his vehicle" when he drove to the defendant's store in response to the defendant's "bait and switch" advertisement -- but then didn't buy anything -- constituted "injury in fact" and "loss of money or property." Id. at 16-17. The Court of Appeal reversed the order granting the defendant's motion for judgment on the pleadings as to the UCL claim without leave to amend. Id. The opinion does not go on to discuss whether the plaintiff in this case would be able to recover restitution. Injunctive relief would likely be available if the defendant was still running the misleading advertisement. The Court of Appeal's affirmance of the order striking the class allegations (id. at 21-25), however, complicates this further.
A lengthy dissenting opinion disagrees with the majority's holding, concluding, in effect, that to qualify as "injury in fact," the monetary loss must also be recoverable as "restitution":
In order to effectuate the statute's purpose, I conclude that a mere loss, monetary or otherwise, is not enough to confer standing. When a court orders restitution, it orders the defendant to give up his gains to the claimant, as opposed to compensating the claimant for his or her loss. To satisfy the section 17204 "injury in fact" standing requirement, regardless of whether the relief sought is court-ordered restitution or an injunction, the loss suffered must be recoverable. Damages are not recoverable under the UCL (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1148) and they should not be sufficient to confer standing. This requirement, without going so far as to imply a transaction is necessary, prescribes that there be at minimum an interaction between the parties in which not only a loss but a gain results.
Slip op., dissent at 9. I am not aware of any California Court of Appeal opinions that hold this, but there is one federal ruling that does. Walker v. USAA Casualty Ins. Co., 474 F.Supp.2d 1168 (E.D. Cal. 2007). This argument has always seemed to me contrary to the language of Prop. 64.
The Freeman decision also appears to conflict with another case in which the Supreme Court recently granted review, Meyer v. Sprint Spectrum L.P., 150 Cal.App.4th 1136 (2007) (review granted 08/16/07, no. S153846). There, the Court of Appeal held that the plaintiffs could not maintain a CLRA claim against a defendant who merely included an unconscionable provision in its contract, if that provision had not been enforced against them to their detriment. In the unpublished Freeman decision, however, the Court of Appeal said:
The trial court also sustained the demurrer to the CLRA cause of action based upon the failure of the complaint to allege that Freeman suffered any damage as required by Civil Code section 1780, subdivision (a). As indicated above, our Supreme Court has interpreted Civil Code section 1780 to state that in order to have standing to bring an action for violation of the CLRA, all a plaintiff need allege is that the defendant violated a provision of Civil Code section 1770. (Kagan, supra, 35 Cal.3d at p. 593.) The first amended complaint alleges that Defendants violated Civil Code section 1770, subdivision (a)(3), (5), (7), (9), (10), and (13). Hence, for the reasons stated above, the allegations of the complaint are sufficient to establish Freeman's standing to pursue injunctive relief for violation of the CLRA.
Slip op. at 20. This is precisely the opposite of what the Court of Appeal held in Meyer, also citing Kagan. The dissent had this to add on this point:
Although the California Supreme Court in Kagan stated that suffering "any damage" includes the infringement of any legal right as defined by Civil Code section 1770 (Kagan, supra, 35 Cal.3d at p. 593), I would find that there is still room for debate as to what type of damage is sufficient to confer standing. While plaintiffs do not have to allege monetary loss to have standing under the CLRA, they must suffer some damage as a result of defendant's conduct. In other words, despite the fact that a plaintiff has alleged a violation of the CLRA, which, according to Kagan, would be sufficient to confer standing, the fact that he or she did not sustain any tangible loss precludes him or her from bringing claims. Thus, in my opinion, damage requires something more than a mere allegation of an infringement upon a right protected by Civil Code section 1770.
By allowing a plaintiff who alleges unfair business practices to secure standing under the CLRA, we begin down a slippery slope. The California Supreme Court in Kagan seems to have obliterated the meaning of the phrase "suffers any damage as a result of" in the CLRA standing requirements. (Kagan, supra, 35 Cal.3d at pp. 590, 593; Civ. Code, Â§ 1780, subd. (a).) In so doing, our high court has inhibited the judiciary from applying a meaningful limit on the damage and causation requirements of the CLRA. Because alleging a violation, suffering damage, and alleging causation have all been rolled into one requirement (Kagan, supra, 35 Cal.3d at p. 593), courts are left asking, "Is there any limit on the damages that are sufficient to confer standing under the CLRA?" If gas money is sufficient, then why not wear and tear on one's tires? What about loss of time? Why not something as intangible as an alleged violation of Civil Code section 1770? The term "any damage" admittedly sounds limitless. However, if a court is forced to allow a mere allegation of unfair business practices to satisfy the "any damage" standing requirement of the CLRA, the judiciary of this state should brace itself for the imminent flood of litigation. At some point, the maxim of "the law disregards trifles" must be applied to limit the "any damage" requirement of the CLRA. (Harris v. Time, Inc. (1987) 191 Cal.App.3d 449, 458 [holding that a suit for damages based on being forced to open junk mail is frivolous litigation and not a sufficient cause of action].)
Slip op., dissent at 11-12, 13.
In sum, this is a very interesting unpublished opinion. Thanks to the blog reader who emailed me to bring it to my attention.
In Buckland v. Threshold Enterprises, Ltd., ___ Cal.App.4th ___ (Sept. 25, 2007), the plaintiff purchased the defendant's products, suspecting that their packaging contained false and misleading advertising, for no reason other than to facilitate a potential lawsuit. The Court of Appeal (Second Appellate District, Division Four) held that the trial court properly sustained the defendant's demurrer to the plaintiff's fraud, CLRA, and UCL claims. The fraud claim failed because the plaintiff could not plead actual reliance. Instead of relying on the truth of the representations, she suspected they were false, negating any showing of actual reliance. Slip op. at 6-9. The CLRA claim failed for the same reason. Id. at 9-13. (Part of the CLRA discussion relied on McAdams v. Monier, Inc., 151 Cal.App.4th 667 (2007), even though the Supreme Court had granted review in that case the week before. Slip op. at 12-13. The opinion may need to be modified to omit that discussion.)
The UCL claim failed for lack of post-Prop. 64 standing. Id. at 13-24. Buckland is the first decision to address Prop. 64's preamble language stating that the intiative was intended "to prohibit private attorneys from filing lawsuits for unfair competition where they have no client who has been injured in fact under the standing requirements of the United States Constitution." Prop. 64 §1(e) (quoted in Buckland, slip op. at 17 (emphasis in original)). The opinion addresses "injury in fact" in a separate section from "lost money or property." The discussion of standing is quite detailed and worth reading.
Yesterday, the Ninth Circuit affirmed class certification of a UCL "unfair" prong claim in Lozano v. AT&T Wireless Services, Inc., ___ F.3d ___ (9th Cir. Sept. 20, 2007). I have not had time to review the decision in detail, but I did notice this paragraph on restitution, which is particularly interesting in light of the recent Shersher decision:
The next question we address is whether these injuries are recoverable under the UCL. The only types of relief available under the UCL actions are injunctive and restorative. Cal. Bus. & Prof. Code § 17203; see also Cel-Tech, 83 Cal. Rptr. 2d at 560. While restoring Lozano's overage payments, if any, fits squarely within the restorative context of the UCL, we question whether restoring Lozano's "reserved" minutes falls into this category. Restitution in the UCL context, however, includes restoring money or property that was not necessarily in the plaintiff's possession. The California Supreme Court has stated that the concept of restoration or restitution, as used in the UCL, is not limited only to the return of money or property that was once in the possession of that person. Instead, restitution is broad enough to allow a plaintiff to recover money or property in which he or she has a vested interest. See Juarez v. Arcadia Fin., Ltd., 61 Cal. Rptr. 3d 382, 400 (Cal. Ct. App. 2007) (citing Korea Supply Co. v. Lockheed Martin Corp., 131 Cal. Rptr. 2d 29, 42 (2003)). Here, Lozano has a vested interest in 400 free anytime minutes. Due to out-of-cycle billing, however, Lozano found it necessary to reserve, and therefore lose, a certain number of those minutes each billing period. Accordingly, we find that Lozano has properly stated an injury that he did not receive the full value of his contract with AWS due to its alleged failure to disclose out-of-cycle billing, and that this injury is redressable under the UCL. See Daghlian v. DeVry Univ., Inc., 461 F. Supp. 2d 1121, 1155 (C.D. Cal. 2006) (accepting plaintiff's theory that he suffered injury under the UCL because he paid thousands of dollars of tuition to defendant university and "did not receive what he had bargained for" due to its alleged unfair business practices).
Slip op. at 12772. The court also declined to employ the third, intermediate formulation of "unfair" adopted by the Court of Appeal in Camacho v. Automobile Club of Southern California, 142 Cal.App.4th 1394 (2006). Instead, it held that the district court did not err by applying the pre-Cel-Tech formulation set forth in South Bay Chevrolet v. General Motors Acceptance Corp., 72 Cal.App.4th 861 (1999) (and other cases). Slip op. at 12775-77.
Yesterday, the Supreme Court granted review in Meyer v. Sprint Spectrum, no. S153846. In that case, the Court of Appeal (Fourth Appellate District, Division Three) said that Prop. 64 created a "two-part, statutory standing test," and held that the plaintiffs lacked Prop. 64 standing to challenge unconscionable provisions in their cellular telephone contracts because the defendant had not enforced or threatened to enforce the provisions against them. The Court also held that the plaintiffs' CLRA claim failed. Meyer v. Sprint Spectrum L.P., 150 Cal.App.4th 1136 (2007). My original post on the Meyer decision is available at this link.
This case was decided the day before the State Bar's UCL conference in Los Angeles, at which I spoke on May 18, 2007. Those of you who attended may recall that a copy was handed out to all attendees.
A bunch of new UCL and class action decisions have been handed down over the past week and a half:
Schultz v. Neovi Data Corp., ___ Cal.App.4th ___ (June 15, 2007) (Fourth Appellate District, Division Three) (a Mervyn's "grant and hold" case on remand to the Court of Appeal)
Linear Technologies Corp. v. Applied Materials, Inc., ___ Cal.App.4th ___ (June 18, 2007) (Sixth Appellate District) (a UCL competitor action)
Gatton v. T-Mobile USA, Inc., ___ Cal.App.4th ___ (June 22, 2007) (First Appellate District, Division Five) (another case invalidating a no-class-action arbitration clause)
In re: Ocwen Loan Servicing, LLC Mortgage Servicing Litigation, ___ F.3d ___ (7th Cir. June 22, 2007) (the Seventh Circuit mentions the UCL again, and the CLRA, too, and warns lawyers not to file "a hideous sprawling mess" of a complaint)
Lott v. Pfizer, Inc., ___ F.3d ___ (7th Cir. June 25, 2007) (addresses CAFA and the right to recover attorneys' fees after improper removal; see this post on the Seventh Circuit's prior opinion in the same case)
McAdams v. Monier, Inc., ___ Cal.App.4th ___ (May 30, 2007, modified June 25, 2007) (Third Appellate District) (court just issued an order modifying the original opinion; an interesting change in wording re "
Juarez v. Arcadia Financial., Ltd., ___ Cal.App.4th ___ (June 26, 2007) (Fourth Appellate District, Division One) (probably the most interesting of the bunch; addresses UCL remedies)
I've had limited time to read or analyze these decisions. Time permitting, I will post more about them later on.
Yesterday, the Supreme Court granted review in Amalgamated Transit Union v. Superior Court (First Transit) (no. S151615).
The Supreme Court's docket does not yet indicate the specific issues on which review has been granted, but the Court of Appeal's opinion addressed a union's standing to assert a UCL claim on behalf of its members post-Prop. 64:
In this writ proceeding, we hold:
(1) An individual’s statutory right to sue in a representative capacity, conferred under the Labor Code Private Attorneys General Act of 2004 (Labor Code section 2699) and under the unfair competition law (Business and Professions Code section 17203), may not be assigned to a third party.
(2) Section 17203 of the unfair competition law, as amended by Proposition 64, providing that representative claims may be brought only if the injured claimant “complies with Section 382 of the Code of Civil Procedure,” means that private representative claims must meet the procedural requirements applicable to class action lawsuits.
Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court, 148 Cal.App.4th 39 (2007) (modified Mar. 22, 2007) (slip op. at 2). My original post on the Court of Appeal's decision (now no longer citable) is at this link.
In Daro v. Superior Court, ___ Cal.App.4th ___ (Jun. 6, 2007), the Court of Appeal (First Appellate District, Division Three) addressed the UCL's injunctive relief remedy post-Prop. 64.
In Chavez v. Blue Sky Natural Beverage Co., 2007 WL 1691249 (N.D. Cal. Jun. 11, 2007), Judge Conti dismissed UCL and CLRA claims alleging that the defendant falsely represented that its beverages were manufacturered and bottled in New Mexico. The Court rejected the plaintiff's argument that "he would not have purchased Blue Sky beverages had he known the truth about the geographic origin of the products" and that he "lost the full value of the price paid for each can or bottle of soda" (id. at *3):
In contrast to Daghlian [v. DeVry Univ., Inc., 461 F.Supp.2d 1121, 1153-57 (C.D. Cal. 2006)] and Laster [v. T-Mobile, 407 F.Supp.2d 1181, 1194 (S.D. Cal. 2005)], the Plaintiffs in this case suffered no injury or damages as a result of Defendants' conduct. Plaintiff did not pay a premium for Defendants' beverages because the drinks purportedly originated in Santa Fe, New Mexico. Accepting the facts as stated by Plaintiffs and drawing all inferences in their favor, Defendants' promise concerning geographic origin had no value and Plaintiffs have suffered no damages by purchasing beverages they thought were produced in New Mexico by a New Mexico-based company, but actually originated in California. As a result of Plaintiffs' failure to allege any damages under all four causes of action, Plaintiffs have no standing to pursue their claims against Defendants.
Id. at *4. In other words, the plaintiff got what he paid for (the soda). Perhaps the plaintiff would have fared better if he had sought only a portion of the soda's purchase price, rather than "the full value of the price paid." Under Colgan v. Leatherman Tool Group, Inc., 135 Cal.App.4th 663, 700 (2006), evidence of the “value of the consumer impact or the advantage realized by [the defendant]” is admissible to prove “the amount of restitution necessary to restore [the plaintiffs] to the status quo ante” (citing Korea Supply)). Evidently, Judge Conti thought that the alleged misrepresentation did not affect the soda's price and thus caused no harm as a matter of law.
UPDATE: On June 23, 2009, the Ninth Circuit reversed this decision in an unpublished memorandum opinion that reads, in part:
In summary, Chavez asserts that he purchased beverages that he otherwise would not have purchased in absence of the alleged misrepresentations. As a result, Chavez personally lost the purchase price, or part thereof, that he paid for those beverages. This is not a situation where, for example, Chavez never even purchased Blue Sky soda. .... We conclude that the district court erred by granting appellees’ motion [to dismiss].Slip op. at 6-7.
I recently found an interesting paper by Michael F. Ram of Levy, Ram & Olson in San Francisco. The paper is called "Recent Developments in Class Certification of Consumer Products Cases in California Under the Consumers Legal Remedies Act and the Unfair Competition Law." The paper, which appears to be dated late 2006, discusses Chamberlan, Bardin, Pfizer, and other relatively recent decisions. It's quite good and is worth a read.
Yesterday, in McAdams v. Monier, Inc., ___ Cal.App.4th ___ (May 30, 2007), the Court of Appeal (Third Appellate District) reaffirmed that UCL and CLRA class actions alleging failure to disclose material information are alive and well in California. The Court reversed a trial court order denying class certification of such claims, holding that they may be established through a classwide inference of reliance, and that individualized proof of each class member's actual reliance is not required. The Supreme Court is expected to decide this precise question in In re Tobacco Cases II.
Regarding the CLRA claim, the McAdams court explained:
The court in Massachusetts Mutual concluded ... that th[e] causation requirement under the CLRA did not render the case before it unsuitable for class treatment. Drawing from two state Supreme Court decisions, Vasquez v. Superior Court (1971) 4 Cal.3d 800 (Vasquez) and Occidental Land, Inc. v. Superior Court (1976) 18 Cal.3d 355 (Occidental), Massachusetts Mutual concluded that this causation requirement can be satisfied if the record permits an “inference of common reliance” to the class. (Massachusetts Mutual, supra, 97 Cal.App.4th at pp. 1292-1293.)
Slip op. at 10. After carefully considering Vasquez, Occidental, and Massachusetts Mutual, the Court of Appeal concluded that "[t]he record here permits an inference of common reliance among the CLRA class." Slip op. at 12. "The class action is based on a single, specific, alleged material representation. Monier knew but failed to disclose that its color roof tiles would erode to bare concrete long before the life span of the tiles was up. ... [I]n this context, class treatment is appropriate." Id. at 9.
As for the UCL claim, it was "based on the same material misrepresentation" as the CLRA claim — "Monier's failure to disclose the premature color erosion of the roof tiles" (slip op. at 20) — so the same analysis applied:
The real nub of the issue of UCL class suitability here turns on the element of reliance (causation). As amended by Proposition 64, section 17204 requires, for purposes of standing, that a private plaintiff have “suffered injury in fact and [have] lost money or property as a result of such unfair competition.” Furthermore, it is a basic principle of standing that “‘[t]he definition of a class cannot be so broad as to include individuals who are without standing to maintain the action on their own behalf. Each class member must have standing to bring the suit in his own right.’” (Collins v. Safeway Stores, Inc. (1986) 187 Cal.App.3d 62, 73, quoting McElhaney v. Eli Lilly & Co. (D.S.D. 1982) 93 F.R.D. 875, 878; Feitelberg v. Credit Suisse First Boston, LLC (2005) 134 Cal.App.4th 997, 1018.) As we shall explain, the concept of “inference of common reliance” (as opposed to “actual reliance”) can be applied here to satisfy these two quoted principles of standing, rendering plaintiff’s UCL action suitable for class treatment.
Massachusetts Mutual again points the way. As we discussed in the previous section of this opinion, that decision applied an “inference of common reliance” in determining that a fraud-based class action under the CLRA was suitable for class treatment.
Slip op. at 22-23. The Court of Appeal found no reason why the "inference of reliance" analysis should not apply to both the CLRA claim and the UCL claim for class certification purposes:
Several factors support our conclusion that this standard of “inferred reliance” from the CLRA class context may also be applied to the Proposition 64 UCL class context, instead of requiring a showing of “actual reliance.” The CLRA and the UCL are both consumer protection statutes with traditionally less rigorous proof burdens than common law fraud. (See Civ. Code, § 1760; § 17200; Consumer Advocates v. Echostar Satellite Corp. (2003) 113 Cal.App.4th 1351, 1360; Comment, The California Consumers Legal Remedies Act (1973) 10 Cal. Western L. Rev. 161.) After Proposition 64, the two acts’ language on reliance is similar (i.e., suffer “damage” (CLRA), or “injury in fact” (UCL), “as a result of”). (Civ. Code, § 1780, subd. (a); § 17204.) The two acts are often alleged in the same lawsuit, and a CLRA violation can serve as the “unlawful” prong and furnish the “fraudulent” basis of a UCL action. (See Daugherty, supra, 144 Cal.App.4th at pp. 837-838.) The Proposition 64 amendments on UCL standing at issue here were designed simply to close a “loophole” that allowed private persons to bring UCL actions on behalf of the abstract “general public,” even though no one had been damaged or misled. (Voter Information Pamp., supra, analysis by Legislative Analyst, pp. 38-39; argument in favor of Prop. 64, p. 40; see Californians for Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 232 (Mervyn’s) [Proposition 64 “left entirely unchanged the substantive rules governing business and competitive conduct”].) And if the principle of inferred reliance is sufficient to satisfy the element of reliance/causation as to a CLRA fraud-based class action, in which damages can be awarded, it certainly is sufficient to satisfy that element for a similar UCL class action where the remedies are essentially limited to injunctive and restitutionary relief.
Slip op. at 25-26 (footnote omitted). McAdams is the first opinion that comes anywhere close to acknowledging the holding in Mervyn's that Prop. 64's amendments were "procedural," not substantive. However, any reliance requirement, whether inferred or actual, would be a substantive change to the UCL, not a procedural one. This opinion gamely tries to find a middle ground by holding that reliance on material omissions may be inferred. But any holding that Prop. 64 imports reliance as an element still runs afoul of Mervyn's.
In a case sure to be discussed at today's conference (same-day registration available!), the Court of Appeal examined Prop. 64's "injury in fact" language in depth. Meyer v. Sprint Spectrum, L.P., ___ Cal.App.4th ___ (May 16, 2007). The Meyer plaintiffs alleged that "Sprint improperly included certain illegal and unconscionable terms in its customer service agreement. Plaintiffs did not allege Sprint had asserted or threatened to assert those terms against them." Slip op. at 2. The Court of Appeal (Fourth Appellate District, Division Three) held that the plaintiffs lacked standing to assert either a UCL or a CLRA claim.
With respect to the UCL claim, the Court of Appeal determined that the language "'injury in fact' and 'lost money or property as a result of [the alleged] unfair competition'' creates a "two-part, statutory standing test." Id. The entire decision is worth reading, but the following excerpt is of particular interest:
The cases decided since Proposition 64 changed the language of section 17204 have concluded a plaintiff suffers an injury in fact for purposes of standing under the UCL when he or she has:
(1) expended money due to the defendant’s acts of unfair competition (Aron v. U-Haul Co. of California (2006) 143 Cal.App.4th 796, 802-803 [plaintiff alleged he was required to purchase excess fuel when returning rental truck]; Monarch Plumbing Co. v. Ranger Ins. Co. (E.D.Cal., Sept. 25, 2006, No. Civ. S-06-1357) 2006 U.S.Dist. Lexis 68850, *20 [plaintiff alleged he paid higher insurance premiums because of defendant insurer’s settlement policies]; Witriol v. LexisNexis Group (N.D.Cal., Feb. 10, 2006, No. C05?02392) 2006 U.S.Dist. Lexis 26670, *18-19 [plaintiff incurred costs to monitor and repair damage to his credit caused by defendants’ unauthorized release of private information]; Southern California Housing Rights Center v. Los Feliz Towers Homeowners Assn. Bd. (C.D.Cal. 2005) 426 F.Supp.2d 1061, 1069 [housing rights center lost financial resources and diverted staff time investigating case against defendants]; Laster v. T-Mobile USA, Inc. (S.D.Cal. 2005) 407 F.Supp.2d 1181, 1194 [defendants advertised cellular phones as free or substantially discounted when purchased with cellular telephone service, but plaintiffs were required to pay sales tax on the full retail value of the phones]);
(2) lost money or property (Huntingdon Life Sciences, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (2005) 129 Cal.App.4th 1228, 1240, 1262 [plaintiff’s home and car were vandalized by animal rights protestors]);
(3) been denied money to which he or she has a cognizable claim (Progressive West Ins. Co. v. Superior Court (2005) 135 Cal.App.4th 263, 269-270, 285, fn. 5 [insurance company paid insured’s medical bills, then sued to recover that money when insured collected damages from the third party who caused his injuries; insured had standing to bring UCL claim against insurance company]; Starr-Gordon v. Massachusetts Mutual Life Ins. Co. (E.D.Cal., Nov. 7, 2006, No. Civ. S-03-68) 2006 U.S.Dist. Lexis 83110, *1, 18-19 [plaintiff challenged the process by which defendant terminated her disability benefits]).
Unlike the plaintiffs in the foregoing cases, plaintiffs here have not suffered any injury in fact. They have not been required to pay any money out of their own pockets (other than the fees they paid for their cellular telephone service), they have not lost money or property, and they have not been denied any money that they can allege is rightfully theirs.
Id. at 6-7.
Fireside Bank v. Superior Court (Gonzalez), ___ Cal.4th ___ (Apr. 16, 2007) is a densely-packed decision. Here are some thoughts on certain aspects of it.
My initial impression was that this case was a win for the plaintiffs. And for the named plaintiffs in this specific case, it is. Their class certification order has been affirmed, and they will get to re-file their
summary adjudication motion motion for judgment on the pleadings after notice has been given and opt-out period has expired. Summary adjudication The motion was granted before, and will likely be granted again. They are sitting pretty.
Was this case also a win for class action plaintiffs generally? That is less certain. The opinion does contain some plaintiff-favorable class certification language and, because it is a UCL case, some interesting language there as well. I will start out, in this post, by talking about the class certification and UCL aspects of the opinion, leaving the "one-way intervention" aspects for a later post.
Fireside Bank challenged only the "typicality" and "superiority" elements of class certification. As to typicality, Fireside Bank argued first of all that the named plaintiff "failed to present evidence establishing she has standing and has suffered injury typical of the class." Slip op. at 24.
The Supreme Court disagreed. What's interesting for UCL purposes is the way the Court analyzed the standing question. It addressed the declaratory and injunctive relief remedies separately from the restitution remedies:
Gonzalez has standing. She, like other members of the putative class, was subjected to the same alleged wrong: deprivation of a fair opportunity to redeem the financed vehicle, followed by an unlawful demand for payment. The record demonstrates Fireside Bank repossessed Gonzalez’s vehicle and pursued a deficiency judgment against her. She thus has standing to seek a declaration that Fireside Bank is unlawfully asserting a debt against her, as well as an injunction against all further collection efforts. The record further shows Gonzalez (or someone on her behalf) made a postrepossession payment against the alleged deficiency; upon proof she made that payment, Gonzalez also has standing to seek restitution.
Id. (footnote omitted). This is interesting because the Court is saying that the named class representative would have standing to seek injunctive relief under the UCL even if she could not recover restitution—in other words, even if she had not lost money or property as a result of the defendant's UCL violation. All she would have to show was that she was "depriv[ed] of a fair opportunity to redeem the financed vehicle, followed by an unlawful demand for payment" (not an actual payment). This may very well answer a previously-unanswered question in the brave new post-Prop. 64 world: In a UCL action for injunctive relief only, is "lost money or property" required for standing purposes? Under Fireside Bank, the answer is no. It is enough to show that the defendant's UCL violations threaten harm.
The Supreme Court made this even more clear in the footnote accompanying the language quoted above:
We leave it for the trial court to determine whether, on remand, it may be appropriate or necessary to designate subclasses consisting of those subjected to demands who made payments and have restitution claims, and those who did not and thus have only injunctive and declaratory relief claims. Contrary to Fireside Bank’s assertion, the fact the record does not (as yet) disclose in which general group Gonzalez falls does not render the trial court’s conclusion that her claims are typical an abuse of discretion.
Id. n.8. This language obviously very favorable as to the "typicality" prong. But it also could hardly be clearer that an out-of-pocket payment of money is not a prerequisite to a UCL injunctive or declaratory relief action, even after Prop. 64.
Fireside Bank's second attack on typicality was the argument that the class representative was subject to unique defenses not typical of the class. Slip op. at 25-26. Again, the Supreme Court disagreed: "Contrary to Fireside Bank’s assertion ... , a defendant’s raising of unique defenses against a proposed class Fireside Bank's alleged "unclean hands" defense "may be resolved without significant distraction from the common class issues at the heart of this case." Id. at 26.
Finally, the Court addressed Fireside Bank's "superiority" challenge. That challenge was based on pre-Prop. 64 authorities, most notably Frieman v. San Rafael Rock Quarry, Inc., 116 Cal.App.4th 29 (2004) and Alch v. Superior Court, 122 Cal.App.4th 339 (2004), holding that a certified UCL class action would not be "superior" to the more streamlined representative procedure afforded by the UCL. According to Fireside Bank, a non-class UCL representative action would "provide a simpler alternative" to class certification. Slip op. at 28. (See this prior post for more on that argument.) The Supreme Court confirmed that after Prop. 64, which eliminated the non-class, representative procedure of yore, this superiority argument fails. Id.
Those are my preliminary thoughts on some of the class certification and UCL aspects of this case. Thanks to the readers who emailed me to share your insights earlier in the week. More comments, anyone?
In Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court, ___ Cal.App.4th ___ (Feb. 28, 2007), the Court of Appeal (Second Appellate District, Division Eight) summarized its holdings as follows:
(1) We agree the Unions have standing as assignees to assert the claims of union members who have assigned to the Unions their rights to recover wages owing to them. The Unions may not, however, assert claims on behalf of members who have not assigned their claims to the Unions. An assignment purporting to transfer to the Unions “my right to sue in a representative capacity on behalf of current and former employees” is not a transfer “by the owner” of “a right to recover money or other personal property” within the meaning of Civil Code sections 953 and 954. Nor is such an assignment the transfer of an “injury in fact” from assignor to assignee that confers standing on the assignee within the meaning of Vermont Agency of Natural Resources v. United States ex rel. Stevens (2000) 529 U.S. 765 (Vermont Agency). Consequently, the Unions do not have standing under PAGA or the UCL to assert the rights of members who have not assigned their recovery rights to the Unions.
(2) We further conclude that the UCL requirement that a person pursuing relief on behalf of others must both meet standing requirements and “[compl[y] with Section 382 of the Code of Civil Procedure” means, as stated in the Voter Information Guide for Proposition 64, that unfair competition lawsuits on behalf of others, initiated by persons other than the Attorney General and local public prosecutors, must “meet the additional requirements of class action lawsuits.” (Voter Information Guide, Gen. Elec. (Nov. 2, 2004) analysis of Prop. 64 by Legislative Analyst, p. 39 (hereafter Guide).)
Slip op. at 5-6. One justice dissented from the first of these two holdings.
The Fall/Winter 2006 issue of Competition, the journal of the Antitrust and Unfair Competition Law Section of the State Bar of California, recently arrived in the mail. It has an interesting article by Kevin K. Green of Lerach Coughlin entitled “The Unfair Competition Law After Proposition 64: The Supreme Court Speaks,” 15 Competition 37 (2006). The article “dissects the Supreme Court’s analysis in Mervyn’s and Branick, with an eye to how these decisions are likely to affect unfair competition and false advertising litigation going forward.” Id. at 38. The article analyzes the opinions in light of insights gathered while the author attended the oral arguments, and also addresses the Court of Appeal’s opinion in Pfizer.
One of the issues the article addresses is why the Supreme Court did not rely on the "statutory repeal rule." Every single Court of Appeal panel that held that Prop. 64 applies to pending cases relied on that so-called "rule." Yet, those of you who attended the Supreme Court oral argument (or read my report of it) may recall that the justices did not ask a single question during counsel's presentations on that "rule." The article offers these thoughts:
Although many lower courts felt duty-bound to apply the repeal notion as they perceived it, the Supreme Court, taking a global view, seemed to view the matter from a different vantage point. The justices may have been concerned foremost with maintaining consistency in the rules and presumptions governing statutory interpretation. The most recent high court pronouncements in this area have emphasized the presumption of prospectivity. A reinvigorated repeal rule might have created a confusing cross-current in modern Supreme Court precedent on the retroactive effect of statutes.
For all these reasons, the procedural/substantive approach (although itself an imperfect dichotomy) seems to have been a less controversial anchor for the Mervyn's outcome. The justices found common analytical ground in what is, for purposes of future UCL litigation, a more sweeping rationale for the decision. Summing up statutory amendments as either "procedural" or "substantive" generates waves through UCL doctrine after Proposition 64, in contrast to the ripples that might have flowed from a conclusion that the new standing rules are a statutory repeal.
Id.at 41 (footnote omitted).
The article also poses and answers some interesting questions relating to Branick's holding that leave to amend may be granted:
Id. at 44 (footnotes omitted).
For example, what proceedings are required in a case that has already gone to judgment in favor of an unaffected plaitniff who had standing to enforce the UCL on behalf of the "general public" before Proposition 64? The Supreme Court accepted on a grant and hold basis at least two cases fitting this description. Must the judgment be vacated, and if so, may it be reinstated following further proceedings in superior court under Proposition 64? The logic of Mervyn's suggests an answer. If the new plaintiff seeks to enforce the same liability against the defendant, based on the same asserted misconduct, then nothing should impede entry of a new judgment after the plaintiff substitution. A retrial of the same facts would be pointless and wasteful. Although apparently scant, there is authority allowing a judgment for the plaintiff to be reinstated following proceedings found necessary only after the judgment was entered. A plaintiff substitution due to Proposition 64 is in this category.
Next, the article tackles Pfizer, convincingly arguing that Proposition 64 does not require proof that all class members suffered an injury in fact; did not eviscerate the "likely to deceive" formulation of the UCL's "fraudulent" prong; and did not add a reliance element to a UCL claim. Id. at 45-49. The article then invokes the statutory-interpretation principle that "'[a] statute will be construed in light of common-law decisions, unless its language clearly and unequivocally discloses an intention to depart from, alter, or abrogate the common-law rule concerning the particular subject matter ...' Put another way, '[t]here is a presumption that a statute does not, by implication, repeal the common law. Repeal by implication is recognized only when there is no rational basis for harmonizing two potentially conflicting laws.'" Id. at 50 (quoting California Assn. of Health Facilities v. Department of Health Services, 16 Cal.4th 284, 297 (1997)). The article then argues:
Id. at 50.
Nothing in Proposition 64 "clearly and unequivocally" signals any intent to relegate to history nearly thirty years of UCL precedent on liability standards. Likewise, there is a more than "rational basis" for reconciling this precedent with Proposition 64. Of course, the person bringing the suit must meet the new standing requirements set forth in Business and Professions Code sections 17203, 17204 and 7535. This provides the accountability the voters sought in private UCL litigation. They declared that unaffected plaintiffs no longer have a key to the courthouse. But nothing indicates that the electorate meant to take the far more dramatic step of overhauling the established standards for proving a UCL cause of action. Again, section 17200 was not amended. Fully consistent with the letter of Proposition 64 and its stated goals, the defendant's liability to the represented group is proved under the familiar prongs and accompanying judicial articulations reaffirmed by the voters.
The article concludes by quietly calling the Supreme Court to action:
Because there is a wealth of Supreme Court case law fleshing out the UCL, Proposition 64's impact on proving a UCL claim directly impacts the viability of the court's own precedents. As before Proposition 64, the Supreme Court can be expected to have a central role in shaping UCL doctrine, especially if its precedents are called into question by lower courts as in Pfizer.
Id. at 51. I agree there is little reason why the Supreme Court should not step up to the plate now, grant review in Pfizer and/or In re Tobacco, and examine the continuing validity of its precedents sooner rather than later. The article as a whole is very good and worth reading in its entirety.
In Aron v. U-Haul Company, ___ Cal.App.4th ___ (Oct. 3, 2006), the plaintiff filed a putative class action alleging that U-Haul violated the UCL and CLRA by: (a) charging a $20 "refueling fee" even though it does not actually refuel its rental trucks, but simply re-rents them with whatever gas the previous customer left in the tank; (b) charging $2 per gallon for "fuel estimated to have been used, but not replaced, by the customer," but relying solely on the trucks' inexact gas gauges to quantify the customer's fuel usage; and (c) failing to reimburse customers who return the rental trucks with more gas than they started out with.
The trial court granted U-Haul's motion for judgment on the pleadings. The Court of Appeal (Second Appellate District, Division Seven) reversed. Its opinion contains the following holdings of note:
To state a cause of action under consumer protection statutes designed to protect the public from fraudulent or deceptive representations, the plaintiff must demonstrate that “‘members of the public are likely to be deceived.’ [Citations.]” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 211.) .... We find that Aron has alleged facts sufficient to show that U-Haul’s representations would be misleading to a reasonable consumer because there is no connection between the imposition of a fee or cost and whether the customer has in fact refueled the vehicle. “A perfectly true statement couched in such a manner that it is likely to mislead or deceive the consumer, such as by failure to disclose other relevant information, is actionable.” (Day v. A T & T Corp. (1998) 63 Cal.App.4th 325, 332-333.)Slip op. at 9-10. Again, the Court stayed true to Mervyn's by narrowly interpreting the new standing language so as not to alter the substantive law.
The September 2006 issue of Forum: The Magazine of Consumer Attorneys of California has an article by Sharon J. Arkin entitled "To Rely or Not Rely: §17200 Cases and the Conflict Between Mervyn's and Pfizer." The article is quite good, and addresses (among other things) Pfizer's disregard of California Supreme Court precedent on presumed reliance, such as Vasquez v. Superior Court, 4 Cal.3d 800 (1971) and Occidental Land, Inc. v. Superior Court, 18 Cal.3d 355 (1976). The article, which concludes by urging the Supreme Court to grant review in Pfizer, is available to CAOC members only.
Doe v. Texaco, Inc., 2006 WL 2053504 (N.D. Cal. Jul. 21, 2006) is interesting because it was decided ten days after Pfizer and three days before Mervyn's. There, the court (Judge Alsup) cited Pfizer in granting the defendants' motion to dismiss the UCL claim:
Actions alleging violations of the Unfair Competition Law may be brought "by any person who has suffered injury in fact and has lost money or property as a result of such unfair competition." Cal. Bus. & Prof.Code § 17204. In the instant action, plaintiffs do not allege that they lost money or property as a result of Chevron's false statements about the environmental and health harms in Ecuador. For plaintiffs to prevail, they would have to claim that their cancer or increased risk of cancer caused them to lose property or money and that the false statements caused the cancer or increased risk thereof. Such a contention would be patently absurd and appears nowhere in the complaint.
In addition, the "as a result of" language in the statute means that, for a plaintiff to state a claim, he or she must allege that they relied upon the defendant's acts of unfair competition and, as a result, suffered injury in fact. Pfizer v.Super. Ct. of L.A. County, No. B188106, --- Cal.Rptr.3d ----, 2006 WL 1892581 at *9 (Cal.Ct.App. July 11, 2006). Plaintiffs here do not allege that they suffered cancer or increased risk of cancer due to misleading statements made by Chevron. Their claim founders on this silence.
2006 WL 2053504 at *3. It is somewhat difficult to analyze this language, because the order does not really explain who the plaintiffs are or what they were claiming the defendants did wrong. It talks about environmental pollution, people who contracted cancer, and the defendant's alleged "false statements." If the plaintiffs contracted cancer due to the defendants' environmental pollution, and spent money on a physician's care, then they certainly would have "lost money or property as a result of" the defendant's conduct. However, that does not seem to be what the complaint alleged. Leave to amend was granted, so it will be interesting to see what develops in this case, especially now that Pfizer has been impliedly overruled.
Yesterday, in Pfizer, Inc. v. Superior Court, ___ Cal.App.4th ___ (Jul. 11, 2006), the Court of Appeal (Second Appellate District, Division Three) addressed a trio of significant and unresolved questions about how the UCL works in the post-Prop. 64 world. The court decided all three questions in the defendant's favor:
(1) In a UCL class action, all class members, not just the representative plaintiff, must have suffered "injury in fact." "We conclude that in order to meet the ‘community of interest’ requirement of Code of Civil Procedure section 382, which requires, inter alia, the class representative to have claims typical of the class, it is insufficient if the class representative alone suffered injury in fact and lost money or property as a result of the unfair competition or false advertising. The class members being represented by the named plaintiff likewise must have suffered injury in fact and lost money or property as a result of such violation." (Slip op. at 5 (emphasis added).) The court rejected the argument that the amendment's plain language—"Actions ... under this section may be prosecuted ... by any person who has suffered injury in fact and has lost money or property as a result of a violation of this chapter"—meant that only the representative plaintiff had to prove "injury in fact." (Slip op. at 13-14.)
(2) The "likely to deceive" standard, which governed UCL "fraudulent" prong cases before Prop. 64, has been abolished. "[T]he mere likelihood of harm to members of the public is no longer sufficient for standing to sue. Persons who have not suffered any injury in fact and who have not lost money or property as a result of an alleged fraudulent business practice cannot state a cause of action merely based on the 'likelihood' that members of the public will be deceived." (Slip op at 5 (emphasis added).) The Court declined to follow any of the post-Prop. 64 decisions that applied the "likely to deceive" formulation (see this post for a list of those decisions). (Slip op. at 15-17.)
(3) Prop. 64 imports a reliance element into the UCL. "[I]nherent in Proposition 64’s requirement that a plaintiff suffered ‘injury in fact ... as a result of’ the fraudulent business practice or false advertising (§§ 17204, 17535, italics added) is that a plaintiff actually relied on the false or misleading misrepresentation or advertisement in entering into the transaction in issue." (Slip op. at 5 (emphasis in original).) The court expressly declined to follow Anunziato v. eMachines, Inc., 402 F.Supp.2d 1133 (C.D. Cal. 2005), and held instead that "the district court's decision in Laster v. T-Mobile USA, Inc. (S.D. Cal. 2005) 407 F.Supp.2d 1181, sets forth the correct interpretation." (Slip op. at 18.) (See these posts for further discussion of Anunziato and Laster.)
The Court concluded by saying:
(Slip op. at 20.)
We recognize this initiative measure, which was promoted as adding a standing requirement to the UCL and FAL, has had the effect of dramatically restricting these consumer protection measures. .... However, this court must take the statutory language as it finds it. Given the new restrictions on private enforcement under the UCL and the FAL, enforcement of these statutes in legitimate cases is increasingly the responsibility of a vigilant state Attorney General and/or local public prosecutors.
If the Pfizer holdings stand up, the effect of Prop. 64 will indeed be quite different from what the electorate was told. The silver lining for plaintiffs is that such amendments cannot possibly be construed as merely "procedural." According to Pfizer, Prop. 64 altered the "fraudulent" prong's "likely to deceive" standard and "added a reliance element to the UCL." (Slip op. at 16-17 (emphasis added).) Those changes are substantive. They cannot be applied to cases filed before the amendments' effective date absent a very clear statement of retroactive intent, which Proposition 64 does not contain.
On the other hand, if the Supreme Court holds that Prop. 64's amendments do apply to previously-filed actions, that would impliedly overrule Pfizer (unless the holding is based exclusively on the so-called "statutory repeal rule," which I consider unlikely for reasons explained here). This whole thing is becoming a Gordian knot.
Today's Daily Journal has a practice article called "Change in Unfair-Competition Law Begs 'Causation' Question." While the article is very defendant-oriented, it does highlight an interesting disagreement between two federal decisions on whether the UCL after Prop. 64 requires proof of "causation." Compare Laster v. T-Mobile USA, Inc., ___ F.Supp.2d ___, 2005 WL 3610616 (S.D. Cal. Nov. 30, 2005) with Anunziato v. eMachines, Inc., 402 F.Supp.2d 1133 (C.D. Cal. 2005). My original post on Anunziato is here, and ContractsProf Blog has more on Laster v. T-Mobile here.
As a programming note, my upcoming trial date has been continued, so I should be back to regular blogging soon. The new trial date will also allow me to accept PLI's invitation to speak on "Blogs and RSS Feeds" at their seminar "The Law Library 2006: Skills, Strategies and Solutions" on March 1, 2006. One of my co-speakers will be Susan Nevelow Mart, Adjunct Professor of Law at U.C. Hastings and co-author of LibraryLaw Blog.
Thanks to the readers who alerted me to an important federal order interpreting Prop. 64, Anunziato v. eMachines, Inc., 2005 U.S. Dist. LEXIS 28213 (Nov. 10, 2005). (It might actually be Annunziato v. eMachines, Inc., since the name is spelled one way in the caption but differently in the body.) In this order, Judge James V. Selna of the Central District of California "decline[d] to read a reliance requirement into the 'as a result of' language in either Section 17200 or Section 17500." Slip op. at 8. The Court noted that the plain language of Prop. 64 makes no mention of "reliance," then considered a variety of hypothetical fact patterns and the potential impact of imposing a "reliance" requirement. Id. at 2-8, passim. In "numerous situations ... the addition of a reliance requirement would foreclose the opportunity of many consumers to sue under the UCL and the FAL." Id. at 5. The Court concluded:
The goal of consumer protection is not advanced by eliminating large segments of the public from coverage under the UCL or the FAL where they suffer actual harm merely because they were inattentive or for one reason or another lacked the language skills to appreciate the particular unfair or false representation in issue. A construction of these statutes that reduced them to common law fraud would not only be redundant, but would eviscerate any purpose that the UCL and the FAL have independent of common law fraud. .... The Court finds that the remedial purposes of Proposition 64 are fully met without imposing requirements which go beyond actual injury.
Id. at 6-7.
On September 16, 2005, an interesting order was issued in Aureflam Corp. v. Pho Hoa Phat I, Inc., case no. 5:05-cv-00746-RS (N.D. Cal. Sept. 16, 2005). It addresses a number of questions of first impression relating to the interpretation of the UCL as amended by Prop. 64.
The case is a dispute between two owners of Vietnamese restaurant chains. The plaintiff's original suit alleged trademark infringement and unfair business practices under the UCL. The defendant counter-claimed, seeking cancellation of the trademark registration, damages for fraud on the patent office, and injunctive relief under the UCL. The district court (Magistrate Judge Seeborg) granted the plaintiff's motion to dismiss the UCL counterclaim, holding that the defendant had neither alleged "actual injury" nor satisfied the requirements of Code of Civil Procedure section 382. (The case was filed in 2005, after Prop. 64's efffective date, so retroactivity was not an issue.)
The only "actual damages" the defendant claimed were "the attorneys' fees incurred in responding to the principal claim filed by [the plaintiff]." Slip op. at 5. That was held to be insufficient:
The Court has not located, nor did [the defendant] cite, any authority which supports the proposition that attorneys' fees incurred in this action may constitute an actual injury for purposes of a Section 17200 counterclaim. .... Although it is perhaps conceivable that a definition of "actual damages" may emanate from the [California] Supreme Court ... that would include attorneys' fees, there is no current authority which provides that such fees constitute an actual injury for the purpose of Section 17200.Id. That is an understatement, given that there is essentially no authority at all about what "injury in fact" means. But what's odd about it is the implicit assumption that a UCL claimant seeking injunctive relief only would have to establish an actual injury. That assumption makes little sense, even given the recent amendments to the UCL. One of the main functions of injunctive relief is to stop a threatened injury before it occurs, not after someone has been harmed. Moreover, as the Supreme Court recognized in California v. Altus Finance, S.A., ___ Cal.4th ___ (Aug. 17, 2005), a UCL claim for injunctive relief can be crafted so as to rectify individual wrongs, rather than widespread public ones.
Another interesting thing about this order is its assumption that California rules of class action procedure would apply to a UCL claim filed in federal court:
Reader Jeffery L. Fazio posted this thoughtful analysis as a comment to my August 26th post. I'm re-posting it here in full because I think it is worthy of serious discussion:
I’ve been doing some thinking about one of the anomalies created by Proposition 64: Its requirement that plaintiffs demonstrate they have suffered damages (i.e., a loss of money or property) before they’re permitted to bring a UCL action, even though they’re not allowed to actually recover those damages if they prove their claim.
The asymmetry — not to mention the inherent unfairness — of that result has led me to reexamine the underpinnings of the rule that prohibits courts from awarding damages under the UCL, and although I’ve yet to complete that task, it seems that the prohibition against the award of damages in a UCL action needs to be reconsidered.
Before the California Supreme Court addressed the issue in Bank of the West v. Superior Court, damages were recognized as one of the remedies available to plaintiffs in UCL cases. That was so because the ability to award damages was deemed an essential part of the courts’ equitable powers to do justice by whatever means were necessary.