The UCL Practitioner

New Ninth Circuit UCL "likely to deceive" decision: Williams v. Gerber Products Co.

On Monday, the Ninth Circuit handed down an opinion applying the "likely to deceive" formulation of the UCL's "fraudulent" prong. Williams v. Gerber Products Co., ___ F.3d ___, 2008 WL 1776522 (9th Cir. Apr. 21, 2008). In Williams, the Ninth Circuit reversed an order dismissing the plaintiff's UCL claims (Williams v. Gerber Products Co., 439 F.Supp. 2d 1112 (S.D. Cal. 2006)), holding that the district court erred by assessing for itself whether the defendant's allegedly misleading labeling was "likely to deceive a reasonable consumer":

Here, the district court based its decision to grant the motion to dismiss solely on its own review of an example of the packaging. It is true that “the primary evidence in a false advertising case is the advertising itself.” Brockey v. Moore, 107 Cal.App.4th 86, 100 (Cal.App. 2003). California courts, however, have recognized that whether a business practice is deceptive will usually be a question of fact not appropriate for decision on demurrer. See e.g., Linear Technology Corp. v. Applied Materials, Inc., 152 Cal.App.4th 115, 134-35 (Cal.App. 2007) (“Whether a practice is deceptive, fraudulent, or unfair is generally a question of fact which requires ‘consideration and weighing of evidence from both sides’ and which usually cannot be made on demurrer.” (quoting McKell v. Washington Mutual, Inc., 142 Cal.App.4th 1457, 1472 (Cal.App. 2006))); Committee on Children’s Television, 35 Cal.3d at 197 (finding demurrer inappropriate in case where parents alleged deceptive advertising of sugar cereals).

....

The facts of this case ... do not amount to the rare situation in which granting a motion to dismiss is appropriate. Here, there are a number of features of the packaging Gerber used for its Fruit Juice Snacks product which could likely deceive a reasonable consumer. The product is called “fruit juice snacks” and the packaging pictures a number of different fruits, potentially suggesting (falsely) that those fruits or their juices are contained in the product. Further, the statement that Fruit Juice Snacks was made with “fruit juice and other all natural ingredients” could easily be interpreted by consumers as a claim that all the ingredients in the product were natural, which appears to be false. And finally, the claim that Snacks is “just one of a variety of nutritious Gerber Graduates foods and juices that have been specifically designed to help toddlers grow up strong and healthy” adds to the potential deception.

Slip op. at 4195-96. At this point, the opinion has an interesting footnote with a useful quotation for advertising cases:

Gerber’s claim that Snacks is “nutritious,” were it standing on its own, could arguably constitute puffery, since nutritiousness can be difficult to measure concretely. See Cook, Perkiss and Liehe, Inc. v. Northern Cal. Collection Serv., Inc., 911 F.2d 242, 246 (9th Cir. 1990) (finding that statements are non-actionable puffery where they constituted “general assertions of superiority” rather than “factual misrepresentations”). This statement certainly contributes, however, to the deceptive context of the packaging as a whole. Given the context of this statement, we decline to give Gerber the benefit of the doubt by dismissing the statement as puffery. “It is not difficult to choose statements, designs, and devices which will not deceive.” United States v. Ninety-Five Barrels More or Less of Alleged Apple Cider Vinegar, 265 U.S. 438, 443 (1924).

Slip op. at 4196 n.3. The opinion goes on:

The district court suggests that “no reasonable consumer upon review of the package as a whole would conclude that Snacks contains juice from the actual and fruit-like substances displayed on the packaging particularly where the ingredients are specifically identified.” Williams, 439 F.Supp.2d at 1116. We disagree with the district court that reasonable consumers should be expected to look beyond misleading representations on the front of the box to discover the truth from the ingredient list in small print on the side of the box. The ingredient list on the side of the box appears to comply with FDA regulations and certainly serves some purpose. We do not, however, think that a busy parent walking through the aisles of a grocery store should be expected to verify that the representations on the front of the box are confirmed in the ingredient list. Instead, reasonable consumers expect that the ingredient list contains more detailed information about the product that confirms other representations on the packaging. We do not think that the FDA requires an ingredient list so that manufacturers can mislead consumers and then rely on the ingredient list to correct those misinterpretations and provide a shield for liability for the deception.

Slip op. at 4196-97 (emphasis added). Finally, to illustrate these holdings, the opinion includes a copy of the challenged label:

Slip op. at 4199 (a full-size copy of the image is available at this link; click on the image to enlarge it).

The Ninth Circuit's reversal of the District Court's published order in Williams may necessitate reconsideration (or reversal) of other orders in which other District Courts followed Williams. See, e.g., McKinniss v. General Mills, Inc., 2007 WL 4762172 (C.D. Cal. Sept. 18, 2007); McKinnis v. Kellogg USA, 2007 WL 4766060 (C.D. Cal. Sept. 19, 2007).

Federal decision on UCL "unlawful" prong: Gabana Gulf Distribution, Ltd. v. GAP Intern. Sales, Inc.

In Gabana Gulf Distribution, Ltd. v. GAP Intern. Sales, Inc., 2008 WL 111223 (N.D. Cal. Jan. 9, 2008), the Court (Judge Charles R. Breyer) held that a UCL "unlawful" prong claim may be predicated on violation of a common-law rule (specifically, breach of the implied covenant of good faith and fair dealing):

Because the Court has denied summary judgment to Gap on the breach of covenant claim, summary judgment must also be DENIED as to the § 17200 claim because Gabana may use the covenant claim as a predicate for § 17200 liability. Although the state of § 17200 jurisprudence is in rapid flux, California courts have not yet foreclosed common law theories--such as breach of the covenant of good faith--as a basis for actions pursuant to § 17200. See Mercado v. Allstate Ins. Co., 340 F.3d 824, 828 n. 3 (9th Cir.2003); Diaz v. Allstate Ins. Group, 185 F.R.D. 581, 595 (C.D.Cal.1998) ("[A]llegations of fraudulent and unfair business activity are sufficient to state a cause of action for relief under the UCA.").

As I explained in this prior post, such a holding is significant because few decisions have confirmed that an "unlawful" prong claim may be predicated on violation of a common-law rule (although plenty of published opinions say in general terms that violations of "court-made" law are actionable under the "unlawful" prong).

Recent federal UCL "safe harbor" decision: Williams v. Washington Mutual Bank

In Williams v. Washington Mutual Bank, 2008 WL 115097 (E.D. Cal. Jan. 11, 2008), the court (Judge William B. Schubb) had this to say about the Cel-Tech "safe harbor":

California's UCL restricts "any unlawful, unfair, or fraudulent business act or practice and unfair, deceptive, untrue, or misleading advertising." Cal. Bus. & Prof.Code § 17200. The UCL " 'borrows' violations from other laws by making them independently actionable as unfair competitive practices." Korea Supply Co. v. Lockhead Martin Corp., 29 Cal.4th 1134, 1143 (2003). However, "[w]hen specific legislation provides a 'safe harbor,' plaintiffs may not use the general unfair competition law to assault that harbor." Cal-Tech [sic] Commc'ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal.4th 163, 182-83 (1999); Schnall v. Hertz Corp., 78 Cal.App. 4th 1144, 1154 (2000). Therefore, plaintiff cannot assert a UCL claim if a federal or state law legalizes defendant's practice. See Augustine v. FIA Card Servs., N.A., 485 F.Supp.2d 1172, 1176 (E.D.Cal.2007) (stating that federal or state law can provide a safe harbor).

As discussed above, [T]ILA authorizes defendant's practice because defendant provides sufficient notice in its initial disclosures. Defendant's practice comes within the UCL's "safe harbor," thus negating plaintiff's ability to challenge the practice under the UCL. C[e]l-Tech Commc'ns, Inc., 20 Cal.4th at 182-83. Accordingly, the court must dismiss plaintiff's third cause of action.

Id. at *4-*5.

New Ninth Circuit UCL/class certification decision: Lozano v. AT&T Wireless

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.

New UCL/CLRA nondisclosure decision: Falk v. General Motors Corp.

In Falk v. General Motors Corp., 2007 WL 1970123 (N.D. Cal. Jul. 3, 2007), the plaintiffs alleged that GM knowingly sold vehicles with defective speedometers. Judge William Alsup denied GM's motion to dismiss the plaintiffs' CLRA and UCL claims.

Analyzing the CLRA claim, Judge Alsup distinguished both Daugherty and Bardin, then held that the alleged problem with the speedometers was material and that GM had a duty to disclose it. As for the UCL claim, Judge Alsup applied the ordinary "likely to be deceived" formulation of the "fraudulent" prong and the pre-Cel-Tech formulation of the "unfair" prong. He concluded that a claim was stated under all three prongs of the UCL. The opinion concludes:

In closing, it is worth saying that ordinarily an express warranty begins and ends the manufacturer’s duty to replace an item like the one in question. Here, however, the large number of articulate and credible Internet postings set forth in the complaint strongly indicates that GM knew of the problem and very likely had far more information on a material defect. At least at the pleading stage, this complaint states a claim that GM knew and concealed that its speedometers were defective and likely to fail far more often than expected by the consuming public. Discovery may or may not bear this claim out. But enough is alleged to authorize plaintiffs and their counsel to proceed to take discovery.

For the reasons given, defendant’s motion to dismiss plaintiffs’ unjust enrichment claim is GRANTED without leave to amend. Plaintiffs, however, allege sufficient factual support for all of their other claims. Although Daugherty and Bardin bar CLRA claims for omissions when there is no duty to disclose and when defendants have made no representations to the contrary, plaintiffs adequately plead that GM had a duty to disclose here, which it violated. Defendant’s motion to dismiss under Rules 12(b)(6) and 9(b) is therefore DENIED as to plaintiffs’ CLRA, UCL and fraud by omission claims. Discovery may begin immediately.

Falk, 2007 WL 1970123 at *10 (slip op. at 14). Thanks to the blog reader who emailed a copy of this decision.

Recent federal UCL decision: Doe v. Texaco, Inc.

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.

New Ninth Circuit FTC Act decision: FTC v. Cyberspace.com

I hope to provide more commentary later this week on the interplay between Mervyn's, Branick, and Pfizer, but in the meantime, here is a new Ninth Circuit case to consider. Federal Trade Commission v. Cyberspace.com LLC, ___ F.2d ___ (9th Cir. July 13, 2006), is a rare decision interpreting the Federal Trade Commission Act (15 U.S.C. §§41 et seq.). The FTC Act prohibits "deceptive acts or practices in or affecting commerce." Slip op. at 7766 (quoting 15 U.S.C. §45(a)). "[A] practice falls within this prohibition (1) if it is likely to mislead consumers acting reasonably under the circumstances (2) in a way that is material." Id. (citing FTC v. Gill, 265 F.3d 944 (9th Cir. 2001)). Because the UCL is also known as California's "little FTC Act," federal caselaw interpreting the federal FTC Act can be instructive. The decision is worth a read.

Recent federal UCL decision: Bezuszka v. L.A. Models, Inc.

I recently came across Bezuszka v. L.A. Models, Inc., 2006 WL 770526 (S.D. N.Y. 2006), decided in March. I find that I disagree with the reasoning of remote federal courts in UCL cases rather often. The Bezuszka decision contains the following bizarre holding: "[T]he question of whether Proposition 64 applies to pending cases is currently pending before the California Supreme Court. .... Regardless, because the Model Plaintiffs clearly allege an injury in fact, that element is irrelevant to our analysis, except to the extent that it precludes them from arguing that they are part of a class of plaintiffs injured by the defendants' alleged unlawful practices." Id. at *16 n.30 (emphasis added). Since when does suffering an injury in fact preclude someone from seeking to represent a class? On the contrary, that injury would mean that the plaintiffs were part of the class they sought to represent.

To make matters worse, the Court then held that the plaintiffs could not state a UCL claim because they "cannot allege a harm to the general public." Id. at *17. The stated rationale for that holding was that the main thrust of the lawsuit was breach of contract. See id. (citing Rosenbluth Int'l, Inc. v. Superior Court, 101 Cal.App.4th 1073 (2002)). However, harm to the general public is not a required element of UCL claim, regardless of whether the action involves a contract dispute. The Rosenbluth court addressed that question only because the plaintiff was not a party to the contracts he sought to enforce, had suffered no injury himself, and sought relief only on behalf of the "general public." An injured UCL plaintiff can choose to proceed on behalf of herself alone (which is what the Bezuska plaintiffs sought to do), or (especially after Prop. 64) on behalf of a class of similarly situated persons. It matters not whether the alleged UCL violation impacted the public at large.

Finally, the Court held that "because restitution would equal any amounts not paid under the contracts, the Model Plaintiffs' UCL claims are superfluous." Id. at *17 n.32. The Court overlooked Business & Professions Code section 17205, which states: "Unless otherwise expressly provided, the remedies or penalties provided by this chapter are cumulative to each other and to the remedies or penalties available under all other laws of this state." I am aware of no case holding that a parallel UCL claim cannot, as a matter of law, proceed alongside a breach of contract claim, so long as the UCL's substantive elements are met. The Court exacerbated its problematic reasoning by declining, for equitable reasons, to entertain a UCL claim for injunctive relief—a remedy not normally available for breach of contract. 2006 WL 770526 at *17 n.32.

Follow-up on Bahramipour v. Citigroup Global Markets, Inc., 2006 WL 449132 (N.D. Cal. 2006)

According to the blog Federal Civil Practice Bulletin, Judge Wilken's decision in Bahramipour v. Citigroup Global Markets, Inc., 2006 WL 449132 (N.D. Cal. 2006) was soon followed by a $98 million classwide settlement. In that case, Judge Wilken held that by asserting their Fair Labor Standards Act (29 U.S.C. §§200 et seq.) claim as a UCL "unlawful" prong violation, rather than as a direct violation of the Act, plaintiffs enjoyed a longer statute of limitations and an "opt-out" (rather than an "opt-in") class. My original post on Bahramipour is here; see also this post on Harris v. Investor's Business Daily, Inc., ___ Cal.App.4th ___ (Mar. 29, 2006), in which the California Court of Appeal reached a similar conclusion. UPDATE: As an alert reader pointed out in the comments, the California Supreme Court denied review in Harris today (06/28/06).

More on the UCL and securities class actions

Last week, I reported here on Merrill Lynch, Pierce, Fenner & Smith v. Dabit, 547 U.S. ___ (Mar. 21, 2006), in which the U.S. Supreme Court held that the Securities Litigation Uniform Standards Act of 1998 ("SLUSA") rather drastically limits state-law securities class actions. Since then, a reader suggested to me that while the new decision might impact fraud-based state law securities class actions, it doesn't seem to impact non-fraud claims. There may be an arguable window for negligent failure to act claims that do not allege or coincide with fraud. Of course, UCL claims don't need to allege either fraud or negligence; they're based on strict liability. Nonetheless, to the extent the securities-based UCL claim can be couched in terms of negligence rather than fraud, it might fit through the very narrow window Dabit may have left open. Dabit also has no impact on individual actions or actions with fewer than 50 plaintiff class members.

The reader also pointed out that a follow-on case, Kircher v. Putnam Funds, no. 05-409, is still pending before the Supreme Court and will be argued on April 24. That case involves the jurisdictional question of whether a SLUSA remand order is appealable. Under 28 U.S.C. section 1447(d), remand orders are usually not appealable, but in Kircher v. Putnam Funds Trust, 373 F.3d 847 (7th Cir. 2004), the Seventh Circuit held that SLUSA remand orders are. The Supreme Court could take the opportunity to provide additional clarification on SLUSA's substantive reach. (SCOTUSblog has more on the cert. grant in Kircher here, and the petitioner's brief is accessible here.)

UPDATE: On June 15, 2006, the Supreme Court issued its opinion in Kircher v. Putnam Funds Trust (no. 05-409). The Court did not expand on its substantive analysis in Dabit, but held that SLUSA remand orders are not appealable.

The UCL and securities class actions

Yesterday, in a widely-publicized decision, the U.S. Supreme Court held that the Securities Litigation Uniform Standards Act of 1998 preempts "state-law class-action claims brought by plaintiffs who have a private remedy under federal law" as well as "state-law class-action claims for which federal law provides no private remedy." Merrill Lynch, Pierce, Fenner & Smith v. Dabit, 547 U.S. ___ (Mar. 21, 2006) (slip op. at 1).

There is a split in California decisional law on whether the UCL may be invoked to rectify securities violations (regardless of whether federal law provides a parallel remedy). Compare Roskind v. Morgan Stanley Dean Witter & Co., 80 Cal.App.4th 345 (2000) (holding that UCL claim may be predicated on securities law violations) with Bowen v. Ziasun Technologies, 116 Cal.App.4th 777 (2004) (holding that UCL does not apply to securities transactions); see also these blog posts from 2004 (discussing Bowen and UCL securities claims). Assuming that Roskind has the better view on this issue, and securities claims can be rectified via the UCL as a matter of California state law, it could be that this new Supreme Court decision has closed that avenue of relief. On the other hand, the federal statute applies only to a "covered class action," which is defined as "any single lawsuit in which ... damages are sought on behalf of more than 50 persons ...." Merrill Lynch, slip op. at 10 n.8 (quoting 15 U.S.C. §78bb(f)(5)(B)). Because "damages" are not recoverable under the UCL, there could be some wiggle room to argue that the federal statute does not apply. Still, given Prop. 64's class action provisions and the Class Action "Fairness" Act's removal provisions, you'll probably wind up making this argument to a federal judge, very few of whom would likely be receptive to it. And since you'll be in federal court anyway, you may as well plead the securities violation under federal law. Comments, anyone?

UPDATE: The Wall Street Journal Law Blog has this post with links to blogosphere commentary on the Merrill Lynch decision, including this thoughtful analysis at the Conglomerate, which observes: "With one fell swoop, the Supreme Court wipes out the practical value of many state blue sky laws and general consumer fraud laws and such. I understand and agree with the 'occupying the field' argument in principle, but, geesh, today is a very different consumer fraud litigation day than was yesterday!"

New federal UCL decision: Wolfert v. Transamerica Home First, Inc.

Many thanks to the reader who alerted me to Wolfert v. Transamerica Home First, Inc., ___ F.3d ___ (2d Cir. Feb. 24, 2006), a recent opinion from the Second Circuit. In Wolfert, a nationwide UCL class action settlement that was approved by the San Mateo County Superior Court in 2003 survived various "due process" challenges and was upheld under the doctrine of res judicata. The Second Circuit determined that New York laws governing reverse mortgages provided no broader protections than the UCL, so the class representatives did not inadequately represent New York class members in settling their claims pursuant to the UCL rather than the New York laws that would otherwise govern. In a word to the wise for all UCL litigants seeking to settle the claims of out-of-state plaintiffs, the Court said:

Without attempting to delineate the degree of divergence of interests that would render class representatives inadequate, it suffices to note in this case that if Mrs. Wolfert is correct that New York law affords her significant protection not available under California law, she was not adequately represented.

(Slip op. at 19.) The Court also held that the form of notice to the class (by first class mail and publication) was sufficient. The case is an interesting read.

New federal UCL order: Bahramipour v. Citigroup Global Markets, Inc.

Thanks to Jessica for handing me a copy of the Order Denying Defendant's Motion for Partial Summary Judgment in Bahramipour v. Citigroup Global Markets, Inc., No. C 04-440 CW (N.D. Cal.). In this case, the plaintiff's UCL "unlawful" prong cause of action is predicated on alleged violation of the federal Fair Labor Standards Act (29 U.S.C. §§200 et seq.). Judge Claudia Wilken held that the FLSA did not preempt either (a) the UCL's four-year statute of limitations or (b) the "opt-out" class certification procedure that would apply under Rule 23 to UCL claims in federal court: "By allowing 'opt-out' class actions and longer statute of limitations for UCL claims, California provides increased protections for its workers, furthering the central purpose of the FLSA. The UCL as invoked in Plaintiff's claim does not stand as an obstacle to the purposes of the FLSA." (Slip op. at 13.)

If the FLSA claim had been brought directly, rather than through the UCL, it would have been subject to a two-year statute of limitations (or three years, if willful misconduct is proven), and special "opt-in" rules would have limited the size of the class. This case illustrates the procedural benefits of UCL claims, even after Proposition 64.

UPDATE: The Westlaw citation is Bahramipour v. Citigroup Global Markets, Inc., 2006 WL 449132 (N.D. Cal. 2006).

Recent federal order on the UCL post-Prop. 64: Aureflam v. Pho Hoa Phat

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: