The UCL Practitioner

Last week's arguments in Rose and Zhang

As I previously reported, last week the Supreme Court heard oral arguments in two cases potentially implicating the ordinary rule that a UCL "unlawful" prong may proceed regardless of whether the legislature intended the "borrowed" law to carry a private right of action.  Zhang v. Superior Court (Cal. Cap. Ins.), no. S178542, was argued last Wednesday, and Rose v. Bank of America, no. S199074, was argued Tuesday. 

Emily Green of the Daily Journal had a story on the Zhang argument in last Thursday's paper.  An excerpt:

Plaintiffs lawyers and insurance companies have waited more than three years for the state Supreme Court to take up the case of Yanting Zhang, a homeowner who sued her insurance company for false advertising after it repeatedly stalled her efforts to get recovery after an apartment fire.

But at oral argument Wednesday, ... the questions posed by the justices suggested the court is inclined to rule in favor of Zhang, who wants to move forward with her claim.

....

The backdrop to the case is a prior California Supreme Court decision that says private citizens can't privately sue insurers who commit unfair practices under the state's Unfair Insurance Practices Act. Only the insurance commissioner can do that.  Moradi-Shalal v. Fireman's Fund Ins. Companies, 46 Cal.3d 287 (1988).

Much of oral argument centered on whether Moradi-Shalal affected Zhang's case.  ....

[Justice] Corrigan questioned why Zhang should be precluded from suing the company for false advertising. If one of the parties has no intention of living up to its side of the contract, she said, then the contract is "fraudulently induced." 

Justice Corrigan is one of the more conservative members of the Court, so if her questions favored the plaintiff, that is a strong signal that the plaintiff may ultimately prevail. 

I have seen no press coverage of Rose, but an attorney present reported that the questioning in that case also seemed to favor the plaintiffs' position.  The attorney said that from the questioning, it appeared that the justices were accepting the argument that the repeal of the private right of action for violations of the Truth in Savings Act (12 U.S.C. § 4301 et seq.) did not affect the Act's preemption language or establish a federal policy precluding state enforcement of its provisions. 

Both opinions are due to be filed no later than the week of August 5, 2013.  

Oral argument preview: Zhang v. Superior Court

Today at 1:00 p.m. in San Francisco, the Supreme Court will hear oral argument in Zhang v. Superior Court (Cal. Cap. Ins.), no. S178542:

• Issues: (1) Can an insured bring a cause of action against its insurer under the unfair competition law (Bus. & Prof. Code, § 17200) based on allegations that the insurer misrepresents and falsely advertises that it will promptly and properly pay covered claims when it has no intention of doing so? (2) Does Moradi-Shalal v. Fireman's Fund Ins. Companies (1988) 46 Cal.3d 287 bar such an action?
• Court of Appeal Opinion:Zhang v. Superior Court (Cal. Cap. Ins. Co.), 178 Cal.App.4th 1081 (Oct. 29, 2009.

For more on the case, see this blog post.  The opinion will be due in ninety days, or by August 6, 2013.

It appears that the Supreme Court sees the issues raised in this case as somewhat related to those presented in in Rose v. Bank of America, no. S199074, which was argued yesterday.  In Rose, review was granted in March 2012, barely a year ago.  Zhang, on the other hand, has been pending since February 2010.  It could be coincidence, but I think there must be a reason for the setting on adjacent days.  The issues appear to be substantively related, as I explained here.

Unfortunately, the press of business has prevented me from attending either of the arguments.  If you attended yesterday (or are planning to attend today) and would like your report to appear here, please drop me a line. 

Oral argument preview: Rose v. Bank of America

This morning at 9:00 a.m. in San Francisco, the Supreme Court will hear oral argument in Rose v. Bank of America, no. S199074:

• Issue: Can a cause of action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) be predicated on an alleged violation of the Truth in Savings Act (12 U.S.C. § 4301 et seq.), despite Congress's repeal of the private right of action initially provided for under that Act?
• Court of Appeal Opinion: Rose v. Bank of America, N.A., 200 Cal.App.4th 1441 (2011)

Justice Louis R. Mauro of the Third Appellate District will sit in place of Justice Chin, who is recused.  For more on this case, see this blog post. 

Once the case is submitted, the opinion will be due in 90 days, or by August 5, 2013. 

Supreme Court puts two UCL cases on May argument calendar: Rose v. Bank of America and Zhang v. Superior Court

Last week, the Supreme Court released its May oral argument calendar.  Two UCL cases will be heard.

On Tuesday, May 7, 2013 at 9:00 a.m., the Court will hear Rose v. Bank of America, no. S199074.  Justice Louis R. Mauro of the Third Appellate District will sit in place of Justice Chin, who is recused.  Links to the briefs in this case are available here. 

Then, on Wednesday, May 8, 2013 at 1:30 p.m., the Court will hear Zhang v. Superior Court (Cal. Cap. Ins.), no. S178542.  Review was granted in Zhang in February 2010 and the briefing was completed in August 2010.  It is one of the oldest civil cases on the Court's docket.   

The issues raised in these cases are somewhat related.  The usual rule is that a statutory violation can lead to UCL liability regardless of whether the underlying, "borrowed" statute carries a private right of action. 

In Zhang, the Court of Appeal considered whether Moradi-Shalal, in which the Supreme Court held that the legislature did not intend to create a private right of action for violations of the Unfair Insurance Practices Act, also barred UCL "unlawful" prong claims for violations of the Act. An earlier case said it did, but in Zhang the Court of Appeal held that if the defendant's conduct not only violates the Act but is also otherwise unlawful, it can be pursued under the UCL.  Zhang v. Superior Court (Cal. Cap. Ins. Co.), 178 Cal.App.4th 1081 (Oct. 29, 2009). 

Rose involved the Truth in Savings Act (12 U.S.C. § 4301 et seq.), a federal statute that used to carry a private right of action, but Congress allowed it to sunset.  The Court of Appeal reasoned that permitting a UCL "unlawful" prong claim would contravene Congress's intent to preclude the statute's private enforcement.  Rose v. Bank of America, N.A., 200 Cal.App.4th 1441 (2011).  Rose, unlike Zhang, has federal preemption implications. 

Both arguments will take place in San Francisco.  I hope to be able to attend at least one of them.

Pending cert. petition of interest: Pom Wonderful LLC v. The Coca-Cola Co.

In June, the Ninth Circuit handed down its opinion in Pom Wonderful LLC v. The Coca-Cola Co., 679 F.3d 1170 (9th Cir. 2012), discussed in this blog post.  Pom sued Coca-Cola for allegedly mislabeling its "pomegranate blueberry" juice, which according to the lawsuit actually consists mostly of grape and apple juices.  The Ninth Circuit allowed Pom's state-law claims, including its UCL claim, to proceed, but found the Lanham Act claims barred. 

In December, Pom filed a cert. petition with the U.S. Supreme Court.  POM Wonderful LLC v. The Coca Cola Co., No. 12-761 (U.S.).  The case was distributed for conference on March 22, 2013, and on March 25, the Court invited the Solicitor General to file a brief.  This development suggests some interest in the case. 

Pom Wonderful is mainly a Lanham Act case, but its UCL holdings are important, as the Court of Appeal recently recognized in Law Offices of Mathew Higbee v. Expungement Assistance Services, ___ Cal.App.4th ___ (Mar. 14, 2013) (discussed here).  This is the question presented, according to the cert. petition:

Whether the court of appeals erred in holding that a private party cannot bring a Lanham Act claim challenging a product label regulated under the Food, Drug, and Cosmetic Act.

Amicus briefs in pending Supreme Court UCL case: Rose v. Bank of America

The merits briefing in Rose v. Bank of America, no. S199074, was completed in August.  After that, amicus curiae briefs were filed by a number of organizations: 

• Amicus Curiae Brief of the Center for Biological Diversity (filed 09/20/12)
• Amicus Curiae Brief of the California Bankers Association and the American Bankers Association (filed 09/27/12)
• Amicus Curiae Brief of the California Chamber of Commerce and the Chamber of Commerce of the United States (filed 09/27/12)
• Amicus Curiae Brief of Consumer Attorneys of California and the National Employment Law Center (filed 09/27/12)
• Amicus Curiae Brief of the Civil Justice Association of California (filed 09/27/12)
• Amicus Curiae Brief of the City Attorneys of San Francisco and Los Angeles (filed 10/16/12)

All of the above links are courtesy of plaintiffs' counsel, Henry Rossbacher, whose website has a case page devoted to the proceeding. The merits briefs are available there, or at these links:

• Opening Brief on the Merits (filed 05-15-12)
• Answer Brief on the Merits (filed 07-17-12)
• Reply Brief on the Merits (filed 08-21-12)

Supreme Court holds that ordinary claims accrual rules, including the delayed discovery doctrine, apply to UCL claims: Aryeh v. Canon Business Solutions, Inc.

Yesterday, in Aryeh v. Canon Business Solutions, Inc., ___ Cal.4th ___ (Jan. 24, 2013), the Supreme Court held that common-law rules governing claims accrual (including the delayed discovery rule, the doctrine of equitable tolling, fraudulent concealment, the continuing violation doctrine, and the continuous accrual doctrine) apply to UCL claims -- just as they would to any other claim. The unanimous opinion was authored by Justice Werdegar. 

In so holding, the Court relied heavily on the UCL's legislative history, which "indicates the Legislature intended the UCL’s limitations period to be subject to the usual judicial rules governing accrual, rather than to special legislatively declared accrual rules." Slip op. at 7.  The opinion goes on:

Section 17208 was passed in 1977 as part of an act that consolidated and recodified existing state unfair competition laws without substantive change in the Business and Professions Code.  (Stats. 1977, ch. 299, § 1, p. 1203; Assem. Off. of Research, 3d reading analysis of Assem. Bill No. 1280 (1977-1978 Reg. Sess.) as introduced Mar. 31, 1977, p. 1.)  The adoption of an express statute of limitations was not intended to modify but to clarify the presumed applicable limitations period.  (Assem. Com. on Judiciary, Bill Digest of Assem. Bill No. 1280 (1977-1978 Reg. Sess.) p. 1.)  On the question of accrual, legislative committee reports are conspicuously silent, and the enrolled bill report expressly confirms the understanding that the subject is to be governed not by statute but by judicial construction:  “Questions concerning the point at which the statute of limitations begins will be left to judicial decision.”  (Governor’s Off. of Legal Affairs, Enrolled Bill Rep. on Assem. Bill No. 1280 (1977-1978 Reg. Sess.) June 27, 1977, p. 1.)  It thus appears the Legislature, by passing a bare-bones limitations statute and delegating to the judiciary the task of defining the point of accrual in particular cases, left courts free to determine whether the circumstances in each case call for application of either the general last element rule of accrual or any of its equitable exceptions.

Slip op. at 7-8 (emphasis added).

The Court also approved much of the reasoning in Broberg v. The Guardian Life Ins. Co., 171 Cal.App.4th 912 (2009) (discussed in this blog post). The opinion reads: 

Broberg involved a statute of limitations challenge to a claim of deceptive practices under the UCL.  The court reasoned that the underlying nature of the claim, not its form, should control.  (See Jefferson v. J. E. French Co. (1960) 54 Cal.2d 717, 718 [“[T]the nature of the right sued upon, not the form of action or the relief demanded, determines the applicability of the statute of limitations.”].)  Consequently, that the cause of action was pleaded under the UCL should not preclude application of an equitable exception to the usual accrual rule; just like common law claims challenging fraudulent conduct, a UCL deceptive practices claim should accrue “only when a reasonable person would have discovered the factual basis for a claim.”  (Broberg, at pp. 920-921.)  Broberg is consistent with both our precedent and the absence of anything in the text or legislative history of the UCL establishing a legislative desire either to categorically limit or categorically guarantee the application of common law accrual exceptions under the UCL.

Broberg also highlights an aspect of the statutory scheme salient for limitations purposes:  the UCL is a chameleon.  The UCL affords relief from unlawful, unfair, or fraudulent acts; moreover, under the unlawful prong, the UCL “ ‘ “borrows” violations of other laws and treats them as unlawful practices’ that the unfair competition law makes independently actionable.”  (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.)  Depending upon which prong is invoked, a UCL claim may most closely resemble, in terms of the right asserted, an action for misrepresentation (e.g., Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310), misappropriation (e.g., Glue-Fold, Inc. v. Slautterback Corp. (2000) 82 Cal.App.4th 1018), price fixing (e.g., Clayworth v. Pfizer, Inc., supra, 49 Cal.4th 758), interference with prospective economic advantage (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134), or any of countless other common law and statutory claims.  Given the widely varying nature of the right invoked, it makes sense to acknowledge that a UCL claim in some circumstances might support the potential application of one or another exception (e.g., Broberg v. The Guardian Life Ins. Co. of America, supra, 171 Cal.App.4th at pp. 920-921), and in others might not (e.g., M&F Fishing, Inc. v. Sea-Pac Ins. Managers, Inc. (2012) 202 Cal.App.4th 1509, 1531-1532 [concluding that while in theory delayed discovery might preserve an unfair competition claim, the nature of the particular UCL claim asserted precluded its application]). [1]

Accordingly, we conclude the UCL is governed by common law accrual rules to the same extent as any other statute.  That a cause of action is labeled a UCL claim is not dispositive; instead, “the nature of the right sued upon” (Jefferson v. J. E. French Co., supra, 54 Cal.2d at p. 718) and the circumstances attending its invocation control the point of accrual.  The common law last element accrual rule is the default (see Neel v. Magana, Olney, Levy, Cathcart & Gelfand, supra, 6 Cal.3d at p. 187), while exceptions to that rule apply precisely to the extent the preconditions for their application are met, as would be true under any other statute.  We disapprove Snapp & Associates Ins. Services, Inc. v. Robertson, supra, 96 Cal.App.4th 884, and Salenga v. Mitsubishi Motors Credit of America, Inc., supra, 183 Cal.App.4th 986, to the extent they hold otherwise.

---

[1]        As well, the UCL and its remedies are equitable.  (Korea Supply Co. v. Lockheed Martin Corp., supra, 29 Cal.4th at p. 1144.)  It would be inconsistent to conclude that while equity may drive the availability of remedies under the UCL, equitable exceptions have no place in determining whether a claim for relief has been timely asserted in the first instance.

Slip op. at 10-12 (emphasis added). 

The opinion then holds that in this particular case, the complaint adequately pleaded "a recurring unfair act," which was sufficient to support application of the continuous accrual doctrine.  Accordingly, the trial court erred in sustaining the defendant's demurrer without leave to amend.  Id. at 14-20.

In theory, the Court could have considered only the continuous accrual doctrine, held that it applied to UCL cases (including this case), and left the other doctrines for another day.  It did not, perhaps because the rationale for its decision would be identical for all the doctrines.  The approach also promotes judicial economy by resolving the split in authority among the lower courts, which revolved around the delayed discovery rule in particular. 

Supreme Court to hand down UCL statute of limitations opinion today: Aryeh v. Canon Business Solutions

Yesterday, in its notice of forthcoming filings, the Supreme Court announced that this morning it will hand down its opinion in Aryeh v. Canon Business Solutions, Inc., no. S184929.  When the opinion is posted online at approximately 10:00 a.m., is should be available at this link:

• Aryeh v. Canon Business Solutions, Inc., ___ Cal.4th ___ (2013)

These are the issues on review in the case, which was argued on December 4, 2012:

(1) May the continuing violation doctrine, under which a defendant may be held liable for actions that take place outside the limitations period if those actions are sufficiently linked to unlawful conduct within the limitations period, be asserted in an action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.)?

(2) May the continuous accrual doctrine, under which each violation of a periodic obligation or duty is deemed to give rise to a separate cause of action that accrues at the time of the individual wrong, be asserted in such an action?

(3) May the delayed discovery rule, under which a cause of action does not accrue until a reasonable person in the plaintiff's position has actual or constructive knowledge of facts giving rise to a claim, be asserted in such an action?

With one justice dissenting, the Court of Appeal found each doctrine inapplicable.  Aryeh v. Canon Business Solutions, Inc., 185 Cal.App.4th 1159 (2010).  My earlier coverage of the case can be found in these two posts.  Links to the briefs are available here. 

I will hope to have more on the opinion in a later post. 

Supreme Court takes up additional "grant and hold" case on UCL insurer liability: Hernandez Henderson v. Farmers Group

Last week, on January 16, 2013, the Supreme Court took up a second "grant and hold" case pending resolution of Zhang v. Superior Court (Cal. Cap. Ins.), no. S178542.   The new "grant and hold" case is Henderson v. Farmers Group, no. S207068, and my post on the Court of Appeal's opinion from October is here.

In Zhang, the Supreme Court will addresses whether insurers enjoy a special exemption from UCL liability not enjoyed by any other industry.  The issues on review in Zhang are as follows: 

(1) Can an insured bring a cause of action against its insurer under the unfair competition law (Bus. & Prof. Code, § 17200) based on allegations that the insurer misrepresents and falsely advertises that it will promptly and properly pay covered claims when it has no intention of doing so? (2) Does Moradi-Shalal v. Fireman's Fund Ins. Companies (1988) 46 Cal.3d 287 bar such an action?

The Supreme Court took up Zhang almost three years ago, on February 10, 2010. It would stand to reason that the case would be set for oral argument in the not-too-distant future.  The other "grant and hold" case is Hughes v. Progressive Direct Ins. Co., no. S195069, taken up in September 2011 (see this blog post). 

Henderson has been added to my list of pending California Supreme Court cases involving issues of interest related to the UCL, the CLRA, and class actions.  I have also updated this list to include several recent "grant and hold" cases involving class arbitration.

"State Supreme Court mulls statute of limitations in commercial suit"

I have not received any reports on Tuesday's oral argument in Aryeh v. Canon Business Solutions, Inc., no. S184929, but Emily Green of the Daily Journal had an article yesterday. 

An excerpt:

In oral arguments Tuesday, state Supreme Court justices appeared sympathetic to a plaintiff who was barred from suing Canon Business Solutions Inc. because he failed to bring his lawsuit within a four-year statute of limitations time period.

....

The big picture question before the court was whether the multiple alleged overcharges by Canon were one distinct act, or if each overcharge was a separate act that triggered the statute of limitations clock anew. Aryeh's lawyers, adopting a position articulated by the dissenting justice in the appellate court, argued each overcharge should be considered a separate act.

....

The justices spent little time on a second question that had garnered the interest of many consumer attorneys: whether courts should take into account "delayed discovery," or the time the plaintiff finds out about the alleged unfair activity, in Unfair Competition Law cases.

The opinion is due in 90 days. 

Briefs from Aryeh v. Canon Business Solutions, Inc.

Many thanks to the blog readers who kindly forwarded the briefs listed below from Aryeh v. Canon Business Solutions, Inc., no. S184929.  The case addresses UCL statute of limitations issues, and will be argued next Tuesday, December 4, 2012 at 9:00 a.m. in Los Angeles. 

I am still seeking a volunteer to attend the argument and provide a report for posting here, so if you're interested, please let me know. Your report can be with or without attribution, your choice. 

• Petition for Review (filed 07/30/10)
• Answer to Petition for Review (09/01/10)
• Reply in Support of Petition for Review (09/10/10)
• Letter from the Office of the Attorney General in Support of Review (dated 08/30/10)
• Opening Brief on the Merits (filed 11/19/10)
• Answer Brief on the Merits (filed 01/31/11)
• Reply Brief on the Merits (filed 02/22/11)
• Amicus Curiae Brief of Consumer Attorneys of California (filed 03/30/11)
• Amicus Curiae Brief of Beverly Clark et al. (filed 03/30/11)
• Amicus Curiae Brief of the Office of the Attorney General (filed 05/05/11)
• Amicus Curiae Brief of the Association of Southern California Defense Counsel (filed 05/05/11)
• Response of Canon Business Solutions, Inc. to Amicus Curiae Briefs (filed 06/03/11)

Supreme Court schedules UCL statute of limitations case for oral argument: Aryeh v. Canon Business Solutions, Inc.

Last week, the Supreme Court issued its oral argument calendar for December.  On December 4, 2012 at 9:00 a.m. in Los Angeles, the Court will hear argument in Aryeh v. Canon Business Solutions, Inc., no. S184929. 

The issues on review in Aryeh, according to the docket, are as follows:

(1) May the continuing violation doctrine, under which a defendant may be held liable for actions that take place outside the limitations period if those actions are sufficiently linked to unlawful conduct within the limitations period, be asserted in an action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.)?

(2) May the continuous accrual doctrine, under which each violation of a periodic obligation or duty is deemed to give rise to a separate cause of action that accrues at the time of the individual wrong, be asserted in such an action?

(3) May the delayed discovery rule, under which a cause of action does not accrue until a reasonable person in the plaintiff's position has actual or constructive knowledge of facts giving rise to a claim, be asserted in such an action?

On a 2-1 vote, the Court of Appeal found none of these doctrines applicable to the case before it.  Aryeh v. Canon Business Solutions, Inc., 185 Cal.App.4th 1159 (2010).  My earlier coverage of the case can be found in these two posts. The Supreme Court's opinion will be important because the lower courts are currently divided on whether the delayed discovery rule applies in UCL cases. 

If anyone has copies of the merits and amicus briefs, I would appreciate receiving copies of them.  Additionally, I will be seeking a Southern California correspondent to provide a report on the argument, so please let me know if you are available and interested in attending on December 4. 

Reply brief on the merits filed in Rose v. Bank of America

The reply brief on the merits was filed on August 21, 2012 in in Rose v. Bank of America, no. S199074.  The merits briefing is now complete.

• Opening Brief on the Merits (filed 05-15-12)
• Answer Brief on the Merits (filed 07-17-12)
• Reply Brief on the Merits (filed 08-21-12)

Amicus briefs, if any, will be due 30 days after the reply was filed (or by approximately September 20, 2012).  See Rule of Court 8.520(f). 

Supreme Court issues "grant and hold" order in UCL statute of limitations case: People v. E*Poly Star

On Wednesday, the Supreme Court issued a "grant and hold" order in People v. E*Poly Star, No. S203477.  The case has been held pending action in Aryeh v. Canon Business Solutions, Inc., no. S184929 (review granted 10/20/10).  Both cases involve whether the delayed discovery rule and the continuing violation doctrine apply to UCL claims.  

My original post on E*Poly Star is here.  The Court of Appeal opinion is People v. E*Poly Star, Inc., 205 Cal.App.4th 1316 (May 14, 2012).

Answer brief on the merits filed in Rose v. Bank of America

Many thanks to the blog reader who forwarded the answer brief on the merits filed last week in Rose v. Bank of America, no. S199074.

• Opening Brief on the Merits (filed 05-15-12)
• Answer Brief on the Merits (filed 07-17-12)

Supreme Court UCL preemption opinion: Parks v. MBNA America Bank, N.A.

In Parks v. MBNA America Bank, N.A., ___ Cal.4th ___ (Jun. 21, 2012), the Supreme Court held that the National Bank Act preempted a UCL "unlawful" prong claim predicated on violation of Civil Code section 1748.9, "a California law requiring that certain disclosures accompany preprinted checks that a credit card issuer provides to its cardholders for use as credit."  Slip op. at 1. 

The opinion says nothing substantive about the UCL in particular; its focus is on section 1748.9 and the provisions of the National Bank Act.

Opening brief on the merits filed in Rose v. Bank of America

The opening brief on the merits was filed last Tuesday in Rose v. Bank of America, no. S199074.

• Opening Brief on the Merits (filed 05-15-12)

The review petition, answer and reply are available at this post.  This is the statement of the issue on review in Rose:

Can a cause of action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) be predicated on an alleged violation of the Truth in Savings Act (12 U.S.C. § 4301 et seq.), despite Congress's repeal of the private right of action initially provided for under that Act?

Review petition in Rose v. Bank of America

Here are the review petition and other documents from Rose v. Bank of America, no. S199074, in which the Supreme Court granted review on March 14, 2012:

• Petition for review (filed 12/30/11)
• Answer to petition for review (filed 01/20/12)
• Reply in support of petition for review (filed 01/31/12)
• Amicus letter of AG's office in support of petition for review (dated 01/31/12)

I have not seen the answer to the petition for review.  If you have a copy, please forward it and I will add it to the list above.  [UPDATE:  Many thanks to the blog reader who provided a copy of the answer to the petition for review. ]

The AG's letter is interesting.  According to the letter (at p. 4), the Court of Appeal in Rose held that a UCL "unlawful" prong claim may not be "predicated on violations of federal laws where Congress did not provide a private right of action."  I did not read the Rose opinion quite so broadly, but if this is what it held, that is certainly inconsistent with California Supreme Court precedents.  The letter makes a series of excellent arguments in support of review. 

Here is the docket's statement of the issue on review in Rose:

Can a cause of action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) be predicated on an alleged violation of the Truth in Savings Act (12 U.S.C. § 4301 et seq.), despite Congress's repeal of the private right of action initially provided for under that Act?

Statement of issue on review in Rose v. Bank of America

The Supreme Court's docket in Rose v. Bank of America, no. S199074, has been updated to include a statement of the issue on review:

Can a cause of action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) be predicated on an alleged violation of the Truth in Savings Act (12 U.S.C. § 4301 et seq.), despite Congress's repeal of the private right of action initially provided for under that Act?

This is rather a narrow statement, and tells us little about the extent to which the Court may elaborate on the scope of the UCL's "unlawful" prong, as the Court of Appeal did in its now-uncitable opinion. 

California Supreme Court grants review in UCL "safe harbor" case: Rose v. Bank of America

Yesterday, the Supreme Court granted review in Rose v. Bank of America, no. S199074.  In that case, the Court of Appeal held that a UCL "unlawful" prong claim could not be predicated on alleged violations of the federal Truth in Savings Act (TISA), 12 U.S.C. § 4301 et seq.  Rose v. Bank of America, N.A., 200 Cal.App.4th 1441 (2011). 

The opinion's discussion of the UCL's "unlawful" prong and the scope of the Cel-Tech "safe harbor" was quite interesting.  My original blog post on Rose is here. 

The Supreme Court docket has not yet been updated with a description of the issue(s) on review. 

Supreme Court grants review in UCL preemption case: People ex rel. Harris v. Pac Anchor Transportation, Inc.

Last week, on August 10, 2011, the Supreme Court granted review in a UCL preemption case, People ex rel. Harris v. Pac Anchor Transportation, Inc., no. S194388.  This is the issue on review:

Is an action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) that is based on a trucking company's alleged violation of state labor and insurance laws "related to the price, route, or service" of the company and, therefore, preempted by the Federal Aviation Administration Authorization Act of 1994 (49 U.S.C. § 14501)?

The Court of Appeal (Second Appellate District, Division Five) said no.  People ex rel. Harris v. Pac Anchor Transportation, Inc., 195 Cal.App.4th 765 (May 18, 2011) (review granted).

This case has been added to my list of pending Supreme Court cases.

More on Sullivan v. Oracle Corp.

The Supreme Court's discussion of the UCL claim in Sullivan v. Oracle Corp., ___ Cal.4th ___ (Jun. 30, 2011), is quite interesting.  It does nothing, however, to narrow current thinking on the scope of the UCL's extraterritorial reach. 

The plaintiffs, who are non-California residents, invoked the UCL's "unlawful" prong claim against their California-based employer, Oracle, in an attempt to revive Fair Labor Standard Act ("FLSA") claims that otherwise would have been time-barred.  Slip op. at 19 & n.8.  Their complaint alleged that Oracle violated the FLSA by failing to appropriately compensate them for overtime work they performed outside California.  This, in turn, violated the UCL's "unlawful" prong (which carries a four-year statute of limitations).   Id. at 19. 

To decide whether the UCL could be invoked as plaintiffs proposed, the Supreme Court needed to consider whether any of the conduct that violated the FLSA occurred in California.  Id. at 20-21.  The defendant's motion for summary judgment on this issue was based on stipulated facts.  Id. at 3.  The only stipulated fact relevant to the analysis was Oracle's adoption, in California, of a policy erroneously classifying the plaintiffs as exempt from the overtime laws.  Id. at 21.  "But for an employer to adopt an erroneous classification policy is not unlawful in the abstract.  [Citation.]  What is unlawful, and what creates liability under the FLSA, is the failure to pay overtime when due."  Id.

The stipulated facts did not address whether the plaintiffs' wages were paid by Oracle in California.  If they were, "the UCL might conceivably apply to plaintiffs' claims": 

In contrast to the abstract classification decision, the failure to pay legally required overtime compensation certainly is an unlawful business act or practice for purposes of the UCL.  (Bus. & Prof. Code, § 17200; see Cortez v. Purolator Air Filtration Products Co., supra, 23 Cal.4th 163, 177 [UCL authorizes, as restitution, order for payment of unlawfully withheld wages].)

Id. at 22.  The Supreme Court declined to go any further, leaving it to the federal court to decide whether the parties could augment the statement of stipulated facts to address the question of where the wages were paid (or underpaid).  Id. 

In other words, the Sullivan decision does not really impact existing jurisprudence on the UCL's operation outside the borders of California.  In fact, the Court favorably cited two decisions approving nationwide class actions for UCL violations, explaining that extraterritorial operation was proper in those cases because "the unlawful conduct that formed the basis of the out-of-state plaintiffs' claims (i.e., fraudulent misrepresentations made to induce consumer transactions) ... occurred in California."  Id. at 21 n.10 (citing Wershba v. Apple Computer, Inc., 91 Cal.App.4th 224 (2001); Clothesrigger, Inc. v. GTE Corp., 191 Cal.App.3d 605 (1987)). 

The decision does not even cite Norwest Mortgage, Inc. v. Superior Court, 72 Cal.App.4th 214 (1999), which has been the leading case on extraterritorial reach up to this point.  In Norwest, the Court of Appeal held that non-Californians could bring UCL claims if the conduct constituting the violation occurred in California.  Sullivan implicitly held exactly the same thing.  (See this blog post for a lengthier discussion of Norwest.)

Accordingly, Sullivan has changed nothing in the UCL playbook, despite the defendant's technical win on the point as framed. 

Supreme Court addresses UCL's extraterritorial reach: Sullivan v. Oracle Corp.

Yesterday, the Supreme Court handed down Sullivan v. Oracle Corp., ___ Cal.4th ___ (Jun. 30, 2011), in which it addressed the UCL's extraterritorial reach:

In this proceeding we address, at the request of the United States Court of Appeals for the Ninth Circuit, questions about the applicability of California law to nonresident employees who work both here and in other states for a California-based employer.  We conclude the Labor Code’s overtime provisions (id., §§ 510, 1194) do apply to plaintiffs’ claims for compensation for work performed in this state, and that the same claims can serve as predicates for claims under California’s unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.).  We also conclude that plaintiffs’ claims for overtime compensation under the federal Fair Labor Standards Act of 1938 (FLSA) (29 U.S.C. § 201 et seq.; see id., § 207(a)) for work performed in other states cannot serve as predicates for UCL claims.

Slip op. at 1 (footnote omitted).  Time permitting, I may have more on this opinion in a later post.

Six pending cases to watch in 2011

Here are six important cases to follow in the coming months (listed in no particular order):

1. Kwikset Corp. v. Superior Court (Benson), no. S171845 (Cal.).  This UCL case was argued in the California Supreme Court on November 3, 2010, which means that the opinion is due by Tuesday, February 1, 2010.  Because the Court hands down opinions on Mondays and Thursdays, we can expect the opinion no later than Monday, January 31, 2011 -- assuming former Chief Justice George sends his vote in from Antarctica!  In this case, the Supreme Court will be interpreting Prop. 64's "lost money or property" language. 
   
   
2. AT&T Mobility LLC v. Concepcion, no. 09-893 (U.S.).  This case was argued in the U.S. Supreme Court on November 9, 2010.  The issue is whether the FAA preempts state-law unconscionability principles as applied to no-class-action arbitration clauses in consumer contracts of adhesion, and the continuing vitality of our own Supreme Court's Discover Bank decision could be at stake.  The opinion will be filed by the end of the current Term, which means no later than June 27, 2011. 
   
3. Brinker Restaurant Corp. v. Superior Court (Hohnbaum), no. S166350 (Cal.).  This wage and hour case raises substantive questions relating to California's meal period and rest break laws, but could also be a significant class certification case.  The Supreme Court has not directly addressed core class certification issues since Sav-on in 2004.  The case is fully briefed, but has not yet been scheduled for oral argument.  It may or may not be set this year.  [Disclosure:  My firm is co-counsel for the workers in Brinker.]
   
   
4. Wal-Mart Stores, Inc. v. Dukes, no. 10-277 (U.S.).  The U.S. Supreme Court granted cert. in this case on December 6, 2010, and has scheduled oral argument for March 29, 2010. The opinion will be filed by the end of June 2011, when the current Term ends.  The district court granted class certification of certain employment discrimination claims under Rule 23(b)(2), and the Ninth Circuit, sitting en banc, affirmed in part. 
   
   
5. Mazza v. American Honda Motor Co., no. 09-55376 (9th Cir.).  In this auto defect case, the district court granted nationwide class certification of UCL and CLRA claims for recovery of economic losses.  Mazza v. American Honda Motor Co., 254 F.R.D. 610 (C.D. Cal. 2008).  The Ninth Circuit granted a Rule 23(f) petition for permission to appeal, and the case was argued on June 11, 2010.  One day after the Supreme Court granted cert. in Dukes, however, the Ninth Circuit issued a sua sponte order deferring submission of the action pending resolution of that case.
   
   
6. Sullivan v. DB Investments, Inc., no. 08-2784 (3d Cir.). In this antitrust case for price-fixing in the diamond industry, the Third Circuit reversed the district court's order granting final approval of a nationwide class action settlement.  Sullivan v. DB Investments, Inc., 613 F.3d 134 (3d Cir. 2010).  On August 27, 2010, en banc rehearing was granted, and the case has been scheduled for argument on February 23, 2011.  On November 10, 2010, the Court ordered supplemental briefing on some broad class-certification-related questions. 

Supreme Court UCL restitution decision: Pineda v. Bank of America

In Pineda v. Bank of America, N.A., ___ Cal.4th ___ (Nov. 18, 2010), the Supreme Court held that Labor Code section 203 penalties may not be recovered as "restitution" under the UCL.  Slip op. at 13-15.  The opinion contains an interesting discussion, which confirms that while unpaid wages are recoverable under the UCL, Labor Code remedies that amount to penalties, rather than wages, are not: 

In explaining why section 203 penalties are not recoverable as restitution, it is first helpful to briefly discuss why unpaid wages are recoverable.

In Cortez, we held the plaintiff could seek restitution of unpaid overtime wages via the UCL.  (Cortez, supra, 23 Cal.4th at p. 168.)  We explained that, “[o]nce earned, those unpaid wages became property to which the employees were entitled.”  (Ibid.)  Thus, it was of no import that the overtime wages had never been in the possession of the employees; “earned wages that are due and payable pursuant to section 200 et seq. of the Labor Code are as much the property of the employee who has given his or her labor to the employer in exchange for that property as is property a person surrenders through an unfair business practice.”  (Id. at p. 178.)  “An order that earned wages be paid is therefore a restitutionary remedy authorized by the UCL.”  (Ibid.)

By contrast, permitting recovery of section 203 penalties via the UCL would not “restore the status quo by returning to the plaintiff funds in which he or she has an ownership interest.”  (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1149.)  Section 203 is not designed to compensate employees for work performed.  Instead, it is intended to encourage employers to pay final wages on time, and to punish employers who fail to do so.  In other words, it is the employers’ action (or inaction) that gives rise to section 203 penalties.  The vested interest in unpaid wages, on the other hand, arises out of the employees’ action, i.e., their labor.  Until awarded by a relevant body, employees have no comparable vested interest in section 203 penalties.  We thus hold section 203 penalties cannot be recovered as restitution under the UCL.

Slip op. at 14-15 (footnote omitted). 

The Court also held that a three-year, rather than a one-year, statute of limitations applies to all claims for penalties brought directly under Labor Code section 203, regardless of whether unpaid wages are also sought in the same action.  Slip op. at 3-13.  The Court of Appeal had concluded that a one-year statute of limitations applied in some cases.  Id. at 3. 

The practical effect of the opinion, therefore, is that workers will be able to recover section 203 penalties going back three years, not one year, as the Court of Appeal had held, and not four years, as the UCL would have permitted.

Supreme Court to hand down opinion tomorrow in Pineda v. Bank of America

Well, I'm interrupting my hiatus already because the Supreme Court just announced that tomorrow (November 18, 2010) it will hand down its opinion in Pineda v. Bank of America, no. S170758, which was argued on October 5, 2010. 

Pineda is the case involving whether waiting time penalties may be recovered as restitution under the UCL.  See this blog post for more.  The California Channel has the video of the oral argument here.  (According to Scott Leviant the Pineda argument starts at about the 7:30 mark in the video.)

When the opinion is posted online, it should be available at this link:

• Pineda v. Bank of America, N.A., ___ Cal.4th ___ (Nov. 18, 2010)

Oral argument preview: Kwikset Corp. v. Superior Court (Benson)

This morning at 9:00 a.m., the Supreme Court will hear oral argument in in Kwikset Corp. v. Superior Court (Benson), no. S171845, in which the issue on revivew is as follows:

Does a plaintiff's allegation that he purchased a product in reliance on the product label's misrepresentation about a characteristic of the product satisfy the requirement for standing under the Unfair Competition Law (Bus. & Prof. Code, section 17200 et seq.) that the plaintiff allege a loss of money or property, or is such a plaintiff unable to allege the required loss of money or property because he obtained the benefit of his bargain by receiving the product in exchange for the payment?

The Court of Appeal opinion, which found no standing under those facts, is here: Kwikset Corp. v. Superior Court (Benson), 171 Cal.App.4th 645 (2009) (rev. granted 06/10/09). 

I'm planning to attend the argument and will endeavor to provide a report later in the week.

Supreme Court briefs in Kwikset Corp. v. Superior Court (Benson)

The Supreme Court has posted online copies of the briefs in Kwikset Corp. v. Superior Court (Benson), no. S171845, which is scheduled for oral argument in San Francisco on Wednesday, November 3, 2010 at 9:00 a.m.:

S171845 - KWIKSET CORPORATION v. S.C. (BENSON)

• Real Parties' in Interest Petition for Review
• Petitioners' Answer to Petition for Review
• Real Parties' in Interest Reply to Answer to Petition for Review
• Real Parties' in Interest Opening Brief on the Merits
• Petitioners' Answer Brief on the Merits
• Real Parties' in Interest Reply Brief on the Merits
• Real Parties' in Interest Supplemental Brief

This case will address important questions relating to the proper interpretation of the UCL's post-Prop. 64 standing requirement.  Chief Justice George is not recused in this case, which is one factor that distinguishes it from Tobacco II.

After the case is argued on November 3, the opinion will be due in 90 days.  That works out to February 1, 2011.  However, Chief Justice George's term ends on January 2, 2011.  Will the Court expedite decision in the cases on the November calendar?  How will it handle the December calendar (scheduled for the week of December 6, 2010)?  I don't have an answer to either of these questions. 

UPDATE:  In response to my questions, the folks from At the Lectern undertook a review of opinions issued after the retirements of other Supreme Court justices. They found that many of the retired justices continued to sign opinions for several months after they departed from the Court.  At the Lectern predicts that the Acting Chair of the Judicial Council will assign Chief Justice George as a pro tem justice in all of the cases that he hears through the December calendar.  This is a logical prediction and is one solution that had crossed my mind.

Supreme Court takes up UCL statute of limitations case: Aryeh v. Canon Business Solutions, Inc.

Last week, the Supreme Court granted review in a statute of limitations case, Aryeh v. Canon Business Solutions, Inc., no. S184929. 

In Aryeh, the Court of Appeal (Second Appellate District, Division Eight) examined the "continuing violation" doctrine and held, on a 2-1 vote, that it did not apply to UCL claims.  Aryeh v. Canon Business Solutions, Inc., 185 Cal.App.4th 1159 (2010) (review granted).  This blog's original post on the Court of Appeal's June 2010 opinion is here.

It looks like the Supreme Court will be resolving the split in authority on whether the delayed discovery rule applies in UCL cases, which the Court of Appeal acknowledged in Aryeh but did not address.  This is the statement of issues on review from the main docket page:

(1) May the continuing violation doctrine, under which a defendant may be held liable for actions that take place outside the limitations period if those actions are sufficiently linked to unlawful conduct within the limitations period, be asserted in an action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.)?

(2) May the continuous accrual doctrine, under which each violation of a periodic obligation or duty is deemed to give rise to a separate cause of action that accrues at the time of the individual wrong, be asserted in such an action?

(3) May the delayed discovery rule, under which a cause of action does not accrue until a reasonable person in the plaintiff's position has actual or constructive knowledge of facts giving rise to a claim, be asserted in such an action?

Thoughts on Clark v. Superior Court (Nat'l Western Life Ins. Co.)

I've been meaning to write more on Clark v. Superior Court (Nat'l Western Life Ins. Co.), 50 Cal.4th 605 (Aug. 9, 2010).  In Clark, the Supreme Court held that the enhanced remedies of Civil Code section 3345 (applicable in certain cases brought by senior citizens and disabled persons) are not recoverable in a UCL "unlawful" prong case predicated on violation of that statute.  

The Court had this to say about UCL restitution:

For the reasons given above, we conclude that trebled recovery may be awarded under Civil Code section 3345, subdivision (b) only if the statute under which recovery is sought permits a remedy that is in the nature of a penalty. We now consider whether the unfair competition law, the basis of plaintiffs' private party action, falls within that category. 

As we have seen, restitution is the only monetary remedy authorized in a private action brought under the unfair competition law.  (Korea Supply Co. v. Lockheed Martin Corp., supra, 29 Cal.4th at pp. 1146, 1148.)  Restitution is not a punitive remedy.  The word “restitution” means the return of money or other property obtained through an improper means to the person from whom the property was taken.  (Kasky v. Nike, Inc., supra, 27 Cal.4th at p. 950; Kraus v. Trinity Management Services, Inc., supra, 23 Cal.4th at pp. 126-127.) “The object of restitution is to restore the status quo by returning to the plaintiff funds in which he or she has an ownership interest.” (Korea Supply Co. v. Lockheed Martin Corp., supra, 29 Cal.4th at p. 1149, italics added.) In contrast, a penalty is a recovery “ ‘without reference to the actual damage sustained....’ ” (Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1104.) “Penalties provide for ‘ “recovery of damages additional to actual losses incurred, such as double or treble damages....” ’ ” (Ibid.)  Because restitution in a private action brought under the unfair competition law is measured by what was taken from the plaintiff, that remedy is not a penalty and hence does not fall within the trebled recovery provision of Civil Code section 3345, subdivision (b).

Slip op. at 9-10 (emphasis added).  Contrast this with what the Court said in Tobacco II a year earlier:

"[T]o state a claim under either the UCL or the false advertising law, based on false advertising or promotional practices, 'it is necessary only to show that "members of the public are likely to be deceived."'" (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 951 [119 Cal.Rptr.2d 296, 45 P.3d 243].)  To achieve its goal of deterring unfair business practices in an expeditious manner, the Legislature limited the scope of the remedies available under the UCL. "A UCL action is equitable in nature; damages cannot be recovered. [Citation.] . . . We have stated under the UCL, '[p]revailing plaintiffs are generally limited to injunctive relief and restitution.' [Citation.]" (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1144.)

The fraudulent business practice prong of the UCL has been understood to be distinct from common law fraud. "A [common law] fraudulent deception must be actually false, known to be false by the perpetrator and reasonably relied upon by a victim who incurs damages. None of these elements are required to state a claim for injunctive relief" under the UCL. (Day v. AT&T Corp. (1998) 63 Cal.App.4th 325, 332; see State Farm Fire & Casualty Co. v. Superior Court (1996) 45 Cal.App.4th 1093, 1105.)  This distinction reflects the UCL's focus on the defendant's conduct, rather than the plaintiff's damages, in service of the statute's larger purpose of protecting the general public against unscrupulous business practices. (Fletcher v. Security Pacific National Bank (1979) 23 Cal.3d 442, 453.)

In re Tobacco II Cases, 46 Cal. 4th 298, 312 (2009) (footnote omitted) (emphasis added). 

So, enthusiastic readers, are the two holdings consistent, and if not, how do we reconcile them?