The UCL Practitioner

New UCL "fraudulent" prong decision: Buller v. Sutter Health

In Buller v. Sutter Health, ___ Cal.App.4th ___ (Mar. 5, 2008), the plaintiff challenged the defendant's failure to disclose its practice of providing discounts, on request, to customers who timely paid their bills in full. This practice was "fraudulent" and "unfair" under the UCL, the plaintiff claimed, because the defendant did not disclose the practice and did nothing that "'would lead a reasonable consumer ... to seek the discount, or discern that the prompt-pay discount is available to all who pay promptly.'" Slip op. at 2. The Court of Appeal (First Appellate District, Division One) held that the trial court correctly sustained the defendant's demurrer to the plaintiff's UCL claim without leave to amend.

The most unfortunate part of this opinion is its discussion of the UCL's "fraudulent" prong. According to the opinion, "it appears settled that 'Absent a duty to disclose, the failure to do so does not support a claim under the fraudulent prong of the UCL.' (Berryman v. Merit Property Management, Inc. (2007) 152 Cal.App.4th 1544, 1557 [62 Cal.Rptr.3d 177] [failure to disclose detailed listings or breakdowns of specific escrow charges comprising transfer or document fees did not violate the UCL].) This is because a consumer is not 'likely to be deceived' by the omission of a fact that was not required to be disclosed in the first place." Slip op. at 5. The opinion goes on to explain that the alleged nondisclosure was not actionable because "[consumers] in [plaintiff's] position are not likely to be operating under the expectation that they are entitled to a discount." Slip op. at 5-6 (citing Daugherty v. American Honda Motor Co., 144 Cal.App.4th 824 (2006); Bardin v. DaimlerChrysler Corp., 136 Cal.App.4th 1255 (2006)).

I would not call it "settled law" that a "duty to disclose" analysis has any place in UCL jurisprudence. The first case to use "duty to disclose" language in discussing a UCL claim is Daugherty, decided on October 31, 2006, less than 18 months ago. What the Buller opinion does not acknowledge is that nondisclosures are actionable if the concealed information would be material to a reasonable consumer. See, e.g., Massachusetts Mutual Life Ins. Co. v. Superior Court, 97 Cal.App.4th 1282, 1292 (2002) (whether the concealed information “should have been disclosed given the characteristics” of the transaction); see also Day v. AT&T Corp., 63 Cal.App.4th 325, 333 (1998) (“failure to disclose other relevant information”); Podolsky v. First Healthcare Corp., 50 Cal.App.4th 632, 651 (1996) (failure to disclose “all the pertinent facts”); Schnall v. Hertz Corp., 78 Cal.App.4th 1144, 1164 (2001) (concealment of information “relevant to the … decision” faced by the consumer). Perhaps the outcome in Buller would have been the same under that standard. Nonetheless, the settled decisions do not use "duty to disclose" terminology.

Incidentally, the Buller opinion applied the pre-Prop. 64 "likely to deceive" formulation of the "fraudulent" prong, rather than requiring proof of actual reliance. Slip op. at 5-6.

The Court then turned to the "unfair" prong, noting the split in authority regarding whether the pre- or post-Cel-Tech formulation applies. The Court resolved the matter thus: "[A]s we have noted in prior opinions, '[t]his court ... has followed the line of authority that ... requires the allegedly unfair business practice be "tethered" to a legislatively declared policy or has some actual or threatened impact on competition.' (Belton v. Comcast Cable Holdings, LLC (2007) 151 Cal.App.4th 1224, 1239–1240 [60 Cal.Rptr.3d 631], citing to Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 853–854 [128 Cal.Rptr.2d 389].)" Slip op. at 10-11. "[Plaintiff] makes no argument on appeal that his allegations are directly connected to any legislatively declared policy or threatened competition [and] has given us no reason to depart from our prior holdings in Belton and Gregory ...." Id. at 11.

The concluding paragraph of the analysis section shows that the Court simply did not think this was a good case:

Finally, we note that it is fairly common for consumers to ask for and receive discounts on products and services. The amount of these discounts may vary depending on many factors. Arguably, requiring a business to state a discount on its initial invoice runs counter to the purpose of having discretionary discounts in the first place. Indeed, taken to their logical conclusion, appellant’s arguments would effectively require a business to disclose all discretionary discounts it might offer. While we sympathize with appellant’s frustration over his failure to benefit from respondents’ discount policy, when viewed from the standpoint of consumers in general we believe respondents’ practice is beneficial rather than harmful, inasmuch as they apparently are not required to offer privately insured patients any discounts whatsoever.

Id. at 11.

New UCL "unfair" and "fraudulent" prong decision: Puentes v. Wells Fargo Home Mortgage, Inc.

In Puentes v. Wells Fargo Home Mortgage, Inc., ___ Cal.App.4th ___ (Feb. 28, 2008), the Court of Appeal (Fourth Appellate District, Division One), held that the trial court did not err by granting the defendant's summary judgment motion as to the plaintiffs' UCL claim. The claim challenged the way the defendant mortgage company, Wells Fargo, calculated interest on plaintiffs' home loans. Slip op. at 2-3. The Court of Appeal:

• Discussed the Cel-Tech "safe harbor" in some detail. Wells Fargo argued that federal Regulation Z (12 C.F.R. sections 226 et seq.) authorized their method of calculating interest. The Court, however, decided that "[w]e need not resolve the issue." Plaintiffs' challenge to the interest calculation was predicated on the deed of trust, a contract, which they said prohibited Wells from calculating interest the way it did. Quoting a federal case, Watson Laboratories v. Rhone-Poulenc Rorer, Inc., 187 F. Supp.2d 1099, 1117 n.12 (C.D. Cal. 2001), the Court said that "[a] breach of contract may ... form the predicate for Section 17200 claims, provided it also constitutes conduct that is 'unlawful, unfair, or fraudulent.'" Slip op. at 8.

• The Court then applied the pre-Prop. 64 formulation of "fraudulent," and held that Wells' interpretation of the trust deed provisions respecting interest calculations was "reasonable and not likely to deceive members of the public." Slip op. at 9.

• The Court then discussed the pre- and post-Cel-Tech formulations of "unfair" at some length. Slip op. at 10-12. It determined, however, that "[w]e are not required to adopt a particular definition of 'unfair' here, however, because Wells Fargo's practice is not actionable under any of the definitions." Id. at 12. The opinion concludes:

  The consumer benefit of Wells Fargo's adherence to Regulation Z and Appendix J in calculating equal monthly payments — and not recalculating interest during the year of payoff to retrospectively make monthly payments unequal — far outweighs the de minimus injury to some consumers who, like the Puenteses, may pay for a day or two of additional interest than if actual days in the month were used.

  Wells Fargo met its burden of persuasion that its practice is not fraudulent or unfair within the meaning of the UCL, and the Puenteses raised no triable issues of material fact in their opposing papers. Accordingly, summary judgment was proper.

  Slip op. at 18-19.

The full text of the opinion appears after the jump.

New unpublished UCL/CLRA auto defect opinion: Hunter v. General Motors Corp.

Yesterday, in an opinion worthy of publication, the Court of Appeal (Second Appellate District, Division Five) held that the trial court had improperly sustained without leave to amend the defendant's demurrer to the plaintiffs' UCL and CLRA claims. Hunter v. General Motors, no. B190809.

The putative class action challenged the defendant's "development, design, manufacture, and sale of certain vehicles with a defective rear brake system." Slip op. at 2. The opinion addresses, among other things, the Federal Motor Vehicle Safety Standards promulgated by NHTSA. The Safety Standards are often the central focus of non-injury consumer class actions involving safety-related auto defects. This opinion is the first to interpret them in the context of UCL and CLRA claims. For example:

Plaintiffs allege that defendant violated section 1770, subdivision (a)(3) of the CLRA when it knowingly affixed a certification label or tag to each of the subject vehicles falsely stating, “This Vehicle Conforms to All Applicable U.S. Federal Motor Vehicle Safety Standards in Effect on the Date of Manufacture Show[n] above.” Defendant’s defective braking system, plaintiffs allege, violated Federal Motor Vehicle Safety Standards 105 and 135.

....

The trial court ruled that plaintiffs’ Federal Motor Vehicle Safety Standards allegations do not state a basis for a misrepresentation under the CLRA because they fail to allege that “the parking brake systems were not ‘capable’ of holding the subject vehicles stationary for 5 minutes in both a forward and reverse direction on a 30 percent grade, nor is there an allegation that the parking brake system did not hold the vehicle stationary for 5 minutes in both a forward and reverse direction on the grade.” The trial court’s reading of plaintiffs’ allegations is unduly narrow and inconsistent with the mandate to construe the CLRA liberally (§ 1760; Wang v. Massey Chevrolet, supra, 97 Cal.App.4th at p. 869) and to give the complaint a reasonable interpretation (Aubry v. Tri-City Hospital Dist., supra, 2 Cal.4th at pp. 966-967). Plaintiffs allege that the label or tag affixed to each of the subject vehicles certifying that the vehicle conformed to all effective Federal Motor Vehicle Safety Standards was false because the parking brake system was defective. Liberally construed, that allegation alleges that the parking brakes could not hold the subject vehicles as required by 49 C.F.R. part 571.105, subpart 5.2.1 and 49 C.F.R. part 571.135, subpart 7.12.3 and, accordingly, is sufficient to establish a misrepresentation under the CLRA.

Also, plaintiffs’ allegations establish a misrepresentation under the CLRA based on 49 C.F.R. part 571.135, subpart 5.6(a) which provides, in pertinent part, “[a]ll mechanical components of the braking system shall be intact and functional.” Plaintiffs allege that defendant knew that “the parking brakes on the Subject Vehicles were defective in that they did not work.” We must accept that allegation as true. (Aubry v. Tri-City Hospital Dist., supra, 2 Cal.4th at pp. 966-967.) If the parking brakes “did not work,” then they were not “functional” as required by subpart 5.6(a), and a certification that a vehicle equipped with such parking brakes conformed to “All Applicable U.S. Federal Motor Vehicle Safety Standards in Effect on the Date of Manufacture” is an actionable misrepresentation under the CLRA.

Plaintiffs also allege that defendant violated section 1770, subdivisions (a)(5) and (a)(7) of the CLRA when defendant represented that the subject vehicles had characteristics and benefits they did not have and were a particular standard, quality, or grade they were not. In support of their CLRA cause of action, plaintiffs allege that defendant made representations about the quality, safety, and performance of the parking brake system on the subject vehicles while failing to disclose information it knew about the defect in the parking brakes. The list of proscribed practices in section 1770 includes the concealment or suppression of material facts. In the CLRA context, “[f]raud or deceit may consist of the suppression of a fact by one who is bound to disclose it or who gives information of other facts which are likely to mislead for want of communication of that fact.” (Outboard Marine Corp. v. Superior Court (1975) 52 Cal.App.3d 30, 37; compare with Bardin v. DaimlerChrysler Corp. (2006) 136 Cal.App.4th 1255 and Daugherty v. American Honda Motor Co., Inc. (2006) 144 Cal.App.4th 824, 835 [“although a claim may be stated under the CLRA in terms constituting fraudulent omissions, to be actionable the omission must be contrary to a representation actually made by the defendant, or an omission of a fact the defendant was obliged to disclose”].) Plaintiffs’ allegations are sufficient to state a violation of the CLRA based on defendant’s alleged representations about the parking brakes and concealment of the defect. (See Outboard Marine Corp. v. Superior Court, supra, 52 Cal.App.3d at p. 37.)

Slip op. at 12-14 (footnotes omitted). The discussion of the plaintiffs' claims under the UCL's three prongs is equally interesting, including the holding that the plaintiffs "need not wait for a catastrophic event such as brake failure to bring an action under the UCL based on the facts alleged in the fourth amended complaint." Id. at 19. I would not be surprised to see publication requests filed here.

By the way, thanks again to JS, who continues to tirelessly mine the unpublished Court of Appeal opinions and send me the gems like this one.

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.

"The UCL's 'Unfair' Prong: Recent Case Law Muddies the Waters Even More"

The July/August 2007 issue of Forum (the magazine of Consumer Attorneys of California) has an article by yours truly called "The UCL's 'Unfair' Prong: Recent Case Law Muddies the Waters Even More" (members-only link; login required). It is my first in a regular monthly column that I'm going to be writing for Forum called "The UCL/Class Action Zone."

If you are a plaintiffs' attorney (or a judge, judicial research attorney, etc.) and would like to receive a copy of the article, please email me at uclpractitioner@gmail.com and I'll be happy to send it to you.

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.

New UCL/CLRA decision: Belton v. Comcast Cable Holdings, LLC

In Belton v. Comcast Cable Holdings, LLC, ___ Cal.App.4th ___ (June 8, 2007), the Court of Appeal (First Appellate District, Division One) addressed the interplay between the UCL, the CLRA, and the Unruh Act (Civ. Code §51). Among other things, the Court applied the post-Cel-Tech formulation of "unfair" to this consumer action:

[Plaintiffs] rely upon the definition of “unfair” set forth in Cel-Tech, supra, 20 Cal.4th 163. In Cel-Tech, the court, in the context of an unfair competition claim by a competitor, defined “unfair” as “conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition.” (Id. at p. 187.) The Cel-Tech court further required “that any finding of unfairness to competitors under [Business and Professions Code] section 17200 be tethered to some legislatively declared policy or proof of some actual or threatened impact on competition.” (Id. at pp. 186-187.) The court left open the question whether this definition should also apply in the context of unfair competition claims brought by consumers (id. at p. 187, fn. 12), leading to a split of authority on this question among the courts of appeal. (See Bardin v. DaimlerChrysler Corp. (2006) 136 Cal.App.4th 1255, 1273-1274 [noting the split of authority and urging the California Supreme Court to resolve it].) This court, however, has followed the line of authority that also requires the allegedly unfair business practice be “tethered” to a legislatively declared policy or has some actual or threatened impact on competition. (See Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 853-854.)

Slip op. at 14. The Court of Appeal affirmed the judgment in the defendant's favor on all causes of action.

New Cel-Tech "safe harbor" decision: Fladeboe v. American Isuzu Motors, Inc.

In Fladeboe v. American Isuzu Motors, Inc., ___ Cal.App.4th ___ (Apr. 23, 2007) (modified Apr. 24, 2007), cross-complainant American Isuzu Motors, Inc. prevailed at trial on its individual UCL claim against a company that fraudulently posed as an authorized Isuzu dealership. The UCL claim was tried to the judge, while a jury separately found the defendant liable for fraud and negligent misrepresentation. The jury awarded $114,642.87 in damages, and the judge awarded $214,300 in restitution. Judgment was entered for "a total of $214,300 in damages and restitution." Slip op. at 8-10. (Given the facts of this case, that result sounds right, but damages and restitution do not always overlap as they did here. In some cases, the two sums would be added together.)

On appeal, the defendant raised a Cel-Tech "safe harbor" argument. The Court of Appeal (Fourth Appellate District, Division Three) rejected it:

[Cross-defendant] Fladeboe AG argues Vehicle Code section 11713.3, subdivision (d) and Corporations Code section 2010, subdivision (a) gave it a “safe harbor” for its conduct. In Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 184, the California Supreme Court concluded “a plaintiff may not bring an action under the unfair competition law if some other provision bars it.” This statutory safe harbor must “actually bar” the action, and not “merely fail to allow it.” (Ibid.) “Acts that the Legislature has determined to be lawful may not form the basis for an action under the unfair competition law, but acts may, if otherwise unfair, be challenged under the unfair competition law even if the Legislature failed to proscribe them in some other provision.” (Id. at p. 183.)

Fladeboe AG argues Vehicle Code section 11713.3, subdivision (d) provided it a safe harbor by permitting a motor vehicle dealer to transfer its dealership, subject to the manufacturer’s consent. “[I]t is evident,” Fladeboe AG argues, “that attempts to consummate a transfer do not have the quality of wrongfulness that [Business and Professions Code] section 17200 was designed to redress.” But Isuzu did not assert, and the trial court did not find, wrongful conduct based on the attempt to transfer RFLM’s Isuzu dealership. The trial court found Fladeboe AG engaged in wrongful conduct by fraudulently representing itself as an authorized Isuzu dealer—both to the public and to Isuzu—without obtaining Isuzu’s consent and without the requisite form .... Vehicle Code section 11713.3 does not provide a safe harbor for such conduct; to the contrary, subdivision (f)(1) of section 11713.1 prohibits it.

Slip op. at 29-30.

Supreme Court grants review in UCL/CLRA case: Miller v. Bank of America

Yesterday, the Supreme Court granted review in Miller v. Bank of America, no. S149178. In Miller, the Court of Appeal reversed an enormous judgment, approaching $300 million in compensatory damages and restution, plus even more in statutory penalties, holding that the defendant bank's conduct did not violate the UCL or the CLRA. Miller v. Bank of America, NT & SA, 144 Cal.App.4th 1301 (2006). My original post on Miller is here, and today's Recorder reports that "Supreme Court Takes Up $1B Banking Case" (subscription). UPDATE: Here is a non-subscription version of the Recorder article.

UCL jury instructions? Muranaka Farm, Inc. v. Huacuja (unpublished)

In a recent unpublished opinion, Muranaka Farm, Inc. v. Huacuja, no. B183656 (Nov. 16, 2006), the Court of Appeal (Second Appellate District, Division Two), approved this UCL "unfair" prong jury instruction:

For purposes of statutory unfair competition law, conduct is unfair if the harm to the victim outweighs the utility of the conduct to the defendant.

Slip op. at 14 n.5. This jury instruction presumably derived from State Farm Fire & Cas. Co. v. Superior Court, 45 Cal.App.4th 1093 (1996), under which a UCL "unfair" prong claim is established if "the gravity of the harm to the alleged victim" outweighs "the utility of the defendant's conduct." Id. at 1103-04 (quoting Motors, Inc. v. Times Mirror Co., 102 Cal.App.3d 735 (1980)).

On appeal, the defendant argued that the narrower Cel-Tech formulation of "unfair" applied and that the instruction should have been different. The Court of Appeal held that (1) the defendant waived the argument by not raising it below, and that (2) any error was harmless because substantial evidence supported the jury's findings of liability for breach of fiduciary duty, conversion, and common law unfair competition, which in turn supported liability under the UCL's "unlawful" prong. Slip op. at 12-15. This part of the opinion is noteworthy because it amounts to explicit acknowledgment by an appellate court that a UCL "unlawful" prong claim may be predicated on a violation of common law (not just statutory law). (See this post for more on that issue.)

You may be wondering, as I did, why the UCL claim went to the jury at all. UCL claims are equitable in nature and are normally tried to the court. The Court of Appeal held that the defendant waived the issue by not raising it below and that any error was harmless:

Appellant further contends that the trial court improperly submitted respondent’s claim of statutory unfair competition under Business & Professions Code section 17200 (hereafter section 17200) to the jury. Respondent asserts that appellant waived this claim because he did not object to the statutory unfair competition claim being decided by the jury or demand, as he does now on appeal, that the trial court prepare a statement of decision for this claim. Appellant has not responded to respondent’s claim of waiver as to the submission of the statutory unfair competition claim to the jury. Thus, we consider this issue to be waived. In any event, there is no reason to believe that the trial court would have ruled differently than the jury on this claim, since it was based on the same facts supporting the jury’s findings of liability on the other causes of action. Therefore, we also find that any error in submitting this equitable claim to the jury was harmless.

Slip op. at 7 n.3. Thanks to the reader who emailed me about this unpublished opinion.

New UCL/CLRA decision: Miller v. Bank of America

In Miller v. Bank of America, NT & SA, ___ Cal.App.4th ___ (Nov. 20, 2006), a judgment following a jury trial in a certified class action, with compensatory damages and penalties exceeding $1 billion, was reversed, wholesale. The Court of Appeal held that the defendant's conduct, which involved applying Social Security benefits deposited into its customers' accounts to pay various bank fees, did not violate either the UCL or the CLRA.

This morning's Daily Journal reports that "Billion-Dollar Reversal Lets Banks Tap Social Security Funds" (subscription), and the Recorder that "Billion-Buck BofA Ruling Struck Down" (subscription). In both articles, class counsel is quoted as saying he will seek Supreme Court review.

UPDATE: Here is a non-subscription link to the Recorder article. Also, the San Francisco Chronicle reports today that "Billion-dollar ruling against BofA tossed; Appeals court says deducting money to pay fees is OK." And the Los Angeles Times reports that "Judgment against BofA is overturned."

New UCL "unfair" prong decision: Camacho v. Automobile Club of So. Cal.

In Camacho v. Automobile Club of Southern California, ___ Cal.App.4th ___ (May 3, 2006), the Court of Appeal (Second Appellate District, Division Eight) exacerbated the split in authority on what formulation of "unfair" should apply to consumer actions after Cel-Tech. It held that Cel-Tech overruled other formulations, but that the Cel-Tech formulation itself was unsuitable for consumer actions:

[W]e do not think that Cel-Tech’s definition of “unfair” in cases involving anticompetitive practices applies to consumer cases. There are two reasons for this. First, “tethering” a finding of unfairness to “specific constitutional, statutory or regulatory provisions” does not comport with the broad scope of section 17200. “Tethering” the concept of unfairness to existing positive law undercuts the principle that a practice is prohibited as “unfair” or “deceptive,” even if it not “unlawful” or vice versa. (Cel-Tech, supra, 20 Cal.4th at p. 180.) .... Second, anticompetitive conduct is best defined in terms of the policy and spirit of antitrust laws; the same cannot be said of a business practice that is “unfair” or “deceptive” in the terms of section 17200. That is, cases involving anticompetitive conduct move in a far smaller, and more clearly defined, universe than unfair or deceptive business practices. It is therefore possible to “tether” anticompetitive conduct to the antitrust laws, while the universe of laws and/or regulations that bear on unfair practices is so varied that it is not possible to achieve a consensus which of these laws and regulations might apply to define an unfair practice.

(Slip op. at 9-10.) Therefore, the court developed a new, intermediate standard for consumer actions:

Cel-Tech itself holds the key to the definition of “unfair” in consumer cases. Cel-Tech holds that “we may turn for guidance to the jurisprudence” arising under section 5 of the Federal Trade Commission Act. (Cel-Tech, supra, 20 Cal.4th at p. 185.) Since 1980, the factors that define unfairness under section 5 are: (1) the consumer injury must be substantial; (2) the injury must not be outweighed by any countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves could not reasonably have avoided. (Orkin Exterminating Co. v. F.T.C. (11th Cir. 1988) 849 F.2d 1354, 1364.) These factors have now been codified in title 15 United State Code section 45(n). This definition of “unfair” is on its face geared to consumers and is for that reason appropriate in consumer cases. It is also suitably broad and is therefore in keeping with the “sweeping” nature of section 17200. We will refer to this as the “section 5 test.”

(Slip op. at 10-11.) The court then held that the plaintiff could not plead facts sufficient to meet its newly-adopted "section 5 test." (Slip op. at 11-13.)

This case harkens back to Bardin v. DaimlerChrysler Corp., ___ Cal.App.4th ___ (2006), in which the Court of Appeal (Fourth Appellate District, Division Three) asked the Supreme Court to tell us what formulation of "unfair" applies to consumer actions. (See my original post on this decision here.) However, no petition for review was apparently filed in that case.

"Courts Get Muddled on What's 'Unfair' in Consumer Actions"

This article by Michael Mallow was in the Daily Journal last Wednesday. (Unfortunately, the Daily Journal's website does not have pass-through links to specific articles.) The article discusses the Court of Appeal's opinion in Bardin v. DaimlerChrysler Corp., ___ Cal.App.4th ___ (Feb. 23, 2006), which asked the Supreme Court and/or the legislature to provide guidance on the meaning of "unfair." According to the online case information site, no petition for review has been filed yet. My original post on Bardin is here.

New UCL "unfair" prong decision: Bardin v. DaimlerChrysler Corp.

In Bardin v. DaimlerChrysler Corp., ___ Cal.App.4th ___ (Feb. 23, 2006), the Court of Appeal (Fourth Appellate District, Division Three) was very concerned about whether the pre- or post-Cel-Tech formulation of "unfair" applied to consumer actions. According to the docket, the Court went out of its way to request supplemental briefs from the parties and amicus briefs from Consumer Attorneys of California on that very question. The opinion discusses both formulations in detail, then lists Cel-Tech's unanswered questions:

Did the Supreme Court limit its holding in Cel-Tech to UCL actions brought by competitors simply because the circumstance of a consumer UCL action was not before it, or because the definition of “unfair” should be different depending on whether the action is brought by a consumer or a competitor? Was the Supreme Court expressing the view that regulation of competitive conduct is contained in existing legislation, but there is no analogous law pertaining to consumers? Should a broader definition of “unfair” apply in consumer actions because consumers require more protection than competitors even though such a distinction between consumers and competitors is not reflected in the language of the statute? Is the Cel-Tech definition of “unfair” too narrow to sufficiently protect consumers? Is the definition of “unfair” applied in Smith [v. State Farm Mut. Auto. Ins. Co.], 93 Cal.App.4th 700 [(2001)] too amorphous in the consumer context, and does it provide “too little guidance to courts and businesses”? (Cel-Tech [Communications, Inc. v. Los Angeles Cellular Tel. Co.], 20 Cal.4th [163,] 184-185 [(1999)].)

(Slip op. at 20 (hyperlinks added).) Finally, the Court asked the Legislature or the Supreme Court to help:

In light of the uncertain state of the law regarding the proper definition of “unfair” in the context of consumer UCL actions, we urge the Legislature and the Supreme Court to clarify the scope of the definition of “unfair” under the UCL.

(Id.) Ultimately, the Court applied both formulations to the facts before it, and determined (in a very fact-specific analysis) that the plaintiff's complaint did not state a claim for relief under either. The opinion also addresses the UCL's "fraudulent" prong and the CLRA.

New UCL decision: Progressive West Ins. Co. v. Superior Court

Last week, the Court of Appeal (Third Appellate District) handed down Progressive West Ins. Co. v. Superior Court, ___ Cal.App.4th ___ (Dec. 28, 2005). The decision has a lengthy discussion of each of the three prongs of the UCL—"unfair," "fraudulent" and "unlawful." This is a post-Prop. 64 case that was filed after the effective date of the amendments. Accordingly, the fact that the opinion applies the ordinary definition of "fraudulent" conduct—"likely to be deceived"—is significant. (Slip op. at 30-31 & n.4.) Also, the Court held, after careful analysis, that the pre-Cel-Tech formulation of "unfair" governs consumer actions. (Slip op. at 32-35.) The final interesting thing about this opinion is that the Court determined that a violation of a common-law doctrine will support an "unlawful" prong claim (although such a violation was not pleaded in the case before it). (Slip op. at 35-36.) There are plenty of published cases that say, in general terms, that "any law," including "court-made" laws, will support a UCL "unlawful" prong claim, but there are very few cases in which the Court actually analyzed that type of "unlawful" prong claim.

Recent UCL "unfair" prong decision: RLH Industries v. SBC Communications

RLH Industries, Inc. v. SBC Communications, Inc., ___ Cal.App.4th ___ (Nov. 3, 2005) (Fourth Appellate District, Division Three) is another recent UCL opinion in an action between competitors. Like Eddins v. Sumner Redstone, ___ Cal.App.4th ___ (Nov. 22, 2005), discussed in the post immediately below, it involved a Cartwright Act claim and construed Chavez v. Whirlpool Corp., 93 Cal.App.4th 363 (2001). The Court of Appeal applied the Cel-Tech formulation of "unfair," holding that "nothing suggests [the defendant's challenged] policy 'threatens an incipient violation' of the Cartwright Act, violates its policy or spirit, or otherwise threatens competition. .... Even if some unfair competition causes of action can survive independently of an actual antitrust violation, this one does not." Slip op. at 8-9 (citing Chavez, 93 Cal.App.4th at 375). The Court of Appeal affirmed the trial court's order granting summary judgment to one of the two defendants.

As for the other defendant, summary judgment should not have been granted. The Court of Appeal rejected that defendant's argument that the United States Constitution's dormant commerce clause bars UCL and antitrust claims against an out-of-state defendant for out-of-state anticompetitive conduct that impacts Californians. Slip op. at 14-16.

New UCL "unfair" prong decision: Eddins v. Sumner Redstone

In Eddins v. Sumner Redstone, ___ Cal.App.4th ___ (Nov. 22, 2005), the Court of Appeal (Second Appellate District, Division Eight) construed the UCL's "unlawful" prong in the context of an action between business competitors. The Court determined that the trial court properly granted summary adjudication of the plaintiffs' Cartwright Act claim, but erred in also granting summary adjudication of the UCL claim. The trial court relied on Chavez v. Whirlpool Corp., 93 Cal.App.4th 363, 375 (2001), which held that conduct is not "unfair" within the meaning of the UCL if it is "deemed reasonable and condoned under the antitrust laws." Citing Cel-Tech, the Court of Appeal found that Chavez only applies to a UCL "unlawful" prong claim predicated on the Cartwright Act, but not to a UCL "unfair" prong claim. I've always thought that this aspect of Chavez was inconsistent with Cel-Tech, so it's nice to see another panel decline to follow it.

New Ninth Circuit UCL decision: Arizona Cartridge Remanufacturers Assn. v. Lexmark Int'l

In Arizona Cartridge Remanufacturers Assn., Inc. v. Lexmark Int'l, Inc., ___ F.3d ___ (9th Cir. Aug. 30, 2005), the Ninth Circuit addressed the UCL's "unfair" and "fraudulent" prongs, and affirmed an order granting summary judgment in the defendant's favor.

New UCL decision: People's Choice Wireless, Inc. v. Verizon Wireless

Last Thursday, the Court of Appeal (Second Appellate District, Division Two) handed down People's Choice Wireless, Inc. v. Verizon Wireless, ___ Cal.App.4th ___ (July 28, 2005), and held that the trial court properly sustained the defendant's demurrer to the plaintiff's UCL claim. Because it was an action between competitors, the Court applied the post-Cel-Tech formulation of "unfair." This case probably represents the most detailed exposition of the post-Cel-Tech formulation in a competitor action since Cel-Tech itself was decided.