The UCL Practitioner

"Judge Limits Hiring of Outside Law Firms"

Today's Daily Journal reports (subscription) on what sounds like a very interesting order by Judge Komar in Santa Clara County Superior Court. Citing People ex rel. Clancy v. Superior Court, 39 Cal.3d 740 (1985), he ruled that public-entity plaintiffs may not retain outside attorneys on a contingency fee basis to handle public nuisance lawsuits (in this case, against the lead paint industry). A copy of the order is available at this link (via the blog Valueplays). It sounds like an appeal is inevitable. The reason I find this interesting is I wonder what impact, if any, this development might have on public entities' efforts to retain outside counsel to handle UCL litigation (an idea that was discussed a lot in the wake of Prop. 64).

UPDATE: Today's Recorder also has an article on the decision ("Judge Stops Fee Pacts in Lead Paint Suit") (subscription) that expresses that very concern:

Some lawyers from both sides say Komar's ruling, even if upheld on appeal, would only apply to affirmative litigation based on a public nuisance cause of action. Still, [Santa Clara County Counsel Ann] Ravel is likely to appeal.

"I believe Judge Komar is clearly wrong, and if that decision stands, it will impair the ability of cash-strapped public entities from proceeding against defendants who create nuisances in their communities," Ravel said.

The types of suits Ravel is concerned about include not only environmental and zoning-related suits brought as public nuisance claims, but also tobacco litigation and other claims that might be brought under § 17200 of the state's Business and Professions Code.

"The reasoning could certainly impact those cases," Ravel said.

"Limits on Liability"

Yesterday's Daily Journal had a focus article (subscription) on Daugherty v. American Honda Motor Co., 144 Cal.App.4th 824 (2006), in which review was recently denied.

"Too Much Information?"

Monday's Daily Journal had another article (subscription) on Pioneer Electronics (USA), Inc. v. Superior Court, ___ Cal.4th ___ (Jan. 25, 2007). The first paragraph of the (rather oddly-titled) article reads:

Has the California Supreme Court changed the balance between the right to discovery and privacy rights in class actions? The answer is probably "no," but reasonable minds may differ. The court has now spoken on the issue, but did it really change anything? And what about class actions that are not about consumer products, such as employment and health care actions? A very good argument could be made that the court's opinion does not address privacy issues in those areas.

The article goes on to argue that Pioneer Electronics should have no impact on non-consumer cases.

"Calif. High Court Grapples With Limitations Period in Meal-Pay Law"

This morning's Recorder has this report on the argument in Murphy v. Kenneth Cole Productions. My own report on the argument is in the post immediately below.

"Court Limits Union's Stand-In Role"

This morning's Recorder has an article (subscription) on the Amalgamated Transit decision discussed in the post immediately below:

In a blow to labor unions seeking to enforce [certain wage and hour] protections, the Second District Court of Appeal ruled Wednesday(.pdf) that employees cannot transfer the ability to sue in a representative capacity.

The time I had yesterday to review and analyze this decision was limited. One thing that's not entirely clear to me is whether this decision answers the question about Proposition 64's impact on the rules of associational standing. The decision did not use that terminology, and I'm not 100% sure if the union's argument was, in fact, based on associational standing principles. Perhaps someone else who has had more time to look at the opinion and is familiar with these principles would like to post a comment.

Media coverage of Pioneer Electronics

In today's Daily Journal, reporter Itir Yakar reports that "Ruling Benefits Discovery in Class Actions" (subscription). And at the blog Wage Law, Michael Walsh heralds "A Resounding Victory For Plaintiffs in Pioneer Electronics."

UPDATE: In this morning's San Francisco Chronicle, Bob Egelko reports that "Class-action suits get access to files." And the blog Cal Biz Lit reports that "California Supreme Court Rules on Fishing for Plaintiffs in Class Actions."

I wouldn't call it "fishing." Remember, in Pioneer, an injured class representative had already filed suit. The purpose of the discovery requests was to gain information about potential witnesses who had also experienced problems with the allegedly defective product and to gather evidence to support class certification. A secondary purpose would be to identify possible substitute class representatives in case the original one became disqualified for any reason. Class counsel owe a fiduciary duty to the class as a whole, and one way to fulfill that duty is to ensure that if the original class representative can no longer proceed, others are waiting in the wings so that the action as a whole is not scuttled. Cf. Shapell Industries, Inc. v. Superior Court, 132 Cal.App.4th 1101 (2005) (discussed here).

"Tobacco Case Pushes Limits on Class Suits"

This morning's Daily Journal reports (subscription) on the Supreme Court's grant of review in Tobacco:

The main question the court will decide in the newest case, lawyers for both sides said, is whether plaintiffs must show that each individual member of the class has been harmed, a nearly impossible burden. Much easier would be to prove that the named plaintiffs have suffered a loss and then later evaluate damages to the entire class.

"Court to reconsider huge tobacco lawsuit"

The Sacramento Bee reports here on yesterday's developments at the Supreme Court:

The Court of Appeal in San Diego ruled against the cigarette plaintiffs in September. The unanimous three-judge ruling said their suit was barred by Proposition 64, a 2004 initiative limiting private class actions under the unfair competition law to injured plaintiffs who have lost money or property as a result of alleged unfair competition.

That finding is the likely focus of the Supreme Court's review, which was ordered without explanation or dissent after the justices' weekly closed-door meeting on pending petitions.

Consumer Law and Policy Blog also noted the grant of review. Its post says that Public Citizen's Consumer Justice Project will be filing an amicus brief on the merits.

Illegal hiring suit does not plead UCL after all

In July, The Recorder reported on contemplated UCL actions against employers who hired illegal aliens in violation of the immigration laws, to the detriment of competing companies who hired lawful workers. My coverage of that is here. The Recorder's blog now reports that the first of the suits has been filed in Kern County Superior Court, and helpfully provides a copy of the complaint (PDF). It does not include a UCL claim after all.

"Tour bus companies settle price-fixing suit"

An article in this morning's San Francisco Chronicle reports on a recent settlement in one of the antitrust/UCL cases I am handling. This unpublished Court of Appeal opinion from last September provides more background about the maneuverings in the case, and here is my firm's web page on the case.

"Ruling Threatens Consumer Lawsuits"

This morning's Los Angeles Times has this story on Mervyn's and Branick. The article includes a quotation from me as well as a link to this blog. Welcome, Los Angeles Times readers!

UPDATE: Additional press coverage appears in the San Francisco Chronicle ("Consumer lawsuit scope defined") and the Sacramento Bee ("Justices strengthen frivolous suit ban"). Howard Bashman of How Appealing helpfully provides a non-subscription copy of today's story in the Daily Journal, "High Court Gives and Takes in Cases on Prop. 64."

Press coverage of Mervyn's and Branick

Today's papers are full of the news:

• The Recorder (subscription): "Ruling Renders Prop 64 Retroactive" (with quotations from yours truly)
  
• The Daily Journal (subscription): "Court Gives, Takes With Proposition 64"
  
• Associated Press (San Francisco Chronicle): "California Supreme Court clarifies Proposition 64 reach"

The Recorder reports that attorneys for the plaintiffs in Mervyn's and Branick intend to seek leave to amend to substitute plaintiffs who can satisfy Prop. 64's standing provisions:

In the suit against Mervyn's, plaintiffs' lawyer [James] Sturdevant said that since about 16 disabled individuals testified against the retailer at trial, he believes his clients wouldn't have any problem amending their complaint to comply with the high court's ruling.

Michael Spencer, a partner in Milberg Weiss Bershad & Schulman's New York office who represented the plaintiffs against Downey Savings, said he felt the same way.

"While our clients are disappointed that the Supreme Court interpreted Prop 64 to apply to pending cases," he wrote in an e-mail, "the court's reasoning should allow these cases to continue unimpaired once the complaints are amended to bring in plaintiffs who have suffered injury."

"Class Actions Hamstrung in Prop 64 Cases"

Today's Recorder addresses the Pfizer decision in this article (subscription), in which I am quoted. (UPDATE: Here is a non-subscription link to the article.) The article also quotes a representative of the Attorney General's office:

The California attorney general's office, which had participated as an amicus curiae in league with class plaintiff Steve Galfano, feels the ruling is disastrous.

"Californians should be able to defend themselves in court against false advertisements," spokesman Aaron Carruthers said. "This has always been key in enforcing unfair competition laws. This ruling makes that almost impossible.

"We believe this ruling reaches beyond the voters' intent in passing Prop 64," he continued. "We hope the state Supreme Court gets a chance to make it right."

The article also quotes counsel for the plaintiff in Branick:

Michael Spencer, a partner in Milberg Weiss Bershad & Schulman's New York office who represented two plaintiffs in one of the cases now pending before the California Supreme Court, said he didn't believe Tuesday's ruling would have any impact on the retroactivity issue.

"However," he said in an e-mail, "this court's notion that Prop 64 should be read to completely disembowel false advertising class actions is really far-fetched. The electorate was told that Prop 64 was about standing [who can sue], not about the substance of permissible claims."

The article concludes by saying that attorney Duane Westrup, who represents the plaintiff in Pfizer, will be filing a petition for review.

In addition to the Recorder coverage, Advertising Age reported yesterday that "California Court Supports Marketers in Case Over Class-Action Suits: Listerine Decision a Win for Advertisers Across the Country."

"Lawsuits would open new fronts in immigration and legal wars"

The Sacramento Bee had this column Wednesday on the proposed UCL actions discussed in my post immediately below.

"UCL Suits to Target Illegal Hiring"

This morning's Recorder has the story (subscription required) with a quotation from yours truly! An excerpt:

An Orange County attorney thinks he's devised a novel way to stymie employers of undocumented workers: sue them under California's Unfair Competition Law. David Klehm said he will file up to 10 lawsuits in the coming months on behalf of business owners who accuse competitors of undercutting them by hiring illegal aliens willing to work for dirt-cheap wages and long hours with no overtime. ....

The concept of using UCL suits against such employers is actually "a pretty old one," and one that faces a significant hurdle, said William Stern, a partner in the San Francisco office of Morrison & Foerster. Courts have been reluctant to enter frays touching on sweeping economic policy, preferring instead to let legislators handle enforcement issues, Stern said. ....

Like Stern, UCL expert Kimberly Kralowec does not know the specifics of Klehm's cases. But after reading a brief summary of his strategy, she suggested in an e-mail that he might prevail if he avoids the larger issue of illegal immigration's economic impacts. "A narrowly-tailored action, alleging that one competitor's specific violations of law caused another competitor to suffer identifiable harm, might be the best approach," Kralowec wrote.

UPDATE: Here's the full text of my email to the reporter:

Given the broad scope of the UCL, my initial reaction is that this type of UCL competitor action should be viable. Based solely on your email summary, a narrowly-tailored action, alleging that one competitor's specific violations of law caused another competitor to suffer identifiable harm, might be the best approach. That would be the best way to avoid a defense based on the "economic abstention doctrine" and the potentially unfavorable decision of Diaz v. Kay-Dix Ranch, 9 Cal.App.3d 588 (1970) (copy available at this link: http://login.findlaw.com/scripts/callaw?dest=ca/calapp3d/9/588.html). Diaz interpreted Civil Code section 3369, which is the predecessor to Bus. & Prof. Code section 17200, and it always comes to mind whenever I hear the UCL and immigration mentioned in the same sentence. The case, which involved the problem of illegal immigration, is frequently cited for its application of the "economic abstention doctrine," which bars some UCL actions. (I wrote a short post on that doctrine here: http://www.uclpractitioner.com/
2006/02/new_ucl_equitab.html.) Part of the problem in Diaz was that the plaintiffs sought extremely broad injunctive relief that would have required indefinite court supervision. The case is also distinguishable because the plaintiffs there were legal workers who claimed that defendants' employment of illegal immigrants cost them their jobs. I would need to know more about the specifics of the contemplated actions to opine on whether the "economic abstention doctrine" would or would not apply. But the best way to avoid this defense would be to read Diaz (and other economic abstention cases) carefully before filing suit and tailor the complaint accordingly. That is advice I would give to any plaintiff's attorney contemplating a UCL case in a heavily-regulated field.

Now that I've read the full Recorder article, I'm thinking that it might be a good idea for Mr. Klehm to file the best action as a test case and see what the court does with the Diaz precedent.

"Drug Plaintiff Wants to Skip Class"

Last week's Recorder (6/21/06 issue) had an interesting article (subscription required) on a case raising a question of first impression involving the opt-out process in California class actions. The case is pending in San Francisco Superior Court before the complex litigation judge, Richard A. Kramer. A brief excerpt:

A class action and an unfair competition suit, which have been coordinated before a San Francisco judge for more than a year, both accuse Wyeth of squelching competition to its drug Premarin, which treats hot flashes and other symptoms of menopause.

Plaintiff Carol Sullivan brought her own action against Wyeth in San Diego, after the San Francisco suit was already filed but before it was certified as a class action. Now, pouncing on the fact that she never sent a letter to specifically exclude herself from the San Francisco class action, the drugmaker is trying to persuade the court here to throw out Sullivan's lawsuit.

....

Since California case law hasn't addressed whether the pursuit of a separate lawsuit should be considered an adequate substitute for following the court's opt-out instructions for class actions, both sides' arguments so far have been peppered with federal citations. ....

The article goes on to note that Judge Kramer's tentative ruling was that "a class member such as Sullivan should still be able to opt out at this point in the litigation — if her lawyers can demonstrate good cause, and if they can show that letting her proceed separately now would not prejudice 'the class action process.'" Further briefing has been ordered and a continued hearing set for August 1, 2006. In re Premarin Cases, JCCP No. 4389.

UPDATE: The Legal Reader has a more lengthy excerpt from the Recorder article in a post titled "Premarin Suit May Lead to New Opt-Out Rule."

"Proposition 64 and the 'Statutory Repeal Rule'"

My article on the "statutory repeal rule" is now available online at this link. The San Francisco Daily Journal published the article on May 31, 2006 in a slightly different form under the title "High Court Will Resolve Whether Proposition 64 is Retroactive." The article concludes the analysis that I began in a series of three blog posts on the "statutory repeal rule."

"Lawyer Strikes Out Despite Justice's Softball Questions"

Yesterday's Recorder had more coverage (subscription required) of last week's argument in Mervyn's/Branick, including this observation: "In the heat of argument in front of dozens of your peers in the state's highest court, misunderstanding a question is an easy thing to do."

Also, the San Francisco Chronicle reported last week that "[t]he justices did not tip their hands on that issue [i.e., whether Prop. 64 applies to pending cases], but several expressed interest in an argument that would allow many of the pending suits to survive Prop. 64 by substituting new plaintiffs who claimed harm from the challenged business practices."

"Court Mulls Making Prop. 64 Retroactive"

Today's Recorder reports here on yesterday's argument (subscription required):

Hearing arguments in San Francisco in two separate Prop 64 cases, the court appeared ready to declare the controversial initiative retroactive to an untold number of cases pending when it passed. The result could void several suits under the state's unfair competition law by declaring that the plaintiffs who filed them lacked standing.

I don't agree with that assessment. I think the justices gave very few clues. My own summary of the argument is here.

"High Court Will Resolve Whether Proposition 64 Is Retroactive"

In anticipation of this morning's oral arguments in the Mervyn's and Branick cases, today's Daily Journal has an article by yours truly that addresses the so-called "statutory repeal rule." (Unfortunately, the Daily Journal does not provide pass-through links to specific articles.) A brief excerpt:

Among other issues, the Supreme Court will have to decide whether the so-called statutory repeal rule applies to Proposition 64. This rule holds that "a cause of action or remedy dependent on a statute falls with a repeal of the statute, even after the action thereon is pending, in the absence of a saving clause in the repealing statute." Callet v. Alioto, 210 Cal. 65 (1930). Five court of appeal divisions (in three districts) have held in published opinions that Prop. 64 applies retroactively - all in reliance on this rule. Two divisions (in two districts) have held otherwise.

The California Supreme Court has addressed the statutory repeal rule in a series of cases dating back to the 1930s. A close, chronological examination of these cases demonstrates that this so-called rule is merely an application of the ordinary principle of statutory interpretation that new statutes apply prospectively only, absent a very clear indication of legislative (or electoral) intent to the contrary. See Tapia v. Superior Court, 53 Cal.3d 282 (1991). Accordingly, the rule may not be applied to Prop. 64, or to any other statutory amendment, without examining the Legislature's (or the electorate's) intent.

The article completes the analysis that I began in my three prior posts on the "statutory repeal rule." I'm hoping very much to attend this morning's arguments and to provide a report later today. Anyone else who attends the arguments should feel more than free to email me their thoughts, or post them here as a comment.

UPDATE: I just got back from the arguments and hope to put up a post at some point later today. For now, suffice it to say that all the attorneys argued very well, and the bench was what I would call medium-hot. I also want to point out that the editors made one change to my article that I think is substantive. My original version had quotation marks around the words "statutory repeal rule" (and the shorter version, "rule") wherever they appeared. This was deliberate, as the whole point of my article is that there really is no distinct "statutory repeal rule" per se. Rather, the so-called "rule" is simply an application of the ordinary principle of statutory construction that amendments operate prospectively absent some clear indication of retroactive intent.

"'Novel' Tactic: Legal experts say complaint is unique use of state Unfair Competition Law"

An article in yesterday's San Francisco Chronicle mentioned section 17200 by name and quoted Will Stern, Bruce Simon, and others on a lawsuit contemplated by Barry Bonds seeking to recover the profits from a book about steroids in professional sports. According to the article, the UCL claim is based on the theory that the authors violated federal law (and hence the UCL) by relying on illegally-obtained grand jury transcripts to write their book.

Here is a link to the San Francisco Superior Court docket for the case, which was in fact filed yesterday. The complaint is accessible there for download. The Chronicle also reported yesterday afternoon that Judge James L. Warren denied Bonds' ex parte application for an order appointing a receiver to monitor sales of the book. The Chronicle further reports that the defendants plan an anti-SLAPP motion as well as a challenge based on Prop. 64—that Bonds has suffered no loss of money or property "as a result of" the alleged UCL violation.

UPDATE: Monday's Daily Journal will also have an article, "Legal Swats at Bonds Book: Federal Judge Could Press Authors to Disclose Source," discussing this case as well as activity in a related federal action pending before Judge Susan Illston. (Thanks to JS for the heads-up.)

"O.C. Judge Jails Brea Lawyer for Filing Frivolous Suits"

This article was in Saturday's LA Times. I haven't seen anything about this in the legal press. Here are some related posts. It seems to me that the moral of this story is that the system is working as it should, and that the responsible lawyers—not the law—should have been blamed (and penalized) for the abuses that led to Prop. 64. [Hat tip: Wage Law.]

"Panel OKs Suit Against 'Shakedown'"

Yesterday's Daily Journal reported on American Products Co. v. Law Offices of Geller, Stewart & Foley, LLP, ___ Cal.App.4th ___ (Dec. 16, 2005) (Fourth Appellate District, Division Two), handed down last Friday, in which the Court of Appeal held that the litigation privilege did not bar a suit against lawyers accused of filing Trevor-like "shakedown" suits under the former UCL. In a now-familiar irony, the lawyers were themselves sued for violating the UCL, as well as for intentional interference with prospective economic advantage.

The article incorrectly reported that "[a]fter the Trevor debacle, lawmakers changed the law so that plaintiffs now have to cite specific damages in their claims and post notice to the class." It was not lawmakers, but rather the initiative process, that resulted in the amendment.

"Court Sustains $1.8 Million Civil Penalty"

A story in this morning's Daily Journal reports on People ex rel. Lockyer v. Brar and briefly mentions the Hartford Fire Insurance opinion, calling it "the 10th from all state appellate courts on the [Prop. 64 retroactivity] question."

"Courts Chase Attorney Over 17200 Lawsuits"

Yesterday's Daily Journal ran a story about attorney Harpreet Brar, who has been accused of abuses similar to those of the Trevor Law Group. According to the story, Brar is "the last of a dying breed of lawyers" who allegedly abused the UCL and whose conduct spurred the supporters of Prop. 64 into action. The Deputy Attorney General in charge of the separate civil prosecutions against Trevor, Brar and a handful of others is quoted as saying that he knows of no other lawyers filing such suits: "'We'd receive complaints about "a lawyer just like Trevor," and in most cases they weren't,' the attorney general deputy said."

"State's high court to untangle voter-modified Unfair Competition Law"

I was quoted in this article in Friday's San Diego Daily Transcript. Unfortunately, a paid subscription is necessary to access articles online. Here's an excerpt:

Critics contend there's no language in materials promoting the ballot measure or the bill itself indicating that Proposition 64 regulations were to be applied to pending cases.

"The general rule is new legislation applies prospectively only unless there is a clear indication (otherwise)," said Kimberly Kralowec of San Francisco's Furth Firm. "The ballot materials, the summary of the amendment itself, the ballot arguments ... there's nothing in there [indicating] that anyone wanted it to apply to [pending] cases."

Kralowec, who represents plaintiffs in class-action lawsuits, has a blog devoted to the ongoing debate. She argues the bill contains "prospective-type language" and has been touted as a way to stop attorneys from filing future cases.

Pamela Parker, an attorney for the San Diego office of class-action giant Lerach Coughlin Stoia Geller Rudman & Robbins LLP, agrees. "It all comes down to voter intent and there's no evidence whatsoever that the voters intended to terminate existing UCL litigation," she said. "The focus was frivolous lawsuits, which constitutes a regrettable but small portion of UCL litigation. They thought they were doing something to help curtail that in the future."

"Court Says Prop 64 Wipes Out Visa Case"

This morning's Recorder has the story (subscription required). I remember the underlying Statement of Decision by Judge Sabraw was a significant one, holding that Visa failed to adequately disclose its currency conversion fees. I was even a class member. I'm sure an enormous amount of work went into the case on both sides, and it will be interesting to see what happens on remand. At least the opinion leaves open the possibility of amending to substitute an affected plaintiff.

"Public-Interest Lawyers Manage to Work Around Revised 17200"

This morning's Daily Journal has the story, which quotes my friend Michael Mallow as saying that "he's seen a dramatic drop in filings by 'dummy' associations created especially to serve as public attorneys general. 'There were a significant number of entities that were created for the purposes of filing unfair-competition claims under 17200,' he said. 'Those are now, for the most part, gone.'"