The UCL Practitioner

"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."

"Wal-Mart Plaintiffs Trying for a Break"

My colleague Jessica Grant is quoted in a story in this morning's Recorder (subscription required) about the injunctive relief phase of the Wal-Mart trial, which began on Monday. According to the story, "the outcome of the injunctive relief phase could offer a rare glimpse into what measures a court might be willing to impose on a recalcitrant company. .... 'Even today, after the jury in this case found Wal-Mart liable for punitive damages, Wal-Mart continues to violate specific provisions of both the California Labor Code and Industrial Welfare Commission Wage Orders,' the plaintiffs contend in their brief." Jessica was also quoted yesterday in a Bloomberg News story picked up by the Los Angeles Times, the San Francisco Chronicle, and other outlets.

Because my trial date was just continued last Friday, I had a rare free morning on Monday and I decided to attend a half-day of the trial (something I was unable to do last year during the entire three-month damages phase). As a completely objective observer, I thought Jessica's presentation was very impressive.

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

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

New UCL preemption decision: WFS Financial, Inc. v. Superior Court

In WFS Financial, Inc. v. Superior Court (De La Cruz), ___ Cal.App.4th ___ (June 15, 2006), the plaintiff alleged that the defendant (an operating subsidiary of a federal savings association) violated the disclosure requirements of the Rees-Levering Automobile Sales Finance Act (Civ. Code §§ 2981 et seq.) and thus the UCL's "unlawful" prong. The Court of Appeal (Third Appellate District) held that the Home Owners’ Loan Act (12 U.S.C. §§ 1461 et seq.) preempted both claims: "De La Cruz cannot use the UCL to enforce a statutory violation where the underlying statute is preempted by federal law." Slip op. at 26.

List of leading UCL and class certification cases

Something truly significant happened last week: my trial date was continued. Now I can resume blogging much earlier than anticipated.

My latest addition to the blog is something that I've been meaning to create for some time for my own use. It is a list of the leading UCL and class certification cases in California, with links to the texts of the cases (via FindLaw). Let me know if you think of any cases that should be added, keeping in mind that the list is limited to California Supreme Court cases. Please send the full case name and citation, plus a link to the case on FindLaw. That will make it easy for me to add the case to the list.

Blog hiatus

Unless something truly significant happens, this will be my last post until some point in July. I'm headed to trial again. Please continue to email me about new decisions, etc., and I will catch up my posts once the trial is over.

New UCL/Prop. 64 decision: R&B Auto Center, Inc. v. Farmers Group, Inc.

On Friday, in R&B Auto Center, Inc. v. Farmers Group, Inc., ___ Cal.App.4th ___ (Jun. 9, 2006), the Court of Appeal (Fourth Appellate District, Division Three) reinstated a UCL claim for injunctive relief, holding that the trial court had improperly employed the motion in limine procedure to dismiss that cause of action. The opinion has several interesting components:

First, the Court held that the plaintiff's UCL claim was separate and distinct from its insurance bad faith/breach of contract claim:

After the trial court ruled on the motions in limine and held that there was no coverage as a matter of law, it also dismissed the three causes of action suggested by [defendant] Truck Insurance — those for breach of contract, bad faith and unfair competition. We cannot see why a ruling that the insurance contract provided no coverage for the Peralta litigation claim should translate into a ruling that [plaintiff] R & B cannot state a cause of action seeking to enjoin unfair business practices. Whether the insurance contract provided for lemon law coverage for used car sales was a question of law that the court readily answered by reviewing that contract. But the fact that the insurance contract limited lemon law coverage to new car sales hardly proves that Truck Insurance does not engage in unfair business practices in the sale of its new car lemon law coverage to used car dealerships. The court erred in disposing of the unfair business practices cause of action just because it held that the insurance contract did not provide coverage for the Peralta litigation.

(Slip op. at 33-34.)

Second, the Court reaffirmed its holding that Prop. 64 applies retroactively to pending cases, in part because the plaintiff conceded the point:

We invited the parties to file supplemental briefs on the retroactivity of Proposition 64 and the effect of any retroactive application on the case before us. The parties all agreed that the proposition is retroactive, citing this court’s opinion in Benson v. Kwikset Corp. (2005) 126 Cal.App.4th 887, review granted April 27, 2005, S132443. The Supreme Court granted review of Benson, and several other cases addressing the retroactivity of Proposition 64, after the filing of the supplemental letter briefs in the matter before us. Pending a Supreme Court decision on the question of retroactivity, the trial court is directed to apply the Proposition 64 statutory amendments to this case.

(Slip op. at 38-39.)

Third, the Court interpreted the "suffered injury in fact and lost money or property" language of Prop. 64:

Truck Insurance says that R & B lacks standing, under Business and Professions Code section 17204, to maintain the unfair competition cause of action because it has not alleged that it has “lost money or property as a result of unfair . . . competition.” With this assertion, we certainly disagree. R & B alleges that it paid premiums for illusory coverage and it had to make payment on a lemon law claim that it would not have had to pay had the Truck Insurance policy said what it was represented to say. This is an allegation of loss caused by the purported misrepresentations concerning the scope of coverage. The standing requirement is met.

(Slip op. at 39-40 (emphasis added).)

Fourth, the Court addressed (without deciding) whether a UCL claim seeking injunctive relief only must satisfy the class certification requirements of Code of Civil Procedure section 382:

Next, Truck emphasizes that R & B cannot seek injunctive relief on behalf of the general public unless it meets the requirements of Code of Civil Procedure section 382, with reference to class actions. .... Truck Insurance states that R & B may only seek class action injunctive relief if it can demonstrate compliance with these requirements. However, Truck Insurance does not assert that R & B cannot do so.

R & B contends that it can meet the class certification requirements and points us to its offer of proof with respect to the anticipated testimony of Fena, Rusich and Sweet. R & B requests that this court remand the matter so that it will have an opportunity to show that it can satisfy the requirements of Code of Civil Procedure section 382. It is only fair to grant this request, since at the time R & B filed its third amended complaint it was not required to comply with Code of Civil Procedure section 382.

(Slip op. at 40.)

Evidently, the plaintiff chose not to raise the argument that an injunctive-relief-only UCL claim should not have to satisfy section 382, and to argue instead that it can meet section 382's requirements (which is probably the better strategy in many situations). This case could be an example of the "be careful what you wish for" aspect of Prop. 64. On remand, the plaintiff will seek formal class certification of the injunctive relief claim, and based on the opinion alone, I see no reason why the plaintiff should not also amend to seek restitution (at least for itself, if not on a classwide basis). Overall, the amended UCL claim could enhance, not lessen, the defendant's potential exposure.

New Supreme Court retroactivity decision: Carter v. California Dept. of Veterans Affairs

Last week, in Carter v. California Department of Veterans Affairs, ___ Cal.4th ___ (Jun. 8, 2006), the California Supreme Court discussed retroactivity for the first time since McClung v. Employment Development Dept., 34 Cal.4th 467 (2004) (see my original post on McClung here). In a unanimous opinion, the Court held that a 2003 amendment to the Fair Employment and Housing Act (Gov. Code §§12900 et seq.) applied to pending cases because it "merely clarified existing law." In so holding, the Court penned the following language, which could be relevant to its upcoming analysis of Prop. 64 retroactivity in Mervyn's and Branick:

A statute that merely clarifies, rather than changes, existing law is properly applied to transactions predating its enactment. (Western Security Bank v. Superior Court (1997) 15 Cal.4th 232, 243 (Western Security Bank).) However, a statute might not apply retroactively when it substantially changes the legal consequences of past actions, or upsets expectations based in prior law. (Id. at p. 243; see also Landgraf v. USI Film Products (1994) 511 U.S. 244, 269 (Landgraf).) .... If we conclude the amendment did more than clarify existing law, we would then address whether the amendment should apply retroactively to the conduct present here, and whether a retroactive application would implicate due process concerns. (Landgraf, supra, 511 U.S. at p. 270.)

Slip op. at 6-7, 8 (emphasis and hyperlinks added).

Two aspects of this language warrant comment. First, during the Mervyn's/Branick oral arguments on May 31, those arguing against retroactive application of Prop. 64 focused heavily on the idea that applying the amendments to pending cases would "upset[] expectations based in prior law." The Supreme Court acknowledged the validity of that idea in Carter.

Second, the Court of Appeal (First Appellate District, Division Four) relied heavily on Landgraf in holding that Prop. 64 does not apply retroactively to pending cases. Californians for Disability Rights v. Mervyn's, LLC, 126 Cal.App.4th 386, 393-97 (2005) (review granted). Although the Mervyn's court has been harshly criticized for relying on Landgraf (because the principles set forth in Landgraf supposedly only apply to federal statutes), the Supreme Court showed no hesitancy in citing and relying on Landgraf itself in Carter.

"Blawgs on a Roll"

American Lawyer has the story by Dahlia Lithwick: "'Blawgs'—for the uninitiated—are legal blogs, and if you haven't incorporated them into your daily reading, you are missing out. The most compelling, cutting-edge, honest legal writing being produced in this country today is happening on the Internet, and the crop improves daily. .... [T]he Internet is poised to accommodate an entire universe of lawyers and legal thinkers. Why? Because it promotes dialogue, offers instant access to primary texts, and imposes no space or time constraints."

New Eleventh Circuit CAFA decision: Miedema v. Maytag Corp.

In Miedema v. Maytag Corp., ___ F.3d ___ (June 5, 2006), the Eleventh Circuit agreed with the Ninth Circuit that "less" is "more," and held that the seven-day period to file an application for permission to appeal a CAFA remand order is a deadline, not a waiting period: "[T]o read [the statute] literally would create an absurd result: there would be a front-end waiting period (an application filed 6 days after entry of a remand order would be premature), but there would be no back-end limit (an application filed 600 days after a remand order would not be untimely)." (Slip op. at 6-7.) My prior coverage of the Ninth Circuit's "less is more" decision, Amalgamated Transit Union Local 1309, AFL-CIO v. Laidlaw Transit Servs., Inc., 435 F.3d 1140 (9th Cir. 2006), is here and here.

The Eleventh Circuit also held that CAFA does not alter the rule that the defendant bears the burden of proving that jurisdiction exists, or the rule that removal stautes should be strictly construed and any doubts resolved in favor of remand. (Slip op. at 8-14.) The court then affirmed the district court's remand order, holding that the defendant had not proven the requisite amount in controversy by a preponderance of the evidence. (Slip op. at 14-19.) [Hat tip: How Appealing.]

"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."

Spring/Summer 2006 issue of Competition

The Spring/Summer 2006 issue of Competition: The Journal of the Antitrust and Unfair Competition Law Section of the State Bar of California is now out. It has two articles of interest relating to CAFA:

• Thomas S. Hixson, "The Class Action Fairness Act of 2005: One Year Later"
• Lisa Saveri, "Implications of the Class Action Fairness Act for Antitrust Cases: From Filing Through Trial"

Recent class action arbitration decision: Kristian v. Comcast Corp.

First things first. Today's my Dad's birthday. Happy Birthday, Dad!

Now back to business. In Kristian v. Comcast Corp., ___ F.3d ___, 2006 WL 1028758 (1st Cir. Apr. 20, 2006), the First Circuit joined the California Supreme Court in striking down a class action ban in an arbitration clause as unconscionable. The National Law Journal reported on the decision here, and the blog Appellate Law and Practice has more a more detailed discussion here.

"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.