The UCL Practitioner

"UCL Injunctions to Remedy the Past Effects of Wrongful Conduct: Before and After Proposition 64"

The September 2007 issue of Forum, the magazine of Consumer Attorneys of California, has my latest article, "UCL Injunctions to Remedy the Past Effects of Wrongful Conduct: Before and After Proposition 64." It is the second installment of my column, "The UCL/Class Action Zone." Again, if you are a plaintiffs' attorney, government lawyer, judge, research attorney, etc., email me at [email protected] and I will send you a copy of the article.

Blogosphere comment on "procedural unconscionability" aspects of Gentry

Bruce Nye of the blog Cal Biz Lit has an interesting post on the "procedural unconscionability" aspects of the Supreme Court's decision in Gentry. My own post on Gentry is here.

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.

Supreme Court issues "grant and hold" order in McAdams v. Monier

Yesterday, the Supreme Court issued a "grant and hold" order in McAdams v. Monier, no. S154088. Briefing is deferred pending resolution of In re Tobacco II Cases, no. S147345. The Court of Appeal's opinion, McAdams v. Monier, Inc., 151 Cal.App.4th 667 (2007), is no longer citable. Here is my original post on the review petition in this case, and here is my post on the Court of Appeal's opinion.

Update on the Ford trial in Sacramento

Many thanks to the reader who wrote in with an update on the Ford trial (Ford Explorer Cases, JCCP nos. 4266 & 4270). I'm told that 48 days of trial had been completed as of September 7, 2007 (about 28 days of testimony for plaintiffs and about 18 for Ford). After a two-week break, trial is expected to resume on Monday, September 24. Ford has a couple of hours more of its case to present before it rests, and plaintiffs expect to put on a short rebuttal case. Closing arguments, limited to about two hours per side, are expected to take place on the 25th or 26th. Thereafter, both sides are expected to file post-trial briefs, proposed findings of fact and conclusions of law, etc. My source writes, "I would hope that Judge DeAlba would issue a decision by the end of this year."

If I receive copies of the post-trial briefing, I will definitely put it up here.

Important new UCL restitution decision: Shersher v. Superior Court

In an important new decision, Shersher v. Superior Court, ___ Cal.App.4th ___ (September 10, 2007), the Court of Appeal (Second Appellate District, Division Five) held that the presence of a retail intermediary does not bar a UCL restitution award. The following sentence from Korea Supply had led defendants to argue (and some trial courts to hold) that restitution is not an available remedy in cases involving retail intermediaries because the defendant took no money "directly" from the plaintiff: "Any award that plaintiff would recover from defendants would not be restitutionary as it would not replace any money or property that defendants took directly from plaintiff.” Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1132, 1149 (2003) (emphasis added). The Court of Appeal explained in Shersher that this language was not intended to limit the UCL's restitution remedy to cases by "direct" purchasers:

Nothing in the language of Korea Supply suggests that the Supreme Court intended to preclude consumers from seeking the return of money they paid for a product that turned out to be not as represented. Rather, the holding of Korea Supply on the issue of restitution is that the remedy the plaintiff seeks must be truly “restitutionary in nature”—that is, it must represent the return of money or property the defendant acquired through its unfair practices.

Slip op. at 7. Shersher should finally put an end to this argument in cases involving products sold through retailers. Shersher also distinguished Alch v. Superior Court, Madrid v. Perot Systems, and Feitelberg v. Credit Suisse.

UPDATE: A reader posted a comment asking why Korea Supply uses the word "directly," if it's not intended to limit the scope of UCL "restitution." In fact, no appellate court has held that the word "directly" limits UCL actions to cases not involving retail intermediaries. Nor would such a holding be consistent with Korea Supply. The quoted sentence appears to support such an argument only when taken out of context. As explained in the Shersher decision, Korea Supply involved a claim for what amounted to damages, and did not involve loss of money that was once in the plaintiff's hands. That was the point of the word "directly" in Korea Supply. No money or property had passed "directly" from the plaintiff's pocket to the defendant's (whether through an intermediary or otherwise). Nor had it done so in Alch, Madrid, or Feitelberg. Hence, the plaintiffs in those cases had no UCL restitution claim. The facts of Shersher (and other cases involving manufacturers who misled consumers about their goods, but sold the goods through retailers) are quite different and fall squarely within the definition of "restitution" set forth in Korea Supply. In the Shersher court's words:

The UCL [as interpreted in Korea Supply] ... requires only that the plaintiff must once have had an ownership interest in the money or property acquired by the defendant through unlawful means. Microsoft’s argument is contrary to the plain language of the UCL and the Supreme Court’s mandate that the UCL be interpreted broadly.

Slip op. at 10.

Eleventh Circuit invalidates "no class action" arbitration clause: Dale v. Comcast Corp.

In Dale v. Comcast Corp., ___ F.3d ___ (11th Cir. Sept. 4, 2007), the Eleventh Circuit reversed a district court order compelling abitration, saying, in relevant part:

Corporations should not be permitted to use class action waivers as a means to exculpate themselves from liability for small-value claims.

We thus conclude that the enforceability of a particular class action waiver in an arbitration agreement must be determined on a case-by-case basis, considering the totality of the facts and circumstances. Relevant circumstances may include, but are not limited to, the fairness of the provisions, the cost to an individual plaintiff of vindicating the claim when compared to the plaintiff’s potential recovery, the ability to recover attorneys’ fees and other costs and thus obtain legal representation to prosecute the underlying claim, the practical affect [sic] the waiver will have on a company’s ability to engage in unchecked market behavior, and related public policy concerns.

Slip op. at 17.

Blog hiatus until next week

The blog will be on hiatus until the week of September 17. I can be reached by email at [email protected] or by phone at 415-433-2070.

Appellate briefs in County of Santa Clara v. Superior Court (ARCO)

As I previously reported, in April, Santa Clara County Superior Court Judge Jack Komar ruled that a public entity (specifically, the County of Santa Clara) may not hire private lawyers to represent it on a contingency-fee basis. County of Santa Clara v. Atlantic Richfield Co., Santa Clara County Superior Court case no. 1-00-CV-788657, Order Regarding Defendants' Motion to Bar Payment of Contingent Fees to Private Attorneys, April 4, 2007.

On May 11, 2007, the County of Santa Clara filed a writ petition, and on June 28, 2007, the Court of Appeal (Sixth Appellate District) issued an Order to Show Cause. County of Santa Clara v. Superior Court (ARCO), no. H031540.

This is an interesting case because it could affect the ability of counties and other public entities to retain private lawyers to handle UCL cases on their behalf. This has become much more important since Proposition 64, which limited the ability of private parties to bring public enforcement actions under the UCL. See, e.g., Barbara M. Motz, "Problems in Partnering With Public Prosecutors," 14 Competition 55 (2005) (members-only link).

Many thanks to Santa Clara County Counsel Ann Miller Ravel for providing copies of these briefs from the writ proceeding:

• Petition for Writ of Mandate (filed 05/11/07)
  

• Return by Real Parties in Interest to Petition for Writ of Mandate (filed 07/30/07)
  

• Petitioners' Reply to Real Parties' Return (filed 08/20/07)
  

• Amici Curiae Brief of the California State Association of Counties and the League of California Cities (filed 06/29/07)
  

• Amicus Curiae Brief of the Association of California Water Agencies (filed 08/29/07)
  

• Amici Curiae Brief of Public Justice, P.C., Healthy Children Organizing Project, and Western Center for Law and Poverty (filed 08/29/07)
  

• Amici Curiae Brief of the Chamber of Commerce of the United States and the American Tort Reform Association (filed 08/29/07)
  

The primary authority on which Judge Komar relied, and which most of the briefs attempt to distinguish, is People ex rel. Clancy v. Superior Court, 39 Cal.3d 740 (1985). This case is also discussed in the article by Supervising Deputy Attorney General Motz.

Another pro-class-action decision from the Supreme Court: Gentry v. Superior Court

Like Pioneer Electronics (USA), Inc. v. Superior Court, 40 Cal.4th 360 (2007), the Supreme Court's opinion in Gentry v. Superior Court, ___ Cal.4th ___, 2007 WL 2445122 (Aug. 30, 2007) is very favorable to class actions generally, and to wage and hour class actions in particular.

First of all, the Court reaffirmed the importance of class actions in our judicial system in general, and in wage and hour cases in particular. “By preventing ‘a failure of justice in our judicial system,’ the class action not only benefits the individual litigant but serves the public interest in the enforcement of legal rights and statutory sanctions.” Gentry, slip op. at 20 (quoting Bell v. Farmers Insurance Exchange, 115 Cal.App.4th 715, 741 (2004)). For this reason, among others, the Gentry court determined that individual wage and hour hearings before the Labor Commissioner (Berman hearings) “are neither effective nor practical substitutes for class action [proceedings].” Id. at 24.

Additionally, throughout its opinion, the Gentry court favorably cited Bell, a leading Court of Appeal decision affirming class certification in a wage and hour (misclassification) case involving far more complex evidence than many wage and hour class actions. The Gentry court repeatedly expressed its agreement with the Bell decision, its reasoning, and its holdings. See, e.g., Gentry, slip op. at 10, 13, 14, 16, 20, 24 (citing Bell, 115 Cal.App.4th 715). These favorable citations strengthen Bell's value as precedent.

The Gentry court went on to observe that class actions are particularly appropriate in wage and hour cases, where, “absent effective enforcement, the employer’s cost of paying occasional judgments and fines may be significantly outweighed by the cost savings of not [complying with the Labor Code].” Gentry, slip op. at 20. As the Supreme Court has previously observed, when employers and other defendants find compliance with the law more costly than violation, a class action will be “the only effective way to halt and redress such exploitation.” Linder, 23 Cal.4th at 446.

What's also interesting about Gentry is that Chief Justice George turned out to be the swing vote. You may have noticed that in another wage and hour case, Prachasaisoradej v. Ralph's Grocery Co., ___ Cal.4th ___ (Aug. 23, 2007), decided one week before Gentry, Chief Justice George and Justices Baxter, Chin and Corrigan formed the four-justice majority in favor of the employer. In Gentry, Chief Justice George swung the other way, leaving Justices Baxter, Chin and Corrigan as the three-justice minority in favor of the employer. In another recent wage and hour case, Murphy v. Kenneth Cole Productions, Inc., 40 Cal.4th 1094 (2007), the Court unanimously adopted the employees' position. More time would be needed to analyze these decisions and try to discern what may have influenced certain justices' votes.

Judges do read law blogs

J. Craig Williams of May it Please the Court provides a link to an article from Case in Point, the magazine of the National Judicial College, called "Are You Out There? Blogging on the Bench." The article discusses not only judges who blog, but also the blogs judges read. The article specifically cites May it Please the Court as a blog that judges read.

I've heard from some judges and their research attorneys that they read The UCL Practitioner. In fact, my blog was cited in one trial court order that I'm aware of. If you are a judge or research attorney and you read my blog, I'd love to hear from you and get your feedback. I can be reached by email ([email protected]) or phone (415-433-2070). I will, of course, keep your communications confidential.

[Via Blawg Review]