The UCL Practitioner

Supreme Court to hand down opinion Monday in Miller v. Bank of America

The Supreme Court announced today that it will be handing down its opinion in Miller v. Bank of America, no. S149178, on Monday at 10:00 a.m. When it is posted, the opinion will be available at this link: Miller v. Bank of America, ___ Cal.4th ___ (Jun. 1, 2009).

The case raises UCL and CLRA claims in the following context:

Does California law, which provides that a bank account into which public benefit funds or Social Security payments have been electronically deposited is exempt from attachment and execution, prohibit a bank from exercising its right to setoff as to charges—such as overdraft fees and insufficient fund fees—arising out of use of that same account?

Here are some prior blog posts on the case.

Impact of Tobacco on the Walker/G&C Auto Body split in authority

I have previously written (see these two posts) about the split in authority respecting whether a plaintiff who has suffered "damages" has Prop. 64 standing to seek injunctive relief, even if the loss does not constitute recoverable restitution.  The federal district courts have split on this point.  Compare Walker v. USAA Casualty Ins. Co., 474 F.Supp.2d 1168 (E.D. Cal. 2007) ("damages" insufficient to confer Prop. 64 standing) with G&C Auto Body Inc. v. Geico General Insurance Co., 2007 WL 4350907 (N.D. Cal. Dec. 12, 2007) (contra). 

The California Courts of Appeal also disagree. Compare, e.g., Overstock.com, Inc. v. Gradient Analytics, Inc., 151 Cal.App.4th 688, 716 (2007) (damages sufficient) with Buckland v. Threshold Enters., Ltd., 155 Cal.App.4th 798 (2007) (contra) (dicta) and Citizens of Humanity LLC v. Costco Wholesale Corp., 171 Cal.App.4th 1, 22 (Feb. 11, 2009) (same).  

In March, in a very cursory opinion, the Ninth Circuit affirmed the district court's ruling in Walker. Walker v. Geico General Ins. Co., 558 F.3d 1025 (9th Cir. Mar. 10, 2009). This is the sum total of the Ninth Circuit's analysis:

Walker's position is that, although he cannot establish the requisite “lost money or property” for purposes of monetary relief under the UCL, he is nevertheless entitled to an injunction effectively requiring these insurers in the future to pay higher rates for their insureds' auto body repairs. His argument is supported neither by the language of the amended statute nor its purpose. See Buckland v. Threshold Enters. Ltd., 155 Cal.App.4th 798, 66 Cal.Rptr.3d 543, 557 (2007) (“Because remedies for individuals under the UCL are restricted to injunctive relief and restitution, the import of the requirement is to limit standing to individuals who suffer losses of money or property that are eligible for restitution.”). The history and purpose of the law are outlined more fully in the district court's opinion, with which we agree. See Walker, 474 F.Supp.2d at 1172.

Walker, 558 F.3d at 1027 (bold added). 

Contrary to the Ninth Circuit's holding, the argument is fully unsupported by the amended statute.  It says "suffered injury in fact and lost money or property."  Damages falls squarely within that definition.  Also contrary to the Ninth Circuit's position, "lost money or property" is not "requisite ... for purposes of monetary relief under the UCL."  (See the language in bold, above.)

The district court in Walker made that same mistake, erroneously saying that the California Supreme Court had interpreted the words "lost money or property" "for section 17203 purposes" in Korea Supply and Cortez. Walker, 474 F.Supp.2d at 1172. But those words appeared nowhere in the UCL before Prop. 64, and they still appear nowhere in section 17203 (the UCL's remedies provision).  Accordingly, neither Korea Supply nor Cortez could have said (or did say) anything about what "lost money or property" meant -- either in section 17203 (where those words do not appear at all) or in section 17204 (where they appear only post-Prop. 64).  The district court in Walker went badly astray by concluding that "lost money or property" as used in section 17204 "should be interpreted identically to the 'lost money or property' California courts require for section 17203 purposes" -- because no such "requirement" has ever existed in section 17203.   (The other problems with the district court's analysis in Walker are discussed in my article last year for CAOC Forum.)

Indeed, the Supreme Court in Tobacco took pains to explain that "the language of section 17203 with respect to those entitled to restitution — 'to restore to any person in interest any money or property, real or personal, which may have been acquired' (italics added) by means of the unfair practice — is patently less stringent than the standing requirement for the class representative — 'any person who has suffered injury in fact and has lost money or property as a result of the unfair competition.' (§ 17204, italics added.)"  In re Tobacco II Cases, ___ Cal.4th ___ (May 26, 2009) (bold added) (slip op. at 22).   Far from holding that the two standards should be "interpreted identically" (Walker, 474 F.Supp.2d at 1172), the Supreme Court in Tobacco held that they are "patently" different.  Tobacco exposes the two Walker opinions' flawed reasoning and undermines the value of the Ninth Circuit's Walker opinion as a precedent. 

Three weeks ago (before Tobacco), Judge Maxine Chesney of the Northern District wrote an interesting order discussing both the Ninth Circuit's Walker opinion and the Court of Appeal's opinion in Buckland:

In support of its argument, Logitech relies on Walker v. Geico Gen. Ins. Co., 558 F.3d 1025 (9th Cir.2009), and Buckland v. Threshold Enters., Ltd., 155 Cal.App.4th 798(2007), wherein standing under the UCL was stated to be limited "to individuals who suffer losses of money or property that are eligible for restitution ." See Walker, 558 F.3d at 1027 (quoting Buckland, 155 Cal.App.4th at 817, 66 Cal.Rptr.3d 543). In so stating, however, neither Walker nor Buckland was suggesting that the only type of action that may be brought under the UCL is one for restitution, nor would such a holding be consistent with the language of the UCL, which, for purposes of standing, requires only that the plaintiff have "suffered injury in fact and [ ] lost money or property." See Cal. Bus. & Prof.Code § 17204. Rather, those courts, by the use of the phrase "eligible for restitution," were endeavoring to distinguish between the losses claimed in the respective cases before them and the type of loss cognizable under the UCL, specifically, a loss of "money or property" in which the plaintiff has "either prior possession or a vested legal interest." See Walker v. USAA Cas. Ins. Co., 474 F.Supp.2d 1168, 1172 (E.D.Cal.2007); see also Walker, 558 F.3d at 1027 ("agree[ing]" with district court's analysis). In particular, as determined in both Walker and Buckland, neither of the respective plaintiffs therein had actually "lost money or property" of any sort. See Walker, 474 F.Supp.2d at 1173 (finding plaintiff lacked vested interest where claim based on "estimate for proposed work"; distinguishing case where claim based on non-payment for work performed); Buckland, 155 Cal.App.4th at 818 & n. 11 (noting Buckland "voluntarily [bought] [the] defendant's product to pursue a UCL action in the public interest," and, consequently, her purchase "[could not] reasonably be viewed as 'lost' money or property under the standing requirement").

By contrast, where a plaintiff has adequately alleged "loss of income," "loss of financial resources," or "economic loss," a number of courts, subsequent to the enactment of the UCL standing requirement at issue herein, have found such plaintiff has standing under the UCL, irrespective of any such plaintiff's inability to seek restitution from the defendant named therein. See, e.g., White v. Trans Union LLC, 462 F.Supp.2d 1079, 1084 (C.D.Cal.2006) (holding, where plaintiff alleges "loss of income" and seeks only injunctive relief, UCL "does not require that the losses in question were the product of the defendant's wrongful acquisition of the plaintiff's property"); So. Cal. Housing Rights Ctr. v. Los Feliz Towers Homeowners Ass'n, 426 F.Supp.2d 1061, 1069 (C.D.Cal.2005) (holding plaintiff Housing Rights Center had standing under UCL "because it present[ed] evidence of actual injury based on loss of financial resources in investigating [a discrimination] claim and diversion of staff time from other cases to investigate the allegations [therein]"); Aron v. U-Haul Co. of Cal., 143 Cal.App.4th 796, 802-03 (2006) (holding plaintiff had standing where plaintiff alleged "he suffered economic loss by being required to purchase excess fuel" from third party before returning rental truck to defendant).

Fulford v. Logitech, Inc., 2009 WL 1299088, *1 (N.D. Cal. May 08, 2009) (footnotes omitted) (bold added). 

Notwithstanding Tobacco, this question may not be resolved until the Supreme Court specifically takes it up in an appropriate case. 

Recent Ninth Circuit CAFA decision: Davis v. HBSC Bank Nevada

I'm catching up a bit on opinions handed down while I was on a semi-hiatus from blogging. 

In Davis v. HBSC Bank Nevada, N.A., 557 F.3d 1026 (Mar. 4, 2009), the Ninth Circuit construed the term "citizen" for purposes of the local controversy exception to CAFA jurisdiction (28 U.S.C. §1332(d)(4)):

[W]e hold that a nationwide retailer with operations spread across many states will be a citizen of California only when a substantial predominance of its activities are located in California; it will not be a citizen of California merely because its operations in California cater to California’s larger population.

Slip op. at 2786.

Recent Ninth Circuit class-action-related decisions: Chalk v. T-Mobile USA, Inc., Hunt v. Imperial Merchant Services, Inc., Rodriguez v. West Publishing Corp., and Hatfield v. Halifax PLC

The Ninth Circuit has handed down a number of interesting opinions relating to class actions in recent months:

• In Chalk v. T-Mobile USA, Inc., 560 F.3d 1087 (Mar. 27, 2009), the court struck down an arbitration clause with a class action ban as unconscionable under Oregon law.
  
  
• In Hunt v. Imperial Merchant Servs., Inc., 560 F.3d 1137 (Mar. 31, 2009), the court held, apparently for the first time, that "a district court has the discretion to require a class action defendant to pay the costs of class notification when the court has already determined that the defendant is liable on the merits." Slip op. at 3885.
  
  
• In Rodriguez v. West Publishing Corp., 563 F.3d 948 (Apr. 23, 2009), the court affirmed an order granting final approval of a class action settlement, although it disapproved of certain "ex ante incentive agreements" between some (but not all) of the class representatives and class counsel.
  
  
• In Hatfield v. Halifax PLC, ___ F.3d ___, 2009 WL 1259380 (May 3, 2009), the Ninth Circuit held that California courts would recognize American Pipe tolling, at least as to California class members. The opinion discusses American Pipe tolling in detail. [Via The Complex Litigator.]

We are still waiting for the Ninth Circuit to hand down its en banc opinion in Dukes v. Wal-Mart, Inc., nos. 04-16688 & 04-16720, which was argued on March 24, 2009.

OFF-TOPIC BREAKING NEWS: Supreme Court upholds Prop. 8: Strauss v. Horton

The African race was not in the contemplation of the framers of the Constitution when privileges and immunities were provided for the protection of the citizen.
Dred Scott v. Sandford, 60 U.S. 393 (1856).

Neither slavery nor involuntary servitude shall exist within the United States, or any place subject to their jurisdiction.
U.S. Const., Amend. XIII, §1 (1865).

When the legislature gave to this court the power of granting licenses to practice law, it was with not the slightest expectation that this privilege would be extended to women.
In re Bradwell, 55 Ill. 535 (1869).

No person shall on account of sex be disqualified from entering upon or pursuing any lawful business, vocation, or profession.
Cal. Const., Art. XX, §18 (1879).

All marriages of white persons with negroes, Mongolians, or mulattoes are illegal and void.
Cal. Civ. Code §60 (1933).

The right to marry is the right of individuals, not of racial groups. The equal protection clause does not refer to rights of the Negro race, the Caucasian race, or any other race, but to the rights of individuals.
Perez v. Sharp, 32 Cal.2d 711 (1948).

Times can blind us to certain truths and later generations can see that laws once thought necessary and proper in fact serve only to oppress.  As the Constitution endures, persons in every generation can invoke its principles in their own search for greater freedom.
Lawrence v. Texas, 539 U.S. 558 (2003) (Kennedy, J.).

In light of the fundamental nature of the right to marry, the California Constitution must be interpreted to guarantee this right to all individuals and couples, without regard to their sexual orientation.
In re Marriage Cases, 43 Cal.4th 757 (2008).

Only marriage between a man and a woman is valid or recognized in California.
Cal. Const., Art. 1, §7.5 (2008).

Having been approved by a majority of the voters at the November 4, 2008 election, the initiative measure lawfully amends the California Constitution to include the new provision as article I, section 7.5.
Strauss v. Horton, ___ Cal.4th ___ (May 26, 2009) (slip op. at 12). 

[Prop. 8] reserv[es] the official designation of the term “marriage” for the union of opposite-sex couples as a matter of state constitutional law, but leav[es] undisturbed all of the other extremely significant substantive aspects of a same-sex couple’s state constitutional right to establish an officially recognized and protected family relationship and the guarantee of equal protection of the laws.
Id. (slip op. at 7).

UPDATE 08/04/10:

Because Proposition 8 is unconstitutional under both the Due Process and Equal Protection Clauses, the court orders entry of judgment permanently enjoining its enforcement.
Perry v. Schwarzenegger, ___ F.Supp.2d ___ (N.D. Cal. Aug. 4, 2010).

Enhanced remedies in UCL actions brought by senior citizens: Clark v. Superior Court (Nat'l Western Life Ins. Co.)

In Clark v. Superior Court (Nat'l Western Life Ins. Co.), ___ Cal.App.4th ___ (May 21, 2009), the Court of Appeal (Second Appellate District, Division Seven) held that Civil Code section 3345, which authorizes enhanced remedies in actions by senior citizens for “unfair or deceptive acts or practices or unfair methods of competition,” applies in UCL cases. 

Notably, the opinion cites Tobacco:

The deterrent effect of a restitution remedy under the unfair competition law was most recently articulated in In re Tobacco II Cases (May 18, 2009, S147345) ___ Cal.4th ___ [2009 Cal. Lexis 4365], in which the Supreme Court noted in the context of interpreting Proposition 64’s impact on class actions that its holdings in prior nonrestitutionary disgorgement cases “did not overrule any part of Fletcher v. Security Pacific National Bank, supra, 23 Cal.3d 442, under which restitution may be ordered ‘without individualized proof of deception, reliance, and injury if necessary to prevent the use or employment of an unfair practice.’” (In re Tobacco II Cases, at p. ___, fn. 14.)

Slip op. at 15 (footnote omitted).  The opinion also discusses Korea Supply and Cel-Tech.

UPDATE:  On September 9, 2009, the California Supreme Court granted review in this case. 

More amicus letters in support of review in Kwikset Corp. v. Superior Court (Benson)

Here are copies of six more amicus letters in support of the petition for review in Kwikset Corp. v. Superior Court (Benson), no. S171845:

• Amicus Letter of California Teamsters Public Affairs Council (dated 04/28/09)
• Amicus Letter of Consumer Attorneys of California (dated 04/28/09)
• Amicus Letter of the San Francisco District Attorney (dated 05/08/09)
• Amicus Letter of the National Association of Consumer Advocates and the National Consumer Law Center (dated 05/08/09)
• Amicus Letter of the Natural Resources Defense Council (dated 05/11/09)
• Amicus Letter of Agudath Israel of California (undated)

A seventh amicus letter, plus a copy of the petition for review, are available at this post.

It would be very appropriate for the Supreme Court to take up Kwikset, especially now that Tobacco has been decided.  In Tobacco, the Court interpreted Prop. 64's "as a result of" language in the context of a UCL "fraudulent" prong claim.  Kwikset would address Prop. 64's "lost money or property" language in the same context.  The question naturally flows next from what the Supreme Court decided in Tobacco. 

Once "actual reliance" is established under Tobacco (that is, that the defendant's misrepresentation was "a substantial factor" in the named plaintiff's purchasing decision (Tobacco, slip op. at 30)), the lower courts will still need to address whether the money the named plaintiff paid for the falsely-represented product counts as having been "lost" or whether (as Kwikset held) the product must be somehow defective or inferior -- in addition to falsely represented.  It will be quite interesting to see what the Court does.

More coverage of In re Tobacco II Cases

The San Francisco Chroncile reported yesterday that "Class-action lawsuit over tobacco ads proceeds."  The article quotes Mark Robinson (who argued on behalf of the plaintiffs in Tobacco) and Will Stern (who authored Prop. 64). 

There has been more law blog coverage since yesterday, with reports on all of these blogs:  California Wage Law, Blawgletter, Class Action Blawg, Point of Law Forum, The Pop Tort, Storm's California Employment Law, Class Action Defense Blog, Rebecca Tushnet's 43(B)log, TortsProf Blog.

Incidentally, on Monday The UCL Practitioner received over 1,000 hits, which blows away my prior single-day record by a substantial margin.  Thanks, as always, to everyone for reading!

"In Loss for Big Tobacco, Calif. Supreme Court Loosens Standing to Sue Under Proposition 64"

In an article in this morning's Recorder, Mike McKee writes: "Big Tobacco and other major businesses took a hit Monday when the California Supreme Court ruled that class actions over alleged fraud can go forward, even if it's impossible to tell whether every plaintiff was harmed by deceptive ads."

And the Daily Journal reports on the "Big Win for Plaintiff's Bar in Class Action Case" (subscription).  Laura Ernde writes:

Consumer class-action lawsuits are alive and well in California after a 4-3 decision Monday from the state Supreme Court that limited the reach of a 2005 voter initiative targeting frivolous lawsuits.

The ruling was a big win for plaintiff's attorneys, who feared the court would make it nearly impossible for them to use the state's unfair competition law to hold businesses responsible for false advertising claims.

The Los Angeles Times reports today that "Calif. top court revives class action against tobacco industry" (with comments from both Will Stern and Sharon Arkin, who are frequent co-speakers on UCL panels).  A short AP article appeared yesterday afternoon on the websites of the San Francisco Chroncile and the Sacramento Bee, and Bloomberg News ran a story. 

In the blogosphere, Cal Biz Lit has two posts on the opinion, and the Consumer Law & Policy Blog has a short report.

"California Supreme Court revives class-action suit against tobacco firms"

The Los Angeles Times blog, LA Now, already has a report on this morning's Tobacco opinion.  An excerpt:

The California Supreme Court decided 4-3 today that consumers can file class-action lawsuits against the tobacco industry and other businesses under a law voters limited in 2004, reversing a trend in the lower courts.

The decision, written by Justice Carlos R. Moreno, revived a class-action lawsuit against the tobacco industry that lower courts dismissed. ....

The ruling was the state high court’s most significant interpretation of Proposition 64, the 2004 initiative that limited suits under a major consumer law to people who claimed they had lost money or property as a result of a company’s wrongdoing.

By interpreting this so-called “standing” requirement flexibly, the court cleared the way for consumer class actions that many lower courts have been throwing out.

See the blog post immediately below for more on the opinion.

Supreme Court preserves UCL class actions in In re Tobacco II Cases

This morning, the Supreme Court preserved UCL class actions through its opinion In re Tobacco II Cases, ___ Cal.4th ___ (May 18, 2009). Here are some highlights from the majority opinion:

• The fraudulent business practice prong of the UCL has been understood to be distinct from common law fraud. “A [common law] fraudulent deception must be actually false, known to be false by the perpetrator and reasonably relied upon by a victim who incurs damages. None of these elements are required to state a claim for injunctive relief” under the UCL. (Day v. AT&T Corp. (1998) 63 Cal.App.4th 325, 332; see State Farm Fire & Casualty Co. v. Superior Court (1996) 45 Cal.App.4th 1093, 1105.) This distinction reflects the UCL’s focus on the defendant’s conduct, rather than the plaintiff’s damages, in service of the statute’s larger purpose of protecting the general public against unscrupulous business practices. (Fletcher v. Security Pacific National Bank (1979) 23 Cal.3d 442, 453.) [Slip op. at 11 (bold added).]
  
  
• [I]n granting defendants’ motion for decertification, the trial court concluded that “the simple language of Prop[osition] 64” required each class member to show injury in fact and causation. Thus, the trial court construed the text of Proposition 64 as requiring absent members to affirmatively demonstrate that they met Proposition 64’s standing requirements — injury in fact and the loss of money or property as a result of the unfair practice. We conclude that the trial court’s construction of Proposition 64 was erroneous. [Slip op. at 14 (bold added).]
  
  
• Notably, the references in section 17203 to one who wishes to pursue UCL claims on behalf of others are in the singular; that is, the “person” and the “claimant” who pursues such claims must meet the standing requirements of section 17204 and comply with Code of Civil Procedure section 382. The conclusion that must be drawn from these words is that only this individual — the representative plaintiff — is required to meet the standing requirements. [Slip op. at 15 (bold added).]
  
  
• Notably absent from the ballot materials is any indication that the purpose of the initiative was to alter the way in which class actions operate in the context of the UCL. Indeed, other than the requirement that the representative plaintiff comply with Code of Civil Procedure section 382, the ballot materials contain no reference whatsoever to class actions nor is there any indication that Proposition 64 was intended in any way to alter the rules surrounding class action certification. Those rules do not require that unnamed class members establish standing but, insofar as standing is concerned, focus on the class representative. [Slip op. at 18-19 (bold added).]
  
  
• Moreover, Proposition 64 left intact provisions of the UCL that support the conclusion that the initiative was not intended to have any effect on absent class members. Specifically, Proposition 64 did not amend the remedies provision of section 17203. This is significant because under section 17203, the primary form of relief available under the UCL to protect consumers from unfair business practices is an injunction, along with ancillary relief in the form of such restitution “as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition.” (§ 17203.) [Slip op. at 21 (bold added).]
  
  
• Neither form of relief requires that the absent class members, on whose behalf such relief is sought, meet the same standing requirements as are imposed upon the class representative. Injunctive relief operates “ ‘ “in futuro.” ’ ” (Koebke v. Bernardo Heights Country Club (2005) 36 Cal.4th 824, 837.) The purpose of such relief, in the context of a UCL action, is to protect California’s consumers against unfair business practices by stopping such practices in their tracks. An injunction would not serve the purpose of prevention of future harm if only those who had already been injured by the practice were entitled to that relief. Indeed, “[a]n injunction should not be granted as punishment for past acts where it is unlikely that they will recur.” (Choice-in-Education League v. Los Angeles Unified School Dist. (1993) 17 Cal.App.4th 415, 422.) [Slip op. at 21-22 (footnote omitted).]  [Slip op. at 21-22 (footnote omitted) (bold added).]
  
  
• It is conceivable that a named class representative who met the standing requirements under Proposition 64 could pursue a broad-based UCL class action in which only injunctive relief was sought on behalf of a class that was likely to, but had not yet, suffered injury arising from the unfair business practice. We need not decide here whether such an action would be proper. [Slip op. at 22 n.13.]
  
  
• Similarly, the language of section 17203 with respect to those entitled to restitution — “to restore to any person in interest any money or property, real or personal, which may have been acquired” (italics added) by means of the unfair practice — is patently less stringent than the standing requirement for the class representative — “any person who has suffered injury in fact and has lost money or property as a result of the unfair competition.” (§ 17204, italics added.) This language, construed in light of the “concern that wrongdoers not retain the benefits of their misconduct” (Fletcher v. Security Pacific National Bank, supra, 23 Cal.3d 442, 452) has led courts repeatedly and consistently to hold that relief under the UCL is available without individualized proof of deception, reliance and injury. (E.g., Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1267; Committee on Children’s Television, Inc. v. General Foods Corp., supra, 35 Cal.3d at p. 211.) Accordingly, to hold that the absent class members on whose behalf a private UCL action is prosecuted must show on an individualized basis that they have “lost money or property as a result of the unfair competition” (§ 17204) would conflict with the language in section 17203 authorizing broader relief — the “may have been acquired” language — and implicitly overrule a fundamental holding in our previous decisions, including Fletcher, Bank of the West and Committee on Children’s Television. Had this been the intention of the drafters of Proposition 64 — to limit the availability of class actions under the UCL only to those absent class members who met Proposition 64’s standing requirements — presumably they would have amended section 17203 to reflect this intention. Plainly, they did not. [Slip op. at 22-23 (footnote omitted) (bold added).]
  
  
• Our conclusion with respect to the remedies set forth in section 17203 has nothing to do with the nonrestitutionary disgorgement disallowed in Kraus v. Trinity Management Services, Inc., supra, 23 Cal.4th 116. In Kraus, we concluded that section 17203 does not allow a court to order disgorgement into a fluid recovery fund, e.g., to “compel a defendant to surrender all money obtained through an unfair practice even though not all is to be restored to the persons from whom it was obtained or those claiming under those persons.” (Id. at p. 127.) This prohibition against nonrestitutionary disgorgement did not overrule any part of Fletcher v. Security Pacific National Bank, supra, 23 Cal.3d 442, under which restitution may be ordered “without individualized proof of deception, reliance, and injury if necessary to prevent the use or employment of an unfair practice.” (Bank of the West, supra, 2 Cal.4th at p. 1267.) [Slip op. at 23 n.14 (bold added).]
  
  
• The substantive right extended to the public by the UCL is the “ ‘ “right to protection from fraud, deceit and unlawful conduct” ’ ” (Prata v. Superior Court (2001) 91 Cal.App.4th 1128, 1137), and the focus of the statute is on the defendant’s conduct. As we have already observed, the proponents of Proposition 64 told the electorate that the initiative would not alter the statute’s fundamental purpose of protecting consumers from unfair businesses practices. Rather, the purpose of the initiative was to address a specific abuse of the UCL’s generous standing provision by eliminating that provision in favor of a more stringent standing requirement. That change, as we observed in Mervyn’s, did not change the substantive law. (Mervyn’s, supra, 39 Cal.4th at p. 232.) [Slip op. at 27-28 (bold added).]
  
  
• We emphasize that our discussion of causation in this case is limited to such cases where, as here, a UCL action is based on a fraud theory involving false advertising and misrepresentations to consumers. The UCL defines “unfair competition” as “includ[ing] any unlawful, unfair or fraudulent business act or practice . . . .” (§ 17200.) There are doubtless many types of unfair business practices in which the concept of reliance, as discussed here, has no application. [Slip op. at 30 n.17 (emphasis added).]
  
  
• Moreover, as noted, before Proposition 64, “California courts have repeatedly held that relief under the UCL is available without individualized proof of deception, reliance and injury.” (Massachusetts Mutual Life Ins. Co. v. Superior Court (2002) 97 Cal.App.4th 1282, 1288.) [¶] On the other hand, there is no doubt that reliance is the causal mechanism of fraud. (Molko v. Holy Spirit Assn. (1988) 46 Cal.3d 1092, 1108.) Additionally, because it is clear that the overriding purpose of Proposition 64 was to impose limits on private enforcement actions under the UCL, we must construe the phrase “as a result of” in light of this intention to limit such actions. (People v. Cooper (2002) 27 Cal.4th 38, 45 [“To determine the meaning of a statute, we seek to discern the sense of its language, in full context, in light of its purpose”].) Therefore, we conclude that this language imposes an actual reliance requirement on plaintiffs prosecuting a private enforcement action under the UCL’s fraud prong. [Slip op. at 30-31 (bold added).]
  
  
• This conclusion, however, is the beginning, not the end, of the analysis of what a plaintiff must plead and prove under the fraud prong of the UCL. Reliance is “an essential element of . . . fraud . . . . [¶] [R]eliance is proved by showing that the defendant’s misrepresentation or nondisclosure was ‘an immediate cause’ of the plaintiff’s injury-producing conduct. [Citation.] A plaintiff may establish that the defendant’s misrepresentation is an ‘immediate cause’ of the plaintiff’s conduct by showing that in its absence the plaintiff ‘in all reasonable probability’ would not have engaged in the injury-producing conduct.” (Mirkin v. Wasserman (1993) 5 Cal.4th 1082, 1110-1111 (conc. & dis. opn. of Kennard, J.).) [Slip op. at 31 (bold added).]
  
  
• While a plaintiff must show that the misrepresentation was an immediate cause of the injury-producing conduct, the plaintiff need not demonstrate it was the only cause. “ ‘It is not . . . necessary that [the plaintiff’s] reliance upon the truth of the fraudulent misrepresentation be the sole or even the predominant or decisive factor influencing his conduct. . . . It is enough that the representation has played a substantial part, and so had been a substantial factor, in influencing his decision.’ [Citation.] [¶] Moreover, a presumption, or at least an inference, of reliance arises wherever there is a showing that a misrepresentation was material. [Citations.] A misrepresentation is judged to be ‘material’ if ‘a reasonable man would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question’ [citations], and as such materiality is generally a question of fact unless the ‘fact misrepresented is so obviously unimportant that the jury could not reasonably find that a reasonable man would have been influenced by it.’ [Citation.]” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 976-977.)  Nor does a plaintiff need to demonstrate individualized reliance on specific misrepresentations to satisfy the reliance requirement. .... [Slip op. at 31-32 (bold added).]
  
  
• These decisions provide a framework for what plaintiffs must plead and prove in UCL fraud actions in terms of reliance. These cases teach that, while a plaintiff must allege that the defendant’s misrepresentations were an immediate cause of the injury-causing conduct, the plaintiff is not required to allege that those misrepresentations were the sole or even the decisive cause of the injury-producing conduct. Furthermore, where, as here, a plaintiff alleges exposure to a long-term advertising campaign, the plaintiff is not required to plead with an unrealistic degree of specificity that the plaintiff relied on particular advertisements or statements. Finally, an allegation of reliance is not defeated merely because there was alternative information available to the consumer-plaintiff, even regarding an issue as prominent as whether cigarette smoking causes cancer. [Citation.] Accordingly, we conclude that a plaintiff must plead and prove actual reliance to satisfy the standing requirement of section 17204 but, consistent with the principles set forth above, is not required to necessarily plead and prove individualized reliance on specific misrepresentations or false statements where, as here, those misrepresentations and false statements were part of an extensive and long-term advertising campaign. [Slip op. at 33-34.]
  
  
• Moreover, even assuming that, in light of Proposition 64, the named representatives are no longer adequate representatives of the class because they lack standing, the proper procedure would not be to decertify the class but grant leave to amend to redefine the class or add a new class representative. “This rule is usually applied in situations where the class representative originally had standing, but has since lost it by intervening law or facts.” (First American Title Ins. Co. v. Superior Court (2007) 146 Cal.App.4th 1564, 1574.) We ourselves sanctioned this procedure in a post-Proposition 64 case. (Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 243 [“courts have permitted plaintiffs who have been determined to lack standing, or who have lost standing after the complaint was filed, to substitute as plaintiffs the true parties in interest”].) Accordingly, we reverse the order granting the decertification motion and remand the case for further proceedings to determine whether these plaintiffs can establish standing as we have now defined it and, if not, whether amendment should be permitted. [Slip op. at 34 (bold added).]

So, what does it all mean? It means that, although the named class representatives must meet the standing requirements (which, in UCL "fraudulent" prong cases, includes a showing of "reliance"), for the unnamed class members, the showing required now is exactly the same as what it was pre-Prop. 64. That, after all, is what the Supreme Court held in Mervyn’s. Individualized proof of deception, reliance and injury are not required. After Tobacco, class certification of a UCL claim now should be as easy (or difficult, as the case may be) as it was before Prop. 64.

The opinion is up: In re Tobacco II Cases

The opinion is up.  It is a 4-3 decision, with Justices Baxter, Corrigan, and Chin filing a concurring and dissenting opinion.  Here is a paragraph from the introduction to the majority opinion by Justice Moreno:

On review, we address two questions: First, who in a UCL class action must comply with Proposition 64’s standing requirements, the class representatives or all unnamed class members, in order for the class action to proceed? We conclude that standing requirements are applicable only to the class representatives, and not all absent class members. Second, what is the causation requirement for purposes of establishing standing under the UCL, and in particular what is the meaning of the phrase “as a result of” in section 17204? We conclude that a class representative proceeding on a claim of misrepresentation as the basis of his or her UCL action must demonstrate actual reliance on the allegedly deceptive or misleading statements, in accordance with well-settled principles regarding the element of reliance in ordinary fraud actions. Those same principles, however, do not require the class representative to plead or prove an unrealistic degree of specificity that the plaintiff relied on particular advertisements or statements when the unfair practice is a fraudulent advertising campaign. Accordingly, we reverse the order of decertification to the extent it was based upon the conclusion that all class members were required to demonstrate Proposition 64 standing, and remand for further proceedings regarding whether the class representatives in this case have, or can demonstrate, standing.

Slip op. at 2-3. I hope to have more on the opinion later.

"Consumer class-action suits are on trial in California"

This morning's Los Angeles Times has an article anticipating tomorrow's Tobacco opinion.  The article quotes Harvey Rosenfield, Sharon Arkin, Tim Blood, and Will Stern, among others. 

BREAKING NEWS: Supreme Court to hand down In re Tobacco decision on Monday

Today, the Supreme Court announced that it will be handing down its decision in In re Tobacco II Cases, no. S147345, on Monday morning.  The opinion should be available at this link:

In re Tobacco II Cases, ___ Cal.4th ___ (May 18, 2009)

These are the issues on review in the case:

(1) In order to bring a class action under Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.), as amended by Proposition 64 (Gen. Elec. (Nov. 2, 2004)), must every member of the proposed class have suffered “injury in fact,” or is it sufficient that the class representative comply with that requirement? (2) In a class action based on a manufacturer’s alleged misrepresentation of a product, must every member of the class have actually relied on the manufacturer’s representations?

My report on the oral argument, which took place in early March, is available at this link.

Petition for review filed in Kwikset Corp. v. Superior Court (Benson)

On April 6, 2009, a petition for review was filed in Kwikset Corp. v. Superior Court (Benson), no. S171845. The answer and reply have also been filed, as well as a depublication request, and I've heard that multiple amicus letters in support of review are coming in. So far, I have copies of two items:

• Petition for Review (filed 04/06/09)
  
• Amicus Letter of Consumer Action et al. (dated 05/06/09)

My original blog post on the Court of Appeal opinion, Kwikset Corp. v. Superior Court (Benson), 171 Cal.App.4th 645 (Feb. 25, 2009) (Fourth Appellate District, Division Three), is at this link.

In related news, a petition for review and depublication request have also been filed in Troyk v. Farmers Group, Inc., no. S172288.  

UPDATE:  Thanks to the blog reader who emailed to advise me of a problem with the links to the two briefs.  The problem has been fixed and you should now be able to access them.

New class member discovery decision: Safeco Ins. Co. v. Superior Court

In Safeco Ins. Co. v. Superior Court, ___ Cal.App.4th ___ (Apr. 30, 2009), the Court of Appeal (Second Appellate District, Division Three) held that the trial court did not abuse its discretion by allowing precertification discovery of class member contact information.