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. 

Comments

[AndytheLawyer]

Let's assume for a moment that a UCL plaintiff who has a claim for damages but not for restitution has standing to sue under the UCL for the reasons Kimberly posits. After a successful trial, the plaintiff would be entitled to nothing of value -- because damages are not a UCL remedy. This plaintiff's standing would only be useful to UCL plaintiffs' counsel who, post-Propsition 64, no longer can use any random person to act as a plaintiff as a wedge into the courthouse door and towards a fat fees award -- presumably based on a restitution-based settlement or verdict for the plaintiff class members.

But here's the problem. If the class claim is for restitutionary relief to which the plaintiff class representative is not entitled, then there's no commonality or typicality and thus no basis to certify the class.

The state Supreme Court didn't confront this issue in Tobacco II. But eventually, it will. By then, it will become even more obvious than now that the bulk of traditional UCL standing analysis breaks down when viewed agaisnt the certification requirements of FRCP 23.

I suspect that the federal courts in which UCL claims are filed will be taking the lead in sorting out this mess for the forseeable future. Meanwhile, plaintiffs UCL counsel should try to avoid this problem by finding class representatives whose claims are for restitution, not damages.

[Kimberly A. Kralowec]

You're missing my point. Such a plaintiff would be able to obtain an injunction, which can be of critical importance. The issue is likely to come up in UCL actions between competitors, rather than UCL class actions. Suppose a firm is engaging in unfair practices that take business away from another, law-abiding competitor. The law-abiding competitor has suffered damages (in the form of lost customers and profits), but no money ever passed from his or her pocket to the wrongdoer's. The law-abiding competitor could not recover "restitutution" under the UCL. However, the law-abiding competitor has standing (because the competitor suffered injury in fact and lost money as a result of the unlawful practices) to bring suit under the UCL to seek an injunction to halt the wrongdoer's harmful conduct. The interpretation you are advancing would foreclose such a suit, which certainly was not the purpose of Prop. 64.

[AndytheLawyer]

But Proposition 64 had no impact on competitor v. competitor UCL lawsuits, which need not be brought as class actions. So the standing and class certification issues I raised above aren't implicated in non-consumer suits.

[Kimberly A. Kralowec]

Prop. 64 was not supposed to have had any impact on competitor actions, but they have been a casualty of the amendment. The new standing rules apply to UCL cases whether they are brought as individual or class cases. (UCL cases are not required to be brought as class actions, as some people seem to erroneously believe.) If the competitor must, to satisfy the standing requirements, have suffered harm that amounts to "restitution" rather than "damages," there may no longer be any such thing as a UCL competitor action because most competitors won't have suffered the right kind of harm.

The injunctive relief remedy is what's important for purposes of this discussion -- whether the case is a class action or not.

[Daniel]

Kimberly, do you see any chance that this issue could be decided if Kwikset is taken up for review by the Cali Supreme Court? I recognize Kwikset is a consumer case, but it addresses the same statutory language in the context of standing requirements.

[Kimberly A. Kralowec]

The court probably would not need to decide the issue, because the plaintiff in Kwikset suffered a loss that would be recoverable as restitution. In that case, the plaintiff paid money for a product (a lock mislabeled "Made in the USA"), and some of that money wound up in the defendant's coffers. Under Shersher v. Superior Court, 154 Cal.App.4th 1491 (2007), that loss would be recoverable as restitution under the UCL. The problem in Kwikset was not that the plaintiff suffered the wrong type of loss, but rather that the Court of Appeal didn't consider the loss severe enough. It reasoned that the plaintiff got what he paid for -- a functioning lock -- so although he suffered "injury in fact," he did not "lose money or property" for standing purposes.