The UCL Practitioner

"Advanced Seminar: Cutting-Edge Topics in Class Action Litigation"

On September 15, 2009, the Alameda County Bar Association will present its Advanced Seminar: Cutting-Edge Topics in Class Action Litigation.  Registration begins at 4:30 and the program runs from 5:00-7:00 p.m. at the offices of Wendel, Rosen, Black & Dean, LLP, 1111 Broadway, 19th Floor in Oakland. The cost is just $30 for ACBA members, $40 for non-members.

This is a great program. It will feature both of the Alameda County complex litigation judges, Judge Robert Freedman and Judge Steven Brick, and their research attorneys, Philip Obbard and Walter Stemmler, as well as Judge David B. Flinn of Contra Costa County.

Two years ago, I live-blogged this seminar, and it was chock full of valuable insights from the judges and their research attorneys. Unfortunately, this year I have a scheduling conflict and won't be able to attend, but I encourage everyone who handles class actions in Alameda County to be there.  If I'm able to arrange for someone else to live-blog the seminar in my place I will of course announce that here.

Confidential to WAPA attendees (you know who you are)

It was great seeing everyone at the WAPA event yesterday, and special thanks to M.J. for working so hard to organize it.  It was very well done and I'm looking forward to next year already.  Let's definitely stay in touch in the meantime.

New Ninth Circuit class certification decision: Rodriguez v. Hayes

In Rodriguez v. Hayes, ___ F.3d ___ (Aug. 20, 2009), the Ninth Circuit reversed an order denying class certification under Rule 23(b)(2) in a federal habeas corpus case.  The opinion contains an interesting discussion of the elements of class certification.  This language jumps out in particular in light of Tobacco:

The fact that some class members may have suffered no injury or different injuries from the challenged practice does not prevent the class from meeting the requirements of Rule 23(b)(2).

Slip op. at 11412 (citations omitted) (emphasis added). 

This decision came to my attention because it was mentioned in an article called "Class Confusion" by attorney Aashish Y. Desai in the Daily Journal on Tuesday, August 25, 2009.  Aashish's article points out another interesting aspect of Rodriguez:

On Aug. 20, the 9th Circuit jumped into the debate when it reversed a denial of class certification in Rodriguez v. Hayes, 2009 DJDAR 12450. The interesting and somewhat related point here was that the district court's decision was not afforded the "traditional deference" that normally comes with such decisions because the court made "no findings whatsoever" in support of its denial of class certification. As a result, the 9th Circuit analyzed the certification de novo, noting that "we may evaluate for ourselves" whether the class should have been certified in the first instance. While the respondents were quick to point out "multiple reasons" for denying certification, the 9th Circuit did not buy those arguments. Instead, it recognized that it "would be engaging in mere guesswork were we to assume the district court relied on any particular reason or reasons."  [Quoting Hayes, slip op. at 11391.] 

Federal post-Tobacco class certification ruling: Plascencia v. Lending 1st Mortgage

In Plascencia v. Lending 1st Mortg., ___ F.R.D. ___, 2009 WL 2569732 (N. D. Cal. Aug. 21, 2009), the Court (Judge Claudia Wilken) granted class certification of a UCL claim under Federal Rule of Civil Procedure 23(b)(3), finding that common questions predominated and applying Tobacco:

Prior to 2004, any person acting on behalf of the general public could bring suit under the UCL; standing “did not depend on a showing of injury or damage.” Californians For Disability Rights v. Mervyn's, LLC, 39 Cal.4th 223, 228 (2006). However, Proposition 64, approved by the voters in 2004, amended the UCL to permit suits only by the Attorney General and certain other government attorneys, or by individuals who have “suffered injury in fact and ha[ve] lost money or property as a result of unfair competition.” Id. (quoting Cal. Bus. & Prof.Code § 17204).

The degree to which the UCL claim involves individual issues turns on whether Proposition 64 imposed a new standing requirement that all class members must satisfy, or whether it is sufficient for Plaintiffs to show that they have standing. The California Supreme Court recently answered this question in In re Tobacco II Cases, 46 Cal.4th 298 (2009). The court clarified that only the named plaintiff in a UCL class action need demonstrate injury and causation.

Plaintiffs may prove with generalized evidence that Defendants' conduct was “likely to deceive” members of the public. The individual circumstances of each class member's loan need not be examined because the class members are not required to prove reliance and damage. Common issues will thus predominate on the UCL claim. Moreover, although Proposition 64 requires that Plaintiffs themselves must demonstrate reliance on Defendants' omissions, the court in In re Tobacco II Cases set out a liberal approach to the reliance inquiry:

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. Moreover, a presumption, or at least an inference, of reliance arises wherever there is a showing that a misrepresentation was material. 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, 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.

Id. at 326-27 (internal quotation marks, alteration marks and citations omitted). Just as the materiality of the interest rate and negative amortization terms permits a presumption of reliance in connection with the fraud claim, it also permits a presumption of reliance for the purposes of Proposition 64 standing.

The Court concludes that common issues will predominate on the UCL claim and that Plaintiffs have made a sufficient showing of reliance to serve as class representatives.

Id. at *10-*11. This is precisely how the class certification analysis should work post-Tobacco. 

The Court also granted class certification of the common-law fraud claim, which was based on an omissions theory.  The Court applied the doctrine of presumed reliance from Vasquez:

Defendants argue that, even though their own actions may involve common questions of fact, proof of the fourth element of Plaintiffs' fraud claim--that class members were unaware of the undisclosed loan terms and would not have acted as they did if they had known of the terms--will require looking at the individual circumstances of each class member and will cause individual questions to predominate. However, courts have recognized that this element, which is often phrased in terms of reliance or causation, may be presumed in the case of a material fraudulent omission. As the Supreme Court has held, in cases “involving primarily a failure to disclose, positive proof of reliance is not a prerequisite to recovery.” Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 153 (1972). Rather, “[a]ll that is necessary is that the facts withheld be material,” in the sense that a reasonable person “might have considered them important” in making his or her decision. Id. at 153-54. Similarly, the California Supreme Court has held that class certification is appropriate even where there may be individual issues of reliance because “it is not necessary to show reliance upon false representations by direct evidence.” Vasquez v. Superior Court, 4 Cal.3d 800, 814 (1974). Rather, “reliance upon alleged false representations may be inferred from the circumstances attending the transaction which oftentimes afford much stronger and more satisfactory evidence of the inducement which prompted the party defrauded to enter into the contract than his direct testimony to the same effect.” Id. (internal quotation marks omitted).

Here, a jury may find that the initial interest rate and negative amortization features of the loans were material in the sense that a reasonable person would have wanted to know about them. The jury thus may presume that class members would not have agreed to purchase their loans if Defendants had clearly disclosed that the initial one percent rate was ephemeral and that negative amortization was certain to occur if only the minimum payments were made. Defendants, of course, may attempt to rebut this presumption at trial by introducing evidence that particular class members were either aware of the loan terms or would have purchased the loans even if the terms were clearly disclosed in the documents. Defendants have pointed to evidence, for example, suggesting that Plaintiffs themselves did not carefully read the loan documents they were given, and Defendants have argued that any omission in the documents was not the cause of Plaintiffs' injury.^FN5 Although evidence of this sort is individualized in nature, the issue of damages suffered by class members “is invariably an individual question and does not defeat class action treatment.” Blackie v. Barrack, 524 F.2d 891, 905 (9th Cir.1975).

^FN5. This evidence goes to the merits of Plaintiffs' individual fraud claim and is not so clear as to negate, as a matter of law, the reliance element of that claim.

Because the fraud claim arises from a common course of conduct on Defendants' part, the Court concludes that common issues will predominate and the claim may be certified under Rule 23(b)(3).

Id. at *8-*9.

New class certification decision: Ali v. U.S.A. Cab Ltd.

In Ali v. U.S.A. Cab Ltd., ___ Cal.App.4th ___ (Aug. 24, 2009), the Court of Appeal (Fourth Appellate District, Division One) affirmed an order denying class certification in a case involving alleged misclassification of workers as independent contractors.

New UCL "safe harbor" decision: Yabsley v. Cingular Wireless, LLC

In Yabsley v. Cingular Wireless, LLC, ___ Cal.App.4th ___ (Aug. 19, 2009), the Court of Appeal (Second Appellate District, Division Six) affirmed a judgment following an order sustaining the defendant's demurrer without leave to amend. Slip op. at 1-2. The Court determined that the defendant’s conduct was protected by a Cel-Tech “safe harbor” because it was affirmatively authorized in a statute or regulation. Id. at 9-12 (citing Cel-Tech Communications, Inc. v. Los Angeles Cell. Tel. Co., 20 Cal.4th 163 (1999)).

That part of the opinion did not seem particularly controversial to me (although I haven't reviewed the underlying statutes).  What was interesting was the Court's decision to then also address whether the plaintiff could satisfy the post-Prop. 64 standing requirements, and to hold (without citing Tobacco) that he could not.  Slip op. at 7-9.  That holding is entirely unnecessary to the opinion, given the Cel-Tech "safe harbor" ruling. 

The (unnecessary) standing discussion also contains a couple of instances of imprecise language that could lead to misuse of the opinion as a precedent. 

First, in a footnote in the UCL standing discussion, the opinion states that “[t]he CLRA requires that before an action is filed, the consumer make demand on the retailer to rectify the alleged deceptive practice.” Slip op. at 7-8 n.4 (citing Civ. Code §1782). On the contrary, the CLRA requires a pre-filing demand only in actions in which damages are sought. See Civ. Code §1782(a) (“Thirty days or more prior to the commencement of an action for damages pursuant to this title, the consumer shall do the following: ....” (emphasis added)). Additionally, the CLRA permits an action for injunctive relief to be filed without any pre-filing notice as all, followed by a post-notice amendment of the complaint to seek damages (if the plaintiff wishes to seek monetary relief). Id. §1782(d) (“An action for injunctive relief … may be commenced without compliance with subdivision (a).”).   Hence, it is incorrect to say that a pre-filing demand is required in every CLRA action. 

The Supreme Court had to correct a similar error recently, and modified its original opinion in Vasquez v. State of California, 45 Cal.4th 243, 252 (2008), to make clear that the pre-filing notice requirement applies only in actions "for damages." (See this blog post for more on that modification.)

The second imprecise statement in the opinion suggests that the “legally protected interest” in a UCL case derives only from statutes or regulations other than the UCL itself:

The “legally protected interest” for standing purposes must be an interest that is protected by a source other than the remedial provisions of the UCL or FAL. (See, e.g., Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., supra, 20 Cal.4th at p. 180 [“‘section 17200 “borrows” violations of other laws and treats them as unlawful practices’ that the unfair competition law makes independently actionable”].) The only independent statute Yabsley cites is Revenue and Taxation Code section 6051. ….

Slip op. at 8 (emphasis added).  The problem with that statement is that it overlooks Cel-Tech's clear holding that:

The [UCL] does more than just borrow. The statutory language referring to “any unlawful, unfair or fraudulent” practice (italics added) makes clear that a practice may be deemed unfair even if not specifically proscribed by some other law. “Because Business and Professions Code section 17200 is written in the disjunctive, it establishes three varieties of unfair competition—acts or practices which are unlawful, or unfair, or fraudulent. ‘In other words, a practice is prohibited as “unfair” or “deceptive” even if not “unlawful” and vice versa.’ ”

Cel-Tech, 40 Cal.4th at 180 (quoting Podolsky v. First Healthcare Corp., 50 Cal.App.4th 632, 647 (1996)) (emphasis added). In other words, it is not correct to say that the only "legally protected interest" in a UCL case stems from outside the UCL. That would mean that the “unfair” and “fraudulent” prongs essentially do not exist—an argument that Cel-Tech rejected and that the statute's plain language contradicts.

The easiest way to circumvent these problems and avoid any questions about the opinion's wording would have been to simply omit the standing discussion.  That discussion is unnecessary to the outcome of the case. 

Supreme Court announcement re court closure days

The following notice was recently posted on the Supreme Court's website.  In a nutshell, we will have to wait an extra day for conference results during the week of the third Wednesday.

Due to California's current fiscal crisis the Supreme Court of California, the Courts of Appeal, and all superior courts will be closed on the third Wednesday of each month, starting September 16, 2009 (see below for a complete lists of court closure dates).

Petition conference results for the conferences scheduled on court closures dates will be posted online the Thursday following the closure.

Court Closure Dates for Fiscal Year 2009-2010
Wednesday, September 16, 2009	Wednesday, February 17, 2010
Wednesday, October 21, 2009	Wednesday, March 17, 2010
Wednesday, November 18, 2009	Wednesday, April 21, 2010
Wednesday, December 16, 2009	Wednesday, May 19, 2010
Wednesday, January 20, 2010	Wednesday, June 16, 2010

Transfer orders issued in Tobacco "grant and hold" cases: Pfizer and McAdams

Today, the Supreme Court issued transfer orders in the two Tobacco "grant and hold" cases, Pfizer, Inc. v. Superior Court (Galfano), no. S145775, and McAdams v. Monier, no. S154088.  McAdams has been transferred back to the Third Appellate District, and Pfizer is now returned to the Second District, Division Three.  Both appellate courts have been directed to vacate their opinions and reconsider in light of Tobacco.   

The parties now have a very short period of time to file supplemental briefs under Rule of Court 8.200(b)(1). 

UPDATE:  There is a third Tobacco "grant and hold" case, O'Brien v. Camisasca Automotive Mfg., no. S163207, in which no transfer order has yet been posted.

Complaint in Hiestand v. City of Sacramento

Many thanks to the blog reader who forwarded a copy of the complaint filed on August 11, 2009 in Hiestand v. City of Sacramento.  This UCL class action case was discussed in an article in the Recorder last week (see also this blog post). 

This case illustrates an important principle from Tobacco.  There, the Supreme Court held (among other things) that the "as a result of" standing language "imposes an actual reliance requirement" on the individual named class representative in a UCL "fraudulent" prong case.  In re Tobacco II Cases, 46 Cal.4th 298, 326 (2009).  The Court was careful to clarify, however, that this holding was limited to claims "involving false advertising and misrepresentations to consumers," and that "[t]here are doubtless many types of unfair business practices in which the concept of reliance, as discussed here, has no application."  Id. at 326 n.17. 

Hiestand is one of those cases.  The Hiestand complaint alleges (among other things) a UCL "unlawful" prong claim predicated on violation of Vehicle Code section 22651, which reads, in part:

A peace officer ... of a city, county, or jurisdiction of a state agency in which a vehicle is located, may remove a vehicle located within the territorial limits in which the officer ... may act, under the following circumstances:

....

(n) Whenever a vehicle is parked or left standing where local authorities, by resolution or ordinance, have prohibited parking and have authorized the removal of vehicles. A vehicle shall not be removed unless signs are posted giving notice of the removal.

(Emphasis added.)  Because the defendants allegedly removed Mr. Hiestand's vehicle even though no "signs [were] posted giving notice of the removal," in violation of section 22651, and because Mr. Hiestand incurred and paid towing and storage costs, the standing requirement has been satisfied.  Mr. Hiestand lost money or property "as a result of" the defendants' alleged violation of that law.  He therefore has standing to bring a UCL class action in which neither he nor the unnamed class members will have to prove (at trial) actual "deception, reliance [or] injury."  Tobacco, 46 Cal.4th at 320 (citing Bank of the West v. Superior Court, 2 Cal.4th 1254, 1267 (1992); Committee on Children’s Television, Inc. v. General Foods Corp., 35 Cal.3d 197, 211 (1987)). 

As this case illustrates, it will be important to consider the class representative's standing separate and apart from what must be proven at trial for purposes of liability for a UCL violation.  Tobacco makes clear that, in "fraudulent" prong cases, the "likely to deceive" liability standard is unchanged.  Id.  Moreover, the standard for recovering restitution ("may have been acquired") is also unchanged and is "patently less stringent than the standing requirement."  Id.  The fact that the class representative must establish individual standing therefore should have no impact on the class certification analysis.  In other words, the class certification analysis should be the same now as it was before Prop. 64.

It will be interesting to see how this plays out in the Hiestand case as well as in other cases.  If you are litigating any of these issues at the trial court level, please keep me posted of developments.  I haven't received copies of any relevant rulings in any state court cases yet. 

List of pending Supreme Court cases updated

My list of pending California Supreme Court cases that raise issues of interest relating to the UCL, the CLRA, and/or class actions has been updated.

"Tort Reform Leader Brings Class Action Over Towed Car"

Today's Recorder has this article about a recently-filed UCL class action.  I haven't seen a copy of the complaint yet.  If anyone has it, please forward ([email protected]).  Thanks!

BREAKING NEWS: Rehearing denied in Tobacco

This afternoon, the Supreme Court denied rehearing in In re Tobacco II Cases, no. S147345.  According to the docket, Chief Justice George remained recused (notwithstanding a substitution of attorneys filed the day before the rehearing petition) and did not participate in the decision:

08/12/2009

Rehearing denied

The petition for rehearing is denied. George, C.J., was recused and did not participate. Baxter, Chin and Corrigan, JJ., are of the opinion the petition should be granted. Eileen C. Moore, Associate Justice, Court of Appeal, Fourth Appellate District, Division Three, was assigned by the Acting Chief Justice pursuant to article VI, section 6 of the California Constitution.

Invitation to comment on proposed rule on court closure days

As you may have heard, on July 29, the Judicial Council voted to institute court closure days, as authorized by newly-enacted Government Code section 68106. Here is the Report that led to that vote. 

The Judicial Council has now issued proposed new Rule of Court 1.12 to implement this decision. The Rule would designate the third Wednesday of each month from September 2009 through June 2010 as court closure days and would confirm that closure days are treated as court holidays for purposes of calculating filing deadlines. Comments on the proposed Rule are due on a very short timeframe -- by 5:00 p.m. on Monday, August 17.

I thought the July press coverage was unclear respecting whether the Supreme Court would also be subject to the closure days. The proposed Rule makes plain that the Supreme Court will be closed, like the rest of the courts, on the third Wednesdays. This will, presumably, disrupt the Court's existing conference schedule for the rest of this year, as well as for 2010, and require rescheduling of the conferences set for September 16, October 21, November 18, December 16, and a series of third-Wednesday conferences in 2010.

Incidentally, tomorrow's conference is the final one before the Court's extended deadline (Aug. 14) to rule on the petition for rehearing in Tobacco.  So check back here tomorrow for more on that.

Bridgeport's Eighth Annual Class Action Litigation Conference, Aug. 13-14

My partner Miranda Kolbe will be a speaker at Bridgeport's Eighth Annual Class Action Litigation Conference on August 13-14, 2009 at the Hyatt Regency in San Francisco.  She will be presenting the plaintiffs' perspective on class certification of UCL claims after In re Tobacco. 

Other speakers include former Alameda County Superior Court Judge Ronald M. Sabraw (Ret.), who handled the complex litigation department in Alameda County for many years. It should be an interesting and informative conference.

Seventh Circuit decision bearing on standing: Kohen v. Pacific Inv. Management Co.

In Kohen v. Pacific Investment Management Co., ___ F.3d ___, 2009 WL 1919013 (7th Cir. Jul. 7, 2009), Judge Posner had this to say about whether, under federal law, unnamed class members' standing must be proven at the class certification stage:

PIMCO argues that before certifying a class the district judge was required to determine which class members had suffered damages. But putting the cart before the horse in that way would vitiate the economies of class action procedure; in effect the trial would precede the certification. It is true that injury is a prerequisite to standing. But as long as one member of a certified class has a plausible claim to have suffered damages, the requirement of standing is satisfied. United States Parole Commission v. Geraghty, 445 U.S. 388, 404, 100 S.Ct. 1202, 63 L.Ed.2d 479 (1980); Wiesmueller v. Kosobucki, 513 F.3d 784, 785-86 (7th Cir.2008). This is true even if the named plaintiff (the class representative) lacks standing, provided that he can be replaced by a class member who has standing. “The named plaintiff who no longer has a stake may not be a suitable class representative, but that is not a matter of jurisdiction and would not disqualify him from continuing as class representative until a more suitable member of the class was found to replace him.” Id. at 786.

Before a class is certified, it is true, the named plaintiff must have standing, because at that stage no one else has a legally protected interest in maintaining the suit. Id.; Sosna v. Iowa, 419 U.S. 393, 402, 95 S.Ct. 553, 42 L.Ed.2d 532 (1975); Walters v. Edgar, 163 F.3d 430, 432-33 (7th Cir.1998); Murray v. Auslander, 244 F.3d 807, 810 (11th Cir.2001). And while ordinarily an unchallenged allegation of standing suffices, a colorable challenge requires the plaintiff to meet it rather than stand mute. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). PIMCO tried to show in the district court that two of the named plaintiffs could not have been injured by the alleged corner. We need not decide whether it succeeded in doing so, because even if it did, that left one named plaintiff with standing, and one is all that is necessary.

Slip op. at 7-8, 2009 WL 1919013 at *3-*4 (bold added).

This issue, of course, may come up in some UCL cases pending in federal court as a result of CAFA. Some defendants have argued that Tobacco's clear holding that only the named class representative must meet Prop. 64's standing requirement (which, by its plain language, applies only to "the claimant"), would not govern UCL cases in federal court, because Article III standing rules would require more. At least one federal judge, however, had no problem applying this part of Tobacco in a federal case, and the Seventh Circuit opinion also supports the conclusion that only the named plaintiff need prove standing in class actions generally, whether in federal court under Article III or in California state court.

Many thanks to Scott Leviant for bringing this opinion to my attention. 

New federal decision interpreting Tobacco: Baghdasaarian v. Amazon.com, Inc.

In Baghdasaarian v. Amazon.com, Inc., ___ F.R.D. ___, 2009 WL 2263581 (C.D. Cal. Jul. 7, 2009), the court granted class certification of a UCL "fraudulent" prong claim, and followed Tobacco's holding that only the named class representative must satisfy the standing requirement:

Proposition 64 did not determine whether a plaintiff who has standing under the UCL must also show reliance by each class member. The California Supreme Court recently addressed this issue in the Tobacco II Cases. The California Supreme Court concluded that “standing requirements are applicable only to the class representatives, and not all absent class members.” In re Tobacco II Cases, 46 Cal.4th 298, 206 (Cal.2009). Thus, Plaintiff does not need to show affirmative proof that each individual class member relied on Defendant's deceptive conduct.

Id. at *3.  The court's discussion of the individual plaintiff's standing is also interesting.

MCLE program: "Section 17200 Update After In re Tobacco II Cases"

On Wednesday, August 5, 2009 from noon to 1:30, the Bar Association of San Francisco will present "Section 17200 Update After In re Tobacco II Cases" featuring Will Stern and Jim Sturdevant.