The UCL Practitioner

BREAKING NEWS: Supreme Court to hand down Baycol decision this morning

The Supreme Court's notice of forthcoming filings from last Friday advises us that the opinion in Baycol Cases I and II, no. S178320, will be handed down today.  When it is posted at 10:00 a.m., the opinion should be available at this link:

• In re Baycol Cases I and II, ___ Cal.4th ___ (Feb. 28, 2011)

This is the issue on review:

Did the "death knell doctrine" require plaintiff to immediately appeal the sustaining of a demurer as to class claims when the ruling resolved both individual and class claims, or did the one final judgment rule apply and require a single appeal from the subsequent entry of final judgment on all claims?

UPDATE:  Here is the money quote from Baycol:

If an order terminates class claims, but individual claims persist, the order terminating class claims is immediately appealable under Daar’s death knell doctrine.  If an order terminates class claims and individual claims as well, it is not.  Because the order here fell in the latter category, it was nonappealable, and it was error to treat the subsequent appeal from a final judgment as untimely.

Slip op. at 13.

"California Top Court Says ‘Labels Matter’; Fleshes Out Prop 64 Standing Requirements"

The BNA Class Action Litigation Reporter ran this article on Kwikset on February 11, 2011. 

I am quoted in the article, as is Matt Bailey of Pollard Bailey (author of the Bailey Class Action Daily) and defense attorneys William F. Tarantino of Morrison & Foerster and Cynthia H. Cwik of Jones Day. 

Two new class certification decisions: Tien v. Tenet Healthcare Corp. and Safaie v. Jacuzzi Whirlpool Bath, Inc.

The Court of Appeal has handed down two class certification opinions in the past eight days.

In Tien v. Tenet Healthcare Corp., ___ Cal.App.4th ___ (Feb. 16, 2011), the Court of Apppeal (Second Appellate District, Division Eight) affirmed the trial court's order denying class certification of meal period, rest break, and waiting time penalty claims. Because the opinion addresses the core meal period compliance question in Brinker, the case is likely to be taken up as a "grant and hold." 

In Safaie v. Jacuzzi Whirlpool Bath, Inc., ___ Cal.App.4th ___ (Jan. 25, 2011; pub. ord. Feb. 22, 2011), the Court of Appeal (Fourth Appellate District, Division One) affirmed the trial court's order denying a motion to "recertify" the class on the ground that an earlier order granting decertification had been affirmed on appeal.  The Court of Appeal applied "the settled state law rule that a final order decertifying a class is binding and cannot be later challenged in the trial court by a motion for renewal or reconsideration."  Slip op. at 18.

 

New UCL competitor decision: No Doubt v. Activision Publishing, Inc.

The rock band No Doubt entered into a licensing agreement allowing Activision to use avatars of the band members in the video game Band Hero.  When Activision used the avatars in a manner that exceeded the scope of the licensing agreement, No Doubt sued for violation of the UCL's "fraudulent" prong, arguing that Activision's conduct was likely to deceive a reasonable consumer.

The trial court denied Activision's anti-SLAPP motion, and the Court of Appeal (Second Appellate District, Division Four) affirmed, holding that No Doubt had established it was likely to prevail on the UCL claim.  No Doubt v. Activision Publishing, Inc., ___ Cal.App.4th ___ (Feb. 15, 2011).  The opinion does not address standing, but it does contain an interesting discussion of the possible interplay between the UCL and the First Amendment.  Slip op. at 22-28.

"Case Study: Zhang v. Superior Court"

On February 15, 2011, Competition Law 360 had an interesting article on Zhang v. Superior Court, no. 178542, which is currently pending before the California Supreme Court.  The full article, by Chris Micheletti and Jose Umbert of Zelle Hofmann, is available to subscribers only. Here is a brief excerpt:

It is likely that the decision in Zhang will clarify whether an insured can bring a cause of action against its insurer under the UCL based on allegations of fraudulent misrepresentation and false advertising. Therefore, the ruling may have a substantial impact on insurance litigation in California.

If the Supreme Court allows Section 17200 claims based on insurers' alleged advertising or other representations and promises regarding timely payment for covered losses, those causes of action likely will be regularly inserted in complaints against insurance companies and, given the broad scope of the UCL, will provide insureds with a potentially significant additional avenue for relief. While damages are not recoverable under the statute, the possibility of an injunction requiring changes in company practices may pose a significant threat for a carrier.

On the other hand, if the Supreme Court determines that UCL claims based on conduct that also violates the UIPA are not permitted, the policyholders' arsenal will generally be limited to causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing. Insurance practitioners should therefore pay close attention to the California Supreme Court's upcoming decision in Zhang.

The article mentions that damages are not recoverable under the UCL, and that injunctive relief would be a powerful remedy, but I think restitution would be available in such a hypothetical case against an insurer.  If the insured bought the policy in reliance on misrepresentations regarding settlement practices, the policy premiums (or some portion thereof) should be recoverable as restitution.  Also, the insured has a vested interest in policy benefits (created by contract and by statute), so if the insurer has refused to pay a covered claim, those benefits should likewise be recoverable as restitution.  I have never been able to agree with the idea that the insurance industry should enjoy a special exemption from UCL liability when its fraud relates to settlement practices.

As a reminder, these are the issues on review in Zhang:

(1) Can an insured bring a cause of action against its insurer under the unfair competition law (Bus. & Prof. Code, § 17200) based on allegations that the insurer misrepresents and falsely advertises that it will promptly and properly pay covered claims when it has no intention of doing so? (2) Does Moradi-Shalal v. Fireman's Fund Ins. Companies (1988) 46 Cal.3d 287 bar such an action?

 The case has been fully briefed since June 2010, so in theory it could be scheduled for argument at any time.  In practice, there are other cases closer to the head of the line.

"Getting your class settlement approved: Guidelines for motions for preliminary and final approval of class settlement"

Judge William Highberger and Judge Peter Lichtman of the Los Angeles County Superior Court had a great article on settlement approval motions in the January 2011 issue of Advocate, the monthly magazine of Consumer Attorneys Association of Los Angeles.

Unfortunately, the article is available online to CAALA members only.  

New federal UCL standing decision: Webb v. Carter's, Inc.

Many thanks to the multiple readers who emailed me about a new federal standing decision, Webb v. Carter's, Inc., ___ F.R.D. ___, 2011 WL 343961, 2011 U.S. Dist. LEXIS 12597 (C.D. Cal. Feb. 3, 2011). 

In Webb, District Judge Gary Allen Feess of the Central District of California held that in federal court, all class members must meet Article III's standing requirements:

Before considering whether Plaintiffs' proposed classes meet the requirements of Federal Rule of Civil Procedure 23, the Court must determine whether the members of the proposed class have Article III standing. Although there is no controlling authority requiring absent class members, as opposed to the named plaintiffs, to satisfy Article III's standing requirements, the Court is persuaded by authority indicating that they must. In Burdick v. Union Security Insurance Co., Judge Collins concluded that absent class members, like the class representatives, must have standing. Burdick v. Union Sec. Ins. Co., 2009 WL 4798873, *3 (C.D.Cal. Dec.9, 2009). In reaching this conclusion, Judge Collins pointed to the Supreme Court's decision in Reno v. Catholic Social Services, Inc., 509 U.S. 43, 113 S.Ct. 2485, 125 L.Ed.2d 38 (1993), which allows the federal courts to exercise jurisdiction over the claims of class members only if those claims are ripe. Id. at *3. Judge Collins also pointed to other cases indicating that classes should be defined so as to exclude members lacking standing. Id. at *4 (citing Denney v. Deutsche Bank AG, 443 F.3d 253, 264 (2d Cir.2006); O'Neill v. Gourmet Sys. of Minn., Inc., 219 F.R.D. 445, 451-52 (W.D.Wis.2002); Sanders v. Apple, Inc., 2009 WL 150950, at *10 (N.D.Cal.2009)). Finally, Judge Collins noted that requiring class members to have standing comports with the Supreme Court's admonition to be “mindful that Rule 23's requirements must be interpreted in keeping with Article III constraints.” Id. (quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 612-13, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997)).

The Court acknowledges that a leading treatise, Newberg on Class Actions, indicates that absent class members need not make a showing of standing. Newberg on Class Actions § 2:7. This treatise, however, also suggests that members of a proper class will necessarily have standing, because the class representative's claims must be “typical” of those of the class.

Further, contrary to Plaintiffs' contention, the California Supreme Court's decision in In re Tobacco II, 46 Cal.4th 298, 93 Cal.Rptr.3d 559, 207 P.3d 20 (Cal.2009), does not establish that absent class members in a federal class action need not have Article III standing. In that case, the California Supreme Court considered the effect of Proposition 64, a voter initiative that amended the UCL to allow private suit only by a plaintiff “who has suffered injury in fact and has lost money or property as a result of ... unfair competition.” Id. at 25. Previously, the UCL had allowed suit by any private party. The court considered whether that new requirement applied only to the named plaintiff or also to all absent class members. Id. at 25. The court concluded, based on the language of the initiative, that only the named plaintiff needed to show such an injury in fact. Id. Individuals could remain part of the class even if they had suffered no injury in fact. Id. at 35. That case, however, was in state court and did not address federal courts' standing requirements. Before the enactment of Proposition 64, uninjured plaintiffs could bring UCL claims in state court, but not federal court. See, e.g., Seibels Bruce Group, Inc. v. R.J. Reynolds Tobacco Co., No. C-99-0593 MHP, 1999 WL 760527 at *6 (N.D. Cal. Sept.21, 1999) (holding that plaintiff did not have standing to assert UCL claim in federal court because it did not establish a distinct and palpable injury); Boyle v. MTV Networks, Inc., 766 F.Supp. 809, 817-18 (N.D. Cal. 1991) (noting that case involving private-party UCL claim could not be removed as it would result in lack of standing). Tobacco II established that Proposition 64 changes this for named plaintiffs, but not for absent class members. It did not, and could not, hold that uninjured parties could be class members in a class action brought in federal court, despite their lack of Article III standing. Tobacco II therefore does not persuade the Court that a class action can proceed even where class members lack Article III standing.

Id. at *6 (emphasis in original).

ABA teleseminar on Kwikset coming up on Tuesday

The American Bar Association, Section of Antitrust Law, Private Advertising Litigation Committee is putting on a free teleseminar on the Kwikset decision this Tuesday, February 15, 2011 at noon Pacific.  Click here to register.

The moderator of the panel will be Dale Giali of Howrey LLP.  The panelists are Jeff LeVee of Jones Day, Lisa Perrochet of Horvitz & Levy, and Jamie Speyer of Arnold & Porter.  This is the panel description:

California's Kwikset Decision and Its Effect on Standing and Monetary Recovery under California Unfair Competition Laws
In a state known for its consumer fraud class action cases, all of those who do business or litigate in California have been waiting for the state Supreme Court's Kwikset decision. The opinion decided an important question of standing in unfair competition cases. This timely panel will explore the consequences of the decision in terms of case strategies for plaintiffs and defendants, and will also debate the implications of the decision's discussion of the monetary relief available under the unfair competition laws.

Despite the lack of any plaintiff-side panelists, I am assured that the presentation is intended to be balanced. 

The best laid plans ...

I was hoping to resume regular blogging this week, but I'm still pretty much buried at work right now. 

A few quick things:

• Today the Supreme Court handed down its decision in Pineda v. Williams-Sonoma and reinstated the plaintiffs' case.  I attended the argument in that case last month, and that was how they seemed to be leaning. 
• I have heard from two people who attended the argument in Baycol Cases on Tuesday that the justices seem to be leaning in favor of the petitioner.  This case involves appealability of certain class certification-related orders.
• The Ninth Circuit handed down a new CAFA decision a few weeks ago, on which I want to report more later.
• There was an article in The Advocate Magazine in January on class settlements.  The article is by Judges Highberger and Lichtman of the Los Angeles County Superior Court.  I have not had time to read it!  
• More briefs are available in Dukes v. Wal-Mart up at the U.S. Supreme Court.  I hope to put up some of those links later when I can. 

Quick post on Kwikset

I have been meaning to post more analysis of the Kwikset decision, but I have been swamped at work this week.  I hope to get back to more regular blogging next week.  Happy Friday!