The UCL Practitioner

New arbitration decision briefly mentions Concepcion: Mission Viejo Emergency Medical Assoc. v. Beta Healthcare Group

In Mission Viejo Emergency Medical Associates v. Beta Healthcare Group, ___ Cal.App.4th ___ (Jun. 29, 2011; pub. ord. Jul. 27, 2011), the Court of Appeal (Fourth Appellate District, Division Three) reversed an order denying a motion to compel arbitration in a non-class-action case.

In doing so, the Court had this to say about Concepcion: 

We invited the parties to provide their comments on the recent United States Supreme Court case, AT&T Mobility LLC v. Concepcion (2011) __ U.S. __ [131 S.Ct. 1740] (AT&T).  Defendants appear to argue that AT&T essentially preempts all California law relating to unconscionability.  We disagree, as the case simply does not go that far.  General state law doctrine pertaining to unconscionability is preserved unless it involves a defense that applies “only to arbitration or that derive[s] [its] meaning from the fact that an agreement to arbitrate is at issue.”  (Id. at p. __ [131 S.Ct. at p.1746].)  This simply does not apply here.

Slip op. at 13 n.4. 

The case is not a class action, so the opinion does not address arbitration clauses with class action bans, but the language above is nonetheless interesting.  Many thanks to Mark Moore of Spiro Moss LLP for bringing it to my attention. 

UPDATE:  Scott Leviant of The Complex Litigator has a more detailed post on this opinion.

Articles of interest in new issue of Competition

The Spring 2011 issue of Competition, the journal of the Antitrust and Unfair Competition Law Section of the State Bar of California, is now out.  It contains several articles of interest, including two with contrasting perspectives on Kwikset:

"Kwikset Corp. v. Superior Court: Reaffirming the Vitality of Private Enforcement of the Unfair Competition Law After Proposition 64" by Pamela M. Parker and Alan M. Mansfield

"The California Supreme Court's Kwikset Opinion — A Glass Half-Empty and Half-Full" by Eric P. Enson

"Existing the Fun House of Mirrors: Clayworth v. Pfizer and the Handling of Pass-On in Post-Trial Allocation Proceedings in Federal and State Court" by Emilio E. Varanini

BREAKING NEWS: Governor Brown nominates Professor Goodwin Liu to California Supreme Court

This news is just breaking. Links with more details later.

UPDATE:  Here is Governor Brown's press release.  News coverage is available in the San Francisco Chronicle and the Los Angeles Times.  Here's Professor Liu's faculty bio page at Boalt. 

In a separate article, the Los Angeles Times points out that if Professor Liu is confirmed, the Supreme Court will have an Asian majority.  Justices Chin and Kennard, as well as Chief Justice Cantil-Sakauye, all have Asian roots. 

In the legal press, the Recorder reports that "Brown Disappoints Some Latinos with Choice of Liu for Supreme Court."  This article says that Governor Brown indicated that he expects Professor Liu to be on the bench by the time of the September oral argument session, which begins on the day after Labor Day in San Francisco.  That is when the same-sex marriage case is expected to be argued, according to a Daily Journal article last week. 

Brinker miscellany

As of last week, there are now seven Brinker "grant and hold" cases.  The seventh is In re Lamps Plus Overtime Cases, no. S194064 (review granted 07/20/11).  Here are my amicus letter in support of review and my depublication request. 

There may be an eighth "grant and hold" before long. UPDATE: On September 28, 2011, the Supreme Court took up the eighth "grant and hold" case, Santos v. Vitas Healthcare, no. S195866.

I've updated my Brinker page to include a link to the amicus brief that the Supreme Court allowed Rogelio Hernandez (represented by Michael Rubin of Altshuler Burzon in San Francisco) to file after his case (Hernandez v. Chipotle Mexican Grill) became the fifth "grant and hold" in January.   Brinker filed an answer to that brief in March. 

Last week we filed a supplemental brief under Rule of Court 8.520(d)(1) to address the impact of Martinez v. Combs, 49 Cal.4th 35 (2010).

Also last week, the Daily Journal ran a front-page article (available by subscription only) on Brinker.  Evidently, the reporter asked the Chief Justice when the case would be set for argument, but she declined to say.  I am quoted in the article, along with Jim Finberg of Altshuler Berzon and Eric Kingsley of Kingsley & Kingsley.  Brinker's counsel Rex Heinke of Akin Gump is also mentioned in the article.

I am informed that a more detailed article is in the works and will appear in California Lawyer magazine in August or September.  UPDATE:  The article ran in the August 2011 issue of California Lawyer and is available at this link. 

[Disclosure: I am appellate counsel for the workers in this case.] 

Supplemental briefs filed in Mazza v. Honda (9th Cir.) regarding Wal-Mart Stores, Inc. v. Dukes

As you may remember from these two posts, in 2008, the district court granted nationwide class certification of UCL and CLRA claims in an auto defect class action against Honda.  Mazza v. American Honda Motor Co., 254 F.R.D. 610 (C.D. Cal. 2008).  The Ninth Circuit granted a Rule 23(f) petition for permission to appeal, and the case was argued in June 2010.  Mazza v. American Honda Motor Co., no. 09-55376 (9th Cir.).

In December 2010, the Ninth Circuit sua sponte ordered submission deferred pending resolution of Wal-Mart Stores, Inc. v. Dukes, no. 10-277.  This happened one day after the Supreme Court granted cert. in Dukes and about six months after Mazza was argued.

On June 22, 2011, two days after the Dukes opinion was handed down, the Ninth Circuit ordered Mazza resubmitted and directed the parties to file supplemental briefs on the impact of Dukes.  Those briefs were due, and were filed, last Friday. Here are copies:

• Appellees' Supplemental Brief Addressing the Impact of Wal-Mart Stores, Inc. v. Dukes (filed 07-22-11)


• Supplemental Brief of American Honda Motor Co. Regarding Wal-Mart Stores, Inc. v. Dukes (filed 07-22-11)

Oregon Supreme Court affirms consumer fraud class action judgment: Strawn v. Farmers Ins. Co.

In another decision of interest from May, the Oregon Supreme Court affirmed a judgment for compensatory damages (but reversed the punitive damages award) following a jury verdict in a common-law consumer fraud class action.  Strawn v. Farmers Ins. Co., ___ P.3d ___, 2011 WL 1886283 (Or. May 19, 2011).

The opinion's discussion of classwide reliance in a common-law fraud case is of particular interest. 

New UCL class certification decision: Fairbanks v. Farmers New World Life Ins. Co.

In Fairbanks v. Farmers New World Life Ins. Co., ___ Cal.App.4th ___ (Jul. 13, 2011), the Court of Appeal (Second Appellate District, Division Three) affirmed an order denying class certification of a UCL "fraudulent" prong claim. The case challenged the allegedly deceptive manner in which the defendant marketed and sold certain life insurance policies.

The Court agreed that "the intervening opinion of the Supreme Court in Tobacco II renders immaterial the trial court's finding that the issue of reliance is not subject to common proof."  Slip op. at 24.  The Court went on to affirm, however, finding that the case had a Kaldenbach problem.  Id. at 26-30. 

Court of Appeal strikes down class action ban despite Concepcion: Brown v. Ralphs Grocery Co.

In Brown v. Ralphs Grocery Co., ___ Cal.App.4th ___ (Jul. 12, 2011), the Court of Appeal (Second Appellate District, Division Five) addressed the impact of the Concepcion case.  The trial court denied a motion to compel arbitration of a representative PAGA action for Labor Code violations, holding that the arbitration clause's ban on class and representative actions was unenforceable in the PAGA context.  Slip op. at 4.  The Court of Appeal affirmed.

After taking supplemental briefing on Concepcion, the Court of Appeal held that the Federal Arbitration Act, as interpreted in Concepcion, did not preempt California decisional law interpreting PAGA rights as unwaivable:

In short, representative actions under the PAGA do not conflict with the purposes of the FAA.  If the FAA preempted state law as to the unenforceability of the PAGA representative action waivers, the benefits of private attorney general actions to enforce state labor laws would, in large part, be nullified.

Slip op. at 12.

One justice dissented from the PAGA holding:

Given the consistent line of [U.S.] Supreme Court cases mandating enforcement of arbitration clauses under the FAA, even in the face of California statutory or decisional law requiring court or administrative action rather than arbitration, I cannot join the majority’s conclusion that the arbitration agreement’s waiver of representative PAGA actions is unenforceable.

Kriegler, J., dissenting (slip op. at 4-5).

Links to law review articles cited in Wal-Mart Stores, Inc. v. Dukes

The majority opinion in Wal-Mart Stores, Inc. v. Dukes, ___ U.S. ___ (Jun. 20, 2011) relied heavily on a 2009 law review article by the late Professor Richard A. Nagareda of Vanderbilt University School of Law.  The dissent, too, cited a 2003 article by Professor Nagareda. 

Professor Nagareda's influential articles are available online at these links:

• Nagareda, Class Certification in the Age of Aggregate Proof, 84 N.Y.U. L. Rev. 97 (2009)


• Nagareda, The Preexistence Principle and the Structure of the Class Action, 103 Colum. L. Rev. 149 (2003) (link courtesy of classactionlitigation.com)

ABA Section of Antitrust Law free teleseminar on Wal-Mart Stores, Inc. v. Dukes

On Thursday Friday, July 22, 2011 at 10:00 a.m. Pacific, the American Bar Association, Section of Antitrust Law, Private Advertising Litigation and Civil Practice & Procedure Committees, will present a one-hour teleseminar entitled "Class Certification in Consumer Fraud Class Actions After Wal-Mart v. Dukes."

Click here to register.  Registration is free, but no MCLE credit is provided. (I imagine the program would qualify for self-study credit under California State Bar Rule 2.83(A).) 

Save the date of October 27, 2011 for the 21st Annual Golden State Antitrust and Unfair Competition Law Institute, presented by the State Bar of California, Antitrust and Unfair Competition Law Section.  I am a Vice Chair of the Section and am responsible for co-organizing the event again this year.  We will have a special plenary panel on the impact of the U.S. Supreme Court's class-action-related decisions this Term, including Wal-Mart, Concepcion, and Smith v. Bayer, on antitrust and UCL class actions.  If the Third Circuit hands down the Sullivan decision by the time of the Institute, that case will be covered as well.  More details will be posted on the Section's website soon. 

Decisions of interest from April and May 2011

The Court of Appeal and Ninth Circuit handed down the following decisions in April and May (listed in reverse chronological order by publication date):

Folgelstrom v. Lamps Plus, Inc., 195 Cal.App.4th 986 (Apr. 29, 2011; pub. ord. May 20, 2011; mod. Jun. 7, 2011) (Second Appellate District, Division Five) (affirming dismissal of UCL claim for lack of Prop. 64 standing; reversing dismissal of Song-Beverly Act claim, following Pineda v. Williams-Sonoma)

Knapp v. AT & T Wireless Services, Inc., 195 Cal.App.4th 932 (Apr. 25, 2011; pub. ord. May 20, 2011) (Fourth Appellate District, Division Three) (affirming order denying class certification of UCL, CLRA and fraud claims, which suffered from Kaldenbach problems)

Archer v. United Rentals, Inc., 195 Cal.App.4th 807 (May 19, 2011; mod. Jun. 13, 2011) (Second Appellate District, Division One) (affirming dismissal of UCL claim for injunctive relief for lack of Prop. 64 standing; reversing order denying class certification of Song-Beverly Act claim, following Pineda v. Williams-Sonoma)

People ex rel. Harris v. Pac Anchor Transportation, Inc., 195 Cal.App.4th 765 (May 18, 2011) (Second Appellate District, Division Five) (reversing dismissal of public prosecutor action in which the Attorney General's office employed the UCL's "unlawful" prong to pursue the defendant for wage and hour violations, holding that the FAA Authorization Act did not preempt the claims)

Marlo v. United Parcel Service, Inc., 639 F.3d 942 (9th Cir. Apr. 28, 2011) (affirming order decertifying class in wage & hour misclassification case)

Starbucks Corp. v. Superior Court (Lords), 194 Cal.App.4th 820 (Apr. 25, 2011) (Fourth Appellate District, Division Three) (reversing order permitting discovery of class list by putative class representatives who lacked standing)

Recent UCL "fraudulent" prong decision: Hill v. Roll Int'l Corp.

In Hill v. Roll International Corp., 195 Cal.App.4th 1295 (May 26, 2011), the Court of Appeal (First Appellate District, Division Two) held as a matter of law that "no reasonable consumer would be misled to think that the green drop on Fiji water represents a third party organization's endorsement or that Fiji water is environmentally superior to that of the competition."  Id., slip op at 5 (emphasis in original).  

The Court discussed the "reasonable consumer" standard in some detail (id. at 8-10), and concluded that "in these days of inevitable and readily available Internet criticism and suspicion of virtually any corporate enterprise, ... a reasonable consumer ... does not include one who is overly suspicious."  Id. at 9.

The Court also held that Kwikset did not dictate a contrary result:

We agree wholeheartedly that “labels matter,” all labels, including that here.  Defendants obviously put the green drop on the label for a purpose, as their counsel had to necessarily concede at oral argument:  that the green drop was for a “marketing” purpose, to signify “something to do with the environment.”  Such concession notwithstanding, we hold—and it is all we hold—that no reasonable consumer would be misled to think that the green drop represents a third party organization’s endorsement or that Fiji water is environmentally superior to that of the competition.

Id. at 12.

Accordingly, the Court affirmed the judgment of dismissal following the trial court's order sustaining the defendant's demurrer to the UCL, FAL, and CLRA claims without leave to amend.

More on Sullivan v. Oracle Corp.

The Supreme Court's discussion of the UCL claim in Sullivan v. Oracle Corp., ___ Cal.4th ___ (Jun. 30, 2011), is quite interesting.  It does nothing, however, to narrow current thinking on the scope of the UCL's extraterritorial reach. 

The plaintiffs, who are non-California residents, invoked the UCL's "unlawful" prong claim against their California-based employer, Oracle, in an attempt to revive Fair Labor Standard Act ("FLSA") claims that otherwise would have been time-barred.  Slip op. at 19 & n.8.  Their complaint alleged that Oracle violated the FLSA by failing to appropriately compensate them for overtime work they performed outside California.  This, in turn, violated the UCL's "unlawful" prong (which carries a four-year statute of limitations).   Id. at 19. 

To decide whether the UCL could be invoked as plaintiffs proposed, the Supreme Court needed to consider whether any of the conduct that violated the FLSA occurred in California.  Id. at 20-21.  The defendant's motion for summary judgment on this issue was based on stipulated facts.  Id. at 3.  The only stipulated fact relevant to the analysis was Oracle's adoption, in California, of a policy erroneously classifying the plaintiffs as exempt from the overtime laws.  Id. at 21.  "But for an employer to adopt an erroneous classification policy is not unlawful in the abstract.  [Citation.]  What is unlawful, and what creates liability under the FLSA, is the failure to pay overtime when due."  Id.

The stipulated facts did not address whether the plaintiffs' wages were paid by Oracle in California.  If they were, "the UCL might conceivably apply to plaintiffs' claims": 

In contrast to the abstract classification decision, the failure to pay legally required overtime compensation certainly is an unlawful business act or practice for purposes of the UCL.  (Bus. & Prof. Code, § 17200; see Cortez v. Purolator Air Filtration Products Co., supra, 23 Cal.4th 163, 177 [UCL authorizes, as restitution, order for payment of unlawfully withheld wages].)

Id. at 22.  The Supreme Court declined to go any further, leaving it to the federal court to decide whether the parties could augment the statement of stipulated facts to address the question of where the wages were paid (or underpaid).  Id. 

In other words, the Sullivan decision does not really impact existing jurisprudence on the UCL's operation outside the borders of California.  In fact, the Court favorably cited two decisions approving nationwide class actions for UCL violations, explaining that extraterritorial operation was proper in those cases because "the unlawful conduct that formed the basis of the out-of-state plaintiffs' claims (i.e., fraudulent misrepresentations made to induce consumer transactions) ... occurred in California."  Id. at 21 n.10 (citing Wershba v. Apple Computer, Inc., 91 Cal.App.4th 224 (2001); Clothesrigger, Inc. v. GTE Corp., 191 Cal.App.3d 605 (1987)). 

The decision does not even cite Norwest Mortgage, Inc. v. Superior Court, 72 Cal.App.4th 214 (1999), which has been the leading case on extraterritorial reach up to this point.  In Norwest, the Court of Appeal held that non-Californians could bring UCL claims if the conduct constituting the violation occurred in California.  Sullivan implicitly held exactly the same thing.  (See this blog post for a lengthier discussion of Norwest.)

Accordingly, Sullivan has changed nothing in the UCL playbook, despite the defendant's technical win on the point as framed. 

New class certification decision: Soderstedt v. CBIZ Southern California, LLC

In Soderstedt v. CBIZ Southern California, LLC, ___ Cal.App.4th ___ (Jun. 7, 2011, pub. ord. Jul. 7, 2011), the Court of Appeal (Second Appellate District, Division Two) affirmed an order denying class certification of overtime claims arising out of alleged misclassification.

The opinion's discussion of numerosity and adequacy (slip op. at 21-24) is interesting and underscores the importance of attention to every detail in preparing one's papers in support of class certification. The opinion provides some guidance on what it is safest to make sure is always included in class representative declarations on adequacy. 

New decision on insurer liability under the UCL: Hughes v. Progressive Direct Ins. Co.

In Hughes v. Progressive Direct Ins. Co., ___ Cal.App.4th ___ (Jun. 15, 2011), the Court of Appeal (Second Appellate District, Division Seven) held that Moradi-Shalal did not bar a UCL action predicated on violation of Insurance Code section 758.5, which "prohibits an insurer from either requiring an insured’s automobile be repaired by a specific automobile repair dealer or suggesting or recommending that a specific automobile repair dealer be used unless the insured is informed in writing of his or her right to select another repair dealer."  Slip op. at 2.

This is another decision chipping away at the rule of Moradi-Shalal as interpreted in cases such as Textron Financial Corp. v. National Union Fire Ins. Co., 118 Cal.App.4th 1061 (2004).  In Hughes, the Court of Appeal held that "UCL actions may be maintained against an insurer when the alleged conduct, even though violating the UIPA, also violates other statutes applicable to insurers. ....  [R]ecognizing a violation of section 758.5 as a predicate unlawful business practice for a UCL claim does not appear to conflict with Moradi-Shalal and the case law extending its holding to UCL causes of action based solely on alleged violations of the UIPA."  Slip op. at 12, 14. 

A similar case is now pending before the Supreme Court.  As the Hughes court put it:

In Zhang v. Superior Court (2009) 178 Cal.App.4th 1081, review granted Feb. 10, 2010, S178542, the Supreme Court will consider two related issues similar to, but not necessarily dispositive of, the question presented by the case at bar:  “(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?”

Slip op. at 8 n.2.

UPDATE: On September 28, 2011, the Supreme Court took up this case as a "grant and hold" pending resolution of Zhang.  Hughes v. Progressive Direct Ins. Co., no. S195069.

New UCL standing decision: Bower v. AT&T Mobility

In Bower v. AT&T Mobility, LLC, ___ Cal.App.4th ___ (Jun. 29, 2011), the Court of Appeal (Second Appellate District, Division One) addressed UCL standing and applied the Supreme Court's decision in Kwikset Corp. v. Superior Court (Benson), 51 Cal.4th 310 (2011).

Supreme Court addresses UCL's extraterritorial reach: Sullivan v. Oracle Corp.

Yesterday, the Supreme Court handed down Sullivan v. Oracle Corp., ___ Cal.4th ___ (Jun. 30, 2011), in which it addressed the UCL's extraterritorial reach:

In this proceeding we address, at the request of the United States Court of Appeals for the Ninth Circuit, questions about the applicability of California law to nonresident employees who work both here and in other states for a California-based employer.  We conclude the Labor Code’s overtime provisions (id., §§ 510, 1194) do apply to plaintiffs’ claims for compensation for work performed in this state, and that the same claims can serve as predicates for claims under California’s unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.).  We also conclude that plaintiffs’ claims for overtime compensation under the federal Fair Labor Standards Act of 1938 (FLSA) (29 U.S.C. § 201 et seq.; see id., § 207(a)) for work performed in other states cannot serve as predicates for UCL claims.

Slip op. at 1 (footnote omitted).  Time permitting, I may have more on this opinion in a later post.