The UCL Practitioner

"The Supreme Court Redirects Class Action Defense"

That is the name of my panel this morning at the ABA Section of Antitrust Law Spring Meeting, which is taking place this week in Washington, D.C.  For those in attendance, and for my readers at home, here is a copy of the handout with cites to some of the more recent cases construing Dukes and Concepcion. 

Our wonderful and very diligent moderator is Amy Ralph Mudge of Venable LLP.  Amy co-authors the blog All About Advertising Law.  My three co-panelists could not be more distinguished:  Miguel A. Estrada of Gibson Dunn & Crutcher LLP, Professor Alan B. Morrison of George Washington University Law School, and Andrew J. Pincus of Mayer Brown LLP. 

One of Andy's many claims to fame is that he argued the Concepcion case before the U.S. Supreme Court.  His client was AT&T Mobility.  Miguel, too, is an experienced U.S. Supreme Court advocate with many arguments under his belt.  Alan co-founded the Public Citizen Litigation Group with Ralph Nader in 1972 before turning to academia.  He is also a U.S. Supreme Court litigator who has handled many arguments. 

This is the description of our panel:

Will the 2011 term decisions represent a sea change in the treatment of class action litigation, or will they be narrowly interpreted by lower courts? At issue -- binding arbitration clauses in consumer contracts (Concepcion), class certification (Dukes), jurisdiction over foreign corporations after Goodyear/Nicastro, and re-litigating dismissed class allegations after Bayer.

I highly recommend the articles that each of my co-panelists submitted (available to Spring Meeting attendees on the flash drive).  These are the titles:

• "The Impacts of McIntyre on Minimum Contacts" by Alan B. Morrison
• "The Supreme Court's Strict Application of Rules Governing Access to the Courts:  Implications of the Court's 2010 Term on the Availability of Judicial Remedies in the Antitrust and Consumer Protection Contexts" by Miguel A. Estrada and Jesenka Mrdjenovic
• "In re American Express: Erroneously Limiting Concepcion to State-Law Claims" by Andrew Pincus
• "The Impact of Wal-Mart and Concepcion on Antitrust and Consumer Protection Class Actions:  A Brief Survey of Recent Developments in the Lower Courts" by Robert J. Katerberg, Adam Linkner and Amy Ralph Mudge
• "Dukes and Common Proof in California" by Kimberly A. Kralowec

Two new UCL economic abstention doctrine decisions: Willard v. AT&T and Klein v. Chevron

The Court of Appeal reached opposite conclusions in two opinions addressing the UCL economic abstention doctrine this year.  (See this blog post for more on that doctrine.)

In Willard v. AT&T Communications of Cal., Inc., ___ Cal.App.4th ___ (Mar. 6, 2012), the Court of Appeal (Second Appellate District, Division Five) held that the trial court did not abuse its discretion in declining to entertain the plaintiff's UCL action based on the economic absention doctrine. It affirmed the judgment of dismissal that followed the trial court's order sustaining the defendant's demurrer without leave to amend.

Justice Mosk dissented.  His dissenting opinion argues that the court cannot evaluate, at the demurrer stage, whether the action would implicate questions of complex economic policy.  He would have allowed the case to proceed to discovery. 

Earlier this year, in Klein v. Chevron U.S.A., Inc., 202 Cal.App.4th 1342 (Jan. 25, 2012), the Court of Appeal (Second Appellate District, Division Seven) held that the trial court erred by invoking the economic abstention doctrine at the pleading stage and dismissing the plaintiffs' UCL and CLRA claims.  Id. at 1361-66.  Justice Mosk cited Klein in his dissenting opinion in Willard.

Recent Prop. 64 standing decision: Glen Oaks Estates Homeowners Assn. v. Re/Max Premier Properties

In Glen Oaks Estates Homeowners Assn. v. Re/Max Premier Properties, Inc., 203 Cal.App.4th 913 (Feb. 23, 2012), a homeowners' association filed a UCL and FAL action against the real estate agents who marketed the parcels of land purchased by the association's owners, alleging various misrepresentations and nondisclosures regarding soil conditions and the parcels' susceptibility to damage from soil displacement.  Id. at 867-69.

The Court of Appeal (Second Appellate District, Division Eight) held that the homeowners' association had suffered "injury in fact" and "lost money or property" sufficient to confer Prop. 64 standing.  It found these monetary losses sufficient:

• investigative costs associated with the repair and replacement of the damaged common area improvements ... ;
• the amount to properly landscape the manufactured slopes of common areas that were not landscaped and/or were not properly landscaped with an adequate quantity or correct type of planting materials, irrigation, and drainage systems;
• the amount omitted from the budgetary analysis that is required to stabilize and perform the repair, restoration, and construction of the common areas, common area slopes, and common roadway.

Id. at 871.  The same facts were sufficient to establish the association's standing under Civil Code section 1368.3, which empowers homeowners' associations to bring certain types of litigation.  See id. at 870.  The association was required to satisfy both standing requirements (section 1368.3 and Prop. 64). 

The most interesting part of this decision is its holding that the association's "investigative costs" were sufficient to confer Prop. 64 standing.  That holding is certainly consistent with Kwikset, which speaks of an "identifiable trifle" or "nontrivial amount" of economic injury, and goes on to hold that the loss need not be recoverable as restitution.  Kwikset Corp. v. Superior Court (Benson), 51 Cal.4th 310, 324-25, 335-37 (2011).   (Although I'm not sure, under these facts, what the association could ultimately recover from the agents in a UCL/FAL action, except perhaps their commissions.)

Rehearing denied in 9th Circuit class certification case: Mazza v. American Honda Motor Co.

In Mazza v. American Honda Motor Co., ___ F.3d ___ (9th Cir. Jan. 12, 2012), the Ninth Circuit reversed the district court's order granting nationwide class certification of UCL and CLRA nondisclosure claims.  Here is my original post on the district court's decision.

First, the court held that under California choice-of-law rules, California law should not apply to all consumers' claims nationwide.  Slip op. at 197-206. 

Second, it reversed the class certification order, holding that common questions regarding unnamed class members' reliance predominated (even though reliance is, of course, not an element of a UCL claim).  Id. at  207-10 (citing, among other cases, Cohen v. DirecTV, Inc., 178 Cal. App. 4th 966 (2009)).

Although the panel ordered supplemental briefing on Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), the opinion says little about that case, except to confirm that

commonality only requires a single significant question of law or fact. Even assuming arguendo that we were to agree with Honda’s “crucial question” contention, the individualized issues raised go to preponderance under Rule 23(b)(3), not to whether there are common issues under Rule 23(a)(2).

Slip op. at 195-96 (citing Dukes, 131 S.Ct. at 2556).

A petition for panel or en banc rehearing was filed on February 2, 2012.  It was denied on March 16, 2012. 

Rehearing denied and review petition filed in Duran v. U.S. Bank N.A.

On February 6, 2012, the Court of Appeal (First Appellate District, Division One) handed down its opinion in Duran v. U.S. Bank National Association, ___ Cal.App.4th ___ (Feb. 6, 2012), in which it reversed the judgment and class certification in an employee misclassification case, declining to approve a "trial management plan lacking in any expert input or principled statistical foundation."  Slip op. at 52.  (Instead of following the recommendations of either party's experts, the trial court, for unknown reasons, decided that twenty names would be drawn from a hat, and the testimony of those twenty used to extrapolate findings for the whole class.) 

On March 6, 2012, the Court of Appeal denied the petition for rehearing and modified the opinion by adding a footnote stating that the trial court must consider, on remand, the status of the damages awards to the named plaintiffs and other testifying class members.  This makes sense, given that no extrapolation would be necessary to affirm the judgment in favor of those who testified below.  The trial court held that all of them had been misclassified and should have been paid significant overtime wages.   Duran v. U.S. Bank National Association, no. A125557.

On March 19, 2012, a review petition was filed.  Duran v. U.S. Bank National Association, no. S200923. 

Brinker update

The most recent development in Brinker is that on March 6, 2012, the Supreme Court denied the application of one of the amicus participants to file a further amicus curiae brief in response to Brinker's supplemental brief on Duran.  Here is a link to the docket. 

The deadline for the Court to issue its opinion has not changed. The opinion remains due no later than 90 days from the date of resubmission, which was January 13, 2012. 

Statement of issue on review in Rose v. Bank of America

The Supreme Court's docket in Rose v. Bank of America, no. S199074, has been updated to include a statement of the issue on review:

Can a cause of action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) be predicated on an alleged violation of the Truth in Savings Act (12 U.S.C. § 4301 et seq.), despite Congress's repeal of the private right of action initially provided for under that Act?

This is rather a narrow statement, and tells us little about the extent to which the Court may elaborate on the scope of the UCL's "unlawful" prong, as the Court of Appeal did in its now-uncitable opinion. 

BREAKING NEWS: Review granted in Sanchez v. Valencia Holding Co.

Today, the California Supreme Court granted review in Sanchez v. Valencia Holding Co., no. S199119.

This is the case in which the Court of Appeal declined to enforce a no-class-action arbitration clause notwithstanding Concepcion.  Sanchez v. Valencia Holding Co., LLC, 201 Cal.App.4th 74 (2011).  The Court of Appeal reasoned that ordinary state-law unconscionability principles were preserved by Concepcion. 

As I mentioned in this post last Friday and another post this morning, this reading of Concepcion finds support in two recent Ninth Circuit decisions, Kilgore v. KeyBank, N.A., ___ F.3d ___ (9th Cir. Mar. 7, 2012) and Coneff v. AT&T Corp., ___ F.3d ___ (9th Cir. Mar. 16, 2012). 

The docket in Sanchez has not yet been updated to indicate the issues on review. 

UPDATE:  This is the issue on review, as stated on the docket: 

Does the Federal Arbitration Act (9 U.S.C. § 2), as interpreted in AT&T Mobility LLC v. Concepcion (2011) 563 U. S. __, 131 S.Ct. 1740, preempt state law rules invalidating mandatory arbitration provisions in a consumer contract as procedurally and substantively unconscionable?

Yet another new opinion interpreting Concepcion: Coneff v. AT&T Corp.

Thanks to the blog reader who pointed out that on Friday, the Ninth Circuit handed down another opnion interpreting Concepcion. 

In Coneff v. AT&T Corp., ___ F.3d ___ (9th Cir. Mar. 16, 2012), the Ninth Circuit held that Concepcion preempted Scott v. Cingular Wireless, 161 P.3d 1000 (Wash. 2007), which is the Washington Supreme Court's equivalent to Discover Bank.  Slip op. at 3145-51.  (My blog post on Scott is here.) 

The opinion went on to hold that Concepcion recognized the "continued vitality" of the doctrine of procedural unconscionability, and remanded for the district court to reevaluate the enforceability of the arbitration clause under this doctrine (after deciding which state's laws should apply).  Slip op. at 3151-53.

MCLE program on Concepcion tomorrow in San Francisco

On Wednesday, March 21, 2012 from 12:00 to 1:30 p.m., the ADR and Antitrust and Business Regulation Sections of the Bar Association of San Francisco will present "AT&T Mobility v. Concepcion: A Year Later."

The panel will feature Donald M. Falk of Mayer Brown LLP, Jonathan E. Gertler of Chavez & Gertler LLP, and moderator John S. Worden of Schiff Hardin, LLP.   Topics to be addressed include:

• How has the decision shaken out so far? - including a review of the Second Circuit’s recent AmEx III decision
  
• What is left to find out on the California and federal levels?
• What is the next shoe to drop?
• What is the plaintiffs bar doing to adjust/adapt?
• Is there any chance of legislative or executive intervention?
• How does the defense bar view the future?

Click here for more information and to register. 

New opinions interpreting Concepcion: Robinson v. Title Lenders, Brewer v. Missouri Title Loans, and Kilgore v. KeyBank

Last week, three noteworthy new opinions were handed down interpreting AT&T Mobility LLC v. Concepcion, 563 U.S. __, 131 S.Ct. 1740 (2011).

Two of the opinions hail from Missouri.  In Robinson v. Title Lenders, Inc., ___ S.W.3d ___ (Mo. Mar. 6, 2012), the Missouri Supreme Court held that the FAA, as interpreted in Concepcion, did not preempt general state-law unconscionability principles.  The Court reversed the trial court's order compelling arbitration and remanded for further proceedings.  In Brewer v. Missouri Title Loans, ___ S.W.3d ___ (Mo. Mar. 6, 2012), the Court reiterated its unconscionability holding and affirmed the lower court's order striking down the arbitration clause (which happened to include a class action ban) as unconscionable under Missouri law. 

Our own Court of Appeal reached a similar conclusion several months ago in Sanchez v. Valencia Holding Co., LLC, 201 Cal.App.4th 74 (2011).  (A petition for review was filed in January and remains pending in Sanchez. Here is a link to the docket.  On February 23, 2012, the Supreme Court gave itself an extension of time, through April 3, to grant or deny the petition.)

In Kilgore v. KeyBank, N.A., ___ F.3d ___ (9th Cir. Mar. 7, 2012), the Ninth Circuit likewise assessed the enforceability of an arbitration clause in light of ordinary rules of unconscionability (namely, those of California as set forth in Armendariz).  Slip op. at 2654-56.  With great conciseness (at least when compared to the Robinson and Brewer opinions), the Ninth Circuit in Kilgore held that such rules are not preempted:

Concepcion did not overthrow the common law contract defense of unconscionability whenever an arbitration clause is involved. Rather, the Court reaffirmed that the savings clause preserves generally applicable contract defenses such as unconscionability, so long as those doctrines are not “applied in a fashion that disfavors arbitration.” Concepcion, 131 S. Ct. at 1747.

Slip op. at 2654.  The court went on to hold that the particular abitration clause before it was not unconscionable.  Id. at 2654-56.

The opinion's other major holding is even more noteworthy.  The Ninth Circuit held that the FAA, as interpreted in Concepcion, preempts the California Supreme Court's Broughton and Cruz decisions, which held that CLRA and UCL claims seeking public injunctions are not arbitrable as a matter of public policy.  Kilgore, slip op. at 2646-54.  

In some respects, the issue resembles one addressed by the Court of Appeal in Brown v. Ralphs Grocery Co., 197 Cal.App.4th 489 (2011).  Brown held that a representative action brought under the Labor Code Private Attorneys General Act ("PAGA") was inarbitrable, Concepcion notwithstanding.  The California Supreme Court denied review in October.  A cert. petition is now pending in the U.S. Supreme Court (no. 11-880).  The response to the petition is due to be filed today.

In other arbitration-related news, simultaneous supplemental briefs were filed two days ago, on March 13, 2012, in Sonic-Calabasas A, Inc. v. Moreno, S174475.  That case involves an employment contract in which arbitration was substituted for a Berman hearing.  The U.S. Supreme Court vacated the California Supreme Court's February 2011 opinion and ordered the matter reconsidered in light of Concepcion.  See this blog post for more.

And on February 15, 2012, the Kentucky Supreme Court heard oral argument on the post-Concepcion petition for rehearing in Schnuerle v. Insight Communications Co., no. 2008-SC-000789 (to pull up the case, visit the docket search page, click on "case number," then insert year 2008 and case no. 789).  In its original opinion, handed down in December 2010, the Kentucky Supreme Court struck down as unconscionable a no-class-action arbitration clause.  Schnuerle v. Insight Communications Co., ___ S.W.3d ___, 2010 WL 5129850 (Ky. Dec. 16, 2010).  See this blog post for more on Schnuerle.

California Supreme Court grants review in UCL "safe harbor" case: Rose v. Bank of America

Yesterday, the Supreme Court granted review in Rose v. Bank of America, no. S199074.  In that case, the Court of Appeal held that a UCL "unlawful" prong claim could not be predicated on alleged violations of the federal Truth in Savings Act (TISA), 12 U.S.C. § 4301 et seq.  Rose v. Bank of America, N.A., 200 Cal.App.4th 1441 (2011). 

The opinion's discussion of the UCL's "unlawful" prong and the scope of the Cel-Tech "safe harbor" was quite interesting.  My original blog post on Rose is here. 

The Supreme Court docket has not yet been updated with a description of the issue(s) on review. 

Rutter Group 17200 program tonight in San Francisco, Thursday in Los Angeles

It's not too late to register and attend the Rutter Group's annual 17200 program, at which I am speaking tonight along with Will Stern and Justice Victoria Chaney of the Second District Court of Appeal.  This year, the program is called "Kwikset and Beyond: Advanced Topics in §17200 Practice."  It promises to be a great program. 

We will be presenting live tonight at the Hotel Nikko, 222 Mason Street, in San Francisco. Registration will open at 5:30 p.m. and the program will run from 6:00-9:15 p.m.  I hope to see some of you there.

On Thursday night, we will present the program live in Los Angeles at the Marriott Downtown, 333 S. Figueroa Street.  Video replays will be presented in Sherman Oaks on March 21, San Diego on March 22, and Costa Mesa on March 27.  (Details available at this link.)  The cost is $160 for three hours of MCLE credit (including 0.5 hours of ethics). 

Please sign up to attend!