"Why Materiality Does Not Equal a Safety Risk"

The Spring 2012 issue of Competition, journal of the Antitrust and Unfair Competition Law Section of the State Bar of California, is just out.

The issue has an interesting article called "Revisiting Materiality in the Context of CLRA and UCL Claims:  Why Materiality Does Not Equal a Safety Risk" by James C. Shah and Rose F. Luzon.  Here is an excerpt from the introduction:

Some practitioners and courts now take the position that, in order to establish materiality in an omission-based claim under the CLRA and UCL, a plaintiff must allege that the subject product poses a safety risk.  ....

As this discussion will demonstrate, given what is and has been the prevailing materiality standard for years, the existence of a safety risk is clearly not a required element of this standard, and its absence should not be a basis for precluding otherwise viable CLRA and UCL claims that are brought to redress consumer wrongs.  This article discusses why the imposition of a "safety" requirement for pleading materiality in omission-based consumer fraud claims is both contrary to controlling legal authority and to the express legislative purpose of the CLRA and UCL.

The article is worth a read.  This is an important area of law and one in which we are seeing what is perhaps CAFA's most problematic side effect:  federal judges making California law.  Federal judges construe the law in removed class-action cases raising no federal questions, their rulings are cited by litigants in state courts, and those rulings are followed by state-court judges.  The intermediate Court of Appeal opinion in Brinker is another example of this phenomenon.  

Comments

[Elliot Silverman]

Ever since Erie, we have had federal courts deciding issues of state law. The state courts are not required to follow those decisions unless they find them persuasive.

[Kimberly A. Kralowec]

The problem is it has been happening significantly more often since CAFA, and state court judges do follow these decisions. Because of CAFA, federal judges are seeing and ruling on certain types of state law questions that tend to arise in class actions (for example, interpretation of the UCL and Labor Code) much more frequently than they did pre-CAFA. Federal judges follow each other in later class actions, leading to a critical mass of decisions that some state judges then also choose to follow. More and more federal district court decisions are being cited in California Court of Appeal opinions (which happens partly because those decisions are readily available in databases like Westlaw and partly because the rules permit citation of unpublished federal decisions in California state courts). Even if these federal decisions are supposed to be merely "persuasive," it cannot be denied that they are having an impact on the development of California law -- one that we would not be seeing but for CAFA. It is certainly possible that some of CAFA's proponents intended and expected this to happen.