The UCL Practitioner

Supreme Court depublishes class certification opinion: Bartoni v. American Medical Response West

Yesterday, the Supreme Court issued an order depublishing the Court of Appeal's opinion in Bartoni v. American Medical Response West, 11 Cal.App.5th 1084 (2017).  Under Rule of Court 8.1115, the opinion is no longer a citable precedent. 

In Bartoni, the plaintiffs alleged that their employer required them to remain "on call" at all times, including during all meal periods. The trial court denied their motion for class certification, holding that an "on-call" meal period was compliant unless actually interrupted, and that as a result, non-common questions predominated.  The Court of Appeal agreed, and affirmed.  11 Cal.App.5th at 1092, 1101-02.  (The Court of Appeal reversed a similar ruling as to the rest break claim.  Id. at 1102.) 

The depublication requests, one of which was filed by yours truly, argued that this holding was inconsistent with Augustus and Brinker, which together held that meal periods (and rest breaks), to be compliant, must be entirely "off-duty," and that an "on-call" meal period (or rest break) is not an "off-duty" one.  See Augustus v. ABM Security Services, Inc., 2 Cal.5th 257, 269-72 (2016) (citing Brinker Restaurant Corp. v. Superior Court, 53 Cal.4th 1004, 1039-40 (2012)). 

The Bartoni opinion was reminiscent of several post-Brinker opinions that the Supreme Court depublished in 2012 and 2013.  See these blog posts for more on those depublication orders.  [Disclosure: I am co-counsel of record for the plaintiffs in Bartoni.] 

New UCL, FAL and CLRA opinion: Rubenstein v. The Gap, Inc.

In Rubenstein v. The Gap, Inc., ___ Cal.App.5th ___ (Aug. 24, 2017), the plaintiff alleged that the defendant should have disclosed that clothing sold at its "Factory Stores" (including Gap and Banana Republic factory stores) was of inferior quality compared to the clothing sold at its "traditional" stores, and that the lesser-quality merchandise had never been offered for sale at the "traditional" stores.  Slip op. at 2-3.  The trial court sustained the defendant's demurrer without leave to amend.  Id. at 4.

The Court of Appeal (Second Appellate District, Division One) held, as a matter of law, on the pleadings, that this conduct did not violate the FAL, the UCL, or the CLRA:

As a matter of law, Gap’s use of its own brand name labels on clothing that it manufactures and sells at Gap-owned stores is not deceptive, regardless of the quality of the merchandise or whether it was ever for sale at other Gap-owned stores.  Retailers may harm the value of their brands by selling inferior merchandise at factory stores, but doing so does not constitute false advertising.  Under these allegations, the trial court properly dismissed the FAL cause of action.

 Slip op. at 6-7.  The Court's reasoning was similar for the UCL claim:

As explained in discussing the FAL cause of action, the SAC alleges no statement by Gap about the quality of factory store merchandise or that it was previously for sale in traditional Gap-owned stores.  Gap’s use of its own brand names in factory store names and on factory store clothing labels is not likely to deceive a reasonable consumer for the simple reason that a purchaser is still getting a Gap or Banana Republic item.  

Id. at 8.  

The opinion goes on to say this: 

The SAC states that “[r]easonable consumers believe outlet stores sell products that were previously available for purchase at retail stores,” but alleges no facts showing this to be true.  Moreover, a consumer for whom the retail history of factory store items is material can ask Gap employees about this.  A reasonable consumer would also inspect the quality of factory store clothing items before buying them and could return items after purchase if they turn out to be unsatisfactory.  In the end, the allegation that Gap is not living up to the quality standards it has set for Gap and Banana Republic brands fails to state a cause of action for a fraudulent business practice under the UCL.

Id. 

This part of the Court's reasoning appears to me inconsistent with a number of principles articulated in Kwikset.  The Court even says that it is rejecting a series of contrary arguments made by the Attorney General in an amicus curiae brief in support of the plaintiff.  See slip op. at 10-12. 

On the UCL "unfair" prong claim, the Court applied the "section 5" test, without acknowledging the three-way split in authority (see this blog post).  Slip op. at 13 (citing Klein v. Chevron U.S.A., Inc., 202 Cal.App.4th 1342 (2012); Camacho v. Automobile Club of Southern California, 142 Cal.App.4th 1394 (2006)). 

Under the "section 5" test:

“[A] business practice is ‘unfair’ if (1) the consumer injury is substantial; (2) the injury is not outweighed by any countervailing benefits to consumers or competition; and (3) the injury could not reasonably have been avoided by consumers themselves.”  (Klein, at p. 1376 & fn. 14 [applying and following Camacho].)

The SAC fails to allege an unfair business practice.  The injury alleged is not substantial because consumers are getting Gap and Banana Republic brand name items for low prices, and there is no allegation that Gap ever made any representations about the retail history or quality of factory store merchandise.  A consumer who cared about whether the items were identical to other Gap merchandise could have asked a sales associate whether this is true.  As for any quality issues, consumers could have examined factory store apparel before purchasing it, read the clothing labels for materials used in manufacture, and returned merchandise after purchase if it was unsatisfactory.  Indeed, [the plaintiff] does not allege that any of the clothing items she purchased at Gap and Banana Republic Factory Stores had any quality issues.

Slip op. at 13-14.  I have to respectfully disagree with this analysis.  The allegation is that the stores are using their brand names to pass off inferior merchandise--not that the merchandise has obvious defects in materials or workmanship.  If it did, and the customer returned it, the deception would have been insufficiently subtle, and would have failed.  A merchant should not be allowed to get away with concealing material information by instituting a return policy, or one that says, "We'll tell you the truth but only if you ask."   

Finally, the Court found no CLRA violation because no affirmative misrepresentations were made and the defendant had no duty to disclose.  Slip op. at 14-15. 

New class arbitration opinion: Sprunk v. Prisma LLC

In Sprunk v. Prisma LLC, ___ Cal.App.5th ___ (Aug. 23, 2017), the Court of Appeal (Second Appellate District, Division One) held that the defendant "waived its right to seek arbitration by filing and then withdrawing a motion to compel arbitration against the named plaintiff, Maria Elena Sprunk, and then waiting until after a class had been certified to seek arbitration against class members."  Slip op. at 2. 

UPDATE:  Scott Leviant has a more detailed discussion ("Arbitration sunk  in Sprunk") over at The Complex Litigator.

"The U.S. Supreme Court Has Misinterpreted the Federal Arbitration Act"

Over at SCOCAblog, an article by William T. Newman posted earlier this week has an interesting take on Concepcion. 

Ninth Circuit approves "cy pres-only" settlement: In re Google Referrer Header Privacy Litig.

In In re Google Referrer Header Privacy Litigation, ___ F.3d ___ (9th Cir. Aug. 22, 2017), the Ninth Circuit affirmed an order granting final approval of an $8.5 million nationwide settlement of certain privacy claims against Google.   

Under the settlement, approximately $3.2 million would be "set aside for attorneys' fees, administration costs, and incentive payments to the named plaintiffs," with the rest "allocated to six cy pres recipients" who would use the money "to promote public awareness and education, and/or to support research, development, and initiatives, related to protecting privacy on the Internet."  Slip op. at 6. 

The Ninth Circuit held that the district court properly found the settlement to be "non-distributable," and therefore appropriate for a cy pres distribution.  Id. at 8-9 (citing Lane v. Facebook, Inc., 696 F.3d 811 (9th Cir. 2012)). 

The panel also rejected the objectors' argument that a "non-distributable" settlement, by definition, cannot meet the "superiority" element of class certification.  Id. at 10-11.  To the contrary:

The two concepts [i.e., cy pres and "superiority"] are not mutually exclusive, since “[w]here recovery on an individual basis would be dwarfed by the cost of litigating on an individual basis, this factor weighs in favor of class certification.” .... The district court did not abuse its discretion in finding the superiority requirement was met because the litigation would otherwise be economically infeasible. This finding dovetails with the rationale for the cy pres-only settlement.

Id. at 11 (footnote omitted) (quoting Wolin v. Jaguar Land Rover N. Am., LLC, 617 F.3d 1168, 1175 (9th Cir. 2010)).

The final sections of the opinion address the propriety of the selected cy pres recipients and of the attorneys' fees awarded to class counsel  Id. at 11-21.  One judge dissented from the cy pres recipients portion of the opinion, reasoning that the district court should have more closely vetted the three recipients affiliated with class counsel's alma maters.  Id. at 21-27.  The majority, however, found no abuse of discretion.  Id. at 19.

New UCL class certification opinion: Kizer v. Tristar Risk Management

In Kizer v. Tristar Risk Management, ___ Cal.App.5th ___ (Jun. 26, 2017; pub. ord. Jul. 26, 2017), the Court of Appeal (Fourth Appellate District, Division Three) affirmed an order denying class certification of Labor Code claims arising out of the defendant's alleged misclassification of its claims examiners, and of the UCL "unlawful" prong claim stemming from that. 

Basically, the Court of Appeal reasoned that misclassification, standing alone, is not unlawful; instead, a violation occurs only when the misclassified employees are denied overtime pay (or other statutory protections afforded to non-exempt employees).  Slip op. at 12-20.  Even if the elements relevant to assessing the applicability of the administrative exemption might be amenable to common proof, this was not sufficient for class certification, because the plaintiffs had failed to offer any proof of a uniform policy policy or practice to deny overtime pay to the claims examiners.  See id.

For similar reasons, the Court of Appeal affirmed the ruling as to the UCL claim.  Id. at 20-23.  The plaintiffs relied on Tobacco II, arguing that individualized proof of causation and injury are not elements of a UCL claim.  Id. at 21-22.  But the Court of Appeal found a more basic problem in the plaintiffs' failure to introduce any common proof of an unlawful practice (i.e., denying overtime pay to claims examiners):

As explained above, and contrary to Plaintiffs’ contention, the trial court did not deny Plaintiffs’ class certification motion based on their failure to present individualized proof of injury by each potential class member.  Rather, the court denied the motion because Plaintiffs failed to satisfy the commonality requirement by presenting evidence to show they could establish through common proof that Tristar required claims examiners to work overtime.  Substantial evidence supports that finding and it is consistent with the governing legal standards.

Id.  at 23. 

The Kizer opinion is one for the list of post-Tobacco II class certification decisions.  (See my prior series of posts: "Nine post-Tobacco II decisions," "A tenth post-Tobacco II opinion," "New UCL class certification decision," and "A thirteenth post-Tobacco II opinion.") 

Although the opinion cites Cohen v. DIRECTV, Inc., 178 Cal.App.4th 966 (2009) and Davis‑Miller v. Automobile Club of Southern California, 201 Cal.App.4th 106 (2011) (discussed in these blog posts), I would still put in on the plaintiffs' side of the ledger.  Unlike those cases, Kizer did not hold that certification could be properly denied due to predominance of non-common questions as to reliance or injury (which are not even elements of a UCL claim).  Rather, Kizer focused on whether the unlawful conduct itself could be established through common proof.  In so holding, Kizer also relied heavily on Steroid Hormone Product Cases, 181 Cal.App.4th 145 (2010) (discussed in this blog post), which illustrates the proper focus of the class certification inquiry in a UCL "unlawful" prong case.