The UCL Practitioner

Interplay between UCL and tax code: McClain v. Sav-On Drugs and Loeffler v. Target Corp.

Last month (on March 4, 2019), the Supreme Court decided McClain v. Sav-On Drugs, 6 Cal.5th 951 (2019), which includes this passage pertaining to the UCL: 

In [Loeffler v. Target Corp., 58 Cal.4th 1081 (2014)], we held that consumers could not bring actions under the Unfair Competition Law or the Consumer Legal Remedies Act to challenge a retailer’s alleged misrepresentation of the taxability of hot coffee.  (Loeffler, supra, 58 Cal.4th at p. 1092.)  We said “it is clear that a remedy that is directed at requiring the taxpayer to make a claim for refund from the Board, rather than one involving a direct claim by the consumer against the retailer, is the remedy that is consistent with the current governing statutory scheme.”  (Id. at p. 1133.)  We explained that “a Javor-type remedy for consumers,” which compels retailers to file a refund claim with the Department, is “an appropriate means to vindicate a consumer interest in a refund of a reimbursement charge” and that Javor “do[es] not suggest” that taxability issues “should be resolved in a consumer action” against the retailer.  (Ibid.)

McClain, 6 Cal.5th at 962 (citing Javor v. State Board of Equalization, 12 Cal.3d 790 (1974)).

This reminded me that I had never done a post on the Supreme Court's Loeffler opinion, although I reported on the oral argument setting back in early 2014.  (I can't believe it has been five years.)  Essentially, in a 4-3 opinion, with a dissent by Justice Liu, the Supreme Court affirmed the Court of Appeal's judgment, reasoning that the tax code provides the exclusive remedies for the tax-related UCL/CLRA violations asserted in the case, and created a "safe harbor."  Loeffler v. Target Corp., 58 Cal.4th 1081 (2014).

Recent opinion addresses CLRA's pre-lawsuit demand and correction procedures: Valdez v. Seidner-Miller, Inc.

In Valdez v. Seidner-Miller, Inc., ___ Cal.App.5th ___ (Mar. 27, 2019), the Court of Appeal (Second Appellate District, Division Seven) considered Civil Code section 1782, which states that a CLRA action for damages cannot be maintained unless (a) the plaintiff has made an appropriate pre-filing demand that the defendant "correct, repair, replace, or otherwise rectify" the violation; and (b) the defendant failed to "give" the consumer "an appropriate correction, repair, replacement, or other remedy ... within 30 days after receipt of the notice." 

As a preliminary matter, the Court considered what happens if "30 days after receipt of the notice" falls on a Saturday or other "holiday."  Under Code of Civil Procedure section 12a, the Court held, the defendant has until the following business day to respond.  Hence, the defendant's offer, made 32 days "after receipt of the notice," was timely.  Slip op. at 14-16 & n.13. 

Next, the Court held that the defendant's correction offer, which took the form of a detailed proposed settlement agreement, "was not an appropriate correction offer as contemplated by section 1782, subdivision (b)" because the offered relief was conditioned on the plaintiff's agreement to release other claims beyond his CLRA claim for damages.  Id. at 16.  The Court explained:

Th[e] broad release language and covenant not to sue [included in the defendant's correction offer] would have prohibited Valdez from asserting his [Civil Code] section 1632, UCL, and fraud claims and his claim for injunctive relief under the CLRA.  Yet Valdez had a right to bring those claims without first providing notice under the CLRA.  As to a CLRA claim, a timely and appropriate correction under section 1782, subdivision (b), only bars a claim for damages, not injunctive relief.  [Citations.]

Here, Valdez sought injunctive relief under the CLRA and UCL, prohibiting [defendant] “from entering into lease agreements without providing appropriate translations, prior to execution, when negotiations are conducted primarily in a language other than English ....”  Injunctive relief is available under both the CLRA and the UCL.  [Citations.]  Because [defendant]’s draft settlement agreement did not provide the requested injunctive relief, it was not appropriate for [defendant] to condition its correction offer on release of Valdez’s claims for injunctive relief.

Id. at 17 (citations and footnotes omitted).

The opinion favorably cites and discusses Flores v. Southcoast Automotive Liquidators, Inc., 17 Cal.App.5th 841 (2017), which also held that a "reasonable" CLRA correction offer cannot bar the plaintiff "from pursuing remedies based on other statutory violations or common law causes of action based on conduct under those laws."  Slip op. at 18-19 (quoting Flores, 17 Cal.App.5th at 850)  (For more on Flores, see this blog post and accompanying comment.)  The opinion also reconfirms Flores's holding that the UCL and CLRA provide independent remedies and are "independently actionable."  Id. at 20-21. 

Finally, the opinion declined to follow Benson v. Southern California Auto Sales, Inc., 239 Cal.App.4th 1198 (2015), in which a CLRA correction offer was held to bar non-CLRA claims that "were 'inextricably intertwined with the CLRA claim and based on the same conduct.'"  Slip op. at 22 (quoting Benson, 239 Cal.App.4th at 1210).  Such a holding, Valdez held, would be inconsistent with the plain text of sections 1782(a) and (b), as well as other CLRA provisions (namely sections 1752 and 1760), and "would lead to incongruous results."  Id. at 23-24. 

U.S. Supreme Court opines again on class arbitration: Lamps Plus, Inc. v. Varela

On Wednesday, the U.S. Supreme Court handed down Lamps Plus, Inc. v. Varela, ___ U.S. ___ (Apr. 23, 2019).  In order to find a way to force the injured plaintiff into individual (non-class) arbitration, the majority held that California's bedrock common-law rule of contract interpretation, that ambiguities in a contract are construed against the drafter, is preempted by the FAA.  Some of my views on the majority opinion are quoted in this article on Bloomberg Law, published yesterday.  SCOTUSblog has this analysis of the opinion. 

Instead of dwelling any further on the majority's outcome-driven "reasoning," I will quote this passage from Justice Ginsburg's dissenting opinion: 

I write separately to emphasize once again how treacherously the Court has strayed from the principle that "arbitration is a matter of consent, not coercion." Stolt-Nielsen S. A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 681 (2010) (internal quotation marks omitted).

Congress enacted the Federal Arbitration Act (FAA) in 1925 "to enable merchants of roughly equal bargaining power to enter into binding agreements to arbitrate commercial disputes." Epic Systems Corp. v. Lewis, 584 U.S. ___, ___ (2018) (GINSBURG, J., dissenting) (slip op., at 19) (emphasis in original). The Act was not designed to govern contracts "in which one of the parties characteristically has little bargaining power." Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403, n. 9 (1967); ....

The Court has relied on the FAA, not simply to overcome once-prevalent judicial resistance to enforcement of arbitration disputes between businesses. In relatively recent years, it has routinely deployed the law to deny to employees and consumers "effective relief against powerful economic entities." DIRECTV, Inc. v. Imburgia, 577 U.S. ___, ___ (2015) (GINSBURG, J., dissenting) (slip op., at 9). Arbitration clauses, the Court has decreed, may preclude judicial remedies even when submission to arbitration is made a take-it-or-leave-it condition of employment or is imposed on a consumer given no genuine choice in the matter. See Epic, 584 U.S., at ___-___ (GINSBURG, J., dissenting) (slip op., at 21-22) .... 

Piling Pelion on Ossa, the Court has hobbled the capacity of employees and consumers to band together in a judicial or arbitral forum. See Epic, 584 U.S., at ___, n. 12 (GINSBURG, J., dissenting) (slip op., at 22, n. 12) (noting Court decisions enforcing class-action waivers imposed by the party in command, who wants no collective proceedings). The Court has pursued this course even though "neither the history nor present practice suggests that class arbitration is fundamentally incompatible with arbitration itself." AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 362 (2011) (BREYER, J., dissenting).

....

Today's decision underscores the irony of invoking "the first principle" that "arbitration is strictly a matter of consent," ante, at 7 (internal quotation marks and alterations omitted), to justify imposing individual arbitration on employees who surely would not choose to proceed solo. Respondent Frank Varela sought redress for negligence by his employer leading to a data breach affecting 1,300 employees. See Complaint in No. 5:16‒cv‒00577 (CD Cal.), Doc. 1, ¶¶1, 59. The widely experienced neglect he identified cries out for collective treatment. Blocking Varela's path to concerted action, the Court aims to ensure the authenticity of consent to class procedures in arbitration. Ante, at 7‒8. Shut from the Court's sight is the "Hobson's choice" employees face: "accept arbitration on their employer's terms or give up their jobs." Epic, 584 U.S., at ___, n. 2 (GINSBURG, J., dissenting) (slip op., at 7, n. 2); see Circuit City [Stores, Inc. v. Adams], 532 U.S. [532,] 139 [(2001)] (Souter, J., dissenting) (employees often "lack the bargaining power to resist an arbitration clause if their prospective employers insist on one").

....

... [M]andatory individual arbitration continues to thwart "effective access to justice" for those encountering diverse violations of their legal rights. DIRECTV, 577 U.S., at ___ (GINSBURG, J., dissenting) (slip op., at 1). The Court, paradoxically reciting the mantra that "[c]onsent is essential," ante, at 7, has facilitated companies' efforts to deny employees and consumers the "important right" to sue in court, and to do so collectively, by inserting solo-arbitration-only clauses that parties lacking bargaining clout cannot remove. CompuCredit Corp. v. Greenwood, 565 U.S. 95, 115 (2012) (GINSBURG, J., dissenting). When companies can "muffl[e] grievance[s] in the cloakroom of arbitration," Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Ware, 414 U.S. 117, 136 (1973), the result is inevitable: curtailed enforcement of laws "designed to advance the well-being of [the] vulnerable." Epic, 584 U.S., at ___ (GINSBURG, J., dissenting) (slip op., at 26). "Congressional correction of the Court's elevation of the FAA over" the rights of employees and consumers "to act in concert" remains "urgently in order." Id., at ___ (slip op., at 2).

Lamps Plus, slip op. at 1-5 (Ginsburg, J., dissenting) (emphasis added).

UCL remedies for Labor Code violations and UCL claim "splitting": Zakaryan v. Men's Warehouse, Inc.

While Zakaryan v. Men's Warehouse, Inc., ___ Cal.App.5th ___ (Mar. 28, 2019), is primarily an arbitration decision, it includes some interesting observations about the UCL.   

Seeking to recover unpaid wages as restitution under the UCL is now so routine, the Zakaryan opinion says, that this enforcement mechanism is properly described as one of several "[t]raditionally" pursued by aggrieved employees: 

Traditionally, the Labor Code provides several mechanisms for three different actors to enforce the above described labor laws. 

First, the aggrieved employee may seek judicial or administrative relief.  In terms of judicial relief, the employee may “file[] an ordinary civil action against the employer” for (1) breach of contract (Reynolds v. Bement (2005) 36 Cal.4th 1075, 1084 (Reynolds), abrogated on other grounds in Martinez v. Combs (2010) 49 Cal.4th 35), (2) restitution under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 177-178), or (3) violation of the Labor Code provision at issue if (and only if) the Code authorizes individual employees to bring a claim based on that provision (§§ 1194, subd. (a) [authorizing civil suit to recover “unpaid balance” of overtime premium pay], 218 [authorizing civil suit to recover pay for missed meal and rest periods and waiting time penalty]). .... 

Slip op. at 6-7 (emphasis added). 

Zakaryan also had this to say about permissible "splitting" of UCL and CLRA claims:

Broughton held that an individual plaintiff’s claim under the Consumer Legal Remedies Act (CLRA) (Civ. Code, § 1750 et seq.) could be split into two and shunted into two different fora—namely, his claim for damages sent to arbitration and his claim for injunctive relief to “enjoin[][the defendant’s allegedly] deceptive [methods, acts and] practices” to remain in court.  (Boughton, at pp. 1079-1084.)  Following on Broughton’s heels, Cruz held that an individual plaintiff’s claim under the Unfair Competition Law (UCL) (Bus. & Prof. Code, § 17200 et seq.) could likewise be split into two and shunted into two different fora—namely, his claim for restitution to arbitration and his claim for injunctive relief to “‘enjoin[] [the defendant’s allegedly] wrongful acts and practices’” to remain in court.  (Cruz, at pp. 308-309, 312-313, 315.)  Broughton and Cruz sanctioned the claim splitting because the individual plaintiff’s CLRA and UCL claims, respectively, involved two primary rights—namely, the individual plaintiff’s right to be made whole (through damages or restitution) and the public’s right to be protected from deceptive or wrongful practices (through a “public injunction” sought by the individual plaintiff “act[ing] in the purest sense as a private attorney general”).  (Cruz, at p. 312; Broughton, at pp. 1079-1080, 1084; see also McGill v. Citibank, N.A. (2017) 2 Cal.5th 945, 961 [“the public injunctive relief available under the UCL [and] the CLRA . . . is primarily ‘for the benefit of the general public’ . . . [and] ‘not to resolve a private dispute’”].)  In other words, individual CLRA and UCL plaintiffs sometimes wear two hats while the employee who brings a solitary PAGA action always wears but one; the former may accordingly be split while the latter may not.

Id. at 13-14 (emphasis added) (citing Cruz v. PacifiCare Health Systems, Inc., 30 Cal.4th 303 (2003); Broughton v. Cigna Healthplans, 21 Cal.4th 1066 (1999)). 

FAL not void for vagueness: People v. Superior Court (J.C. Penney Corp.)

People v. Superior Court (J.C. Penney Corp.), ___ Cal.App.5th ___ (Apr. 16, 2019), is a public prosecutor action alleging that J.C. Penney, Macy's, Kohl's and Sears violated the UCL and FAL when they "sold products online by means of misleading, deceptive or untrue statements regarding the former prices of those products."  Slip op. at 2.  The appeal concerned the FAL claims only. 

The Court of Appeal (Second Appellate District, Division Four) closely examined the FAL and concluded that it is not constitutionally void for vagueness, either on its face or as applied against the defendants.  The Court of Appeal also rejected the defendants' argument that the FAL impermissibly infringed on their free speech rights.  

Supreme Court to consider jury trial right in UCL public prosecutor actions: Nationwide Biweekly Admin., Inc. v. Superior Court

Last September, the Supreme Court granted review in Nationwide Biweekly Administration v. Superior Court, no. S250047, which presents the following issue (according to the docket):

Is there a right to a jury trial in a civil action brought by the People, acting through representative governmental agencies, pursuant to the Unfair Competition Law (Bus. & Prof. Code, § 17200, et seq.), the False Advertising Law (Bus. & Prof. Code, § 17500, et seq.) or the Check Sellers, Bill Payers, and Proraters Law (Fin. Code, § 12200, et seq.), when the People seek statutory civil penalties among other forms of relief?

The Court of Appeal (First Appellate District, Division One) held that there is a jury trial right in such a public prosecutor action on the question of liability.  The amount of civil penalties, and the propriety of other equitable remedies (such as injunctive relief), is for the court to determine. Nationwide Biweekly Administration, Inc. v. Superior Court, 24 Cal.App.5th 438 (2018). 

The panel canvassed the past UCL case law on the jury trial question, and concluded that most of the past cases considered the Sixth Amendment right to a jury trial in criminal actions, not the common-law jury trial right secured by the California constitution, on which the defendant relied.  Under the common law, governmental actions seeking civil penalties were considered legal, not equitable, and were triable by jury:

[C]ontrary to the People’s assertion, there is no line of cases holding that there is no right to jury trial in a UCL enforcement action brought by the government and seeking statutory penalties. Rather, there is a line of cases holding that the Sixth Amendment right to jury trial in criminal cases is inapplicable to the UCL—a proposition with which we agree. Only one case, Bhakta, has concluded there is no right to a jury trial in a UCL enforcement action under article I, section 16 of the California Constitution. However, as we have discussed, in our view the Bhakta court’s analysis was incomplete and failed to take into account that statutory penalties are a significant remedy under the UCL and such penalties, under historic English common law, would have been sought in the courts of law, thus securing to defendants the right to jury trial.  [Citations.]

Id. at 460-61 (citing People v. Bhakta, 162 Cal.App.4th 973 (2008)).   

In a footnote, the panel considered one of the leading cases holding that UCL actions between private litigants carry no jury trial right:

The Bhakta court cited Hodge v. Superior Court (2006) 145 Cal.App.4th 278, 284 (Hodge), for the proposition that the UCL provides for “only equitable remedies.” (Bhakta, supra, 162 Cal.App.4th at p. 979.) Hodge, however, was a wage and hour case in which the plaintiff employees sought back wages for overtime. (Hodge, at pp. 281–282.) The defendant employer claimed it had a right to jury trial because its liability was based on conduct that was “unlawful” under the Labor Code. (Id. at p. 283.) The Hodge court concluded otherwise, stating “the UCL provides only for equitable remedies,” “[d]amages are not available.” (Id. at p. 284.) Thus, said the appellate court, “the UCL is not simply a legislative conversion of a legal right into an equitable one. It is a separate equitable cause of action.” (Ibid.) In short, the Hodge court was not called upon to address, nor did it, the issue of statutory penalties sought in a government enforcement action.

Furthermore, in observing that other courts had held there is no jury trial right under the UCL, the Hodge court cited to [three cases] all holding that there is no Sixth Amendment right to jury trial under UCL, a conclusion with which we agree but which is not apposite to the right to jury trial in a civil case. (Hodge, supra, 145 Cal.App.4th at p. 285.)

Id. at 460 n.11 (emphasis in original; hyperlink added).  For more on Hodge, see my original blog post on that opinion. 

It will be interesting to see what, if anything, the Supreme Court has to say about Hodge or other decisions on the jury trial right in private UCL actions.  As of April 5, 2019, the merits briefing in Nationwide Biweekly is complete. 

UCL class certification case set for oral argument: Noel v. Thrifty Payless

The Supreme Court has posted its early May argument calendar. The case of Noel v. Thrifty Payless, no. S246490, will be heard on Wednesday, May 8, 2019 at 9:00 a.m. in San Francisco.  As I reported earlier this month, in Noel, the Supreme Court will consider the ascertainability element of class certification in the specific context of retail sales to consumers. 

This should be an interesting argument, and I will try to attend and report on it here if my work schedule permits. 

Update on Noel v. Thrifty Payless

Just over a year ago, in March 2018, the Supreme Court granted review in Noel v. Thrifty Payless, no. S246490. Noel is a false advertising case under the UCL, CLRA and FAL (see this blog post).  It presents the following question (according to the Supreme Court's docket):

Must a plaintiff seeking class certification under Code of Civil Procedure section 382 or the Consumer[s] Legal Remedies Act demonstrate that records exist permitting the identification of class members?

The Court of Appeal (First Appellate District, Division Four) said yes to this question, and therefore concluded that the proposed class of of approximately 20,000 persons who purchased a certain type of inflatable pool at Rite-Aid could not be certified. Noel v. Thrifty Payless, Inc., 17 Cal.App.5th 1315 (2017).

This holding appears to run counter to Daar v. Yellow Cab Co., 67 Cal.2d 695 (1967), which pronounced—50 years before Noel—that "[i]f the existence of an ascertainable class has been shown, there is no need to identify its individual members in order to bind all members by the judgment." Id. at 706. 

Briefing was completed in November 2018.  Numerous amicus briefs were filed.  Last month, on March 15, 2019, the Supreme Court notified the parties that the case "could [be] set ... for argument within the next few months."  Presumably, that means the May or June argument calendars, because the Court does not hear arguments in July or August. This case will be one to watch. 

U.S. Supreme Court remands cy pres case for further proceedings: Frank v. Gaos

About a year ago, I reported that the U.S. Supreme Court had granted cert. in Frank v. Gaos, No. 17-961, and would be reviewing Ninth Circuit's opinion in In re Google Referrer Header Privacy Litigation, 869 F.3d 767 (2017).  As discussed in this blog post, in Google Referrer, the Ninth Circuit affirmed the district court's order approving distribution of class action settlement proceeds to cy pres recipients only.  The objectors probably hoped the Supreme Court would invalidate all such cy pres settlements.  But on March 20, 2019, the U.S. Supreme Court disposed of the matter without reaching the cy pres question. 

In a per curiam opinion, the Court remanded the case back to the Ninth Circuit for it (or for the district court) to address the question of the named plaintiffs' standing under Spokeo.  Frank v. Gaos, ___ U.S. ___ (Mar. 20, 2019) (citing Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016)).  The plaintiffs sought statutory remedies under the Stored Communications Act, which prohibits disclosures of certain types of electronic communications.  According to the plaintiffs, Google's use of "referrer headers," which inform website owners of the search terms used to navigate to their sites, violated the Act.  Id. (slip op. at 1-2).  Spokeo, handed down while the appeal in Google Referrer was pending, "held that 'Article III standing requires a concrete injury even in the context of a statutory violation.'"  Id. (slip op. at 4).  Because the standing question "raise[d] a wide variety of legal and factual issues not addressed in the merits briefing before us or at oral argument," the Court chose to remand these issues back to the lower courts to determine in the first instance.  Id.

In a dissenting opinion, Justice Thomas said he would reverse on the merits, and expressed the view that "cy pres payments are not a form of relief to the absent class members and should not be treated as such ...."  Id. (Thomas, J., dissenting) (slip op. at 2). 

Class actions and the "five-year" rule: Rel v. Pacific Bell Mobile Servs.

In Rel v. Pacific Bell Mobile Services, ___ Cal.App.5th ___ (Mar. 29, 2019), the Court of Appeal (First Appellate District, Division Five) reviewed the dismissal of a putative class action under the "five-year" rule (Code Civ. Proc. §583.310). The panel considered, among other issues, the interplay between the dismissal statutes and interim "death knell" appeals from orders denying class certification.