The UCL Practitioner

Another post-Tobacco II class certification opinion: Downey v. Public Storage, Inc.

In Downey v. Public Storage, Inc., 44 Cal.App.5th 1103 (Feb. 6, 2020), the Court of Appeal (Second Appellate District, Division Two) affirmed an order denying class certification of UCL and FAL claims based on the defendant storage facility's allegedly deceptive "$1-for-the-first month" promotion. 

I disagree with most of the reasoning of this opinion because I think it misapplies Tobacco II.  This opinion, in effect, requires classwide proof of elements that are necessary for the named plaintiff's standing after Prop. 64, but that need not be shown for the unnamed class members.   In my humble opinion, it makes no sense to deny class certification based on issues that may very well be non-common, but that pertain to facts that will not have to be proven at trial.   For example, if actual deception is not an element of a UCL "fraudulent" prong claim, as the Supreme Court held in Tobacco II and other cases, then it should not matter if some class members were actually deceived by the allegedly false advertising and some may not have been.   In re Tobacco II Cases, 46 Cal.4th 298, 320 (2009) ("relief under the UCL is available without individualized proof of deception, reliance and injury" (citations omitted)). 

I've been saying this for a long time, but in spite of my most sincere and earnest protestations (that's my attempt at some humor, folks), many opinions have gone the same way as Downey.  Most of these are cited in Downey.  Some decisions have gone the other way.  For a few years after Tobacco II, I tracked the post-Tobacco II opinions falling on both sides of this split. (See these five blog posts.)  Downey is the fifteenth such case I have covered on this blog (there may be some others I've missed over the years), with cases falling on both sides of the question. 

The Supreme Court has yet to weigh in on how Tobacco II applies at the class certification stage.  A petition for review was filed in Downey on March 13, 2020.  Downey v. Public Storage, no. S261212. 

New UCL standing opinion: Hansen v. Newegg.com Americas, Inc.

In Hansen v. Newegg.com Americas, Inc., ___ Cal.App.4th ___ (July 31, 2018), the Court of Appeal (Second Appellate District, Division Seven) addressed UCL and FAL standing in a case involving false advertising of a product's former price (or the amount by which the product price had been reduced or discounted). 

Applying Kwikset Corp. v. Superior Court, 51 Cal.4th 310 (2011) (discussed in this blog post), the Court determined that the plaintiff satisfied the UCL and FAL's standing requirements by alleging that if the former price had not been misrepresented, he would not have purchased the product.  He need not also allege that the product was not worth what he paid for it (a "benefit of the bargain" theory of standing advanced by the defendant).  Slip op. at 10-21. 

In so holding, the Court examined and endorsed the Ninth Circuit's opinion in Hinojos v. Kohl's Corp., 718 F.3d 1098 (9th Cir. 2013), another case involving false former price advertising (discussed in this blog post).  Hinojos, the Court held, had correctly applied Kwikset.

The panel also held that the reasoning of two 2008 opinions--Hall v. Time, Inc., 158 Cal.App.4th 847 (2008) and Petersen v. Cellco Partnership, 164 Cal.App.4th 1583 (2008) (discussed in these blog posts)--had been superseded by Kwikset:

These cases, however, were decided before Kwikset, which held that the “benefit of the bargain” theory has no relevance when the misrepresentation underlying the UCL claim is material in nature.  (See Kwikset, 51 Cal.4th at pp. 332-333; see also Hinojos, supra, 718 F.3d at p. 1107 [“‘benefit of the bargain’ rationale was explicitly rejected in Kwikset” for UCL claims that allege a material misrepresentation].) 

Slip op. at 21.  When it comes to former price, "'reasonable people can and do attach importance'" to it "'in their purchasing decisions.'"  Id. at 19-20 (quoting Kwikset, 51 Cal.4th at 333).  "[E]mpirical research" shows that "the presence of a higher original price affects consumers' perceptions 'about the product's worth,' and increases their willingness to buy the product."  Id. at 20 (quoting Hinojos, 718 F.3d at 1106). 

"We agreeth with the trial court" that the wine buyer is out of luck

Neither of these recent cases is a UCL or a class action matter, but I can't resist sharing them.  Here is the Fourth Appellate District, Division Three, in an opinion handed down last week:

“O thou invisible spirit of wine, if thou hast no name to be known by, let us call thee devil!”  (Shakespeare, Othello, act II, scene 3.)

Yea verily, we are presented with a most unfortunate tale of a villainous wine dealer who sold millions of dollars’ worth of counterfeit wine to an unsuspecting wine collector.  When the wine collector discovered the fraud, he filed an insurance claim based on his “Valuable Possessions” property insurance policy.  The insurance company denied the claim.  The wine collector sued for breach of contract.  The trial court ruled in favor of the insurance company, sustaining its demurrer.

We agreeth with the trial court; the wine collector suffered a financial loss, but there was no loss to property that was covered by the property insurance policy.  In other words, the wine collector is stuck with the devil wine without recompense.  A Shakespearean tragedy, to be sure.

....

Finally, we can merely offereth to Doyle this small piece of wisdom from the Bard of Avon:  “The robbed that smiles steals something from the thief.”  (Shakespeare, Othello, act I, scene 3.)

Doyle v. Fireman's Fund Ins. Co., ___ Cal.App.5th ___ (Mar. 7, 2018) (slip op. at 2, 8) (emphasis in original).  Somehow I doubt Doyle feels very consoled by that.  On the other hand, he does have standing to assert a UCL claim against the fraudster:

Simply stated: labels matter. The marketing industry is based on the premise that labels matter — that consumers will choose one product over another similar product based on its label and various tangible and intangible qualities they may come to associate with a particular source.  ....  Whether a wine is from a particular locale may matter to the oenophile who values subtle regional differences.  ....

....  Two wines might to almost any palate taste indistinguishable — but to serious oenophiles, the difference between one year and the next, between grapes from one valley and another nearby, might be sufficient to carry with it real economic differences in how much they would pay.

Kwikset Corp. v. Superior Court (Benson), 51 Cal.4th 310, 329, 330 (2011).  The fraudster in Doyle "for many years ... had apparently been filling empty wine bottles with his own wine blend and had been affixing counterfeit labels to the bottles." In other words, the case presents a textbook "fraudulent" prong claim. 

Back to Shakespeare.  Here is Justice Cuéllar, writing for the Supreme Court two days before Doyle:

Like “cloud-capp’d towers,” “gorgeous palaces,” and perhaps someday even “the great globe itself,” many arrangements endure for some time but eventually dissolve.¹   So too with certain law partnerships –– including firms that are retained, before they dissolve, to handle matters on an hourly basis.

¹          “The cloud-capp’d towers, the gorgeous palaces, / The solemn temples, the great globe itself, / Yea, all which it inherit, shall dissolve.”  (Shakespeare, The Tempest, act IV, scene I, lines 152–154.) 

Heller Ehrman LLP v. Davis Wright Tremaine LLP, ___ Cal.5th ____ (Mar. 5, 2018) (slip op. at 1).  Let us hope for better things for "the great globe itself."

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. 

New UCL "injury in fact" opinion: Ivanoff v. Bank of America, N.A.

In another wrongful foreclosure case, the Court of Appeal (Second Appellate District, Division Seven) held that the plaintiff had adequately alleged Prop. 64 "injury in fact" for standing purposes:

Whether or not Ivanoff’s allegation that she “stands to lose her home” adequately pleaded injury in fact under the UCL, Ivanoff also alleged, as a result of the Bank’s unlawful business practices, she paid money to the Bank and received billings for increased monthly loan payments in excess of what she should have owed (or was told she would owe).  No more is required to allege injury in fact.

Ivanoff v. Bank of America, N.A., ___ Cal.App.5th ___ (Mar. 13, 2017), slip op. at 13-16.  However, the UCL claim was time-barred.  It accrued no later than May 2011, more than four years before suit was filed in August 2015.  Id. at 17-19. 

Supreme Court takes up UCL standing case: Goonewardene v. ADP

Last week, on February 15, 2016, the Supreme Court granted review in Goonewardene v. ADP, No. S238941.  In this case, the Court of Appeal affirmed dismissal of the plaintiff's UCL and FAL claims for lack of standing, but allowed several other claims to move forward.  Goonewardene v. ADP, LLC, 5 Cal.App.4th 154 (2016).  My original post on the opinion is here.

I haven't seen the petition for review, but it's possible that it focused on the other claims considered in the Court of Appeal opinion, rather than the UCL and FAL claims. This is the issue on review, according to the docket:

Does the aggrieved employee in a lawsuit based on unpaid overtime have viable claims against the outside vendor that performed payroll services under a contract with the employer?

Under Rule of Court 8.115(e), as amended last year, the Court of Appeal opinion remains citable despite the grant of review, although it lacks precedential effect. 

Interesting UCL standing decision from December: Veera v. Banana Republic, LLC

During a very busy December, I missed a highly interesting new UCL standing decision.  In Veera v. Banana Republic, LLC, 6 Cal.App.5th 907 (Dec. 15, 2016), the plaintiffs shopped at Banana Republic after seeing a "40% off" sign in the window, only to be told at the check-out counter that the discount was limited to certain merchandise. "[O]ut of frustration and embarrassment," they bought at least one item at full price anyway.  The Court of Appeal (Second Appellate District, Division Four) reversed summary judgment in the defendant's favor, holding that the plaintiffs had raised a triable issue on whether they suffered "economic injury" within the meaning of Kwikset.    

[H]ere, plaintiffs ... bought certain items at full price, even though (assuming plaintiffs’ evidence of misleading advertising is true) Banana Republic sold those items to them in violation of the UCL, FAL, and CLRA.  The economic harm thus suffered is the difference between the advertised price plaintiffs should have been charged, and the full price plaintiffs actually paid.  (See Kwikset, supra, 51 Cal.4th at p. 325 [“If a party has alleged or proven a personal, individualized loss of money or property in any nontrivial amount, he or she has also alleged or proven injury in fact.”].)

Slip op. at 14.  With one judge dissenting, the Court rejected the defendant's argument that its successful "bait and switch" tactic eliminated standing because the plaintiffs knew the actual price when they paid it:

Plaintiffs’ evidence portrays, in essence, a type of “bait and switch” advertising.  (See Hawaii Community Federal Credit Union v. Keka (2000) 11 P.3d 1, 15 [“[t]he term ‘bait and switch’ is usually applied in the context of advertising goods or services with the intent not to sell them as advertised”]; Stern, Cal. Practice Guide:  Bus. & Prof. Code Section 17200 Practice (The Rutter Group 2016) § 4:35 [“A ‘bait and switch’ is a form of false advertising in which advertisements may not be bona fide because what the merchant intends to sell is significantly different from that which drew the potential customer in.  [Citation.]”].)  In such a scheme, one of the dangers is that the consumer will rely on the deceptive advertising to decide to buy merchandise.  Then, when the deception is revealed, the consumer, now invested in the decision to buy and swept up in the momentum of events, nonetheless buys at the inflated price, despite his or her better judgment. 

If such a scheme is unsuccessful – that is, if the consumer is able to resist the influence of the momentum to buy created by the chain of events flowing from the false advertising – the consumer has no standing to bring a private action under Proposition 64, because the consumer has suffered no economic injury. That result is consistent with the purpose of Proposition 64, which was intended to curb “use [of the UCL] by unscrupulous lawyers who exploited the generous standing requirement . . . to file ‘shakedown’ suits to extort money from small businesses.”  (Tobacco II, supra, 46 Cal.4th at p. 316.)  .... 

But under Banana Republic’s theory, if the scheme is successful – that is, if the consumer is influenced by the momentum to buy created by the false advertising, and therefore buys at the inflated price—the consumer, as a matter of law, also has no standing, because just before money changed hands, when the deception was finally revealed, the consumer learned the full price of the item bought.  Under this theory, only in the very rare case when the advertiser surreptitiously charges an inflated price, which the consumer does not realize he has paid until after money has changed hands, does the consumer have standing to bring a private action.  This result seems at odds with the intent of Proposition 64, which “did not propose to curb the broad remedial purpose of the UCL or the use of class actions to effect that purpose, but targeted only the specific abuse described above.”  (Tobacco II, supra, 46 Cal.4th at p. 317.)

In sum, we conclude that plaintiffs have raised a triable issue whether they lost “money or property sufficient to qualify as injury in fact, i.e., economic injury,” and whether “that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.”  (Kwikset, supra, 51 Cal.4th at p. 322.)

Id. at 18-19. 

This is an interesting case.  The record appears to show that Banana Republic did, in fact, post unqualified "40% off" signs in its windows for at least a few days during the class period.  Id. at 20.  If that happened, and assuming the named plaintiffs have standing, then the remedy is for the discount to simply be given to everyone who made a full-price purchase on those days, which should be recorded in the defendant's records, at least for non-cash purchases.  It looks like the next step here is class certification. 

Ninth Circuit UCL standing decision: Van Patten v. Vertical Fitness Group, LLC

In Van Patten v. Vertical Fitness Group, LLC, ___ F.3d ___ (9th Cir. Jan. 30, 2017), the Ninth Circuit held that the plaintiff satisfied Article III's standing requirements by alleging a "concrete injury in fact," but that he lacked Prop. 64 standing because he had not suffered an "economic injury" within the meaning of Kwikset.  Slip op. at 21-23. 

New FAL/UCL opinion considers standing: Goonewardene v. ADP, LLC

In Goonewardene v. ADP, LLC, ___ Cal.App.4th ___ (Nov. 4, 2016), the Court of Appeal (Second Appellate District, Division Four) affirmed the trial court's dismissal of the plaintiff's FAL and UCL claims for lack of Prop. 64 standing and for other reasons.  Slip op. at 45-53. 

As for the FAL claim, the complaint alleged that the defendant made numerous false statements to the public, but did not allege that the plaintiff saw or relied on them for any reason.  Id. at 47.  (The plaintiff alleged that she worked for a company who hired the defendant to handle its payroll and wage statements.)  The opinion discusses Kwikset at some length.  See id. at 47-49.

The portion of the opinion discussing the UCL claim is more interesting.  The opinion does not acknowledge the three-way split in authority on the definition of "unfair" conduct.  Instead, it holds that the plaintiff failed to state a claim under the post-Cel-Tech "tethering" test, under which, in the words of this opinion, "the public policy necessary to establish an unfair practice must be closely tied to a statute."  Slip op. at 50-51.   The lack of a statutory tether defeated not only the "unfair" prong claim, but also the "unlawful" prong claim, to the extent predicated on non-statutory, common-law violations (including negligence and breach of contract).  Id. at 51-52. (I think the latter holding was error, but it might not matter, because the opinion allows those common-law claims to proceed on their own. That said, it would be unfortunate if this opinion had the effect of eroding the broad scope of the UCL's "unlawful" prong as construed by the Supreme Court.)

As for the "fraudulent" prong claim, this failed for lack of allegations of reliance, and also because the complaint alleged no losses that could be recoverable from the payroll company as restitution.  Id. at 52-53.  The plaintiff allegedly lost wages because of the payroll company's misconduct, but the company "derived no benefit" from the lost wages.  Id. (citing Bradstreet v. Wong, 161 Cal.App.4th 1440, 1444 (2008)).  In other words, it's not the payroll company, but rather the employer, who owed the plaintiff any lost wages or penalties, and the payroll company had acquired no money from the plaintiff, either directly or indirectly, by means of its alleged payroll mistakes (or misrepresentations).

Court of Appeal construes UCL's "as a result of" standing requirement: Orcilla v. Big Sur, Inc.

This is another case from earlier in the year. 

In Orcilla v. Big Sur, Inc., 244 Cal.App.4th 982 (Feb. 11, 2016), the plaintiffs sued their bank (and other defendants) for wrongful foreclosure, asserting UCL and other claims.  Id. at 990-93.   The bank raised a standing challenge to the UCL claim, arguing that the plaintiffs had not adequately alleged that they "lost money or property as a result of" any wrongdoing by the bank, as required by Prop. 64 (Bus. & Prof. Code § 17204 (emphasis added)).  According to the bank, the plaintiffs lost their home because they defaulted on their loan, not because of anything the bank did later. Id. at 1012-13.

The Court of Appeal disagreed with this supervening-cause-style argument:

Liberally construed, count 12 and the allegations it incorporates allege that the Bank Defendants engaged in an unlawful or unfair business practice by enforcing the underlying loan and the loan modification agreement, both of which were unconscionable. (Shadoan v. World Savings & Loan Assn. (1990) 219 Cal.App.3d 97, 101-102 [“that a contractual provision is unconscionable may be relevant to the question of whether a party who drafted—and seeks to enforce—the provision, has committed an unfair business practice”].) We have already concluded that the complaint adequately alleges that both agreements were unconscionable. With respect to causation, we can reasonably infer from the allegations that the Orcillas would not have lost the Property if the Bank Defendants had not enforced the unconscionable agreements by way of foreclosure proceedings.

Id. at 1013.  Orcilla thus stands for the proposition that for UCL standing purposes, the defendant's conduct must be a cause of the plaintiff's loss, but it need not be the only cause, or even the primary cause.  This is consistent with ordinary principles of causation in other contexts.

New Ninth Circuit opinion on CAFA and standing: Polo v. Innoventions International, LLC

In Polo v. Innoventions International, LLC, ___ F.3d ___ (9th Cir. Aug. 18, 2016), the plaintiff brought UCL, CLRA, and other claims, alleging that she purchased the defendant's allegedly mislabeled diabetes medication, and that taking the medication made her diabetes worse.   The district court held that Article III standing was lacking, and dismissed the case.  The plaintiff appealed as to the CLRA class claim only, arguing that instead of being dismissed, the case should have been remanded back to state court, where it was initially filed before the defendant removed it under CAFA.  Slip op. at 4.  The Ninth Circuit agreed:

The rule that a removed case in which the plaintiff lacks Article III standing must be remanded to state court under § 1447(c) applies as well to a case removed pursuant to CAFA as to any other type of removed case.

Slip op at 7. The court then explained that the CLRA class claim might be viable in state court even if the plaintiff did not suffer "injury in fact" for Article III purposes: 

A plaintiff who purchased goods in light of deceptive practices has standing to sue pursuant to the CLRA if she alleges (a) that she purchased a product from the defendant, and (b) that “the purchase would not have been made but for the misrepresentation.” Kwikset Corp. v. Superior Court, 246 P.3d 877, 890 (Cal. 2011); see also Hinojos v. Kohl’s Corp., 718 F.3d 1098, 1108 (9th Cir. 2013). The injury Polo asserts with respect to her CLRA claim fits these requirements:

Plaintiff and California Class members suffered injuries caused by Defendants’ misrepresentations about DiabeStevia because: (a) Plaintiff and the California Class members would not have purchased DiabeStevia on the same terms had they known the true facts; (b) Plaintiff and the California Class paid a premium price due to the false and misleading advertising of DiabeStevia; and (c) DiabeStevia did not have the level of safety, quality, effectiveness or value as promised.

Polo’s standing to bring her CLRA claim does not depend upon her allegation that taking DiabeStevia made her diabetes worse. Indeed, with respect to Polo’s CLRA claim, when Polo ceased taking her diabetes medication—or whether she had diabetes at all—is irrelevant. What matters are her allegations that she thought she had diabetes; that Innoventions marketed DiabeStevia as a treatment for diabetes; and that but for that marketing, she would not have bought DiabeStevia.

Were that the end of the allegations, Polo would likely have standing under Article III. See Hinojos, 718 F.3d at 1104 n.3. But the district court held that because Innoventions fully compensated Polo for “her entire purchase price,” her CLRA claim is moot.⁵ Under California law, however, that sort of “picking off” of class plaintiffs is ineffective: “[O]nce a person has been the victim of a proscribed practice under the CLRA and makes a demand on behalf of a class, remedying the plaintiff’s individual complaint does not disqualify her as class representative.” Meyer v. Sprint Spectrum, L.P., 200 P.3d 295, 300 (Cal. 2009). Instead, to defeat a class action based on practices proscribed under the CLRA, the defendant “must adequately notify the members of the class and provide an opportunity for an appropriate remedy for the defective goods or services.” Id. (citing Cal. Civ. Code § 1782(c)).

Polo made a demand on behalf of a class on April 6, 2012. Innoventions refunded Polo’s purchase price on May 11, 2012, but does not contend that it provided the notice and remedy to class members required by the CLRA. See Cal. Civ. Code § 1782(c); Meyer, 200 P.3d at 300. Thus, Polo likely retains standing under California law. At a minimum, we cannot say with “absolute certainty” that remand would be futile. Therefore, the district court should have remanded this case to state court pursuant to 28 U.S.C. § 1447(c).

⁵ This conclusion is questionable, see Chen v. Allstate Ins. Co., 819 F.3d 1136, 1141–43 (2016), but Polo expressly waived any argument to the contrary on appeal. ....

Slip op. at 10-12 (footnote 4 omitted). 

It seems to me that the district court erred by dismissing the action in the first place. The "no-pickoff" rule applies in federal court, too.  See Gomez v. Campbell-Ewald Co., 768 F.3d 871, 874-75 (9th Cir. 2014) (discussed here); Diaz v. First American Home Buyers Protection Corp., 732 F.3d 948 (9th Cir. 2013) (discussed here); Pitts v. Terrible Herbst, Inc., 653 F.3d 1081 (9th Cir. 2011) (discussed here).  Even if the medication did not worsen plaintiff's diabetes, if she purchased the mislabeled product, she probably has a viable CLRA claim, and if she doesn't, the defendant can't eliminate the case by picking her off, regardless of whether the case is in federal or state court.  The good news is the plaintiff can now proceed with the case in state court, which is where she wanted to be in the first place. It's too bad about all the wasted time and effort in federal court, though. 

New UCL Prop. 64 standing opinion: Two Jinn, Inc. v. Government Payment Service, Inc.

In Two Jinn, Inc. v. Government Payment Service, Inc., ___ Cal.App.4th ___ (Feb. 2, 2015), the Court of Appeal (First Appellate District, Division Four) addressed Prop. 64 standing in the context of a UCL competitor action, and affirmed the trial court's grant of summary judgment in the defendant's favor.

The plaintiff (Aladdin Bail Bonds) advanced a couple of standing arguments, each of which the Court rejected.

Aladdin contends that GPS's allegedly unfair business practices caused it economic injury when customers who would otherwise have used Aladdin's services used GPS's services instead. We disagree because the summary judgment evidence shows that any diversion of customers from Aladdin to GPS did not result from the fact that GPS does not have a bail bond license, or that it does not comply with other regulations governing the activities of licensed bail bond agents.

Slip op. at 9.

Alternatively, Aladdin contends it has standing because it suffered an economic injury by incurring “significant costs and expenses” to investigate the “nature, scope and extent of Defendant's conduct.” .... Aladdin paid money to hire outside counsel, obtain copies of GPS's contracts, and to determine which California counties were involved with GPS's allegedly unlawful activities ... [and] incurred expenses by diverting staff to investigate GPS's activities. ....

 

These “pre-litigation” costs do not establish standing to bring a UCL claim because they are not an economic injury caused by the business practices that Aladdin characterizes as unlawful. Rather, as Pinney's declaration confirms, the reason Aladdin incurred pre-litigation expenses was to generate evidence. Aladdin then used that evidence to support this lawsuit. “Plaintiffs cannot establish standing to pursue a UCL claim based on expenses incurred in order to bring their UCL claim. If they could, the requirement that individuals show they lost money or property ‘as a result’ of the challenged practice in order to have standing to sue under the UCL would be meaningless. [Citation.]” (Robinson v. HSBC Bank USA (N.D.Cal.2010) 732 F.Supp.2d 976, 989.)

Slip op. at 12-13.

This part of the opinion stands in contrast to Glen Oaks Estates Homeowners Assn. v. Re/Max Premier Properties, Inc., 203 Cal.App.4th 913 (2012) (discussed in this blog post), which held that investigative costs are sufficient "injury in fact" to confer standing under Kwikset.

The opinion then goes on to hold that, even if the plaintiff did have standing, the defendant's conduct was neither "unlawful" nor "unfair" within the meaning of the UCL.  Slip op. at 15-24.

New UCL Prop. 64 standing opinion: Sarun v. Dignity Health

In Sarun v. Dignity Health, ___ Cal.App.4th ___ (Dec. 15, 2014; pub. ord. Jan. 6, 2015), the plaintiff's UCL and CLRA causes of action alleged that the defendant hospital failed to disclose that it charged uninsured patients more for emergency medical care than it charges other patients.  The plaintiff himself received emergency medical care for which the defendant billed him over $23,000.  By the time he filed suit, however, he had paid only a portion of the balance due, and he had not applied for any available discounts from the defendant.   Slip op. at 1-4. 

Based on the latter facts, the trial court sustained the defendant's demurrer without leave to amend, holding that the plaintiff had not suffered injury in fact or lost money or property, and therefore lacked standing.  Id. at 5-6. 

The Court of Appeal (Second Appellate District, Division Seven) disagreed, and reversed.

Citing both Kwikset Corporation v. Superior Court, 51 Cal.4th 310 (2011) and Clayworth v. Pfizer, Inc., 49 Cal.4th 758 (2010), the Court of Appeal explained that the plaintiff had adequately alleged an economic injury based on the defendant's assertion against him of an obligation to pay, and on the transaction costs that wold be required to avoid the injury:

To satisfy Proposition 64 a plaintiff “must now establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that economic injury was the result of, i.e. caused by, the unfair practice or false advertising that is the gravamen of the claim.”  (Kwikset, at p. 322.) 

“Injury in fact” as used in Proposition 64 has the same meaning as under federal law:  “‘[A]n invasion of a legally protected interest which is (a) concrete and particularized, [citations]; and (b) “actual or imminent, not ‘conjectural’ or ‘hypothetical,’” [citations].’”  (Kwikset, supra, 51 Cal.4th at p. 322.)  Proposition 64, however, imposes the additional requirement that the plaintiff have lost money or property.  (Ibid.)  Indeed, loss of money or property—that is, “economic injury”— “is itself a classic form of injury in fact.”  (Id. at p. 323; see id. at p. 325, fn. 8 [“proof of lost money or property will generally satisfy the element of injury in fact”].)  Economic injury may be shown in many ways including a plaintiff  “surrender[ing] in a transaction more, or acquir[ing] in a transaction less, than he or she otherwise would have”; “hav[ing] a present or future property interest diminished”; and “be[ing] required to enter into a transaction, costing money or property, that would otherwise have been unnecessary.”  (Id. at p. 323.)

....

....  Although Dignity had not begun any collection activity, the existence of an enforceable obligation, without more, ordinarily constitutes actual injury or injury in fact.  (See Hale, supra, 183 Cal.App.4th at pp. 1383-1384; see generally Adams v. Paul (1995) 11 Cal.4th 583, 591, fn. 5 [“actual injury . . . may well precede quantifiable financial costs”].)

....

.... [And, a]lthough a further discount from Dignity’s “full charges”—even a complete elimination of the charges in excess of what Sarun already had paid—may have been available, the invoice as presented to Sarun (which was before the trial court after it granted Dignity’s unopposed motion for judicial notice) stated a $23,487.90 balance was due.  Sarun was not merely “exposed” to the allegedly unlawful pricing system—that is, a list price expressly subject to negotiation like the sticker price on an automobile on a dealer’s lot or a shouted offer at the souk—Dignity’s invoice told him to pay the full remaining sum unless he sought relief.  Indeed, the form admissions agreement Sarun had signed after arriving by ambulance at the hospital obligated him to pay Dignity’s full charges unless other discounts applied, but did not obligate him to apply for such discounts, and further provided he would be liable for attorney fees and collection expenses if the matter was referred for collection.  As in Hale, upon receipt of this bill Sarun faced at least an imminent invasion of a legally protected interest. 

Moreover, the Meyer Court, in discussing its earlier decision in Kagan v. Gibraltar Sav. & Loan Assn. (1984) 35 Cal.3d 582, also explained that incurring transaction costs to avoid the consequences of a deceptive practice “falls within the broad meaning of suffering ‘any damage as a result of the use or employment’ of an unlawful practice, whether or not those transaction costs are cognizable as ‘actual damages.’”  (Meyer v. Sprint Spectrum, L.P, supra, 45 Cal.4th at p. 643.)  Sarun was faced with just such transaction costs:  To avoid the consequences of its allegedly unlawful “full charges” pricing structure for uninsured emergency care patients, Dignity required Sarun to apply for financial assistance, including providing tax return information and other personal financial data.  The tangible burden of such an application process is far more than the “identifiable trifle” required to confer injury-in-fact standing.

Slip op. at 7-11 (italics in original; bold added). 

Also of interest is the Court of Appeal's recognition that mitigation of damages is not an element of a UCL or CLRA claim, nor is it a prerequisite to standing:

Our conclusion is reinforced by Clayworth v. Pfizer, Inc. (2010) 49 Cal.4th 758 in which the Supreme Court held retail pharmacies had standing to assert UCL claims against pharmaceutical companies that had allegedly engaged in price fixing even though the retail pharmacies were able to pass on any overcharges to their customers.  (Id. at p. 788 [pharmacies “lost money:  the overcharges they paid”].)  The Court rejected the pharmaceutical companies’ argument the pharmacies ultimately “suffered no compensable loss because they were able to mitigate fully any injury by passing on the overcharges,” explaining “[t]he doctrine of mitigation, where it applies, is a limitation on liability for damages, not a basis for extinguishing standing.  [Citation.]  This is so because mitigation, while it might diminish a party’s recovery, does not diminish the party’s interest in proving it is entitled to recovery.”  (Id. at p. 789.)  Dignity’s argument Sarun was required to apply for financial assistance to perfect his claim (that is, to allege injury in fact) would be akin to requiring Sarun to mitigate his damages as a precondition to suit.  As in Clayworth, that is unnecessary here.

Id. at 11 (bold added).

U.S. Supreme Court relists class certification cases: Whirlpool v. Glaser and Sears v. Butler (Updated)

These two cases, involving class certification of claims related to mold growth in front-load washers, were distributed for consideration during the U.S. Supreme Court's conference of last Friday, January 10, 2013 2014.  (Oops, still trying to get used to the fact that it is now the year 2014.  And by the way, where's my flying car, my jetpak, and my robot maid?)

The dockets were both updated Monday morning to show that the cases have been relisted and redistributed for conference on Friday, January 17, 2013 2014.  Whirlpool Corp. v. Glaser, No. 13-431 (U.S.); Sears, Roebuck & Co. v. Butler, No. 13-430 (U.S.). 

For more details on these cases, including links to the lower court opinions and some of the briefs, see this blog post. 

In other news, the Court granted cert. in a case I've been following because the underlying action includes a UCL claim.  POM Wonderful LLC v. The Coca Cola Co., No. 12-761 (U.S.).  Before cert. was granted last Friday, the matter had been relisted once, and the Solicitor General was invited to file an amicus curiae brief, which it did in late November.  

Given the question presented as stated in the cert. petition, it appears unlikely that the Court's opinion in the case will touch on any UCL-related issues: 

Whether the court of appeals erred in holding that a private party cannot bring a Lanham Act claim challenging a product label regulated under the Food, Drug, and Cosmetic Act.

The Ninth Circuit's opinion is Pom Wonderful LLC v. The Coca-Cola Co., 679 F.3d 1170 (9th Cir. 2012), discussed in this blog post.  The UCL claim was allowed to proceed, but the Lanham Act claim was not.  The cert. petition does not appear to have challenged the former ruling.  Indeed, a footnote in the solicitor general's amicus brief states as follows:

Petitioner also brought claims under various California laws.  Those claims are not at issue in this Court.  See pet. 1.  The district court granted summary judgment to respondent on those claims, No. 08-CV-6237, 2013 WL 543361 (C.D. Cal. Feb. 13, 2013), and petitioner's appeal is pending, No. 13-5570 (9th Cir).

Amicus Curiae Brief of United States at 5 n.2. In the cited decision, the district court held that the UCL claim was preempted by federal law. 

SCOTUSblog's case page for this matter has links to more of the briefs. 

New decision addresses (briefly) UCL standing: Boorstein v. CBS Interactive, Inc.

In Boorstein v. CBS Interactive, Inc., ___ Cal.App.4th ___ (Dec. 19, 2013), the Court of Appeal (Second Appellate District, Division Four) held that the plaintiff lacked standing to bring a claim against the defendant for violating the "shine the light" law (Civil Code §§ 1798.83 et seq.).  Slip op. at 9-18.  The panel determined that the plaintiff had not been "injured by a violation of this title," as the "shine the light" law requires.  Id. at 9 (quoting Civ. Code § 1798.84). 

As a result, the plaintiff also lacked standing to bring a UCL "unlawful" prong violation predicated on violation of that statute:

The UCL provides that to pursue a claim for relief under the statute, an individual must have “suffered injury in fact and ha[ve] lost money or property as a result of the unfair competition.”  (Bus. & Prof. Code, § 17204.)  For the reasons stated above, plaintiff failed to allege an “injury in fact.”  Thus, he has not stated a claim for relief under the UCL.  The demurrer to the second cause of action was properly sustained.

Slip op. at 18. 

Another recent opinion construes the UCL in the foreclosure context: Lueras v. BAC Home Loans Servicing, LP

In Lueras v. BAC Home Loans Servicing, LP, ___ Cal.App.3d ___ (Oct. 31, 2013), the Court of Appeal reversed dismissal of the plaintiff's UCL and other claims stemming from an alleged wrongful foreclosure of his home.

The opinion's discussion of the UCL begins with standing, and holds that "[s]ale of a home through a foreclosure sale is certainly a deprivation of property to which a plaintiff has a cognizable claim."  Slip op. at 37.  Accordingly, the plaintiff had adequately alleged that he had "lost money or property" within the meaning of the UCL as construed in Kwikset.  Id.  The next question was whether the loss occurred "as a result of" something the bank had done wrong, rather than merely as a result of the plaintiff's own default on his loan repayment obligations.  See id. at 37-38.  The Court held that the plaintiff should be given an opportunity to amend the complaint to adequately allege causation:

We believe there is a reasonable possibility that Lueras can cure the defect in the First Amended Complaint.  As we explained in addressing the fraud cause of action, Bank of America informed Lueras any pending foreclosure sale would be “on hold” while he was being considered for other foreclosure avoidance programs.  Whitaker of Bank of America told him the May 5, 2011 letter was sent in error and he had been approved for a loan modification.  Lueras was told the foreclosure sale was to be rescheduled pending Fannie Mae’s approval of his loan modification.  Those allegations suggest Lueras can amend his UCL cause of action to allege Bank of America’s misrepresentations caused him to lose his home through foreclosure.  In addition, Lueras might be able to allege Bank of America did not work with him in good faith to evaluate and try to identify and implement a permanent solution, as a consequence of which he lost his home through foreclosure.

Slip op. at 38:

Next, without attempting to resolve the split in authority on the definition of "unfair" conduct, the Court held that several of the plaintiff's allegations were adequate to state a UCL claim (assuming the standing allegations were properly amended on remand):

It is fraudulent or unfair for a lender to proceed with foreclosure after informing a borrower he or she has been approved for a loan modification, or telling the borrower he or she will be contacted about other options and the borrower’s home will not be foreclosed on in the meantime, as represented in the May 5 letter.  It is fraudulent or unfair for a lender to misrepresent the status or date of a foreclosure sale.  In this case, Lueras alleged he contacted Bank of America about the May 6, 2011 letter, was informed he had already been approved for a loan modification, and was told the trustee’s sale, which had been rescheduled for May 18, 2011, would be reset pending approval by Fannie Mae of the loan modification.

Id. at 41-42.

Ninth Circuit addresses UCL standing and construes Kwikset: Hinojos v. Kohl's Corp.

In Hinojos v. Kohl's Corp., ___ F.3d ___ (9th Cir. May 25, 2013), the plaintiff's UCL and CLRA action challenged Kohl's practice of claiming that its prices are discounted off a "regular" or "original" price.  The district court dismissed the claim, finding that the plaintiff had not alleged that he had "lost money or property" sufficient for Prop. 64 standing. Slip op. at 4-6.

The Ninth Circuit disagreed, and reversed. 

The opinion observed, first of all, that California law explicitly prohibits advertising former prices "unless the alleged former price was the prevailing market price ... within three months next immediately preceding the publication of the advertisement."  Slip op. at 7 (quoting Bus. & Prof. Code § 17501). The complaint alleged that Kohl's advertising violated this requirement.  See id. at 5.

The Court then addressed standing and Kwikset, and concluded:

Hinojos has done everything Kwikset requires to allege an economic injury under the UCL and FAL. He alleges that the advertised discounts conveyed false information about the goods he purchased, i.e., that the goods he purchased sold at a substantially higher price at Kohl’s in the recent past and/or in the prevailing market. He also alleges that he would not have purchased the goods in question absent this misrepresentation. This is sufficient under Kwikset.

Slip op. at 10.

The opinion takes pains to debunk the defendant's argument (and the district court's holding) that Kwikset applies "only in cases involving 'factual misrepresentations about the composition, effects, origin, and substance of advertised products.'"  Id. at 11.  According to the defendant, "when a merchant misrepresents the 'regular' price of his wares, it does not misrepresent the innate value of those wares so the misled consumer has suffered no economic injury; he gets the product he expected at the price he expected."  Id.

The Ninth Circuit found this line of argument unsupported by Kwikset:

Kwikset cannot be so easily limited. It is true that Kwikset itself involved misrepresentations regarding how the merchandise in question was produced; the defendant in Kwikset was a manufacturer of locksets, which it falsely labeled as having been “Made in [the] U.S.A.” It is also true that Kwikset described a number of other examples of misrepresentations concerning a product’s origin or composition that would be actionable under the UCL and FAL: meat falsely labeled as kosher or halal, wine labeled with the wrong region or year, blood diamonds mislabeled as conflict-free, and goods falsely suggesting they were produced by union labor. Kwikset, 216 P.3d at 889–90.  Nothing in Kwikset, however, suggests that these examples were intended to be exhaustive instead of illustrative. ....

The district court’s “composition, effects, origin, and substance” test ignores the fact that, to other consumers, a product’s “regular” or “original” price matters; it provides important information about the product’s worth and the prestige that ownership of that product conveys. See Dhruv Grewal & Larry D. Compeau, Comparative Price Advertising: Informative or Deceptive?, 11 J. of Pub. Pol’y & Mktg. 52, 55 (Spring 1992) (“By creating an impression of savings, the presence of a higher reference price enhances subjects’ perceived value and willingness to buy the product.”); id. at 56 (“[E]mpirical studies indicate that as discount size increases, consumers’ perceptions of value and their willingness to buy the product increase, while their intention to search for a lower price decreases.”).  Misinformation about a product’s “normal” price is, therefore, significant to many consumers in the same way as a false product label would be. See Kwikset, 246 P.3d at 890 (recognizing that falsely labeling a watch as a Rolex would be an actionable misrepresentation even if the watch was a “functional[] equivalent” of a Rolex). That, of course, is why retailers like Kohl’s have an incentive to advertise false “sales.” It is also why the California legislature has prohibited them from doing so. In fact, the deceived bargain hunter suffers a more obvious economic injury as a result of false advertising than the Kwikset consumer who was duped into buying foreign-made goods, because the bargain hunter’s expectations about the product he just purchased is precisely that it has a higher perceived value and therefore has a higher resale value.

Slip op. at 12-13 (emphasis in original) (footnote omitted). 

"In sum," the discussion concludes, "price advertisements matter."  Id. at 16.

The rest of the opinion's analysis of this issue is quite interesting and worth a careful read. The panel reversed the dismissal of the CLRA claim for similar reasons.  Id. at 16-17.

New UCL competitor and Prop. 64 standing opinion: Law Offices of Mathew Higbee v. Expungement Assistance Services

In Law Offices of Mathew Higbee v. Expungement Assistance Services, ___ Cal.App.4th ___ (Mar. 14, 2013), the Court of Appeal (Fourth Appellate District, Division Three) held that Prop. 64 did not eliminate UCL actions brought against a competitor whose unlawful business practices were stealing away the plaintiff's customers, market share and profits. 

To me, the issues raised in this case should have been no-brainers.  Nothing in Prop. 64 suggested an intention by voters to elimimate UCL competitor actions, and after the Supreme Court's holdings in Clayworth and Kwikset, there should have been no doubt that a competitor who loses customers, market share and profits (that is, suffers monetary "injury in fact") because of the unfair competition of a competing business can bring a UCL action and seek injunctive relief. 

Nevertheless, the defendant in Higbee argued that the plaintiff business competitor lacked Prop. 64 standing because it could allege no "direct" business dealings with the defendant.  Slip op. at 2.  The opinion approaches this argument as though it had some conceivable merit.  It does not, as the opinion correctly concludes.

In Hibgee, the plaintiff was a law firm specializing in providing record expungement services.  The defendant provided the same services, but did so using employees who were neither licensed to practice law nor registered or bonded as "legal document assistants" under the Business and Professions Code:

Higbee argues the allegation that EAS violated section 6125 et seq. (pertaining to the requirement of an active law license), section 6400 et seq. (pertaining to the registration and bonding of, and permissible activities of, legal document assistants), and Penal Code section 4852.2 (pertaining to the requirement of a law license for the handling of certain criminal matters), constituted an allegation of an unlawful business practice within the meaning of the UCL.  He says he is entitled to base a UCL lawsuit on those statutes, citing Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553 (superseded in part by Prop. 64, as recognized in Californians for Disability Rights v. Mervyn’s, LLC, supra, 39 Cal.4th at p. 227).

Slip op. at 9-10 (footnotes omitted).

As a preliminary matter, the Court agreed that the UCL "borrows" violations of other laws and makes them independently actionable, and found "no reason why the alleged violations of statutes concerning the unauthorized practice of law cannot serve as a predicate for Higbee's UCL action."  Id. at 9-12.

Next, the Court considered, and rejected, the defendant's argument that the plaintiff lacked post-Prop. 64 standing because it had not suffered the right type of injury.  Id. at 12-20. 

The operative complaint alleged that "as a result of EAS’s unauthorized practice of law, advertisement of illegal services, and representation that it could perform the same legal services as [plaintiff] did, he had been forced, in order to compete, to lower his prices and to expend more money on advertising, he had lost clients and revenue, and the value of his law firm had diminished."  Id. at 13.  The defendant argued that "a loss of market share is not the type of economic injury that qualifies as an injury in fact for the purposes of standing under the UCL.  Id.

The Court of Appeal disagreed, citing, among other cases, Clayworth, Kwikset, Saunders v. Superior Court, 27 Cal.App.4th 832 (1994), Allergan, Inc. v. Athena Cosmetics, Inc., 640 F.3d 1377 (Fed. Cir. 2011) (discussed in this blog post), Pom Wonderful LLC v. Coca-Cola Co., 679 F.3d 1170 (9th Cir. 2012) (discussed here), and VP Racing Fuels, Inc. v. General Petroleum Corp., 673 F.Supp.2d 1073 (E.D. Cal. 2009).  In Saunders, Allergan, and VP Racing, "the alleged injury was based on reduced market share."  Slip op. at 16.

This was sufficient for UCL standing: 

As we have observed, the original purpose of the unfair competition laws was to protect against “wrongful conduct in commercial enterprises which resulted in business loss to another, ordinarily by the use of unfair means in drawing away customers from a competitor.”  (People ex rel. Mosk v. National Research Co. of Cal., supra, 201 Cal.App.2d at p. 770.)  Although the UCL was ultimately expanded to provide equitable relief to consumers in addition to business competitors (ibid.), this does not mean that the UCL no longer protects business competitors (Kwikset Corp. v. Superior Court, supra, 51 Cal.4th at p. 320).

As the Supreme Court stated in Kwikset Corp. v. Superior Court, supra, 51 Cal.4th 310, the purpose of the UCL “‘is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.’  [Citations.]”  (Id. at p. 320; accord, Hall v. Time Inc. (2008) 158 Cal.App.4th 847, 852.)  Put another way, the UCL “governs ‘anti-competitive business practices’ as well as injuries to consumers, and has as a major purpose ‘the preservation of fair business competition.’  [Citations.]”  (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.)

“There are innumerable ways in which economic injury from unfair competition may be shown.  A plaintiff may (1) surrender in a transaction more, or acquire in a transaction less, than he or she otherwise would have; (2) have a present or future property interest diminished; (3) be deprived of money or property to which he or she has a cognizable claim; or (4) be required to enter into a transaction, costing money or property, that would otherwise have been unnecessary.  [Citation.]”  (Kwikset Corp. v. Superior Court, supra, 51 Cal.4th at p. 323.)  The foregoing list is not exhaustive and the notion of “lost money” under the UCL is not limited.  (Ibid.)  Moreover, “the quantum of lost money or property necessary to show standing is only so much as would suffice to establish injury in fact” and “it suffices . . . to ‘“allege[] some specific, ‘identifiable trifle’ of injury.”’  [Citations.]”  (Id. at pp. 324-325, fn. omitted.)  “‘“The basic idea . . . is that an identifiable trifle is enough for standing to fight out a question of principle; the trifle is the basis for standing and the principle supplies the motivation.”’  [Citations.]”  (Id. at p. 325, fn. 7.)

In the matter before us, we hold that Higbee, having alleged that he had been forced to pay increased advertising costs and to reduce his prices for services in order to compete, and that he had lost business and the value of his law practice had diminished, succeeded in alleging at least an identifiable trifle of injury as necessary for standing under the UCL.

Slip op. at 19-20 (emphasis added).

Finally, the Court reached the defendant's core argument that the plaintiff "cannot demonstrate standing to bring a UCL claim because he never engaged in any business dealings with EAS."  Id. at 21.  The defendant relied wholly on Clayworth, where the Supreme Court stated:  "While the voters clearly intended to restrict UCL standing, they just as plainly preserved standing for those who had had business dealings with a defendant and had lost money or property as a result of the defendant’s unfair business practices."  Id. (quoting Clayworth v. Pfizer, Inc., 49 Cal.4th 758, 788 (2010)).    

The Court of Appeal carefully considered Clayworth and determined that the Supreme Court did not "intend[] to engraft upon section 17204 a requirement that all plaintiffs must, in every event, have engaged in business dealings with a defendant in order to demonstrate UCL standing."  Id. at 23.  The Court observed that it is possible to "allege facts sufficient to support causation in the absence of direct business dealings" (id.), and concluded:

The language of the UCL does not leave the court hamstrung, unable to even consider an action seeking injunctive relief just because the defendant engages in its purportedly unlawful activity via the Internet and has not had any direct business dealings with the plaintiff.

Id. at 24.

A final interesting aspect of this opinion is that it rejected as irrelevant, in an "unlawful" prong case, decisions involving the UCL's "fraudulent" prong, which interpreted "as a result of" to mean "reliance on":

EAS’s citations to cases pertaining to the requirement to allege reliance in order to show causation in cases based on fraud (see, e.g., In re Tobacco II Cases (2009) 46 Cal.4th 298; Pfizer Inc. v. Superior Court (2010) 182 Cal.App.4th 622) do not convince us otherwise.

Id.; see also Medrazo v. Honda of North Hollywood, 205 Cal.App.4th 1 (2012) (discussing Supreme Court's Tobacco II footnote, which states that "there are doubtless many types of unfair business practices in which the concept of reliance, as discussed here, has no application") (see this blog post for more on Medrazo).

In the last sentence of the opinion, the Court of Appeal directed the clerk to forward a copy of the opinion to the Attorney General, presumably so that her office can take appropriate action against the defendant, perhaps including an action for civil penalties under the UCL. Slip op. at 25.

Congratulations to Mat Higbee, who represented himself in this case. 

Ninth Circuit vacates UCL standing and preemption opinion: Degelmann v. Advanced Medical Optics Inc.

On October 30, 2012, the Ninth Circuit vacated its opinion in Degelmann v. Advanced Medical Optics Inc., 659 F.3d 835 (2011), which addressed UCL standing after Kwikset (among other issues). My original blog post on the opinion is here.

I have heard, but have not confirmed, that the action settled while a petition for en banc rehearing was pending.  The Ninth Circuit not only vacated the opinion, but also dismissed the appeal. 

A thirteenth post-Tobacco II opinion: Tucker v. Pacific Bell Mobile Services

In Tucker v. Pacific Bell Mobile Services, ___ Cal.App.4th ___ (Aug. 7, 2012), the Court of Appeal (First Appellate District, Division Five) affirmed an order sustaining the defendants' demurrer to the complaint's class allegations, relying heavily on Knapp v. AT&T Wireless Services, Inc., 195 Cal.App.4th 932 (2011) and Cohen v. DirecTV, Inc., 178 Cal.App.4th 966 (2009).

The opinion contains a lengthy and interesting discussion of the legal standard governing challenges to class allegations at the pleading stage.  Slip op. at 5-10. 

This is the thirteenth significant Court of Appeal opinion construtiong In re Tobacco II Cases, 46 Cal.4th 298 (2009).  See this blog post for more on the first twelve cases. 

New Ninth Circuit UCL and CLRA opinion: Sateriale v. R.J. Reynolds Tobacco Co.

In Sateriale v. R.J. Reynolds Tobacco Co., ___ F.3d ___ (9th Cir. Jul. 13, 2012), the Ninth Circuit affirmed dismissal, for lack of standing, of UCL and CLRA claims based on alleged misrepresentations surrounding R.J. Reynolds' termination of its "Camel Cash" customer rewards program. 

Before addressing the UCL and CLRA claims, the court held that plaintiffs' complaint did adequately allege breach of contract and promissory estoppel.  Slip op. at 8090-8105.

The opinion's detailed discussion of those claims is quite interesting and brings back many pleasant memories of first-year contracts class.  Who could forget that the doctrine of mutuality of obligation, while fully applicable to bilateral contracts, does not apply to unilateral contracts?  Id. at 8102.  Or that "an enforceable termination clause that gives a promisor an unrestricted power to terminate a contract at any time" renders that contract illusory and unenforceable, at least so long as the contract remains wholly executory?  Id. at 8103.

The court then turned to the UCL and CLRA claims: 

Because the plaintiffs’ UCL claim sounds in fraud, they are required to prove “actual reliance on the allegedly deceptive or misleading statements,” Kwikset Corp. v. Superior Court, 246 P.3d 877, 888 (Cal. 2011) (quoting In re Tobacco II Cases, 207 P.3d 20, 26 (Cal. 2009)) (internal quotation marks omitted), and that “the misrepresentation was an immediate cause of [their] injury-producing conduct,” In re Tobacco II Cases, 207 P.3d at 39. The complaint does not satisfy these requirements.

In particular, the plaintiffs do not allege reliance.  They do not allege that they purchased additional Camel cigarettes in reliance on the October 1 announcement [that the rewards program would terminate six months later]. They also do not allege that they delayed redeeming their saved Camel Cash certificates in reliance on the announcement. Even if they had alleged delay, they do not explain how this delay could have caused their injury: under the allegations of the complaint, RJR ceased accepting C-Notes for redemption as soon as it delivered the October 1 announcement, so delay could not have caused the plaintiffs’ loss. Given the absence of an alleged causal connection between the alleged misrepresentations
and the plaintiffs’ injuries, the district court properly dismissed the UCL claim.

....

As with the UCL, consumers seeking to recover damages under the CLRA based on a fraud theory must prove “actual reliance on the misrepresentation and harm.” Nelson v. Pearson Ford Co., 112 Cal. Rptr. 3d 607, 638 (Ct. App. 2010); accord Durell v. Sharp Healthcare, 108 Cal. Rptr. 3d 682, 697 (Ct. App. 2010); In re Vioxx Class Cases, 103 Cal. Rptr. 3d 83, 94 (Ct. App. 2009).  

The plaintiffs have not satisfied these requirements here ...  as we explained in connection with the plaintiffs’ UCL claim. We therefore affirm dismissal of the plaintiffs’ CLRA claim as well.

Slip op. at 8105-06, 8107 (footnote omitted).

District court construes Mazza: Keegan v. American Honda Motor Co.

In Keegan v. American Honda Motor Co., ___ F.R.D. ___, 2012 WL 2250040 (C.D. Cal. Jun. 12, 2012), Judge Margaret M. Morrow of the Central District of California construed and distinguished the Ninth Circuit's opinion in Mazza v. American Honda, 666 F.3d 581 (9th Cir. 2012), and partially granted class certification of UCL, CLRA and other claims.

Here is one passage addressing Mazza:

The court is mindful of the Ninth Circuit's warning that differences in state law concerning the need for proof of reliance can “spell the difference between the success and failure of the claim.” Mazza, 666 F.3d at 591. Mazza, however, addressed omissions in advertisements and oral statements that included differing information. The Ninth Circuit concluded that “[a] presumption of reliance [could] not arise when class members ‘were exposed to quite disparate information from various representatives of the defendant.’ “ Id. at 596 (quoting Stearns, 655 F.3d at 1020). It noted further: “For everyone in the class to have been exposed to the omissions, as the dissent claims, it is necessary for everyone in the class to have viewed the allegedly misleading advertising. Here the limited scope of that advertising makes it unreasonable to assume that all class members viewed it.” Id.

 In this case, by contrast, plaintiffs allege that defendants did not disclose to any member of the class information regarding the potential for excessive and premature tire wear caused by negative camber. There is no question of different statements being made to different groups of consumers, or certain class members being exposed to information others were not. Consequently, the court concludes that any potential differences in state law concerning the proof of reliance that is necessary to prevail on consumer protection claims do not defeat predominance in this case.

Keegan, 2012 WL 2250040 at *33-*34.

The order also has this passage on class certification of a UCL "fraudulent" prong claim:

As is clear from the California Supreme Court's decision in In re Tobacco II Cases, 46 Cal.4th 298 (2009), moreover, there is no need to prove reliance on an individual basis. Rather, “In re Tobacco II Cases set out a liberal approach to the reliance inquiry,” permitting plaintiffs to prove a UCL violation by presenting “generalized evidence that Defendants' conduct was ‘likely to deceive’ members of the public.” Plascencia v. Lending 1 st Mortgage LLC, 259 F.R.D. 437, 448 (N.D. Cal. 2009). Indeed, as with the CLRA, materiality is relevant to prove reliance, since “a presumption, or at least an inference, of reliance arises wherever there is a showing that a misrepresentation was material.” In re Tobacco II,46 Cal.4th at 327. Consequently, a violation of the UCL can be proved with common evidence regarding the nature of the design defect in question, the likely effect of the defect on class vehicles, its likely impact on vehicle safety, what Honda knew or did not know, and what it disclosed or did not disclose to consumers. See Yamada, 275 F.R.D. at 578 (“[I]t is unlikely that a member of the putative class would have purchased the NobelDirect product without having been influenced by Defendants' uniform marketing claims. Furthermore, it is reasonable to assume that no rational member of the putative class would have purchased and used the NobelDirect implant had he or she been aware of the alleged defective design”); Delarosa v. Boiron, Inc., 275 F.R.D 582, 594 (C.D. Cal. 2011) (“In addition, Defendant's arguments that it can present proof that Coldcalm worked for some individual class members goes to the proof of the merits of Plaintiff's claim, not to the common question as to the overall efficacy of the product”).

Id. at *23.

Many thanks to the friend who forwarded this decision.

Ninth Circuit addresses UCL standing: Pom Wonderful LLC v. The Coca-Cola Co.

The end of a recent Ninth Circuit opinion, Pom Wonderful LLC v. The Coca-Cola Co., ___ F.3d ___ (9th Cir. May 17, 2012), contains this passage on UCL standing:

To have standing to bring a claim under the UCL, a private plaintiff must show that it “has suffered injury in fact and has lost money or property as a result of” unfair competition; to have standing under the FAL, a private plaintiff must make the same showing of injury and loss as a result of an FAL  violation. Cal. Bus. & Prof’l Code §§ 17204, 17535. The district court interpreted the “lost money or property” language to require a plaintiff to show that it is entitled to restitution from the defendant—even if the plaintiff seeks only injunctive relief. That was error. The California Supreme Court has now made clear that standing under section 17204 (the UCL standing provision) does not depend on eligibility for restitution. See Kwikset Corp. v. Superior Ct., 246 P.3d 877, 895 (Cal. 2011); Clayworth v. Pfizer, Inc., 233 P.3d 1066, 1088 (Cal. 2010). We are inclined to interpret the materially identical language in section 17535 (the FAL standing provision) the same way. Nevertheless, because these cases came down after the district court entered judgment in this case, we will vacate the judgment as to Pom’s state law claims and remand to the district court to rule on standing in light of Kwikset and Clayworth.

Slip op. at 5258-59.

This was a UCL competitor and Lanham Act case brought by Pom Wonderful against Coca-Cola over the labeling of the latter's "Pomegranate Blueberry" juice, which "contains about 99.4% apple and grape juices, 0.3% pomegranate juice, 0.2% blueberry juice, and 0.1% raspberry juice."  Id. at 5248.  In the first part of its analysis, the Ninth Circuit held that the federal Food, Drug and Cosmetic Act did not bar the Lanham Act claim.  Id. at 5252-58. 

Interesting passage on UCL standing in Ninth Circuit concurrence: Carijano v. Occidental Petroleum

A recent Ninth Circuit opinion concurring in the denial of en banc rehearing had this to say about UCL standing and Kwisket: 

Whoa!!! The Chief has put the proverbial cart before the horse. .... Occidental is free, on remand, to renew its motion to dismiss on the ground that Amazon Watch may not have standing to assert its claim under California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200 et seq. ....

The question of standing cannot be resolved on the bare pleadings, which is all we have before us given the procedural posture of this appeal. .... Here, Occidental disputes the existence, the cause and the redressability of the harm alleged by Amazon Watch. Resolving these issues will require factual development on a number of fronts. For example, to show harm, Amazon Watch may produce evidence of the manner in which Occidental’s conduct forced it to divert resources from its central mission of protecting the rainforest and advancing the rights of the indigenous people of the Amazon.  See Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 322-24 (2011) (requiring economic harm to prove UCL standing). To show causation, Amazon Watch may also produce evidence linking Occidental’s alleged deceptive practices to Amazon Watch’s diminished ability to carry out its mission. See id. at 326 (affirming that fraud or reliance is a causal mechanism recognized under the UCL). Further, Amazon Watch may prove a continuing injury, which may be redressed through, for example, injunctive relief compelling Occidental to research and remediate environmental harms or to conduct outreach and education about health risks with the indigenous people. See id. at 336-37 (standing under the UCL is not dependent on the availability of restitution as a remedy).

The district court did not address standing, and we need not—indeed, could not—do so in the first instance here.

Carijano v. Occidental Petroleum, ___ F.3d ___, 2012 WL 1970375 (May 31, 2012) (Wardlaw, J., concurring in denial of en banc rehearing) (slip op. at 6009-11) (emphasis added). 

Judges Schroeder and Gould joined in Judge Wardlaw's concurrence.  Four judges joined Chief Judge Kosinski in dissenting from the denial of en banc rehearing. 

Judge Wardlaw wrote the opinion of which rehearing was sought, Carijano v. Occidental Petroleum, 643 F.3d 1216 (2011).  Her views in this concurrence will be useful not only on remand in this case, but in other cases as well. 

There can be little remaining doubt that harms such as investigative costs and diversion of resources caused by a defendant's UCL violations are sufficient to confer Prop. 64 standing.  Another recent case similarly interpreted Kwikset.  Glen Oaks Estates Homeowners Assn. v. Re/Max Premier Properties, Inc., 203 Cal.App.4th 913 (2012) (discussed in this blog post).

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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.)

New UCL class certification decision: Davis-Miller v. Automobile Club of Southern California

In Davis-Miller v. Automobile Club of California, ___ Cal.App.4th ___ (Oct. 26, 2011; pub. ord. Nov. 22, 2011), the Court of Appeal (Second Appellate District, Division Three) affirmed an order denying class certification of UCL and CLRA claims.

The case might be described as a twelfth post-Tobacco II class certification decision.  (See my prior blog posts, "Nine post-Tobacco II decisions" and "A tenth post-Tobacco II opinion.")  Not surprisingly, the court relied heavily on Pfizer and Vioxx, decided by the same Division. 

The eleventh post-Tobacco II decision in the series is 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).   I mentioned Knapp very briefly in a post in July.  There, the panel relied heavily on Cohen v. DIRECTV, Inc., 178 Cal.App.4th 966 (2009), in affirming the denial of class certification.  A petition for review was filed in June and denied in August (no. S193539). 

New Ninth Circuit UCL standing and preemption decision: Degelmann v. Advanced Medical Optics Inc.

In Degelmann v. Advanced Medical Optics Inc., ___ F.3d ___ (9th Cir. Sept. 28, 2011), the defendant's contact lens solution, Complete MoisturePlus, was inferior to other brands because it created an enhanced risk of contracting a certain type of serious eye infection.   Two consumers who bought the solution filed suit under the UCL and FAL, alleging that the defendant misrepresented the solution's efficacy as a contact lens disinfectant and that they wouldn't have bought the solution if they had known.   Slip op. at 18562-63.

The district court (Judge Hamilton) granted the defendant's summary judgment motion and dismissed the action for lack of standing.  Id. at 18563. 

The Ninth Circuit reversed.  Citing Kwikset Corp. v. Superior Court, 51 Cal.4th 310 (2011), it rejected the argument that the plaintiffs lost no money because they necessarily would have bought some other solution instead:

Here, as in Kwikset, the plaintiffs allege that they paid more for a product due to reliance on false advertising. The district court in this case was likely correct that [plaintiffs] would have bought other contact lens solution had they not purchased MoisturePlus. However, as elucidated by the Kwikset court’s discussion, it does not necessarily follow that they did not suffer economic harm. [Plaintiffs] presented evidence that they were deceived into purchasing a product that did not disinfect as well as it represented. Had the product been labeled accurately, they would not have been willing to pay as much for it as they did, or would have refused to purchase the product altogether. The district court’s reasoning—that class members would have bought other contact lens solution, and therefore suffered no economic harm—conceived of injury in fact too narrowly.

Slip op. at 18565 (footnote omitted). 

In a footnote, the panel distinguished a pre-Kwikset decision, Birdsong v. Apple, Inc., 590 F.3d 955 (9th Cir. 2009):

The inquiry into injury in fact in this case, where the class makes claims under both the UCL’s fraud prong and the FAL, is not controlled by Birdsong v. Apple, Inc., 590 F.3d 955 (9th Cir. 2009). In that case, purchasers of iPod headphones pursued a claim under the UCL’s “unfair” and “unlawful” prongs, asserting that listening to loud music on the headphones could result in hearing loss. They did not allege economic harm from having purchased headphones in reliance on false advertising, but rather claimed that the inherent risk of the headphones reduced the value of their purchase and deprived plaintiffs of the benefit of their bargain. Id. at 961. The court in that case found that the claim of economic harm was not sufficient to plead injury in fact in part because, in distinct contrast to the MoisturePlus labeling at issue in this case, Apple had not represented that the headphones were safe at high volume. Rather, “Apple provided a warning against listening to music at loud volumes.” Id. Because there is allegedly false labeling and advertising at issue in this case, Birdsong does not aid our disposition here.

Slip op. at 18565-66 n.1.

The opinion goes on to find the claims preempted by the the federal Food, Drug, and Cosmetic Act (21 U.S.C. § 360k(a)).  Id. at 18566-70.

UPDATE:  On October 30, 2012, the Ninth Circuit vacated this opinion and dismissed the appeal.  I have heard through the grapevine that the action settled while a petition for en banc rehearing was pending. 

Interesting Ninth Circuit comment on UCL vs. Article III standing: TrafficSchool.com, Inc. v. Edriver Inc.

TrafficSchool.com, Inc. v. Edriver Inc., ___ F.3d ___ (9th Cir. Jul. 28, 2011), is primarily a Lanham Act decision.  However, the Ninth Circuit had this to say about UCL and Article III standing:

The district court found that plaintiffs “failed to prove . . . that they have suffered an injury in fact and lost money or property as a result of Defendants’ actions,” and that they “provided no evidence showing a causal connection between Defendants’ actions and any harm Plaintiffs incurred.” Defendants argue that this finding divested the district court of jurisdiction, and also that plaintiffs lacked standing under the Lanham Act.  The latter contention is wrong because a false advertising plaintiff need only believe that he is likely to be injured in order to bring a Lanham Act claim. 15 U.S.C. § 1125(a). Moreover, the district court made its findings of no injury when it analyzed plaintiffs’  state-law unfair competition claim. These findings conclusively establish that plaintiffs didn’t have standing to bring their state-law claim; but, because California’s unfair competition law defines “injury in fact” more narrowly than does Article III, the findings don’t necessarily preclude Article III standing. See Cal. Bus. & Prof. Code § 17204.1

1 Plaintiffs filing an unfair competition suit must prove a pecuniary injury, Hall v. Time Inc., 70 Cal. Rptr. 3d 466, 470-71 (Cal. Ct. App. 2008), and “immediate” causation, In re Tobacco II Cases, 207 P.3d 20, 40 (Cal. 2009). Neither is required for Article III standing.

Slip op. at 9740-41 & n.1. 

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)

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).