The UCL Practitioner

Ninth Circuit affirms class certification of UCL claims: Walker v. Life Insurance Co. of the Southwest

Last week, the Ninth Circuit affirmed class certification in a UCL action alleging misrepresentations in connection with the sale of life insurance policies.  Walker v. Life Ins. Co. of the Southwest, ___ F.3d ___ (9th Cir. Mar. 23, 2020). 

In so doing, the Court construed and applied Tobacco II as follows: 

The UCL bans “unlawful, unfair or fraudulent business act[s] or practice[s] and unfair, deceptive, untrue or misleading advertising.” Cal. Bus. & Prof. Code § 17200. To bring a UCL claim, a plaintiff must establish he suffered “as a result of” the defendant’s conduct. Id. § 17204. In the seminal California case on UCL class actions, In re Tobacco II Cases, the defendants moved to decertify a UCL class for the reason that individualized issues—i.e., whether all class members were exposed to, relied on, and were injured by allegedly false and deceptive advertisements—predominated over common ones. 207 P.3d 20, 28 (Cal. 2009). The California Supreme Court interpreted this statute to mean that named plaintiffs, but not absent ones, must show proof of “actual reliance” at the certification stage. Id. at 38. Relying on California cases, wherein courts “repeatedly and consistently . . . h[eld] that relief under the UCL is available without individualized proof of deception, reliance and injury,” the court reasoned that “requiring all unnamed members of a class action to individually establish standing would effectively eliminate the class action lawsuit as a vehicle for the vindication” of rights under the UCL. Id. at 35–36.

We have repeatedly relied on Tobacco II in recognizing “what amounts to a conclusive presumption” of reliance in UCL cases. Stearns [v. Ticketmaster Corp.], 655 F.3d [1013,] 1021 n.13 [(9th Cir. 2011)]. The presumption serves to relieve UCL plaintiffs of their obligation to establish absent class members’ reliance, see 2 Newberg on Class Actions § 4:60 (5th ed. 2019)—an issue that, in other contexts, can raise so many individualized questions as to defeat predominance, id. § 4:58.

Slip op. at 11-12 (citing In re Tobacco II Cases, 46 Cal.4th 298 (2009)). 

The Court went on to explain that in UCL actions, non-common questions might predominate when the defendant distributed "disparate information" across the class, rather than "pervasive[]" "material misrepresentations."  See id. at 12 (citing cases).  (In prior blog posts, I have described this as a "Kaldenbach problem.")  Certification was properly granted of a class defined to include only those purchasers to whom the alleged misstatements were made.  See id. at 13-15. 

Compare this analysis to the Court of Appeal's reasoning in Downey v. Public Storage, Inc., 44 Cal.App.5th 1103 (Feb. 6, 2020), discussed yesterday in this blog post. 

The Ninth Circuit also considered "whether a district court can, as it did here, define a class in a way that automatically gives rise to a presumption of reliance."  Slip op. at 18.  The answer is yes: 

This question appears to be one of first impression in our circuit. In our prior UCL class-certification cases, we have relied on allegations and evidence establishing class-wide dissemination of alleged misrepresentations to determine whether a presumption of reliance applies. [Citations.] Can a class definition, which extends membership only to those who were exposed to alleged misrepresentations, automatically trigger the presumption? We cannot think of any good reason why not, or any evils that allegations and evidence of class-wide dissemination could cure that a class definition cannot.

Id. at 18-19. 

Also of interest is the Court's holding than when reviewing class certification orders on appeal, "[t]he Court 'accord[s] the district court noticeably more deference' to a grant of certification 'than when [it] review[s] a denial.'"  Id. at 9 (quoting Wolin v. Jaguar Land Rover N. Am., LLC, 617 F.3d 1168, 1171 (9th Cir. 2010); In re Salomon Analyst Metromedia Litig., 544 F.3d 474, 480 (2d Cir. 2008)) (emphasis added).

The last section of the opinion is a lengthy and interesting discussion of the requirements for timely filing a Rule 23(f) petition for permission to appeal when reconsideration is sought.  Id. at 19-25.  Plaintiffs' attempt to "cross-appeal" (so to speak) in order to challenge a certain aspect of the class definition was untimely.  See id.

New Ninth Circuit UCL preemption opinion: Lusnak v. Bank of America, N.A.

In Lusnak v. Bank of America, N.A., ___ F.3d ___ (Mar. 2, 2018), a putative class action, the Ninth Circuit held that the National Bank Act did not preempt the plaintiff's UCL "unlawful" prong claim predicated on violations of Civil Code section 2954.8(a), as well as a provision of the federal Truth in Lending Act, both of which require payment of interest on escrow account funds.

Ninth Circuit reverses nationwide class action settlement: In re Hyundai and Kia Fuel Economy Litigation

On Tuesday, the Ninth Circuit handed down a lengthy opinion in a UCL and CLRA class action in which it reversed, on a 2-1 vote, the district court's order granting certification of a nationwide settlement class.  In re Hyundai and Kia Fuel Economy Litigation, ___ F.3d ___ (9th Cir. Jan. 23, 2018). 

The opinion extensively analyzes Mazza v. American Honda Motor Co., 666 F.3d 581 (9th Cir. 2012) (discussed in this blog post), in which certification of a similar nationwide class was also reversed.  

I have not yet had a chance to fully absorb the new opinion, but Perry Elizabeth Cooper wrote up an interesting report at bna.com.  I would imagine that a petition for en banc rehearing is in the offing, and it might even be granted.  On the other hand, en banc rehearing was denied in Mazza, which was also decided on a 2-1 vote.

Ninth Circuit holds Rule 23(f) time limit not jurisdictional: Lambert v. Neutraceutical Corp.

In Lambert v. Neutraceutical Corp., ___ F.3d ___ (9th Cir. Sept. 14, 2017), the Ninth Circuit considered a UCL, FAL and CLRA action against the manufacturer of an "aphrodisiac dietary supplement."  Slip op. at 5.  The complaint alleged that the defendant sold the product in violation of certain FDA regulations and that the product was falsely labeled.  Id. 

The district court "initially granted class certification on the basis of the full refund damages model. That model applies when a product is shown to be worthless, and damages may be calculated by multiplying the average retail price by the number of units sold."  Id. at 6.  Subsequently, the defendant moved to decertify the class, and a different judge granted the motion.  Id.  Plaintiff moved for reconsideration, which was denied.  Id. at 7.  Within 14 days thereafter, plaintiff filed a Rule 23(f) petition.  Id. at 8. 

The Ninth Circuit held that the fourteen-day deadline to file a Rule 23(f) petition is "not jurisdictional, thus equitable exceptions apply."  Slip op. at 1.  In particular, "a motion for reconsideration filed within the Rule 23(f) deadline will toll the deadline," as will "additional equitable circumstances."  Id. at 1, 10.  In a lengthy discussion, the Court concluded that the plaintiff's Rule 23(f) petition was timely.  Id. at 9-21.

Then, the Court turned to the merits, and held that the district court erred in granting the defendant's motion to decertify the class.  Slip op. at 21-25.  Variations in damages do not defeat class certification; UCL, FAL, and CLRA damages (or restitution) calculations need not be precise; and the plaintiff's proposed "full refund" damages model was a "workable method" to determine and award damages.  See id.

This analysis relies heavily on Pulaski & Middleman, LLC v. Google, Inc., 802 F.3d 979 (9th Cir. 2015) (discussed in this blog post) and Leyva v. Medline Industries Inc., 716 F.3d 510 (9th Cir. 2013) (discussed here).

Recent Ninth Circuit UCL decision considers all three prongs: Friedman v. AARP, Inc.

In Friedman v. AARP, Inc., 855 F.3d 1037 (9th Cir. May 3, 2017), the plaintiff alleged that the defendant "solicited" and "transacted" insurance without a license, in violation of several California Insurance Code provisions, and that the defendant collected and kept a 4.95% commission on each sale. Id. at 1049-50.  The complaint alleged that the policyholders paid this commission on top of the premium they otherwise would have paid for the insurance.  Id.

The Ninth Circuit held that these facts adequately alleged a UCL "unlawful" prong claim, as well as "unfair" and "fraudulent" prong claims.  Id. at 1051-57. 

Notably, as to the "fraudulent" prong claim, the court adhered to Tobacco II in holding that "actual reliance [for purposes of a UCL claim] ... is inferred from the misrepresentation of a material fact."  Id. at 1055, 1056 (citing In re Tobacco II Cases, 46 Cal.4th 298, 326 (2009); Chapman v. Skype, Inc., 220 Cal.App.4th 217, 229 (2013)) (alterations in original).

Accordingly, to have alleged reliance on Defendants’ misrepresentation of material facts, Friedman only needed establish it to be plausible that a “reasonable man would attach importance to [their] existence or nonexistence in determining his choice of action in the transaction in question.” .... 

We think it is not, as a matter of law, an “obviously unimportant” consideration for a reasonable purchaser of insurance to know that an undisclosed fee charged to a group insurance policyholder would be collected in addition to—rather than from—the actual cost of the insurance. 

Id. at 1056-67 (quoting Tobacco II, 46 Cal.4th at 326; citing Chapman, 220 Cal.App.4th at 229).

Interesting discussion of equitable vs. non-equitable monetary relief: Bayer v. Neiman Marcus Group

The Ninth Circuit's recent opinion in Bayer v. Neiman Marcus Corp., ___ F.3d ___ (9th Cir. Jun. 26, 2017), contains a thought-provoking discussion of equitable vs. non-equitable forms of monetary relief.  See slip op. at 16-20. 

The case does not involve the UCL, and it considers federal law rather than California law, but the discussion resonates for me as I think about UCL restitution and the differences between restitutionary and non-restitutionary disgorgement.  Because of course I think about that all the time, especially on warm summer days like today.     

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. 

Ninth Circuit hands down UCL "unlawful" prong and CLRA decision: Gonzales v. CarMax Auto Superstores, LLC

In Gonzales v. CarMax Auto Superstores, LLC, ___ F.3d ___ (9th Cir. Oct. 20, 2016), the Ninth Circuit considered a UCL "unlawful" prong claim and a CLRA claim predicated on alleged violations of Vehicle Code section 11713.18, which is part of the "Car Buyer's Bill of Rights," enacted in 2005.  That section prohibits a car dealer from describing a used car as "certified" unless the dealer provides the buyer with a "completed inspection report" prior to sale, and expressly makes any violation actionable under both the UCL and the CLRA: 

A violation of this section is actionable under the Consumers Legal Remedies Act (Title 1.5 (commencing with Section 1750) of Part 4 of Division 3 of the Civil Code), the Unfair Competition Law (Chapter 5 (commencing with Section 17200) of Part 2 of Division 7 of the Business and Professions Code), Section 17500 of the Business and Professions Code, or any other applicable state or federal law. The rights and remedies provided by this section are cumulative and shall not be construed as restricting any right or remedy that is otherwise available.

Veh. Code § 11713.18(b).  In other words, it adds an item to the CLRA's laundry list of deceptive conduct. 

The panel reversed the district court's grant of summary judgment in the dealer's favor, and remanded with directions to enter summary judgment for the plaintiff instead.  Slip op. at 9-22.  The opinion delves deeply into the purpose and legislative history of the Car Buyer's Bill of Rights, and is worth a read for anyone handling litigation involving that Act. 

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. 

Recent Ninth Circuit UCL opinion: Beaver v. Tarsadia Hotels

In Beaver v. Tarsadia Hotels, 816 F.3d 1170 (9th Cir. Mar. 10, 2016), the Ninth Circuit considered a UCL "unlawful" prong claim predicated on violation of a federal statute.  The UCL's four-year statute of limitations governed, the court held—not the shorter limitations period of the "borrowed" federal statute.  Id. at 1177-78.  Nor did the shorter limitations period preempt "the UCL's more generous" one.  Id. at 1778-81.

A cert. petition was filed in June and remains pending.  Possibly, the petition focuses on the court's holdings in the second half of the opinion, which considered whether the "borrowed" federal statute (the Interstate Land Sales Full Disclosure Act, 15 U.S.C. § 1701 et seq.) applied to the defendant's conduct.  Id. at 1781-88. 

Many thanks to the blog reader who brought this case to my attention.  Although I have not been blogging as frequently this year as I have in the past, I always enjoy and appreciate hearing from my wonderful readers. 

New Ninth Circuit class certification opinion: Pulaski & Middleman, LLC v. Google, Inc.

In Pulaski & Middleman, LLC v. Google, Inc., ___ F.3d ___ (9th Cir. Sept. 21, 2015), the Ninth Circuit reversed an order denying class certification of UCL and FAL claims.

Consistent with its earlier opinions Stearns and Yokoyama, as well as the California Supreme Court's Tobacco II opinion, the Court held that variations in the amount of recoverable restitution do not defeat class certification.  Slip op. at 10-17 (citing Stearns v. Ticketmaster Corp., 655 F.3d 1013 (9th Cir. 2011); Yokoyama v. Midland Nat'l Life Ins. Co., 594 F.3d 1087 (9th Cir. 2010); In re Tobacco II Cases, 46 Cal.4th 298 (2009)). 

Rather, "restitution is available on a classwide basis once the class representative makes the threshold showing of liability under the UCL and FAL."  Id. at 14.  That "threshold showing" requires proof only that "members of the public are likely to be deceived" by the defendant's conduct.  Id. at 11 (quoting Tobacco II, 46 Cal.4th at 312).

The Court also held (as it had done previously in Leyva and Jimenez) that "differences in damage calculations do not defeat class certification," even after the U.S. Supreme Court's Comcast opinion.  Slip op. at 17 (citing Comcast Corp. v. Behrend, 133 S.Ct. 1426 (2013); Jimenez v. Allstate Ins. Co., 765 F.3d 1161 (9th Cir. 2014); Leyva v. Medline Industries, Inc., 716 F.3d 510 (9th Cir. 2013)).

Finally, the Court held that the plaintiffs' proposed method for calculating restitution was not "arbitrary."  Slip op. at 18-20.  This section of the opinion contains an interesting discussion of the different possible ways to measure restitution under the UCL, and considers both Colgan v. Leatherman Tool Group, 135 Cal.App.4th 663 (2006) (see this blog post) and Kwikset Corp. v. Superior Court (Benson), 51 Cal.4th 310 (2011).

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 Ninth Circuit UCL and class certification opinion: Gutierrez v. Wells Fargo Bank

In Gutierrez v. Wells Fargo Bank, NA, ___ F.3d ___ (9th Cir. Dec. 26, 2012), the Ninth Circuit reversed the judgment in a certified class action challenging the defendant bank's practice of "high-to-low" posting of debit card transactions (as opposed to "low-to-high" or chronological posting), which allegedly led to more frequent overdrafts and hefty charges.  However, the Court affirmed class certification as well as liability, and remanded for redetermination of the appropriate remedy.

Preliminarily, the Court held that the defendant had waived its right to seek to compel arbitration, and rejected the argument that doing so would have been "futile" before Concepcion.  Slip op. at 10-17.

The Court then held that the National Bank Act preempted the UCL to the extent that its "unfair" prong prohibited the defendant's "high-to-low" posting (which the district court had enjoined).  Slip op. at 20-25.  So applied, the UCL "prevent[ed] or significantly interfere[d] with a national bank’s federally authorized power to choose a posting order."  Id. at 24.   Likewise, the claim under the UCL's "fraudulent" prong for not adequately disclosing the posting method was also preempted.  Id. at 26.

However, the claim based on the bank's affirmative misstatements was a different story.  The UCL's "prohibition on misleading statements under the fraudulent prong of the statute is not preempted by the National Bank Act."  Id. at 27.  The Court relied on a 2002 OCC advisory letter warning that national banks may be subject to state UDAP statues such as the UCL.  Id. (citing OCC Advisory Letter, Guidance on Unfair or Deceptive Acts or Practices, 2002 WL 521380 (Mar. 22, 2002)). The panel further explained:

California’s prohibition of misleading statements does not significantly interfere with the bank’s ability to offer checking account services, choose a posting method, or calculate fees. Nor does the Unfair Competition Law mandate the content of any nonmisleading and nonfraudulent statements in the banking arena. On the flip side, the National Bank Act and other OCC provisions do not aid Wells Fargo, as neither source regulates deceptive statements vis-a-vis the bank’s chosen posting method.  Where, as here, federal laws do not cover a bank’s actions, states “are permitted to regulate the activities of national banks where doing so does not prevent or significantly interfere with the national bank’s or the national bank regulator’s exercise of its powers.” Watters, 550 U.S. at 12; see also Gibson v. World Sav. & Loan Ass’n, 103 Cal. App. 4th 1291, 1299 (2002) (the “state cannot dictate to the Bank how it can or cannot operate, but it can insist that, however the Bank chooses to operate, it do so free from fraud and other deceptive business  practices”).

Id. at 28.  The court then found ample evidence of classwide misleading statements in the record regarding the bank's posting practices, affirmed the judgment based on that UCL violation, and remanded for redetermination of the appropriate relief to be ordered (both injunctive and restitutionary).  Id. at 32-34.

The opinion also reaffirms the rule that in federal court, only a single named class representative must have standing, and affirmed the district court's finding of standing under Prop. 64.  Id. at 30-31 (citing Bates v. United Parcel Serv., Inc., 511 F.3d 974, 985 (9th Cir. 2007) (en banc) (“In a class action, standing is satisfied if at least one named plaintiff meets the requirements.”)).

Finally, the opinion affirmed the class certification order.  This section of the opinion reads in its entirety as follows: 

Next, class certification under Fed. R. Civ. P. 23(b)(3) requires that “questions of law or fact common to class members predominate over any questions affecting only individual members.” With respect to marketing materials, the district court found that:

A Wells Fargo marketing theme was that debit-card purchases were “immediately” or “automatically” deducted from an account.  This likely led the class to believe: (1) that the funds would be deducted from their checking accounts in the order transacted, and (2) that the purchase would not be approved if they lacked sufficient available funds to cover the transaction. This language was present on Wells Fargo’s website (TX 129), on Wells Fargo’s Checking, Savings and More brochures from 2001 and 2005 (TX 88, 89), and Wells Fargo’s New Account Welcome Jacket from 2004 (TX 82).

The pervasive nature of Wells Fargo’s misleading marketing materials amply demonstrates that class members, like the named plaintiffs, were exposed to the materials and likely relied on them. See Tobacco II, 46 Cal. 4th at 312 (to establish fraud under the Unfair Competition Law, plaintiffs must show “that members of the public are likely to be deceived”). In addition, the district court found that Wells Fargo knew that “new accounts generate the bulk of OD [overdraft] revenue.” Wells Fargo’s speculation—that “some class members would have engaged in the same conduct irrespective of the alleged misrepresentation”—does not meet its burden of demonstrating that individual reliance issues predominate. Unlike McLaughlin v. Am. Tobacco Co., 522 F.3d 215, 223 (2d Cir. 2008) (partially abrogated on other grounds by Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008)), where individual class members could have had different motives for choosing “light” cigarettes, we are hard pressed to agree that any class member would prefer to incur multiple overdraft fees.

Slip op. at 31-32.  This case exemplifies how class certification should work under the UCL's "fraudulent" prong, which requires proof only that the defendant's conduct was "likely to deceive" a reasonable consumer.

The Recorder had this article on the opinion the day it was handed down.

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. 

New Ninth Circuit UCL and FAL opinion: Davis v. HSBC Bank Nevada, N.A.

In Davis v. HSBC Bank Nevada, N.A., ___ F.3d ___ (9th Cir. Aug. 31, 2012), the Ninth Circuit affirmed dismissal of UCL and FAL claims at the pleading stage:

Turning to the claims in the FAC, Davis first alleges that Best Buy’s advertising was misleading because it failed to disclose the existence of an annual fee. We agree with the district court that no reasonable consumer would have been deceived by these advertisements into thinking that no annual fee would be imposed.

Slip op. at 10377. 

The opinion also addresses and applies the Cel-Tech "safe harbor."  Id. at 10382-88.  The last sections cover the UCL's "unlawful" prong (here, the "unlawful" prong claim was predicated, interestingly, on a federal regulation requiring national banks to comply with section 5 of the FTC Act) and the "unfair" prong (here, the court noted the three-way split but found the complaint stated no claim under any formulation).  Id. at 10389-94. 

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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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. 

New UCL competitor decision: Allergan, Inc. v. Athena Cosmetics,Inc.

The U.S. Court of Appeals for the Federal Circuit has handed down an opinion in a UCL competitor action.  Allergan, Inc. v. Athena Cosmetics, Inc., ___ F.3d ___ (Fed. Cir. May 24, 2011).  The case was commenced in the Central District of California, but the Federal Circuit had jurisdiction over the appeal because the case included patent claims.  Slip op. at 7.

Applying Kwikset and Clayworth, the Federal Circuit reversed the district court's order dismissing the UCL claim for lack of Prop. 64 standing: 

Here, Allergan has plainly alleged an economic injury that was the result of an unfair business practice. The unfair competition that Allergan alleges involves the defendants’ manufacture, marketing and/or sale of hair and eyelash growth products without a prescription, federal or state approval, and proper labeling in violation of federal and California laws. Allergan’s First Am. Compl. 9-14. As a result of these acts, Allergan alleges that it has “lost sales, revenue, market share, and asset value.” Id. at 14. Allergan’s complaint sufficiently alleges an injury that was caused by the defendants’ unfair business practices. Under Kwikset, this satisfies the requirements of section 17204, and therefore Allergan has standing to pursue its claim for relief under the UCL. See Kwikset, 246 P.3d at 894-95; Clayworth, 233 P.3d at 1087.

Id. at 11 (emphasis added).  The district court had erroneously applied earlier Court of Appeal opinions, such as Citizens of Humanity, holding that only a restitutionary loss could create Prop. 64 standing.  See id. at 6.  UCL competitor actions are alive and well. 

The court also rejected the defendants' novel argument that Prop. 64 created a so-called "business dealings requirement":

Proposition 64 did not add a “business dealings requirement” to standing under section 17204. The only amendment Proposition 64 made to section 17204 re-quired that a private person bringing an action pursuant to the UCL must have “suffered injury in fact and . . . lost money or property as a result of such unfair competition.” Cal. Prop. 64 § 3. Reading this amendment to encompass a business dealings requirement would contradict the plain language of the statute and improperly elevate one purpose of Proposition 64 over the language of the statute. See City of Chicago v. Envtl. Def. Fund, 511 U.S. 328, 337 (1994) (“[I]t is the statute, and not the [voter’s findings], which is the authoritative expression of the law . . . .”).

The defendants also argued that Kwikset approved of the business dealings requirement. Oral Arg. at 30:00-31:00, available at http://www.cafc.uscourts.gov/oral-argument-recordings/2010-1394/all. The crux of defendants’ argument is the introduction of Kwikset, which states that the purpose of Proposition 64 was to “eliminate standing for those who have not engaged in any business dealings with would-be defendants . . . .” 246 P.3d at 881. This argument disregards the focus of Kwikset, which held that the only requirements to establish standing under section 17204 are that (1) the plaintiff suffered an injury in fact from the loss of money or property; and (2) that this injury was caused by the defendant’s unfair business practice. Id. at 885.

Moreover, the defendants’ argument ignores that there are “innumerable ways” to show economic injury from unfair competition and that the Kwikset court did not “supply an exhaustive list of ways in which unfair competition may cause economic harm.” Id. at 886. While a direct business dealing is certainly one way in which a plaintiff could be harmed, the California courts have also recognized claims under the UCL where a direct business dealing was lacking. See, e.g., Overstock.com, Inc. v. Gradient Analytics, Inc., 151 Cal. App. 4th 688, 716 (Cal. Ct. App. 2007) (finding standing under section 17204 where plaintiff had plead that defendant’s unfair business practices—intentional dissemination of false negative reports—had “result[ed] in diminution in value of [plaintiff’s] assets and decline in its market capitalization and other vested interests”). Thus, standing under section 17204 is not restricted by a direct business dealings requirement. The only standing requirements under 17204 are those in the language of the statute and, as explained in I.B., Allergan has satisfied those requirements.

Slip op. at 12-13 (emphasis added).

New federal UCL standing decision: Webb v. Carter's, Inc.

Many thanks to the multiple readers who emailed me about a new federal standing decision, Webb v. Carter's, Inc., ___ F.R.D. ___, 2011 WL 343961, 2011 U.S. Dist. LEXIS 12597 (C.D. Cal. Feb. 3, 2011). 

In Webb, District Judge Gary Allen Feess of the Central District of California held that in federal court, all class members must meet Article III's standing requirements:

Before considering whether Plaintiffs' proposed classes meet the requirements of Federal Rule of Civil Procedure 23, the Court must determine whether the members of the proposed class have Article III standing. Although there is no controlling authority requiring absent class members, as opposed to the named plaintiffs, to satisfy Article III's standing requirements, the Court is persuaded by authority indicating that they must. In Burdick v. Union Security Insurance Co., Judge Collins concluded that absent class members, like the class representatives, must have standing. Burdick v. Union Sec. Ins. Co., 2009 WL 4798873, *3 (C.D.Cal. Dec.9, 2009). In reaching this conclusion, Judge Collins pointed to the Supreme Court's decision in Reno v. Catholic Social Services, Inc., 509 U.S. 43, 113 S.Ct. 2485, 125 L.Ed.2d 38 (1993), which allows the federal courts to exercise jurisdiction over the claims of class members only if those claims are ripe. Id. at *3. Judge Collins also pointed to other cases indicating that classes should be defined so as to exclude members lacking standing. Id. at *4 (citing Denney v. Deutsche Bank AG, 443 F.3d 253, 264 (2d Cir.2006); O'Neill v. Gourmet Sys. of Minn., Inc., 219 F.R.D. 445, 451-52 (W.D.Wis.2002); Sanders v. Apple, Inc., 2009 WL 150950, at *10 (N.D.Cal.2009)). Finally, Judge Collins noted that requiring class members to have standing comports with the Supreme Court's admonition to be “mindful that Rule 23's requirements must be interpreted in keeping with Article III constraints.” Id. (quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 612-13, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997)).

The Court acknowledges that a leading treatise, Newberg on Class Actions, indicates that absent class members need not make a showing of standing. Newberg on Class Actions § 2:7. This treatise, however, also suggests that members of a proper class will necessarily have standing, because the class representative's claims must be “typical” of those of the class.

Further, contrary to Plaintiffs' contention, the California Supreme Court's decision in In re Tobacco II, 46 Cal.4th 298, 93 Cal.Rptr.3d 559, 207 P.3d 20 (Cal.2009), does not establish that absent class members in a federal class action need not have Article III standing. In that case, the California Supreme Court considered the effect of Proposition 64, a voter initiative that amended the UCL to allow private suit only by a plaintiff “who has suffered injury in fact and has lost money or property as a result of ... unfair competition.” Id. at 25. Previously, the UCL had allowed suit by any private party. The court considered whether that new requirement applied only to the named plaintiff or also to all absent class members. Id. at 25. The court concluded, based on the language of the initiative, that only the named plaintiff needed to show such an injury in fact. Id. Individuals could remain part of the class even if they had suffered no injury in fact. Id. at 35. That case, however, was in state court and did not address federal courts' standing requirements. Before the enactment of Proposition 64, uninjured plaintiffs could bring UCL claims in state court, but not federal court. See, e.g., Seibels Bruce Group, Inc. v. R.J. Reynolds Tobacco Co., No. C-99-0593 MHP, 1999 WL 760527 at *6 (N.D. Cal. Sept.21, 1999) (holding that plaintiff did not have standing to assert UCL claim in federal court because it did not establish a distinct and palpable injury); Boyle v. MTV Networks, Inc., 766 F.Supp. 809, 817-18 (N.D. Cal. 1991) (noting that case involving private-party UCL claim could not be removed as it would result in lack of standing). Tobacco II established that Proposition 64 changes this for named plaintiffs, but not for absent class members. It did not, and could not, hold that uninjured parties could be class members in a class action brought in federal court, despite their lack of Article III standing. Tobacco II therefore does not persuade the Court that a class action can proceed even where class members lack Article III standing.

Id. at *6 (emphasis in original).

New Ninth Circuit UCL opinion: Rubio v. Capital One Bank

In Rubio v. Capital One Bank, ___ F.3d ___ (9th Cir. Jul. 21, 2010), the Ninth Circuit addressed UCL standing and held that loss of a line of credit constitutes a loss of money or property sufficient to confer Prop. 64 standing.  Slip op. at 10400-01. 

The court also noted the split in authority on the definition of "unfair," but found it unnecessary to choose between the different definitions because the defendant's conduct was unfair under both.  Id. at 10402.

Finally, the court applied the pre-Prop. 64 formulation of the "fraudulent" prong (conduct likely to deceive a reasonable consumer).  Id.  at 10402 (citing Tobacco II and Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008)). 

New Ninth Circuit FTC Act opinion: FTC v. Neovi, Inc.

In Federal Trade Commission v. Neovi, Inc., ___ F.3d ___ (9th Cir. May 14, 2010), the Ninth Circuit construed the Federal Trade Commission Act, 15 U.S.C. § 45(n). 

The opinion is an interesting one, especially to the extent that some Court of Appeal panels may be adopting the FTC Act standard as a third formulation of the UCL's "unfair" prong.  See, e.g., Davis v. Ford Motor Credit Co., 179 Cal.App.4th 581 (2009). But see Overstock.com, Inc. v. Gradient Analytics, Inc., 151 Cal.App.4th 688, 715 (2007) ("the California UCL contains no directive to interpret our consumer protection statute consistently with the FTC Act"). 

Here is a notable passage:

To support its argument that the FTC’s showing of causation was insufficient, Qchex urges us to seek interpretive guidance from several California state cases that were decided under California Business & Professions Code § 17200—the so-called “Little FTC Act.” We decline the invitation. While it is common practice for states with consumer protection statutes modeled on the FTC Act to rely on federal authority when interpreting those statutes, the reverse is not the case. As the FTC points out, given the abundance of state laws on which such interpretations could be based, this practice would likely result in a sea of inconsistent rulings. See Orkin Exterminating Co., Inc. v. FTC, 849 F.2d 1354, 1363 (11th Cir. 1988) (noting that there is nothing constraining the FTC “to follow judicial interpretations of state statutes in construing the agency’s section 5 authority”).

Slip op. at 6994.  I have not seen the briefs, so I don't know whether the defendant cited Davis and Camacho, which expressly adopted the FTC Act standard for "unfair" conduct (creating a three-way split in authority), or other UCL cases that did not.

Seventh Circuit decision bearing on standing: Kohen v. Pacific Inv. Management Co.

In Kohen v. Pacific Investment Management Co., ___ F.3d ___, 2009 WL 1919013 (7th Cir. Jul. 7, 2009), Judge Posner had this to say about whether, under federal law, unnamed class members' standing must be proven at the class certification stage:

PIMCO argues that before certifying a class the district judge was required to determine which class members had suffered damages. But putting the cart before the horse in that way would vitiate the economies of class action procedure; in effect the trial would precede the certification. It is true that injury is a prerequisite to standing. But as long as one member of a certified class has a plausible claim to have suffered damages, the requirement of standing is satisfied. United States Parole Commission v. Geraghty, 445 U.S. 388, 404, 100 S.Ct. 1202, 63 L.Ed.2d 479 (1980); Wiesmueller v. Kosobucki, 513 F.3d 784, 785-86 (7th Cir.2008). This is true even if the named plaintiff (the class representative) lacks standing, provided that he can be replaced by a class member who has standing. “The named plaintiff who no longer has a stake may not be a suitable class representative, but that is not a matter of jurisdiction and would not disqualify him from continuing as class representative until a more suitable member of the class was found to replace him.” Id. at 786.

Before a class is certified, it is true, the named plaintiff must have standing, because at that stage no one else has a legally protected interest in maintaining the suit. Id.; Sosna v. Iowa, 419 U.S. 393, 402, 95 S.Ct. 553, 42 L.Ed.2d 532 (1975); Walters v. Edgar, 163 F.3d 430, 432-33 (7th Cir.1998); Murray v. Auslander, 244 F.3d 807, 810 (11th Cir.2001). And while ordinarily an unchallenged allegation of standing suffices, a colorable challenge requires the plaintiff to meet it rather than stand mute. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). PIMCO tried to show in the district court that two of the named plaintiffs could not have been injured by the alleged corner. We need not decide whether it succeeded in doing so, because even if it did, that left one named plaintiff with standing, and one is all that is necessary.

Slip op. at 7-8, 2009 WL 1919013 at *3-*4 (bold added).

This issue, of course, may come up in some UCL cases pending in federal court as a result of CAFA. Some defendants have argued that Tobacco's clear holding that only the named class representative must meet Prop. 64's standing requirement (which, by its plain language, applies only to "the claimant"), would not govern UCL cases in federal court, because Article III standing rules would require more. At least one federal judge, however, had no problem applying this part of Tobacco in a federal case, and the Seventh Circuit opinion also supports the conclusion that only the named plaintiff need prove standing in class actions generally, whether in federal court under Article III or in California state court.

Many thanks to Scott Leviant for bringing this opinion to my attention. 

New federal decision interpreting Tobacco: Baghdasaarian v. Amazon.com, Inc.

In Baghdasaarian v. Amazon.com, Inc., ___ F.R.D. ___, 2009 WL 2263581 (C.D. Cal. Jul. 7, 2009), the court granted class certification of a UCL "fraudulent" prong claim, and followed Tobacco's holding that only the named class representative must satisfy the standing requirement:

Proposition 64 did not determine whether a plaintiff who has standing under the UCL must also show reliance by each class member. The California Supreme Court recently addressed this issue in the Tobacco II Cases. The California Supreme Court concluded that “standing requirements are applicable only to the class representatives, and not all absent class members.” In re Tobacco II Cases, 46 Cal.4th 298, 206 (Cal.2009). Thus, Plaintiff does not need to show affirmative proof that each individual class member relied on Defendant's deceptive conduct.

Id. at *3.  The court's discussion of the individual plaintiff's standing is also interesting.

New Ninth Circuit UCL/CLRA pleading decision: Kearns v. Ford Motor Co.

In Kearns v. Ford Motor Co., 567 F.3d 1120 (9th Cir. Jun. 8, 2009), the Ninth Circuit held that "the heightened pleadings standards of Rule 9(b)" applied to UCL and CLRA claims that were "grounded in fraud." 

In a recent post-Tobacco decision, a federal district court followed Kearns but determined that the complaint's allegations satisfied the heightened pleading standard because they "sufficiently identified 'the circumstances constituting fraud so that the defendant can prepare an adequate answer from the allegations.'" Germain v. J.C. Penney Co., 2009 WL 1971336, *3-*5 (C.D. Cal. Jul. 06, 2009) (quoting Walling v. Beverly Enterprises, 476 F.2d 393, 397 (9th Cir.1973)).

Recent federal UCL preemption decision: Lockwood v. Conagra Foods, Inc.

The plaintiffs' claim in Lockwood v. Conagra Foods, Inc., ___ F.Supp.2d ___, 2009 WL 250459 (N.D. Cal. Feb. 3, 2009) is that "defendant engages in misleading conduct by advertising its 'Healthy Choice' pasta sauce as 'all natural' when in fact it includes 'high fructose corn syrup.'"  Id. at *1.  Judge Charles R. Bryer determined that neither the Nutrition Labeling and Education Act nor FDA regulations under the Federal Food and Drug Cosmetic Act preempted this claim. Id. at *1-*6. He also refused to strike the class allegations:

Finally, defendant seeks to strike the class allegations on the ground that a class cannot be certified as a matter of law. Specifically, defendant alleges that each class member must prove reliance on the “all natural” representation and therefore individual questions necessarily predominate.

If a misrepresentation is material an inference of class-wide reliance may be inferred. Mass. Mut. Li[f]e Ins. Co. v. Superior Court, 97 Cal.App.4th 1282, 1292, 119 Cal.Rptr.2d 190 (Cal.App.2002).  The Court cannot determine on the pleadings whether a class-wide inference is appropriate in this case. Accordingly, defendant's motion to strike the class allegations is denied without prejudice to the Court considering the issue on a fully-briefed and supported motion concerning class certification.

Id. at *6.

Ninth Circuit withdraws opinion in Sullivan v. Oracle Corp. and certifes questions to California Supreme Court

Today, the Ninth Circuit issued an order withdrawing its opinion in Sullivan v. Oracle Corp., 547 F.3d 1177 (9th Cir. 2008), and certifying these three questions to the California Supreme Court under Rule of Court 8.548:

First, does the California Labor Code apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs in the circumstances of this case, such that overtime pay is required for work in excess of eight hours per day or in excess of forty hours per week?

Second, does § 17200 apply to the overtime work described in question one?

Third, does § 17200 apply to overtime work performed outside California for a California-based employer by out-of-state plaintiffs in the circumstances of this case if the employer failed to comply with the overtime provisions of the FLSA?

The order issued after the defendant filed petitions for rehearing and en banc rehearing. It is unclear from the order whether the panel opinion will be reinstated if the Supreme Court declines to accept the certified questions, but a second order indicates that the petitions have both been "dismissed as moot." My original blog post on the panel opinion is here.

New Ninth Circuit UCL "safe harbor" opinion: Hauk v. JP Morgan Chase Bank USA

In Hauk v. JP Morgan Chase Bank USA, ___ F.3d ___ (Jan. 23, 2009), the Ninth Circuit held that the defendant's compliance with the Truth-in-Lending Act (15 U.S.C. §§1601-1667f) and Reg. Z (12 C.F.R. Part 226) did not create a Cel-Tech "safe harbor" for the defendant's other conduct or support the trial court's order granting summary judgment of the UCL claim in the defendant's favor.  Slip op. at 835-40. 

Another new federal nationwide class certification decision: Parkinson v. Hyundai Motor America

Nationwide class certification was recently granted in another UCL and CLRA auto defect case, Parkinson v. Hyundai Motor America, 2008 WL 5233200 (C.D. Cal. Dec. 12, 2008). In that case, as in another recent decision, the court (Chief Judge Alicemarie H. Stotler) narrowly interpreted the Ninth Circuit's opinion in Sullivan v. Oracle Corp., 547 F.3d 1177 (9th Cir. 2008) (discussed in this post):

[T]he Court recognizes that extraterritorial application of the UCL is improper where non-residents of California raise claims based on conduct that allegedly occurred outside of the state. See Sullivan v. Oracle Corp., ___ F.3d ___, No. 06-56649, 547 F.3d 1177, 2008 WL 4811911, at *10 (9th Cir. Nov. 6, 2008). In Sullivan, for example, the Ninth Circuit, citing Norwest Mortgage, Inc. v. Superior Court, 72 Cal.App.4th 214, 85 Cal.Rptr.2d 18 (1999), held “that § 17200 does not apply to the claims of nonresidents of California who allege violations of the FLSA outside California.” Sullivan, 547 F.3d 1177, 2008 WL 4811911, at *10. However, extraterritorial application of the UCL is not barred where the alleged wrongful conduct occurred in California. See Norwest Mortgage, 72 Cal.App.4th at 224-25, 85 Cal.Rptr.2d 18. In light of defendant's alleged in-state conduct discussed above, the Court finds that certification of a nation-wide class for plaintiffs' UCL claim is not barred under the Ninth Circuit's reasoning in Sullivan.

Parkinson, 2008 WL 5233200 at *18. Thanks to the blog reader who forwarded this decision.

New federal nationwide class certification decision: Mazza v. American Honda Motor Co.

The court (Judge Valerie Baker Fairbank) granted nationwide class certification of UCL and CLRA claims in an auto defect action, Mazza v. American Honda Motor Co., ___ F.R.D. ___, 2008 WL 5256432 (C.D. Cal. Dec. 16, 2008). Many thanks to the blog reader who forwarded the order.

Ninth Circuit denies en banc rehearing and modifies its opinion in Williams v. Gerber Products Co.

On Monday, the Ninth Circuit issued an order denying en banc rehearing and modifying its opinion in Williams v. Gerber Products Co., 523 F.3d 934 (9th Cir. 2008). Originally, the opinion contained these three sentences:

We do not, however, think that a busy parent walking through the aisles of a grocery store should be expected to verify that the representations on the front of the box are confirmed in the ingredient list. Instead, reasonable consumers expect that the ingredient list contains more detailed information about the product that confirms other representations on the packaging. We do not think that the FDA requires an ingredient list so that manufacturers can mislead consumers and then rely on the ingredient list to correct those misinterpretations and provide a shield for liability for the deception.

Slip op. at 4197 (emphasis added). The first sentence has been omitted, and the other two reversed, to read:

We do not think that the FDA requires an ingredient list so that manufacturers can mislead consumers and then rely on the ingredient list to correct those misinterpretations and provide a shield for liability for the deception. Instead, reasonable consumers expect that the ingredient list contains more detailed information about the product that confirms other representations on the packaging.

Slip op. at 16639.  Here is my original blog post on the Gerber decision.  Thanks to the blog reader who emailed to advise of this development.