The UCL Practitioner

Supreme Court holds UCL and CLRA claims survive SLAPP challenge: Serova v. Sony Music Entertainment

Last Thursday, August 18, 2022, the Supreme Court held that commercial sellers may not misrepresent the authorship of artistic works.  Accordingly, the Court determined, the trial court had improperly granted the defendant's anti-SLAPP motion in an action involving disputed representations that Michael Jackson was the vocalist on three tracks included in a posthumously-issued album.  Serova v. Sony Music Entertainment, ___ Cal.5th ___ (Aug. 18, 2022).

The unanimous opinion concludes:

Serova has sufficiently demonstrated, for purposes of the anti-SLAPP proceedings before us, that her CLRA and UCL claims related to [the album]'s packaging and promotional video have sufficient merit.  Perhaps in another context the First Amendment would limit the reach of our consumer protection laws, but Sony’s album-back promise and video are commercial advertising making claims about a product, and we will not place them beyond the reach of state regulation. 

Slip op. at 43.  Both the San Francisco Chronicle and the Los Angeles Times covered the opinion. This blog's prior coverage of the case is here and here.

Supreme Court takes up UCL/anti-SLAPP case: Serova v. Sony Music Entertainment

During this week's conference, the Supreme Court granted review in Serova v. Sony Music Entertainment, No. S260736.  The statement of the issue on review has not yet been added to the main docket page, but the case involves UCL and CLRA claims based on allegedly false statements about whether Michael Jackson actually performed all the songs on an album marketed as a "Michael Jackson" album.  The Court will address whether these claims can survive an anti-SLAPP attack.  See this prior blog post for more on the rather lengthy procedural history of the case, which includes a prior review petition and a "grant and transfer" order.  

The Court took this action after giving itself an extension of time, to May 18, to grant or deny review.  With assistance from attorney David Arbogast, I filed CAOC's letter in support of review on the first day of the Bay Area's shelter-in-place orders.  The petition for review, answer, and reply are also of interest. Congratulations to plaintiffs' counsel, Jeremy Bollinger and Dennis Moss, on this result, and many thanks for sharing copies of these briefs. 

Recent decision addresses UCL in anti-SLAPP context: Serova v. Sony Music Entertainment

Last week (on April 8, 2020), the Supreme Court granted itself an extension of time to grant or deny review in Serova v. Sony Music Entertainment, No. S260736.  Serova involves the interplay between the UCL (and the CLRA) and the anti-SLAPP statute (Code Civ. Proc. § 425.16).  The action alleges that Sony Music (and related entities) marketed and sold an album by falsely attributing all ten songs on the album to Michael Jackson, when in fact, a cover singer performed three of the songs.  The action seeks injunctive relief, restitution and damages on behalf of a proposed class of California purchasers of the album (or of any of the three mis-attributed songs). 

This case has been to the Supreme Court once before.  In 2018, the Court of Appeal (Second Appellate District, Division Two) reversed the trial court's order denying Sony's anti-SLAPP motion, holding that the attribution of the songs to Michael Jackson "did not simply promote sale of the album, but also stated a position on a disputed issue of public interest."  Serova v. Sony Music Entertainment, 26 Cal.App.5th 759, 764 (2018). 

The Supreme Court issued a "grant and hold" order in December 2018.  In September 2019, the Court transferred the case back to the Court of Appeal with directions to reconsider the matter in view of FilmOn.com Inc. v. Double Verify Inc., 7 Cal.5th 133 (2019).   Serova v. Sony Music Entertainment, No. S251822.

After the parties filed supplemental briefing, the Court of Appeal issued its new opinion on January 8, 2020.  Serova v. Sony Music Entertainment, 44 Cal.App.5th 103 (2020).  The new opinion essentially adopted the same analysis and came to the same conclusion as the earlier opinion. 

A second petition for review was filed in February 2020.  On the day after the Bay Area "shelter in place" orders went into effect, I submitted a letter in support of review on behalf of CAOC.  (This is the case I mentioned in my post on March 19, 2020).  The current deadline for the Supreme Court to grant or deny review is Monday, May 18, 2020.  As a practical matter, that means the Court will act by no later than its conference scheduled for Wednesday, May 13, 2020. 

Three-way split on "unfair" conduct: Weimer v. Nationstar Mortgage, LLC

In an unpublished section of Weimer v. Nationstar Mortgage, LLC, ___ Cal.App.5th ___ (Apr. 2, 2020), the Court of Appeal (Third Appellate District) discussed the three-way split in authority on the definition of "unfair" conduct under the UCL.  The three tests developed in the case law so far are the "balancing" test, the "tethering" test, and the "Section 5" test": 

Following Cal-Tech Communications, a split in authority has developed concerning the standard for consumer claims under the “unfair” prong of the unfair competition law.  (Compare Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 718-719 [adopting the pre-Cal-Tech Communications balancing test] with Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 854 [adopting the “tether[ing]” test]; see also Camacho v. Automobile Club of Southern California (2006) 142 Cal.App.4th 1394,1403 [adopting the test for unfairness set forth in 15 U.S.C. § 45(n)] [aka the "Section 5" test].)

Slip op. at 49 (emphasis added).  The panel decided to follow the "balancing" test because another panel of the same District had adopted that test some years ago.  Id. (citing Progressive West Ins. Co. v. Superior Court, 135 Cal.App.4th 263, 285-86 (1999)).  I have seen other appellate courts approach the three-way split in the same way.  Evidently, the parties offered no briefing on which test should apply.  See id.  Possibly, each side argued it should win no matter which test governed, which is a legitimate strategy approach in many cases.  That said, the Supreme Court is unlikely to resolve this split until a case arises in which the outcome depends on which test applies.   

Under the "balancing" test, the Court held in the unpublished section, the plaintiff had adequately alleged that defendants' handling of his loan modification was "unfair" within the meaning of the UCL.  The alleged conduct was also "fraudulent": 

The complaint alleges defendants subjected plaintiff to a fraudulent application process, stringing him along with false assurances that a loan modification would be forthcoming or that he was eligible for a HAMP modification, and then claiming, falsely and repeatedly, that plaintiff failed to supply requested documents.  The complaint further alleges that defendants intentionally delayed the loan modification process by demanding that plaintiff submit the same documents over and over again, all in an attempt to increase arrears, penalties, and fees.  These allegations adequately support a cause of action under the “fraudulent” and “unfair” prongs of the unfair competition law.  (See Rufini v. CitiMortgage, Inc. (2014) 227 Cal.App.4th 299, 310 [allegation that lender “pretended to engage in loan modification efforts while actually intending to foreclose” stated unfair competition law cause of action under “fraudulent” and “unfair” prongs]; Majd [v. Bank of America, N.A.], 243 Cal.App.4th [1293,] 1304 [(2015)] [borrower sufficiently alleged violation of the unfair competition law based, in part, on lender’s false assertion that he failed to provide required documentation].)

Slip op. at 49-50.  (This blog's short 2014 post on Rufini is here.)

New UCL/CLRA opinion considers the "reasonable consumer": Brady v. Bayer Corp.

In Brady v. Bayer Corp., ___ Cal.App.5th ___ (Sept. 7, 2018), the Court of Appeal (Fourth Appellate District, Division Three) held that the plaintiff's complaint adequately alleged that the defendant's product label was misleading to a reasonable consumer under both the CLRA and the UCL. 

The front of the label called the product "One A Day" multivitamin gummies, but you had to read the back of the label to find out that you're supposed to take two gummies per day to get the recommended daily nutritional value.  The opinion includes images of the front and back of the product label. 

Among other past cases, the opinion considers and favorably cites the Ninth Circuit's decision in Williams v. Gerber Prods. Co., 552 F.3d 934 (9th Cir. 2008) (discussed in these blog posts).

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."

Insurance bad faith and the UCL

The September 2017 issue of Plaintiff magazine has an article by Jeffrey I. Ehrlich called "Be an insurance Myth Buster!"  One of the busted myths relates to the UCL.  The myth is this:  "An insurer's breach of its common-law duties cannot support a claim under the UCL." 

As explained in Jeffrey's article, the California Supreme Court busted this myth in 2013, in Zhang v. Superior Court, 57 Cal.4th 364 (2013) (discussed here).  Click over to Jeffrey's piece for more. 

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

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

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

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

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

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

Id. at 8.  

The opinion goes on to say this: 

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

Id. 

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

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

Under the "section 5" test:

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

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

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

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

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).

Ninth Circuit reinstates UCL claim in wrongful foreclosure action: Oskoui v. J.P. Morgan Chase Bank, N.A.

In Oskoui v. J.P. Morgan Chase Bank, N.A., ___ F.3d ___ (9th Cir. Mar. 13, 2017), the Ninth Circuit held that the district court should not have summarily adjudicated the plaintiff's UCL claim in the defendant's favor. 

According to the opinion, the evidence showed that the defendant lender strung the plaintiff borrower along for more than two years, leading her to believe that she could obtain a loan modification if she made additional payments, when in fact she was ineligible for the modification program due to the size of her loan. The lender's conduct was not only "Kafkaesque," but also "fraudulent" and "unfair" within the meaning of the UCL, whether "intentional or the result of corporate ineptitude."  Slip op. at 10-13. 

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).

New UCL opinion considers all three prongs: Moran v. Prime Healthcare Management, Inc.

In Moran v. Prime Healthcare Management, Inc., ___ Cal.App.5th ___ (Sept. 14, 2016; pub. ord. Oct. 5, 2016), the Court of Appeal (Fourth Appellate District, Division Three) considered UCL and CLRA claims involving the cost of emergency room medical care for uninsured ("self-pay") patients.  Essentially, the lawsuit alleges that the defendant unfairly charges uninsured patients more than it charges insurers (or other third-party payors) for insured patients.  Slip op. at 2-4. 

The trial court dismissed the entire action, but the Court of Appeal held that parts of the case survived:

• Plaintiff's discriminatory pricing theory enjoyed a Cel-Tech "safe harbor," but his theory that the self-pay patients are charged "artificial and grossly excessive rates" did not.  Slip op. at 7-8.
  
  
• The UCL "unlawful" prong claim, which was predicated on CLRA violations, largely failed for lack of standing.  Id. at 8-15.  However, the claim survived to the extent it asserted unconscionability in violation of the CLRA (Civil Code section 1770(a)(19)).  Id. at 15-18.
  
  
• The UCL "fraudulent" prong claim failed for lack of standing because the plaintiff did not adequately allege his reliance on specific misrepresentations.  Id. at 18-19.
  
  
• The UCL "unfair" prong claim survived, again to the extent based on the theory that "biling the full amount to self-pay patients is unconscionable."  Id. at 19-21.  This section of the opinion discussed the three-way split in authority on the proper formulation of "unfair" in consumer actions, but the Court concluded that it did not have to resolve the split in order to decide the appeal.  Id. at 20.
  
  
• The CLRA claim survived as to the unconscionability theory only.  Id. at 21-22.
  
  
• The declaratory relief claim survived.  Id. at 23-24.

New Ninth Circuit UCL, FAL and CLRA opinion: Ebner v. Fresh, Inc.

In Ebner v. Fresh, Inc., ___ F.3d ___ (9th Cir. Sept. 27, 2016), the plaintiff asserted UCL, FAL and CLRA claims based on the defendant's labeling and marketing of its "Sugar" lip balm.  According to the plaintiff, the statements of "net weight" are wrong and the "oversize" tubes and boxes in which the lip balm is sold "create the misleading impression that each unit has a larger quantity of lip product than it actually contains." Slip op. at 6.  The district court dismissed the action in its entirety.  Id. at 4-5. 

The Ninth Circuit held that claims based on misstatements of "net weight" were properly dismissed because the federal Food, Drug and Cosmetic Act created a Cel-Tech safe harbor for such statements.  Slip op. at 8-9.  However, plaintiff also argued that the defendant omitted any "supplemental or clarifying statement" explaining that part of the next weight would be inaccessible to the consumer because of the tube design.  Claims based on this omission theory enjoyed no safe harbor, nor were they expressly or impliedly preempted.  Id. at 9-12.

Nevertheless, the omission claim failed, the Court held, because "Plaintiff cannot plausibly allege that the omission of supplemental disclosures about product weight rendered Sugar’s label 'false or misleading' to the reasonable consumer."  Id. at 12.  Basically, the Court held that reasonable consumers know how lip balm tubes with screw mechanisms work, and that they know the tubes can end up leaving some product behind at the bottom.  See id. at 13-15.  In this portion of the opinion, the Court distinguished Williams v. Gerber Products Co., 552 F.3d 934 (9th Cir. 2008) (discussed in these blog posts).

The Court then held that claims based on misleading packaging (as opposed to labeling) also failed "for largely the same reasons that the label-based claims fail."  Id. at 16.  In "the high-end cosmetics market, Sugar's elaborate packaging and the weighty feel of the tub is commonplace and even expected by a significant portion of Fresh's 'targeted consumers.'"  Id. (citing Lavie v. Procter & Gamble Co., 105 Cal.App.4th 486 (2003) (discussed in this blog post)). 

This opinion accompanies an order denying the plaintiff's petition for panel rehearing or en banc rehearing, which challenged an earlier opinion handed down in March.   The main difference between the current opinion and the earlier opinion (which has been superseded) is that the current opinion spends more time distinguishing Williams. 

(Hat tip: The Complex Litigator.)

New UCL opinion: Rutledge v. Hewlett Packard Co.

The Court of Appeal (Sixth Appellate District) handed down an important new UCL opinion last week. 

In Rutledge v. Hewlett Packard Co., ___ Cal.App.4th ___ (Jul. 22, 2015), the Court of Appeal reinstated a UCL "fraudulent" prong claim, and a CLRA claim, against a product manufacturer for failing to disclose material information about the product -- even though the nondisclosure was not about a safety-related defect, and even though for some class members the product did not fail until after the expiration of the manufacturer's warranty.  Slip op. at 6-12. 

Put another way, the opinion places some important limitations on Daugherty v. American Honda Co., 144 Cal.App.4th 824 (2006), and its successor opinion, Bardin v. DaimlerChrysler Corp., 136 Cal.App.4th 1255 (2006).  (For more on Daugherty, see these blog posts.  For more on Bardin, see this one.)  Before this new opinion, the Court of Appeal's most recent word on these issues had been Collins v. eMachines, Inc., 202 Cal.App.4th 249 (2011).

This is what the opinion has to say about the warranty issue:

HP argues [one of the named plaintiffs] and class members similar to him do not have a claim for fraudulent concealment under the UCL, because they received notebooks with inverters that functioned for the duration of the one-year warranty, and were not damaged by HP’s alleged failure to disclose the fact of the faulty inverter.  However, a claim for fraudulent business practices “reflects the UCL’s focus on the defendant’s conduct, rather than the plaintiff’s damages, in service of the statute’s larger purpose of protecting the general public against unscrupulous business practices.”  (In re Tobacco II Cases (2009) 46 Cal.4th 298, 312.)  The question under the UCL is related to HP’s conduct in failing to disclose the faulty inverter, not on whether the notebook’s computer functioned for one-year.  HP’s argument that the expiration of the warranty period precludes a claim for fraudulent concealment under the UCL is incorrect.

Slip op. at 10-11 (emphasis added).

Back in 2008, the same division of the Court of Appeal declined to disturb the trial court's order granting class certification of the UCL claim in the same case.   My post on the 2008 opinion is here.  In the opinion handed down last week, the Court of Appeal not only reaffirmed that result, but also held that certification should have been granted of a nationwide class.  Slip op. at 23-29.

Court of Appeal considers interplay between UCL, FAL, and anti-SLAPP statute: Demetriades v. Yelp, Inc.

In Demetriades v. Yelp, Inc., ___ Cal.App.4th ___ (Jun. 24, 2014), the Court of Appeal (Second Appellate District, Division One) reversed the judgment that ensued after the trial court granted defendant Yelp, Inc.'s anti-SLAPP motion. 

The Court of Appeal held that the plaintiff's UCL "fraudulent" prong claim and his FAL false advertising claim fell outside the scope of the anti-SLAPP statute:

We conclude that the commercial speech exemption of section 425.17, subdivision (c) applies to Yelp’s statements concerning the accuracy and efficacy of its review filter, and therefore find the trial court erred in granting Yelp’s special motion to strike under section 425.16.  We reverse.

....

The legislative history indicates this legislation [i.e., the anti-SLAPP statute's commercial speech exemption (Code Civ. Proc. § 425.17, subd. (c)] is aimed squarely at false advertising claims and is designed to permit them to proceed without having to undergo scrutiny under the anti-SLAPP statute.  Proponents of the legislation argued that corporations were improperly using the anti-SLAPP statute to burden plaintiffs who were pursuing unfair competition or false advertising claims.  The proponents noted that law seminars were being conducted on the unfair competition law, “encouraging corporations to use the SLAPP motions as [a] new litigation weapon to slow down and perhaps even get out of litigation.”  (Sen. Rules Com., Off. of Sen. Floor Analyses, Sen. Bill No. 515 (2003–2004 Reg. Sess.) as amended Jul. 8, 2003; Sen. Com. on Judiciary, Analysis of Sen. Bill No. 515 (2003–2004 Reg. Sess.) as amended May 1, 2003.)

....

Here, plaintiff’s claims satisfy both prongs of section 425.17, subdivision (c).  Although Yelp’s website is a public forum and contains matters of public concern in its reviews of restaurants and other businesses (Hupp v. Freedom Communications, Inc. (2013) 221 Cal.App.4th 398, 404), unlike the editorial content of Stewart v. Rolling Stone LLC, supra,181 Cal.App.4th 664, Yelp’s statements about its review filter—as opposed to the content of the reviews themselves—are commercial speech about the quality of its product (the reliability of its review filter) intended to reach third parties to induce them to engage in a commercial transaction (patronizing Yelp’s website, which patronage induces businesses on Yelp to purchase advertising).

Slip op. at 2, 15, 17.

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.

"Appeals court revives suit against Skype"

Yesterday's San Francisco Chronicle had this article (subscription) by Bob Egelko on the Court of Appeal's latest UCL and CLRA opinion, Chapman v. Skype Inc., ___ Cal.App.4th ___ (Oct. 4, 2013).

Chapman stands in rather stark contrast to Simpson v. The Kroger Corp., ___ Cal.App.4th ___ (Sept. 25, 2013), decided the preceding week (see this blog post).  More details on Chapman can be found on Professor Tushnet's blog, which also had a post on Simpson.

New UCL "fraudulent" prong and preemption decision: Simpson v. The Kroger Corp.

In Simpson v. The Kroger Corp., ___ Cal.App.4th ___ (Sept. 25, 2013), the Court of Appeal (Second Appellate District, Division Four) affirmed dismissal of plaintiff's UCL, FAL and CLRA claims, which asserted that the defendant, who makes Challenge butter, mislabeled its spreadable "butter" products. (The action also named the supermarket where the plaintiff purchased the products.)  According to the complaint, the spread is not "butter" because it contains canola and/or olive oil (sounds like margarine to me, although later the opinion clarifies that this was not plaintiff's contention).  Slip op. at 2-4, 8-9. 

This is one of the challenged labels (no pun intended):

Id. at 22 (Appx. B).

First, the opinion addresses preemption, holding that the federal Food Drug and Cosmetic Act (21 U.S.C. §§ 301 et seq.) preempts the California Milk and Milk Products Act of 1947 (Food & Agr. Code §§ 32501 et seq.) (which appears to have a more narrow definition of "butter" than the federal Act) but not the California Sherman Food, Drug and Cosmetic Law (Health & Saf. Code §§ 109875 et seq.).  Slip op. at 5-16.

Then, the opinion holds that regardless of the preemption analysis, the UCL, FAL and CLRA claims failed because "plaintiff has not, and as a matter of law cannot, allege that a reasonable consumer would have been mislead [sic] by the labels here."  Id. at 17.  Of interest, the opinion confirms the substantive "likely to deceive" standard for these claims:

Although California “courts have held that reasonable reliance is not an element of the claims under [the three statutory schemes alleged],” a plaintiff must establish that consumers were likely to be deceived by the product.  ([Yumul v. Smart Balance, Inc. (C.D. Cal. 2010) 733 F.Supp.2d 1117,] 1125; In re Vioxx Class Cases (2009) 180 Cal.App.4th 116, 130 [to state a claim for deceptive advertising under the Consumer Legal Remedies Act, a plaintiff “need only establish that members of the public were likely to be deceived by the advertising.”]; Colgan v. Leatherman Tool Group, Inc. (2006) 135 Cal.App.4th 663, 682 [to establish a false advertising claim, “a plaintiff need only show that members of the public are likely to be deceived” under a “‘reasonable consumer’ standard”].)

....

....  The labels on the products here clearly informed any reasonable consumer that the products contain both butter and canola or olive oil.  This was plain on both the top and side panels of the tubs in which the products are sold.  No reasonable person could purchase these products believing that they had purchased a product containing only butter.  The trial court did not abuse its discretion in denying leave to amend.

Id. at 18, 19.

Supreme Court holds insurance companies enjoy no special immunity from UCL liability: Zhang v. Superior Court

In the second of last week's pair of UCL decisions, Zhang v. Superior Court (Cal. Capital Ins. Co.), ___ Cal.4th ___ (Aug. 1, 2013), the Supreme Court held that Moradi-Shalal did not grant insurance companies special immunity from UCL liability.  This excerpt is from the introduction:

We hold that Moradi-Shalal does not preclude first party UCL actions based on grounds independent from section 790.03, even when the insurer’s conduct also violates section 790.03.  We have made it clear that while a plaintiff may not use the UCL to “plead around” an absolute bar to relief, the UIPA does not immunize insurers from UCL liability for conduct that violates other laws in addition to the UIPA.  (Manufacturers Life Ins. Co. v. Superior Court (1995) 10 Cal.4th 257, 283-284 (Manufacturers Life); see also Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 182-183 (Cel-Tech); Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 43 (Quelimane); Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 565 (Stop Youth Addiction).)

Here, plaintiff alleges causes of action for false advertising and insurance bad faith, both of which provide grounds for a UCL claim independent from the UIPA.  Allowing her also to sue under the UCL does no harm to the rule established in Moradi-Shalal. 

Slip op. at 2 (footnote omitted) (citing Moradi-Shalal v. Fireman’s Fund Ins. Companies, 46 Cal.3d 287 (1988)).

Time permitting later in the week, I will provide more thoughts on Zhang in a future post.  

"Welcome to Food Court"

On March 1, 2013, the Recorder had this article on the numerous false advertising cases pending against food manufacturers in the Northern District of California, which the article says has "emerg[ed] as preferred venue for a new wave of class action litigation over food labels alleged to mislead consumers or violate federal regulations."

Many thanks to the blog reader who forwarded the link.

Jury verdict thrown out in UCL false advertising case: Wallace v. Monier, Inc.

According to articles in The Recorder and Law360 (both subscription), as well as a press release by Morrison & Foerster, in late January, the judge overturned a $7 million jury verdict in a Placer County Superior Court case called Wallace v. Monier, Inc.   This is the same lawsuit that resulted in a published opinion on class certification three years ago, McAdams v. Monier, Inc., 182 Cal.App.4th 174 (2010).

I have not seen the order(s) or any of the briefs.  If and when I receive copies, I will post them here. 

UPDATE:  The order, dated January 28, 2013, is available at this link.  Many thanks to the blog reader who forwarded it.

New UCL opinion teaches pleading lesson: Hutton v. Fidelity National Title Co.

In Hutton v. Fidelity National Title Co., ___ Cal.App.4th ___ (Jan. 31, 2012), the Court of Appeal (Fifth Appellate District) affirmed summary judgment in a UCL case predicated on the defendant's alleged violation of a Government Code provision capping notary fees. 

After holding that the defendant had not violated that provision, thereby eliminating the UCL "unlawful" prong claim, the Court of Appeal refused to consider whether the plaintiff could proceed under the UCL's "unfair" or "frauduent" prongs because those prongs had not been adequately pleaded in the complaint:

In arguing that defendant did not address certain other potential causes of action, plaintiff’s appeal emphasizes that the UCL has three separate grounds of liability.  That is a correct statement of the law.  (See Bus. & Prof. Code, § 17200.)  “Since section 17200 is in the disjunctive, it establishes three separate types of unfair competition.  The statute prohibits practices that are either ‘unfair,’ or ‘unlawful,’ or ‘fraudulent.’  [Citation.]”  (Pastoria v. Nationwide Ins. (2003) 112 Cal.App.4th 1490, 1496.)  Plaintiff argues that it stated a cause of action for potential unfair or fraudulent practices ....  Whatever we may think about the viability of such theories, the problem for plaintiff at this stage is that no such claim or cause of action was ever alleged.

In an effort to persuade us that these theories were somehow pled, plaintiff notes that the first cause of action included a statement that defendant’s conduct was “unlawful, unfair or fraudulent.”  But that was a bare conclusion, not the factual basis of a cause of action.  Moreover, we cannot ignore that the next sentence of the complaint made it unmistakably clear that the first cause of action was based solely on “unlawful” conduct.  It stated, as we previously noted above, as follows:  “Namely, [Defendant] overcharged Plaintiff … by assessing and collecting set Notary Fees in each Real Estate Transaction irrespective of the number of signatures actually notarized.  Plaintiff … [was] charged more than California law allowed, and thus lost money due to [Defendant’s] unlawful business practices.”  (Italics added.)  ....  Plainly then, the actionable wrongdoing for which relief was sought in the complaint was not a failure to disclose or itemize, nor a notary’s unauthorized practice of law, but that of overcharging plaintiff by exceeding the amount permitted under section 8211.

....

What we said at the outset of our discussion bears repeating here:  For purposes of a summary judgment motion, the pleadings set the boundaries of the issues to be resolved.  (Conroy, supra, 45 Cal.4th at p. 1250.)  Defendant, therefore, met its burden as the moving party when it negated the sole basis of plaintiff’s claims—namely, the alleged excessive notary fee under section 8211.  It was not incumbent on defendant to refute liability on some theoretical possibilities not included in the pleadings.  (Conroy, supra, at p. 1254; County of Santa Clara v. Atlantic Richfield Co., supra, 137 Cal.App.4th at p. 332.)  Each of the suggested other grounds for liability argued by plaintiff were simply theoretical possibilities that were not included in the pleadings.  Finally, plaintiff cannot use his opposition papers as a substitute for an amended pleading, and his failure to seek an amendment below forfeits the issue.  (Conroy, supra, at p. 1254; County of Santa Clara v. Atlantic Richfield Co., supra, at pp. 333; Lackner v. North, supra, 135 Cal.App.4th at pp. 1201-1202, fn. 5.)

Slip op. at 15-17 (italics in original; bold added).

This case illustrates why the better way to plead a UCL claim in most cases will be to assert each prong as a separate, independent cause of action.  At a minimum, each prong should be pleaded in a separate paragraph or subparagraph specifically tailored to the elements of that prong.  The process of drafting separate allegations for each independent prong will force you to focus in on precisely how the defendant's conduct ran afoul of each prong. 

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.

"An Express Warranty Defines Materiality Under the UCL and CLRA"

The latest issue of Competition, the journal of the Antitrust and Unfair Competition Law Section of the State Bar of California, has an article of interest to those handling UCL cases:

• "'Revisiting Materiality' is Revisionist History: An Express Warranty Defines Materiality Under the UCL and CLRA Absent an Unreasonable Safety Hazard," by Paul J. Riehle and Jia-Ming Shang

The article is a response to a piece published in the Spring 2012 issue, "Revisiting Materiality in the Context of CLRA and UCL Claims: Why Materiality Does Not Equal a Safety Risk," by James C. Shah and Rose F. Luzon (mentioned in this blog post). 

These articles both address an important issue originating in Daugherty v. American Honda Motor Co., 144 Cal.App.4th 824 (2006), namely, whether product manufacturers enjoy an escape hatch from liability under the CLRA and UCL for concealing known defects in their products.  The escape hatch suggested by Daugherty (and seized on in later decisions) is offering an express warranty, and the hatch is open to all manufacturers unless the concealed defect creates a safety hazard for consumers. 

In my view, this is an issue that the Supreme Court should take up when a proper case presents itself, because Daugherty  (as interpreted, or rather misinterpreted, in later cases) upended years of UCL and CLRA jurisprudence. 

The Court of Appeal's most recent word on this question is Collins v. eMachines, Inc., 202 Cal.App.4th 249 (2011). The Supreme Court denied review in Collins early this year.  At the Golden State Institute last week, I learned of an unpublished Ninth Circuit opinion on the issue, Vitt v. Apple Computer, Inc., 469 Fed.Appx. 605 (9th Cir. 2012). 

The two articles are both very well done and effectively present two opposing views on this question. 

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. 

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).

New UCL "fraudulent" and "unfair" prong decision: Boschma v. Home Loan Center, Inc.

In Boschma v. Home Loan Center, Inc., ___ Cal.App.4th ___ (Aug. 10, 2011), the Court of Appeal (Fourth Appellate District, Division Three) reversed the judgment entered after an order sustaining a demurrer to UCL "fraudulent" and "unfair" prong claims without leave to amend.  The Court of Appeal also reversed as to the common-law fraud claims. 

The claims were predicated on partial omissions by a lender in connection with option adjustable rate mortgage loans ("Option ARM" loans).   The Court criticized the lender's "byzantine descriptions" of the loan terms, which were "hidden in the complexity" of the various loan documents and TILA disclosures.  Slip op. at 23, 29.  In other words, although the material facts were, technically speaking, fully disclosed, the deceptive manner in which they were allegedly disclosed made them actionable: 

Keeping in mind the procedural posture of this case, we conclude plaintiffs have adequately pleaded that material facts were concealed by inaccurate representations and half-truths.  If plaintiffs can show defendant intentionally used its Option ARM forms to deceive borrowers, plaintiffs may be able to establish a fraud claim.  Plaintiffs’ actual interest rates and monthly payments sufficient to amortize the loan (or at least pay the accruing interest) were hidden in the complexity of the Option ARM contract terms.  “‘The fact that a false statement may be obviously false to those who are trained and experienced does not change its character, nor take away its power to deceive others less experienced.  There is no duty resting upon a citizen to suspect the honesty of those with whom he [or she] transacts business.  Laws are made to protect the trusting as well as the suspicious.  [T]he rule of caveat emptor should not be relied upon to reward fraud and deception.’”  (Thompson v. 10,000 RV Sales, Inc. (2005) 130 Cal.App.4th 950, 976.)

Slip op. at 23.

The opinion also discusses the three-way split in authority over the proper formulation of the UCL's "unfair" prong.  Id. at 27.  While the opinion is a little ambiguous, the Court appears to hold that the allegations satisfied all three formulations.  See id. at 29. 

New UCL class certification decision: Fairbanks v. Farmers New World Life Ins. Co.

In Fairbanks v. Farmers New World Life Ins. Co., ___ Cal.App.4th ___ (Jul. 13, 2011), the Court of Appeal (Second Appellate District, Division Three) affirmed an order denying class certification of a UCL "fraudulent" prong claim. The case challenged the allegedly deceptive manner in which the defendant marketed and sold certain life insurance policies.

The Court agreed that "the intervening opinion of the Supreme Court in Tobacco II renders immaterial the trial court's finding that the issue of reliance is not subject to common proof."  Slip op. at 24.  The Court went on to affirm, however, finding that the case had a Kaldenbach problem.  Id. at 26-30. 

Recent UCL "fraudulent" prong decision: Hill v. Roll Int'l Corp.

In Hill v. Roll International Corp., 195 Cal.App.4th 1295 (May 26, 2011), the Court of Appeal (First Appellate District, Division Two) held as a matter of law that "no reasonable consumer would be misled to think that the green drop on Fiji water represents a third party organization's endorsement or that Fiji water is environmentally superior to that of the competition."  Id., slip op at 5 (emphasis in original).  

The Court discussed the "reasonable consumer" standard in some detail (id. at 8-10), and concluded that "in these days of inevitable and readily available Internet criticism and suspicion of virtually any corporate enterprise, ... a reasonable consumer ... does not include one who is overly suspicious."  Id. at 9.

The Court also held that Kwikset did not dictate a contrary result:

We agree wholeheartedly that “labels matter,” all labels, including that here.  Defendants obviously put the green drop on the label for a purpose, as their counsel had to necessarily concede at oral argument:  that the green drop was for a “marketing” purpose, to signify “something to do with the environment.”  Such concession notwithstanding, we hold—and it is all we hold—that no reasonable consumer would be misled to think that the green drop represents a third party organization’s endorsement or that Fiji water is environmentally superior to that of the competition.

Id. at 12.

Accordingly, the Court affirmed the judgment of dismissal following the trial court's order sustaining the defendant's demurrer to the UCL, FAL, and CLRA claims without leave to amend.