The UCL Practitioner

Live blog of "UCL Remedies" panel at the 2022 Golden State Institute

Today I'm attending the 2022 Golden State Antitrust and Unfair Competition Law Institute at the Julia Morgan Ballroom in San Francisco. The 3:00 p.m. panel is entitled: "UCL Remedies: You Can't Always Get What You Want." The speakers are Andre Mura of Gibbs Law Group LLP; Zoe Savitsky of the Oakland City Attorney's Office; Steven E. Swaney of Veneable LLP; and Betsy C. Manifold of Wolf Haldenstein as moderator. This promises to be an excellent talk. 

It's been a very long time since I've done a live blog, but my plan is to cite new decisions of interest mentioned by the panel that I haven't previously covered on the blog. Here we go:

1. New California Supreme Court opinion on civil penalties recoverable in a UCL public prosecutor action and the equitable nature of that remedy: Nationwide Biweekly Administration, Inc. v. Superior Court, 9 Cal.5th 279 (2020).
2. New California Supreme Court opinion on geographic scope of UCL remedies in a public prosecutor action; local prosecutors may recover statewide civil penalties as well as statewide injunctive relief: Abbott Laboratories v. Superior Court, 9 Cal.5th 642 (2020).
3. Johnson & Johnson public prosecutor action involving cervical mesh extensively addressed issue of how civil penalties are calculated.
4. Court of Appeal rejects argument that harms resulting from lost market share is recoverable as UCL restitution in a competitor action: Lee v. Luxottica Retail N. Am., Inc., 65 Cal.App.5th 793, 797 (2021).
5. New Ninth Circuit opinions on "adequate legal remedy" defense to UCL claims:
   1. Sonner v. Premier Nutrition Corp., 971 F.3d 834 (9th Cir. 2020) (Sonner I) (action involved misrepresentations regarding a dietary supplement; UCL and CLRA claims brought; Ninth Circuit affirmed dismissal of UCL claim because CLRA provided adequate legal remedy--importantly, as a matter of federal common law under Eire)
   2. Sonner v. Premier Nutrition Corp., 49 F.4th 1300 (9th Cir. 2022) (Sonner II) (same plaintiff re-filed her case in state court (Alameda County); defendant's motion to enjoin state-court proceeding was denied due to uncertainty over jurisdictional issue)
   3. Guzman v. Polaris Indus., 49 F.4th 1308 (9th Cir. 2022) (decided Sept. 29, 2022) (affirmed dismissal of UCL claim with directions to dismiss without prejudice to re-filing in state court)
   4. The above case summaries are by panelist Steven Swaney. My takeaway is these decisions may provide a way to avoid federal jurisdiction, allowing your UCL class action to proceed in state court.  Panelist Andre Mura just pointed out that this may be a pyrrhic victory for defendants. I agree. Panelist Swaney is now pointing out that defendants should think long and hard before moving to dismiss UCL claims under Sonner.
6. Several new opinions on "public injunctive relief" in private UCL litigation. The issue is coming up a lot, according to panelist Mura, because it's relevant to whether the UCL claim is arbitrable under McGill (see this blog post).
   
   1. Hodges v. Comcast Cable Communications, LLC, 21 F.4th 535, 542 (9th Cir. 2021) (held that the injunction sought was "public" rather than private)
   2. Stover v. Experian Holdings, Inc., 978 F.3d 1082 (9th Cir. 2020) (addressing Article III standing)
   3. Rogers v. Lyft, Inc., 452 F.Supp.3d 904, 919 (N.D. Cal. 2020) (addressing Prop. 64 standing)
   4. DiCarlo v. MoneyLion, Inc., 988 F.3d 1148 (9th Cir. 2021) (construing McGill)

As you can imagine, the panel had much more to say about the new decisions, and they also provided an interesting and useful summary of each form of UCL remedy. Many thanks to the panelists for a great discussion. That's all for today's live blog.

Another new UCL public prosecutor opinion: People v. Overstock.com, Inc.

In People v. Overstock.com, Inc., ___ Cal.App.5th ___ (Jun. 2, 2017), the Court of Appeal (First Appellate District, Division Four) affirmed a judgment of more than $6.8 million (!) in civil penalties, plus injunctive relief, against Overstock.com for UCL and FAL violations. 

New UCL public prosecutor opinion: People ex rel. Harris v. Aguayo

In People ex rel. Harris v. Aguayo, ___ Cal.App.5th ___ (Apr. 26, 2017; pub. ord. May 25, 2017), the Court of Appeal (Second Appellate District, Division Two), affirmed an award of UCL restitution and civil penalties in the amount of nearly $4 million, as well as a broad permanent injunction precluding the defendants from repeating the wrongful acts comprising their "complex real estate scam." 

The opinion's summary of the applicable law, which governs in public and private actions alike, reads as follows:

The UCL is a law enforcement tool designed to protect consumers and deter and punish wrongdoing.  (Lavie v. Procter & Gamble Co. (2003) 105 Cal.App.4th 496, 503.)  It prohibits any “unlawful, unfair or fraudulent business act or practice.”  (§ 17200.)  Each of the three types of wrongful conduct is recognized as distinct from the others.  “‘“[A] practice is prohibited as ‘unfair’ or ‘deceptive’ even if it is not ‘unlawful’ or vice versa.”’  [Citations.]”  (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.)  The People may prove an unlawful act by showing virtually any violation of federal, state, or local law.  (Ibid.)  To show a fraudulent act, the law requires a showing that members of the public are “‘“likely to be deceived.”’  [Citation.]”  (Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 839.)  The fraudulent element may be proved even if there is no evidence that anyone was “‘actually deceived, relied upon the fraudulent practice, or sustained any damage.  [Citation.]’”  (Prata v. Superior Court (2001) 91 Cal.App.4th 1128, 1146.)

Slip op. at 9-10.  The opinion goes on to confirm the broad scope of the trial court's discretion in awarding restitution and fixing the amount of civil penalties.  Id. at 21-35.  As for the injunction, the opinion says this:

The trial court properly enjoined each independent act in furtherance of appellants’ wrongful scheme. [¶] Appellants assert that they know what they have done wrong, and will not “repeat mistakes of the past.”  The trial court did not believe this, finding instead that they had no remorse or insight into their own wrongdoing.  The trial court’s decision to enjoin each precise misdeed in appellants’ wrongful scheme was designed to ensure the protection of the public.

Id. at 37-38.

Class certification not required for broad-ranging "public" injunctive relief under the UCL: McGill v. Citibank, N.A.

This morning, the California Supreme Court handed down its long-awaited opinion, McGill v. Citibank, N.A., ___ Cal.5th ___ (Apr. 6, 2017). 

In McGill, the Court was expected to address whether the Federal Arbitration Act, as construed in Concepcion, preempts the Broughton-Cruz rule (see this blog post for more on that rule).  However:

[I]t is now clear that the Broughton-Cruz rule is not at issue in this case.  As detailed above, late in the Court of Appeal proceedings, McGill asserted that the arbitration provision purports to preclude her from seeking public injunctive relief in any forum.  She repeats that assertion in this court ....   At oral argument before us, Citibank agreed with McGill’s reading of the arbitration provision.

Slip op. at 7 (emphasis in original).

Accordingly, the opinion addressed whether such a contractual provision—one purporting to completely eliminate the right to seek public injunctive relief under the UCL, FAL, and CLRA—was void, under ordinary contract-law principles, as contrary to public policy.  The Court held that it was.  Id. at 14. 

The opinion then addressed whether the FAA, construed in Concepcion, preempted this principle of California contract law.  It held that Concepcion did not.  Slip op. at 14-22. 

Here's the part that's really interesting.   The opinion addresses, at length, whether Prop. 64 eliminated the ability of private plaintiffs to seek broad-ranging public injunctive relief.  Not only did the Court say "no" to that (id. at 10-14), it also held that class certification is not required of a UCL or FAL claim seeking such relief!  Id. at 13-14. 

This has been an open question for the past twelve years, since Prop. 64 passed in November 2004.  (For example, see this 2005 blog post, this one from 2006, and this one from 2007.) 

Truthfully, I did not expect the Court to reach or decide it in McGill, but I think the Court's conclusion is absolutely the correct one.  Attempting to apply class certification principles to forward-reaching injunctive relief claims just doesn't make any sense, procedurally:  

[W]e have held that the phrase “compl[y] with Section 382 of the Code of Civil Procedure” (Bus. & Prof. Code, §§ 17203, 17535) “imposes a requirement that the action be brought as a class action.”  (Arias v. Superior Court (2009) 46 Cal.4th 969, 978.)  This requirement has never been imposed with regard to requests to enjoin future wrongful business practices that will injure the public, and we find nothing in the ballot materials for Proposition 64 suggesting an intent to link or restrict such relief to the class action context.  Indeed, imposing this requirement would largely eliminate the ability of a private plaintiff to pursue such relief, because class certification requires “the existence of both an ascertainable class and a well-defined community of interest among the class members” (Washington Mutual Bank v. Superior Court (2001) 24 Cal.4th 906, 913), and “ ‘the general public’ . . . fails to meet” this requirement (Czap v. Credit Bureau of Santa Clara Valley (1970) 7 Cal.App.3d 1, 6). 

Slip op. at 13 (emphasis added).  The opinion holds that the class certification requisite added by Prop. 64 applies only to claims by private plaintiffs "seek[ing] disgorgement and/or restitution on behalf of persons other than or in addition to the plaintiff.'"  Id. at 13-14 (quoting Kraus v. Trinity Management Services, Inc., 23 Cal.4th 116, 126 n.10 (2000))(emphasis in original). 

The opinion also strongly suggests that a defendant's "voluntary cessation of wrongful conduct" does not automatically preclude forward-reaching injunctive relief.  Id. at 10.  Notably, the opinion favorably cites Robinson v. U-Haul of California, 4 Cal.App.4th 304 (2016) (discussed in this blog post), in which the Court of Appeal rejected an argument that no injunction may issue under the UCL if the defendant voluntarily stops engaging in wrongful acts. 

For those interested in a general overview of the McGill opinion, this is the Court's introductory paragraph:

In previous decisions, this court has said that the statutory remedies available for a violation of the Consumers Legal Remedies Act (CLRA; Civ. Code, § 1750 et seq.), the unfair competition law (UCL; Bus. & Prof. Code, § 17200 et seq.), and the false advertising law (id., § 17500 et seq.) include public injunctive relief, i.e., injunctive relief that has the primary purpose and effect of prohibiting unlawful acts that threaten future injury to the general public.  (Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303, 315-316 (Cruz); Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066, 1077 (Broughton).)  The question we address in this case is the validity of a provision in a predispute arbitration agreement that waives the right to seek this statutory remedy in any forum.  We hold that such a provision is contrary to California public policy and is thus unenforceable under California law.  We further hold that the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.) does not preempt this rule of California law or require enforcement of the waiver provision.  We therefore reverse the judgment of the Court of Appeal.

Slip op. at 1.

Supreme Court requests supplemental briefing on UCL issue: McGill v. Citibank

On December 7, 2016, the California Supreme Court heard oral argument in McGill v. Citibank, No. S224086.  This case presents the question of whether the Federal Arbitration Act, as construed in Concepcion, preempts the Broughton-Cruz rule.  (See this blog post for more.)

In the vast majority of argued cases, the matter is submitted upon completion of oral argument, and the Court simply issues its opinion within 90 days of the argument date.   On Tuesday, January 24, 2017, however, the Court vacated submission and directed the parties to file supplemental briefs on an interesting UCL-related issue.  From the docket:

Submission is vacated to allow for supplemental briefing. The court requests that the parties serve and file supplemental briefs addressing the following question: Whether the 2004 amendments to the Unfair Competition Law and the false advertising law, through passage of Proposition 64, eliminated the ability of private plaintiffs to seek public injunctive relief? Amici curiae that have filed briefs in this matter may also file supplemental briefs addressing the above question if they so choose. All initial briefs addressing the above question must be served and filed simultaneously on or before February 6, 2017. Any reply to the supplemental briefs must be served and filed on or before February 13, 2017. This matter will be resubmitted, without further order, as of the date that the last supplemental brief is or could be timely filed under this or any subsequent order of this court. (See Cal. Rules of Court, rule 8.524(h).) Corrigan, J., was recused and did not participate.

(Emphasis added.)

Brinker is another example of a case in which the Court vacated submission post-argument and directed further briefing.  In that case, the eventual opinion did not turn on (or even mention) the issue on which supplemental briefing was ordered.  So, the McGill order is very interesting, to be sure, but it does not necessarily mean that this point will become a central focus of the Court's opinion.  What it does mean is that the opinion will be delayed by at least a few weeks. 

In my view, the clear answer to the Court's question is no, assuming the plaintiff meets the standing requirements imposed by Proposition 64.   The initiative did not alter any of the remedies afforded by the UCL (as held in Mervyn's; see this blog post), so all the same forms of injunctive relief should be available both before and after the amendments. 

Another new opinion on UCL injunctive relief: Robinson v. U-Haul Company

In Robinson v. U-Haul Company, ___ Cal.App.5th ___ (Oct. 18, 2016), the Court of Appeal (First Appellate District, Division Four) affirmed the trial court's issuance of a permanent injunction under the UCL, plus attorneys' fees under the private attorney general doctrine (Code Civ. Proc. § 1021.5).  The injunction required the defendant, U-Haul, to stop attempting "to enforce against any former or current dealers the non-competition covenant in its dealer contracts," which the court had determined was void and unenforceable.  Slip op. at 8.  

On appeal, U-Haul argued that it had voluntarily stopped enforcing the covenant, and absent evidence of a continuing violation, no injunction may issue.  The Court of Appeal disagreed,  noting that "there is no hard-and-fast rule that a party’s discontinuance of illegal behavior makes injunctive relief against him or her unavailable."  Id. at 11 (citing cases).  This is especially true, the Court thought, when "there may be reason to doubt the bona fides of [the defendant's] newly established law-abiding policy" and where the injunction is directed to past recurring misconduct, rather than an "isolated" incident.  Id.  Other circumstances supporting the trial court's exercise of discretion included evidence that the defendant "had acted in knowing violation of the law over a period of many years" and that it "changed its policy only when threatened with an injunction."  Id. at 11-12.  In summary:

As we read [the trial court's] orders and judgment, the injunction was a response in part to U-Haul’s resistance to amending its policies, and its persistence in pursuing its anticompetitive litigation strategy over the years ....  The injunction eliminates a practice that is now shrouded in uncertainty and plagued by a troubling past.  We have no reason to overturn the trial court’s decision to issue an injunction, as it did not result from lack of evidence, legal error, or an abuse of discretion.

Id. at 12 (emphasis in original).

Next, U-Haul argued that the plaintiff lacked Prop. 64 standing, and therefore could not obtain an injunction, because he had not "suffered injury in fact or lost money or property" as a result of any UCL violation.  The Court of Appeal, again, disagreed, pointing out that the plaintiff lost money (in the form of attorneys' fees and costs) when U-Haul sued him to enforce the covenant.   Id. at 14.  The opinion explains:

The alleged unfair business practice in this case was not just the inclusion of the noncompetition covenant in [U-Haul]’s dealer contracts, but the strategic use of litigation and threatened litigation to achieve its anticompetitive purpose. ....  This is not a case where an unscrupulous attorney teamed up with a stick figure plaintiff to shake down a completely unrelated business.  (See fn. 6, ante.)  As one of the victims of [U-Haul]’s anticompetitive business practice, Robinson has standing.

Id.

The opinion goes on to address arguments raised by U-Haul concerning mootness, collateral estoppel, and an order excluding certain trial testimony.  Id. at 14-20.  The final section of the opinion (at pp. 21-26) addresses procedural questions concerning the timing of plaintiff's motion for attorneys' fees. 

One other aspect of this opinion is worthy of note.  The trial court issued, and the Court of Appeal affirmed, a broad-ranging injunction (stop the wrongful conduct, as opposed to stop harming the plaintiff) even though class certification of the UCL claim had been denied.  See slip op. at 6 n.4.  After Prop. 64, some questioned whether such an injunction could be issued without class certification, given this amended language in Business & Professions Code section 17204:

Any person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of Section 17204 and complies with Section 382 of the Code of Civil Procedure ....

(Emphasis added.)  These two blog posts touch on this issue.  I am not aware of any published opinions squarely addressing the question, but this opinion certainly provides support for such injunctive relief.  The Court of Appeal took pains to observe that the injunction benefited not only other dealers, but also U-Haul's competitors and the rental market in general:

T]he court found the anticompetitive impact of the covenant spread to more than just dealers.  The trial court found the threat to competition extended to the dealers’ customers and to the truck rental market in general.  UHC’s enforcement and threats to enforce the covenant in California negatively affected its competitors by denying them rental outlets for their trucks and hurt the rental market customers by limiting their access to rental trucks and restricting price competition.  For the protection of UHC’s dealers, past dealers and prospective dealers, UHC’s competitors, and the members of the general public who participate in the truck and trailer rental market, an injunction was warranted.

Slip op. at 17.  The Court of Appeal appears to have seen no procedural impediment to the issuance of this injunction under the UCL -- even though the Court was well aware of the concerns that led to the enactment of Prop. 64 in the first place.  See id. at 13 n.6. 

New UCL opinion considers injunctive relief remedy: Verio Healthcare, Inc. v. Superior Court

In Verio Healthcare, Inc. v. Superior Court, ___ Cal.App.5th ___ (Oct. 12, 2016), the defendants sought a nine-month stay of litigation under Code of Civil Procedure sections 595 and 1054.1, which provide for mandatory continuances of court proceedings if a party is represented by an attorney who is also a member of the California State Assembly -- unless the continuance "would defeat or abridge the other party's right to provisional or pendente lite relief."  Slip op. at 2-3.

The Court of Appeal (Fourth Appellate District, Division Three) held that because the action sought the "provisional remedy" of preliminary injunctive relief under the UCL, the trial court properly declined to issue the requested stay:  

The operative first amended complaint alleges an entitlement to preliminary and permanent injunctive relief as remedies for the alleged trade secret misappropriation and unfair competition under Business and Professions Code section 17200.  In cases such as these, it is common that plaintiffs would invoke the provisional remedy of a preliminary injunction. And as plaintiffs' counsel suggested at oral argument, some discovery may be necessary before filing such a motion. A stay would effectively abridge the right to invoke provisional relief by denying discovery, thereby preventing the filing of a preliminary injunction motion.

Id. at 15 (footnote omitted). 

Public prosecutor obtains preliminary injunction under the UCL: People ex rel. Feuer v. Nestdrop, LLC

In another opinion from earlier this year (March), the Court of Appeal affirmed the trial court's issuance of a preliminary injunction under the UCL, holding that the City of Los Angeles had shown that it was likely to prevail on the merits of its "unlawful" prong claim. People ex rel. Feuer v. Nestdrop, LLC, 245 Cal.App.4th 664 (2016). 

The claim asserted that the defendants had aided and abetted violations of a municipal code provision banning most medical marijuana businesses from operating in Los Angeles (Proposition D).  Id. at 667-71. The defendants' mobile app violated the ordinance, the City argued, by allowing people to order medical marijuana and have it delivered to their homes within city limits.  See id. The opinion's conclusion reads:

The City established a likelihood of proving defendants' Nestdrop app caused, aided, or abetted the violation of Proposition D because, outside of the narrow exception for designated primary caregivers, it prohibits the vehicular delivery of medical marijuana to qualified participants, identification card holders, or primary caregivers in the City. Because the City has demonstrated a likelihood of success on its claim that defendants facilitated a violation of Proposition D, defendants' opposition to the City's unfair competition allegations necessarily fails. Defendants made no showing at all concerning the balance of hardships, much less that the balance tipped sharply in their favor. The trial court was right to enter a preliminary injunction.

Id. at 678.  I mention this case mainly because it demonstrates the power of the UCL in the hands of public prosecutors when an underlying statute (or ordinance) does not expressly provide a civil remedy. 

UCL injunctive relief opinion from earlier this year: Davis v. Farmers Insurance Exchange

This opinion was handed down in March, but I have not previously discussed it. 

In Davis v. Farmers Insurance Exchange, 245 Cal.App.4th 1302 (2016), the plaintiff brought an individual UCL claim as part of his action for wrongful termination. The jury found that the plaintiff's age was a "motivating factor" in his termination, but no damages were awarded because the jury also found that the plaintiff would have been terminated for other, legitimate reasons.  After affirming this point (see id. at 1319-25), the Court of Appeal found no basis under the UCL for enjoining the defendant from engaging in future age discrimination.   The plaintiff was no longer an employee,"and there is no reasonable likelihood he will be at any time in the future or will otherwise be in a position to be harmed by [the defendant's] actions."  Id. at 1327.  Moreover, the record contained no evidence of any ongoing discrimination against any current employees.  Id.

However, the Court of Appeal reversed the judgment on the plaintiff's individual wage claims (id. at 1330-38), as well as the UCL claim to the extent predicated on the wage violations: 

Our conclusion with respect to the wage claim necessarily revives appellant's UCL claim to the extent it is based on failure to pay wages and seeks restitution to recover such wages. (See Cortez v. Perolator Air Flitration Products Co., supra, 23 Cal.4th at pp. 177-178.) 

Id. at 1338 (footnote omitted). 

New UCL restitution opinion: In re Tobacco Cases II

In In re Tobacco Cases II, ___ Cal.App.4th ___ (Sept. 28, 2015), the Court of Appeal (Fourth Appellate District, Division One) handed down an interesting new opinion in the long-running UCL cases involving "light" cigarettes.  I'm sure everyone recalls the Supreme Court's landmark opinion in this case from 2009, In re Tobacco II Cases, 46 Cal.4th 298 (2009) (discussed here).

After remand following the Supreme Court's decision, the trial court conducted a bench trial, and ultimately held that Philip Morris knew that "light" cigarettes were no less dangerous than other cigarettes, and that its advertising was likely to deceive a reasonable consumer. Slip op. at 2, 5-6. However, the trial court exercised its discretion to decline to award restitution, based in part on lack of competent evidence.  Id. at 2, 7-9. The trial court also denied injunctive relief.  Id. at 2, 9. 

The Court of Appeal affirmed the judgment in full, in an interesting opinion that addresses UCL restitution in detail.  Id. at 12-30.  The discussion of injunctive relief is also quite interesting.  Id. at 30-32.  Given the outcome and the issues, I would assume that a review petition will be filed.

I will be discussing this opinion during a panel at the 25th Annual Golden State Antitrust and Unfair Competition Law Institute on October 29, 2015 in San Francisco.  The description of my panel is below. I am looking forward to this event and hope to see some of you there.

Session #3 -- GSI 25th Anniversary Retrospective and Prospective Views on CA Antitrust and Unfair Competition Law

This panel of leading plaintiffs' lawyers and defense counsel, moderated by a preeminent California federal court judge, will discuss the major changes in California antitrust and UCL law over the last 25 years and what the panelists prognosticate for the future. The panel also will explore the effect of technology on how these cases have been tried and what changes they see for the future.

Panelists:

• Craig Corbitt, Zelle Hofmann Voelbel & Mason LLP-San Francisco, CA
• Dan Wall, Latham & Watkins LLP-San Francisco, CA
• Kimberly A. Kralowec, The Kralowec Law Group-San Francisco, CA
• William Stern, Morrison & Foerster LLP-San Francisco, CA

Moderator:

• Moderator: Hon. Susan Illston, United States District Judge for the Northern District of California-San Francisco, CA

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.

New UCL and FAL public prosecutor opinion: People v. JTH Tax, Inc.

In People v. JTH Tax, Inc., ___ Cal.App.4th ___ (Jan. 17, 2013), the Court of Appeal (First Appellate District, Division Four) affirmed the judgment in a public prosecutor action brought under the UCL and FAL.

Among other things, the opinion holds that ordinary agency principles apply in UCL cases:

[A]s the People point out, our Supreme Court has held, without the limitations urged by [defendant] in the present case, that “section 17500 [the FAL] incorporates the concept of principal-agent liability.”  (Ford Dealers Assn. v. Department of Motor Vehicles (1982) 32 Cal.3d 347, 361 (Ford Dealers).)  Since violations of the UCL “include any . . . unfair, deceptive, untrue or misleading advertising and any act prohibited by [the FAL]” (§ 17200), Ford Dealers establishes that persons can be found liable for misleading advertising and unfair business practices under normal agency theory.  To the extent that Toomey, supra, 157 Cal.App.3d 1, or Emery, supra, 95 Cal.App.4th 952 hold otherwise, which defendant implies without stating outright in the course of arguing its limiting theories, these cases are mistaken.

Slip op. at 24. 

The opinion also discusses how to determine the number of "violations" for purposes of awarding civil penalties under the UCL and FAL.  Id. at 33-40.  The analysis for the defendant's false TV advertisements differed from that employed for the false print ads.  See id.  The last section of the opinion affirms the trial court's detailed injunctive relief order.  Id. at 40-47. 

The trial judge in this case was Judge Curtis E.A. Karnow, who was recently reassigned to one of the two complex litigation departments of the San Francisco Superior Court.  Judge Kramer will now preside in a civil trials department. 

Interesting unpublished UCL public prosecutor opinion: People ex rel. Herrera v. Stender

On December 4, 2012, the Court of Appeal (First Appellate District, Division Two) handed down an interesting, but unpublished, UCL opinion.  People ex rel. Herrera v. Stender, 2012 WL 6016722, No. A131625 (Dec. 4, 2012). 

The San Francisco City Attorney sought to invoke the UCL in an attempt to shut down an immigration law practice allegedly headed up by an attorney who had resigned from the Bar with disciplinary charges pending. The opinion holds that the Rules of Professional Conduct can form the predicate of a UCL "unlawful" prong claim.  Slip op. at 17-18.  It also addresses the economic abstention doctrine (id. at 29-30) and the scope of injunctive relief available under the UCL.

UPDATE:  On January 3, 2013, the opinion was certified for publication.  Here is a link to the docket.

Recent UCL public prosecutor decision: People ex rel. Harris v. Black Hawk Tobacco, Inc.

In People ex rel. Harris v. Black Hawk Tobacco, Inc., ___ Cal.App.4th ___ (Jul. 13, 2011; pub. ord. Aug. 8, 2011), the Attorney General office used the UCL to enforce several federal and state statutes regulating the sale of tobacco:

The superior court granted a preliminary injunction, prohibiting defendants and appellants Black Hawk Tobacco, Inc. (Black Hawk) and Frederick Allen McAllister (McAllister) from selling cigarettes to non-Indians in violation of state and federal laws.  Black Hawk and McAllister appeal from the order granting the injunction.  (Code Civ. Proc., § 904.1, subd. (a)(6).)

On appeal, defendants argue that the State of California cannot regulate defendants’ sale of cigarettes to non-Indians because defendants are operating stores located on trust lands held by the United States for the Agua Caliente Band of Cahuilla Indians (the Band), a federally-recognized tribe.  We reject this argument and hold the superior court did not abuse its discretion in granting the preliminary injunction against defendants.

....

The unfair competition law, proscribing any unlawful business practice, provides broad authority for an injunction.  (Bus. & Prof. Code, § 17200 et seq., § 17203; Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.)  Express authority for injunctive relief is provided by the California Cigarette Fire Safety and Firefighter Protection Act.  (Health & Saf. Code, § 14955, subd. (f).)  Defendants admitted their cigarette sales did not comply with state and federal law.  As elaborated in the following analysis, it is reasonably probable that the People will prevail on the merits.

Slip op. at 1, 8.

New UCL competitor action applying Clayworth: Finelite, Inc. v. Ledalite Architectural Products

Many thanks to the blog reader who forwarded a recent decision by U.S. District Judge Maxine Chesney, Finelite, Inc. v. Ledalite Architectural Products, 2010 WL 3385027 (N.D. Cal. Aug. 26, 2010).  Finelite is competitor action arising from misstatements by one competitor that allegedly stole away sales from the other competitor, impacting that competitor's profits.   The defendant moved to dismiss the UCL claim (which sought injunctive relief only) for lack of standing, arguing that to obtain any form of relief under the UCL, the plaintiff must have suffered a loss that would be compensable as restitution.  Lost profits would be damages, not recoverable under the UCL.  Id. at *1.

Judge Chesney denied the motion, applying the Supreme Court's recent holding in Clayworth v. Pfizer:  

Ledalite also relies on cases that have held a plaintiff cannot seek injunctive relief under § 17200 if the plaintiff does not have standing to seek restitution. See Pom Wonderful LLC v. Welch Foods, Inc., 2009 WL 5184422, *3-5 (C.D.Cal.2009) (holding plaintiff lacked standing to seek injunctive relief where plaintiff failed to allege entitlement to restitution); Walker v. GEICO General Ins. Co., 474 F.Supp.2d 1168, 1172 (E.D.Cal.2007) (holding plaintiff lacked standing to assert “any UCL claim” because plaintiff could not show “either prior possession or a vested legal interest in the money or property allegedly lost”). As the California Supreme Court has more recently explained, however, “the right to seek injunctive relief under section 17200 is not dependent on the right to seek restitution; the two are wholly independent remedies.” See Clayworth v. Pfizer, Inc., 49 Cal.4th 758, 790, 111 Cal.Rptr.3d 666, 233 P.3d 1066 (2010) (rejecting argument that plaintiffs alleging claim under § 17200 “could not seek injunctive relief unless they could also seek restitution”); see also Fulford v. Logitech, Inc., 2009 WL 1299088, at *1 (N.D.Cal.2009) (noting “a number of courts, subsequent to the enactment of the UCL standing requirement ..., have found [the] plaintiff has standing under the UCL, irrespective of any such plaintiff's inability to seek restitution from the defendant”); G & C Auto Body, Inc. v. GEICO General Ins. Co., 2007 WL 4350907, at *3-5 (N.D.Cal.2007) (holding, although plaintiffs could not establish entitlement to restitution, plaintiffs had standing to seek injunction based on plaintiffs' “loss of business caused by [d]efendants' steering of customers away from [p]laintiffs' [businesses]”); White v. Trans Union, LLC, 462 F.Supp.2d 1079, 1083 (C.D.Cal.2006) (holding that although plaintiffs “would be required to show that [defendant] took money directly from them in order to obtain [restitution], no such burden exists [ ] where [p]laintiffs seek only injunctive relief” under § 17200). Consequently, any inability by Finelite to state a claim for restitution does not constitute a bar to Finelite's seeking injunctive relief.

Id. at *2 (footnotes omitted) (emphasis added).  Finelite confirms that Prop. 64 did not do away with UCL competitor actions for injunctive relief. 

Supreme Court hands down significant UCL decision: Clayworth v. Pfizer

The Supreme Court's decision in Clayworth v. Pfizer is now up.  Clayworth v. Pfizer, Inc., ___ Cal.4th ____ (Jul. 12, 2010). 

After discussing the Cartwright Act claim in depth, the Court turned to the UCL, and confirmed that, to have standing to seek an injunction, the plaintiff need not have suffered a loss that would be recoverable as restitution: 

The Court of Appeal held Pharmacies were barred from seeking injunctive relief because, it concluded, they had suffered no monetary loss. To the extent this holding rests on the conclusion Pharmacies lacked standing under section 17204, it is erroneous; as discussed ante, Pharmacies have standing. To the extent the holding rests on the conclusion that even if Pharmacies had standing, they could not seek injunctive relief unless they could also seek restitution, it similarly is erroneous. Section 17203 makes injunctive relief “the primary form of relief available under the UCL,” while restitution is merely “ancillary.” (In re Tobacco II Cases (2009) 46 Cal.4th 298, 319.) Nothing in the statute’s language conditions a court’s authority to order injunctive relief on the need in a given case to also order restitution. Accordingly, the right to seek injunctive relief under section 17203 is not dependent on the right to seek restitution; the two are wholly independent remedies. (See ABC Internat. Traders, Inc. v. Matsushita Electric Corp. (1997) 14 Cal.4th 1247, 1268 [§ 17203 “contains . . . no language of condition linking injunctive and restitutionary relief”]; Prata v. Superior Court (2001) 91 Cal.App.4th 1128, 1139 [plaintiff could pursue injunctive relief even though restitution was unavailable].)

Slip op. at 41. This overrules a number of decisions, such as Buckland and Citizens for Humanity, holding that the only type of monetary loss that can confer standing is a restitutionary loss. This is going to be very important for preserving competitor vs. competitor UCL cases.

I'm still reviewing the opinion and hope to have more on it later.  The Court also held that the pass-on defense does not bar either the Cartwright Act or the UCL claims. 

Impact of Tobacco on the Walker/G&C Auto Body split in authority

I have previously written (see these two posts) about the split in authority respecting whether a plaintiff who has suffered "damages" has Prop. 64 standing to seek injunctive relief, even if the loss does not constitute recoverable restitution.  The federal district courts have split on this point.  Compare Walker v. USAA Casualty Ins. Co., 474 F.Supp.2d 1168 (E.D. Cal. 2007) ("damages" insufficient to confer Prop. 64 standing) with G&C Auto Body Inc. v. Geico General Insurance Co., 2007 WL 4350907 (N.D. Cal. Dec. 12, 2007) (contra). 

The California Courts of Appeal also disagree. Compare, e.g., Overstock.com, Inc. v. Gradient Analytics, Inc., 151 Cal.App.4th 688, 716 (2007) (damages sufficient) with Buckland v. Threshold Enters., Ltd., 155 Cal.App.4th 798 (2007) (contra) (dicta) and Citizens of Humanity LLC v. Costco Wholesale Corp., 171 Cal.App.4th 1, 22 (Feb. 11, 2009) (same).  

In March, in a very cursory opinion, the Ninth Circuit affirmed the district court's ruling in Walker. Walker v. Geico General Ins. Co., 558 F.3d 1025 (9th Cir. Mar. 10, 2009). This is the sum total of the Ninth Circuit's analysis:

Walker's position is that, although he cannot establish the requisite “lost money or property” for purposes of monetary relief under the UCL, he is nevertheless entitled to an injunction effectively requiring these insurers in the future to pay higher rates for their insureds' auto body repairs. His argument is supported neither by the language of the amended statute nor its purpose. See Buckland v. Threshold Enters. Ltd., 155 Cal.App.4th 798, 66 Cal.Rptr.3d 543, 557 (2007) (“Because remedies for individuals under the UCL are restricted to injunctive relief and restitution, the import of the requirement is to limit standing to individuals who suffer losses of money or property that are eligible for restitution.”). The history and purpose of the law are outlined more fully in the district court's opinion, with which we agree. See Walker, 474 F.Supp.2d at 1172.

Walker, 558 F.3d at 1027 (bold added). 

Contrary to the Ninth Circuit's holding, the argument is fully unsupported by the amended statute.  It says "suffered injury in fact and lost money or property."  Damages falls squarely within that definition.  Also contrary to the Ninth Circuit's position, "lost money or property" is not "requisite ... for purposes of monetary relief under the UCL."  (See the language in bold, above.)

The district court in Walker made that same mistake, erroneously saying that the California Supreme Court had interpreted the words "lost money or property" "for section 17203 purposes" in Korea Supply and Cortez. Walker, 474 F.Supp.2d at 1172. But those words appeared nowhere in the UCL before Prop. 64, and they still appear nowhere in section 17203 (the UCL's remedies provision).  Accordingly, neither Korea Supply nor Cortez could have said (or did say) anything about what "lost money or property" meant -- either in section 17203 (where those words do not appear at all) or in section 17204 (where they appear only post-Prop. 64).  The district court in Walker went badly astray by concluding that "lost money or property" as used in section 17204 "should be interpreted identically to the 'lost money or property' California courts require for section 17203 purposes" -- because no such "requirement" has ever existed in section 17203.   (The other problems with the district court's analysis in Walker are discussed in my article last year for CAOC Forum.)

Indeed, the Supreme Court in Tobacco took pains to explain that "the language of section 17203 with respect to those entitled to restitution — 'to restore to any person in interest any money or property, real or personal, which may have been acquired' (italics added) by means of the unfair practice — is patently less stringent than the standing requirement for the class representative — 'any person who has suffered injury in fact and has lost money or property as a result of the unfair competition.' (§ 17204, italics added.)"  In re Tobacco II Cases, ___ Cal.4th ___ (May 26, 2009) (bold added) (slip op. at 22).   Far from holding that the two standards should be "interpreted identically" (Walker, 474 F.Supp.2d at 1172), the Supreme Court in Tobacco held that they are "patently" different.  Tobacco exposes the two Walker opinions' flawed reasoning and undermines the value of the Ninth Circuit's Walker opinion as a precedent. 

Three weeks ago (before Tobacco), Judge Maxine Chesney of the Northern District wrote an interesting order discussing both the Ninth Circuit's Walker opinion and the Court of Appeal's opinion in Buckland:

In support of its argument, Logitech relies on Walker v. Geico Gen. Ins. Co., 558 F.3d 1025 (9th Cir.2009), and Buckland v. Threshold Enters., Ltd., 155 Cal.App.4th 798(2007), wherein standing under the UCL was stated to be limited "to individuals who suffer losses of money or property that are eligible for restitution ." See Walker, 558 F.3d at 1027 (quoting Buckland, 155 Cal.App.4th at 817, 66 Cal.Rptr.3d 543). In so stating, however, neither Walker nor Buckland was suggesting that the only type of action that may be brought under the UCL is one for restitution, nor would such a holding be consistent with the language of the UCL, which, for purposes of standing, requires only that the plaintiff have "suffered injury in fact and [ ] lost money or property." See Cal. Bus. & Prof.Code § 17204. Rather, those courts, by the use of the phrase "eligible for restitution," were endeavoring to distinguish between the losses claimed in the respective cases before them and the type of loss cognizable under the UCL, specifically, a loss of "money or property" in which the plaintiff has "either prior possession or a vested legal interest." See Walker v. USAA Cas. Ins. Co., 474 F.Supp.2d 1168, 1172 (E.D.Cal.2007); see also Walker, 558 F.3d at 1027 ("agree[ing]" with district court's analysis). In particular, as determined in both Walker and Buckland, neither of the respective plaintiffs therein had actually "lost money or property" of any sort. See Walker, 474 F.Supp.2d at 1173 (finding plaintiff lacked vested interest where claim based on "estimate for proposed work"; distinguishing case where claim based on non-payment for work performed); Buckland, 155 Cal.App.4th at 818 & n. 11 (noting Buckland "voluntarily [bought] [the] defendant's product to pursue a UCL action in the public interest," and, consequently, her purchase "[could not] reasonably be viewed as 'lost' money or property under the standing requirement").

By contrast, where a plaintiff has adequately alleged "loss of income," "loss of financial resources," or "economic loss," a number of courts, subsequent to the enactment of the UCL standing requirement at issue herein, have found such plaintiff has standing under the UCL, irrespective of any such plaintiff's inability to seek restitution from the defendant named therein. See, e.g., White v. Trans Union LLC, 462 F.Supp.2d 1079, 1084 (C.D.Cal.2006) (holding, where plaintiff alleges "loss of income" and seeks only injunctive relief, UCL "does not require that the losses in question were the product of the defendant's wrongful acquisition of the plaintiff's property"); So. Cal. Housing Rights Ctr. v. Los Feliz Towers Homeowners Ass'n, 426 F.Supp.2d 1061, 1069 (C.D.Cal.2005) (holding plaintiff Housing Rights Center had standing under UCL "because it present[ed] evidence of actual injury based on loss of financial resources in investigating [a discrimination] claim and diversion of staff time from other cases to investigate the allegations [therein]"); Aron v. U-Haul Co. of Cal., 143 Cal.App.4th 796, 802-03 (2006) (holding plaintiff had standing where plaintiff alleged "he suffered economic loss by being required to purchase excess fuel" from third party before returning rental truck to defendant).

Fulford v. Logitech, Inc., 2009 WL 1299088, *1 (N.D. Cal. May 08, 2009) (footnotes omitted) (bold added). 

Notwithstanding Tobacco, this question may not be resolved until the Supreme Court specifically takes it up in an appropriate case. 

"UCL Standing to Seek Injunctive Relief: Is a Restitutionary Loss Required?"

The July/August 2008 issue of CAOC's Forum magazine just arrived in the mail. It has my latest article, "UCL Standing to Seek Injunctive Relief: Is a Restitutionary Loss Required?" The article addresses two opposing federal decisions on that topic, Walker v. USAA Casualty Insurance Co. 474 F.Supp.2d 1168 (E.D. Cal. Feb. 12, 2007) and G&C Auto Body Inc. v. Geico General Insurance Co., 2007 WL 4350907 (N.D. Cal. Dec. 12, 2007). Focusing on the language of the UCL and relevant California decisional law, the article explains why a loss amounting to "damages" is sufficient to confer UCL standing, regardless of whether the loss also constitutes recoverable "restitution."

The article will soon be available at CAOC's website to CAOC members only. Other plaintiff-side attorneys, government lawyers, judges, research attorneys, etc., should email me at [email protected] if you would like a copy of the article.

"UCL Injunctions to Remedy the Past Effects of Wrongful Conduct: Before and After Proposition 64"

The September 2007 issue of Forum, the magazine of Consumer Attorneys of California, has my latest article, "UCL Injunctions to Remedy the Past Effects of Wrongful Conduct: Before and After Proposition 64." It is the second installment of my column, "The UCL/Class Action Zone." Again, if you are a plaintiffs' attorney, government lawyer, judge, research attorney, etc., email me at [email protected] and I will send you a copy of the article.

New UCL "injury in fact"/injunctive relief decision: Daro v. Superior Court

In Daro v. Superior Court, ___ Cal.App.4th ___ (Jun. 6, 2007), the Court of Appeal (First Appellate District, Division Three) addressed the UCL's injunctive relief remedy post-Prop. 64.

Preliminary thoughts on Fireside Bank

Fireside Bank v. Superior Court (Gonzalez), ___ Cal.4th ___ (Apr. 16, 2007) is a densely-packed decision. Here are some thoughts on certain aspects of it.

My initial impression was that this case was a win for the plaintiffs. And for the named plaintiffs in this specific case, it is. Their class certification order has been affirmed, and they will get to re-file their summary adjudication motion motion for judgment on the pleadings after notice has been given and opt-out period has expired. Summary adjudication The motion was granted before, and will likely be granted again. They are sitting pretty.

Was this case also a win for class action plaintiffs generally? That is less certain. The opinion does contain some plaintiff-favorable class certification language and, because it is a UCL case, some interesting language there as well. I will start out, in this post, by talking about the class certification and UCL aspects of the opinion, leaving the "one-way intervention" aspects for a later post.

Fireside Bank challenged only the "typicality" and "superiority" elements of class certification. As to typicality, Fireside Bank argued first of all that the named plaintiff "failed to present evidence establishing she has standing and has suffered injury typical of the class." Slip op. at 24.

The Supreme Court disagreed. What's interesting for UCL purposes is the way the Court analyzed the standing question. It addressed the declaratory and injunctive relief remedies separately from the restitution remedies:

Gonzalez has standing. She, like other members of the putative class, was subjected to the same alleged wrong: deprivation of a fair opportunity to redeem the financed vehicle, followed by an unlawful demand for payment. The record demonstrates Fireside Bank repossessed Gonzalez’s vehicle and pursued a deficiency judgment against her. She thus has standing to seek a declaration that Fireside Bank is unlawfully asserting a debt against her, as well as an injunction against all further collection efforts. The record further shows Gonzalez (or someone on her behalf) made a postrepossession payment against the alleged deficiency; upon proof she made that payment, Gonzalez also has standing to seek restitution.

Id. (footnote omitted). This is interesting because the Court is saying that the named class representative would have standing to seek injunctive relief under the UCL even if she could not recover restitution—in other words, even if she had not lost money or property as a result of the defendant's UCL violation. All she would have to show was that she was "depriv[ed] of a fair opportunity to redeem the financed vehicle, followed by an unlawful demand for payment" (not an actual payment). This may very well answer a previously-unanswered question in the brave new post-Prop. 64 world: In a UCL action for injunctive relief only, is "lost money or property" required for standing purposes? Under Fireside Bank, the answer is no. It is enough to show that the defendant's UCL violations threaten harm.

The Supreme Court made this even more clear in the footnote accompanying the language quoted above:

We leave it for the trial court to determine whether, on remand, it may be appropriate or necessary to designate subclasses consisting of those subjected to demands who made payments and have restitution claims, and those who did not and thus have only injunctive and declaratory relief claims. Contrary to Fireside Bank’s assertion, the fact the record does not (as yet) disclose in which general group Gonzalez falls does not render the trial court’s conclusion that her claims are typical an abuse of discretion.

Id. n.8. This language obviously very favorable as to the "typicality" prong. But it also could hardly be clearer that an out-of-pocket payment of money is not a prerequisite to a UCL injunctive or declaratory relief action, even after Prop. 64.

Fireside Bank's second attack on typicality was the argument that the class representative was subject to unique defenses not typical of the class. Slip op. at 25-26. Again, the Supreme Court disagreed: "Contrary to Fireside Bank’s assertion ... , a defendant’s raising of unique defenses against a proposed class Fireside Bank's alleged "unclean hands" defense "may be resolved without significant distraction from the common class issues at the heart of this case." Id. at 26.

Finally, the Court addressed Fireside Bank's "superiority" challenge. That challenge was based on pre-Prop. 64 authorities, most notably Frieman v. San Rafael Rock Quarry, Inc., 116 Cal.App.4th 29 (2004) and Alch v. Superior Court, 122 Cal.App.4th 339 (2004), holding that a certified UCL class action would not be "superior" to the more streamlined representative procedure afforded by the UCL. According to Fireside Bank, a non-class UCL representative action would "provide a simpler alternative" to class certification. Slip op. at 28. (See this prior post for more on that argument.) The Supreme Court confirmed that after Prop. 64, which eliminated the non-class, representative procedure of yore, this superiority argument fails. Id.

Those are my preliminary thoughts on some of the class certification and UCL aspects of this case. Thanks to the readers who emailed me to share your insights earlier in the week. More comments, anyone?

New UCL/Prop. 64 decision: R&B Auto Center, Inc. v. Farmers Group, Inc.

On Friday, in R&B Auto Center, Inc. v. Farmers Group, Inc., ___ Cal.App.4th ___ (Jun. 9, 2006), the Court of Appeal (Fourth Appellate District, Division Three) reinstated a UCL claim for injunctive relief, holding that the trial court had improperly employed the motion in limine procedure to dismiss that cause of action. The opinion has several interesting components:

First, the Court held that the plaintiff's UCL claim was separate and distinct from its insurance bad faith/breach of contract claim:

After the trial court ruled on the motions in limine and held that there was no coverage as a matter of law, it also dismissed the three causes of action suggested by [defendant] Truck Insurance — those for breach of contract, bad faith and unfair competition. We cannot see why a ruling that the insurance contract provided no coverage for the Peralta litigation claim should translate into a ruling that [plaintiff] R & B cannot state a cause of action seeking to enjoin unfair business practices. Whether the insurance contract provided for lemon law coverage for used car sales was a question of law that the court readily answered by reviewing that contract. But the fact that the insurance contract limited lemon law coverage to new car sales hardly proves that Truck Insurance does not engage in unfair business practices in the sale of its new car lemon law coverage to used car dealerships. The court erred in disposing of the unfair business practices cause of action just because it held that the insurance contract did not provide coverage for the Peralta litigation.

(Slip op. at 33-34.)

Second, the Court reaffirmed its holding that Prop. 64 applies retroactively to pending cases, in part because the plaintiff conceded the point:

We invited the parties to file supplemental briefs on the retroactivity of Proposition 64 and the effect of any retroactive application on the case before us. The parties all agreed that the proposition is retroactive, citing this court’s opinion in Benson v. Kwikset Corp. (2005) 126 Cal.App.4th 887, review granted April 27, 2005, S132443. The Supreme Court granted review of Benson, and several other cases addressing the retroactivity of Proposition 64, after the filing of the supplemental letter briefs in the matter before us. Pending a Supreme Court decision on the question of retroactivity, the trial court is directed to apply the Proposition 64 statutory amendments to this case.

(Slip op. at 38-39.)

Third, the Court interpreted the "suffered injury in fact and lost money or property" language of Prop. 64:

Truck Insurance says that R & B lacks standing, under Business and Professions Code section 17204, to maintain the unfair competition cause of action because it has not alleged that it has “lost money or property as a result of unfair . . . competition.” With this assertion, we certainly disagree. R & B alleges that it paid premiums for illusory coverage and it had to make payment on a lemon law claim that it would not have had to pay had the Truck Insurance policy said what it was represented to say. This is an allegation of loss caused by the purported misrepresentations concerning the scope of coverage. The standing requirement is met.

(Slip op. at 39-40 (emphasis added).)

Fourth, the Court addressed (without deciding) whether a UCL claim seeking injunctive relief only must satisfy the class certification requirements of Code of Civil Procedure section 382:

Next, Truck emphasizes that R & B cannot seek injunctive relief on behalf of the general public unless it meets the requirements of Code of Civil Procedure section 382, with reference to class actions. .... Truck Insurance states that R & B may only seek class action injunctive relief if it can demonstrate compliance with these requirements. However, Truck Insurance does not assert that R & B cannot do so.

R & B contends that it can meet the class certification requirements and points us to its offer of proof with respect to the anticipated testimony of Fena, Rusich and Sweet. R & B requests that this court remand the matter so that it will have an opportunity to show that it can satisfy the requirements of Code of Civil Procedure section 382. It is only fair to grant this request, since at the time R & B filed its third amended complaint it was not required to comply with Code of Civil Procedure section 382.

(Slip op. at 40.)

Evidently, the plaintiff chose not to raise the argument that an injunctive-relief-only UCL claim should not have to satisfy section 382, and to argue instead that it can meet section 382's requirements (which is probably the better strategy in many situations). This case could be an example of the "be careful what you wish for" aspect of Prop. 64. On remand, the plaintiff will seek formal class certification of the injunctive relief claim, and based on the opinion alone, I see no reason why the plaintiff should not also amend to seek restitution (at least for itself, if not on a classwide basis). Overall, the amended UCL claim could enhance, not lessen, the defendant's potential exposure.

Review denied in two cases: Discover Bank and Colgan

Last week, the Supreme Court denied petitions for review in two cases:

1. The Discover Bank remand case, in which the Court of Appeal avoided the question of whether the no-class-action arbitration provision was unconscionable under California law by holding that Delaware law applied. Discover Bank v. Superior Court (Boehr), 134 Cal.App.4th 886 (2005) (Supreme Court docket). The Court also denied the depublication request. My original post on this case is here.

2. The UCL restitution decision, Colgan v. Leatherman Tool Group, Inc., ___ Cal.App.4th ___ (2006) (Supreme Court docket). My original posts on Colgan are here and here.

New UCL "restitution" decision: Colgan v. Leatherman Tool Group, Inc.

On Tuesday, January 10, 2006, the Court of Appeal issued a new and significant decision on UCL "restitution." Colgan v. Leatherman Tool Group, Inc., ___ Cal.App.4th ___ (Jan. 10, 2006). The decision provides a roadmap for plaintiffs on how to prove restitution in a UCL case.

The defendant manufactured products and sold them to consumers through retail intermediaries. The defendant represented that its products were "Made in U.S.A." when, in fact, "a significant portion of the various parts of the products were manufacturered abroad." Slip op. at 16. The trial court granted summary adjudication on liability in the plaintiff's favor. Then, following a court trial on remedies, it entered judgment for $13 million as "restitution" under the UCL (as well as the CLRA and the False Advertising Act). Slip op. at 7. The trial court also ordered broad-ranging injunctive relief, including a mandatory injunction requiring the defendant to issue a "corrective announcement" about its products, "to publish for twelve weeks in nine national magazines and forty-seven California newspapers notices of its deceptive labeling and advertising practices," and to pay the cost for retailers to return any offending products still in their inventories. Slip op. at 2-3, 9, 40.

The Court of Appeal, after a lengthy discussion, affirmed the order granting summary adjudication in plaintiff's favor on liability. Slip op. at 10-29. Then, it turned to the remedies.

Restitution, it observed, represents "the value of the property at the time of its improper ... disposition." Slip op. at 37 (quoting Rest., Restitution, §151). It determined that "the amount of restitution necessary to restore purchasers to the status quo ante ... would involve the amount attributable to the misleading 'Made in U.S.A.' representations." Id. at 39. Unfortunately, the plaintiff had presented "no evidence" on that point (partly because he had not cross-appealed from the trial court's adverse evidentiary rulings), so the $13 million award had to be reversed. Id. at 38-39. But the Court then went on to provide examples of the kind of evidence that would constitute sufficient proof of the amount of restitution. As one example, evidence could be offered of the property's "exchange value ..., or the amount for which it could be exchanged if there were an open market with a wide opportunity for buyers." Id. at 37 (quoting Rest., Restitution, §151). Other relevant evidence would include retail price, market value, and potential expert testimony on "the dollar value of the consumer impact or the advantage realized by" the defendant as a result of its UCL violations. Id. at 38.

Plaintiffs should take careful note of the evidentiary roadmap the Court of Appeal provides in this case to a UCL restitution award. This is the only detailed decision that I'm aware of that addresses how to measure UCL restitution in an action involving sale of goods. It confirms my own ideas of what restitution should look like in a UCL case like this. It is also a useful decision on UCL injunctive relief, since the Court of Appeal affirmed every aspect of the trial court's broad mandatory injunction except the part that would have required the defendant to "notify class members of the procedures for obtaining restitution"—a remedy the Court determined had not been proven. (Slip op. at 2-3, 9, 40.)

Recent federal order on the UCL post-Prop. 64: Aureflam v. Pho Hoa Phat

On September 16, 2005, an interesting order was issued in Aureflam Corp. v. Pho Hoa Phat I, Inc., case no. 5:05-cv-00746-RS (N.D. Cal. Sept. 16, 2005). It addresses a number of questions of first impression relating to the interpretation of the UCL as amended by Prop. 64.

The case is a dispute between two owners of Vietnamese restaurant chains. The plaintiff's original suit alleged trademark infringement and unfair business practices under the UCL. The defendant counter-claimed, seeking cancellation of the trademark registration, damages for fraud on the patent office, and injunctive relief under the UCL. The district court (Magistrate Judge Seeborg) granted the plaintiff's motion to dismiss the UCL counterclaim, holding that the defendant had neither alleged "actual injury" nor satisfied the requirements of Code of Civil Procedure section 382. (The case was filed in 2005, after Prop. 64's efffective date, so retroactivity was not an issue.)

The only "actual damages" the defendant claimed were "the attorneys' fees incurred in responding to the principal claim filed by [the plaintiff]." Slip op. at 5. That was held to be insufficient:

The Court has not located, nor did [the defendant] cite, any authority which supports the proposition that attorneys' fees incurred in this action may constitute an actual injury for purposes of a Section 17200 counterclaim. .... Although it is perhaps conceivable that a definition of "actual damages" may emanate from the [California] Supreme Court ... that would include attorneys' fees, there is no current authority which provides that such fees constitute an actual injury for the purpose of Section 17200.

Id. That is an understatement, given that there is essentially no authority at all about what "injury in fact" means. But what's odd about it is the implicit assumption that a UCL claimant seeking injunctive relief only would have to establish an actual injury. That assumption makes little sense, even given the recent amendments to the UCL. One of the main functions of injunctive relief is to stop a threatened injury before it occurs, not after someone has been harmed. Moreover, as the Supreme Court recognized in California v. Altus Finance, S.A., ___ Cal.4th ___ (Aug. 17, 2005), a UCL claim for injunctive relief can be crafted so as to rectify individual wrongs, rather than widespread public ones.

Another interesting thing about this order is its assumption that California rules of class action procedure would apply to a UCL claim filed in federal court:

Scope of injunctive relief under the post-Prop. 64 UCL?

Recently, the Court of Appeal issued an opinion that touches on that question in a very tangential way. Thompson v. 10,000 RV Sales, Inc., ___ Cal.App.4th ___ (Jun. 28, 2005) is a relatively technical decision involving "negative equity" in a retail installment contract. "Negative equity" (a subject dear to my heart after my days at Severson) exists when the trade-in vehicle is worth less than the amount still owed on it. The presence of negative equity complicates the financing arrangement for the new vehicle, and TILA and Regulation Z extensively regulate the handling of negative-equity trade-ins. In any event, the Fourth Appellate District, Division One, agreed with the trial court that the defendant had handled the negative-equity trade-in improperly, in violation of a variety of statutes including all three prongs of the UCL and the Consumers Legal Remedies Act ("CLRA") (Civ. Code §§1750 et seq.). It affirmed the issuance of a permanent injunction requiring the defendant to "stop including trade-in over-allowances in the cash price of the vehicles it sells." Slip op. at 11.

In the last section of the opinion, the Court had this to say about the UCL after Prop. 64:

In its amicus curiae brief, California Motor Car Dealers Association suggests the injunction is improper under the UCL following the recent passage of Proposition 64 because Thompson did not comply with class action procedures. However, we need not decide whether Proposition 64 applies here because the court's injunction was proper under the CLRA.

Id. at 37. What's odd about this is the opinion doesn't indicate anywhere that the CLRA claim had been certified for class treatment. So the Court of Appeal seems to be recognizing that the CLRA does not require formal class certification as a prerequisite to broad injunctive relief. And if the CLRA does not, why should Code of Civil Procedure section 382, under which UCL claims would be certified? The short answer is, it doesn't. This case also illustrates the power of the CLRA as an alternative to the post-Prop. 64 UCL.

Finally, it's interesting that the trial court ordered "restitution" in favor of the other customers whose negative-equity trade-ins had been improperly handled, presumably under the UCL and presumably without class certification. Id. at 12, fn.11. That part of the order was, apparently, not appealed.