The UCL Practitioner

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

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

Supreme Court hands down new UCL preemption opinion: Solus Industrial Innovations, LLC v. Superior Court

Yesterday, the Supreme Court reversed the Court of Appeal and held that an action by the Orange County District Attorney for civil penalties under the UCL was not preempted by Fed/OSHA (the federal Occupational Safety and Health Act (29 U.S.C. § 651 et seq.)).  Solus Industrial Innovations, LLC v. Superior Court, ___ Cal.5th ___ (Feb. 8, 2018). The ruling allows public prosecutors to invoke the UCL to pursue civil penalties and injunctive relief against employers who fail to comply with workplace safety regulations.  As reported in the San Francisco Chronicle, "State Supreme Court unanimous ruling allows big fines for unsafe workplaces."

This case has rather a long history.  In 2014, I wrote this blog post on the Court of Appeal's original opinion, which, in the Supreme Court's words, "was based in part on a misapprehension concerning the date that unfair competition penalty provisions were enacted compared with the date the federal Secretary of Labor approved California’s occupational safety and health plan."  Solus, slip op. at 4.  

In early 2015, the Supreme Court issued a "grant and transfer" order, directing the Court of Appeal to reconsider.  It did so, and in September 2015, handed down a second opinion in which it again found the claims preempted.  Thereafter, the Supreme Court granted plenary review. 

For those of us who follow the UCL and FAL, but who may not be especially interested in Fed/OSHA preemption issues, here are the passages of greatest interest: 

The UCL concerns unfair competition, a term that “mean[s] and include[s] any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by [the false advertising law].”  (Bus. & Prof. Code, § 17200.)  The purpose of the UCL “is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.”  (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 949.)  As we have said, “the act provides an equitable means through which both public prosecutors and private individuals can bring suit to prevent unfair business practices and restore money or property to victims of these practices.”  (Zhang v. Superior Court (2013) 57 Cal.4th 364, 371, italics added.)  The FAL, for its part, makes actionable “untrue or misleading” statements made to “induce the public to enter into any obligation” to purchase goods and services.  (Bus. & Prof. Code, § 17500.)  Actions to enforce the UCL or FAL, which may be brought by government officials and by individuals who have suffered injury in fact (Bus. & Prof. Code, § 17203), address the “ ‘ “overarching legislative concern . . . to provide a streamlined procedure for the prevention of ongoing or threatened acts of unfair competition.”  [Citation.]’ ”  (Zhang, supra, 57 Cal.4th at p. 371, italics added.)  And the remedies are “cumulative . . . to the remedies or penalties available under all other laws of this state.”  (Bus. & Prof. Code, § 17205.) 

As noted above, under state law, these actions are not considered on their face to be a means of enforcing the underlying law.  “ ‘By proscribing “any unlawful” business practice, “[the UCL] ‘borrows’ violations of other laws and treats them as unlawful practices” that the [UCL] makes independently actionable.  [Citations.]’ ”  (Rose v. Bank of America, N.A. (2013) 57 Cal.4th 390, 396.)  We have explained that “by borrowing requirements from other statutes, the UCL does not serve as a mere enforcement mechanism.  It provides its own distinct and limited equitable remedies for unlawful business practices, using other laws only to define what is ‘unlawful.’  [Citation.]  The UCL reflects the Legislature’s intent to discourage business practices that confer unfair advantages in the marketplace to the detriment of both consumers and law-abiding competitors.”  (Id. at p. 397; see People ex rel. Harris v. Pac Anchor Transportation, Inc. (2014) 59 Cal.4th 772, 783 [Federal Aviation Administration Act does not on its face preempt UCL claims against motor carriers for misclassification of drivers]; In re Tobacco Cases II (2007) 41 Cal.4th 1257, 1272 [a federal law governing cigarette sales to minors on its face did not expressly preempt the UCL, which “is a law of general application, and it is not based on concerns about smoking and health”]; Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1150; Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180; Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 560, 566 576.)  Thus, the UCL and FAL are laws of general application.

We acknowledge that in some instances, a UCL claim may fall within a field of preemption.  For example, in In re Tobacco Cases II, supra, 41 Cal.4th 1257, a UCL claim based on advertising activities alleged to violate Penal Code section 308 (prohibiting sale of tobacco products to minors and possession of such products by minors) was preempted as applied under the particular terms of a federal law governing cigarette labeling and advertising.  (Id. at pp. 1272-1273.)  Under the federal law involved, preemption turned on whether the particular UCL claim would impose a duty necessarily and inherently based on concerns about smoking and health.  (Id. at p. 1273.)  But here, the UCL and FAL claims are based on standards set forth in an approved state plan, and which therefore preempt any federal standards.  Because these claims do not impose any duty on employers that is subject to federal preemption, they do not come within the principles articulated in Tobacco Cases II.

Slip op. at 25-27.  I see no new ground broken here. 

Supreme Court schedules UCL case for argument in November: Solus Industrial Innovations v. Superior Court (People)

Last week, the Supreme Court announced that a UCL public prosecutor action, in which review was granted in 2015, will be orally argued on November 7, 2017 at 10:00 a.m. during the Court's special session in Sacramento.  Solus Industrial Innovations v. Superior Court (People), No. S222314.  

For a discussion of the procedural history of this case, see these two blog posts.  The Court of Appeal held that federal law (namely, Fed/OSHA) preempted the Orange County District Attorney's UCL and FAL prong claims, which are predicated in part on asserted violations of state workplace safety standards (i.e., Cal/OSHA).  Solus Industrial Innovations LLC v. Superior Court (People), 229 Cal.App.4th 1291 (2014), review granted.  

Copies of the Supreme Court briefs can be obtained at this link. 

UCL preemption opinion from earlier this year: People ex rel. Harris v. Delta Air Lines, Inc.

This is another opinion from earlier in the year (May) that I haven't yet reported on.

In People ex rel. Harris v. Delta Air Lines, Inc., 247 Cal.App.4th 884 (2016), the Attorney General brought a UCL "unlawful" prong action against Delta Air Lines, alleging that Delta's mobile app violated the Online Privacy Protection Act (Cal. Bus. & Prof. Code §§22575-79).  The Court of Appeal (First Appellate District, Division Three) affirmed the trial court's holding that this claim was expressly preempted by the federal Airline Deregulation Act of 1978. 

Of interest is the Court's conclusion that the claim "related to" Delta's air transportation services:  

We also reject the Attorney General's argument that the complaint does not relate to Delta's services. By its complaint, the State seeks to compel Delta to maintain its Fly Delta mobile application in compliance with the OPPA's privacy policy requirements. The Fly Delta mobile application, selected and designed to facilitate access to the airline's services, is a marketing mechanism "appropriate to the furnishing of air transportation services." (Wolens, supra, at p. 228.) As alleged in the complaint, the Fly Delta mobile application, at a minimum, "may be used to check-in online for an airplane flight, view reservations for air travel, rebook cancelled or missed flights, pay for checked baggage, track checked baggage, and access a user's frequent flyer account." Thus, it is clear, beyond cavil, that the complaint does "relate to" Delta's services in that the allegations have a "connection with, or reference to" Delta's services.

Id. at 901.

Recent UCL preemption decision: Roberts v. United Healthcare Services, Inc.

In Roberts v. United Healthcare Services, Inc., ___ Cal.App.4th ___ (Aug. 4, 2016), the Court of Appeal (Second Appellate District, Division Two) held that UCL, FAL, and other claims brought on behalf of a putative class of members of a health care plan governed by the federal Medicare Advantage program (a Part C plan) were expressly preempted by the Medicare Act.  Slip op. at 7-16.

With express preemption clauses, Congress’s intent to preempt is clear; our job is reduced to “‘“‘identify[ing] the domain expressly pre-empted.’”’”  (Quesada, supra, 62 Cal.4th at p. 308, quoting Brown v. Mortensen (2011) 51 Cal.4th 1052, 1062.)  The “best evidence concerning th[at] breadth” is “the statutory text” itself.  (Quesada, at p. 308.)  Here, the plain language of section 1395w-26(b)(3) plainly spells out Congress’s intent that the standards governing Medicare Advantage plans will displace “any State law or regulation” except for State laws regarding licensing or plan solvency.  (Italics added.)  Because the Secretary has promulgated standards governing the content of a Medicare Advantage plan’s marketing materials (42 C.F.R. §§ 422.2260-422.2276) as well as the adequacy of its network (42 C.F.R. §§ 422.100 & 422.112), those standards fall within the ambit of the preemption clause.  Because plaintiff’s claims for violation of the unfair competition law, for unjust enrichment and for financial elder abuse do not deal with either of the preemption clause’s exceptions for licensing or plan solvency, they are preempted “with respect to [United Healthcare’s] plan.”

Slip op. at 9.

New UCL preemption opinion: Eckler v. Neutrogena Corp.

In Eckler v. Neutrogena Corp., ___ Cal.App.4th ___ (Jun. 9, 2015; pub. ord. Jul. 1, 2015), the Court of Appeal (Second Appellate District, Division Seven) held that the federal Food, Drug and Cosmetics Act preempted claims under the UCL and False Advertising Law concerning the labeling of Neutrogena sunscreen. 

Supreme Court takes up UCL public prosecutor action: Solus Industrial Innovations v. Superior Court

Happy New Year to all readers of this blog!  I hope everyone had a great holiday season. 

On Wednesday, January 14, 2015, the Supreme Court granted review in Solus Industrial Innovations v. Superior Court (People), No. S222314.  The Court's two newest justices joined in the unanimous vote to take up the case.

In this UCL public prosecutor action, the Orange County District Attorney seeks civil penalties against an employer for violating California's workplace safety standards.  In its original opinion, the Court of Appeal (Fourth Appellate District, Division Three) held that the UCL claim was preempted by Fed/OSHA (the federal Occupational Safety and Health Act of 1970 (29 U.S.C. § 651 et seq.)).

My post on the Court of Appeal's original opinion is here.

In July, the Supreme Court issued a "grant and transfer" order directing the Court of Appeal to "reconsider the matter in light of Statutes 1972, chapter 1084, pp. 2020-2021."    My post on the "grant and transfer" order is here. 

In September, the Court of Appeal issued a new opinion in which it again concluded that the UCL claim was preempted.  Solus Industrial Innovations LLC v. Superior Court (People), 229 Cal.App.4th 1291 (2014), review granted.   The District Attorney petitioned for review, and the Supreme Court has now taken up the case on the merits. 

"Grant and transfer" ordered in UCL public prosecutor action: Solus Industrial Innovations v. Superior Court

Earlier this year, the Court of Appeal (Fourth Appellate District, Division Three) handed down its opinion in Solus Industrial Innovations, Inc. v. Superior Court, 224 Cal.App.4th 17 (2014), review granted.  

Solus is a UCL public prosecutor action for civil penalties for alleged violations by an employer of California's workplace safety standards.  The defendant argued that the claim was preempted by federal law; the Orange County District Attorney's office argued that because the U.S. Secretary of Labor had approved California's safety standards, California may enforce them by any mechanism approved by the Legislature, including the UCL.

The Court of Appeal disagreed, based largely on a curious misunderstanding about when the UCL was first enacted: 

Our assessment of whether the district attorney’s UCL causes of action are preempted by federal law begins with the observation that the UCL was enacted in 1977 (Stats. 1977, ch. 299, § 1, p. 1202), which is after the Secretary initially approved California’s workplace safety plan.  Hence, there is no basis to infer that reliance on those provisions as a supplemental remedy for violation of California’s workplace safety standards was contemplated as part of the Secretary’s initial decision approving California’s plan. 

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

In my blog post on the Court of Appeal's opinion in this case, I wrote as follows:

In fact, the UCL was enacted in 1933. .... The UCL has allowed public prosecutors to bring suit to enjoin "unlawful" conduct since 1963.  It is possible that the Court of Appeal meant to say that the provisions allowing public prosecutors to recover civil penalties in UCL actions were first enacted in the 1970s, but even those first appeared in 1972, not 1977.  See fmr. Civ. Code § 3370.1 (stats. 1972, ch. 1084, p. 2021), cited in People v. Superior Court (Olson), 96 Cal.App.3d 181, 191 (1979).  All that happened in 1977 was that the UCL was recodified as part of the Business and Professions Code.

(Emphasis added.)

According to the Solus opinion, California's workplace safety plan was not even enacted until 1973, and was approved by the Secretary of Labor the same year — after the Legislature amended the UCL in 1972 to allow public prosecutors to seek civil penalties for any unlawful, unfair or fraudulent conduct.  The misunderstanding in the paragraph of the opinion quoted above, therefore, may have been outcome-determinative.

The Orange County District Attorney's office filed a petition for review, and on June 16, 2014, the California Supreme Court issued this order:

The petition for review is granted. The cause is transferred to the Court of Appeal, Fourth Appellate District, Division Three, with directions to reconsider the matter in light of Statutes 1972, chapter 1084, pp. 2020-2021.

Solus Industrial Innovations v. Superior Court, No. S217651 (emphasis added). 

It will be interesting to see the new opinion when it is handed down. 

Supreme Court to hand down UCL preemption opinion this morning: People ex rel. Harris v. Pac Anchor (Updated)

Last week, the Supreme Court announced that it will be handing down its opinion this morning in People ex rel. Harris v. Pac Anchor Transportation, Inc., no. S194388.  Harris is a UCL public prosecutor action in which the defendant asserts federal preemption. 

When the opinion is posted online at approximately 10:00 a.m., it should be available at this link:

• People ex rel. Harris v. Pac Anchor Transportation, Inc., ___ Cal.4th ___ (Jul. 28, 2014)

This is the issue on review, according to the docket:

Is an action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) that is based on a trucking company's alleged violation of state labor and insurance laws "related to the price, route, or service" of the company and, therefore, preempted by the Federal Aviation Administration Authorization Act of 1994 (49 U.S.C. § 14501)?

The Court of Appeal (Second Appellate District, Division Five) said no.  People ex rel. Harris v. Pac Anchor Transportation, Inc., 195 Cal.App.4th 765 (2011), review granted.  The introductory paragraph of the Court of Appeal's opinion read as follows:

Plaintiff and appellant State of California appeals from a judgment following an order granting judgment on the pleadings in favor of defendants and respondents Alfredo Barajas and Pac Anchor Transportation, Inc.  The State contends the Federal Aviation Administration Authorization Act (FAAAA) (49 U.S.C. § 14501 et seq.) does not preempt this action under California’s unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.) based on alleged violations of California labor and unemployment insurance laws.  We agree the State’s unfair competition action is not related to a price, route, or service of a motor carrier with respect to the transportation of property, and therefore, the action is not preempted by the FAAAA.  We reverse.

Slip op. at 1.

UPDATE:  The opinion is up.  The Supreme Court unanimously held the FAAAA does not preempt the UCL, either in general or as applied to the particular claim brought by the AG against the employer.

New UCL public prosecutor opinion addresses federal preemption: Solus Industrial Innovations LLC v. Superior Court

In Solus Industrial Innovations LLC v. Superior Court, ___ Cal.App.4th ___ (Feb. 24, 2014; mod. Mar. 17, 2014), the Court of Appeal (Fourth Appellate District, Division Three) held that the Orange County District Attorney's action for civil penalties under the UCL was preempted by Fed/OSHA (the federal Occupational Safety and Health Act of 1970 (29 U.S.C. § 651 et seq.)).

The opinion contains a couple of curious statements, such as this one:

Our assessment of whether the district attorney’s UCL causes of action are preempted by federal law begins with the observation that the UCL was enacted in 1977 (Stats. 1977, ch. 299, § 1, p. 1202), which is after the Secretary initially approved California’s workplace safety plan.  Hence, there is no basis to infer that reliance on those provisions as a supplemental remedy for violation of California’s workplace safety standards was contemplated as part of the Secretary’s initial decision approving California’s plan. 

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

In fact, the UCL was enacted in 1933.  Justice Kennard's dissenting opinion in Cel-Tech contains a useful historical summary:

Our Legislature first recognized unfair competition in 1933 when it amended Civil Code former section 3369 (hereafter section 3369), which had addressed the availability of injunctive relief in general. The 1933 amendment had three aspects: It authorized injunctions in cases of "unfair competition"; it authorized the Attorney General, district attorneys, and private persons to seek such injunctions; and it defined "unfair competition" as any "unfair or fraudulent business practice and unfair, untrue or misleading advertising and any act denounced by Penal Code sections 654a, 654b or 654c." (Stats. 1933, ch. 953, § 1, p. 2482.)

....

In 1963, the Legislature again amended section 3369 to add "unlawful" business practices to the list of proscribed conduct. In doing so, it expanded the definition of unfair competition with respect to conduct violating statutory prohibitions, for now any business practice that violated an independent statutory duty was an instance of unfair competition that could be enjoined even if the underlying statute did not specifically authorize injunctive relief. (Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 112-113 [section 3369 extended to " 'anything that can properly be called a business practice and that at the same time is forbidden by law' "].)  ....  In 1977 the Legislature reenacted, without substantive change, the unfair competition portion of section 3369 as Business and Professions Code sections 17200, 17201, 17202, 17203, and 17204. (Stats. 1977, ch. 299, § 1, p. 1202.) In 1992, the Legislature expanded the scope of the unfair competition law to include unfair business acts as well as practices; the operative language now reads in full: "As used in this chapter, unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code." (Bus. & Prof. Code, § 17200.)

Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal.4th 163, 194-95 (1999) (Kennard, J., dissenting) (emphasis added). 

The UCL has allowed public prosecutors to bring suit to enjoin "unlawful" conduct since 1963.  It is possible that the Court of Appeal meant to say that the provisions allowing public prosecutors to recover civil penalties in UCL actions were first enacted in the 1970s, but even those first appeared in 1972, not 1977.  See fmr. Civ. Code § 3370.1 (stats. 1972, ch. 1084, p. 2021), cited in People v. Superior Court (Olson), 96 Cal.App.3d 181, 191 (1979).  All that happened in 1977 was that the UCL was recodified as part of the Business and Professions Code. 

Here's another curious excerpt from the Solus opinion:

Here, the district attorney proposes to utilize the UCL as a means of imposing truly massive penalties against Solus, based specifically upon its alleged violation of workplace safety laws.  Significantly, and in contrast to Rose, this is not merely a private UCL cause of action, brought by a litigant who has suffered injury in fact as a result of defendant’s anti-competitive conduct, and who seeks restitution for that injury and to enjoin such conduct in the future.  This is instead an action, available only to a representative of the state, which is expressly intended to penalize a party for past misconduct.  (Bus. & Prof. Code, § 17206, subd. (a) [civil penalties “shall be assessed and recovered in a civil action brought in the name of the people of the State of California by the Attorney General, by any district attorney, by any county counsel  . . . or . . . by a city prosecutor”].)

Under each of these two UCL causes of action, the district attorney seeks to recover penalties of up to $2,500 per day, per employee, for the period from November 29, 2007 to March 19, 2009.  That represents a potential penalty in excess of $1 million per employee, for each cause of action.  And of course, the penalties available under the UCL are cumulative, and thus would be assessed in addition to whatever penalties were directly provided for under the Labor Code (and thus directly approved by the Secretary as part of California’s state plan.)  By contrast, as the district attorney acknowledges, the total penalty actually imposed by Cal/OSHA in the stayed administrative action arising out of these same violations was under $100,000.

Slip op. at 15-16 (emphasis in original). 

This overlooks the fact that the UCL plainly authorizes penalties of less than $2,500 (the statute says "up to" that amount "per violation") and that the trial court has significant discretion in determining what "per violation" means.  The text of section 17206(b) lists the factors the trial court must consider in determining the size of a penalty award:

In assessing the amount of the civil penalty, the court shall consider any one or more of the relevant circumstances presented by any of the parties to the case, including, but not limited to, the following: the nature and seriousness of the misconduct, the number of violations, the persistence of the misconduct, the length of time over which the misconduct occurred, the willfulness of the defendant's misconduct, and the defendant's assets, liabilities, and net worth.

Bus. & Prof. Code § 17206(b).  The Court of Appeal's analysis assumes that the maximum penalty amounts sought in the complaint would automatically be awarded, which is by no means certain.

New UCL preemption decision: Quesada v. Herb Thyme Farms, Inc.

Happy New Year!  I hope everyone enjoyed the holiday season.  There are a few recent developments of interest and I'm back to blogging this week.

In Quesada v. Herb Thyme Farms, Inc., ___ Cal.App.4th ___ (Dec. 23, 2013), the plaintiff alleged that the defendant, a grower of fresh herbs, violated the UCL, FAL and CLRA by selling packages of herbs labeled "Fresh Organic" and "USDA Organic" when the packages actually "contained a mix of organically grown herbs and conventionally grown herbs."  Slip op. at 3.  The defendant was a "certified grower with federal approval to label its organically grown herbs as 'USDA Organic.'"  Id.

The Court of Appeal (Second Appellate District, Division Three) held that the claims were impliedly (but not expressly) preempted by the federal Organic Foods Production Act of 1990 (7 U.S.C. § 6501 et seq.), in particular "Congress’s mandate precluding private enforcement of the national organic standards to ensure national consistency in the production and labeling of agricultural products as 'organic.'"  Id. at 18.

This is an interesting decision and it's hard to say what its broader impact might be on lawsuits involving false representations that foods are "organic."  The existence of such misrepresentations by unscrupulous sellers factored heavily into Justice Werdegar's reasoning in Kwikset:

The observant Jew who purchases food represented to be, but not in fact, kosher; the Muslim who purchases food represented to be, but not in fact, halal; the parent who purchases food for his or her child represented to be, but not in fact, organic, has in each instance not received the benefit of his or her bargain.

Kwikset Corp. v. Superior Court (Benson), 51 Cal.4th 310, 332 (2011) (emphasis added).  I have a very clear memory of Justice Werdegar mentioning "organically grown" foods during the oral argument in Kwikset.

Of course, Kwikset did not involve either foodstuffs or preemption.  And Quesada's reasoning appears to apply only if the defendant is a federally-certified grower: 

With this state-federal statutory framework in mind, we turn to the preemption question, that is, whether Quesada’s state consumer lawsuit against a certified organic grower based on mislabeling its product as “organic,” in violation of the OFPA or COPA is preempted.  

Slip op. at 7-8 (emphasis added).

Supreme Court takes up UCL preemption case as a "grant and hold": Rodriguez v. RWA Trucking Co.

Last week, on December 11, 2013, the Supreme Court issued a "grant and hold" order in Rodriguez v. RWA Trucking Co., No. S214150. 

In Rodriguez, the Court of Appeal held that the plaintiffs' UCL "unlawful" prong claims were preempted, in part, by federal law, namely, the Federal Aviation Administration Authorization Act of 1994 (49 U.S.C. § 14501) ("FAAAA"). See Rodriguez v. RWA Trucking Co., ___ Cal.App.4th ___ (Sept. 12, 2013; mod. Sept. 20, 2013) (discussed in this blog post).

The Supreme Court is already considering FAAAA preemption in People ex rel. Harris v. Pac Anchor Transportation, Inc., No. S194388.  Briefing in Rodriguez has been deferred pending resolution of Harris.

[via]

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.

New UCL preemption and prejudgment interest opinion: Rodriguez v. RWA Trucking Co. (Updated)

The plaintiffs in Rodriguez v. RWA Trucking Co., ___ Cal.App.4th ___ (Sept. 12, 2013; mod. Sept. 20, 2013), a certified class action, were owner-drivers who contracted with the defendant trucking company to haul cargo in their rigs.  They brought UCL "unlawful" prong claims based on the defendant's practice of charging them for auto insurance, physical damage insurance, cargo insurance, and workers’ compensation insurance.  Plaintiffs asserted that none of these forms of insurance could be sold except by a licensed insurance broker (under Ins. Code section 1631), which the defendant was not, and that the workers' compensation insurance charges were prohibited by the Labor Code (section 3751).  Slip op. at 2-7.

The trial court ruled in plaintiffs' favor on all claims. The Court of Appeal (Second Appellate District, Division Four) reversed in part, holding that the claims related to the liability, damage and cargo insurance were preempted by federal law, but that the claim based on the workers' compensation insurance charges was not.  Slip op. at 8-39.

In the next section of the opinion, the Court of Appeal addressed the prejudgment interest awarded by the trial court on the original judgment.  Id. at 39-43.  Following M&F Fishing, Inc. v. Sea-Pac Ins. Managers, Inc., 202 Cal.App.4th 1509 (2012), the Court held that "Civil Code section 3287 does not authorize prejudgment interest on an award of restitution under the UCL."  Id. at 40.  However, the Court concluded, the trial court does have power to award such interest under its "inherent discretionary authority."  Id. at 43.  The Court remanded for determination of whether interest was appropriate on the affirmed part of the judgment. Id. at 40, 43.

Other courts have reached a different conclusion on the prejudgment interest question,¹ but if Rodriquez and M&F stand up, what it means as a practical matter is that prejudgment interest is discretionary, but not mandatory, in UCL actions. 

¹ See, e.g., In re Neurontin Marketing and Sales Practices Litigation, 2011 WL 3852254, *60 (D. Mass. Aug. 31, 2011); Irwin v. Mascott, 112 F.Supp.2d 937, 956 (N.D. Cal. 2000) (citing Tripp v. Swoap, 17 Cal.3d 671, 681 (1976)).

UPDATE:  On December 11, 2013, the Supreme Court issued a "grant and hold" order in this case, making the Court of Appeal opinion uncitable as precedent.  Rodriguez v. RWA Trucking Co., No. S214150.  Briefing has been deferred pending resolution of People ex rel. Harris v. Pac Anchor Transportation, Inc., No. S194388, in which the Court is considering preemption by the Federal Aviation Administration Authorization Act of 1994 (49 U.S.C. § 14501) ("FAAAA").  

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Supreme Court UCL preemption opinion: Parks v. MBNA America Bank, N.A.

In Parks v. MBNA America Bank, N.A., ___ Cal.4th ___ (Jun. 21, 2012), the Supreme Court held that the National Bank Act preempted a UCL "unlawful" prong claim predicated on violation of Civil Code section 1748.9, "a California law requiring that certain disclosures accompany preprinted checks that a credit card issuer provides to its cardholders for use as credit."  Slip op. at 1. 

The opinion says nothing substantive about the UCL in particular; its focus is on section 1748.9 and the provisions of the National Bank Act.

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

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

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

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

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

Slip op. at 18565 (footnote omitted). 

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

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

Slip op. at 18565-66 n.1.

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

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

Supreme Court grants review in UCL preemption case: People ex rel. Harris v. Pac Anchor Transportation, Inc.

Last week, on August 10, 2011, the Supreme Court granted review in a UCL preemption case, People ex rel. Harris v. Pac Anchor Transportation, Inc., no. S194388.  This is the issue on review:

Is an action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) that is based on a trucking company's alleged violation of state labor and insurance laws "related to the price, route, or service" of the company and, therefore, preempted by the Federal Aviation Administration Authorization Act of 1994 (49 U.S.C. § 14501)?

The Court of Appeal (Second Appellate District, Division Five) said no.  People ex rel. Harris v. Pac Anchor Transportation, Inc., 195 Cal.App.4th 765 (May 18, 2011) (review granted).

This case has been added to my list of pending Supreme Court cases.

New Ninth Circuit UCL preemption decision: Aguayo v. U.S. Bank

In Aguayo v. U.S. Bank, ___ F.3d ___ (9th Cir. Aug. 1, 2011), the Ninth Circuit held that federal law (namely, the National Bank Act and implementing OCC regulations) did not preempt a UCL "unlawful" prong claim predicated on violation of the Rees-Levering Act.

Decisions of interest from April and May 2011

The Court of Appeal and Ninth Circuit handed down the following decisions in April and May (listed in reverse chronological order by publication date):

Folgelstrom v. Lamps Plus, Inc., 195 Cal.App.4th 986 (Apr. 29, 2011; pub. ord. May 20, 2011; mod. Jun. 7, 2011) (Second Appellate District, Division Five) (affirming dismissal of UCL claim for lack of Prop. 64 standing; reversing dismissal of Song-Beverly Act claim, following Pineda v. Williams-Sonoma)

Knapp v. AT & T Wireless Services, Inc., 195 Cal.App.4th 932 (Apr. 25, 2011; pub. ord. May 20, 2011) (Fourth Appellate District, Division Three) (affirming order denying class certification of UCL, CLRA and fraud claims, which suffered from Kaldenbach problems)

Archer v. United Rentals, Inc., 195 Cal.App.4th 807 (May 19, 2011; mod. Jun. 13, 2011) (Second Appellate District, Division One) (affirming dismissal of UCL claim for injunctive relief for lack of Prop. 64 standing; reversing order denying class certification of Song-Beverly Act claim, following Pineda v. Williams-Sonoma)

People ex rel. Harris v. Pac Anchor Transportation, Inc., 195 Cal.App.4th 765 (May 18, 2011) (Second Appellate District, Division Five) (reversing dismissal of public prosecutor action in which the Attorney General's office employed the UCL's "unlawful" prong to pursue the defendant for wage and hour violations, holding that the FAA Authorization Act did not preempt the claims)

Marlo v. United Parcel Service, Inc., 639 F.3d 942 (9th Cir. Apr. 28, 2011) (affirming order decertifying class in wage & hour misclassification case)

Starbucks Corp. v. Superior Court (Lords), 194 Cal.App.4th 820 (Apr. 25, 2011) (Fourth Appellate District, Division Three) (reversing order permitting discovery of class list by putative class representatives who lacked standing)

New UCL preemption decision: Parks v. MBNA America Bank, N.A.

Many thanks to the blog reader who wrote to draw my attention to Parks v. MBNA America Bank, N.A., ___ Cal.App.4th ___ (May 12, 2010).  In Parks, the Court of Appeal (Fourth Appellate District, Division Three) held that federal law did not preempt plaintiffs' UCL "unlawful" prong claim, which was predicated on alleged violations of Civil Code section 1748.9. 

Interestingly, in so holding, the Court expressly declined to follow a contrary Ninth Circuit decision, Rose v. Chase Bank USA, N.A., 513 F.3d 1032 (9th Cir. 2008):

Although we are reluctant to create a split of authority with the Ninth Circuit Court of Appeals on a point of federal law, our understanding of the authorities discussed above requires us to do so. It is still possible MBNA may demonstrate that section 1748.9 imposes burdens on national banks that significantly impair the authority granted to it by the [National Bank Act]. But there is no basis for preempting section 1748.9 without a factual record.

Slip op. at 19-20 (footnote omitted).

New U.S. Supreme Court preemption decision: Wyeth v. Levine

This morning, the Supreme Court just handed down its opinion in Wyeth v. Levine, ___ U.S. ___ (Mar. 4, 2009).   The Court held, by a vote of 6 to 3, that the FDA's approval of the defendant's labeling of its medical device prescription drug did not preempt plaintiffs' state law product liability (failure to warn) claim.  This decision is generally viewed as a companion to Altria Group, Inc. v. Good, ___ U.S. ___, 129 S.Ct. 538 (Dec. 16, 2008) (discussed in this blog post), in which the Court held that the Federal Cigarette Labeling and Advertising Act (15 U.S.C. §§1331 et seq.) did not preempt a state-law claim for deceptive advertising of light cigarettes.

The New York Times has more on the Wyeth decision in this article.

CORRECTION:  I wrote my post above a little too hurriedly.  I should have said that the Wyeth case is considered a companion to Riegel v. Medtronic, Inc., ___ U.S. ___, 128 S. Ct. 999 (2008), in which the Supreme Court held that state-law product liability claims for FDA-approved medical devices were preempted.  With Altria and Wyeth, perhaps the preemption tide is turning. 

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

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

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

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

Id. at *6.

U.S. Supreme Court preemption decision: Altria Group, Inc. v. Good

By now, you have probably already read the Supreme Court's new preemption decision, Altria Group, Inc. v. Good, ___ U.S. ___, 129 S.Ct. 538 (Dec. 16, 2008). (See this blog post for my original coverage of this case.) In Altria, the Supreme Court held that the Federal Cigarette Labeling and Advertising Act ("FCLAA") (15 U.S.C. §§1331 et seq.) did not preempt a claim under the Maine Unfair Trade Practices Act (a statute very similar to the UCL) for deceptive advertising of "light" cigarettes.

I have been thinking about the impact of this case, if any, on the pending Tobacco case, in which we expect the California Supreme Court to interpret Prop. 64. The California Supreme Court's earlier preemtion decision was, if anything, narrower than Altria. In In re Tobacco Cases II, 41 Cal.4th 1257 (2007) (discussed in this post), the California Supreme Court held that the FCLAA did partly preempt the UCL claims in that case -- to the extent they had to do with marketing cigarettes to minors. The Supreme Court considered itself bound by Lorillard Tobacco Co. v. Reilly, 533 U.S. 525 (2001), but in Altria v. Good, the U.S. Supreme Court distinguished that case:

Reilly involved regulations promulgated by the Massachusetts attorney general “‘in order to address theincidence of cigarette smoking and smokeless tobacco use by children under legal age ... [and] in order to prevent access to such products by underage customers.’” 533 U. S., at 533 (quoting 940 Code Mass. Regs. §21.01 (2000)).  The regulations did not pertain to the content of any advertising; rather, they placed a variety of restrictions on certain cigarette sales and the location of outdoor and point-of-sale cigarette advertising. The attorney general promulgated those restrictions pursuant to his statutory authority to prevent unfair or deceptive trade practices. Mass. Gen. Laws, ch. 93A, §2 (West 1996). But although the attorney general’s authority derived from a general deceptive practices statute like the one at issue in this case, the challenged regulations targeted advertising that tended to promote tobacco use by children instead of prohibiting false or misleading statements. Thus, whereas the “prohibition” in Cipollone was the common-law fraud rule, the “prohibitions” in Reilly were the targeted regulations. Accordingly, our holding in Reilly that the regulations were pre-empted provides no support for an argument that a general prohibition of deceptive practices is “based on” the harm caused by the specific kind of deception to which the prohibition is applied in a given case.

Altria, slip op. at 12.  

The outcome of Altria is consistent with the Supreme Court's decision in March 2008 to deny cert. in the Tobacco preemption case. Review had already been granted in Altria in January 2008.  And in supplemental letter briefs in Tobacco, the parties both took the position that the preemption case has no bearing on the Prop. 64 case. Even so, Altria may well prove to limit the precedential value of the California Supreme Court's Tobacco preemption decision going forward.

U.S. Supreme Court preemption case: Wyeth v. Levine

SCOTUSBlog reports that the U.S. Supreme Court heard oral argument yesterday in Wyeth v. Levine, no. 06-1249.  In Wyeth, the Court will address whether FDA approval of warning labels precludes consumers from bringing state-law tort claims against drug manufacturers for failure to adequately warn of a drug's risks.

The transcript of the oral argument is available at this link, and here is my prior coverage of a similar preemption case, Riegel v. Medtronic, Inc., 128 S. Ct. 999 (2008), addressing medical devices.

UPDATE:  Dahlia Lithwick has an interesing article in Slate about the Wyeth argument.  Also, Law.com reports that "High Court Appears Torn Over Drug Labeling Case."  [Hat tip: How Appealing.]

New Third Circuit preemption decision: Fellner v. Tri-Union Seafoods, L.L.C.

In Fellner v. Tri-Union Seafoods, L.L.C., ___ F.3d ___ (Aug. 19, 2008), the Third Circuit held that the FDA's "regulatory actions" did not preempt certain non-disclosure claims brought under New Jersey law. On Aug. 20, The Legal Intelligencer reported that "3rd Circuit Revives Mercury-in-Tuna Class Action."

This decision is of interest to California practitioners in light of this paragraph:

The factual landscape of this case is colored by recent litigation in California. On June 21, 2004, then-Attorney General of California, Bill Lockyer, filed a lawsuit against Tri-Union and other defendants under California’s “Proposition 65,” CAL. HEALTH & SAFETY CODE § 25249.6, seeking an injunction and civil penalties for defendants’ failure to warn consumers that their tuna products contain dangerous mercury compounds. While that suit was pending, the Commissioner of the FDA sent a letter to Mr. Lockyer expressing the opinion that the FDA’s prior regulatory actions preempt the State’s lawsuit. In the Commissioner’s view, the defendants would be unable to comply both with that approach and state law and the existence of the lawsuit would “frustrate the [FDA’s] carefully considered federal approach” to the issue of mercury in fish. See People v. Tri-Union Seafoods, 2006 WL 1544377 (Cal. Super. Ct. May 12, 2006) (taking judicial notice of the letter). In May 2006, following a bench trial, the Superior Court of California found the Attorney General’s lawsuit preempted by federal law. People v. Tri-Union Seafoods, 2006 WL 1544384 (Cal. Super. Ct. May 11, 2006), appeal docketed, No. A116792 (Cal. Ct. App. 1st Dist. Feb. 20, 2007).

Slip op. at 4-5. The Third Circuit panel disagreed, at least with respect to the particular New Jersey claims before it:

This is a situation in which the FDA has promulgated no regulation concerning the risk posed by mercury in fish or warnings for that risk, has adopted no rule precluding states from imposing a duty to warn, and has taken no action establishing mercury warnings as misbranding under federal law or as contrary to federal law in any other respect. Fellner’s lawsuit does not conflict with the FDA’s “regulatory scheme” for the risks posed by mercury in fish or the warnings appropriate for that risk because the FDA simply has not regulated the matter. Fellner’s duty-to-warn claim does not conflict with an FDA determination deliberately to forego warnings because the FDA took no action to preclude state warnings – at least, no binding action via ordinary regulatory procedures, and no action whatsoever until after Tri-Union allegedly wrongfully failed to warn. Finally, Fellner’s lawsuit does not conflict with the FDCA’s food misbranding provision or the FDA’s actions thereunder because the FDA has not exercised its misbranding authority under the FDCA with respect to methylmercury warnings for fish.

Id. at 37-38.

UCL/CLRA preemption case on remand: Farm Raised Salmon Cases (unpublished)

In February, in Farm Raised Salmon Cases, 42 Cal.4th 1077 (2008), the Supreme Court held that the Federal Food, Drug, and Cosmetic Act (21 U.S.C. §§ 301 et seq.) did not preempt plaintiffs' UCL and CLRA claims. Those claims rested on the argument that the defendants improperly failed to disclose that they used artificial coloring to turn the flesh of their salmon pink before selling it. (For more on that decision, see these two blog posts.)

On remand, the Court of Appeal (Second Appellate District, Division Three) held in an unpublished opinion that the primary jurisdiction doctrine did not apply and that the trial court improperly sustained defendants' demurrer without leave to amend. Farm Raised Salmon Cases, No. B182901a (May 16, 2008). Respecting the primary jurisdiction doctrine, the court explained:

The primary jurisdiction doctrine does not apply ... if the issues involved are of a type ordinarily resolved by the courts in the first instance, an administrative agency has no particular expertise with regard to the issues, and the issues do not require the application of complex regulations. (Cundiff v. GTE California Inc., supra, 101 Cal.App.4th at p. 1413.) In those circumstances, concerns about the uniform application of regulatory laws ordinarily are not implicated.

We conclude that the sustaining of the demurrer based on the primary jurisdiction doctrine was an abuse of discretion. ....

The alleged violations of the [Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 301 et seq.)] and parallel provisions of the Sherman Law [(Health & Saf. Code, § 109875 et seq.)] concern “false and misleading” labeling of salmon offered for sale and the failure to state on the labeling that the salmon contains artificial coloring. Federal and state regulations expressly and unequivocally require the disclosure of canthaxanthin and astaxanthin as artificial coloring agents. (21 C.F.R. §§ 73.35(d)(3), 73.75(d)(4); Health & Saf. Code, § 110100, subd. (a).) There are no complex regulations at issue in this regard, but only straightforward requirements. The determination whether the salmon offered for sale by defendants contained those chemicals and whether the labeling failed to disclose that fact requires neither the application of complex regulations nor any particular administrative expertise. Rather, those questions are the sorts of factual questions that ordinarily are committed to the courts. Moreover, the FDCA and the regulations under that act provide no administrative procedure (and certainly no “ ‘pervasive and self contained system of administrative procedure’ [citation] to deal with the precise questions involved” as in Farmers, supra, 2 Cal.4th at page 396) to determine whether a food is misbranded, but only provide for the FDA to enforce the act by filing an action in court. (21 U.S.C. § 337(a).) Although the Sherman Law provides for an administrative proceeding to determine whether a food is misbranded (Health & Saf. Code, § 111855), we conclude that any advantage that the DHS may have in resolving the issues presented here is not particularly strong. For these reasons, we conclude that the primary jurisdiction doctrine does not apply.

Slip op. at 8-10. The Court went on to hold that the complaint adequately alleged a CLRA violation:

The CLRA prohibits, among other things, “Representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have or that a person has a sponsorship, approval, status, affiliation, or connection which he or she does not have.” (Civ. Code, § 1770, subd. (a)(5).) Liberally construing this provision as the Legislature intended (id., § 1760), we conclude that by allegedly displaying and offering for sale farm-raised salmon that was artificially colored to resemble wild salmon, without disclosing the artificial coloring, defendants were “representing” that the salmon had the same origin and characteristics as wild salmon. We therefore conclude that the complaint alleges “representing” within the meaning of Civil Code section 1770, subdivision (a)(5) and that the sustaining of the demurrer to the count for violation of the CLRA was error. (Daugherty v. American Honda Motor Co., Inc. (2006) 144 Cal.App.4th 824, 834 [stating, “the CLRA proscribes a concealment of characteristics or quality ‘contrary to that represented’ ”].) In light of our conclusion, we need not decide whether the complaint adequately alleges other prohibited acts or practices under the CLRA.

Id. at 11. Many thanks to the blog reader who emailed with news of this opinion.

U.S. Supreme Court preemption decision: Riegel v. Medtronic, Inc.

You've probably already heard about the U.S. Supreme Court's decision in Riegel v. Medtronic, Inc., ___ U.S. ___ (Feb. 20, 2008), earlier this year. Last Thursday, The American Lawyer had an interesting article, "For Defendants Alone?" (subscription), about that and other preemption cases now before the Supreme Court: "All three cases turn on the court's developing view of federal preemption of state torts. Specifically, whether or not approval by the Food and Drug Administration immunizes the makers of pharmaceuticals and medical devices from state court damages claims."

Sunday's New York Times also reported that "Drug Makers Near Old Goal: A Legal Shield." The article points out that the FDA is not in a position to substitute for products liability lawsuits:

A series of independent assessments have concluded that the agency is poorly organized, scientifically deficient and short of money. In February, its commissioner, Andrew C. von Eschenbach, acknowledged that the agency faces a crisis and may not be “adequate to regulate the food and drugs of the 21st century.”

The F.D.A. does not test experimental medicines but relies on drug makers to report the results of their own tests completely and honestly. Even when companies fail to follow agency rules, officials rarely seek to penalize them. “These are scientists, not cops,” said David Vladeck, a professor at Georgetown Law School.

"High Court OKs Suit Over Pink Salmon"

Today's Recorder has an article (subscription) on the Salmon decision. The Daily Journal also reports that "High Court Allows Suits Over Salmon" (subscription).

Looking at the decision more closely last night, it doesn't really say anything particularly new or interesting about the UCL or CLRA. The rationale for the decision was that the California law on which the UCL claim was predicated (i.e., the Sherman Food, Drug and Cosmetic Law (Health & Saf. Code §§ 109875 et seq.)) was "identical" to the relevant provisions of the Federal Food, Drug and Cosmetic Act (21 U.S.C. §§ 301 et seq.). The opinion did not analyze the CLRA claim separately from the UCL claim.

The opinion did have one interesting footnote that should remove any doubts concerning the propriety of citing unpublished federal district court rulings in California state courts:

In their briefs, the parties discuss an unpublished federal district court opinion which came to the same conclusion when considering nearly identical facts. (Vermont Pure Holdings, Ltd. v. Nestle Waters North America, Inc. (D.Mass., Mar. 28, 2006, No. Civ. A. 03-11465) 2006 WL 839486, *6, fn. 3.) Citing unpublished federal opinions does not violate our rules. (Cal. Rules of Court, rule 8.1115.) We find the court’s reasoning persuasive.

Slip op. at 22 n.18 (emphasis in original).