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.

UCL remedies for Labor Code violations and UCL claim "splitting": Zakaryan v. Men's Warehouse, Inc.

While Zakaryan v. Men's Warehouse, Inc., ___ Cal.App.5th ___ (Mar. 28, 2019), is primarily an arbitration decision, it includes some interesting observations about the UCL.   

Seeking to recover unpaid wages as restitution under the UCL is now so routine, the Zakaryan opinion says, that this enforcement mechanism is properly described as one of several "[t]raditionally" pursued by aggrieved employees: 

Traditionally, the Labor Code provides several mechanisms for three different actors to enforce the above described labor laws. 

First, the aggrieved employee may seek judicial or administrative relief.  In terms of judicial relief, the employee may “file[] an ordinary civil action against the employer” for (1) breach of contract (Reynolds v. Bement (2005) 36 Cal.4th 1075, 1084 (Reynolds), abrogated on other grounds in Martinez v. Combs (2010) 49 Cal.4th 35), (2) restitution under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 177-178), or (3) violation of the Labor Code provision at issue if (and only if) the Code authorizes individual employees to bring a claim based on that provision (§§ 1194, subd. (a) [authorizing civil suit to recover “unpaid balance” of overtime premium pay], 218 [authorizing civil suit to recover pay for missed meal and rest periods and waiting time penalty]). .... 

Slip op. at 6-7 (emphasis added). 

Zakaryan also had this to say about permissible "splitting" of UCL and CLRA claims:

Broughton held that an individual plaintiff’s claim under the Consumer Legal Remedies Act (CLRA) (Civ. Code, § 1750 et seq.) could be split into two and shunted into two different fora—namely, his claim for damages sent to arbitration and his claim for injunctive relief to “enjoin[][the defendant’s allegedly] deceptive [methods, acts and] practices” to remain in court.  (Boughton, at pp. 1079-1084.)  Following on Broughton’s heels, Cruz held that an individual plaintiff’s claim under the Unfair Competition Law (UCL) (Bus. & Prof. Code, § 17200 et seq.) could likewise be split into two and shunted into two different fora—namely, his claim for restitution to arbitration and his claim for injunctive relief to “‘enjoin[] [the defendant’s allegedly] wrongful acts and practices’” to remain in court.  (Cruz, at pp. 308-309, 312-313, 315.)  Broughton and Cruz sanctioned the claim splitting because the individual plaintiff’s CLRA and UCL claims, respectively, involved two primary rights—namely, the individual plaintiff’s right to be made whole (through damages or restitution) and the public’s right to be protected from deceptive or wrongful practices (through a “public injunction” sought by the individual plaintiff “act[ing] in the purest sense as a private attorney general”).  (Cruz, at p. 312; Broughton, at pp. 1079-1080, 1084; see also McGill v. Citibank, N.A. (2017) 2 Cal.5th 945, 961 [“the public injunctive relief available under the UCL [and] the CLRA . . . is primarily ‘for the benefit of the general public’ . . . [and] ‘not to resolve a private dispute’”].)  In other words, individual CLRA and UCL plaintiffs sometimes wear two hats while the employee who brings a solitary PAGA action always wears but one; the former may accordingly be split while the latter may not.

Id. at 13-14 (emphasis added) (citing Cruz v. PacifiCare Health Systems, Inc., 30 Cal.4th 303 (2003); Broughton v. Cigna Healthplans, 21 Cal.4th 1066 (1999)). 

New UCL and class certification opinion: Espejo v. The Copley Press, Inc.

In Espejo v. The Copley Press, Inc., ___ Cal.App.5th ___ (Jul. 7, 2017), the Court of Appeal (Fourth Appellate District, Division One) considered a series of challenges to a post-trial judgment in a certified class action alleging that the plaintiff newspaper carriers were incorrectly classified as independent contractors, in violation of the Labor Code and thus the UCL. The 81-page opinion affirmed the judgment on liability, but directed that certain adjustments be made to the amount of the restitution and attorneys' fees awards on remand. 

Given that trials in UCL class actions are relatively rare, this case is instructive procedurally. 

The trial court bifurcated the equitable UCL claim from the remaining claims, and heard the equitable claim first, in a bench trial.  Slip op. at 5-9.  Because the plaintiffs prevailed in the bench trial and were awarded full monetary restitution, no jury trial went forward.  See id.  Attorneys' fees were awarded under Code of Civil Procedure section 1021.5, rather than under any applicable Labor Code provision.  See id.  A portion of the fees were to be paid by the defendant, with the rest payable from the common fund.  Id. at 9-10.

In the first section of its opinion, the Court of Appeal affirmed the trial court's holding that the newspaper carriers were the defendant's employees, not independent contractors.  Slip op. at 10-25.

In the next section, the court rejected the defendant's argument that the class should have been decertified because the class representatives became inadequate after certification, adhering to the "changed circumstances" rule: "We find no significant change in circumstances between the time the class was certified and the time of trial that would support our decertifying the class or reversing the judgment on the ground of inadequacy of the class representatives."  Id. at 28 (citing Kight v. CashCall, Inc., 231 Cal.App.4th 112, 125-26 (2014)).  The court also rejected the argument that all but one of the class representatives became inadequate because they did not testify at the trial.  Id. at 30. 

The third section considered the defendant's argument that the trial court had awarded classwide relief on an uncertified claim.  The opinion examined the trial court's class certification order and found it broad enough to encompass that claim.  Id. at 32-36.

The next section affirmed the trial court's order allowing post-trial amendment of the complaint to conform to proof, rejecting the defendant's argument that such amendments should not be allowed in a certified class action.  Id. at 36-39.  "We see no reason why a trial court has any less discretion to allow amendment of a pleading to conform to proof in a class action than in other civil actions."  Id. at 37.

Next, the opinion considered the trial court's order bifurcating the equitable UCL claim and trying it first, and held that the defendant had acquiesced in the order and therefore could not challenge it on appeal.  Id. at 39-42.

The defendant's next series of arguments challenged various aspects of the $4.95 million in restitution and prejudgment interest awarded to the class, which included several different types of expense reimbursements under Labor Code section 2802, as construed in Gattuso v. Harte-Hanks Shoppers, Inc., 42 Cal.4th 554 (2007).  Slip op. at 42-67.

Several of the holdings in this section of the opinion are worthy of note:

• The court had no difficulty concluding that unpaid expense reimbursements were recoverable as restitution under the UCL because such reimbursements are considered part of an employee's wages. Id. at 50-51 (citing, inter alia, Cortez v. Purolater Air Filtration Products Co., 23 Cal.4th 163 (2000)).
• The court also held that certain "credits and reversals" should have been subtracted from the restitution award because those sums had been "already paid" to the class.  Id. at 51-56.
• A UCL restitution award, like a damages award, need not be calculated with strict "mathematical precision," and the trial court did not err in accepting the plaintiffs' expert's "reasonable estimate" of the amount owed the class in mileage reimbursements.  Id. at 57-58 (citing Duran v. U.S. Bank Nat. Assn., 59 Cal.4th 1, 40 (2014)). 
• However, the trial court did err in accepting an unreasonable estimate of the amount of another type of reimbursement.  Id. at 59-61.
• The trial court properly exercised its discretion to award prejudgment interest on the restitution award.  Id. at 62-67.  The panel rejected the defendant's argument that prejudgment interest is not recoverable under the UCL, but determined that the amount of interest should be recalculated after the adjustments to the base restitution award, discussed above, were made.  See id.

The final sections of the opinion largely affirmed the attorneys' fees award under section 1021.5, but remanded for the trial court to determine, in the first instance, whether the amount of the award should be reduced because the base restitution award would be adjusted downward on remand.  Slip op. at 67-76.  The opinion also held that the trial court did not abuse its discretion in declining to apply a lodestar multiplier in fixing the amount of the fee award.  Id. at 77-80.

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

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

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

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.

"Dole Buyers Get Mixed Win In 9th Circ. Natural Label Ruling"

Last week, I was quoted in an article in Competition Law360 (subscription) on the Ninth Circuit's unpublished opinion in Brazil v. Dole Packaged Foods, LLC, 2016 WL 5539863 (9th Cir. Sept. 30, 2016).

The article begins:

Consumers won a major false advertising battle Friday when the Ninth Circuit ruled the label on Dole's "all natural" frozen berry products may be misleading, but the panel's finding that the decertified class hadn't shown it could prove classwide damages greatly limits what the buyers can recover if they ultimately prevail, attorneys say.

As I told the reporter, I think the opinion mistakenly assumes that there are only two ways to measure UCL restitution, which is not the law in California.  Also, the class certification portion of the opinion seems to me inconsistent with Pulaski & Middleman, LLC v. Google, Inc., 802 F.3d 979 (9th Cir. 2015) (discussed in this blog post).  The analysis assumes that every unnamed class member would have to show that they were misled, which is inconsistent with both Pulaski and In re Tobacco II Cases, 46 Cal.4th 298 (2009), which this opinion does not cite (it cites only the more recent Tobacco II opinion on remand, discussed here).  This non-precedential opinion should be limited to its facts.

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

UCL "unlawful" prong opinion: Medrazo v. Honda of North Hollywood

This UCL opinion published in April got lost in the Brinker blizzard, but it is important and warrants  a belated post.  

In Medrazo v. Honda of North Hollywood, 205 Cal.App.4th 1 (Mar. 27, 2012; pub. ord. Apr. 16, 2012), the Court of Appeal (Second Appellate District, Division Four) addressed a UCL "unlawful" prong claim that went to trial on behalf of a certified class of motorcycle buyers.  Previously, in 2008, the Court of Appeal had reversed the trial court's order denying class certification.   Medrazo v. Honda of North Hollywood, 166 Cal.App.4th 89 (2008) (discussed in this blog post). In its 2012 opinion, the Court of Appeal reversed the trial court's order granting the defendant's motion for judgment at the conclusion of the plaintiff's case-in-chief (essentally, a motion for nonsuit). 

First, the opinion addresses the famous footnote of Tobacco II, where the Supreme Court explained that while reliance is an element of UCL standing in "fraudulent" prong cases, "there are doubtless many types of unfair business practices in which the concept of reliance, as discussed here, has no application."   In re Tobacco II Cases, 46 Cal.4th 298, 325 n.17 (2009). 

I have always thought the concept of reliance would be irrelevant in most "unlawful" prong cases, and the Court of Appeal confirmed this in Medrazo: 

[T]he Supreme Court ... explained [in Tobacco II] that an actual reliance requirement does not apply to UCL actions that are not based upon a fraud theory. (Id. at p. 325, fn. 17). In those actions, the plaintiff must simply show that the alleged violation caused or resulted in the loss of money or property.

Medrazo, 205 Cal.App.4th at12 (emphasis added).

The relevant question, for standing purposes in an "unlawful" prong case, is going to be whether the defendant's statutory violation caused the plaintiff to lose money.  In Medrazo, the defendant violated a Vehicle Code provision requiring that a hanger tag disclosing dealer-added charges be attached to all motorcycles offered for sale.  Id. at 4.  If the hanger tag is not attached, or if the dealer-added charges are not disclosed on the tag, the dealer may not collect the charges.  See id.  The plaintiff class lost money as a result of the defendant's violation because the class members paid such charges even though the defendant had not attached the required hanger tags.  Id. at 13-14.  It did not matter whether the class members had "relied" on the missing hanger tags, nor was proof required that they would or would not have bought the motorcycles if the hanger tags had been attached and read.  See id.  It was sufficient that the defendant had violated the law, that the plaintiffs had purchased the products, and that they paid the unlawfuly-imposed charges.  See id.

Put another way, the violation was not the dealer's failure to disclose the added charges, but rather its collection of those charges in violation of the statute. 

 The second important holding relates to the measure of restitution to be awarded at trial.  Medrazo is really the only helpful opinion on this issue since Colgan v. Leatherman Tool Group, Inc., 135 Cal.App.4th 663 (2006).  While Colgan was a "fraudulent" prong case, Medrazo addresses the measure of restitution in the context of the "unlawful" prong.

Medrazo held that the proper measure of restitution was the full amount of the unlawfully-imposed charges:

If, on retrial, the court determines that [the defendant's] sale of motorcycles without hanger tags (or without tags that disclosed dealer-added charges) violated the UCL, class members will be entitled to restitution of any money “which may have been acquired [by defendant] by means of such unfair competition” (Bus. & Prof.Code, § 17203)—i.e., the dealer-added charges that were not disclosed on hanger tags. 

205 Cal.App.4th at 13-14 (footnote omitted) (emphasis added).  There was no question about the value of the motorcycles or whether the defendant could have sold them for the same price if the dealer-added charges had been properly disclosed.  No, the defendant will be required on remand to refund the full amount of the unlawfully-collected charges, period. 

In short, Medrazo is a very significant opinion that should be widely cited in other "unlawful" prong cases.  Here is my publication request filed in April on behalf of CAOC. Several other publication requests were also filed. 

Kwikset expressly disapproves Buckland and Citizens of Humanity on restitution issue

There's a lot to digest in this opinion, but one thing that stands out is the Court's express disapproval of Buckland and Citizens of Humanity on the restitution issue: 

Finally, the Court of Appeal rested its holding in part on a line of cases that have read the “lost money or property” requirement as confining standing under section 17204 “ ‘to individuals who suffer losses . . . that are eligible for restitution.’ ”  (Quoting Buckland v. Threshold Enterprises, Ltd., supra, 155 Cal.App.4th at p. 817; see also Silvaco Data Systems v. Intel Corp. (2010) 184 Cal.App.4th 210, 245; Citizens of Humanity, LLC v. Costco Wholesale Corp. (2009) 171 Cal.App.4th 1, 22; Walker v. GEICO General Ins. Co. (9th Cir. 2009) 558 F.3d 1025, 1027 [following Buckland].) Because plaintiffs were not entitled to restitution, the Court of Appeal reasoned, they necessarily lacked standing.

As we recently have noted, however, the standards for establishing standing under section 17204 and eligibility for restitution under section 17203 are wholly distinct.  (See Clayworth v. Pfizer, Inc., supra, 49 Cal.4th at p. 789.)  For the drafters of Proposition 64, which amended both sections 17203 and 17204, to make standing under section 17204 expressly dependent on eligibility for restitution under section 17203 would have been easy enough, but nothing in the text or history of Proposition 64 suggests this was intended.  (Clayworth, at pp. 788-789.)  We thus rejected in Clayworth the argument that if the plaintiffs could demonstrate no compensable losses or entitlement to restitution under section 17203, they would lack standing under section 17204. ....

....

Accordingly, we hold ineligibility for restitution is not a basis for denying standing under section 17204 and disapprove those cases that have concluded otherwise.  (See Silvaco Data Systems v. Intel Corp., supra, 184 Cal.App.4th 210, 245; Citizens of Humanity, LLC v. Costco Wholesale Corp., supra, 171 Cal.App.4th 1, 22; Buckland v. Threshold Enterprises, Ltd., supra, 155 Cal.App.4th 798, 817.)

Slip op. at 29-32 (footnote omitted; emphasis added).  Even the dissent acknowledges that a competitor who suffered "lost sales and profits due to Kwikset's misrepresentations" (which would not normally be recoverable as restitution) would have standing under Prop. 64.  Dissent, Slip op. at 11.

Supreme Court UCL restitution decision: Pineda v. Bank of America

In Pineda v. Bank of America, N.A., ___ Cal.4th ___ (Nov. 18, 2010), the Supreme Court held that Labor Code section 203 penalties may not be recovered as "restitution" under the UCL.  Slip op. at 13-15.  The opinion contains an interesting discussion, which confirms that while unpaid wages are recoverable under the UCL, Labor Code remedies that amount to penalties, rather than wages, are not: 

In explaining why section 203 penalties are not recoverable as restitution, it is first helpful to briefly discuss why unpaid wages are recoverable.

In Cortez, we held the plaintiff could seek restitution of unpaid overtime wages via the UCL.  (Cortez, supra, 23 Cal.4th at p. 168.)  We explained that, “[o]nce earned, those unpaid wages became property to which the employees were entitled.”  (Ibid.)  Thus, it was of no import that the overtime wages had never been in the possession of the employees; “earned wages that are due and payable pursuant to section 200 et seq. of the Labor Code are as much the property of the employee who has given his or her labor to the employer in exchange for that property as is property a person surrenders through an unfair business practice.”  (Id. at p. 178.)  “An order that earned wages be paid is therefore a restitutionary remedy authorized by the UCL.”  (Ibid.)

By contrast, permitting recovery of section 203 penalties via the UCL would not “restore the status quo by returning to the plaintiff funds in which he or she has an ownership interest.”  (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1149.)  Section 203 is not designed to compensate employees for work performed.  Instead, it is intended to encourage employers to pay final wages on time, and to punish employers who fail to do so.  In other words, it is the employers’ action (or inaction) that gives rise to section 203 penalties.  The vested interest in unpaid wages, on the other hand, arises out of the employees’ action, i.e., their labor.  Until awarded by a relevant body, employees have no comparable vested interest in section 203 penalties.  We thus hold section 203 penalties cannot be recovered as restitution under the UCL.

Slip op. at 14-15 (footnote omitted). 

The Court also held that a three-year, rather than a one-year, statute of limitations applies to all claims for penalties brought directly under Labor Code section 203, regardless of whether unpaid wages are also sought in the same action.  Slip op. at 3-13.  The Court of Appeal had concluded that a one-year statute of limitations applied in some cases.  Id. at 3. 

The practical effect of the opinion, therefore, is that workers will be able to recover section 203 penalties going back three years, not one year, as the Court of Appeal had held, and not four years, as the UCL would have permitted.

Supreme Court to hand down opinion tomorrow in Pineda v. Bank of America

Well, I'm interrupting my hiatus already because the Supreme Court just announced that tomorrow (November 18, 2010) it will hand down its opinion in Pineda v. Bank of America, no. S170758, which was argued on October 5, 2010. 

Pineda is the case involving whether waiting time penalties may be recovered as restitution under the UCL.  See this blog post for more.  The California Channel has the video of the oral argument here.  (According to Scott Leviant the Pineda argument starts at about the 7:30 mark in the video.)

When the opinion is posted online, it should be available at this link:

• Pineda v. Bank of America, N.A., ___ Cal.4th ___ (Nov. 18, 2010)

New federal UCL "fraudulent" prong decision: In re Neurotonin Marketing & Sales Practices Litigation

Many thanks to the blog reader who drew my attention to a new federal decision of interest, In re Neurotonin Marketing & Sales Practices Litigation, ___ F.Supp.2d ___, 2010 WL 4325225 (D. Mass. Nov. 3, 2010).  In this post-trial decision, the court orders the defendant (Pfizer) to pay $95 million in restitution to the plaintiff (Kaiser Foundation Health Plan) for violations of the UCL's "fraudulent" prong. 

The decision is lengthy and covers a variety of very interesting UCL-related subjects, including "reliance" post-Tobacco II, partial omissions, the delayed discovery rule, choice-of-law, causation, the measure of restitution, and pre-judgment interest in UCL actions. 

This case shows just how powerful the UCL can be.

Thoughts on Clark v. Superior Court (Nat'l Western Life Ins. Co.)

I've been meaning to write more on Clark v. Superior Court (Nat'l Western Life Ins. Co.), 50 Cal.4th 605 (Aug. 9, 2010).  In Clark, the Supreme Court held that the enhanced remedies of Civil Code section 3345 (applicable in certain cases brought by senior citizens and disabled persons) are not recoverable in a UCL "unlawful" prong case predicated on violation of that statute.  

The Court had this to say about UCL restitution:

For the reasons given above, we conclude that trebled recovery may be awarded under Civil Code section 3345, subdivision (b) only if the statute under which recovery is sought permits a remedy that is in the nature of a penalty. We now consider whether the unfair competition law, the basis of plaintiffs' private party action, falls within that category. 

As we have seen, restitution is the only monetary remedy authorized in a private action brought under the unfair competition law.  (Korea Supply Co. v. Lockheed Martin Corp., supra, 29 Cal.4th at pp. 1146, 1148.)  Restitution is not a punitive remedy.  The word “restitution” means the return of money or other property obtained through an improper means to the person from whom the property was taken.  (Kasky v. Nike, Inc., supra, 27 Cal.4th at p. 950; Kraus v. Trinity Management Services, Inc., supra, 23 Cal.4th at pp. 126-127.) “The object of restitution is to restore the status quo by returning to the plaintiff funds in which he or she has an ownership interest.” (Korea Supply Co. v. Lockheed Martin Corp., supra, 29 Cal.4th at p. 1149, italics added.) In contrast, a penalty is a recovery “ ‘without reference to the actual damage sustained....’ ” (Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1104.) “Penalties provide for ‘ “recovery of damages additional to actual losses incurred, such as double or treble damages....” ’ ” (Ibid.)  Because restitution in a private action brought under the unfair competition law is measured by what was taken from the plaintiff, that remedy is not a penalty and hence does not fall within the trebled recovery provision of Civil Code section 3345, subdivision (b).

Slip op. at 9-10 (emphasis added).  Contrast this with what the Court said in Tobacco II a year earlier:

"[T]o state a claim under either the UCL or the false advertising law, based on false advertising or promotional practices, 'it is necessary only to show that "members of the public are likely to be deceived."'" (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 951 [119 Cal.Rptr.2d 296, 45 P.3d 243].)  To achieve its goal of deterring unfair business practices in an expeditious manner, the Legislature limited the scope of the remedies available under the UCL. "A UCL action is equitable in nature; damages cannot be recovered. [Citation.] . . . We have stated under the UCL, '[p]revailing plaintiffs are generally limited to injunctive relief and restitution.' [Citation.]" (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1144.)

The fraudulent business practice prong of the UCL has been understood to be distinct from common law fraud. "A [common law] fraudulent deception must be actually false, known to be false by the perpetrator and reasonably relied upon by a victim who incurs damages. None of these elements are required to state a claim for injunctive relief" under the UCL. (Day v. AT&T Corp. (1998) 63 Cal.App.4th 325, 332; see State Farm Fire & Casualty Co. v. Superior Court (1996) 45 Cal.App.4th 1093, 1105.)  This distinction reflects the UCL's focus on the defendant's conduct, rather than the plaintiff's damages, in service of the statute's larger purpose of protecting the general public against unscrupulous business practices. (Fletcher v. Security Pacific National Bank (1979) 23 Cal.3d 442, 453.)

In re Tobacco II Cases, 46 Cal. 4th 298, 312 (2009) (footnote omitted) (emphasis added). 

So, enthusiastic readers, are the two holdings consistent, and if not, how do we reconcile them?

Supreme Court briefs in Pineda v. Bank of America

The Supreme Court has posted copies of the briefs in Pineda v. Bank of America, no. S170758, which is scheduled for oral argument in Fresno on Tuesday, October 5, 2010 at 1:30 p.m.:

S170758 - PINEDA v. BANK OF AMERICA
(Chin, J., not participating; Richli, J., assigned justice pro tempore)

• Expanded Background Summary
• Appellant's Petition for Review
• Respondent's Answer to Petition for Review
• Appellant's Reply to Answer to Petition for Review
• Appellant's Opening Brief on the Merits
• Respondent's Answer Brief on the Merits
• Appellant's Reply Brief on the Merits

From a UCL perspective, the most interesting issue in Pineda is whether waiting time penalties under Labor Code section 203 may be recovered as restitution in a UCL "unlawful" prong case for violation of that section.  The opening brief on the merits relies on the "vested interest" theory of UCL restitution, arguing that like the "earned wages" "due and payable” in Cortez, the penalty wages are also due and payable by operation of statute, giving the workers a property interest in the funds recoverable under the UCL as restitution. I think that's a persuasive argument, wholly consistent with Cortez and the purpose of UCL restitution generally. 

The brief says that Judge David Velasquez of the Orange County Superior Court has adopted that reasoning in at least one other case.  The order referred to appears to be the same one discussed in this blog post from May 2008.

For more on the "vested interest" theory of UCL restitution, see my article on the subject (link accessible to CAOC members only). 

Supreme Court sets UCL restitution case for oral argument: Pineda v. Bank of America

Yesterday, the Supreme Court posted its oral argument calendar for October.  One case of interest, Pineda v. Bank of America, no. S170758, has been set for argument, on Tuesday, October 5, 2010 at 1:30 p.m.  The Court is holding a special oral argument session that week at the Fifth District Court of Appeal in Fresno.

These are the issues on review in Pineda:  

(1) When a worker files an action to recover penalties for late payment of final wages under Labor Code section 203, but does not concurrently seek to recover any other unpaid wages, is the statute of limitations the one-year statute for penalties under Code of Civil Procedure section 340, subdivision (a), or the three-year statute for unpaid wages under Labor Code section 202? (2) Can penalties under Labor Code section 203 be recovered as restitution in an Unfair Competition Law action (Bus. & Prof. Code, § 17203)?

(Emphasis added.)  My original post on the Court of Appeal opinion in Pineda is at this link.

"Supremes Hand Win to Workers with Google Age Bias Ruling"

Yesterday's Recorder had this article by Kate Moser summarizing the Supreme Court's decision yesterday in Reid v. Google, Inc., ___ Cal.4th ___ (Aug. 5, 2010).   An exerpt from the article:

In a unanimous opinion published today, the court held that applying the federal "stray remarks" doctrine in employment discrimination cases — which deems statements made outside of the company's decision-making process to be irrelevant — might lead to an unfair result.

....

The court also held that a trial judge's failure to rule on evidentiary objections at a summary judgment hearing makes for an implied overruling, preserving them for appellate review. That's how San Jose's Sixth District Court of Appeal treated Google's objections in the immediate case, reversing a judgment in the company's favor.

This was my post on the UCL aspects of the Court of Appeal's decision in October 2007.  The Supreme Court's opinion does not appear to address the UCL.

More thoughts on Clayworth v. Pfizer

Another notable part of Clayworth v. Pfizer, Inc., ___ Cal.4th ___ (Jul. 12, 2010) is its confirmation that plaintiffs who did not purchase a product "directly" from the defendant may nonetheless bring a UCL claim and recover restitution if the plaintiff's loss can be traced to the defendant's pockets.  This was an issue in some cases involving purchases of products from retail intermediaries, until the Court of Appeal rejected the argument in Shersher v. Superior Court, 154 Cal.App.4th 1491 (2007) (discussed in this blog post).

The Supreme Court adopted the rule of Shersher in Clayworth:

While the voters clearly intended to restrict UCL standing, they just as plainly preserved standing for those who had had business dealings with a defendant and had lost money or property as a result of the defendant’s unfair business practices. (Prop. 64, § 1, subds. (b), (d); see § 17204.) Under that standard, Pharmacies have established standing. To distribute their pharmaceuticals, Manufacturers depend on a network of wholesalers and retailers. Pharmacies acted as retailers for Manufacturers’ drugs and thus had indirect business dealings with Manufacturers. (See Shersher v. Superior Court (2007) 154 Cal.App.4th 1491, 1499-1500 [indirect purchases may support UCL standing].) They lost money: the overcharges they paid. (See Hall v. Time Inc. (2008) 158 Cal.App.4th 847, 854 [§ 17204 standard is satisfied when the plaintiff has “expended money due to the defendant’s acts of unfair competition”].) Finally, that loss was the result of an unfair business practice: Pharmacies paid more than they otherwise would have because of a price-fixing conspiracy in violation of state law. The voters’ intent that under Proposition 64 suits be limited to those who suffer injury in fact is satisfied here. (See Chattanooga Foundry v. Atlanta, supra, 203 U.S. at p. 396 [“A person whose property is diminished by a payment of money wrongfully induced is injured in his property.”].)

Slip op. at 38-39 (emphasis added).

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. 

Clayworth v. Pfizer opinion to be handed down Monday

Many thanks to the blog reader who emailed to advise that the Supreme Court's opinion in Clayworth v. Pfizer, Inc., no. S166435, will be handed down on Monday at 10:00 a.m., according to the Notice of Forthcoming Filings posted today. 

When it is issued, the opinion should be available at this link:

• Clayworth v. Pfizer, Inc., ___ Cal.4th ___ (Jul. 12, 2010).

Supreme Court takes up two cases involving UCL issues: Pineda v. Bank of America and Sullivan v. Oracle

Today, the Supreme Court took up two cases involving UCL issues. 

First, the Court granted review in Pineda v. Bank of America, no. S170758, in which the Court of Appeal (First Appellate District, Division Three) held that Labor Code “section 203 penalties may not be recovered as restitution under Business and Professions Code section 17203.” Pineda v. Bank of America, N.A., 170 Cal.App.4th 388, 390 (2009) (discussed in this blog post).  That opinion is no longer citable as precedent. 

Second, the Court accepted the questions certified to it by the Ninth Circuit in Sullivan v. Oracle Corp., no. S170577:

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

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

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

Sullivan v. Oracle Corp., 557 F.3d 979 (9th Cir. 2009) (listing certified questions).  See this blog post for more on the Ninth Circuit's withdrawn opinion, Sullivan v. Oracle Corp., 547 F.3d 1177 (9th Cir. 2008).

As soon as I have time, I will add these cases to my list of pending Supreme Court cases involving UCL and/or class certification issues. 

New UCL restitution opinion: Grodensky v. Artichoke Joe's Casino

In Grodensky v. Artichoke Joe's Casino, ___ Cap.App.4th ___ (Mar. 11, 2009), the Court of Appeal (First Appellate District, Division Two) held that employees may recover as UCL "restitution" tips that their employer unlawfully took from them, even though the employer then paid the tips to others (here, to shift managers whom the Labor Code prohibits from sharing in tips). Slip op. at  23-32.  The opinion also has an interesting discussion of attorneys' fees under the private attorney general doctrine (Code Civ. Proc. section 1021.5).  Id. at 34-42. 

Incidentally, the opinion creates a split in authority with Lu v. Hawaiian Gardens, 170 Cal.App.4th 466 (2009), respecting whether the Labor Code provisions governing tips carry a private right of action. Id. at 13-23. 

New UCL restitution decision: Pineda v. Bank of America, N.A.

In the published portion of Pineda v. Bank of America, N.A., ___ Cal.App.4th ___ (Jan. 21, 2009), the Court of Appeal (First Appellate District, Division Three) held that Labor Code "section 203 penalties may not be recovered as restitution under Business and Professions Code section 17203." Slip op. at 2; see id. at 7-10. The practical result of this holding is that, while the unpaid wages themselves may be recovered as UCL restitution (see Cortez v. Purolator Air Filtration Products Co., 23 Cal.4th 163, 173 (2003)), a shorter statute of limitations will apply to claims for any waiting time penalties associated with those unpaid wages.

The Complex Litigator has a detailed post on Pineda. Wage Law was following Pineda, but does not yet have a post on the new opinion. 

Statement of issues on review in Clayworth v. Pfizer, Inc.

The Supreme Court has posted its statement of issues on review in Clayworth v. Pfizer, Inc., no. S166435. The UCL-related issues are particularly interesting:

(1) When plaintiffs pay overcharges on goods or services as a result of the anticompetitive conduct of defendant sellers but recover the overcharges through increased prices at which the goods or services are sold to end users, may defendants assert a "pass-on" defense and argue that plaintiffs were not injured because they did not suffer financial loss as a result of the anticompetitive conduct? (2) Is restitution available under the Unfair Competition Law (Bus. & Prof. Code, 17200 et seq.) to plaintiffs who recovered from third persons the overcharges paid to defendants? (3) When plaintiffs recover from third persons the overcharges paid to defendants, have they suffered actual injury and lost money or property for purposes of establishing standing under the Unfair Competition Law, as amended by Proposition 64?

I've added Clayworth to my list of pending California Supreme Court cases of interest to UCL and class action practitioners. I also added Brinker to that list.

Supreme Court grants review in UCL/antitrust case: Clayworth v. Pfizer, Inc.

Yesterday, the Supreme Court granted review in Clayworth v. Pfizer, Inc., no. S166435. In Clayworth, the Court of Appeal held that the "pass-on" defense applied to a price-fixing case brought by intermediate purchasers under California's Cartwright Act, and also that if the plaintiffs have passed on the entirety of their losses, they can no longer recover restitution under the UCL. Clayworth v. Pfizer, Inc., ___ Cal.App.4th ___, 83 Cal.Rptr.3d 45 (2008) (review granted). See this blog post for more on Clayworth.

In addition, the Supreme Court denied review in Medrazo v. Honda of North Hollywood, no. S167170. In Medrazo, the Court of Appeal (Second Appellate District, Division Four) reversed an order denying class certification of UCL and CLRA claims predicated on the defendant's violation of certain Vehicle Code provisions. Medrazo v. Honda of North Hollywood, 166 Cal.App.4th 89 (2008). See this blog post for more on Medrazo.

Finally, the Supreme Court will be handing down its decision this morning at 10:00 a.m. in the Vasquez attorneys' fees case. When it does, the opinion will be available at this link. Time permitting, I will post a summary of the holding later today.

Supreme Court extends time to grant or deny review in UCL/antitrust case: Clayworth v. Pfizer, Inc.

On October 31, 2008, the Supreme Court gave itself an extension of time, through December 4, 2008, to grant or deny review in Clayworth v. Pfizer, Inc., no. S166435.

Clayworth is an interesting case that I did not have time to report on when it was handed down this summer.  In Clayworth, the Court of Appeal (First Appellate District, Division Two) held that the "pass-on" defense applied to a price-fixing case brought by intermediate purchasers under California's Cartwright Act.  Clayworth v. Pfizer, Inc., ___ Cal.App.4th ___, 83 Cal.Rptr.3d 45 (July 25, 2008; modified Aug. 18, 2008).  The case also included a UCL claim.  The Court of Appeal held that the plaintiffs, having passed on the the entirety of their losses, could not recover restitution within the meaning of the UCL: 

Once plaintiffs resold defendants’ products, and thereby recovered all of their costs, plaintiffs relinquished any ownership interest in the claimed overcharges—and forfeited any possible UCL claim. (See Woodward, “Passing-on” the Right to Restitution (1985) 39 U.Miami L.Rev. 873.)

Slip op. at 39.  Cal Biz Lit had a nice post on Clayworth back in August.

New Ninth Circuit UCL restitution decision: Theme Promotions, Inc. v. News America Marketing FSI

In Theme Promotions, Inc. v. News America Marketing FSI, ___ F.2d ___ (9th Cir. Aug. 20, 2008), the Ninth Circuit affirmed the trial court's determination that the monetary loss the plaintiff suffered did not constitute "restitution" within the meaning of the UCL. Slip op. 11082-84.

"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.

Interesting UCL restitution order: Ybarra v. Aramark Corp.

On May 1, 2008, Judge David C. Velasquez, Supervising Judge of the Orange County Superior Court Complex Civil Panel, issued an interesting order in a wage and hour case, Ybarra v. Aramark Corp., No. 30-2008-0018008-CU-OE-CXC (Orange Cty. Super.). Judge Velasquez held that waiting time penalties under Labor Code section 203 were recoverable under the UCL as "restitution":

In similar fashion to the "additional hour of pay" [in Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1108], the instant court observes that Labor Code §203 does not provide that the employer is "subject to" the imposition of the waiting time penalty. Rather that section states "the wages of the employee shall continue" if the employer does not pay separation wages within 72 hours of the employee's termination. The employee is not required to do anything affirmative — "take action" — in order to be entitled to the continuing right to wages. The right to the waiting time penalty is self-executing, i.e., the employee's right to payment of the waiting time penalty arises immediately upon the satisfaction of the condition precedent, late payment of the last wages due to the employee at the time of termination from employment. In that respect, because the waiting time penalty becomes immediately due and payable to the employee, the right to receive the penalty becomes a vested property right of the employee and the proper subject of restitution. (Cf. Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 178 [wages which are due but unpaid are the proper subject of restitution].)

Minute Order at 2. This would be a form of what I call "vested interest" restitution. Judge Velasquez therefore denied the motion to strike the complaint's references to UCL restitution and to the four-year statute of limitations (and overruled the defendant's demurrer to the UCL cause of action as a whole).

Many thanks to the blog reader who emailed this order to me. If you know of an interesting trial-level order like this one, I'd be glad to receive a copy of it ([email protected]).

New UCL restitution decision: Bradstreet v. Wong

The Court of Appeal's opinion in Bradstreet v. Wong, ___ Cal.App.4th ___ (Apr. 16, 2008) addresses "vested interest" restitution, which is one of the three types of UCL restitution. The California Supreme Court has held that the Labor Code gives employees a vested interest in earned but unpaid wages, which are therefore recoverable as restitution in a UCL action. Cortez v. Purolator Air Filtration Products Co., 23 Cal.4th 163 (2000); see slip op. at 19-20 (citing Cortez). In Bradstreet, the Court of Appeal (First Appellate District, Division One) held that a defunct corporation's individual owner-officers could not be required to restore unpaid wages earned by the corporation's employees. The plaintiff-employees had a vested right to be paid by the corporate employer, but that right did not extend to its owner-officers:

There is no dispute ... that the unpaid wages could be recovered from the Wins Corporations as restitution pursuant to Business and Professions Code section 17203. “[A]n order that a business pay to an employee wages unlawfully withheld is consistent with the legislative intent underlying the authorization in [Business and Professions Code] section 17203 for orders necessary to restore to a person in interest money or property acquired by means of an unfair business practice.” (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 178.) ....

The issue in the case before us is whether [the individual] defendants, who were not the employers, and who were not found to have required any employee to work for them personally, or to have misappropriated corporate funds for their own use, may also be required to pay the earned but unpaid wages as restitution.

“[A]n order for restitution is one ‘compelling a UCL defendant to return money [or earned wages for service performed] obtained through an unfair business practice to those persons in interest from whom the property was taken, that is, to persons who had an ownership interest in the property or those claiming through that person.’ ” (Korea Supply, supra, 29 Cal.4th at p. 1149.) The problem with requiring defendants, rather than the Wins Corporations, to pay unpaid wages as restitution is that the labor intervener performed was not for defendants personally, but for the employers, the Wins Corporations. Defendants did not personally obtain the benefit of those services, and the duty to pay wages was owed by the corporations as employers, not by defendants as owners, officers or managers. (See Reynolds, supra, 36 Cal.4th at p. 1087.)

Nor is this a case in which defendants “misappropriated to themselves, as individuals for their individual advantage, the unpaid wages” the Wins Corporations owed. (Reynolds, supra, 36 Cal.4th at p. 1090.) Although intervener cites evidence that she contends establishes defendants did take funds out of the Wins Corporations for their personal use, the court, as trier of fact, found that defendants did not personally obtain any “money or gains from which to . . . pay restitution.” It resolved against intervener conflicts in the evidence on the issue of withdrawal of funds from the Wins Corporations for defendants’ personal use. It found, instead, that defendants “put far more personal funds into the corporations in the form of capital infusions and loans than were alleged to have been improperly taken out. . . . [E]vidence indicated capital contributions and loans from Defendants to the corporations in excess of $1,000,000. These capital contributions and loans came largely toward the end of the Wins Corporations’ existence in an unsuccessful effort to keep the corporations afloat.”

In the absence of a finding that intervener performed labor for defendants personally, rather than for the benefit of Wins Corporations, or that defendants appropriated for themselves corporate funds that otherwise would have been used to pay the unpaid wages, we agree with the trial court’s conclusion that an order requiring defendants to pay the unpaid wages would not be “restitutionary as it would not replace any money or property that [defendants] took directly from” intervener. (Korea Supply, supra, 29 Cal.4th at p. 1149.) “[T]he notion of restoring something to a victim of unfair competition includes two separate components. The offending party must have obtained something to which it was not entitled and the victim must have given up something which he or she was entitled to keep.” (Day v. AT&T Corp. (1998) 63 Cal.App.4th 325, 340.) Therefore, restitution is available where “ ‘a defendant has wrongfully acquired funds or property in which a plaintiff has an ownership or vested interest.’ ” (Feitelberg v. Credit Suisse First Boston, LLC (2005) 134 Cal.App.4th 997, 1012.) Defendants cannot be required to return or restore to intervener something they never obtained. (See Madrid v. Perot Systems Corp. (2005) 130 Cal.App.4th 440, 456 [noting absence of authority for proposition that “a UCL plaintiff may recover money from a defendant who never received it . . . ].) The intervener provided her labor to the employer, i.e., the Wins Corporations. The Wins Corporations, not their owners, officers or managers, owed the earned wages that became due and payable when the labor was performed. (See Reynolds, supra, 36 Cal.4th at p. 1087.) Not having acquired or directly and personally benefited from intervener’s labor without paying for it, or having misappropriated for their personal use corporate funds that could have been used to pay her wages, defendants could not be required to pay the unpaid wages as restitution. Such relief would not be “restitutionary as it would not replace any money or property that [defendants] took directly from” intervener. (Korea Supply, at p. 1149.)

Slip op. at 20-22 (emphasis in original) (footnote omitted). It is critical here that the owner-officers never misappropriated funds for their own use and contributed more capital to the corporation than they took out. Otherwise, a stronger argument might have been made that the value of the employees' labor passed from the employees, to the corporation, to the owners, and was thus traceable and subject to a restitutionary award.

Statement of issues on review in Reid v. Google

The Supreme Court's statement of issues on review in Reid v. Google, no. S158965, is up. It looks like the UCL restitution issue will not be a major focus of the case:

Petition for review after the Court of Appeal affirmed in part and reversed in part the judgment in a civil action. This case presents the following issues: (1) Should California law recognize the "stray remarks" doctrine, which permits the trial court in ruling on a motion for summary judgment to disregard isolated discriminatory remarks or comments unrelated to the decision-making process as insufficient to establish discrimination? (2) Are evidentiary objections not expressly ruled on at the time of decision on a summary judgment motion preserved for appeal?

UPDATE: The blog Cal Biz Lit has an interesting post on the summary judgment issues that the Supreme Court will be reviewing in this case. And an article by Mike McKee in Monday's Recorder reports that "Google Appeal Carries Big Evidence Issue." An excerpt:

E-mails were flying between litigators Thursday as word spread that the California Supreme Court had agreed to resolve a thorny issue over how trial court judges should treat evidence.

Specifically, the high court decided Wednesday it was time to take a closer look at so-called Biljac rulings to clarify what lawyers and trial court judges must do to ensure that evidentiary objections are preserved for appellate review when summary judgment motions are decided.

For more discussion of the Biljac issue, see this post from my other blog, The Appellate Practitioner.