The UCL Practitioner

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

In an unpublished section of Weimer v. Nationstar Mortgage, LLC, ___ Cal.App.5th ___ (Apr. 2, 2020), the Court of Appeal (Third Appellate District) discussed the three-way split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

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

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

Under the "balancing" test, the Court held in the unpublished section, the plaintiff had adequately alleged that defendants' handling of his loan modification was "unfair" within the meaning of the UCL.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

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

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

UCL "unlawful" prong case: Uber Technologies Pricing Cases

In Uber Technologies Pricing Cases, ___ Cal.App.5th ___ (Mar. 23, 2020), the Court of Appeal (First Appellate District, Division One) considered an action against Uber by "several taxi companies and taxi medallion owners" "alleging violation of the Unfair Practices Act’s (UPA) prohibition against below-cost sales (Bus & Prof. Code, § 17043) and, in turn, violation of the Unfair Competition Law (UCL) (§ 17200 et seq.)."  Slip op. at 1 (footnote omitted).  The trial court held that the claims fell within a statutory exception for "any service, article or product for which rates are established under the jurisdiction of the [CPUC]," even though the CPUC had not in fact stepped in and "established" any actual rates for Uber to follow.   Id. at 3-4. 

The Court of Appeal affirmed, in a detailed analysis of this statutory interpretation question (id. at 4-18), then disposed of the UCL claim in a footnote:

Because plaintiffs’ UCL claims were wholly derivative of their UPA claims, they were also properly dismissed.  (See Aleksick v. 7-Eleven, Inc. (2012) 205 Cal.App.4th 1176, 1185 [When a UCL claim is derivative of other substantive causes of actions, the dismissal of the antecedent substantive causes of action necessarily means dismissal of the UCL claim.].) 

Id. at 18 n.10. 

I wonder how a UCL "unfair" prong claim might have fared (no pun intended).  The statutory exception does not sound like a Cel-Tech safe harbor, because it does not expressly declare Uber's conduct to be lawful.  Cel-Tech Communications, Inc. v. Los Angeles Cell. Tel. Co., 20 Cal.4th 163, 183-84 (1999).  Nor does the safe harbor apply to regulatory actions, such as hypothetical CPUC rate setting (which had not even occurred in this case).  See Krumme v. Mercury Ins. Co., 123 Cal.App.4th 924, 940 n.5 (2004) (“our Supreme Court has held that only statutes can create a safe harbor”).  

"Dating app can't base fee on age, court decides"

This morning's print issue of the Daily Journal has an article, including my photo, on my Unruh Act case for age discrimination against Tinder.  A similar article is available to subscribers on the Daily Journal's website.  An excerpt:

In a loss for Tinder Inc., the 2nd District Court of Appeal has swiped right to approve a putative class action alleging the popular dating app discriminates by charging users over 30 more money.  .... 

"The Court of Appeal was very careful to adhere to California Supreme Court precedent on the Unruh Act," Kralowec said.  Other opinions have supported differential treatment, but those decisions are justified by a social policy, the appellate court observed. For example, laws allow for seniors and children to get discounts in certain situations. 

"Law recognizes that those groups have reduced income. Children can't work. But there aren't similar statutory enactments ... to protect adults under 30," said Kralowec.

For more on the UCL aspects of the case, see this blog post.  A link to the opinion is available here:  Candelore v. Tinder, Inc., ___ Cal.App.5th ___ (Jan. 29, 2018).

New opinion addresses UCL "unlawful" and "unfair" prongs: Candelore v. Tinder, Inc.

This case is really more about the Unruh Act than the UCL.  In Candelore v. Tinder, Inc., ___ Cal.App.5th ___ (Jan. 29, 2018), the Court of Appeal (Second Appellate District, Division Three) held that because the complaint adequately alleged a violation of the Unruh Act (namely, age-based price discrimination), the complaint also stated a claim for violation of the UCL's "unlawful" prong.  Slip op. at 20. 

In addition, the complaint adequately alleged an "unfair" prong violation:

[I]n view of our conclusion that Tinder’s alleged discriminatory pricing model violates the public policy embodied in the Unruh Act, the UCL’s “unfair” prong provides an independent basis for relief on the facts alleged. The standard for finding an “unfair” practice in a consumer action is “ ‘intentionally broad, thus allowing courts maximum discretion to prohibit new schemes to defraud. [Citation.] The test of whether a business practice is unfair “involves an examination of [that practice’s] impact on its alleged victim, balanced against the reasons, justifications and motives of the alleged wrongdoer. In brief, the court must weigh the utility of the defendant’s conduct against the gravity of the harm to the alleged victim . . . .  [Citations.]” . . . [A]n “unfair” business practice occurs when that practice “offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.” [Citation.]’ ” (Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 718-719; accord Ticconi v. Blue Shield of California Life & Health Ins. Co. (2008) 160 Cal.App.4th 528, 539.)

Slip op. at 20-21 (emphasis added).  The Court applied the "balancing test" formulation of the "unfair" prong.  See id.

Because I served as appellate counsel for the plaintiff and appellant in this case (along with co-counsel Al Rava), I happen to know that the parties did not contest that the "balancing test" applies.  Hence, this case did not present an opportunity for the Court to consider or resolve the three-way split in authority on the proper formulation of "unfair" conduct.  For more on the three-way split, see these blog posts. 

As for the underlying Unruh Act claim, the San Francisco Chronicle reported yesterday that "Dating service cannot charge older folks more on belief they are wealthier." Earlier this month, Consumer Protection Law360 reported that "Tinder User Says Age Bias Suit Deserves Second Chance" (subscription). 

Insurance bad faith and the UCL

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

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

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

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

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

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

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

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

Id. at 8.  

The opinion goes on to say this: 

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

Id. 

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

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

Under the "section 5" test:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

New FAL/UCL opinion considers standing: Goonewardene v. ADP, LLC

In Goonewardene v. ADP, LLC, ___ Cal.App.4th ___ (Nov. 4, 2016), the Court of Appeal (Second Appellate District, Division Four) affirmed the trial court's dismissal of the plaintiff's FAL and UCL claims for lack of Prop. 64 standing and for other reasons.  Slip op. at 45-53. 

As for the FAL claim, the complaint alleged that the defendant made numerous false statements to the public, but did not allege that the plaintiff saw or relied on them for any reason.  Id. at 47.  (The plaintiff alleged that she worked for a company who hired the defendant to handle its payroll and wage statements.)  The opinion discusses Kwikset at some length.  See id. at 47-49.

The portion of the opinion discussing the UCL claim is more interesting.  The opinion does not acknowledge the three-way split in authority on the definition of "unfair" conduct.  Instead, it holds that the plaintiff failed to state a claim under the post-Cel-Tech "tethering" test, under which, in the words of this opinion, "the public policy necessary to establish an unfair practice must be closely tied to a statute."  Slip op. at 50-51.   The lack of a statutory tether defeated not only the "unfair" prong claim, but also the "unlawful" prong claim, to the extent predicated on non-statutory, common-law violations (including negligence and breach of contract).  Id. at 51-52. (I think the latter holding was error, but it might not matter, because the opinion allows those common-law claims to proceed on their own. That said, it would be unfortunate if this opinion had the effect of eroding the broad scope of the UCL's "unlawful" prong as construed by the Supreme Court.)

As for the "fraudulent" prong claim, this failed for lack of allegations of reliance, and also because the complaint alleged no losses that could be recoverable from the payroll company as restitution.  Id. at 52-53.  The plaintiff allegedly lost wages because of the payroll company's misconduct, but the company "derived no benefit" from the lost wages.  Id. (citing Bradstreet v. Wong, 161 Cal.App.4th 1440, 1444 (2008)).  In other words, it's not the payroll company, but rather the employer, who owed the plaintiff any lost wages or penalties, and the payroll company had acquired no money from the plaintiff, either directly or indirectly, by means of its alleged payroll mistakes (or misrepresentations).

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

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

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

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

Supreme Court issues new UCL opinion - not! In re Cipro Cases I & II

Yesterday, the Supreme Court handed down its eagerly-anticipated opinion, In re Cipro Cases I & II, __ Cal.4th ___ (May 7, 2015), in which the Court was expected to reaffirm its landmark holding in Cel-Tech that conduct can be "unfair" under the UCL even if not "unlawful," and vice versa.

It didn't happen.  Here's the entirety of the discussion of the UCL claim:

V.        Unfair Competition Law and Common Law Monopoly Claims

The trial court entered judgment against plaintiffs on their unfair competition and common law monopoly claims using the same reasoning it applied to the Cartwright Act claim.  Because that reasoning was erroneous, we reverse on these claims as well.

Slip op. at 51. 

Oh, well.  Maybe next time. 

On the antitrust issue, the Court unanimously held that "pay-for-delay" agreements between pharmaceutical patent holders and generic-manufacturer competitors can be unlawful under the Cartwright Act:

Under federal antitrust law, these settlements are not immune from scrutiny, even if they limit competition no more than a valid patent would have.  (Federal Trade Commission v. Actavis, Inc. (2013) 570 U.S. ___, ___ [186 L.Ed.2d 343, 356, 133 S.Ct. 2223, 2230] (Actavis).)  We conclude the same is true under state antitrust law.  Some patents are valid; some are not.  Sometimes competition would infringe; sometimes it would not.  Parties illegally restrain trade when they privately agree to substitute consensual monopoly in place of potential competition that would have followed a finding of invalidity or noninfringement.  The Court of Appeal ruled to the contrary; we reverse.

Slip op. at 2.

Oral argument preview: In re Cipro Cases I & II

This morning at 9:00 a.m. in San Francisco, the Court will hear oral argument in In re Cipro Cases I & II, No. S198616.   This case involves some interesting questions of antitrust law as well as a sleeper UCL issue. 

From the court's docket:

This case presents the following issue:  May a suit under the Cartwright Antitrust Act (Bus. & Prof. Code, § 16720 et seq.) be brought to challenge "reverse exclusionary payments" made by pharmaceutical manufacturers to settle patent litigation with generic drug producers and prolong the life of the patents in question?

Put another way, this is a "pay-for-delay" case.  The question before the Court is whether "pay for delay" agreements are per se unlawful under the Cartwright Act.  In 2013, the U.S. Supreme Court held that such agreements "can sometimes" violate the Sherman Act, and that they should be evaluated under the "rule of reason."  FTC v. Actavis, Inc., 133 S.Ct. 2223 (2013).  In late 2013, the California Supreme Court ordered the parties to file supplemental briefs on the impact of Actavis. 

The sleeper UCL issue is whether a defendant's conduct may be found "unfair" within the meaning of the UCL even if the conduct does not violate the Cartwright Act. The Court of Appeal said no (as discussed here).  I believe this answer contravenes Cel-Tech (as explained here and in my amicus brief for CAOC).

If my schedule permits, I plan to attend the argument today and report back on whether the Court or the parties discuss the UCL issue during what promises to be a very engaging argument.

Case with possible UCL issue set for oral argument: In re Cipro Cases I & II

Earlier this month, the Supreme Court posted its March 2015 oral argument calendar.  On March 3, 2015 at 9:00 a.m. in San Francisco, the Court will hear argument in In re Cipro Cases I & II, No. S198616. 

This case mainly raises some very interesting questions of antitrust law.  The litigation also involves a UCL claim, however, so it is possible the Supreme Court may address the UCL in its forthcoming opinion.  I filed an amicus brief for CAOC discussing one aspect of the UCL claim that the parties' briefing did not focus on.

My original post on the Court of Appeal's 2011 opinion is here.  In that opinion, the Court of Appeal reasoned that conduct not prohibited by the Cartwright Act could not be "unfair" within the meaning of the UCL.  I believe this reasoning is inconsistent with Cel-Tech, for reasons explained in detail in my amicus brief for CAOC. 

More discussion of Cipro appears in this blog post.  I first noted this issue more than nine years ago. (!)

I hope to be able to attend the argument on March 3 and see if the Court asks any questions about the UCL claim.  I have not yet attended any arguments with the two new justices presiding, so I'm looking forward to it. 

New UCL "unlawful" prong opinion: Audio Visual Services Group, Inc. v. Superior Court

In Audio Visual Services Group, Inc. v. Superior Court, ___ Cal.App.4th ___ (Jan. 21, 2015), the Court of Appeal (Second Appellate District, Division Three) held that the trial court should have sustained the defendant's demurrer to the plaintiff's UCL "unlawful" prong claim, without leave to amend, because the "borrowed" municipal ordinance did not apply to the plaintiff.  See slip op. at 8-14.

The Court did not consider whether the defendant's conduct might be "unfair," even if not "unlawful," as Cel-Tech allows, presumably because the plaintiff did not plead an "unfair" prong violation.  See id. at 14-15.  The Court had no problem with the idea that a municipal ordinance can form the predicate of a UCL "unlawful" prong claim. 

Ninth Circuit addresses UCL "unfair" prong: City of San Jose v. Office of the Commissioner of Baseball

In City of San Jose v. Office of the Commissioner of Baseball, ___ F.3d ___ (9th Cir. Jan. 15, 2015), the Ninth Circuit affirmed the district court's dismissal of state and federal antitrust claims under the baseball exemption, which Judge Kozinski described as "one of federal law's most enduring anomalies."  Slip op. at 3.  

The opinion disposed of the UCL claim as well, in this passage: 

San Jose also alleges a violation of California’s unfair competition law (UCL). However, under California law, “[i]f the same conduct is alleged to be both an antitrust violation and an ‘unfair’ business act or practice for the same reason—because it unreasonably restrains competition and harms consumers—the determination that the conduct is not an unreasonable restraint of trade necessarily implies that the conduct is not ‘unfair’ toward consumers.” Chavez v. Whirlpool Corp., 113 Cal. Rptr. 2d 175, 184 (Ct. App. 2001). An independent claim under California’s UCL is therefore barred so long as MLB’s activities are lawful under the antitrust laws.

Id. at 11.

I've explained before that Chavez is inconsistent with Cel-Tech on this point.  The issue may be resolved by the California Supreme Court in the Cipro matter, which is fully briefed and awaiting oral argument.  In re Cipro Cases I & II, No. S198616.  My amicus brief for CAOC in Cipro discusses the issue.  

New opinion construes UCL in wrongful foreclosure context: Rufini v. CitiMortgage, Inc.

In Rufini v. CitiMortgage, Inc., ___ Cal.App.4th ___ (May 28, 2014; pub. ord. Jun. 23, 2014; mod. Jul. 22, 2014), the Court of Appeal (First Appellate District, Division Three) held that the trial court improperly sustained the defendant's demurrer to a UCL claim arising out of the alleged wrongful foreclosure of the deed of trust on plaintiff's home. 

There's nothing particularly earth-shattering in the discussion of the UCL claim, which appears at pp. 11-13 of the slip opinion. 

Supreme Court depublishes UCL "unfair" prong opinion: Aspiras v. Wells Fargo Bank

This week, the Supreme Court depublished the Court of Appeal's opinion in Aspiras v. Wells Fargo Bank, N.A., 219 Cal.App.4th 948 (2013), discussed in this blog post.

This is an interesting development.  Aspiras created a split in authority with Jolley v. Chase Home Finance, LLC, 213 Cal.App.4th 872 (2013), regarding the post-Cel-Tech formulation of "unfair" conduct.  There is a longstanding three-way split in authority on the meaning of "unfair," and these two cases created a sub-split. 

Under the post-Cel-Tech formulation, conduct is "unfair" if it contravenes a legislative expression of public policy.  I think of it as violating the spirit, rather than the letter, of the law. 

In Jolley, the defendant's conduct violated a law that the Legislature enacted after the conduct occurred. The Court of Appeal reasoned that by enacting the law, the Legislature had recognized the existence of a public policy, and that the defendant's conduct in contravention of that policy was "unfair" under the UCL. (Jolley is discussed in this blog post.)

The Court of Appeal in Aspiras disagreed with this line of reasoning, and accepted the defendant's argument that so construing the "unfair" prong would "effectuate an improper retroactive application of the [newly-enacted] law." 

I have not seen the depublication request, so it's possible the Supreme Court was concerned with some other aspect of the opinion, which addressed a number of issues.  But at minimum, the Supreme Court's depublication order eliminates this sub-split in authority.

Another recent opinion construes the UCL in the foreclosure context: Lueras v. BAC Home Loans Servicing, LP

In Lueras v. BAC Home Loans Servicing, LP, ___ Cal.App.3d ___ (Oct. 31, 2013), the Court of Appeal reversed dismissal of the plaintiff's UCL and other claims stemming from an alleged wrongful foreclosure of his home.

The opinion's discussion of the UCL begins with standing, and holds that "[s]ale of a home through a foreclosure sale is certainly a deprivation of property to which a plaintiff has a cognizable claim."  Slip op. at 37.  Accordingly, the plaintiff had adequately alleged that he had "lost money or property" within the meaning of the UCL as construed in Kwikset.  Id.  The next question was whether the loss occurred "as a result of" something the bank had done wrong, rather than merely as a result of the plaintiff's own default on his loan repayment obligations.  See id. at 37-38.  The Court held that the plaintiff should be given an opportunity to amend the complaint to adequately allege causation:

We believe there is a reasonable possibility that Lueras can cure the defect in the First Amended Complaint.  As we explained in addressing the fraud cause of action, Bank of America informed Lueras any pending foreclosure sale would be “on hold” while he was being considered for other foreclosure avoidance programs.  Whitaker of Bank of America told him the May 5, 2011 letter was sent in error and he had been approved for a loan modification.  Lueras was told the foreclosure sale was to be rescheduled pending Fannie Mae’s approval of his loan modification.  Those allegations suggest Lueras can amend his UCL cause of action to allege Bank of America’s misrepresentations caused him to lose his home through foreclosure.  In addition, Lueras might be able to allege Bank of America did not work with him in good faith to evaluate and try to identify and implement a permanent solution, as a consequence of which he lost his home through foreclosure.

Slip op. at 38:

Next, without attempting to resolve the split in authority on the definition of "unfair" conduct, the Court held that several of the plaintiff's allegations were adequate to state a UCL claim (assuming the standing allegations were properly amended on remand):

It is fraudulent or unfair for a lender to proceed with foreclosure after informing a borrower he or she has been approved for a loan modification, or telling the borrower he or she will be contacted about other options and the borrower’s home will not be foreclosed on in the meantime, as represented in the May 5 letter.  It is fraudulent or unfair for a lender to misrepresent the status or date of a foreclosure sale.  In this case, Lueras alleged he contacted Bank of America about the May 6, 2011 letter, was informed he had already been approved for a loan modification, and was told the trustee’s sale, which had been rescheduled for May 18, 2011, would be reset pending approval by Fannie Mae of the loan modification.

Id. at 41-42.

New UCL "unfair" prong opinion: Aspiras v. Wells Fargo Bank, N.A.

Back in February, I reported on Jolley v. Chase Home Finance, LLC, 213 Cal.App.4th 872 (2013), in which the Court of Appeal (First Appellate District, Division Two), applying the post-Cel-Tech formulation, held that a finding of "unfair" conduct could be predicated on an expression of legislative policy embodied in the Legislature's subsequent enactment of a bill outlawing the conduct.

In a recently-published opinion, another Division of the Court of Appeal (the Fourth Appellate District, Division One) disagreed with this part of Jolley.  Aspiras v. Wells Fargo Bank, N.A., ___ Cal. App. 4th ___ (Aug. 21, 2013; pub. ord. Sept. 17, 2013).

The Aspiras opinion explains:

[I]n our view, use of the Legislature's enactment of laws against dual tracking as the underlying basis for a UCL cause of action where the assertedly unfair conduct occurred before January 1, 2018, as here, is to effectuate an improper retroactive application of the law.  Where a plaintiff predicates a claim of an unfair act or practice on public policy, it is not sufficient to merely allege the act violates public policy or is immoral, unethical, oppressive or unscrupulous.  (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1365.)  Rather, this court on numerous occasions has held that to establish a practice is "unfair," a plaintiff must prove the defendant's "conduct is tethered to an[] underlying constitutional, statutory or regulatory provision, or that it threatens an incipient violation of an antitrust law, or violates the policy or spirit of an antitrust law."  (Id., at p. 1366; Levine v. Blue Shield of California (2010) 189 Cal.App.4th 1117, 1137; Scripps Clinic v. Superior Court (2003) 108 Cal.App.4th 917, 940; Byars v. SCME Mortgage Bankers, Inc. (2003) 109 Cal.App.4th 1134, 1147.) 

Here, plaintiffs' operative complaint fails to state a claim under the unfairness prong of the UCL because they cannot allege Wells Fargo's alleged dual tracking, when it occurred in 2010, offended a public policy tethered to any underlying constitutional, statutory or regulatory provision.  (Durell v. Sharp Healthcare, supra, 183 Cal.App.4th at p. 1366.)  The trial court properly sustained Wells Fargo's demurrer to that cause of action without leave to amend.

Slip op. at 19-20.

This case might be a good one for Supreme Court review. The opinion not only creates a split in authority with Jolley (and, in doing so, articulates principles inconsistent with Rose), but also appears to squarely present the three-way split on the definition of "unfair."  The Court applied the post-Cel-Tech formulation, found the allegations inadequate, and ended its analysis.  Under the pre-Cel-Tech formulation, which the panel declined to consider, the outcome might have been different.  I think that's what it will take for the Supreme Court to accept a case presenting the split.  What I can't tell from the opinion is whether the argument has been preserved; possibly, the plaintiffs conceded that the post-Cel-Tech formulation applied. 

The UCL and wrongful foreclosure: Glaski v. Bank of America, N.A.

In Glaski v. Bank of America, N.A., ___ Cal.App.4th ___ (Jul. 31, 2013; pub. ord. Aug. 8, 2013), an individual wrongful foreclosure action, the Fifth District has a single paragraph addressing the UCL:

Based on the foregoing, we conclude that Glaski’s fourth cause of action has stated a claim for wrongful foreclosure.  It follows that Glaski also has stated claims for quiet title (third cause of action), declaratory relief (fifth cause of action), cancellation of instruments (eighth cause of action), and unfair business practices under Business and Professions Code section 17200 (ninth cause of action).  (See Susilo v. Wells Fargo Bank, N.A. (C.D.Cal. 2011) 796 F.Supp.2d 1177, 1196 [plaintiff’s wrongful foreclosure claims served as predicate violations for her UCL claim].)

Slip op. at 26-27.  The citation to a federal district court decision suggests that no other California Court of Appeal opinion has addressed whether conduct constituting wrongful foreclosure (which is a catch-all term that can encompass a variety of defects in the foreclosure process, including statutory violations) can form the predicate for a UCL claim. There's no reason why it shouldn't, particularly after Rose and Zhang reconfirmed the broad scope of the UCL's "unlawful" prong.

Pending California Supreme Court cases list updated

I've updated my list of pending California Supreme Court cases relevant to the areas of practice covered by this blog. 

The only new cases added to the list are five more "grant and holds" involving arbitration issues and stayed pending resolution of Sanchez or Iskanian.  Removing all the "grant and hold" cases from the list, here's what's pending.  (If I've missed any, please drop me an email.) 

There are two class certification cases (Ayala and Duran); three arbitration-related cases (Sonic-Calabasas, Sanchez, and Iskanian); one preemption case (Pac Anchor); and one "unfair" prong case (Cipro): 

Ayala v. Antelope Valley Newspapers, No. S206874 (review granted 01/30/13)

• Issue: This case presents questions concerning the determination of whether common issues predominate in a proposed class action relating to claims that turn on whether members of the putative class are independent contractors or employees.
• Court of Appeal Opinion:  Ayala v. Antelope Valley Newspapers, Inc., 210 Cal.App.4th 77 (2012)

Iskanian v. CLS Transportation, No. S204032 (review granted 09/19/12)

• Issues: (1) Did AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __ [131 S. Ct. 1740, 179 L.Ed.2d 742] impliedly overrule Gentry v. Superior Court (2007) 42 Cal.4th 443 with respect to contractual class action waivers in the context of non-waivable labor law rights? (2) Does the high court's decision permit arbitration agreements to override the statutory right to bring representative claims under the Labor Code Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.)? (3) Did defendant waive its right to compel arbitration?
• Court of Appeal Opinion: Iskanian v. CLS Transp. Los Angeles, LLC, 206 Cal.App.4th 949 (2012)

Duran v. U.S. Bank National Association, no. S200923 (review granted 05/16/12)

• Issue: This case presents issues concerning the certification of class actions in wage and hour misclassification litigation and the use of representative testimony and statistical evidence at trial of such a class action.
• Court of Appeal Opinion: Duran v. U.S. Bank National Ass'n., 203 Cal.App.4th 212 (2012)
• Briefs: available at this link

Sanchez v. Valencia Holding Co., no. S199119 (review granted 03/21/12)

• Issue: Does the Federal Arbitration Act (9 U.S.C. § 2), as interpreted in AT&T Mobility LLC v. Concepcion (2011) 563 U. S. __, 131 S.Ct. 1740, preempt state law rules invalidating mandatory arbitration provisions in a consumer contract as procedurally and substantively unconscionable?
• Court of Appeal Opinion: Sanchez v. Valencia Holding Co., LLC, 201 Cal.App.4th 74 (2011)

In re Cipro Cases I & II, no. S198616 (review granted 02/15/12)

• Issue: May a suit under the Cartwright Antitrust Act (Bus. & Prof. Code, § 16720 et seq.) be brought to challenge "reverse exclusionary payments" made by pharmaceutical manufacturers to settle patent litigation with generic drug producers and prolong the life of the patents in question? 
• Court of Appeal Opinion: In re Cipro Cases I & II, 200 Cal.App.4th 442 (2011)

People ex rel. Harris v. Pac Anchor Transportation, Inc., no. S194388 (review granted 08/10/11)

• Issue: 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)?
• Court of Appeal Opinion: People ex rel. Harris v. Pac Anchor Transportation, Inc., 195 Cal.App.4th 765 (May 18, 2011)

Sonic-Calabasas A, Inc. v. Moreno, no. S174475 (review granted 09/09/09)

• Issues:  (1) Can a mandatory employment arbitration agreement be enforced prior to the conclusion of an administrative proceeding conducted by the Labor Commissioner concerning an employee's statutory wage claim? (2) Was the Labor Commissioner's jurisdiction over employee's statutory wage claim divested by the Federal Arbitration Act under Preston v. Ferrer (2008) __ U.S. __, 128 S.Ct. 978, 169 L.Ed.2d 917?
• Supreme Court Opinion:  Sonic-Calabasas A, Inc. v. Moren0, 59 Cal.4th  (Feb. 24, 2011) 
• U.S. Supreme Court Order (10/31/11):  The petition for writ of certiorari is granted. The judgment is vacated, and the case is remanded to the Supreme Court of California for further consideration in light of AT&T Mobility LLC v. Concepcion, 563 U.S. ___ (Apr. 27, 2011).
• Supreme Court Order (01/11/12): In light of the United States Supreme Court's order vacating our judgment in the above-entitled case and remanding the cause to this court "for further consideration in light of AT&T Mobility LLC. v. Concepcion, 563 U.S. __ (2011) [131 S.Ct. 1740]," the parties are requested to brief the significance of that case. The parties are requested to file and serve simultaneous briefs by February 10, 2012, and may file and serve reply briefs by February 24, 2012.

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

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

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

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

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

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

Supreme Court to hand down opinions in Rose and Zhang tomorrow

The Supreme Court announced this morning that its opinions in Rose and Zhang will be handed down tomorrow at 10:00 a.m.  When they are posted online, they should be available at these links:

• Rose v. Bank of America, N.A., ___ Cal.4th ___ (Aug. 1, 2013)
• Zhang v. Superior Court (Cal. Capital Ins. Co.), ___ Cal.4th ___ (Aug. 1, 2013)

I will have more on the opinions later.  See these posts for information on the UCL issues raised in these two cases. 

Recent UCL "unlawful" prong opinion: Las Canoas Co. v. Kramer

In Las Canoas Co. v. Kramer, 216 Cal.App.4th 96 (May 7, 2013), the Court of Appeal (Second Appellate District, Division Six) affirmed dismissal of UCL "unlawful" and "unfair" prong claims predicated on alleged violations of Code of Civil Procedure section 2025.510, which, among other things, requires the fees charged by court reporters for copies of deposition transcripts to be "reasonable."

The Court of Appeal observed that the statute allows a motion to be brought in the original action to enforce this requirement.  Slip op. at 3. The Court then held that this mechanism is the exclusive remedy, and that a later UCL "unlawful" (or "unfair") prong claim is barred.  Id. at 3-4.  It concluded that:

a non-noticing party who does not move for such an order in the pending action may not bring a subsequent action to obtain restitution for "unreasonable" copy charges or obtain injunctive relief setting a "reasonable rate" to be charged by that court reporter in all future actions.

Id. at 1.

I think this case was incorrectly decided.  The decisional law is very clear that any statute may form the predicate of a UCL "unlawful" prong claim, regardless of whether the law carries its own, separate private enforcement mechanism.  The UCL "borrows" the statute's liability standards, engrafts the UCL's own more streamlined procedures and limited remedies, and disregards any remedies that may be written into the "borrowed" statute.  Here, the statute contains no explicit safe harbor or exclusive remedy language, which are, under Cel-Tech, the only things that should preclude a UCL claim for its violation. 

The Supreme Court is considering similar arguments in Zhang and Rose, which were heard last month.  The opinions in those cases are due to be handed down by approximately the first week of Augusut.  Las Canoas would be a good candidate for a "grant and hold" order pending resolution of one or both of those cases. 

UPDATE: On behalf of CAOC, I filed a request for depublication of this opinion, as well as an amicus letter urging the Court to issue a "grant and transfer" order following issuance of its opinions in Zhang and Rose.  On July 3, 2013, the Court granted itself an extension of time through September 4, 2013 to grant or deny review on its own motion.  Las Canoas Co. v. Kramer, No. S211651.  The time to grant review (or depublish) otherwise would have expired that week.  Ultimately, the Court may not depublish or take any other action, but I thought it was worth a try.  Counsel for the defendant filed response letters opposing both depublication and review. 

UPDATE:  On August 14, 2013, the Supreme Court denied the depublication request and declined to grant review on its own motion.

Supreme Court puts two UCL cases on May argument calendar: Rose v. Bank of America and Zhang v. Superior Court

Last week, the Supreme Court released its May oral argument calendar.  Two UCL cases will be heard.

On Tuesday, May 7, 2013 at 9:00 a.m., the Court will hear Rose v. Bank of America, no. S199074.  Justice Louis R. Mauro of the Third Appellate District will sit in place of Justice Chin, who is recused.  Links to the briefs in this case are available here. 

Then, on Wednesday, May 8, 2013 at 1:30 p.m., the Court will hear Zhang v. Superior Court (Cal. Cap. Ins.), no. S178542.  Review was granted in Zhang in February 2010 and the briefing was completed in August 2010.  It is one of the oldest civil cases on the Court's docket.   

The issues raised in these cases are somewhat related.  The usual rule is that a statutory violation can lead to UCL liability regardless of whether the underlying, "borrowed" statute carries a private right of action. 

In Zhang, the Court of Appeal considered whether Moradi-Shalal, in which the Supreme Court held that the legislature did not intend to create a private right of action for violations of the Unfair Insurance Practices Act, also barred UCL "unlawful" prong claims for violations of the Act. An earlier case said it did, but in Zhang the Court of Appeal held that if the defendant's conduct not only violates the Act but is also otherwise unlawful, it can be pursued under the UCL.  Zhang v. Superior Court (Cal. Cap. Ins. Co.), 178 Cal.App.4th 1081 (Oct. 29, 2009). 

Rose involved the Truth in Savings Act (12 U.S.C. § 4301 et seq.), a federal statute that used to carry a private right of action, but Congress allowed it to sunset.  The Court of Appeal reasoned that permitting a UCL "unlawful" prong claim would contravene Congress's intent to preclude the statute's private enforcement.  Rose v. Bank of America, N.A., 200 Cal.App.4th 1441 (2011).  Rose, unlike Zhang, has federal preemption implications. 

Both arguments will take place in San Francisco.  I hope to be able to attend at least one of them.

New UCL "unfair" prong opinion: West v. JPMorgan Chase Bank, N.A.

In West v. JPMorgan Chase Bank, N.A., ___ Cal.App.4th ___ (Mar. 18, 2013), the Court of Appeal (Fourth Appellate District, Division Three) nicely summarized the three-way split in authority on "unfair" conduct in UCL consumer actions:

Several definitions of “unfair” under the UCL have been formulated.  They are:

1.  “An act or practice is unfair if the consumer injury is substantial, is not outweighed by any countervailing benefits to consumers or to competition, and is not an injury the consumers themselves could reasonably have avoided.”  (Daugherty v. American Honda Motor Co., Inc. (2006) 144 Cal.App.4th 824, 839.)

2.  “‘[A]n “unfair” business practice occurs when that practice “offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.”  [Citation.]’  [Citation.]”  (Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 719.)

3.  An unfair business practice means “‘the public policy which is a predicate to the action must be “tethered” to specific constitutional, statutory or regulatory provisions.’”  (Scripps Clinic v. Superior Court (2003) 108 Cal.App.4th 917, 940.)

Slip op. at 28.  The Court held that the plaintiff's complaint adequately alleged that the defendant "engaged in unfair business practices under any of the three definitions," and that the trial court had improperly sustained the defendant's demurrer to the UCL cause of action.  Id. at 29.

Amicus briefs in pending Supreme Court UCL case: Rose v. Bank of America

The merits briefing in Rose v. Bank of America, no. S199074, was completed in August.  After that, amicus curiae briefs were filed by a number of organizations: 

• Amicus Curiae Brief of the Center for Biological Diversity (filed 09/20/12)
• Amicus Curiae Brief of the California Bankers Association and the American Bankers Association (filed 09/27/12)
• Amicus Curiae Brief of the California Chamber of Commerce and the Chamber of Commerce of the United States (filed 09/27/12)
• Amicus Curiae Brief of Consumer Attorneys of California and the National Employment Law Center (filed 09/27/12)
• Amicus Curiae Brief of the Civil Justice Association of California (filed 09/27/12)
• Amicus Curiae Brief of the City Attorneys of San Francisco and Los Angeles (filed 10/16/12)

All of the above links are courtesy of plaintiffs' counsel, Henry Rossbacher, whose website has a case page devoted to the proceeding. The merits briefs are available there, or at these links:

• Opening Brief on the Merits (filed 05-15-12)
• Answer Brief on the Merits (filed 07-17-12)
• Reply Brief on the Merits (filed 08-21-12)

New opinion addresses UCL "unfair" prong: Jolley v. Chase Home Finance, LLC

In Jolley v. Chase Home Finance, LLC, ___ Cal.App.4th ___ (Feb. 11, 2013), the Court of Appeal (First Appellate District, Division Two) revived a variety of claims stemming from a lender's attempts to foreclose on a construction loan.

The Court had this to say about the UCL's "unfair" prong:

There is a split of authority on what constitutes an “unfair” practice.  (Bardin v. DaimlerChrysler Corp. (2006) 136 Cal.App.4th 1255, 1260-1261.)  Some cases hold an “unfair” practice is one that offends established public policy, that is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers, or that has an impact on the victim that outweighs defendant’s reasons, justifications, and motives for the practice.  (Pastoria v. Nationwide Ins. (2003) 112 Cal.App.4th 1490, 1498; Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 718-719; Podolsky v. First Healthcare Corp. (1996) 50 Cal.App.4th 632, 647.)  Others, including at least one from our district (Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 853-854), hold that the public policy which is a predicate to a claim under the “unfair” prong of the UCL must be tethered to specific constitutional, statutory, or regulatory provisions.  (See also, Scripps Clinic v. Superior Court (2003) 108 Cal.App.4th 917, 938.)  Either way, unfairness is independently sufficient to state a claim under the statute.  (Allied Grape Growers v. Bronco Wine Co. (1988) 203 Cal.App.3d 432, 451; see Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180 [indicating that conduct may be “unfair” without being “unlawful”].)

Slip op. at 37-38.  There is  actually a three-way split in authority on the definition of "unfair" conduct in consumer actions.  The so-called "Section 5" test asks whether "(1) the consumer injury is substantial; (2) the injury is not outweighed by any countervailing benefits to consumers or competition; and (3) the injury could not reasonably have been avoided by consumers themselves."  Boschma v. Home Loan Center, Inc., 198 Cal.App.4th 230, 253 (2011). 

In any event, the Jolley opinion goes on:

With respect to Chase’s own conduct, we have already decided that North’s statements may be construed as misstatements of fact, with possible liability for such conduct left to the trier of fact.  That raises a triable issue as to “fraudulent.”  We have also concluded that dual tracking has been alleged and supported by Jolley’s declaration.  And while dual tracking may not have been forbidden by statute at the time, the new legislation and its legislative history may still contribute to its being considered “unfair” for purposes of the UCL.  Summary adjudication of Jolley’s fifth cause of action was improper.

Slip op. at 38 (emphasis added).  This is very interesting.  Under the post-Cel-Tech formulation, a finding of "unfair" conduct can be predicated on an expression of legislative policy embodied in the Legislature's subsequent enactment of a bill outlawing the conduct. 

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

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

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

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

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

....

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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