The UCL Practitioner

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”).  

Probable cause to pursue a UCL mislabeling action? Citizens of Humanity, LLC v. Hass

In Citizens of Humanity, LLC v. Hass, ___ Cal.App.5th ___ (Feb. 21, 2020; pub. ord. Mar. 16, 2020), the Court of Appeal (Fourth Appellate District, Division One) considered an appeal from orders denying an anti-SLAPP motion in a malicious prosecution case.  The trial court determined that the plaintiff (Citizens of Humanity, maker of expensive designer jeans) "met its burden to establish a probability of prevailing on the merits."  Slip op. at 2, 7-8.  On a 2-1 vote, the Court of Appeal reversed affirmed.

The opinion is of interest for its discussion of the underlying lawsuit, which the plaintiff claimed was maliciously prosecuted.  The underlying action (which was commenced in federal court under CAFA) alleged that Citizens of Humanity falsely labeled its jeans "Made in the U.S.A." when, in fact, the fabric used to make the jeans was imported.  This conduct, the plaintiff in the underlying case alleged, violated former Business and Professions Code section 17533.7, and thus the UCL's "unlawful" prong.  The case also asserted a CLRA violation.  Slip op. at 4. 

While the action was pending, the Legislature amended section 17533.7 (effective Jan. 1, 2016) to allow "Made in the U.S.A." labels on products "if foreign parts comprise no more than 5 percent of the product's final wholesale value" or "if foreign-sourced materials could not be domestically sourced and comprise no more than 10 percent of the product's final wholesale value."  Slip op. at 4-5.  Motion practice ensued on whether these amendments applied retroactively.  Id. at 5.  After the district court held that they did (applying the "statutory repeal" rule; see these blog posts), and also that standing was not adequately alleged, the remaining named plaintiff elected not to amend her complaint, and the action was subsequently dismissed with prejudice.  Id. at 5-6.

The Court of Appeal decided that Citizens of Humanity had shown that it would probably prevail on the merits of its malicious prosecution claim against the attorneys who brought this case and the remaining named plaintiff.  Slip op. at 13-24.  Evidence adduced in the underlying action supported the conclusion that the first named plaintiff (Clark, who subsequently withdrew) was a "shill plaintiff" who lacked standing, and "no reasonable attorney" would have represented her.  Id. at 13-16.  As for the second named plaintiff (Hass), the record included evidence that she also lacked standing and had conducted no investigation into her claims before agreeing to serve as a class representative.   Id. at 17-24. 

As to the element of "malice," the Court of Appeal determined that "[t]he record contains some evidence that would support a reasonable inference by a trier of fact that [the attorneys and their client Hass] were pursuing the litigation against Citizens with an improper purpose."  Id. at 24; see id. at 24-26 (summarizing this evidence).  Finally, the Court of Appeal determined that Citizens had shown a "favorable termination on the merits" in the underlying action.  Id. at 27-31.

Justice Dato filed a dissenting opinion in which he strongly disagreed with the Court of Appeal's "probable cause" analysis.  From the introduction:

In my view, Citizens failed to make a prima facie showing that the underlying mislabeling lawsuit was instituted or maintained without probable cause.  As such, the anti-SLAPP motions should have been granted.  (See JSJ Limited Partnership v. Mehrban (2012) 205 Cal.App.4th 1512, 1527 [reversing for failure of proof as to a single essential element].)

At its core, this case turns on the distinction between a reasonable inference and a speculative one.  My colleagues and I broadly agree on the facts and applicable law.  We part ways in how we view those facts in the context of this anti-SLAPP motion.  Although the disagreement appears on some level mundane—what credence to afford a given set of facts—the import of today's decision implicates the ability of lawyers to zealously advocate for their clients.

Slip op. (Dato, J., dissenting) at 1-2.  He goes on, summarizing the evidence on which the majority relied as to the first plaintiff (Clark) and expressing his view that it is not enough to support a prima facie case for malicious prosecution:

Crediting Citizens's proffer, the majority suggest there is "significant evidence to support the reasonable inference that Clark was a shill plaintiff, and the Del Mar Attorneys were aware of this fact." (Maj. opn., ante, at p. 14.) What evidence specifically?  One of the Del Mar Attorneys (but not the one in charge of the case) is Clark's brother-in-law, and Clark has been a named plaintiff in several of the firm's prior mislabeling lawsuits.  Clark testified at her deposition that she left the tags on the jeans after coming home, as she prepared to wash them.  She also testified that she purchased a lot of jeans but, under normal circumstances, rarely looked to see where they were made.  And after Clark was deposed, she sought to withdraw because she was no longer comfortable being in the spotlight.  We are told that in their totality, these facts support a reasonable inference that Clark was a "shill" plaintiff, whose lawsuit was entirely contrived. 

But can such facts, even in their totality, truly suffice to support a judgment at trial?  Although an inference can serve as substantial evidence for a factual finding on appeal, " ' "the inference must be a reasonable conclusion from the evidence and cannot be based upon suspicion, imagination, speculation, surmise, conjecture or guesswork." ' "  (Shandralina G. v. Homonchuk (2007) 147 Cal.App.4th 395, 411; see Evid. Code, § 600, subd. (b).)  In the SLAPP context specifically, courts have confirmed that although we do not "weigh the credibility or comparative probative strength of competing evidence," we disregard evidence that is "argumentative, speculative, impermissible opinion, hearsay, or conclusory."  (Gilbert v. Sykes (2007) 147 Cal.App.4th 13, 26−27.) 

Clark's participation in other mislabeling suits does not support a nonspeculative finding that she was a "shill," as opposed to someone who relied on the labels of the products she purchased.  Many consumers leave tags on newly purchased clothing until they wash or wear them—the fact that the tags were still on the jeans as Clark prepared the wash does not support a nonspeculative finding that her purchase was a ruse.  For budgetary reasons Clark bought many foreign-made goods; this hardly means she did not place a premium on jeans specifically labeled "Made-in-the-USA."²  And Clark's decision to withdraw as named plaintiff after facing accusations about her family ties does not permit us to conclude why she withdrew, and it is certainly not enough to allow a jury to find she withdrew because her disingenuous motives were about to be exposed. 

² I may buy most of my clothing without looking at a tag to see where the item was made.  But if I splurge on an expensive suit or pair of shoes labeled "Made in Italy," it would hardly be fair to say I didn't care about that label.

These observations are not an impermissible weighing of the evidence.  Courts always perform an essential gatekeeping role in deciding how much is enough evidence to allow a jury to reach a reasonable conclusion.  Here, respectfully, the inferences relied on by the majority opinion are too inconclusive and speculative to carry Citizens' burden.  Although Citizens may harbor a suspicion based on these facts that Clark was a shill whose lawsuit was contrived, it has in my view failed to produce sufficient evidence as would support such a finding at trial.

Id. at 5-7 (footnotes 3 and 4 omitted).  The dissent includes a similar discussion of the claims against the second named plaintiff (Hass).  Id. at 8-10. 

The dissent then concludes as follows:

Defendants regularly complain of being forced to incur substantial expense to defend against meritless lawsuits.  In most cases, we understandably balance the costs and benefits in favor of permitting plaintiffs their day in court.  The costs of defense are the costs we accept for the ability to freely seek redress of grievances. 

But the context of this case is very different, because permitting this malicious prosecution plaintiff its day in court will, I fear, do much to chill the ability of other plaintiffs in all types of cases to seek fair redress of their grievances.  Even more troubling, in my view, is the chilling effect this may have on lawyers asked to represent them.  Will attorneys now infer they would be advised not to represent family members on something less than open-and-shut cases?  Or that a law firm should cease to represent a client after filing a few similar lawsuits on her behalf?  If a client becomes confused and performs poorly at a deposition, will a reasonable attorney feel compelled to jump ship?  And must an attorney direct a heightened level of scrutiny to information provided by a client before filing suit? 

I hope these are not the inferences that are drawn by most lawyers.  No doubt they are not the inferences intended by the majority.  But if we learn nothing else from this case, we should certainly understand that the strength and reasonableness of inferences often lies in the eye of the beholder.

To be sure, today's holding simply permits a malicious prosecution action to move forward, without in any way suggesting Citizens will ultimately prevail.  But this is precisely the sort of harm the anti-SLAPP statute was designed to target and precisely the result the procedure is designed to forestall.  Based on Citizens's conduct, this case was "arguably meritorious" when it was filed.  (See Wilson, supra, 28 Cal.4th at p. 822.)  Although plaintiffs ultimately did not succeed when the law changed, I believe the anti-SLAPP procedure should have enabled them and their counsel to defeat this speculative malicious prosecution action at an early stage of litigation.

Id. at 9-10 (emphasis added).  I share Justice Dato's assessment of the facts of this case. 

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 CLRA and UCL opinion: Gutierrez v. CarMax Auto Superstores California

On Tuesday, the Court of Appeal (Fifth Appellate District) handed down a new opinion, Gutierrez v. CarMax Auto Superstores California, ___ Cal.App.5th ___ (Jan. 30, 2018), which contains a lengthy and interesting discussion of the CLRA.

The complaint alleged that the defendant sold plaintiff a used car without disclosing that important safety systems in the car were defective and subject to an active recall.  Slip op. at 3-5.  After considering and rejecting the breach of implied warranty claim (id. at 12-14), the Court turned to the CLRA.  

The question presented was whether certain subsections of the CLRA's laundry list of prohibited acts--namely, those prohibiting specified types of "representations"--encompass non-disclosures in addition to affirmative misstatements.  Id. at 14 ("whether concealment, omissions or failures to disclose are prohibited").

Following a lengthy analysis, the Court arrived at the following answer (with which the dissenting justice disagreed):

Based on the statutory text, legislative history (which includes the National Consumer Act), the judicial decisions and statutes that existed when the CLRA was enacted, the subsequent case law, and the many amendments to the CLRA from 1975 through 2016, we join Klein, McAdams and the other cases concluding that failures to disclose material facts are actionable under the CLRA.  In particular, we conclude paragraphs (5), (7) and (9) of subdivision (a) of Civil Code section 1770 proscribe material omissions in certain situations.

Id. at 26-27 (emphasis added) (citing Klein v. Chevron U.S.A., Inc., 202 Cal.App.4th 1342 (2012); McAdams v. Monier, Inc., 182 Cal.App.4th 174 (2010); Bardin v. DaimlerChrysler Corp., 136 Cal.App.4th 1255 (2006)).  (These three cases are discussed in these three blog posts.) 

The Court then went on to hold that not all material omissions are actionable--a conservative construction of the CLRA that I think is inconsistent with the Act's purposes (and is supported by only some past opinions):

Not every omission or nondisclosure of fact is actionable.  Consequently, we must adopt a test identifying which omissions or nondisclosures fall within the scope of the CLRA.  Stating that test in general terms, we conclude an omission is actionable under the CLRA if the omitted fact is (1) “contrary to a [material] representation actually made by the defendant” or (2) is “a fact the defendant was obliged to disclose.”  (Daugherty, supra, 144 Cal.App.4th at p. 835; see Rubenstein, supra, 14 Cal.App.5th at p. 881; Collins v. eMachines, Inc. (2011) 202 Cal.App.4th 249, 255 (Collins).) 

Id. at 27. 

The Court then elaborated on "the second type of omitted fact and the question of whether CarMax had a duty to disclose a fact not made known to the plaintiff."  Id.

In Collins, the court identified four situations in which a failure to disclose a fact constitutes a deceptive practice actionable under the CLRA.  (Collins, supra, 202 Cal.App.4th at p. 255.)  Those situations arise when the defendant is plaintiff’s fiduciary, when the defendant has exclusive knowledge of material facts not known or reasonably accessible to the plaintiff, and when the defendant actively conceals a material fact.  In addition, the duty to disclose exists “when the defendant makes partial representations that are misleading because some other material fact has not been disclosed.”  (Ibid.)  In the context of the CLRA, a fact is “material” if a reasonable consumer would deem it important in determining how to act in the transaction at issue.  (Collins, supra, at p. 256.)  In other words, a defendant has a duty to disclose when the fact is known to the defendant and the failure to disclose it is “‘misleading in light of other facts … that [the defendant] did disclose.’”  (Klein, supra, 202 Cal.App.4th at p. 1382; see Civ. Code, § 1710, subd. 3.) 

Id. (See this blog post for a discussion of Collins.)

The next section of the opinion addresses safety-related defects, à la Bardin and Daugherty v. American Honda Motor Co., 144 Cal.App.4th 824 (2006) (discussed here).  The Court held that a defendant has a duty to disclose a "material" safety-related defect if the defendant had exclusive knowledge of the defect or if the defendant "actively concealed" it.  Id. at 29-30.  Two other circumstances creating a duty to disclose such a defect would be if a fiduciary relationship exists or if the defendant "makes partial misrepresentations but also suppresses a material fact."  Id. at 30 (citation omitted). 

The Court then turned to the complaint, holding that it alleged facts sufficient to support the conclusion that the defendant had "made partial representations" about the vehicle's (defective) systems, and that these were "likely to mislead" because the defendant had concealed other information about the systems (namely, that they were defective and the subject of a recall).  These facts, in turn, stated an actionable CLRA violation (and a UCL "unlawful" prong violation).  Id. at 30-33, 36-37. 

However, "causes of action under the CLRA and UCL must be stated with reasonable particularity, which is a more lenient pleading standard than is applied to common law fraud claims."  Id. at 31.  (I believe this rule would apply only to CLRA and UCL violations sounding in fraud.  Many UCL "unlawful" prong claims do not.)

The dissenting justice would have held that in cases involving sales of goods under warranty, the CLRA should not be construed to prohibit non-disclosures (with the exceptions stated in the CLRA's text):

The best way to harmonize the CLRA with implied warranty jurisprudence is to adopt the plain meaning of “representing” in the CLRA.  Implied warranty law addresses the situation of goods failing to meet minimum levels of merchantability, regardless of what the seller did or did not say; and the CLRA, with its threat of punitive damages, steps in only when the seller acts deceptively.

By creating expansive omission-based liability under the CLRA, the majority is supplanting implied warranty law and upsetting the delicate balance it achieves.

....  In sum, the CLRA applies only to misrepresentations and specific, inapplicable omissions. Since the operative complaint does not successfully allege any affirmative misrepresentations under CLRA, the sustaining of the demurrer should be upheld.

Id., dissenting opn. of Poochigian, J., slip op. at 7-8 (footnote omitted).

These are all very interesting issues.  I could see the Supreme Court becoming involved at some point. 

"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). 

Interesting UCL "unlawful" prong opinion: Burd v. Barkley Court Reporters, Inc.

In Burd v. Barkley Court Reporters, Inc., ___ Cal.App.5th ___ (Nov. 29, 2017), the Court of Appeal (Second Appellate District, Division Two) considered a UCL "unlawful" prong class action predicated on violations of Government Code sections 69950 and 69954, which limit court reporter transcription rates. 

The Court held that the statutory rate limitations "apply to any court reporter producing a transcript of a civil court proceeding, regardless of whether the reporter is employed by the superior court or privately retained by a party."  Slip op. at 1. 

Sounds like we might all need to go back and check our recent court reporter invoices.

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 class certification opinion: Kizer v. Tristar Risk Management

In Kizer v. Tristar Risk Management, ___ Cal.App.5th ___ (Jun. 26, 2017; pub. ord. Jul. 26, 2017), the Court of Appeal (Fourth Appellate District, Division Three) affirmed an order denying class certification of Labor Code claims arising out of the defendant's alleged misclassification of its claims examiners, and of the UCL "unlawful" prong claim stemming from that. 

Basically, the Court of Appeal reasoned that misclassification, standing alone, is not unlawful; instead, a violation occurs only when the misclassified employees are denied overtime pay (or other statutory protections afforded to non-exempt employees).  Slip op. at 12-20.  Even if the elements relevant to assessing the applicability of the administrative exemption might be amenable to common proof, this was not sufficient for class certification, because the plaintiffs had failed to offer any proof of a uniform policy policy or practice to deny overtime pay to the claims examiners.  See id.

For similar reasons, the Court of Appeal affirmed the ruling as to the UCL claim.  Id. at 20-23.  The plaintiffs relied on Tobacco II, arguing that individualized proof of causation and injury are not elements of a UCL claim.  Id. at 21-22.  But the Court of Appeal found a more basic problem in the plaintiffs' failure to introduce any common proof of an unlawful practice (i.e., denying overtime pay to claims examiners):

As explained above, and contrary to Plaintiffs’ contention, the trial court did not deny Plaintiffs’ class certification motion based on their failure to present individualized proof of injury by each potential class member.  Rather, the court denied the motion because Plaintiffs failed to satisfy the commonality requirement by presenting evidence to show they could establish through common proof that Tristar required claims examiners to work overtime.  Substantial evidence supports that finding and it is consistent with the governing legal standards.

Id.  at 23. 

The Kizer opinion is one for the list of post-Tobacco II class certification decisions.  (See my prior series of posts: "Nine post-Tobacco II decisions," "A tenth post-Tobacco II opinion," "New UCL class certification decision," and "A thirteenth post-Tobacco II opinion.") 

Although the opinion cites Cohen v. DIRECTV, Inc., 178 Cal.App.4th 966 (2009) and Davis‑Miller v. Automobile Club of Southern California, 201 Cal.App.4th 106 (2011) (discussed in these blog posts), I would still put in on the plaintiffs' side of the ledger.  Unlike those cases, Kizer did not hold that certification could be properly denied due to predominance of non-common questions as to reliance or injury (which are not even elements of a UCL claim).  Rather, Kizer focused on whether the unlawful conduct itself could be established through common proof.  In so holding, Kizer also relied heavily on Steroid Hormone Product Cases, 181 Cal.App.4th 145 (2010) (discussed in this blog post), which illustrates the proper focus of the class certification inquiry in a UCL "unlawful" prong case. 

Supreme Court agrees to answer certified question in UCL "unlawful" prong case: De La Torre v. CashCall

On June 12, 2017, the Supreme Court agreed to answer questions certified by the Ninth Circuit in De La Torre v. CashCall, no. S241434.  As explained in the Ninth Circuit's order, De La Torre is a certified class action asserting a UCL "unlawful" prong claim based on alleged violations of Finance Code provisions concerning interest rates. 

The Supreme Court's website frames the issue as follows:

Can the interest rate on consumer loans of $2,500 or more governed by California Finance Code section 22303 render the loans unconscionable under section 22302?

The eventual opinion may or may not end up addressing the UCL directly.  According to the Ninth Circuit's order, one of the defendant's arguments was that California law "only recognize[s] unconscionability as a defense to a suit by a lender, not an affirmative UCL action for restitution."  Another was that section 22303 creates a Cel-Tech "safe harbor." 

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).

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).

Ninth Circuit hands down UCL "unlawful" prong and CLRA decision: Gonzales v. CarMax Auto Superstores, LLC

In Gonzales v. CarMax Auto Superstores, LLC, ___ F.3d ___ (9th Cir. Oct. 20, 2016), the Ninth Circuit considered a UCL "unlawful" prong claim and a CLRA claim predicated on alleged violations of Vehicle Code section 11713.18, which is part of the "Car Buyer's Bill of Rights," enacted in 2005.  That section prohibits a car dealer from describing a used car as "certified" unless the dealer provides the buyer with a "completed inspection report" prior to sale, and expressly makes any violation actionable under both the UCL and the CLRA: 

A violation of this section is actionable under the Consumers Legal Remedies Act (Title 1.5 (commencing with Section 1750) of Part 4 of Division 3 of the Civil Code), the Unfair Competition Law (Chapter 5 (commencing with Section 17200) of Part 2 of Division 7 of the Business and Professions Code), Section 17500 of the Business and Professions Code, or any other applicable state or federal law. The rights and remedies provided by this section are cumulative and shall not be construed as restricting any right or remedy that is otherwise available.

Veh. Code § 11713.18(b).  In other words, it adds an item to the CLRA's laundry list of deceptive conduct. 

The panel reversed the district court's grant of summary judgment in the dealer's favor, and remanded with directions to enter summary judgment for the plaintiff instead.  Slip op. at 9-22.  The opinion delves deeply into the purpose and legislative history of the Car Buyer's Bill of Rights, and is worth a read for anyone handling litigation involving that Act. 

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.

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

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

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

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

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

Id. at 1338 (footnote omitted). 

New UCL "unlawful" prong opinion: Local TV LLC v. Superior Court (Knutssen)

In Local TV LLC v. Superior Court (Knutssen), ___ Cal.App.4th ___ (Sept. 2, 2016), the Court of Appeal (Second Appellate District, Division Five) concluded that the plaintiff's UCL "unlawful" prong claim failed because the underlying, "borrowed" claims (for common-law and statutory misappropriation of name and likeness) failed.  Slip op. at 14-15.  Evidently, the plaintiff did not separately plead a violation of the UCL's "unfair" prong. 

The discussion of the UCL claim reads, in full:

Plaintiffs also alleged that LTV violated Business and Professions Code section 17200 et. seq., the unfair competition law.  Section 17200 provides a private cause of action for any “unlawful, unfair or fraudulent business practice and unfair, deceptive, untrue or misleading advertising.”  Section 17200, however, is not a substitute for a tort or contract action, and it generally is limited to providing injunctive relief and restitution to prevent ongoing or threatened acts of unfair competition.  (Zhang v. Superior Court (2013) 57 Cal.4th 364, 371.)  Our Supreme Court has stated that “‘section 17200 “borrows” violations of other laws and treats them as unlawful practices’ that the unfair competition law makes independently actionable.  (State Farm Fire & Casualty Co. v. [Superior Court] (1996) 45 Cal.App.4th 1093, 1103, citing Farmers Ins. Exchange v. Superior Court [(1992) 2 Cal.4th 377, 383]).”  (Cel-Tech Communications, Inc. v. L.A. Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.)

Here, as alleged against LTV, the sole factual basis for the section 17200 claim is the same as for the misappropriation tort discussed in section II above.  Plaintiffs seek the precise monetary damages that they seek in the misappropriation cause of action.  Because summary judgment in favor of LTV was proper on the cause of action that the section 17200 claim “borrows,” summary judgment is likewise warranted on the unfair business practices claim.

Id.

Recent opinion addressing UCL's extraterritorial reach: Aghaji v. Bank of America, N.A.

In Aghaji v. Bank of America, N.A., 247 Cal.App.4th 1110 (May 31, 2016), more than 200 plaintiffs from California and other states brought UCL and other claims against numerous lenders and loan servicers related to the handling of their home mortgages.  Id. at 1112-13.

Among other holdings, the Court of Appeal (Second Appellate District, Division Four) determined that the non-California plaintiffs could not assert UCL claims without alleging that the harm they suffered emanated from California, which their complaint failed to do:

In addition to alleging facts sufficient to show violations of [the underlying federal regulations on which the UCL claims were predicated], plaintiffs who are not California residents must also allege facts to show that the alleged violations occurred within California, because California's unfair competition law does not apply extraterritorially. (See Sullivan v. Oracle Corp. (2011) 51 Cal.4th 1191, 1207; Norwest Mortgage, Inc. v. Superior Court (1999) 72 Cal.App.4th 214, 222-227.)  Plaintiffs assert in their appellants' reply brief that “although many of the Defendant servicers are entities formed in states other than California and have their headquarters outside of California, they have processing facilities and personnel in California and, upon information and belief, that is where the misapplied payments were received or that is from where the improper charges or improper crediting of payments occurred with respect to out of state Plaintiffs/Appellants.” But plaintiffs' assertion is insufficient for two reasons. First, plaintiffs state that many—not all—defendant servicers have facilities and personnel in California, and therefore appear to concede that at least some of the defendants do not. Second, plaintiffs do not disclose what information they have that leads them to believe that the alleged violations occurred in those California facilities. (See Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1158-59 [“a pleading made on information and belief is insufficient if it ‘merely assert[s] the facts so alleged without alleging such information that “lead[s] [the plaintiff] to believe that the allegations are true” ’ ”].)

In short, plaintiffs have not shown that they can truthfully allege facts necessary to allege a violation of [the underlying statutes] in California as to any plaintiff, let alone all plaintiffs.  ....

Id. at 1119-20 (emphasis in original).  My original post on Sullivan is here.  See this post for a discussion of Norwest Mortgage. 

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. 

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. 

U.S. Supreme Court schedules UCL case for conference: Rose v. Bank of America

Last week, the U.S. Supreme Court put Bank of America, N.A. v. Rose, No. 13-662, on its conference agenda for June 26, 2014. 

This follows the filing on May 27 of the Solicitor General's brief recommending that the cert. petition be denied.

According to the SCOTUSblog calendar, June 26 is the last day of the Term on which the Court is scheduled to conference cases.  So there should be no further relisting, and the order granting or denying cert. should be announced by Monday, June 30. 

The cert. petition seeks to overturn the California Supreme Court's landmark UCL decision, Rose v. Bank of America, N.A., 57 Cal.4th 390 (2013), discussed here.

UPDATE:  On June 30, 2014, the U.S. Supreme Court denied the cert. petition.

Solicitor General recommends denying cert. in UCL matter: Rose v. Bank of America

As I previously reported, on March 10, 2014, the U.S. Supreme Court invited the Solicitor General to file a brief expressing the views of the United States in Bank of America, N.A. v. Rose, No. 13-662.  The cert. petition seeks to overturn the California Supreme Court's decision in Rose v. Bank of America, N.A., 57 Cal.4th 390 (2013) (discussed here).  

On May 27, 2014, the Solicitor General filed a brief recommending that the cert. petition be denied. The brief expresses the view that the California Supreme Court's ruling was correct and that it does not conflict with any federal appellate opinions.  The brief also points out that the ruling is interlocutory only.

The general counsel of the Consumer Financial Protection Bureau is a signatory to the brief along with the Solicitor General's office.  As explained on page 2, the CFPB is the agency currently empowered to adopt regulations to carry out the purpose of the federal Truth in Savings Act, which is implicated in Rose.  That agency appears to have no problem with the idea that California may have a parallel enforcement scheme.

See this blog post for links to the cert. petition and other briefs filed in the U.S. Supreme Court.  My original post on Rose is here.

Recent Ninth Circuit opinion touches on the "unlawful" prong: In re Late Fee and Overlimit Fee Litig.

In In re Late Fee and Overlimit Fee Litigation, 741 F.3d 1022 (9th Cir. Jan. 21, 2014), the Ninth Circuit affirmed dismissal of the UCL claim: 

California's Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq., makes violations of other state and federal laws "independently actionable as unfair competitive practices." CRST Van Expedited, Inc. v. Werner Enters., Inc., 479 F.3d 1099, 1107 (9th Cir. 2007) (citation omitted). Because we conclude that the issuers' conduct did not violate the National Bank Act or the DIDMCA, there is no derivative liability under the Unfair Competition Law.

Id. at 1027.

From that language, it appears that the plaintiffs did not allege that the defendant's conduct was "unfair," but only that it was "unlawful." 

This is an interesting case.  It challenges the late fees charged by credit card companies.  The theory is that these fees are analogous to punitive damages, and that the fees are charged in amounts that exceed the constitutional due process limits set forth in  BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996) and the single-digit ration established in State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 425 (2003). 

The concurring opinion of Judge Reinhardt is worth a read:

This is a constitutional case of first impression. It is an attempt by a group of cardholders to have a new constitutional doctrine applied even-handedly. Their proposed rule would protect consumers from excessive penalties just as the current rule protects corporate and business entities from excessive punitive damages. Constitutional evolution requires continuous evaluation of newly established principles to ensure that changes occur within the framework of fairness and equality. Such must be the case here.

Id. at 1029.

U.S. Supreme Court developments of interest in four cases

A few more recent developments of interest from the U.S. Supreme Court:

• On February 24, 2014, the Court issued a GVR order (grant, vacate and remand) in CarMax Auto Superstores California, LLC v. Fowler, No. 13-439.  In this case, the California Court of Appeal (Second Appellate District, Division One), in an unpublished opinion, reversed the trial court's order compelling arbitration in a wage and hour class action.  Fowler v. CarMax, Inc., 2013 WL 1208111 (Cal. Ct. App. Mar. 26, 2013).  That opinion concluded, among other things, that Concepcion did not overrule Gentry v. Superior Court, 42 Cal.4th 443 (2007) (discussed in this blog post).  The California Supreme Court denied review, but now the U.S. Supreme Court has vacated the decision and directed the Court of Appeal to reconsider the matter in light of American Express Co. v. Italian Colors Restaurant, 133 S.Ct. 2304 (2013). 

• On February 26, 2014, the Court requested a response from the respondent, Moreno, in Sonic-Calabasas A, Inc. v. Moreno, No. 13-856.  The cert. petition challenges the California Supreme Court's decision in Sonic-Calabasas A, Inc. v. Moreno, 57 Cal.4th 1109 (2013) (discussed in this blog post).  The federal high court issued a GVR order the last time Sonic-Calabasas filed a cert. petition in this case, which was in 2011.  That time, the case was remanded for further consideration in light of Concepcion.

• On March 10, 2014, the Court invited the Solicitor General to file a brief expressing the views of the United States in Bank of America, N.A. v. Rose, No. 13-662.  The cert. petition seeks to overturn the California Supreme Court's decision in Rose v. Bank of America, N.A., 57 Cal.4th 390 (2013) (discussed here).   See this blog post for links to some of the briefs filed in the federal proceeding.

• On March 10, 2014, the Court granted cert. in Public Employees' Retirement System of Mississippi v. IndyMac MBS, Inc., No. 13-640, after relisting the case twice.  This case involves American Pipe tolling, and this is the question presented according to the U.S. Supreme Court's website: 

In American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), this Court held that "the commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class who would have been parties had the suit been permitted to continue as a class action." Id. at 554. Section 13 of the Securities Act of 1933—titled "Limitation of actions"—provides, in relevant part, that "[i]n no event shall" an action under § 11 of that Act "be brought ... more than three years after the security was bona fide offered to the public, or under [§ 12] (a) (2) ... more than three years after the sale." 15 U.S.C. § 77m. 

The question presented is:  Does the filing of a putative class action serve, under the American Pipe rule, to satisfy the three year time limitation in § 13 of the Securities Act with respect to the claims of putative class members?

The Second Circuit held last June that American Pipe tolling did not apply. Police and Fire Retirement System of City of Detroit v. IndyMac MBS, Inc., 721 F.3d 95 (2d Cir. 2013).  The SCOTUSblog case page has links to the briefs filed to date.

Cert. petition in UCL case to be conferenced today: Rose v. Bank of America

Today, the U.S. Supreme Court will be conferencing the cert. petition in Bank of America, N.A. v. Rose, No. 13-662.  The petition, filed in November, asks the U.S. Supreme Court to consider and overturn the California Supreme Court's decision in Rose v. Bank of America, N.A., 57 Cal.4th 390 (2013).     

As explained in this blog post, Rose addressed whether a UCL "unlawful" prong claim could be predicated on violations of the federal Truth in Savings Act ("TISA") (12 U.S.C. §§ 4301 et seq.), even though the Act did not carry a private right of action.  The California Supreme Court's answer was yes, and its analysis rested firmly on long-established principles of UCL jurisprudence.

Stranger things have happened, but it seems unlikely that the U.S. Supreme Court would have any interest in this case.  On Monday, the conference results will be announced.  The petition could be granted or denied or the case might be relisted.  Here are links to the parties' briefs:

• Petition for a Writ of Certiorari (filed Nov. 27, 2013)
• Brief in Opposition (filed on Jan. 30, 2014)
• Reply in Support of Petition (filed Feb. 17, 2014)

(I do not have a copy of the amicus curiae brief of the California Bankers Association, filed on Dec. 31, 2013.)

Supreme Court sets oral argument in UCL case: Loeffler v. Target Corp.

On February 4, 2014, at 10:00 a.m. in Sacramento, the California Supreme Court will hear oral argument in Loeffler v. Target Corp., No. 173972, in which review was granted in 2009. The case arose out of a shopping trip to Target, where the plaintiff was charged sales tax on a cup of hot coffee "to go."

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

Does article XIII, section 32 of the California Constitution or Revenue and Taxation Code section 6932 bar a consumer from filing a lawsuit against a retailer under the Unfair Competition Law (Bus. & Prof. Code sections 17200 et seq.) or the Consumers Legal Remedies Act (Civ. Code, section 1750 et seq.) alleging that the retailer charged sales tax on transactions that were not taxable?

The Court of Appeal (Second Appellate District, Division Three) held that "plaintiffs are attempting to resolve a sales tax dispute by using consumer and common law remedies rather than the procedure set forth by the Legislature [in the Revenue and Taxation Code]. This they cannot do under article XIII, section 32."  Loeffler v. Target Corp., 173 Cal.App.4th 1229, 1235 (2009).

My original take on this case was that it involved obscure issues involving the state tax code.  The Court of Appeal opinion says almost nothing about the UCL or CLRA.  But the UCL and CLRA issues appear to be moving to the forefront.  On December 16, 2013, the Court ordered supplemental briefing on these issues:

(1) May a cause of action be brought under the UCL (see Bus. & Prof. Code, § 17200 et seq.) or CLRA (see Civ. Code, § 1750 et seq.) based on an allegation that a retailer misrepresented that it was collecting an amount as tax reimbursement when in fact the retailer failed to remit the amount to the Board of Equalization?

(2) If so, do the allegations in plaintiffs' second amended complaint state a cause of action under the UCL or CLRA on this theory, and, if not, should plaintiffs be afforded an opportunity to amend their complaint to state such causes of action?

A few months earlier, on April 11, 2013, the Court ordered supplemental briefing on a very different issue:

The parties are requested to serve and file simultaneous supplemental letter briefs addressing whether and, if so, in what manner the doctrine of primary jurisdiction (see Jonathan Neil & Assoc., Inc. v. Jones (2004) 33 Cal.4th 917, 931-937), appropriately may be invoked and applied in the present case, including whether the issue was preserved in the trial and appellate courts and whether article XIII, section 32 of the California Constitution would be implicated by applying the doctrine.

Here are copies of some of the briefs:

• Opening Brief on the Merits (filed 11-09-09)
• Answer Brief on the Merits (filed 01-11-10)
• Reply Brief on the Merits (filed 02-01-10)
• Amicus Curiae Brief of State Board of Equalization (filed 04-15-10)
• Target's Consolidated Answer to Amicus Curiae Briefs (filed 05-05-10)
• Plaintiff's Consolidated Answer to Amicus Curiae Briefs (filed 05-05-10)
• Plaintiff's Request for Judicial Notice in Support of Consolidated Answer to Amicus Curiae Briefs (filed 05-05-10)
• Supplemental Amicus Curiae Brief of State Board of Equalization (filed 07-08-11)
• Plaintiffs' Response to Supplemental Amicus Curiae Brief of State Bd. of Equalization (filed 08-08-11)
• Target's Letter Brief re Primary Jurisdiction (filed 04-22-11)
• Plaintiff's Letter Brief re Primary Jurisdiction (filed 04-22-11)
• Target's Reply Letter Brief re Primary Jurisdiction (filed 04-25-11)
• Plaintiff's Reply Letter Brief re Primary Jurisdiction (filed 04-26-11)
• Target's Supplemental Brief re UCL and CLRA (filed 01-13-14)
• Plaintiff's Supplemental Brief re UCL and CLRA (filed 01-13-14)

There are several "grant and hold" cases also pending in the Supreme Court.  Does anyone know if any cases raising similar issues have been stayed in the lower courts pending resolution of Loeffler?

Also, if anyone plans to attend the argument and would like provide a report for publishing here (with or without attribution), please drop me a line.

UPDATE:  On May 1, 2014, the Supreme Court affirmed the Court of Appeal's judgment, holding that the tax code provides the exclusive remedy for the type of violation asserted in this case.  Loeffler v. Target Corp., 58 Cal.4th 1081 (2014). 

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

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

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

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

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

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

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

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.

New public prosecutor opinion addresses interplay between UCL and litigation privilege: People v. Persolve LLC

In People v. Persolve LLC, ___ Cal.App.4th ___ (Aug. 15 2013), the Court of Appeal (Fifth Appellate District) reinstated a UCL "unlawful" prong claim brought by the Kern County District Attorney against a debt collection company for violation of the Rosenthal Act (Civ. Code §§ 1788 et seq.) and the federal Fair Debt Collection Practices Act (15 U.S.C. §§ 1692 et seq.). 

The trial court held that the litigation privilege barred the action because the challenged debt-collection activity related to anticipated litigation.  Slip op. at 2.  The parties did not really dispute, and the Court of Appeal seemed to agree, that the conduct fell within the scope of the privilege because it bore some relation to anticipated litigation (i.e., a lawsuit to enforce the debt).  See id. at 5-6.

The disputed question was whether applying the privilege would make the fair debt collection practices statutes effectively inoperable, and in turn, whether a UCL "unlawful" prong claim predicated on those statutes' violation should be permitted notwithstanding the privilege.  See id. at 6-7.  The Court of Appeal noted that the privilege is "not without limit," and that "Courts have found exceptions to [it] based on irreconcilable conflicts between the privilege and other coequal state laws."  Id. at 6.  An earlier decision, Komarova v. National Credit Acceptance, Inc., 175 Cal.App.4th 324 (2009), held that "the privilege cannot be used to shield violations" of the Rosenthal Act.  Id. at 7.  The same reasoning applied to the federal Act, the Court held.  Id. at 8.

The defendants pointed out that the DA's enforcement action was brought under the UCL, not the state or federal debt collection statutes.  They relied on two decisions holding that the litigation privilege can bar UCL claims.  Id. at 8-9 (citing Rubin v. Green, 4 Cal.4th 1187 (1993); People ex rel. Gallegos v. Pacific Lumber Co., 158 Cal.App.4th 950 (2008) (discussed in this blog post)).

The Court of Appeal was not persuaded:

Where, as here, the “borrowed” statute is more specific than the litigation privilege and the two are irreconcilable, unfair competition law claims based on conduct specifically prohibited by the borrowed statute are excepted from the litigation privilege.  Applying the privilege to unlawful practices based on specific violations of the California Act and the Federal Act would effectively render the protections afforded by those acts meaningless.  In contrast, in both Rubin and Gallegos, the application of the litigation privilege did not render the prohibitions underlying the unfair competition claims significantly or wholly inoperable.  Civil statutes for the protection of the public should be interpreted broadly in favor of their protective purpose.  Accordingly, the People’s unfair competition law claims that are based on conduct that is specifically prohibited by the California Act and/or the Federal Act are not barred by the litigation privilege.  (Komarova, supra, 175 Cal.App.4th at pp. 339-340.)

Id. at 9-10 (emphasis added).  This reasoning should apply not only in public prosecutor actions, but also in cases brought by private litigants. 

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 reconfirms broad scope of UCL's "unlawful" prong: Rose v. Bank of America, N.A.

The opinions handed down yesterday in Rose v. Bank of America, N.A., ___ Cal.4th ___ (Aug. 1, 2013), and Zhang v. Superior Court (Cal. Capital Ins. Co.), ___ Cal.4th ___ (Aug. 1, 2013), were both unanimous and both authored by Justice Corrigan (with a concurrence by Justice Werdegar in Zhang).  Both decisions reaffirm the longstanding general rule that a UCL "unlawful" prong claim may be predicated on a violation of any law — state or federal, statutory or court-made — regardless of whether the underlying law independently carries a private right of action. 

Here are my thoughts on Rose, and I'll discuss Zhang on Monday.

Rose involved a UCL "unlawful" prong claim predicated on violations of the federal Truth in Savings Act ("TISA") (12 U.S.C. §§ 4301 et seq.).  TISA previously carried an explicit statutory private right of action, but Congress allowed that provision to expire 10 years after it was enacted.  Rose, slip op. at 1-2.  The Court of Appeal held that this (in)action evinced an intention by Congress to preclude private civil enforcment, and that the UCL claim was therefore barred.  Id. at 3. 

The Supreme Court disagreed, and reversed. 

The opinion discusses a series of "familiar principles on which the UCL operates."  Id. at 5.  One of them is that the UCL's "unlawful" prong may "borrow" a federal statute as the predicate violation even if "Congress has decided not to allow private enforcement of the federal law."  Id.  The opinion explains:

[W]e have made it clear that by borrowing requirements from other statutes, the UCL does not serve as a mere enforcement mechanism.  It provides its own distinct and limited equitable remedies for unlawful business practices, using other laws only to define what is “unlawful.”  (See Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1150 [UCL provides equitable avenue for prevention of unfair business practices, with streamlined procedures and limited remedies].)  The UCL reflects the Legislature’s intent to discourage business practices that confer unfair advantages in the marketplace to the detriment of both consumers and law-abiding competitors.

Id. at 7. 

The only exceptions to this general rule are narrow ones:   if the UCL action is actually barred by some other prinicple of law, or if some other law explicitly authorizes or immunizes the challenged conduct, the UCL claim may not proceed.  As Rose explains:

It is settled that a UCL action is not precluded “merely because some other statute on the subject does not, itself, provide for the action or prohibit the challenged conduct.  To forestall an action under the [UCL], another  provision must actually ‘bar’ the action or clearly permit the conduct.”  (Cel-Tech, supra, 20 Cal.4th at p. 183; see Zhang v. Superior Court (Aug. 1, 2013, S178542) __ Cal.4th __ [pp. 12-14]; Stop Youth Addiction, supra, 17 Cal.4th at p. 566.)

Id. at 8 (emphasis added). Even evidence of a legislative "intent to create a comprehensive, exclusive scheme" for regulating a particular field is not enough to "actually bar" a UCL action.  Id. at 6 (citing Stop Youth Addiction, Inc. v. Lucky Stores, Inc., 17 Cal.4th 553, 560 (1998)).  Such an action "enforc[es] the UCL, not the statutes underlying [the] claim of unlawful business practice."  Id.

In Rose, no such bar existed.  The proposed UCL claim was not actually precluded by any other act of Congress or by any other affirmative expression of legislative intent.  On the contrary, an unexpired TISA provision expressly permitted "private actions under state laws consistent with TISA.  Thus, the abolition of the TISA remedy does not amount to a bar against UCL claims."  Id.  

The opinion reiterates this fundamental point:

[T]he UCL ... is meant to provide remedies cumulative to those established by other laws, absent express provision to the contrary.  (Bus. & Prof. Code, § 17205.)  We have long recognized that the existence of a separate statutory enforcement scheme does not preclude a parallel action under the UCL.  (Stop Youth Addiction, supra, 17 Cal.4th at pp. 572-573, citing cases.)

Id. at 9-10 (italics in original; bold added) (footnote omitted).

The opinion ends with an interesting footnote citing Bowen v. Ziasun Technologies, Inc., 116 Cal.App.4th 777 (2004) (discussed in these blog posts).  Bowen held that "the UCL does not apply to claims arising from securities transactions."  Rose, slip op. at 10 n.8.  The Supreme Court observed that "[w]hatever the scope and merits of that holding may be, it does not apply here."  Id. (citations omitted). I think this suggests that the Court may view Bowen as inconsistent with the principles reaffirmed in Rose.  (In Overstock.com, Inc. v. Gradient Analytics, Inc., 151 Cal.App.4th 688 (2007) (discussed here), another Court of Appeal panel declined to follow Bowen.)  The Court has reserved that question for another case and another day. 

As between Rose and Zhang, Rose was the more straightforward case.  The opinion is shorter (11 vs. 24 pages) and, unlike Zhang, unanimous in its reasoning (7-0 with no concurrence). It does not really break any unbroken ground, and is based instead on "familiar principles" long established in the Supreme Court's UCL jurisprudence.  I think the opinion will serve to restrain lower courts from construing the UCL's "unlawful" prong more narrowly than the Supreme Court's older precedents warranted (as may have happened in Bowen, for example, as well as in Rose below, and in another case even more recently).

I will have thoughts on Zhang next week.