Cal Biz Lit

Trial Court Strikes Blow For Common Sense In Anti-"Ladies Day" Case

    CalBizLit previously blogged here and here about that brave crusading lawyer and sometime litigant Alfred Rava's efforts to eliminate the scourge of business discrimination against fathers, who sustain humiliation and other forms of emotional distress when they are deprived of stupid hats and other ballpark giveaways on Mother's Day.  Now comes word of his efforts to assert a class action of the same type against Bear Valley Ski Resort.

    Didn't work out so well.  L.A. Superior Court Anthony Mohr denied Rava's motion to certify a class of 995 helpless victims of Ladies Day discrimination. Judge Mohr noted that because the Unruh Act, under which Rava proceeded, provides for minimum penalties of $4,000, there was no need for a class action. 

Assuming plaintiff succeeds on the merits, Bear Valley Ski Resort would be liable for mandatory statutory penalties of $4,000 X 995 putative class members.  The product of $3,980,000 constitutes a draconian sum that would strip Bear Valley of its assets.

You can read Judge Mohr's ruling here.  Some thoughtful commentary on Mr. Rava appears here.

    Hat tip to Legal Pad.  And when selecting the graphic to run with this post, I really wanted to use the brochure with the  "ski bear" homonym, but this is a family blog and I just couldn't do it.

Cal Supremes Put Another Bullet in The Unfair Competition Law

    In a post here last May, I talked about the California Supreme Court's decision in In Re Tobacco II Cases (2009) 46 Cal.4th 298, suggesting that in that decision, the Supremes might have enlarged the field of potential litigation under California's notorious UCL, and I also gave a little history of how the UCL grew out of control, became a playground for uninjured bounty-hunters and eventually ran into a voter buzz-saw in 2006.

    Well, today the Supremes moved in the opposite direction, holding in Arias v. Superior Court (Angelos Dairy, RPI) (June 29, 2009) ___ Cal.4th ___ (S155965) and Amalgamated Transit Union, Local 1756, AFL-CIO et al. v. Superior Court (First Transit, Inc., et al., RPI) (June 29, 2009) ___Cal.4th___(S151615) that a UCL plaintiff who seeks to represent the interests of others must bring suit as a class action and meet class certification requirements.

The UCL After In Re Tobacco II Cases -- Are We Right Back Where We Started?

    Let's review briefly for those who haven't had the privilege of dancing in the UCL mosh pit:

     Long ago, there was California's Unfair Competition Law, or "UCL," which allowed any person to bring suit seeking an injunction or other equitable relief against any business engaged in a business practice that was unlawful, unfair or fraudulent.  It mattered not whether the plaintiff had ever himself been victimized by the business practice.  Indeed, it mattered not whether the plaintiff had ever set foot in the defendant business's premises.  The UCL deputized every citizen of California as a bounty hunter private attorney general.

    In the 1990s, UCL suits mushroomed (or at least, so it seemed), and the law was often used to enforce compliance with technical requirements of consumer protection laws that various industries hadn't paid much attention to.  Plaintiff attorneys would target industry practices and cut a swath through those industries, creating some angry, and fairly well-financed, industry groups. 

    Then, a law partnership known as the Trevor Law Group overreached, and started using the UCL to shake down small mom and pop, recent immigrant-owned dry cleaners and other businesses, and became the poster child for UCL abuse.  And when California business organizations floated a ballot initiative, Proposition 64, to scale back the use of the UCL, it caught fire, winning handily in 2004.

    Proposition 64 eliminated citizen suits under the UCL except by plaintiffs who had suffered "injury in fact " and "lost money or property as a result" of the unfair business practice in question.  The idea, clearly, was to eliminate the use of nominal plaintiffs who had no business relationship with, had never done business with, and had never been harmed by, the defendant businesses.

    Before and after Proposition 64, a UCL action could be the basis for a class suit.  As amended by Proposition 64, the UCL provides that:

"[a]ny person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of Section 17204 [i.e., has suffered injury in fact, lost money or property, etc.] and complies with section 382 of the Code of Civil Procedure [California's class action statute.]"

    So, just who is it that has to have standing?  The class representative or all the class members?  According to today's 4-3 opinion by the Cal Supremes ( In Re Tobacco II Cases (May 17, 2009) ___Cal.4th___ (S147345)), only the class representative has to have standing.  Class members who otherwise qualify for membership don't have to have suffered injury in fact, and don't have to have lost money or property as a result of the predicate act.

    In a concurring (slightly) but dissenting (mostly) opinion, Justice Baxter has, in my view, the better argument:

Even if the majority's holding has some sympathetic appeal on the particular facts alleged here, the rule the majority announces will apply equally to less egregious cases, where it invites the very kinds of mischief Proposition 64 was intended to curtail. . . .[T]he majority's erroneous determination . . .turns class action law upside down and contravenes the initiative measure's plain intent.

    How much of a difference will this ruling make?  Conceiveably a big difference.  To the extent a UCL action seeks injunctive relief, it seems to matter little whether there is one plaintiff or a class of plaintiffs. 

    On the other hand, the UCL also allows restitution -- the restoration of funds or property wrongfully taken by another.  And the restitution sought here, apparently, will be the money class members paid for their cigarettes.  The opinion makes it clear there will be a much relaxed standards for class members seeking resitution in class action UCL cases.  Justice Baxter seems to believe that the majority's ruling will allow

restitutionary relief on behalf of all California smokers who simply saw or heard such ads during the period at issue, regardless of whether false claims contained in those ads had anything to do with any class member's decision to buy and smoke cigarettes.

    Consider this:  As it allows both injunctive relief and other equitable relief as appropriate, the UCL likely allows rescission in an appropriate case.  So imagine a scenario where an automobile manufacturer carries on an extensive fraudulent advertising campaign.  Can rescission be obtained by a class of persons who bought the car and saw or heard an ad, even if there is no evidence that the ad had anything to do with the purchase?

    Looks a lot like the same kind of mischief we saw before.  Only time will tell.

Cal Supremes Decide In Re Tobacco II Cases -- Major UCL Case

    The decision in In Re Tobacco II Cases (May 17, 2009) ___Cal.4th___ (S147345) just hit the internets about ten minutes ago.  CalBizLit won't have time for analysis for a few hours, but at first blush, the decision looks like a big win for class action and UCL plaintiffs:

On review, we address two questions: First, who in a UCL class action must comply with Proposition 64' s standing requirements, the class representatives or all unnamed class members, in order for the class action to proceed? We conclude that standing requirements are applicable only to the class representatives, and not all absent class members. Second, what is the causation requirement for purposes of establishing standing under the UCL, and in particular what is the meaning of the phrase "as a result of' in section 17204? We conclude that a class representative proceeding on a claim of misrepresentation as the basis of his or her UCL action must demonstrate actual reliance on the allegedly deceptive or misleading statements, in accordance with well-settled principles regarding the element of reliance in ordinary fraud actions. Those same principles, however, do not require the class representative to plead or prove an unrealistic degree of specificity that the plaintiff relied on particular advertisements or statements when the unfair practice is a fraudulent advertising campaign.

    Much more analysis (both here, and, in all likelihood, all over the California blawgosphere) later today or tonight.

When Can A Disqualified Class Representative Conduct Discovery To Find a Better Plaintiff? Muddy Waters Get Murkier

    A recurring scenario in post-Proposition 64 Unfair Competition Law cases has been this:  the plaintiff files a UCL case on behalf of all persons allegedly injured by the business practice in question; and it becomes clear that he or she has sustained no actual injury, and therefore can't serve as a plaintiff.  So the plaintiff seeks leave to conduct discovery to find a better representative plaintiff (the scenario can also come up in a more traditional class action setting, and it has).

More after the jump.

Cal Supremes Rule Life Insurance Not A Service Under CLRA

   The Consumer Legal Remedies Act (Civ. Code section 1750 et seq.) prohibits various unfair and deceptive acts and practices in a "transaction intended to result or which results in the sale or lease of goods or services to any consumer." 

    Is life insurance a service?   The California Supreme Court today said "no" in Fairbanks v. Superior Court (April 20, 2009) ___Cal.4th___ (S157001), a CLRA case against Farmers' Insurance.    Section 1761(b) defines "services" as "work, labor and services for other than a commercial business use, including services furnished in connection with the sale or repair of goods."  Life insurance, as a contract of indemnity, doesn't qualify. 

    And the broader application of this decision to CLRA cases is this:  while the plaintiffs contended that there were services involved because of "the work or labor of insurance agents and other insurance company employees in helping consumers select policies that meet their needs," etc., those ancillary services didn't change the result.

. . . ancillary services are provided by the sellers of virtually all intangible goods — investment securities, bank deposit accounts and loans, and so forth. The sellers of virtually all these intangible items assist prospective customers in selecting products that suit their needs, and they often provide additional customer services related to the maintenance, value, use, redemption, resale, or repayment of the intangible item. Using the existence of these ancillary services to bring intangible goods within the coverage of the Consumers Legal Remedies Act would defeat the apparent legislative intent in limiting the definition of “goods” to include only “tangible chattels.”

Greenwashing – What Manufacturers Need to Know About Their Environmental Product Representations

     As previously announced, I'm attending DRI's Product Liability Conference in San Diego, and providing summaries as time permits.  Not quite live-blogging, but trying to keep it current.  There is nothing affiliated with DRI about these posts.   Needless to say, my only affiliation with DRI is that I'm a member and I'm here.

     We had a very good last minute substitute speaker today, Victoria Davis Lockard, an attorney from Alston & Bird LLP in Atlanta.

      The term “greenwashing” is attributed to an environmentalist named Jay Westervfeld, who criticized  the hotel industry’s practice of using placards suggesting guests could help “save the environment” by reusing their sheets and towels;  Westervfeld maintained, logically enough, that the hotels were motivated by profit, not by any real environmental agenda.

    Underlying today’s discussion are TerraChoice’s “Six Sins of Greenwashing” (now updated as “Seven Sins of Greenwashing”) and the FTC Green Guides.

    The original Six Sins of Greenwashing were  hidden trade-offs, lack of proof, vagueness, irrelevance, less of two evils, fibbing.  TerraChoice, a green marketing company, generated the report (available on its web site) after looking at 1700 purportedly green products at big box stores, and found all but one were guilty of one or more of these sins.

    The FTC Green Guides (16 CFR § 260), aren’t enforceable as law, but carry weight with the FTC and the courts in evaluating alleged Section 5 violations.

    The general principles of the Green Guides are these:

• Qualifications or disclosures must be clear, prominent and understandable;

• The environmental attribute or benefit must be presented in a way that is clear;

• The environmental marketing claim cannot be overstated;

• If there are comparative statements (e.g., 50% more recyclable materials) it must make the basis for the comparison sufficiently clear that it is not deceptive.

    There is specific guidance for statements of recyclability.   If a product is described  as  recyclable, it must be accepted at established and commonly available recycling programs.  The use of an SPI code (i.e., the triangle with an number in the middle) is the same thing as saying the product is recyclable.  If the recycling options are limited, the limitations must be stated.

    The USDA rules on "Organic" claims:  There are three levels, 100% organic, “organic” (which means 90%) and “made with organic ingredients” (which means 70% organic).  These relate only to foods.  So cosmetic makers and makers of personal care products technically aren’t subject, but consumer lawsuits have urged that they are if they make those representations.

    Victoria poses the following litigation risks:

• Consumer “no injury” class actions:   She acknowledges we aren’t seeing a lot of these yet.

• Competitor claims under the Lanham Act, or actions before the National Advertising Division of the Better Business Bureau.

• Section 5 Enforcement actions by the FTC – there have been 37 actions from 1990 to 2000, and none since.

• State attorney general actions under state consumer protection laws.

    In California, this is one area where the Unfair Competition Law may have some continuing vitality.  While citizens’ suits are problematic in the aftermath of California’s Proposition 64 (which amended our Unfair Competition Law to require that the plaintiff have sustained injury in fact and lost money or property as a result of the unfair, unlawful or fraudulent practice), there is no such requirement when the Attorney General or another public prosecutor files suit.  Cases of this type have political sex appeal in California, and pose a real risk for companies that run afoul of the six sins or the green guides.

    Chris Bell raised two areas of concern, among others:  One relates to companies pitching “carbon offsets” for everything from air travel to conventions, when there is no agreement, policy, regulation, or anything else that provides a bench mark for what is or is not an appropriate carbon offset.  The second has to do with claims of sustainability that can’t be entirely documented throughout a company’s supply chain.  In California, these mis-steps, as well, might result in the Attorney General prosecuting Unfair Competition Law litigation.

Cal Supremes To Decide Impact of Proposition 64 In Class Action UCL Cases

    To review:  Before November, 2004, any person could bring an action under California's Unfair Competition Lawseeking injunctive and other equitable remedies against a company for a business practice that was unlawful, unfair or fraudulent.  There was no requirement that the plaintiff have been affected in any way by the company's practice (or that he or she had ever conducted business with the company).  The statute authorized litigation by nominal, wholly uninvolved plaintiffs.

    That all changed in the 2004 election, when the voters passed Proposition 64.  This initiative amended the UCL, requiring, as a matter of standing, that a claimant have sustained "injury in fact" and "lost money or property" "as a result of" the unlawful, unfair or fraudulent practice.  The initiative also required that a plaintiff meet the standards of Code of Civil Procedure section 382, California's class action statute.

    In the case of In re Tobacco II Cases, no. S147345, the Cal Supremes are considering two issues:  "(1). . . must every member of the proposed class have suffered 'injury in fact,' or is it sufficient that the class representative comply with that requirement?;"  and "(2) In a class action based on a manufacturer's alleged misrepresentation of a product, must every member of the class have actually relied on the manufacturer's representations?"

    The case was argued yesterday.  UCL Practitioner has complete coverage of the arguments here.  It looks to me like a 4 - 3 vote one way or the other, but we'll find out in the next ninety days.  A "yes" answer to either question would be a big win for plaintiffs in UCL litigation, and would potentially broaden the availability of the UCL a good deal.

This Just In: Supreme Court Rules Statute Means What It Says

    On my long-term list of projects is a white paper on the Consumer Legal Remedies Act, Civil Code section 1750 and following.  This set of statutes, one of the broadest consumer protection schemes in California, outlaws a host of practices in the sale or lease of goods or services, and then provides for recovery of damages, restitution and equitable relief for violations.  The statutory scheme also has somewhat relaxed class certification provisions.

    In a much watched case brought by customers against Sprint, the customers sought to have a binding arbitration provision and related clauses in their Sprint contracts declared unconscionable and illegal, based in part on the CLRA.  Sprint had not enforced these provisions against the plaintiffs. 

    Section 1780 of the CLRA provides that

Any consumer who suffers any damage as aresult of the use or employment by an person of a method, act or practice declared to be unlawful by Section 1770 may bring an action . . .

    Sprint obtained dismissal of the CLRA claims on the ground that the plaintiffs had suffered no damage.  The Court of Appeal agreed.  And today, the Supremes ruled that section 1780 means what it says:  no damage, no lawsuit.  Meyer v. Sprint Spectrum L.P. (January 29, 2009) ___ Cal.App.4th ___ (S153846).

Plaintiffs Lose Takada Seatbelt Buckle Case

    In the mid-1990's, the National Highway Transportation Agency and many of the automobile manufactures undertook a voluntary recall involving seat belt buckles manufactured by Takata, Japan's largest manufacturer of safety equipment.  As I recall, the recall involved the TK-52 buckle, which had a red "press" button that could break.

    Now this just in from Bloomberg:  plaintiff attorneys in Southern California tried to establish class-wide relief involving all purchasers of TK-52 buckles in California, seeking restitution of up to $247 million to replace them all. 

    No dice:

Los Angeles Superior Court Judge Maureen Duffy-Lewis rejected the claims Jan. 16, finding no violations of testing requirements, no evidence that Takata’s tests were inadequate and no evidence that consumers relied on the company’s tests. Lead plaintiff Lupe Zavala didn’t show evidence of actual injury, disqualifying him as representative of other consumers, she said.

“The plaintiffs failed to prove by a ‘preponderance of evidence’ that defendants engaged in unlawful, unfair or fraudulent conduct” concerning testing, Duffy-Lewis said in her six-page decision. “At no point in the trial did any witness suggest that the TK-52 buckle failed to work in the manner it was intended.”

    I'd be curious to know whether these were the same buckles involved in the 1995 recall.  It seems unlikely, since (a)  the recall had presumably been accomplished, and the work would have been done at no cost to the consumers;  and (b)  few of those recall vehicles (which were up to about 1991 models) would still be on the road.