As we rang in the new year, CBL committed to post some ideas about how to improve three problematic areas of California law, making them less business-unfriendly while maintaining California's position as a very pro-consumer, pro-green state. On January 4, we solved a Proposition 65 problem. So this time, let's look at the Consumer Legal Remedies Act, Civil Code section 1750 and following.
Here's what the CLRA does at its heart: it outlaws some 22 deceptive business practices, including "[p]assing off goods or services as those of another," and "[r]epresenting that goods or services have . . . characteristics, ingredients, usies, benefits, or quantities which they do not have . . . " and "[r]epresentinig that goods or services are of a particular standard, quality or grade. . . if they are of another."
Fine. It's the twenty-first century, and we can agree that sellers of goods and services shouldn't make false representations about them. But where the CLRA runs off the rails is when it gets to remedies and the class action provisions. The successful plaintiff can recover actual damages, an injunction, restitution, punitive damages, attorneys' fees and costs and "[a]ny other relief that the court deems proper." Civil Code section 1780. And the CLRA has its own class action provisions, which allows certification of a class without a showing of substantial benefit to the litigants and to the court. Civil Code section 1781, Corbett v. Superior Court (2002) 101 Cal.App.4th 649,669, fn 9.
So, as with Proposition 65 litigation, the odds are stacked against the company. A company that thinks it has a meritorious defense risks a very large hit if it guesses wrong. But there is supposed to be one potential safety valve for the company. Thirty days before the consumer can seek damages, she must give notice of the violation and give the company an opportunity to "correct, repair, replace or otherwise rectify" the problem (Civil Code section 1782).
Under section 1782(b), an individual action is barred if "an appropriate correction, repair, replacement or other remedy is given, or agreed to be given within a reasonable time, to the consuemer within 30 days of the notice." And under section 1782(c), no class action for damages may be brought if the company shows it has identified, or made a reasonable effort to identify, all the class members, offered and given a remedy to all the class members, and stopped the unlawful practice.
So, what's wrong with that? Well, for one thing, a consumer can seek equitable remedies -- including injunction, restitution and rescission -- without giving the thirty days notice, so the notice requirement is pretty much illusory. Also, the notices never fully describe the legal consequences of failing to resolve the claim, so most non-California companies who get the pre-filing notice have no idea about the consequences of ignoring the requests. Consumer attorneys don't want to provide this information; they want the company to ignore the letter so they can file suit. Furthermore, the statutory structure encourages plaintiffs' attorneys to make all kinds of class demands in every pre-filing notice, since compliance is almost always impossible within thirty days.
And finally, the statute is silent as to whether consumer attorneys may insist on receiving fees as part of their initial demands, and pre-filing notices almost always demand attorneys' fees. CBL's best analysis is that there is no right to fees if the company offers a remedy within the statutory time. But CBL acknowledges there is some ambiguity.
So why not make these changes?
- Provide that notice must be given before filing any action under the CLRA;
- Prescribe language that must be included in the notice advising the company of its rights and duties, and the potential consequences of failing to respond to the notice;
- Provide a longer notice -- say, 120 days -- prior to filing a class action suit, so that the company has a full and fair opportunity to conduct an investigation o the allegations; and
- Make it clear in the statute that a company that acts in good faith during the statutory period to remedy the violation will not be liable for attorneys' fees. And make it a requirement that this information be provided in the pre-filing notice.
The statute would still be very protective of consumer rights. It would include all the protections of the existing statute. And, unlike the existing statute, it would encourage early and immediate resolution. What could possibly be wrong with that?