This is kind of inside class action baseball, but it is potentially very important for companies still defending UCL (Business and Professions Code sections 17200, et seq.) cases in this post-Proposition 64 world. In January, I blogged about First American Title Insurance Company v. Superior Court (2007) 146 Cal.App.4th 1564, 53 Cal.Rptr.3d 734. This was a class action where the plaintiff turned out not to be a member of the class he wanted to represent. He sought an order allowing precertification discovery so he (or his lawyers, actually) could find a better class representative. Say, for example, omeone who could meet the requirements of class membership, let alone typicality. And the Court of Appeal said “no” – that would be an abuse of the class action process. Not surprisingly, there has been a petition for review by the Cal Supremes, and a couple of requests for depublication (which would, if granted, make the decision non-binding except as to the parties). So we still don’t know what the disposition of this will be.
But in the meantime, another Court of Appeal has issued an even broader discovery decision, this time in a UCL case. The case is Cryoport Systems v. CNA Insurance Companies, G037056. The case was decided in mid-March, but the Court decided to publish it on April 10. Although the facts and procedural history are odd, the defense has a pretty good argument from this case that a UCL plaintiff who lost standing as a result of Proposition 64 can’t conduct discovery to find a plaintiff who sustained injury in fact or lost money or property, as the UCL now requires.
More after the jump
Cryoport was insured by CNA. It failed to pay its
premium. CNA cancelled the coverage, Cryoport paid but failed to
request reinstatement, Cryoport had a fire loss, CNA denied the claim.
Cryoport sued and lost, the court finding that the cancellation and
failure to reinstate were proper.
Undeterred, Cryoport sued again, this time under the UCL. Its
theory was that when insureds DID request reinstatement, CNA required
insureds to sign a “no loss letter” detailing any known losses during
the cancellation period, and wouldn’t cover those losses. Thus, went
the theory, CNA was receiving premium payments for the time between
cancellation and reinstatement even though it bore no risk.
Cryoport filed this suit one day before the election wherein the
voters enacted Proposition 64. After Proposition 64 pased, UCL plaintiffs
were required to plead and prove they had sustained injury in fact and lost money or
property as a result of the alleged unlawful, unfair or fraudulent
business practice. Since Cryoport hadn’t even requested reinstatement,
let alone signed a “no loss letter,” it no longer qualified as a
Proposition 64 plaintiff. So the trial court sustained CNA’s demurrer
and dismissed the case.
On appeal, Cryoport finally tumbled to the fact that it
should have asked for an opportunity to conduct discovery and find a
better plaintiff. Courts of Appeal don’t like it when appellants raise
an issue for the first time on appeal, and this Court was no exception,
finding that the argument had been waived because it wasn’t raised
below and, in fact, was barely raised on appeal.
But then, the Court went off on an “In any event. . . . . “
discussion, extensively citing and quoting First American Title to hold
that a plaintiff who loses standing because of Proposition 64 cannot use the suit as a vehicle to find a more suitable plaintiff through discovery.
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