1 Brian S. Kabateck Section 17200: Still the California consumer s best friend? Part One: A review of the Unfair Competition Law and its stormy history The information in this article was presented at the 30th Annual CAALA Las Vegas Convention in September 2012 Business and Professions Code section et seq, otherwise known as California s Unfair Competition Law or the UCL, has been designed as a powerful pro-consumer statute, arguably the toughest in California, primarily because the statute does not proscribe any specific conduct, but broadly prohibits unfair competition. It protects consumers by defining as unfair competition those business acts or practices that are: unlawful, unfair, or fraudulent. The purpose of the UCL is to protect both consumers and competitors from unfair competition: the statute is defined in the disjunctive to encompass a wide variety of claims. As a result, a practice may be found unfair or fraudulent, even if not unlawful and vice versa. (See Cel-Tech Communications & Cel-Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.) By proscribing any unlawful business practice, Section borrows violations of other laws and treats them as unlawful that the unfair competition law makes independently actionable. However, the law does more than just borrow. The statutory language referring to any unlawful, unfair practice makes clear that a practice may be deemed unfair even if not specifically proscribed by some other law. (Bardin v. Daimler Chrysler Corp. (2006) 136 Cal.App.4th 1255, 1265 (emphasis added).)
2 Take note that an act that is otherwise lawful can still be challenged as unfair. However, if the conduct complained of has been specifically determined as lawful, it cannot be actionable under the unfair prong of section Trial lawyers can bring a UCL claim even if they believe they can only satisfy one of the three prongs, and a single business practice may simultaneously violate two or all three prongs. Therefore, trial lawyers should evaluate the potential to bring a UCL claim in business lawsuits, as there is a strong likelihood it could apply in a variety of cases. Tip to plaintiffs attorneys: When bringing a UCL claim, try to plead all three prongs and plead facts specific as to each. If the unfair business practice you allege does not survive on demurrer under one prong, one of the other two might still be viable. While the UCL is an equitable, proconsumer tool with equitable remedies for restitution and/or injunctive relief, attorney s fees are not generally awarded. However, a prevailing party may seek attorney fees as a private attorney general pursuant to Code of Civil Procedure section (Walker v. Countrywide Home Loans, Inc. (2002) 98 Cal.App.4th 1158, 1179.) Section Pre-2004 and Prop. 64 The UCL changed the business litigation landscape because it was extremely far-reaching. The requirements to state a UCL claim before Proposition 64 s passage in 2004 were (1) A business practice that is (2) Unlawful, unfair or fraudulent. The unique standing provision provided that any private party could bring an action so long as it was acting for the interests of itself, its members, or the general public. (Former Bus. & Prof. Code, ) A plaintiff did not need to have actually suffered any damages as a result of the challenged unfair business practice. No link was required between the plaintiff and the specific practice that the plaintiff challenged. The California Court of Appeal explained the coverage of the UCL as sweeping, embracing anything that can properly be called a business practice and that at the same time is forbidden by law. (Roskind v. Morgan Stanley Dean Witter & Co. (2000) 80 Cal.App.4th 345, 350.) For class actions, a class representative did not need to show that he suffered any actual harm. For representative actions that were not class actions, a private party would have standing to sue not only on his or her own behalf, but also on behalf of members of the public without having to satisfy the class-action requirements. This meant any person could sue in a representative capacity as an alternative to class actions. There were no formal class action requirements. UCL judgments bound only the named plaintiff who was suing on behalf of the general public and raised the issue of a company s repeat liability for the same underlying conduct. For those suing in a representative capacity, there was no requirement that a member of the public suffer damages as a result of a defendant s violation. Litigation abuses pre-prop. 64 With such wide reach, the UCL became the go-to statute and established itself as an essential part of California law, used in a broad array of claims. Unfortunately, this led to abuse of the UCL by some attorneys. Frivolous lawsuits were being filed because of the breadth of the statute, the ability to bring private representative actions (without class certification) and the possibility of recovering attorney s fees. There were highly publicized reports of a few law firms filing numerous shake down lawsuits against small, independent businesses, for example auto repair shops that failed to timely renew their registrations with the Bureau of Automotive Repair. Prop. 64 and why it was propelled to victory Responding to these litigation abuses, a ballot proposition was born that would forever change the UCL: It is the intent of California voters in enacting this act to eliminate frivolous unfair competition lawsuits while protecting the right of individuals to retain an attorney and file an action for relief pursuant to [the UCL]. Official Voter Information Guide dated 8/9/2004, Proposition 64, Analysis by the Legislative Analyst, Section 1(d) (emphasis added). Prop. 64 narrowed the reach of section to try to address the problems brought on by the statute s lax requirements. The proposition did two major things: (1) Standing requirement: Prohibit plaintiffs (consumers and competitors) from filing unfair competition lawsuits unless they have actually suffered injury and have lost money or property as a result of unfair competition. (2) Prohibit the filing of representative actions as a substitute for class actions. Section post-prop. 64 With the passage of Prop. 64, the Business and Professions Code section added new restrictions on private enforcement by circumscribing standing to bring UCL claims: To have standing, plaintiff must now make a two-fold showing: (1) Suffered direct injury AND (2) Lost money or property as a result of the unfair competition. In Kwikset, the California Supreme Court had to define the new terms of section Regarding the order in which to best consider the new elements of standing, the court observed: If one has alleged/proven a personal, individualized loss of money or property in any nontrivial amount, he or she has also alleged or proven injury in fact. Because the lost money or property requirement is more difficult to satisfy than that of injury in fact, for courts to first consider whether lost money or property has been sufficiently alleged or proven will often make sense. (Kwikset Corp. v. Super. Ct. (2011) 51 Cal.4th 310, 325) Business and Professions Code section17203 was amended to impose new requirements for private representative actions: Plaintiff bringing a representative claim must satisfy the requirements of California Code of Civil Procedure section 382 for class actions AND satisfy
3 section by showing he/she has suffered direct injury and lost money or property as a result of the unfair competition. Important post-prop. 64 developments The courts are trying to deal with novel issues that arose as a result of the new amendments: Whether the new requirements applied to cases already pending when Prop. 64 passed in November of The California Supreme Court determined that the Proposition 64 amendments to the UCL applied to cases already on file in November, when the initiative was effectuated. (See Californians for Disability Rights v. Mervyn s, LLC (2006) 39 Cal.4th 223.) Big issue for class actions: Whether in class actions, Prop. 64 s standing requirements apply to the named class representative only or to all class members? In re Tobacco II Cases involved an unfair competition law action brought on behalf of a class of California smokers who alleged that cigarette makers engaged in a long campaign of fraudulent advertising. The Supreme Court, looking at the fraud prong of the UCL, analyzed the impact of the Proposition on UCL class actions and limited Prop. 64 s new standing requirements to named class representatives only. (See In re Tobacco II Cases (2009) 46 Cal.4th 298.) Despite Prop. 64, UCL claims still offer benefits Even though the pool of individuals who can now bring a claim has shrunk, there are still valuable benefits to those who use it. Let s consider four of them: A claim under the fraudulent prong of business practices does not have to be stated with particularity, as does a general fraud cause of action: [T]he elements a plaintiff must prove to establish a fraudulent business practices cause of action under the UCL are more favorable to plaintiffs than those for common law fraudulent inducement and negligent misrepresentation (Fairbanks, supra, at 561.) Injunctive relief and restitution are powerful tools. The UCL states that [u]nless otherwise expressly provided, the remedies or penalties provided by this chapter are cumulative to each other and to the remedies or penalties available under all other laws of this state. (Bus. & Prof. Code, ) Even if a private cause of action is not otherwise provided in the underlying statute, subject to limitations, the prohibition of unlawful business acts/practices allows redress for statutory violations. California case law has interpreted the unlawful prong to hold illegal a business practice that violates any other law, making it independently actionable under section (See Cel-Tech Communications & Cel-Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.) Subject to important limitations, section prohibition of unfair and deceptive acts allows plaintiffs to attack business practices that are not expressly proscribed by any established law, i.e., you cannot attack them under the unlawful prong of the UCL. The disjunctive definition of unfair competition allows a UCL claim to proceed on an unfair/deceptive basis even though the unlawful claim may be barred (for instance, defendant may bring a defense to the predicate statute plaintiff borrowed for his or her UCL claim). Examples: If a newly enacted statute s legislative history establishes that a practice is disfavored, but there is no explicit prohibition of an act, one may attack it as unfair ; If new technology raises a concern, but there is no specific law that proscribes the use of that technology, one may bring an unfair claim to try to prohibit the use of that technology as unfair under the UCL. In the second part of this article, we ll look at the cases that have defined the UCL and those that are likely to define it in the future. Brian S. Kabateck is a consumer rights attorney and founder of Kabateck Brown Kellner LLP in Los Angeles. President-elect of the Consumer Attorneys of California, he represents plaintiffs in personal injury, mass torts litigation, class actions, insurance bad faith, insurance litigation and commercial contingency litigation.
4 Brian S. Kabateck Section 17200: Still the California consumer s best friend? Part Two: A review of the case law that defines the Unfair Competition Law The information in this article was presented at the 30th Annual CAALA Las Vegas Convention in September 2012 In this second part of our review of the Unfair Competition Law, Business and Professions Code Section (the UCL), we look at recent cases that have defined the law post-prop. 64 and those that will likely define it in the future. UCL cases pending before the California Supreme Court Aryeh v. Canon Business Solutions, Inc. S184929, (2010) 185 Cal.App.4th 1159 (statute of limitations case, involving section 17208). Review granted. Issue: Appellant wanted to apply the doctrine of continuing violations to UCL violations to include wrongful acts occurring outside the statute of limitations period. Facts: In 2001, Canon leased two copy machines to Aryeh. In the agreement Aryeh agreed to pay a monthly fee for X amount of copies, and an additional excess copy charge for copies exceeding the monthly allowance. Shortly after entering the rental agreements, Aryeh learned he was being charged for test copies that Canon service personnel made when they serviced the machines. Canon failed to reimburse him for excess charges that were imposed over a period of time beginning outside the limitations period and continuing into the limitations period. Rule: A UCL cause of action under section must commence within four years after the cause of action accrues. ( 17208) The cause of action accrues when the defendant s conduct occurs, not when the plaintiff learns about the conduct. Analysis: The Court found Snapp & Associates Ins. Services, Inc. v. Robertson (2002) 96 Cal.App.4th 884 controlling, in which the appellate court determined that plaintiff s UCL action was timebarred because while defendant s wrongful conduct was ongoing, the conduct had begun more than four years prior to plaintiff s action. The Court determined that the conduct complained of here is not conduct that the doctrine is meant to deter (egregious and harassing conduct) and a claim for recovery of past damages is not within the contemplation of the UCL. Holding: Appellant s UCL cause of action accrued more than four years before he filed the instant action; the continuing violation doctrine does not apply; affirmed judgment sustaining Canon s demurrer without leave to amend. Tip to plaintiffs attorneys: This illustrates why you should not rely on the discovery rule to toll the statute of limitations because the rule does not apply to causes of action arising under section Instead, try to invoke the equitable tolling doctrine (in Aryeh, the Court stated that the statute of limitations on a UCL action begins to run upon accrual unless plaintiff could establish equitable tolling, which the plaintiff had failed to allege in that case). Loeffler v. Target Corp. S173972, (2009) 173 Cal.App.4th Review granted. Issue: Was Target entitled to collect sales tax reimbursement from customers on the purchase of hot coffee to go? Facts: In California, retailers who are obligated to pay sales taxes on their gross receipts may in turn seek reimbursement of the tax from their customers. Plaintiffs wanted a refund of that reimbursement from Target individually and on behalf of a class of purchasers and an injunction that would prohibit Target from collecting the reimbursement. Plaintiffs alleged Target engaged in unfair and unlawful business acts or practices by imposing the tax, which increased the costs to class members. Rule: Article XIII, section 32 of the California Constitution prohibits injunctions against the collection of state taxes and provides that refunds of sales taxes may only be recovered in a manner provided by the state legislature. Under the legislative scheme, the only way to litigate a sales tax refund dispute is for the retailer, as the taxpayer, to pay the tax, exhaust administrative remedies available to it with the State Board of Equalization ( SBOE ), and if the claim is denied, then file a suit for refund. Customers, however, may only obtain a refund of excess sales tax reimbursement under Revenue and Taxation Code section if: 1) The SBOE ascertains that excess reimbursement was collected, OR 2) The retailer prevails in a suit against the SBOE for a refund of overpaid sales tax. Analysis: The Loeffler court concluded that plaintiffs lawsuit was barred because the regulatory scheme enacted by the Legislature was the sole means by which to obtain reimbursement of wrongfully collected sales tax: Plaintiffs cannot use the UCL and CLRA to circumvent article XIII, section 32 and section Plaintiffs do not have standing to commence a sales tax refund suit because only the retailer, as the taxpayer, may file suit as the Legislature has not provided a private cause of action for customers to seek a refund of sales tax reimbursement. Plaintiffs therefore do not have the right to a sales tax reimbursement because the statute sets forth how a retailer must distribute excess sales tax reimbursements after the Board has determined that a refund is due here the Board has not even made that determination. Plaintiffs are attempting to resolve a sales tax dispute by using consumer and common law remedies rather than the
5 procedure set forth by the Legislature. They cannot do this under article XIII, section 32. By seeking an injunction prohibiting Target from collecting reimbursement from customers, plaintiffs are attempting to circumvent the prohibition of injunctions against the collection of sales taxes in section 32. The end result of enjoining Target from collecting reimbursement would be a restraint on collection of sales tax by the state, because Target might rely on the injunction to stop paying the taxes due on these purchases. Holding: Court of Appeal affirmed trial courts order sustaining Target s demurrer without leave to amend. Yabsley v. Cingular Wireless S (2009) 176 Cal.App.4th Review granted, further action deferred pending disposition in Loeffler. Issue: Whether Cingular s advertising practices were deceptive under and by failing to inform prospective customers that a sales tax would be charged on the undiscounted price of the customer s cell phone. Facts: California Code of Regulations requires sales tax be calculated on the non-sale price of a phone. Cingular did so without informing the customer prior to sale, although the amount of tax is shown on the invoice. Analysis: Yabsley does not meet the UCL standing requirements. Injury in fact: Invasion of a legally protected interest which is concrete and particularized. Yabsley s argument that he has a legally protected interest in receiving truthful advertising under the consumer remedy laws is insufficient for standing purposes; the legally protected interest must be an interest that is protected by a source other than the remedial provisions of the UCL. The only independent statute Yabsley cites is 6051, which only requires that a retailer pay the sales tax based on gross receipts. Lost money or property: The UCL s lost money or property requirement limits standing to individuals who suffer losses that are eligible for restitution. Here, there has been no determination by the Board that Yabsley is eligible for restitution. Causation: Causal connection between the harm suffered and the unlawful business activity. Regulation 1585 allows Cingular to collect the sales tax from the consumer based on the undiscounted price of a phone, so whether Cingular discloses or does not disclose the amount of tax to be collected on the purchase does not change the amount of sales tax that is still due, so the causal connection is broken. Holding: Court of Appeal agreed with Loeffler Court of Appeal s conclusion that the UCL and FAL and the policies they promote cannot take precedence over article XIII, section 32 and the administration of the tax laws requires adherence to statutory procedures for the proper administration of the sales tax law. Zhang v. Superior Court S178542, (2010) 178 Cal.App.4th Review granted. This case may have a substantial impact on insurance law in California. If the California Supreme Court were to allow section claims based on advertising and promises regarding timely payment for claim, then insureds would possibly be able to enjoin the wrongful company practice. Issue: Whether fraudulent conduct by an insurer, which is connected with conduct that would violate Insurance Code section et seq., can also give rise to a private cause of action under the UCL. Facts: Zhang is suing her insurer, California Capital Insurance Company. She alleges misconduct relating generally to insurer s handling of her loss claim and that the insurer engaged in unfair, deceptive, untrue, and/or misleading advertising because of the insurer s promises that it will timely pay proper coverage in case of loss, but has no intention of doing so. Analysis: In Moradi-Shalal, the Supreme Court held that Insurance Code section (which prohibits insurance companies from engaging in a variety of unfair and deceptive conduct) did not carry a private right of action. (See Moradi-Shalal v. Fireman s Fund Ins. Companies (1988) 46 Cal.3d 287.) Some cases, such as Textron Financial Corp., interpreted this holding to bar UCL unlawful prong claims against insurers based on conduct prohibited by section , and held that UCL claims could not be based on common-law claims. Other cases, which the Court of Appeal followed in Zhang, rejected this view. (See, e.g. State Farm Fire & Cas. Co v. Superior Court (Allegro)(1996) 45 Cal.App.4th Here, the court held that Moradi- Shalal exempted insurance companies from UCL claims only to the extent that the UCL claim was based solely on conduct that violates the UIPA but is not otherwise prohibited. The conduct alleged as violating the UCL is not merely improper under the UIPA, but also amounted to fraudulent misrepresentation and misleading advertising, which the UCL prohibits independently of the UIPA. Holding: Moradi-Shalal does not bar a UCL fraudulent prong claim against an insurance company and, on a petition for writ of mandate, the court reversed the trial court s order holding to the contrary. Hughes v. Progressive Direct Ins. Co. S195069, (2011) 196 Cal.App.4th 754. Review granted, briefing deferred pending disposition in Zhang. Issue: Whether Insurance Code section can serve as a predicate for a UCL claim in light of Moradi-Shalal. Facts: Plaintiff alleged that after a car accident he was improperly forced by his insurer to have the damage to his car repaired at an auto body repair shop that was approved and controlled by Progressive, rather than the shop of his choice. While the car was returned to him, it was not restored to its pre-accident condition. Plaintiff argued that Progressive thereby ran afoul of section of the Insurance Code, and based on these allegations, asserted a single
6 UCL cause of action. Note. Section is a non-uipa insurance code provision. Analysis: A private right of action under the predicate statute is not necessary in order to state a cause of action under the UCL for violations based on that statute. Here, Hughes is not suing the insurer for violating the UIPA and the wrongful conduct alleged here is not similar to the bad faith refusal to settle claims (as was the case in Morad-Shalal). Recognizing a violation of section as to predicate unlawful business practices under the UCL does not appear to disturb Moradi-Shalal nor does it conflict with the case law extending the holding to UCL causes of action based solely on violations of the UIPA. Looking at the legislative history of 758.5, the Legislature neither authorized direct private enforcement [of the statute] nor intended simply to classify a violation of the section as another unfair insurance practice with enforcement limited to those remedies set forth in the UIPA. An alleged violation of statutes, other than violations of the UIPA, applicable to insurers may serve as the predicate for a UCL claim absent an express legislative direction to the contrary. Holding: Violation of a statute (section of the Insurance Code) requiring notice of the right to select a repair dealer may serve as a predicate for a UCL claim. UCL-related Appellate Cases of Interest Sullivan v. Oracle Corp. (2011) 51 Cal.4th 1191 (overtime case). Three nonresident employees who performed work for a California-based employer in California brought action against employer for failure to pay overtime wages under the California Labor Code. The court held that: 1) Overtime statutes apply to the work nonresidents perform in California; 2) The UCL applies for failure to pay overtime for the work nonresidents perform in California; AND 3) Nonresident employees claim for overtime under the federal Fair Labor Standards Act cannot serve as predicates for UCL claims for work performed outside California. The Court did not address whether the California Labor Code may serve as a predicate to a UCL cause of action for work temporarily performed outside of California by a California resident. Pineda v. Bank of America, N.A. (2010) 50 Cal.4th 1389 (failure to pay wages case). An employee who did not receive timely payment of final wages after resignation brought an action seeking to represent a class of employees for those untimely wages. In addition to other claims, the employee brought a UCL cause of action pursuant to section 203 of the Labor Code for continued wages as a penalty for employer s untimely wage payment. The unpaid but earned wages that spark a 203 penalty are recoverable as restitution, because the employee has given his or her labor to the employer in exchange for that property. However, the penalty itself is not recoverable as restitution because it does not restore to the employee funds in which the employee, by having performed the labor, now has an ownership interest. Rather, the penalty is imposed to encourage employers to pay the final wages on time. The court held that section 203 penalties are not recoverable as restitution under the UCL because employees have no ownership interest in the funds. Bower v. AT&T Mobility, LLC (2011) 196 Cal.App.4th 1545: Customer s class action against telephone company under various causes of action, including the UCL, challenging the company s misrepresentation that it was required by law to pass on the cost of sales tax to customers. Holding: Customer did not suffer injury in fact from telephone company s alleged misrepresentation about sales tax, because her claim that she was told that charging her sales tax on the full, undiscounted price of the phone was mandatory, and that she was denied an opportunity to shop around for another retailer that doesn t use this practice, pleads at the most a conjectural or hypothetical injury, not an injury in fact. The Court distinguished these facts from Kwikset, in which the consumer would not have purchased the product but for the misrepresentation; also, the Court noted that Bower, the consumer, did not allege that she could have obtained a bundled transaction for a new cell phone at a lower price from another source. People, ex rel. Harris v. PacAnchor Transportation, Inc. (2011) 195 Cal.App.4th 765: State action against trucking company for alleged misclassification of workers as independent contractors rather than employees. Holding: Action was not preempted by the Federal Aviation Administration Authorization Act because the action under the UCL was not related to the price, route or service of a motor carrier (the FAAAA preempts state and local regulation relating to the prices, routes or services of motor carriers with respect to the transportation of property. 49 U.S.C (c)). Rather, the state s UCL action was based on the employers statutory obligations as to its employees. Archer v. United Rentals, Inc. (2011) 195 Cal.App.4th 807: Customers, among other claims, brought UCL class action against United Rentals in connection with the store s request that customers provide personal identification when making credit card purchases. The Court turned to the California Supreme Court s analysis in Kwikset, in which the Court established that the lost money or property requirement for standing is more difficult to satisfy than the requirement of injury in fact. Holding: Customers failed to establish standing because they were required to show they lost money or property in order to have standing to maintain a UCL claim for injunctive relief, and the customers could show neither. The court found that plaintiff customers failed to allege that the unlawful collection and recording of their personal identification information, a privacy violation as plaintiffs alleged, translates into a loss of money or property for standing purposes.
7 Fairbanks v. Farmers New World Life Ins. Co. (2011) 197 Cal.App.4th 544: Class action alleging various causes of action, including the UCL under the fraudulent prong, in connection with the insurer s marketing and sale of universal life insurance policies to insured. Plaintiffs argued, proof of [the] fraudulent scheme could be established by common, rather than individual, proof, based on a combination of common policy language, common language in policyholder statements, and a common marketing scheme. The trial court had denied the motion for class certification because common issues did not prevail; specifically, the trial court found no common marketing strategy. The defendant insurer introduced evidence showing that it taught agents to tailor their presentations to customers objectives, and that it considered the individual policyholder s situation. To state a UCL claim based on false advertising or promotional practices, one need only show that members of the public are likely to be deceived. Still, a class action for a fraudulent business practice under the UCL cannot proceed if a plaintiff cannot establish that the defendant engaged in uniform conduct that would be likely to mislead the entire class. When you have a class action for misrepresentations, class certification denial will be upheld if individual evidence will be required to determine whether representations were actually made to each member of the class. Holding: In the absence of a common marketing scheme, the class action fails. Sharp Healthcare Two cases issued on the same day involving the same hospital and its billing practices: Hale v. Sharp Healthcare (2010) 183 Cal.App.4th 1373: Uninsured patient brought class action against hospital and its owner for violating the fraud and unlawful prongs of the UCL (the unlawful prong was predicated on Civil Code section 1770 (CLRA), pertaining to misrepresentations). The court determined that when the predicate conduct alleged is misrepresentation, Tobacco II s reliance requirement and reasoning applies equally in this case under the unlawful prong. Here, Hale signed an Admission Agreement for services, at which time she expected to be charged reasonable rates. Therefore, she adequately pled reliance. Holding: Patient had standing to bring action under the unlawful and fraud prongs of the UCL because she adequately alleged reliance on statements made by Sharp. Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350: Plaintiff alleged hospital engaged in unfair and deceptive practices by billing uninsured patients full rates for services, versus discounts to those patients covered by insurance/ Medicare. As in Hale, the court reiterated that when the predicate conduct alleged is misrepresentation, Tobacco II s reliance requirement and reasoning applies equally in this case under the unlawful prong (which was predicated on Civil Code section 1770 (CLRA), just as in Hale). However, here, the second amended complaint did not allege that Durell relied on Sharp s Web site presentations or the language in the services agreement that he signed, which obligated him to pay the usual and customary charges for services. Holding: Patient lacked standing to bring action under the unlawful and unfair business practices prongs of the UCL because he could not show causation. In re Steroid Hormone Product Cases (2010) 181 Cal.App.4th 145: Consumer brought class action against retailer GNC that sold products containing a controlled steroid. In Tobacco II, the California Supreme Court concluded that the standing provision added by Prop. 64 did not have an effect on unnamed class members: Once the named plaintiff shows he or she has suffered injury in fact and lost money or property as a result of the unfair competition, no further individualized proof is necessary. Here, the trial court ruled, without applying Tobacco II (because it was issued several months after the trial court s ruling) that Prop. 64 did have an effect on unnamed class members, meaning in this case that individual issues predominated because each class member would need to show that he or she was injured by GNC s alleged unlawful sale of the controlled steroid, which would turn on whether the legality of the sale of the steroid was material to the consumer. Holding: In light of Tobacco II, the Court of Appeal determined that common issues predominated to support class certification for UCL claims. Pfizer Inc. v. Superior Court (2010) 182 Cal.App.4th 622: Plaintiff alleged Pfizer, manufacturer of Listerine mouthwash, marketed the product in a misleading manner by representing that the use of Listerine can replace the use of dental floss in reducing plaque and gingivitis. (Id. at 625.) Pfizer opposed the Superior Court s certification of a class action brought pursuant to the UCL and FAL, arguing individual issues predominated. One of the issues Pfizer enumerated was whether the consumer suffered injury in fact and lost money or property as a result of the alleged deception or reliance. The Court of Appeal in its prior decision concluded the trial court s ruling, was overbroad. The California Supreme Court granted review in 2006, and ordered briefing deferred, pending its decision in Tobacco II. The Supreme Court then transferred the case back to the Court of Appeal in 2009 with directions to vacate and reconsider the matter in light of Tobacco II. Holding: Court of Appeal ultimately concluded that Tobacco II did not change the disposition that the class is overbroad. Regarding the fraud prong of the UCL, the court found that, historically, to state a cause of action under either the UCL or FAL, case law only required a showing that members of the public [were] likely to be deceived. (internal citations omitted). Allegations of actual deception, reasonable reliance and damage were unnecessary and the likely to be deceived standard was not altered by Proposition 64. (citing Tobacco II at pg.
8 312, 320). However, Proposition 64 altered the standing requirement for the class representative in a UCL class action. A private person has standing to sue only if he or she has suffered injury in fact and has lost money or property as a result of such unfair competition. Here, the certified class is grossly overbroad because many class members are clearly not entitled to restitution; a large number of class members were never even exposed to the as effective as floss campaign so there is no likelihood they were deceived. The court further held that Tobacco II allows a class representative who actually relied on the defendant s misleading ad campaign to represent other class members who may have lost money ( may have been acquired being the restitution language of 17203) by means of the unfair practice. The court also said Tobacco II does not stand for the proposition that a consumer who was never exposed to an alleged false or misleading ad/promotional campaign is entitled to restitution. Brian S. Kabateck is a consumer rights attorney and founder of Kabateck Brown Kellner LLP in Los Angeles. President-elect of the Consumer Attorneys of California, he represents plaintiffs in personal injury, mass torts litigation, class actions, insurance bad faith, insurance litigation and commercial contingency litigation.