Saturday, December 19, 2009

Northern District Certifies Sunday Worker Break Class in Ross v. US Bank Nat'l Ass'n

On November 25, 2009, Judge Susan Illston certified a meal/rest period and off the clock class in Ross v. US Bank Nat'l Ass'n, 2009 U.S. Dist. LEXIS 116875 (N.D. Cal. Nov. 25, 2009), on behalf of hourly employees who worked Sunday shifts. Plaintiffs’ meal and rest period claims were predicated upon a “barrier/pressure” theory arising out of defendant’s alleged policy and practice of scheduling only two employees for Sunday shifts, coupled with a security policy requiring at least two employees to be on duty at all times, and a policy requiring that customers receive prompt service. See id., at 18-19. With regard to Plaintiffs’ off the clock claim, plaintiffs further alleged that statistical evidence established that 94 out of the 99 sampled employees had performed off-the-clock work during their recorded meal periods. See id., at 21-22.

In granting plaintiff’s motion, the Court reasoned that the common issue of whether defendant’s challenged policies created a barrier to taking uninterrupted meal and rest periods predominated notwithstanding the fact the defendant maintained policies actually requiring employees take meal and rest periods in accordance with California law:
Defendant contends that individual questions predominate, but defendant supports this contention primarily by advancing arguments that either address the legal merits of plaintiffs' claims or contest plaintiffs' factual allegations. Defendant argues that its policy is to comply with California law with regard to meal periods and rest breaks and to strictly prohibit off-the-clock work. Defendant argues that any violation of such policies is an individualized case that is not suitable for class treatment. But defendant also admits it has a security policy of having at least two employees on duty at all times, which in turn raises a common question as to whether such security policy effectively prohibited employees from taking meal periods and rest breaks on Sundays when only two employees were scheduled to work, and whether defendant is liable for such practices. Defendant also admits it has a policy of discouraging overtime and a practice of scheduling employees to work eight-hour shifts with a one-hour meal period, which in turn raises a common question as to whether such policy and practice forced employees to work off-the-clock during their meal breaks and whether defendant is liable for such practices. Thus, while defendants are correct that individual analyses are required, these individual questions will arise only after significant common questions of law and fact have been answered, and may not arise in the liability context.
See Ross, 2009 U.S. Dist. LEXIS 116875, at 29-30.

Barrier theory is perhaps one of the most effective theories for obtaining class certification of meal and rest period claims. Meal and rest period violations predicated upon a common barrier are antithetical of the issues presently pending before the California Supreme Court in Brinker Restaurant Corp. v. Superior Court, 80 Cal. Rptr. 3d 781, 800 (2008), review granted and opinion superseded in 85 Cal. Rptr. 3d 688 (Oct. 22, 2008), as this theory involves (1) a common compnay policies/practices ideal for class wide adjudication, (2) a lack of employee choice that effectively negates the “individualized” waiver defense, and (3) the potential for employer liability notwithstanding the existence of a facially lawful meal and/or rest period policy. See e.g. Bufil v. Dollar Financial Group, Inc., 162 Cal. App. 4th 1193, 1206 (2008) (“no one disputes that the wage order was posted or that there were designated areas to take a break – these matter naught if a single-shift sole employee or sole employee working with a trainee is not able to take an off-duty break.”). My firm has obtained certification using this theory in three separate cases this year.

Friday, December 18, 2009

Los Angeles Superior Court Grants Certification of Deceptive Promotion Class in Johnson v. GlaxoSmithKline, Inc.

On December 17, 2009, Los Angeles Superior Court Judge Peter D. Litchman certified a UCL deceptive advertising class in Johnson v. GlaxoSmithKline arising out the promotion of the drug Paxil. This case is one which my firm filed way back in 2003, and has seen many ups and downs, including outright dismissal. See Johnson v. GlaxoSmithKline, Inc., 166 Cal. App. 4th 1497 (2008). As I am a directly involved in this case, I will leave my statements on this matter at that. However, I would like to say that certification of was achieved by a great group of attorneys, not only from my office, but from Milstein, Adelman & Kreger, LLP and Kabateck Brown and Kellner.

Thursday, December 17, 2009

Further Discussion on the Second District’s Decision in In Re Vioxx Class Cases

In the two previous posts I have focused on the Court's analysis regarding predominance (here and here). However, another material component of In Re Vioxx Class Cases, __ Cal. App. 4th __ (2009) was the Court’s finding with regard to the issue of typicality.

On this issue, the trial court “concluded that the named plaintiffs, who were all individuals, did not possess claims typical of prescription drug benefit providers who had paid all or part of the purchase price of Vioxx for their subscribers.” See Slip Opinion, at 2-3. The trial court reasoned that typicality was lacking “on the basis that ‘[Merck] present[ed] persuasive evidence that the decisionmaking that goes into purchasing Vioxx on an individual basis is entirely distinct from the process for putting it into a group formulary.’” See id. at 20.

The plaintiffs claimed the trial court erred by treating third party payors (“TPPs”) as distinct from consumers. See id., at 20. Plaintiffs’ reasoned that the claims of the entire class of TPPs were subsidiary to consumers, and as such, “if an individual patient, acting in reliance on Merck’s misrepresentations, paid too much for Vioxx, the TPP which paid a portion of that purchase price should also be entitled to recover.” See id. The Court disagreed.

As reasoned by the Court, the plaintiffs’ analysis was flawed in that “it treats the TPP as a passive entity which simply pays its share of the cost of any prescription written for any of its members, with no independent say in the matter.” See id., at 20. The Court reasoned that the record reflected that while many TPPs passively pre-approved Vioxx for use in all patients, others established their own guidelines as to when Vioxx was indicated, conducted their own reviews of all published literature, and some even conducted their own research studies. See id., at 20-21. Based on such differences, the Court concluded that TPPs stood on a complete different footing with regard to the materiality of the challenged representations regarding Vioxx:
with respect to the UCL claim, in considering whether the representation was likely to mislead, we consider the audience to whom the misrepresentation was directed. Whether an individual patient or physician was likely to be misled by Merck’s representations is a completely different inquiry from whether a sophisticated P&T committee, with substantial resources and the ability to conduct its own research, was likely to be misled. As such, the trial court did not err in concluding the individual plaintiffs’ claims were not typical of the claims of the TPPs.
Slip Opinion, at 21.

The Court also noted that the class was overly broad, in that it “fail[ed] to exclude individuals who suffered personal injury from taking Vioxx.” See Slip Opinion, at 20 n.16 (citing Akkerman v. Mecta Corp., Inc., 152 Cal.App.4th 1094, 1103-1104 (2007)). Similarly, the Court also concluded that the class “fail[ed] to exclude those with a ‘flat copayment’ pharmaceutical benefit[,]” as such individuals “would pay the same copayment for a generic drug (i.e., naproxen) as they would for a name brand drug (i.e., Vioxx) would have no economic loss under plaintiffs’ theory of the case….” See id. (citing In re Cipro Cases I & II, 121 Cal.App.4th 402, 418 (2004).

While each of these defects may have been resolved by redefining the class [Hicks v. Kaufman & Broad Home Corp., 89 Cal. App. 4th 908, 916 (2001) (“if necessary to preserve the case as a class action, the court itself can and should redefine the class where the evidence before it shows such a redefined class would be ascertainable”)], such action likely would have futile in light of the Court’s findings on the issue predominance.

Wednesday, December 16, 2009

More on the Second District’s Decision in In Re Vioxx Class Cases

Yesterday I reported on the Second District’s Decision in In Re Vioxx Class Cases, __ Cal. App. 4th __ (2009).  Having had some time to digest the opinion, it is apparent that In Re Vioxx provides some significant guidance on numerous issues that have arisen post Tobacco II.

On appeal, plaintiffs challenged the trial court’s ruling as to typicality and predominance:
plaintiffs challenge all aspects of the trial court’s ruling. First, they argue that the trial court erred in finding the individual plaintiffs’ claims are not typical of the claims of the TPPs. Second, they argue that the trial court erred in concluding that individual issues prevailed on the element of reliance, because they could establish reliance on a class-wide basis and, in any event, reliance is unnecessary to their UCL and FAL causes of action. Finally, plaintiffs argue that their method of calculating damages is subject to common proof.
See Slip Opinion, at 13.

Preliminary to the Court’s substantive evaluation of the trial court’s order, however, the Court laid out some important ground rules designed to guide a trial court’s evaluation of a UCL claim.

First, the Court confirmed that the UCL is a single prong statute which imposes liability based on a “likely to deceive” standard:
In order to obtain a remedy for deceptive advertising, a UCL plaintiff need only establish that members of the public were likely to be deceived by the advertising. (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1267; Massachusetts Mutual Life Ins. Co. v. Superior Court, supra, 97 Cal.App.4th at p. 1290.) The question has arisen as to which members of the public need be likely to be deceived. The law focusses on a reasonable consumer who is a member of the target population. (Lavie v. Proctor & Gamble Co. (2003) 105 Cal.App.4th 496, 508.) “Where the advertising or practice is targeted to a particular group or type of consumers, either more sophisticated or less sophisticated than the ordinary consumer, the question whether it is misleading to the public will be viewed from the vantage point of members of the targeted group, not others to whom it is not primarily directed.” (Id. at p. 512.)
See Slip Opinion, at 18.

Second, the Court confirmed that the “may have been acquired” language of Section 17203 permits recovery without proof that the funds were lost as a result of actual reliance on defendant’s deceptive conduct:
As to restitution, the UCL provides that “[t]he court may make such orders or judgments . . . as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition.” (Bus. & Prof. Code, § 17203.) This language, providing restitution of funds which “may have been acquired,” has been interpreted to allow recovery without proof that the funds were lost as a result of actual reliance on defendant’s deceptive conduct. (Tobacco II, supra, 46 Cal.4th at p. 320; Fletcher v. Security Pacific National Bank, supra, 23 Cal.3d at p. 450-451; Prata v. Superior Court (2001) 91 Cal.App.4th 1128, 1144.)
See Slip Opinion, at 19.

However, the Court concluded that while Section 17203 permits recovery without proof of actual reliance, such language does not permit recovery without any evidentiary support:
“While the “may have been acquired” language of Business and Professions Code section 17203 is so broad as to allow restitution without individual proof of injury, it is not so broad as to allow recovery without any evidentiary support. (Colgan v. Leatherman Tool Group, Inc. (2006) 135 Cal.App.4th 663, 697.).
See Slip Opinion, at 19.

As reasoned by the Court, where a plaintiff’s theory of restitution is predicated on a formula involving the value of a product, this evidentiary showing requires evidence of the value received with correlating comparative evidence establishing a basis for restitution:
The difference between what the plaintiff paid and the value of what the plaintiff received is a proper measure of restitution. (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 174.) In order to recover under this measure, there must be evidence of the actual value of what the plaintiff received. When the plaintiff seeks to value the product received by means of the market price of another, comparable product, that measure cannot be awarded without evidence that the proposed comparator is actually a product of comparable value to what was received. (Colgan v. Leatherman Tool Group, Inc., supra, 135 Cal.App.4th at p. 675.)
 See Slip Opinion, at 19.

This latter finding was material to the Court’s analysis regarding predominance, as the Court reasoned that the trial court did not err in finding that the Plaintiff’s comparative evidence using naproxen as a basis for restitution was incapable of establishing a right to restitution as to the class as a whole:
However, in order to obtain class wide restitution under the UCL, plaintiffs need establish not only a misrepresentation that was likely to deceive (Corbett v. Superior Court, supra, 101 Cal.App.4th 649, 670) but the existence of a “measurable amount” of restitution, supported by the evidence. (Colgan v. Leatherman Tool Group, Inc., supra, 135 Cal.App.4th at p. 698.) The failure of naproxen as a viable class-wide comparator thus defeats the claim for class-wide restitution. The trial court concluded that whether any particular plaintiff’s loss can be measured by the difference in price between Vioxx and generic naproxen depends on issues specific to that individual plaintiff. The evidence supports the trial court’s conclusion in this regard. Even if plaintiffs establish, class-wide, that Merck misrepresented the cardiovascular risks of Vioxx in a manner that was likely to deceive plaintiffs and their prescribing physicians, no plaintiff would be able to recover without first identifying a proper comparator drug, the cost of which would provide the actual value to the patient of the Vioxx received. As the trial court concluded, on the evidence, that the issue of a proper comparator was a patient-specific issue, incorporating the patient’s medical history, treatment needs, and drug interactions, the trial court properly concluded that restitution could not be calculated on a class-wide basis.
See Slip Opinion, at 27-28.

However, the Court’s opinion also confirmed that a plaintiff is not required to affirmatively prove the actual amount of restitution available to each individual class member on a common basis:
Although the trial court also mentioned that there was no class-wide evidence of the price paid for Vioxx, we agree with plaintiffs that the actual amounts paid could likely be resolved in a claims process. The trial court’s “[o]verarching[]” concern was that there was no evidence that any particular NSAID would be a proper comparator for each class member.
See Slip Opinion, at 28 n.23.

The Court’s analysis is very dense, and likely will take some time to fully unpack. I will likely provide posts in the coming days examining the Court’s opinion further, including the Court’s analysis concerning the plaintiff’s challenge to typicality.

Tuesday, December 15, 2009

Second District Upholds Denial of Certification in In Re Vioxx Class Cases

On December 15, 2009, the Second District (Division 3) upheld the trial court's denial of class certification in In Re Vioxx Class Cases, __ Cal.App. 4th __ (2009).  In that case, the plaintiffs sought recovery, on behalf of all persons and entities in California who paid for Vioxx, of the difference in price between what they paid for Vioxx and what they would have paid for a safer, equally effective, pain reliever. The plaintiff’s theory alleged that Merck knew about the dangers of Vioxx but engaged in a campaign to hide or explain away those risks, and pursued causes of action under the UCL, the FAL the CLRA, and unjust enrichment.

Plaintiffs appeal asserted that the Supreme Court’s decision in In re Tobacco II Cases, 46 Cal.4th 298 (2009), undermined the trial court’s rationale. The Second District disagreed, concluding that “the trial court’s ultimate decision is consistent with Tobacco II, and is supported by substantial evidence.”

As to Plaintiffs’ claims under the UCL and FAL, one issue on appeal concerned the trial court’s conclusion that the plaintiff’s restitutionary theory was not amenable to class-wide adjudication:
The [trial] court concluded that the monetary value plaintiffs wish to assign to their claim – the difference in price between Vioxx and a generic, non-specific NSAID, implicates a patient-specific inquiry and therefore fails the community of interest test. In short, the trial court rejected the entire premise of plaintiffs’ class action. While the trial court allowed the possibility that plaintiffs could recover for having been exposed to misrepresentations, the trial court concluded that the theory that the entire class was harmed because Vioxx was no more effective, and less safe, than naproxen implicated individual issues of proof.
See Slip Opinion, at 24-25.

Plaintiffs mounted a two-pronged challenge to the trial court’s conclusions – neither were successful.

First, plaintiffs argued that the trial court abused its discretion by rejecting their factual evidence establishing that naproxen was a valid comparator to Vioxx. See id., at 25. The Court disagreed, concluding that the trial court’s findings were sufficiently grounded by evidence in the record:
The trial court did not err in rejecting naproxen as a valid class-wide comparator. Defendants introduced substantial evidence that, after Vioxx was withdrawn from the market, most Vioxx patients switched to another COX-2 inhibitor, not a generic NSAID such as naproxen. As this evidence indicates that Vioxx was worth more than naproxen to a majority of class members, it is more than sufficient to support the trial court’s conclusion that naproxen is not a valid comparator on a class-wide basis.
See Slip Opinion, at 25-26.

Second, plaintiffs asserted that the validity of naproxen as a comparator goes to the merits of the action, and as such, the trial court erred by resolving this issue within the confines of the certification motion. See id., at 26. The plaintiffs reasoned that “since the UCL and FAL allow an award of restitution without individualized proof of deception, reliance and injury, the trial court should not have been considering the validity of naproxen as a comparator.” See id. The Court rejected this argument, reasoning that the trial court acted within its discretion by evaluating whether the plaintiff’s restitutionary theory was capable of commonly impacting the class as a whole:
We do not disagree that a trial court has discretion to order restitution even in the absence of individualized proof of injury. (Fletcher v. Security Pacific National Bank, supra, 23 Cal.3d at p. 452.) However, in order to obtain class wide restitution under the UCL, plaintiffs need establish not only a misrepresentation that was likely to deceive (Corbett v. Superior Court, supra, 101 Cal.App.4th 649, 670) but the existence of a “measurable amount” of restitution, supported by the evidence. (Colgan v. Leatherman Tool Group, Inc., supra, 135 Cal.App.4th at p. 698.) The failure of naproxen as a viable class-wide comparator thus defeats the claim for class-wide restitution. The trial court concluded that whether any particular plaintiff’s loss can be measured by the difference in price between Vioxx and generic naproxen depends on issues specific to that individual plaintiff. The evidence supports the trial court’s conclusion in this regard. Even if plaintiffs establish, class-wide, that Merck misrepresented the cardiovascular risks of Vioxx in a manner that was likely to deceive plaintiffs and their prescribing physicians, no plaintiff would be able to recover without first identifying a proper comparator drug, the cost of which would provide the actual value to the patient of the Vioxx received. As the trial court concluded, on the evidence, that the issue of a proper comparator was a patient-specific issue, incorporating the patient’s medical history, treatment needs, and drug interactions, the trial court properly concluded that restitution could not be calculated on a class-wide basis.
See Slip Opinion, at 27-28.

Monday, December 14, 2009

District Court Grants Plaintiff’s Application to Relinquish Supplemental Jurisdiction By Finding Individual Issues will Predominate on Plaintiff’s State Law Wage Claims: Weltman v. Ortho Mattress

On December 10, 2009, Judge Jeffrey T. Miller of the Southern District of California entered an interesting order in response to the plaintiff’s request to relinquish supplemental jurisdiction over state law wage claims in Weltman v. Ortho Mattress, 2009 U.S. Dist. LEXIS 115178 (S.D. Cal. Dec. 10, 2009).

In that case, the plaintiff filed a federal action that asserted federal question jurisdiction based upon an alleged violation of the FLSA, and supplemental jurisdiction pursuant to 28 U.S.C. § 1367 over seven state law causes of action. See id., at 2. Thereafter, plaintiff filed a motion seeking certification of the seven law state claims on a class-wide basis, leaving the federal FLSA misclassification claim out of the mix to be pursued on an individual basis. See id., at 4. In conjunction with filing a motion for class certification, however, plaintiff also filed an ex parte application to have the court relent its supplemental jurisdiction over the state law class claims so that plaintiff’s state-law claims could be pursued in state court. See id., at 1, 10-11 (“Plaintiff's counsel requested that Plaintiff be permitted to pursue his state claims in state court and that the court decline to exercise jurisdiction over the state claims.”).

In resolving the jurisdictional issue, the Court conducted an analysis of the issues posed by certification of plaintiff’s state-wide claims, concluding that individualized issues would likely predominate. See id., at 7-8 (“With respect to class-wide treatment of Plaintiff's state law claims, the court concludes that individualized issues seriously undermine the viability of the class action procedure.”). The Court thereafter used that determination as a basis to find that adjudication of the pendent state-law claims would predominate over the individual FLSA claim. See id., at 9 (“These individualized proof determinations – all involving state law class claims – would likely predominate over Plaintiff's single federal claim.”). Based this determination, the court concluded that supplemental jurisdiction was lacking:
Here, the court declines to exercise supplemental jurisdiction over the state law class claims because the state law claims substantially predominate over the relatively straight-forward FLSA claim. The anticipated economies and convenience anticipated by the class action device do not apply under the circumstances given the individualized determinations required to assess the state law class claims. See Executive Software, 24 F.3d at 1555-57. Further, the state law claims implicate no federal interest yet California courts have a strong interest in enforcing state law labor claims, like those asserted by Plaintiff herein.
See Weltman, 2009 U.S. Dist. LEXIS 115178, at 10.

Not apparent within the opinion are plaintiff counsel's justifications for initially bringing the combination FLSA/State law action, and subsequent decision to limit the FLSA claim to plaintiff only.  While the Court's preliminary conclusions regarding predominance are likely not binding, a plaintiff confronted by such a scenario may have more efficient methods to resolve this issue – such as dismissing the plaintiff's individual FLSA claim.

Saturday, December 12, 2009

District Court Grants Summary Judgment on Prop 64 Standing Issue in Baghdasarian v. Amazon

On December 9, 2009, Judge Andrew J. Guilford of the Central District of California granted defendant Inc.’s motion for summary judgment on the issue of Proposition 64 standing in Baghdasarian v. Amazon, 2009 U.S. Dist. LEXIS 115265 (C.D. Cal. Dec. 9, 2009). As one may recall, the plaintiff in this action previously obtained certification of his UCL claim, in part, based upon Tobacco II's ruling concerning the inapplicability of the element of reliance to absent class members (see previouse post here).  Here, however, the Court granted dismissal based on another aspect of Tobacco II – the requirement that the named plaintiff establish actual reliance to maintain standing to prosecute a UCL claim.

As a threshold matter, the Court considered plaintiff’s argument that the “law of the case” doctrine precluded the Court from revisiting the Court’s ruling on the issue of plaintiff standing contained in its order granting class certification. The Court rejected this argument, asserting that plaintiff conflated the distinction between class certification, a procedural devise which precludes consideration of the merits, and summary judgment:
Plaintiff's argument ignores the difference between the procedural stages of class certification and summary judgment. Cf. Central Valley Water Agency v. United States of America, 327 F. Supp. 2d 1180, 1212 (E.D. Cal. 2004) (holding that a ruling on a pleading motion was not law of the case establishing that the plaintiffs had suffered actual injury for the purpose of a summary judgment motion). At the class certification stage, Plaintiff must make certain allegations concerning standing. Now, to survive summary judgment, Plaintiff must establish certain facts. So while the Court previously held that Plaintiff had standing for class certification purposes, the earlier holding does not automatically extend to the summary judgment stage.
See Baghdasarian, 2009 U.S. Dist. LEXIS 115265, at 9-10.

The Court thereafter considered the factual merits of the standing issue, concluding that “[p]laintiff's own deposition testimony establishes that Plaintiff cannot show actual reliance.” See id., at 12. As reasoned by the Court, the plaintiff admitted at deposition that he would have purchased items from Amazon notwithstanding the alleged hidden shipping fees – a fact that served to undermine the materiality of the challenged promotions to plaintiff, and with it, the presumption of reliance:
Plaintiff here cannot take advantage of a presumption or inference of reliance. In this case, Plaintiff's own deposition testimony undermines his own claims, showing that he did not actually rely on Defendant's statements. Plaintiff admits that the alleged misrepresentation was not an influential factor in his decision to buy from the marketplace. He testified, "[i]t's not that if they had told me of the fees . . . I would have never bought something from Amazon. But the fact that they hid it . . . kind of turned me off . . . ." (Baghdasarian Depo. 32:12-17.)
See Baghdasarian, 2009 U.S. Dist. LEXIS 115265, at 15.

In addition, the Court further reasoned that the plaintiff had failed to provide evidence sufficient “to establish that Defendant's shipping and handling policy was a substantial factor in influencing Plaintiff's decision to buy products on Amazon Marketplace”:
The full extent of Plaintiff's evidence on the point is found in one paragraph in his Declaration. The Baghdasarian Declaration states that Plaintiff “relied on the fact that the shipping and handling fee would be passed on in full to the marketplace seller in order to offset the seller's cost of shipping and handling,” (Baghdasarian Decl. P 2.) This statement is insufficient to establish that Defendant's shipping and handling policy was a substantial factor in influencing Plaintiff's decision to buy products on Amazon Marketplace.
Plaintiff also points out that he stopped buying items from Amazon Marketplace after he learned about Defendant's shipping policy. But this does not link Defendant's shipping policy with Plaintiff's injury.
See Baghdasarian, 2009 U.S. Dist. LEXIS 115265, 15-16.

Based on such evidence, the Court concluded that standing was lacking because “[p]laintiff does not show that he would have declined to enter into the transactions in the absence of the shipping policy. See id., at 16-17.

The Court’s decision, however, is silent as to what will occur with regard to the certified class. This consideration is an important one, as Rule 23(d) vests a district court with a duty to protect the interests and rights of class members.  See Hanlon v. Chrysler Corp., 150 F.3d 1011, 1025 (9th Cir.,1998).

One option would be to allow class counsel to substitute a new class representative. As held by the California Supreme Court, when “in light of Proposition 64, the named representatives are no longer adequate representatives of the class because they lack standing, the proper procedure would not be to decertify the class but grant leave to amend to redefine the class or add a new class representative.” See In re Tobacco II Cases, 46 Cal. 4th 298, 328 (2009). As held by at least one district Court “these cases demonstrate that leave to substitute a different class representative may be granted when there is a certified class already in place.” See Sanchez v. Wal Mart Stores, Inc., 2009 U.S. Dist. LEXIS 89057, 8-9 (E.D. Cal. Sept. 11, 2009).

However, knocking out the named plaintiff cannot be worked into a scenario where the defendant achieves a judgment that will be res judicata as to the class as a whole. Issues relating to Prop 64 standing only impact the claims of the named plaintiff, as the Court itself acknowledged in its Order certifying the class:
Proposition 64 did not determine whether a plaintiff who has standing under the UCL must also show reliance by each class member. The California Supreme Court recently addressed this issue in the Tobacco II Cases. The California Supreme Court concluded that "standing requirements are applicable only to the class representatives, and not all absent class members." In re Tobacco II Cases, 46 Cal. 4th 298, 306, 93 Cal. Rptr. 3d 559, 207 P.3d 20 (Cal. 2009). Thus, Plaintiff does not need to show affirmative proof that each individual class member relied on Defendant's deceptive conduct.
See Baghdasarian v. Amazon.Com, Inc., 258 F.R.D. 383, 387 (C.D. Cal. 2009).

Moreover, under the present circumstances, decertification cannot be worked into a scenario where a subsequent action, on behalf of the very same class, would be collaterally estopped from availing itself of the class mechanism. See In re Bridgestone/Firestone, Tires Prods. Liab. Litig., 333 F.3d 763, 768 (7th Cir., 2003) (“A decision with respect to the class is conclusive only if the absent members were adequately represented by the named litigants….”).

Thus, considering the advanced stages of the proceedings, and the amount of time and effort invested by the Court, parties and counsel, allowing leave to find a substitute representative would seem to be the most prudent approach.

Friday, December 4, 2009

Second District Upholds Order Decertifying Misclassification Class in Keller v. Tuesday Morning, Inc.

On December 4, 2009, the Second District (Division 6) issued an opinion upholding the trial court’s Order decertifying a manager misclassification class in Keller v. Tuesday Morning, Inc., __ Cal. App. 4th __ (2009). The thrust of the Court’s analysis – which relied heavily on previous decisions in Walsh v. IKON Office Solutions, Inc, 148 Cal. App. 4th 1440 (2007) and Dunbar v. Albertson's Inc., 141 Cal. App. 4th 1422 (2006) – turned on a failure of predominance due to variances in manager's duties from store to store.  The Court concluded that there was no abuse of discretion, as substantial evidence supported the trial court's conclusion that individualized issues of liability and damages would predominate over issues common to the class if the overtime claims were tried as a class action:
Here, the record contained the declarations of four managers, TM's expert, its Vice-president of Store Operations, and five of TM's attorneys. All asserted in detail the wide disparity in store location, size, configuration, management duties and styles. They also established that managers routinely exercise their independent judgment. In his written ruling, Judge Munoz noted the varying characteristics of the stores and identified matters he believed were susceptible to class-wide proof (mandated management policies) and those that were individual inquiries (time spent performing exempt duties and exercising discretion). The court observed that the managers, who filed declarations for the class, were impeached by their deposition testimony. This was a comment on the nature of the evidence, and did not constitute a consideration of the case on the merits, or a determination of witness credibility.
Slip Opinion, at 10-11.

Thursday, December 3, 2009

Trial Court’s Class Certification Order in the Complete ® Cases

I have managed to obtain a copy of Orange County Superior Court Judge David C. Velasquez’s class certification Order in the Complete ® Cases. As previously reported by The National Law Journal, the Court certified a broad UCL restitutionary class consisting of all California consumers who purchased Complete MoisturePlus contact lens solution after 2003 based on alleged deceptive marketing practices.  The Court's order may be found here.

Wednesday, December 2, 2009

Southern District Rules That a Retailer’s Refusal to Cash Out Gift Cards Is Not An Unlawful Business Practice Under California Law: Rudd v. Borders, Inc.

On November 24, 2009, Judge Barry Ted Moskowitz of the Southern District granted defendant Borders’s motion to dismiss a proposed gift card class action in Rudd v. Borders, Inc., 2009 U.S. Dist. LEXIS 110064 (S.D. Cal. Nov. 24, 2009). The plaintiff’s proposed action challenged an express limitation provision contained on Borders’ gift cards stating that the gift card was “not returnable or redeemable for cash.” Plaintiff’s complaint alleged that this provision was unlawful under California Civil Code Section 1749.5(b)(1), which provides that “[a]ny gift certificate sold after January 1, 1997 is redeemable in cash for its cash value, or subject to replacement with a new gift certificate at no cost to the purchaser or holder.” The Court disagreed.

The Court reasoned that Civil Code § 1448 – which states that “[i]f an obligation requires the performance of one of two acts, in the alternative, the party required to perform has the right of selection, unless it is otherwise provided by the terms of the obligation” – requires that Section 1749.5(b)(1) be read as providing retailers “the option of choosing whether to redeem a gift card for cash or provide a new card to the customer.” See id., at 6-7. The Court further reasoned that plaintiff’s construction would render superfluous 2007 amendments to Section 1749.5 (b)(2), providing that “’[n]otwithstanding paragraph (b)(1), any gift certificate with a cash value of less than ten dollars ($ 10) is redeemable in cash for its cash value.’” See id., at 9-10.

Rudd is an important decision to remember in this holiday season, as it confirms once and for all that nothing says I love you more than cash (even Borders agrees, they don’t want the gift card either).

Wednesday, November 25, 2009

Central District Grants Class Certification of Nationwide Internet Pay-Per-Click Advertising Action: Menagerie Prods. v. Citysearch

On November 9, 2009, Judge Christina A. Snyder of the Central District granted in part plaintiff’s motion to certify a nation-wide pay-per-click advertising class action in Menagerie Prods. v. Citysearch, 2009 U.S. Dist. LEXIS 108768 (C.D. Cal. Nov. 9, 2009). Plaintiffs’ complaint alleged various claims for breach of contract and unfair and deceptive business practices based on defendant Citysearch’s alleged systemic practice of billing clients for fraudulent “clicks” on prepaid internet advertisements purchased through defendant on a per-click basis. See id., at 11-12.

With regard to plaintiff’s’ breach of contract claim the Court concluded that common issues predominated because plaintiffs’ claim was predicated upon a standard form contract used by defendant as to all advertisers, and that to the extent necessary, any issues regarding interpretation would be based on common representations made by defendant on its website. See Citysearch, 2009 U.S. Dist. LEXIS 108768, at 36-37. Similarly, the Court also concluded that common issues predominated as to plaintiffs’ claim for breach of the implied covenant of good faith and fair dealing because “the alleged breach of contract--namely failing to filter and otherwise monitor for click fraud--if proven, is objectively unreasonable conduct that can be established without resort to individualized proof.” See id., at 38-41.

However, the Court split on plaintiffs’ claims under the UCL. With regard to plaintiff’s claims under the fraudulent prong, the court concluded that common issues predominated because defendant uniformly failed to disclose that it would charge clients for fraudulent clicks, and that, post Tobacco II, the defendant's conduct must be adjudicated under the objective "reasonable consumer" standard rather than by examining the individual circumstances of each class member:
The Court agrees with plaintiffs that common issues predominate with regard to plaintiffs' claim of a common classwide omission under the "fraudulent" prong of the UCL. See Day, 63 Cal. App. 4th at 332-334 (finding defendant liable for failing to disclose material information to all class members under the "fraudulent" prong of the UCL). This UCL claim will be adjudicated under the "reasonable consumer" standard rather than by examining the individual circumstances of each plaintiff. The "reasonable consumer" standard requires plaintiffs to "show that members of the public are likely to be deceived." Williams, 523 F.3d at 938. Here, the "focus is on the defendant's conduct, rather than the plaintiff's damages." In re Tobacco II Cases, 46 Cal. 4th at 312, 320 ("relief under the UCL is available without individualized proof of deception, reliance and injury"). Because the UCL claim arises out of Citysearch's common course of conduct towards all class members, and the "reasonable consumer" standard is employed to adjudicate the claim, the Court finds that predominance prong is met with regards to plaintiffs' claim under the "fraudulent" prong of the UCL.
Citysearch, 2009 U.S. Dist. LEXIS 108768, at 44-45.

With regard to plaintiffs’ claims under the unfair prong, however, the Court concluded that common issues did not predominate.  As reasoned by the Court, the requisite unfairness balancing test (which involves an examination of the practice's impact on its alleged victim, balanced against the reasons, justifications and motives of the alleged wrongdoer), would entail individualized inquiry into each class member’s expectations about the challenged business practice to determine the extent of harm. See id., at 48.

Finally, the Court concluded that certification of nationwide contract and UCL claims was appropriate insofar as (1) all versions of the contract between the class and Citysearch in force during the class period contain a choice of law clause stating that California law governs the contract, and (2) defendant’s challenged conduct originated and emanated from California. See id., at 49-52.

Monday, November 23, 2009

Second District Issues New UCL Standing Opinion re Claims for Permanent Injunctive Relief: Dowell v. Pacesetter, Inc.

In Dowell v. Pacesetter, Inc., __ Cal. 4th __ (2009), the CAP held that the trial court did not abuse its discretion in denying a demand by plaintiff St. Jude to permanently enjoin a competitor’s (“Biosense”) use of a non-compete clause by way of the UCL. Although the non-compete clauses violated California law, giving rise to a violation of Bus. & Prof. 17200, the Court concluded that imposition of a permanent injunction precluding use of the challenged non-compete clause would impact all affected employees (rather than just the 3 former Biosense employees before the court), and therefore, require satisfaction of standing requirements and certification of a class. See Slip Opinion, at 22-26.

As noted by the CAP, the trial court declined to issue a permanent injunction with respect to the agreements involving two of the individual employee plaintiffs because the noncompete clauses had already expired by the time of the court‘s ruling and any such relief would have been moot. See id., at 24. Based on this fact “[t]he permanent injunction that St. Jude otherwise sought with respect to all agreements used by Biosense in California would unquestionably affect agreements with persons not before the trial court and would involve representative claims or relief on behalf of others.” See id.

The CAP reasoned that St. Jude could not meet 17204 standing requirements because, even if it were assumed litigation costs were sufficient to establish injury in fact requirements under applicable law, St. Jude failed to establish injury in fact beyond those employees who were before the court:
Even if such injuries may arguably have been sufficient were St. Jude merely seeking to obtain a permanent injunction with respect to three employees, St. Jude sought an injunction that went well beyond the agreements with these three individuals. St. Jude never offered to produce evidence that it expended resources in connection with Biosense‘s alleged use of the same or similar agreements with other employees whom St. Jude considered employing.
 See id., at 25.

Thus, in the present context, Section 17204 standing was conditioned on the prospective employer (St. Jude) establishing a showing of injury-in-fact which encompassed prospective employees who arguably would be covered by the permanent injunction that was sought.

Friday, November 20, 2009

Second District Holds Class Counsel’s Obligation to the Class Extends to Enforcement of Judgment Against Insolvent Defendant in Barboza v. West Coast Digital GSM, Inc

On November 19, 2009, the Second District (Division 4) issued an interesting opinion relating to class counsel’s post judgment obligations to the class when the defendant is essentially judgment proof. The opinion, Barboza v. West Coast Digital GSM, Inc., __ Cal. App. 4th __ (2009), involved somewhat unique facts, as class counsel was able to obtain a stipulated default judgment on behalf of the class specifically because the defendant had ceased operations, sold its assets to a third party, and stated its intent to file for bankruptcy. See Slip Opinion, at 4. An issue arose, however, when class counsel sought approval of the proposed class notice, which advised the class that class counsel would not be taking further steps to enforce the judgment. See id., at 4-5. The trial court denied approval, concluding that class counsel’s obligations to the class included a duty to actually enforce the judgment. See id., at 5.

The CAP agreed. The Court reasoned that unlike traditional single party litigation, class litigation, and specifically the element of adequacy, requires that the named plaintiff retain counsel that will adequately represent the interests of the class as a whole. See id., at 7. As explained by the Court, the fiduciary duty owed to the class under standards of adequacy does not end at judgment, but extends in scope to all stages of the litigation where class issues are implicated. See id., at 7-8. Moreover, the Court noted that class counsel’s position was deemed to rest upon an inherent conflict, as class certification was achieved based on the principle that individual claims were too small to justify individual actions, but by seeking to abandon the case at judgment, class counsel would effectively strand class members with an aggregated, class-wide judgment that no individual class member could enforce. See id. at 8.

In short, Barboza is a good example of the importance of evaluating cases thoroughly prior to certification and being selective in the type of class cases counsel elects to take on. However, in fairness to counsel in this case, the risk of having a case turn south on you post certification is a scenario that one cannot always foresee. While Barboza confirms that class counsel’s duty extends to enforcement of the class judgment against an insolvent defendant, the opinion largely leaves unresolved the ultimate question regarding the scope of that duty. At the close of its opinion, the Court proposes one potential resolution: associating in counsel experienced in enforcing judgment (at the expense of the class), and if unsuccessful, moving the Court to be relieved as class counsel.

Thursday, November 19, 2009

Eastern District Denies Request to Decertify Class in Cartwright v. Viking Industries

On November 17, 2009, the Court in Cartwright v. Viking Indus., 2009 U.S. Dist. LEXIS 107066 (E.D. Cal., 2009) issued an order denying a request to decertify a class composed of California residential property owners having a specific model of defendant’s windows installed in their homes.

The defendant’s decertification request, which was couched in a motion for reconsideration, claimed that “it was clear error (1) to rely on Viking's lifetime warranty and associated marketing to support certification of fraud claims by subsequent owners; (2) to adopt a presumption of reliance with respect to plaintiffs' UCL, CLRA, and fraud claims; and (3) to accept plaintiffs' theory of defect as a sufficient basis for certification.” See id., at 4. As for the first and second argument, the Court rejected the defendant’s position regarding certification of the UCL, CLRA, and fraud claims on the grounds that allegations and evidence of concealment presented common issues with regard to causation:
With respect to defendant's first and second arguments, the court notes that, contrary to defendant's assertion, the court did not rely solely on the lifetime warranty and associated marketing in finding that common issues of law and fact predominated. Rather, the court emphasized plaintiffs' allegations and supporting evidence that defendant fraudulently concealed the defective nature of the window products in order to induce plaintiffs and class members to purchase them. This allegation of non-disclosure applied to all owners, original and subsequent. The court concluded that plaintiffs' allegations of fraudulent concealment satisfied the predominance requirement because the common question of the materiality of the non-disclosed defects may establish common causation. Further, the court relied upon various California and federal court decisions that supported this conclusion. While defendant may seek to distinguish these cases and may disagree with the court's interpretation, it has failed to demonstrate that the court committed clear error.
See Cartwright, 2009 U.S. Dist. LEXIS 107066, at 4-5.

The opinion is noteworthy, as it reflects ongoing efforts of the defense bar to lump certification of UCL claims as being on par with common law fraud and CLRA – both of which involve an element of reliance that must be established by members of the putative class. Of course, the element of reliance is not even a component of absent class members’ UCL claim. This position has been rejected by the California Supreme Court, which held that the “may have been acquired” language of Section 17203 “has led courts repeatedly and consistently to hold that relief under the UCL is available without individualized proof of deception, reliance and injury.” See Tobacco II, 46 Cal. 4th 298, 320 (2009) (reasoning that “to hold that the absent class members on whose behalf a private UCL action is prosecuted must show on an individualized basis that they have ‘lost money or property as a result of the unfair competition’ (§ 17204) would conflict with the language in section 17203 authorizing broader relief—the ‘may have been acquired’ language—and implicitly overrule a fundamental holding in our previous decisions, including Fletcher, Bank of the West and Committee on Children's Television.”).

The Court did not discuss this distinction, which out of fairness was likely due to the fact the Court’s primary concern involved the defendant’s failure to undertake any effort to couch its motion under the requirements of FRCP Rule 59. See Cartwright, 2009 U.S. Dist. LEXIS 107066, at 7 (“Because defendant's motion is based upon the same factual and legal arguments previously addressed in the court's September 14 order, there is insufficient bases for the court to reconsider class certification.”).

At any rate, absent an appellate opinion that engages in detailed analysis unpacking all components of Tobacco II’s ten page analysis on class member standing, this issue no doubt will continue propel substantial litigation activity by members of both the plaintiff and defense bars.

Tuesday, November 17, 2009

Third District Overturns Dismissal of Proposed DPA Class Action in Louie v. BFS Retail & Commercial Operations, LLC

On November 9, 2009, the Third District issued an opinion in Louie v. BFS Retail & Commercial Operations, LLC, __ Cal.App.4th __ (2009), reversing dismissal of a proposed California Disabled Persons Act (DPA) class action based on res judicata grounds.

In that case, the trial court granted the defendant’s demurrer on the grounds that an ADA consent decree entered in a prior Florida District Court class action barred the plaintiff’s from subsequently litigating a proposed California class seeking damages under the DPA. The CAP reversed, concluding that because the consent decree in the Florida action included a carve out that expressly reserved any damage claims, the prior action could not bar the plaintiff’s proposed state law damages claim on res judicata grounds.

According to the Court, the exclusion of damages from the prior settlement was material from a due process standpoint, as it enabled the Florida court to provide a lesser standard of notice under Rule 23(b)(2). See Slip Opinion, at 23, 26. Moreover, the Court further reasoned that due process could not be met because the notice did not apprized class members that they were giving up their right to damages, or provide class members an opportunity to opt-out. See id., at 29-30. Based on these facts, the CAP reasoned that res judicata could not apply, but even if it could, the “manifest injustice” exception (to the extent the doctrine is still viable) would preclude such application. See id., at 30-31.

Bottom line, the Court’s decision was one rooted in equity and common sense. This was clearly a case of a defendant seeking to have its cake and eat it too.

Thursday, November 12, 2009

Multi-Blog Post and Message to Plaintiffs' attorneys: Join CAOC!

George Washington once said:
Discipline is the soul of an army. It makes small numbers formidable; procures success to the weak, and esteem to all.
Letter of Instructions to the Captains of the Virginia Regiments [July 29, 1759]. The advocates of consumer rights, viewing the resources of defense firms and corporate defendants, can relate to the trepidation felt by the out-numbered and out-gunned Continental Army. Because of that disparity in resources, Consumer Attorneys of California ("CAOC") consolidates the voices of consumer attorneys throughout the state to (1) preserve and protect the constitutional right to trial by jury for all consumers, (2) champion the cause of those who deserve redress for injury to person or property, (3) encourage and promote changes to California law by legislative, initiative or court action, (4) oppose injustice in existing or contemplated legislation, (5) correct harsh, unjust and oppressive legislation or judicial decisions, (6) advance the common law and promote the public good through the civil justice system and concerted efforts to secure safe products, a safe workplace, a clean environment, and quality health care, (7) uphold the honor, integrity and dignity of the legal profession by encouraging mutual support and cooperation among members, (8) promote the highest standards of professional conduct, and (9) inspire excellence in advocacy. This post is a multi-blog effort to inform consumer attorneys about CAOC's value and encourage participation in CAOC through membership.

CAOC works tirelessly to protect or advance those causes of import to consumers and their attorneys in California. Often those efforts, though valuable, receive little fanfare. For example, CAOC recently sponsored SB 510, which affects the re-sale of what are known as "structured settlements," in which victims receive financial compensation over a period of time for medical expenses and basic living needs, as determined by a jury. Before SB 510 was signed by the Governor, Courts expressed frustration at their inability to prevent the sale of structured settlements on terms that might ultimately lead to long-term financial hardship for the victim. Now, SB 510 gives judges the information they need to make a reasoned decision about the propriety of a structured settlement sale.

Measures like CAOC-sponsored SB 510 help protect the most vulnerable members of our society and ask for nothing in return. They exemplify the spirit of CAOC. However, CAOC is only as effective in its mission as its membership allows it to be. When consumer attorneys join the ranks of CAOC, its voice gains in power and clarity. But if consumer advocates sit on the sidelines, hoping to benefit from the work of others, CAOC is stretched thin, and we are all at risk as a result.

Now, consumer advocate bloggers from across the state are combining their voices to call upon each and every lawyer and firm that regularly represents plaintiffs to join CAOC, thereby strengthening the consumer's first line of defense. The blogs participating in this unified call to action are:
Show your support of consumers' rights by joining and supporting CAOC. Together we can make an impact that we cannot make alone.

Tuesday, November 10, 2009

Are Issues Relating to UCL Standing Irrelevant to Predominance? Not According to the Court in Plascencia v. Lending 1st Mortage

Of note, I just stumbled across an insightful UCL certification opinion out the Northern District addressing the issue of predominance, post Tobacco II. The opinion, Plascencia v. Lending 1st Mortage, 2009 U.S. Dist. LEXIS 79585 (N.D. Cal. Aug. 21, 2009), granted a plaintiff’s motion to certify a claim under the fraudulent prong of the UCL based on principles of absent class member standing articulated in Tobacco II.  The plaintiff's UCL claim was predicated upon an alleged failure to disclose that a specific type of home loan offered by the defendant was subject to negative amortization.

As concluded by the Court, predominance was met in that case because liability under the fraudulent prong of the UCL required only a singular showing of “likelihood of deception.” See Plascencia, 2009 U.S. Dist. LEXIS 79585, at 30-31 (“[w]ith respect to fraudulent conduct, the UCL prohibits any activity that is ‘likely to deceive’ members of the public” and as such, “liability under the UCL does not require reliance and injury.”). Importantly, the Court reasoned that individualized issues relating to each class member’s reliance and damage were not properly a component of the court’s predominance analysis after In re Tobacco II:
The degree to which the UCL claim involves individual issues turns on whether Proposition 64 imposed a new standing requirement that all class members must satisfy, or whether it is sufficient for Plaintiffs to show that they have standing. The California Supreme Court recently answered this question in In re Tobacco II Cases, 46 Cal. 4th 298, 93 Cal. Rptr. 3d 559, 207 P.3d 20 (2009). The court clarified that only the named plaintiff in a UCL class action need demonstrate injury and causation.

Plaintiffs may prove with generalized evidence that Defendants' conduct was "likely to deceive" members of the public. The individual circumstances of each class member's loan need not be examined because the class members are not required to prove reliance and damage. Common issues will thus predominate on the UCL claim.
See Plascencia v. Lending 1st Mortage, 2009 U.S. Dist. LEXIS 79585, at 31-32.

Of course, such analysis runs counter to the Second District’s recent decision in Cohen v. DirecTV, which inexplicably found “Tobacco II to be irrelevant because the issue of ‘standing’ simply is not the same thing as the issue of ‘commonality.’” See Cohen, 2009 Cal. App. LEXIS 1728, 29. The Cohen court’s statement in this regard is absolutely mystifying, as a court’s predominance analysis by necessity is built upon the foundation of the requirements necessary to state a claim.

Saturday, November 7, 2009

Fourth District Upholds Denial of Certification in Evans v. Lasco Bathware

On November 6, 2009, the Fourth District (Division One) issued an opinion in Evans v. Lasco Bathware, __ Cal. App. 4th __ (2009), upholding denial of class certification of a design defect action relating to shower components.

In this case, the plaintiffs sought certification of claims based on the theory that defendant “manufactured defectively designed shower pans that caused the pans to leak and cause water damage to adjacent shower components.” See Slip Opinion, at 5. The crux of plaintiff’s certification theory rested upon the use of expert testimony to establish uniformity, not only as to the existence of a common defect, but also uniformity as to class member damages. See id., at 5-6. On the damages issue, Plaintiff’s expert opined that the uniqueness of damage attributable to the purported defect rendered it “distinguishable from water leakage damage attributable to other causes[,]” and that the amount of damages was calculable on a class-wide basis “through a formula that estimated the average cost to replace the shower pan….” See id., at 6. Defendant's expert claimed, however, that “actual costs of replacement were not amenable to estimation because the costs associated with removing and replacing each individual shower pan could vary widely from one class member to the next.” See id., at 7-9, 13.

The Court’s opinion identifies three distinct grounds for upholding the trial court’s denial of certification in this case – all of which are hallmark issues that generally arise when trying certify a mass tort as a class action.
First, the Court concluded that trial court did not abuse its discretion by finding that the inherently individualized nature of each class member’s damages destroyed predominance. While it is true that individualized damages inquiry relating to damage is generally no bar to certification under California law, this rule is subject to being stretched to the breaking point in the mass tort context, as wide variances in the presence, degree and uniqueness of each individual’s damage causes the damage issue to become so unwieldy that it begins to bleed into the issue of liability itself. Thus, the plaintiff’s claim that the trial court erred when it concluded that individualized issues relating to damages predominated was overcome by the fact that the record supported the trail court's conclusion that the complexity of the damages issue alone would require “individualized trials for each class member's damages ….” See id., at 12-16.
Similarly, the Court also concluded that plaintiffs could not predicate error based on the trial court’s refusal to permit the use of statistical damage modeling to overcome individualized damage issues. As reasoned by the Court, “although a trial court has discretion to permit a class action to proceed where the damages recoverable by the class must necessarily be based on estimations, the trial court equally has discretion to deny certification when it concludes the fact and extent of each member's injury requires individualized inquiries that defeat predominance.” See id., at 17-18 (emphasis in original).
Second, the Court also ruled that the trial court did not err in concluding that plaintiffs failed to establish adequacy by pursuit of a certification theory that expressly disclaimed any damage beyond the cost of replacing the shower pans. Plaintiffs' assertion that this issue could be resolved by way of the opt-out mechanism, post certification, was deemed insufficient grounds to establish error. While the Court acknowledged that in some cases the opt-out mechanism may be used to overcome unique damage issues, the decision of whether to use the opt-out device is vested generally within a trial court’s discretion. See id., at 22-23. As reasoned by the Court, the trial court here was reasonable in its conclusion that the opt-out mechanism "would not cure under the peculiar facts of this case” (i.e. the wide diversity of potential damages that could be claimed by the proposed class as a whole). See id., at 23-24.  Boiled to its essence, the Court's analysis underscores that the reality that there is a limit on the use of the opt-out mechanism to overcome issues posed by a fact pattern that does not readily lend itself to class treatment.
Finally, the Court concluded that the trial court did not err in refusing to certify a liability only class. From an appellate perspective, such an argument was long shot, and in fact, perhaps logically incompatible with any argument establishing err (indeed, such argument would itself only come into play after the CAP concluded that the trial court had acted within its discretion in discretion in denying certification). While the plaintiffs cited to Hicks v. Kaufman & Broad Home Corp., 89 Cal.App.4th 908 (2001) for the position that a liability only certification was permissible, the Court reasoned that plaintiffs argument completely ignored the fact that the Hicks court not only denied certification of the very claims pursued by plaintiffs (i.e. for strict liability and negligence), but did so specifically because such claims would require individualized trials to establish liability. See id., at 24-25.
In short, I do not believe that Evans necessarily ads much to the class action landscape. Rather, Evans is really a useful tool to demonstrate that some types of cases just are not appropriate for class adjudication. As a general rule of thumb, the more one needs to compromise a case to fit it within the class action framework, the less likely it is that the case is one amenable to class adjudication.

Friday, November 6, 2009

Petition for Review Filed in Cohen v. Directv

Busy day.  Today, counsel for the plaintiffs filed a Petition for Review in Cohen v. Directv, Inc., __ Cal.App.4th __(2009).  I have a copy of the petition and will post when I get a chance to review.

Fourth District Upholds Denial of Certification in Evans v. Lasco Bathware

On November 6, 2009, the Fourth District (Division One) issued an opinion in Evans v. Lasco Bathware, __ Cal. App. 4th __ (2009), upholding denial of class certification of a design defect action relating to shower components.  Discussion of this case is contained here.

48th Annual CAOC Convention

I just wanted to take a second to promote the class action component of the upcoming Annual CAOC Convention. The Class Action Section will take place on Friday, November 13th between 1:30 and 5:00 at the Fairmont Hotel in San Francisco. Information may be found here.  I attended last year, and took home a few great nuggets of information. This is a really good opportunity for both new and experienced class action practitioners to pick up some useful tips, so I encourage everyone from the plaintiffs bar to come (not to discriminate against you defense guys and gals ... as I know there are several of you who visit regularly).

This year Shawn Khorrami (a.k.a. my "Boss") will be moderating a panel of some very distinguished speakers, including my counterpart Robert Drexler, who will be speaking on the topic of “Getting Your Case Certified” (which will include discussion of the current law of certification, and provide tips about pleading your complaint to maximize certification, precertification contact with class members, the use of class member declarations, discovery plans to maximize certification and the role of experts in the certification process). Bob is not only an excellent practitioner, he is a really great guy.

Other panelists, divided between both class action and mass tort practitioners, include Elizabeth Cabraser, Timothy Blood, Thomas Girardi, Mary Alexander, Raymond Boucher and Christopher Seeger.  Definitely a must see event.

Tuesday, November 3, 2009

California Supreme Court Carves Out Additional Exception to Definition of Accrued Wages in Schachter v. Citigroup, Inc.

On November 2, 2009, the California Supreme Court issued an opinion in Schachter v. Citigroup, Inc., __ Cal.4th __ (2009), holding that an employment incentive provision calling for the forfeiture of restricted company stock if the employment relationship was terminated before vesting did not run afoul California Labor Code sections 201, 202, and 219.

Under the specific facts of the case, Citigroup had offered a voluntary employee incentive compensation plan that provided employees with shares of restricted company stock at a reduced price in lieu of a portion of the participating employee’s annual cash compensation. Under the provision at issue, employees agreed that, should they resign or be terminated for cause before their restricted shares of stock vest, they would forfeit the stock and the portion of cash compensation they directed be paid in the form of the restricted stock. Thus, the issue at hand turned on whether the forfeiture provision violated Labor Code sections 201, 202, and 219 by requiring employees to forfeit “earned and unpaid” wages upon resigning or being terminated for cause. Id., at 8. The Court held that it did not.

As a beginning point, the Court noted that there was no dispute among the parties as to whether both the cash compensation and restricted stock constituted “wages” under Labor Code section 200. Id., at 8-9. All parties agreed that both were wages. Moreover, the plaintiff did not allege that the company failed to “pay” him the compensation he elected to receive in lieu of his annual cash compensation. Id. Rather, the plaintiff alleged that he and other similarly impacted employees were entitled to receive the portion of the cash compensation used to purchase the unvested stock upon termination because Labor Code section 219 prevented employees from agreeing to the Plan (and the forfeiture clause) in the first instance. Id., at 9-10.

The Court disagreed, reasoning that plaintiff could not assert the Plan constituted an improper agreement under section 219 without first establishing the Plan’s forfeiture provision violated sections 201 and 202 – a point which the plaintiff conceded. Id., at 9-10. The Court further reasoned that the Plan’s forfeiture provision did not violate sections 201 and 202, as employees who opted into the Plan entered into a lawful agreement to alter the terms of their employment (i.e. an agreement to exchange a portion of present wages for contingent incentive compensation). Id., at 10-11. Based on this fact, plaintiff was bound by the terms of that agreement, including the Plan’s forfeiture provision, and was not entitled to leverage section 219 to overcome his failure to perform a material condition the agreement (i.e. remain employed until the point off the stock’s vesting) to achieve reimbursement of the wages used to purchase the unvested stock upon termination. Id., at 11-14.

All in all, the Court’s opinion is seems logical and strait forward. As the plaintiff voluntarily entered into the Plan, and voluntarily terminated his employment with the company, the plaintiff really was not in the greatest position to establish wrongdoing on the part of the employer. The future impact of the Court’s decision likely will turn on cases presenting facts which vary from these two distinctions.

Monday, November 2, 2009

California Lawyer: Class Notice in the Electronic Age

I am privileged this month to have an article featured in the class action section of California Lawyer. The article deals with the fascinating subject (at least I think it is) of the future of class notice.  The  article may be found online here.

Saturday, October 31, 2009

Fourth District Rules Fraud Prong of the UCL Not Barred by the UPA in Zhang v. Superior Court

On October 29, 2009, the Fourth District (Division Two) issued an opinion in Zhang v. Superior Court, __ Cal. App. 4th __ (2009), concluding that insurers are not immune from liability under the fraud prong of the UCL for conduct that would violate the “Unfair Insurance Practices Act” (Insurance Code § 790.03 et seq.).

In reversing the trial court’s demurrer, the court concluded that that the California Supreme Court’s decision in Moradi-Shalal v. Fireman’s Fund Ins. Companies, 46 Cal.3d 287 (1988) did not stand for the proposition “that insurers who violate the Unfair Insurance Practices Act can never be liable in tort to the injured party” [id., at 7], as the Supreme Court’s decisions in both Moradi-Shalal and Manufacturers Life Ins. Co. v. Superior Court, 10 Cal.4th 257, 267 (1995) expressly acknowledged that the Unfair Insurance Practices Act did not stand as a substantive bar to existing tort law remedies. See id., at 7-8. Rather, drawing from the analysis in both Moradi-Shalal and Manufacturers Life, the Zhang court reasoned that a UCL claim can be barred only if “a plaintiff relies on conduct that violates the Unfair Insurance Practices Act but is not otherwise prohibited…” See id., at 8.

Thus, in the words of Zhang, “if a plaintiff expressly alleges conduct expressly prohibited by the UCL, such as fraudulent conduct likely to deceive the public [] or false advertising, there is simply no reason to apply Moradi-Shalal to prohibit the cause of action." See id., at 10-11.

Wednesday, October 28, 2009

Bailey Daily Blog Mentions

I'd like to take a minute to thank Curt Cutting of the California Punitive Damages blog and Kimberly Kralowec of The UCL Practitioner for their mentions of my burgeoning blog.  Their posts can be found here and here.  Also, welcome to the new visitors who have come to check things out.  Feel free to drop me a line.

Second District Orders Publication of Cohen v. DirecTV, Inc

On October 28, 2009, the Second District (Division Eight) granted requests to publish its opinion in Cohen v. DirecTV, Inc.  Prior discussion of this opinion may be found here and here.

Tuesday, October 27, 2009

Ninth Circuit Finds AT&T's "New and Improved" Class Action Waiver Unconscionable In Laster v. AT&T Mobility LLC

On October 27, 2009, the Ninth Circuit issued an opinion in Laster v. AT&T Mobility LLC concluding a class action waiver used by AT&T in connection with a “free phone” sales promotion was unconscionable under California law. 

Significantly, AT&T sought to distinguish it’s class action waiver from the pack by including a provision providing consumers the potential to collect a premium contractual payment of $7500 (the maximum amount of a small claims claim in California). However, as noted by the Court, the consumer would receive this payment “only if AT&T does not make a settlement offer to the aggrieved customer in a sum equal to or higher than is ultimately awarded in arbitration, and before an arbitrator is selected.” The Court reasoned that this provision did not overcome the "small damage" claim issue that rendered similar provisions substantively unconscionable in prior decisions such as Shroyer v. New Cingular Wireless Servs., 498 F.3d 976 (9th Cir. Cal. 2007) and Discover Bank v. Superior Court, 36 Cal. 4th 148 (Cal. 2005), as “AT&T will simply pay the face value of the claim before the selection of an arbitrator to avoid potentially paying $7,500.”

Under authority such as Discover Bank and Shroyer, class action waivers have been deemed substantively unconscionable because the class action mechanism provides incentive to bring small damage claims, and as such, is necessary for adjudication of consumer rights. As explained by the California Supreme Court, the class action mechanism is not simply a procedural device when small damages are alleged, as the class mechanism in such cases is “inextricably linked to the vindication of substantive rights.” See Discover Bank v. Superior Court, 36 Cal. 4th 148, 161 (2005).

Monday, October 26, 2009

Fourth District Orders Publication of Opinion in Kaldenbach v. Mutual of Omaha Life Insurance Co.

On October 26, 2009, the Fourth District (Division Three) ordered its opinion upholding denial of certification in Kaldenbach v. Mutual of Omaha Life Insurance Co., __ Cal.App.4th___ (2009) be published.  This decision was previously discussed here.

In this case, the plaintiff asserted claims under the UCL and CLRA predicated upon the sale of alleged “vanishing premium” life insurance policies. With regard to the UCL claim, the plaintiff asserted that reversal was required under Tobacco II because the trial court improperly premised its order denying certification on each class member having to establish reliance and injury.  However, the Court disagreed, concluding that even if the trial court improperly premised its order denying class certification on such grounds, the trial court’s denial was also based on its finding that individualized inquiry would be required to establish defendant's liability:
There were myriad other individualized issues the court found to predominate including whether any given agent took Mutual’s training, read its manuals, and routinely followed the training and materials; and what materials, disclosures, representations, and explanations were given to any given purchaser. These individualized issues go not to the injury suffered by a purchaser, but to whether there was in fact an unfair business practice by Mutual. Neither In re Tobacco II Cases, supra, 46 Cal.4th 298, nor Massachusetts Mutual, supra, 97 Cal.App.4th 1282, compel a different result.
See Kaldenbach, at 21.

As reasoned by the Court, this justification supported the trial court’s denial of certification, as “there was no evidence linking those common tools to what was actually said or demonstrated in any individual sales transaction[,]” but rather, “[t]he record demonstrates Mutual’s training materials and methods were not uniform throughout the class period of 1988 through 1995.” See id., at 18, 22-23.

New Unpublished UCL Restitution Opinion Issued by Second District in In re Baycol Cases I & II

On October 20, 2009, the Second District (Division Seven) issued an unpublished opinion in In re Baycol Cases I & II, reversing the trial court's dismissal of the plaintiff’s individual UCL claim. The opinion is noteworthy, not for the ruling upholding dismissal of the class allegations on technical grounds, but for the court’s approval of a restitionary theory premised on the defendant charging inflated prices for a product through the challenged deceptive advertising. The court’s analysis was as follows:
The focus of the UCL is "on the defendant's conduct, rather than the plaintiff's damages, in service of the statute's larger purpose of protecting the general public against unscrupulous business practices." (In re Tobacco II Cases (2009) 46 Cal.4th 298, 312.)

The trial court sustained the demurrer as to Shaw's individual claims on the ground that he "did not plead that he did not receive health benefits, that he did not get what he paid for, or that he has any basis for injunctive relief." However, Shaw alleged that due to Bayer's unfair, unlawful and deceptive acts in  marketing Baycol, it sold more Baycol at inflated prices than would otherwise have been the case. At a minimum, it is reasonably probable that Shaw could amend his complaint to allege that due to Bayer's unfair, unlawful and deceptive acts in marketing Baycol, he purchased Baycol and he purchased it at a higher price, than would have been the case had Bayer not engaged in unfair, unlawful and deceptive acts. Accordingly, he should have been given the opportunity to amend the complaint to provide more specificity as to his individual claims. (Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1081; City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc., supra, 68 Cal.App.4th at p. 459.)
In re Baycol Cases I & II, 2009 Cal. App. Unpub. LEXIS 8352 (2d Dist. Oct. 20, 2009).

As I previously discussed here (The Scope of Class Restitution in the Wake of In Re Tobacco II Cases), this theory would permit adjudication of a UCL claim on behalf of a class that includes persons who never saw or relied upon the deceptive advertising. 

Saturday, October 24, 2009

California District Court Denies Motion to Decertify Punitive Damages Class in Iorio v. Allianz Life Ins. Co..

On October 21, 2009, a California District Court judge denied a motion to decertify a punitive damages class in Iorio v. Allianz Life Ins. Co. of N. Am., 2009 U.S. Dist. LEXIS 97657 (S.D. Cal., Oct. 21, 2009). The plaintiff’s case – certified on behalf of a class of California senior citizens who purchased deferred annuities from Allianz Life Insurance Company of North America – alleges that Allianz employed false and misleading statements to promote the sale of its annuities. In seeking decertification, the defendant asserted that recent U.S. Supreme Court punitive damage decisions precluded class adjudication of punitive damage claims as a matter of law. The district court disagreed, reasoning as follows:

First, the court concluded that adjudication of punitive damages using the class mechanism is not precluded by Philip Morris USA v. Williams, 549 U.S. 346 (2007). The court reasoned that unlike Williams, which held that the “Due Process Clause forbids a State to use a punitive damages award to punish a defendant for injury that inflicts upon those who are, essentially, strangers to the litigation” [Williams, 549 U.S. at 353], “the non-representative class members who received notice and did not opt out are parties to the litigation.” See Iorio, 2009 U.S. Dist. LEXIS 97657, at 11-14. The court further reasoned that “even though Williams suggests that the Defendant should have the opportunity to present the defenses of reliance and knowledge for each member [], this Court has already found that such individual examination is not necessary because every class member received the same alleged misrepresentation and relied on those misrepresentations.” See id., at 15.

Second, the court disagreed that evaluation of the proportionality of the punitive award to each class member's compensatory damages would require individualized hearings for each class member. See Iorio, 2009 U.S. Dist. LEXIS 97657, at 17-22. As reasoned by the court, “compensatory damages will be calculated depending on the group in the class where each member falls” and “[a]fter compensatory damages have been assessed, a ratio between punitive and compensatory damages can be calculated based on the factors set forth in Campbell.” See id., at 17-18.

Finally, the court concluded that the defendant did not have a due process right to assert an individualized defense against each class member to rebut their reliance and knowledge where all class members were presented with the same alleged misrepresentations by defendant. See Iorio, 2009 U.S. Dist. LEXIS 97657, at 22-24 (“[i]n light of the uniform written misrepresentations and the well-established presumption of reliance created by California law, the Court finds [the due process] argument to lack merit.”).

However, as the court properly notes, this very issue is currently pending before the Ninth Circuit in Dukes v. Wal-Mart, Inc. Thus, whether such analysis ultimately survives remains to be seen.

Friday, October 23, 2009

Ninth Circuit Denies Petition to Appeal Order Granting Class Certification in Friedman v. 24 Hour Fitness USA, Inc..

On October 20, 2009, the Ninth Circuit issued an order denying the petition of 24 Hour Fitness to appeal the district court’s order granting class certification in Friedman v. 24 Hour Fitness USA, Inc., 2009 U.S. Dist. LEXIS 81975 (C.D. Cal., Aug. 25, 2009). (The district court's certification order may be found here).  In Friedman, plaintiffs are alleging that 24 Hour Fitness violated RICO when it fraudulently represented to payment processors that it had member authorization to withdraw membership dues using Electronic Funds Transfer (EFT) in instances where members had previously cancelled their membership.

As reflected in the district court’s certification order, common issues were deemed to predominate on the RICO claim because “the predicate fraud for the RICO claim here turns on Defendant's warranties to the payment processors and the payment processors' reliance on those warranties, not on Defendant's representations to the individual consumers.” See Friedman, 2009 U.S. Dist. LEXIS 81975, at 25. As reasoned by the court, “[t]his situation falls within … ‘a narrow exception to the requirement that the plaintiff prove direct reliance on the defendant's fraudulent predicate act’ … that ‘comes into play when the plaintiff can demonstrate injury as a direct and contemporaneous result of fraud committed against a third party.’” See id. Based on this principle, the court concluded that “there is no need for each class member to prove his own direct reliance on these misrepresentations in order for his injury to have been directly caused by the alleged misrepresentation to the payment processors.” See id.

This principle is an important one to remember, as many modern fraudulent schemes are currently being predicated upon this very fact pattern. An example would include cellular phone cramming, a practice wherein a company submits fraudulent billing to third party cellular phone providers, who in turn impose charges on a consumer’s cellular phone bill to collect monthly fees for services (such as ringtones, games, and joke-lines) which the consumer has not provided authorization or consent. Some courts have deemed this fact pattern to reside outside the reach of state consumer protection statutes due to the fact the consumer lacks the requisit element of reliance on the fraudulent activity that caused the resulting damage.

Tuesday, October 20, 2009

Multiple Requests For Publication Filed in Cohen v. DirecTV, Inc.

Between the period of October 16, 2009 and October 19, 2009, four separate publication requests were filed in Cohen v. DirecTV.  The requests are contained here, here, here and here.

In Cohen, the Second District upheld denial of certification of a UCL class because the proposed class included persons who had not viewed alleged deceptive promotions by DirecTV. The Court reasoned predominance could not be met under circumstances, and in fact, went so far as to state that “we find Tobacco II to be irrelevant because the issue of ‘standing’ simply is not the same thing as the issue of “commonality.”

As I discussed in a prior post, Cohen is poorly reasoned, as the California Supreme Court rejected this very line of analysis in In Re Tobacco II Cases.

Wednesday, October 14, 2009

New FTC Guidelines on Product Testimonials and Endorsements - a Useful Resource to California Practitioners

On October 5, 2009, the FTC announced approval of final revisions to the guidance it gives to advertisers on how to keep their endorsement and testimonial ads in line with the FTC Act.  As explained in the official press release, the new guidelines address endorsements by consumers, experts, organizations, and celebrities, as well as the disclosure of important connections between advertisers and endorsers. These changes, discussed in detail here, compel the following affirmative disclosures to avoid deceptive advertising:
1.  Atypical Results: advertisements that feature a consumer and convey his or her experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect. In contrast to the 1980 version of the Guides – which allowed advertisers to describe unusual results in a testimonial as long as they included a disclaimer such as “results not typical” – the revised Guides no longer contain this safe harbor.

2.  All Forms of Paid Endorsement, Including Sponsored Research: The revised Guides also add new examples to illustrate the long standing principle that “material connections” (sometimes payments or free products) between advertisers and endorsers – connections that consumers would not expect – must be disclosed. Examples where disclosure would be required include (1) the post of a blogger who receives cash or in-kind payment to review a product, or (2) reference to the findings of a research organization that conducted research sponsored by the company. A paid endorsement – like any other advertisement – is deceptive if it makes false or misleading claims.

3.  Celebrity Disclosure of Relationship with Advertisers: In addition to reinforcing existing precedent that celebrities may be held personally liable for false or unsubstantiated claims made in an endorsement – or for failure to disclose material connections between the advertiser and endorsers, the revised Guides also make it clear that celebrities have a duty to disclose their relationships with advertisers when making endorsements outside the context of traditional ads, such as on talk shows or in social media.
These new guidelines may be a useful tool to California practitioners, as the California Supreme Court has long held that California Courts may seek guidance from interpretations of Section 5 of the FTA when interpreting the provisions of the UCL. See e.g. Barquis v. Merchants Collection Assn., 7 Cal. 3d 94, 110 (1972); Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163, 186 (1999)

Monday, October 12, 2009

A Good Exemplar UCL Certification Opinion: Baghdasarian v. Amazon.Com, Inc.

This morning I stumbled across Baghdasarian v. Amazon.Com, Inc., 2009 U.S. Dist. LEXIS 92777 (C.D. Cal. July 6, 2009) – a class certification decision out the Central District of California. In that case, the plaintiff sought certification under the deception prong of the UCL for Amazon’s alleged practice of retaining a portion of shipping fees that were unilaterally set by Amazon without seller input in its Amazon Marketplace platform. See id., at 2-3. The Court’s analysis is noteworthy for its adherence to the principles set forth in In Re Tobacco II Cases.

For example, the Court’s discussion of UCL standing properly acknowledges that “[p]laintiff does not need to show affirmative proof that each individual class member relied on Defendant's deceptive conduct.” See id. at 8-9. Moreover, despite the defendant’s efforts to focus on individual issues relating to individual class member reliance [id., at10-12], the Court’s certification analysis properly focuses on the defendant’s conduct:
common questions of law and fact predominate over individual issues of proof. Specifically, the case deals with whether Defendant's shipping and handling disclosure misleadingly stated or implied that the fee was for shipping and handling, and whether it misleadingly stated or implied that the fee is passed on in full to Marketplace Sellers to compensate them for actual shipping and handling costs. These questions are "common to the entire class and [require] no separate inquiry into the actions or beliefs of individual class members." Simer v. Rios, 661 F.2d 655, 673 (7th Cir. 1981). Further, these questions are significant because they have a direct bearing on the ability of each class member to prove Defendant's liability. See Klay v. Humana, Inc., 382 F.3d 1241, 1255 (11th Cir. 2004). Common questions predominate over any individual questions in this case.
Baghdasarian, 2009 U.S. Dist. LEXIS 92777, 16-17.

Under principles espoused in In Re Tobacco II Cases, the defendant’s conduct is the only relevant issue bearing on UCL liability (previously discussed here and here).

Thursday, October 8, 2009

Central District Court Denies Class Certification of UCL Class Based on Issues Relating to Restitution

On September 14, 2009, class certification of a construction defect action brought (in part) under the UCL was denied in Kingsbury v. U.S. Greenfiber, LLC, 2009 U.S. Dist. LEXIS 92014 (C.D. Cal. Sept. 14, 2009).  The plaintiff alleged, among other things, that he and the putative class had “purchased mass-produced homes containing a type of ‘cellulose insulation’… that can cause dangerous and difficult-to-detect mold growth because it retains too much water during and after installation.” See id., at 3.  As to claims under the UCL, plaintiff pursued various theories, including that the defendant had used false and deceptive advertising to conceal the risks and dangers of the insulation from the original home purchasers. Id., at 25-26.

While the plaintiff asserted that his UCL claim warranted certification under the principles espoused in In re Tobacco II, the District Court disagreed.  The Court denied certification of the UCL claim on the grounds that the proposed class definition was overly inclusive “because it included current owners of Pulte-built homes who did not purchase their homes from Pulte and thus have no claim to restitutionary relief under the UCL.” See id., at 26.  The Court further reasoned that the remedy sought by Plaintiff – the cost of repair – was not restitutionary in nature, but rather constituted damages (which are not recoverable under the UCL). Id., at 27.  Finally, the Court concluded that the named plaintiff failed to establish Prop 64 standing, as he testified at deposition that he did not rely on the defendant’s promotional materials. Id., at 29-30.

Putting the standing issue aside, the Court's opinion is troubling insofar as the court's analysis travels heavily into the merits of the case.  Moreover, the Court's analysis regarding class member restitution conflicts with the analysis in In re Tobocco II (discussed in earlier posts here and here), as the California Supreme Court concluded that the issue of putative class member injury is not properly a part of a court's certification calculous under the UCL.  Out of fairness to the Court, however, the plaintiff in this case may be partially to blame by failing to articulate a restitutionary theory that was viable under the UCL (and tailored to the proposed class).  However, resolution of this issue relates to the merits of the case, and as such, would have been more properly addressed by way of a motion to dismiss.

Wednesday, October 7, 2009

Life Imitating Life: Class Action Filed Against Second Life for Trademark Infringement; Motion to Change Venue Certain to Follow

Time to dust off my avatar (Matt Ballyhoo), there is a legal storm brewing in the land of Linden. On September 15, 2009, a class action complaint was filed in the Northern District of California against Second Life operator, Linden Laboratories, for trademark infringement. The suit alleges that Linden was an active participant in Second Life users' misappropriation of virtual goods (in the case of the named plaintiff, virtual beds) that netted real-life creators hundreds of thousands in actual revenue (that is U.S. dollars, as opposed to the Linden dollar).

The potential for real lifers to make a living in Second Life is no joke.  At one time I actually contemplated hanging out a shingle in SL, and apparently, I was not alone.  As reported by the ABA, some attorneys have set up office within second life.  Indeed, Second Life has its own Bar (Second Life Bar Association), and a burgeoning court system.  I anticipate some serious venue and jurisdictional challenges on the horizon.