Monday, April 19, 2010

Fourth District Companion Cases Conclude Prop 64 Reliance Applies to UCL “Unlawful” Prong When Claim is Rooted in Misrepresentation: Hale v. Sharp Healthcare and Durrell v. Sharp Healthcare

On April 19, 2010, the Fourth District Court of Appeal issued two opinions – Hale v. Sharp Healthcare, __ Cal.App.4th __ (2010) and Durrell v. Sharp Healthcare, __ Cal.App.4th __ (2010) – both of which extended Prop 64 reliance to UCL claims brought under the “unlawful” prong. The Court’s analysis, which drew largely from the California Supreme Court’s analysis in footnote 17 of Tobacco II, acknowledged that such application was to be strictly limited to unlawful prong claims involving false advertising and misrepresentations to consumers:
Construing the phrase "as a result of" in Business and Professions Code section 17204 in light of Proposition 64's intention to limit private enforcement actions under the UCL, we conclude the reasoning of Tobacco II applies equally to the "unlawful" prong of the UCL, when, as here, the predicate unlawful conduct is misrepresentation. Indeed, the court explained in Tobacco II: "We emphasize that our discussion of causation in this case is limited to such cases where, as here, a UCL action is based on a fraud theory involving false advertising and misrepresentations to consumers. The UCL defines 'unfair competition' as 'includ[ing] any unlawful, unfair or fraudulent business act or practice . . . .' [Citation.] There are doubtless many types of unfair business practices in which the concept of reliance, as discussed here, has no application." (Tobacco II, supra, 46 Cal.4th at p. 325, fn. 17, italics added.) The concept of reliance is unequivocally applicable here.
See Hale, at 13-14; Durrell, at 14.

Significantly, the Court was careful to note that pleading the requisite degree of “injury” for purposes of Prop 64 standing is not onerous:
We also relied on the United States Supreme Court's description of "injury in fact" for federal court standing purposes as " 'an invasion of a legally protected interest which is (a) concrete and particularized . . . and (b) "actual or imminent, not 'conjectural' or 'hypothetical,' " [citations].' " (Ibid., quoting Lujan v. Defenders of Wildlife (1992) 504 U.S. 555, 560-561.) We cited a federal opinion that explained, " 'Injury-in-fact is not Mount Everest. [Citation.] ("The contours of the injury-in-fact requirement, while not precisely defined, are very generous," requiring only that claimant "allege[] some specific, 'identifiable trifle' of injury").' " (Troyk, supra, at p. 1347, quoting Danvers Motor Co., Inc. v. Ford Motor Co. (3d Cir. 2005) 432 F.3d 286, 294.)
See Hale, at 2.

In fact, the difference between affirmance in Durrell and reversal in Hale turned on the simple allegation that the named plaintiff expected to be charged “regular rates” after reading the defendant hospital’s patient Admission Agreement at the time of being admitted. See Durrell, at 14-15 (“The SAC does not allege Durell relied on either Sharp's Web site representations or on the language in the Agreement for Services in going to Sharp Grossmont Hospital or in seeking or accepting services once he was transported there.”); but see Hale, at 14-15 (concluding that Hale “has reasonably pled reliance” because “[t]he SAC alleges Hale signed the Admission Agreement, and ‘at the time of signing the contract, she was expecting to be charged 'regular rates,' and certainly not the grossly excessive rates that she was subsequently billed.’”).

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