Breaking News: Ninth Circuit issues en banc decision in Dukes v. Wal-Mart Stores, Inc.

The Ninth Circuit has issued its long-awaited, en banc Opinion in Dukes v. Wal-Mart Stores, Inc. (9th Cir. Apr. 26, 2010).  Of course, I have no idea if you were actually waiting for it, so I am only referring to myself.  As for how long it took to issue the Opinion, it took some time to write an Opinion that is about 136 pages long.  The majority described the holding as follows:

Plaintiffs allege that Wal-Mart, Inc., discriminates against women in violation of Title VII of the Civil Rights Act of 1964. After detailed briefing and hearing, the district court certified a class encompassing all women employed by Wal-Mart at any time after December 26, 1998, and encompassing all Plaintiffs’ claims for injunctive relief, declaratory relief, and back pay, while creating a separate opt-out class encompassing the same employees for punitive damages. We affirm the district court’s certification of a Federal Rule of Civil Procedure 23(b)(2) class of current employees with respect to their claims for injunctive relief, declaratory relief, and back pay. With respect to the claims for punitive damages, we remand so that the district court may consider whether to certify the class under Rule 23(b)(2) or (b)(3). We also remand with respect to the claims of putative class members who no longer worked for Wal-Mart when the complaint was filed so that the district court may consider whether to certify an additional class or classes under Rule 23(b)(3).

Slip op., at 6146-47.  The massive opinion and dissent are simply too long for me to thoroughly cover this morning.  However, Circuit Judge Graber offered this brief comment on the entirety of the opinion:

GRABER, Circuit Judge, concurring: 

The majority and the dissent have written scholarly and complete explanations of their positions. What the length of their opinions may mask is the simplicity of the majority’s unremarkable holding:

Current female employees may maintain a Rule 23(b)(2) class action against their employer, seeking injunctive and declaratory relief and back pay on behalf of all the current female employees, when they challenge as discriminatory the effects of their employer’s company-wide policies.

If the employer had 500 female employees, I doubt that any of my colleagues would question the certification of such a class. Certification does not become an abuse of discretion merely because the class has 500,000 members. I therefore concur fully in the majority opinion.

Slip op., at 6237-38.

I will write more on this Opinion as soon as I am able, but a quick perusal suggests that this decision will have a lasting impact on certification motions in the Ninth Circuit.  Unless the U.S. Supreme Court wants to weigh in on this decision.

in brief: Ninth Circuit joins others in holding that denial of certification does not destroy CAFA jurisdiction

In United Steel, Paper & Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Service Workers International Union, AFL-CIO, CLC, et al. v. Shell Oil Company (9th Cir. Apr. 21, 2010) (say that three times fast), a putative class action alleging various wage & hour violations was removed to federal district court pursuant to 28 U.S.C. § 1332(d)(2) (CAFA).  Certification was eventually denied.  The district court concluded that it lacked jurisdiction and remanded the matter to state court.  On appeal, the Ninth Circuit joined the Seventh and Eleventh Circuits in holding that denial of class certification does not divest the federal district court of jurisdiction.  The Court recognized the general principles that jurisdiction is evaluated at the time it is invoked, and subsequent developments do not destroy jurisdiction if it was properly invoked originally.  All else equal, this decision should reduce the overall degree of hapiness experienced by district court judges.  Now they can't put an unsuccessful, removed class action out of its misery with a remand bullet to the head.  Thus, federal district courts will have the pleasure of overseeing more individual, state law-based actions.

Companion opinions involving billing practices by Sharp Healthcare (Durell and Hale) examine UCL standing

Sharp Healthcare is responsible for two of the three published decisions issued today that concern class action issues.  Hale v. Sharp Healthcare (April 19, 2010) and Durell v. Sharp Healthcare (April 19, 2010) both concern putative class actions.  Both involve billing practices by Sharp Healthcare related to its "regular" billing rate.  Both concern trial court orders sustaining demurrers to UCL causes of action.  And both pronounce new situations where "reliance" is required for UCL claims.  However, the outcomes in the two appeals differ by the width of, at most, a couple of sentences of allegations; one passes muster as a "reliance" allegations and one does not.

Both cases concern the basic theory that Sharp engaged in deceptive and unfair practices by billing uninsured patients its full standardized rates for services, when it substantially discounts those rates for patients covered by Medicare or private insurance.  Both cases questioned, in slightly different ways, what actually constitutes the "regular rates" charged to patients.

In the Durell opinion, the Court focused on the causation aspect of standing:

The court sustained the demurrer to the UCL cause of action without leave to amend on the ground Durell lacks standing to pursue the claim. The court found the SAC insufficiently alleges "injury in fact" and causation. (Bus. & Prof. Code, § 17204.) As to causation, the court explained the SAC fails to allege Durell was harmed "as a result of" Sharp's conduct. (Ibid.) For instance, the SAC does not allege he "relied on Sharp charging its 'usual and customary rates' in receiving treatment." We turn first to the causation issue, which we find dispositive.

Durell, at 12.  The Court found the absence of allegations of "reliance" to be the key defect in Durell's pleading: 

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. Indeed, the SAC does not allege Durell ever visited Sharp's Web site or even that he ever read the Agreement for Services.

Durell, at 14.

Plaintiff Hale, on the other hand, alleged facts that satisfied the Court's examination of "injury in fact" and standing: 

Even though the SAC alleges Hale has paid only $500 of her $14,447.65 medical bill, it also alleges the Admission Agreement obligates her to pay Sharp the balance on her account. Thus, she faces at least an imminent invasion or injury to a legally protected interest. (See Troyk, supra, 171 Cal.App.4th at p. 1346.) The term "imminent" is defined as "ready to take place," "hanging threateningly over one's head," and "menacingly near." (Webster's 3d New Internat. Dict. (1993) p. 1130.) Certainly, this is not the type of action Proposition 64 was intended to squelch. Hale was a bona fide consumer of medical services.

Hale, at 11.  Though thin, the Court agreed that Hale did plead a form of "reliance" sufficient to withstand demurrer: 

We agree with Hale, however, that "to the extent [she] is bringing a fraud-based claim under the UCL, she has reasonably pled reliance." The 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." (Italics added.) This allegation appears in the breach of contract cause of action, but the UCL cause of action incorporates the allegations of all other causes of action. We must interpret the complaint reasonably, "reading it as a whole and its parts in their context." (Stearn v. County of San Bernardino (2009) 170 Cal.App.4th 434, 439.) As Hale notes, the "difference between 'expecting' to be charged regular rates and 'relying' on being charged regular rates is a distinction without a difference." We see no utility in requiring Hale to amend her complaint to exchange the term "expecting" for the term "relying."

Hale, at 14-15.  Lesson one from these cases is that small differences in pleading facts can make a big difference.

But discussing allegations was not the headline-worthy event in these two opinions.  The Court extended the concept of "reliance" discussed in Tobacco II's discussion of the UCL "fraudulent" prong to any "unlawful" prong claim asserting a legal violation that involves deception:

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 unlawfulness is misrepresentation and deception. A consumer's burden of pleading causation in a UCL action should hinge on the nature of the alleged wrongdoing rather than the specific prong of the UCL the consumer invokes. This is a case in which the "concept of reliance" unequivocally applies (Tobacco II, supra, 46 Cal.4th at p. 325, fn. 17), and omitting an actual reliance requirement when the defendant's alleged misrepresentation has not deceived the plaintiff "would blunt Proposition 64's intended reforms." (Cattie v. Wal-Mart Stores, Inc. (S.D.Cal. 2007) 504 F.Supp.2d 939, 948.)

Durell, at 14.

With a new category of "reliance" pleading required for certain "unlawful" prong claims, the Court turned its high-powered, neutrino-powered conservative ray on the "unfair" prong of the UCL.  Durell's "unfair" prong claim also found no success.  After reviewing the post-Cel-Tech hairball, the Court applied its own prior precedent that defines a very strict test for "unfair" conduct:

Here, the court's order does not specifically address the "unfair" prong of the UCL. The SAC alleges Sharp's conduct violates public policy, and is "immoral, unethical, oppressive, and unscrupulous," a vague test of unfairness this court rejects. The SAC does not allege the conduct is tethered to any underlying constitutional, statutory or regulatory provision, or that it threatens an incipient violation of an antitrust law, or violates the policy or spirit of an antitrust law. In his briefing, Durell does not address Cel-Tech, supra, 20 Cal.4th 163, and its affect on the definition of "unfair" in consumer UCL cases, or this court's opinions in Scripps Clinic, supra, 108 Cal.App.4th 917, and Byars, supra, 109 Cal.App.4th 1134. We conclude the court properly granted the demurrer as to the claim under the "unfair" prong of the UCL.

Durell, at 19.

On the flip side, Hale's CLRA claim lives to fight another day, benefiting from the Court's "reliance" pleading analysis set forth in its discussion of Hale's UCL claim:

Again, however, to the extent Hale's CLRA claim is fraud-based, the SAC adequately alleges the reliance element. Thus, the court erred by sustaining the demurrer to the CLRA cause of action.

Hale, at 16.

I will look forward to reading The UCL Practitioner's assessment of these two opinions.

Geico's attempt to "pick off" class representative in UCL action is unsuccessful

Oh, the riches that come to those who wait.  After a fairly dry spell, California's Courts of Appeal bestow no fewer than three opinions about issues related to class actions and the Unfair Competition Law ("UCL").  The first up for commentary is Wallace v. Geico General Insurance Company (April 19, 2010).  In Wallace, the Court of Appeal (Fourth Appellate District, Division One) considered whether GEICO's offer of monetary compensation to Wallace after she filed her lawsuit caused her to lose standing as the representative plaintiff.  Concluding that she did not, the Court reversed the trial court's order striking class allegations.

Wallace filed a proposed class action complaint against GEICO. According to Wallace, her vehicle was damaged in an accident and required body work. She obtained an estimate from a repair shop of her choice and presented the estimate to GEICO. GEICO told her that it would not pay the full amount of the estimate because the hourly rate for labor charged by that business was above what GEICO considered to be the prevailing labor rate.

Meanwhile, following a consent order issued by the California Department of Insurance, GEICO was obligated to calculate reimbursements in an alternative fashion.  Two months after Wallace filed her lawsuit, GEICO sent a check for $387.56 to Wallace to cover the amount that Wallace paid out of pocket for the repair of her vehicle.  Based on the fact of that payment, the trial court ruled that Wallace lacked standing but gave Wallace time to locate an adequate class representative and allowed discovery for that purpose.  Less than two months later, GEICO moved to strike class allegations.  The trial court granted the motion on the ground that the class had no representative.

The Court of Appeal began its review by examining the "pick off" cases:

In the specific situation where a defendant in a class action has forced an involuntary settlement on the representative plaintiff after the lawsuit is filed, case law creates an exception to the requirement that a representative plaintiff continue to be a member of the proposed class. These cases, which are "sometimes referred to as 'pick off ' cases" (Watkins v. Wachovia Corp. (2009) 172 Cal.App.4th 1576, 1590), "arise when, prior to class certification, a defendant in a proposed class action gives the named plaintiff the entirety of the relief claimed by that individual. The defendant then attempts to obtain dismissal of the action, on the basis that the named plaintiff can no longer pursue a class action, as the named plaintiff is no longer a member of the class the plaintiff sought to represent. . . . [T]he defendant seeks to avoid exposure to the class action by 'picking off ' the named plaintiff, sometimes by picking off named plaintiffs serially." (Ibid., citing, among others, La Sala, supra, 5 Cal.3d 864.) In this situation, "the involuntary receipt of relief does not, of itself, prevent the class plaintiff from continuing as a class representative." (Watkins, at p. 1590; see also Larner v. Los Angeles Doctors Hospital Associates, LP (2008) 168 Cal.App.4th 1291, 1299 [case law "prevents a prospective defendant from avoiding a class action by 'picking off' prospective class-action plaintiffs one by one, settling each individual claim in an attempt to disqualify the named plaintiff as a class representative"]; Ticconi v. Blue Shield of California Life & Health Ins. Co. (2008) 160 Cal.App.4th 528, 548 [" '[A] prospective defendant is not allowed to avert a class action by "picking off " prospective plaintiffs one-by-one. Thus, precertification payment of the named plaintiff 's claim does not automatically disqualify the named plaintiff as a class action representative.' "].) 

Slip op., at 11-12.  Having explained that the "pick off" attempt was improper, the Court then explained what the trial court should have done in that situation:

Instead of a reflexive dismissal of the representative plaintiff on the basis that he or she lacks standing as the trial court did here — the proper procedure in a pick off situation is for the trial court to consider whether "the named plaintiffs will continue fairly to represent the class" in light of the individual relief offered by the defendant. (La Sala, supra, 5 Cal.3d at p. 872.) As a practical matter, in most cases, that evaluation may be performed in the context of a ruling on a motion for class certification, where the trial court inquires into the existence of, among other things, "(1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class." (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326, italics added; see also Weiss, supra, 385 F.3d at p. 348 [allowing class certification motion to be filed after defendant attempted to pick off the representative plaintiff].)

Slip op., at 13.  Next, the Court explicitly held that the "pick off" cases apply to UCL actions, even after Proposition 64:

We agree with the parties that the pick off cases are persuasive here, regardless of the injury-in-fact requirement set forth in section 17204. As required by section 17204, Wallace "suffered injury in fact" and "lost money or property" as a result of the practices at issue in this lawsuit. (§ 17204.) Specifically, Wallace was injured by paying for the repair work to her vehicle that GEICO did not agree to cover. Thus, at the time Wallace filed suit she was a proper plaintiff under section 17204. We see no indication in the history of Proposition 64, as reviewed by our Supreme Court in Californians for Disability Rights, supra, 39 Cal.4th 223, 228, that the voters amended section 17204 with the intent of allowing defendants in class actions brought under section 17200 et seq. to defeat class status by forcing an involuntary settlement.

Slip op., at 15-16.  The Court went on to explain that Proposition 64 focused on "the filing of lawsuits by attorneys who did not have clients impacted by the defendant's conduct."  Slip op., at 16.  Thus, "[b]ecause the doctrine expressed in the pick off cases is an established part of class action procedure, there is no reason to believe that Proposition 64 was intended to alter that doctrine in the context of suits brought under section 17200 et seq."  Slip op., at 17, relying on In re Tobacco II Cases (2009) 46 Cal.4th 298, 318.

I still can't get over the fact that an insurance company wouldn't pay for the full cost of vehicle repair.  Inconceivable.

Judge Patel offers interesting comments about the puzzle of PAGA

United States District Court Judge Marilyn Hall Patel (Northern District of California) offered some interesting comments, but no clear solutions, to the puzzle posed by litigation of PAGA claims as representative actions.  Ochoa-Hernandez v. Cjaders Foods, Inc.. (N.D. Cal. Apr. 2, 2010) 2010 WL 1340777.  In the course of denying plaintiff's motion to preclude the defendant from contacting current or former employees about the litigation, the Court said:

From a practical perspective, plaintiff's analogy between class actions and PAGA claims is also misplaced. While both fall within the general category of virtual representation, there are significant differences between the two. Unlike a class action seeking damages or injunctive relief for injured employees, the purpose of PAGA is to incentivize private parties to recover civil penalties for the government that otherwise may not have been assessed and collected by overburdened state enforcement agencies. Id. (“The act's declared purpose is to supplement enforcement actions by public agencies, which lack adequate resources to bring all such actions themselves.”). Unlike class actions, these civil penalties are not meant to compensate unnamed employees because the action is fundamentally a law enforcement action. Moreover, unlike the binding finality of a class action with respect to damages, the individual employee has less at stake in a PAGA representative action: if the employer defeats a PAGA claim, the nonparty employees, because they were not given notice of the action or afforded an opportunity to be heard, are not bound by the judgment as to remedies other than civil penalties. Id. at 987, 95 Cal.Rptr.3d 588, 209 P.3d 923. Thus, nonparty employees can bring an action against the employer based on identical facts so long as they do not seek civil penalties. Class members, however, would be bound by a judgment against the class, independent of the remedy later sought.

*5 Class actions litigated in federal court also contain numerous procedural protections that are not available in PAGA claims. Unnamed employees need not be given notice of the PAGA claim, nor do they have the ability to opt-out of the representative PAGA claim. There is no indication that the unnamed plaintiffs can contest a settlement, if any, reached between the parties. The court does not have to approve the named PAGA plaintiff, nor does the court inquire into the adequacy of counsel's ability to represent the unnamed employees. These procedural protections ensure the fidelity of the attorney-client arrangement in a class action. Their absence further militate against considering a PAGA claim akin to a certified class action.

Additionally, in order to bridge the gap between Arias and the creation of an attorney-client relationship, at least two inferential steps are required, and neither is present. First, Arias is silent on what procedures, if not class action procedures, are sufficient to perfect representative status in representative actions. While representative status may accrue once administrative requirements have been satisfied, Arias does not so hold and plaintiff cites no further authority. Second, assuming that representative status is perfected once administrative requirements are satisfied, Arias does not contemplate the practical issue of when, if at all, an attorney-client relationship arises between plaintiff's counsel and the current or former employees.

Slip op., at 4-5.  If it isn't obvious from this long excerpt, the argument up for discussion was whether an attorney-client relationship existed between the absent employees and the attorney for the named plaintiff.  While the Court's comments explain why a PAGA claim is different from a class action, the discussion is not intended to address the case management question posed by PAGA.  Nevertheless, the brief observations by this Court are of interest to practitioners in this area of law.

Conditionally certified FLSA class of United Auto Credit Corporation Supervisors classified as exempt

United States District Court Judge Ronald M. Whyte (Northern District of California) granted United Auto Credit Corporation's motion to decertify a class of California-based Supervisor (and related) employees after the class was conditionally certified under the FLSA.  Hernandez v. United Auto Credit Corporaiton (N.D. Cal. Apr. 2, 2010) 2010 WL 1337702.  In FLSA actions, many Courts employ a two-phase process for "certification" of FLSA classes, an approach used by the trial court here:

Under the two-step approach, the court first considers whether to certify a collective action and permit notice to be distributed to the putative class members. See Thiessen, 267 F.3d at 1102; Russell v. Wells Fargo & Co., 2008 WL 4104212, at *2-3 (N.D.Cal. Sept.3, 2008). At this first stage, the standard for certification is fairly easy to satisfy. Courts have required only “substantial allegations, supported by declarations or discovery, that the putative class members were together the victims of a single decision, policy, or plan.” Russell, 2008 WL 4104212, at *2.

At the second stage, after discovery has been taken, the court may decertify the class if it concludes that the class members are not similarly situated. Id. at *3. The court can consider a number of factors in deciding whether an action should ultimately proceed collectively, including: (1) the disparate factual and employment settings of the individual plaintiffs; (2) the various defenses available to the defendant and whether they appear to be individual to each plaintiff; (3) fairness and procedural considerations; and (4) whether plaintiffs made the required filings before filing suit. Thiessen, 267 F.3d at 1103. However, a requirement that the class members be identical would be inconsistent with the intent of FLSA's provision that a case can proceed as a collective action. Pendlebury v. Starbucks Coffee Co., 518 F.Supp.2d 1345, 1361 (S.D.Fla.2007).

Slip op., at 2.  The motion filed by the defendant in this case concerned the more rigorous showing required in the second stage.  (Side Note:  The Ninth Circuit has not yet explicitly held that it concurs with the two-stage approach, but District Courts have been employing that approach in the Ninth Circuit for many years without opposition.)

In the course of briefing, the plaintiffs apparently advanced the novel argument that the supervision requirement included in the executive exemption test created a ratio requirement where an employer had to show that there were at least two non-exempt employees for every executive:

Plaintiffs' argument overstates the requirement of the pertinent FSLA regulation. Plaintiffs are correct that in order to qualify for the executive exemption, an employee must “customarily and regularly direct[ ] the work of two or more other employees.” 29 C .F.R. § 541.100(a)(3). The language of the regulation, however, does not require a strict mathematical ratio between an “employee employed in a bona fide executive capacity” and “other employees.” All the regulation requires is that an employee customarily or regularly direct the work of two or more other employees. The other employees whose work the executive directs may or may not themselves be executives. Thus, the FLSA does not create a “ratio requirement.” Whether the present conditional class should be decertified, then, depends on the individualized assessment of whether the class members are “similarly situated.” The court now turns to that inquiry.

Slip op., at 3.  No dice.  Turning to the merits of the motion by defendant, the Court, as did the District Court in Weigele v. Fedex (discussed here), placed little weight on the uniform classification of employees by a central office:  "[T]he recent decision of In re Wells Fargo Homes Mortg. Overtime Litig., 571 F.3d 953 (9th Cir.2009), which involved certification under Federal Rule of Civil Procedure 23(b)(3), cautions against placing too much weight on an internal policy of classifying all members of a particular class of employees as exempt."  Slip op., at 5.  More importantly, however, the Court discussed the plaintiffs' inability to rebut substantial evidence showing great disparity in the job duties of different Supervisors.

Are there really that many large businesses out there that let their employees do whatever they want?

Certified class of fedex managers is subsequently decertified

United States District Court Judge Janis Sammartino (Southern District of California) granted FedEx's motion to decertify a class of California-based Dock Service Managers.  Weigele v. Fedex Ground Package System, Inc. (S.D. Cal. Apr. 5, 2010) 2010 WL 1337031.  Taking In re Wells Fargo Home Mortgage Overtime Pay Litig. (Wells Fargo II), 571 F.3d 953 (9th Cir. 2009) really seriously, the Court concluded that predominance was lacking.  Perhaps the Court took Wells Fargo II a bit too seriously: "The Court's second reason [for] its finding that common issues do not predominate is that with the substantially decreased importance of Defendant's common classification scheme, the common issues are a relatively minor portion of this litigation."  I don't think that Wells Fargo II said that a common classification scheme should be viewed with substantially decreased importance.  It said that a common classification scheme could not treated as the sole factor used in a certification analysis.  In any event, the Court's changed view was very clear:

[T]he Court is unclear how a jury will be able to sort out the issues placed before it. It appears that they will need to determine whether each testifying witness was or was not exempt and determine to what extent that witness was not provided with mandated overtime, meal, and rest breaks. They will then need to extrapolate from all of the testifying witnesses to the entire class. But it is unclear which the tools they will have to perform that extrapolation. At worst it appears that they would be left to guess. This is too amorphous to expect a reasonable and rational result from any jury.

Order, at 11.

As I said the other day, another misclassification theory, another class that doesn't make the cut.

Salenga v. Mitsubishi Motors Credit of America, Inc. addresses issues of accrual of UCL claims

If The UCL Practitioner wasn't on a blogging hiatus, it would be all over this one like attorneys on a mass tort.  In Salenga v. Mitsubishi Motors Credit of America, Inc. (April 9, 2010), the Court of Appeal (Fourth Appellate District, Division One) reversed an Order dismissing a First Amended Cross-Complaint, after defendants demurred on the ground that cross-complainant did not file within the four-year limitations period applicable to the Unfair Competition Law ("UCL").  In the underlying complaint, Cavalry (as an assignee of MMCA) sued a consumer, seeking a deficiency judgment, after the consumer had defaulted on her MMCA auto loan in 2003 and the vehicle was repossessed. She was given a Notice of Intent to Dispose of Motor Vehicle ("NOI" or Notice) dated October 14, 2003, and the vehicle was sold at auction.  About four years later, Cavalry filed its complaint seeking payment of a deficiency balance of $10,288.56, plus interest from May 2004.

After being sued, the consumer brought a cross-complaint, contending that the NOI was defective and could not support a deficiency judgment.  See, Juarez v. Arcadia Financial, Ltd., 152 Cal. App. 4th 889 (2007).  That's when thing get interesting.  Okay, not really, but that's when things happen that are worth reporting.

On appeal, the Court considered whether any form of tolling or accrual-based delay was available to the consumer:

It is well accepted that a limitations period commences when the cause of action "accrues." (Code Civ. Proc., § 312; Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 806.) " 'Generally speaking, a cause of action accrues at "the time when the cause of action is complete with all of its elements." ' " (E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1317-1318.) "The cause of action ordinarily accrues when, under the substantive law, the wrongful act is done and the obligation or liability arises, i.e., when an action may be brought." (3 Witkin, Cal. Procedure (5th ed. 2008) Actions, § 493, p. 633.)

Here, the applicable substantive law includes both the Act and the UCL. It is well-established that "[a]n action for unfair competition under Business and Professions Code section 17200 'shall be commenced within four years after the cause of action accrued.' (Bus. & Prof. Code, § 17208.) The 'discovery rule,' which delays accrual of certain causes of action until the plaintiff has actual or constructive knowledge of facts giving rise to the claim, does not apply to unfair competition actions. Thus, 'the statute begins to run . . . irrespective of whether plaintiff knew of its accrual, unless plaintiff can successfully invoke the equitable tolling doctrine.' " (Snapp & Associates Ins. Services, Inc. v. Malcolm Bruce Burlingame Robertson (2002) 96 Cal.App.4th 884, 891.)

Slip op., at 9.  The consumer, on appeal, expressly disavowed any reliance on a continuing violation theory of delayed accrual.  The Court also concluded that the consumer was not asserting the concept of equitable tolling or a delayed discovery rule.  Instead, the consumer argued that she was not actually adversely affected by the defective NOI until cross-defendants made efforts to pursue a deficiency judgment on it and until she made a payment at that time.  The Court focused its examination on accrual rules:

The authors of 3 Witkin, California Procedure, supra, Actions, section 496, page 635, summarize the various categories of exceptions that have been made over time to the general rule of "accrual" of a cause of action as of the time of the wrongful act. These include, as potentially relevant here, "(2) Accrual when damage results. [Citation.] [¶] (3) Accrual postponed by condition precedent." The authors further explain that these "rules of delayed accrual are to be distinguished from rules that, despite accrual of the cause of action, toll or suspend the running of the statute." (Ibid.)

Slip op., at 10.

The Court then attempted to reconcile the "principles governing the accrual of causes of action to the pleadings before the court, with regard to the protective policies of the [Rees-Levering Motor Vehicle Sales and Finance] Act, including whether there is any reasonable possibility that Appellant can truthfully amend to allege facts establishing the timeliness of this cross-action."  Slip op, at 12.  The Court addressed the purposes of the Act:

Deficiency judgments are subject to certain restrictions under the Act. In Bank of America v. Lallana (1998) 19 Cal.4th 203 (Bank of America), the Supreme Court held that a secured creditor who sells a defaulting debtor's repossessed car may obtain a deficiency judgment, but only by complying with all the provisions of the Act, as well as the relevant provisions of the Uniform Commercial Code (Division 9). (Id. at p. 208; § 2983.8.) The court took this approach: " ' "[T]he rule and requirement are simple. If the secured creditor wishes a deficiency judgment he must obey the law. If he does not obey the law, he may not have his deficiency judgment." ' " (Bank of America, supra, 19 Cal.4th 203, 215.)

Slip op., at 13.

The Court then worked to sort out confusion in the parties' briefs regarding elements of causes of action and the concept of standing to assert a justiciable controversy:

There is some confusion in the briefs about the required elements of a cause of action that may be asserted by a borrower, for breach of a substantive right provided to the borrower by the Act (e.g., no deficiency judgment absent a compliant NOI; §§ 2983.2, subd. (a), 2983.8). The parties have discussed, for limitations purposes, the date of incurring actual injury, as that same concept has been developed in the law for determining whether a putative class representative has standing, under the restrictions of the UCL, to assert a particular claim. Normally, "standing" questions will arise in the related context of justiciability determinations (made upon intertwined criteria of ripeness and standing). " 'One who invokes the judicial process does not have "standing" if he, or those whom he properly represents, does not have a real interest in the ultimate adjudication because the actor has neither suffered nor is about to suffer any injury of sufficient magnitude reasonably to assure that all of the relevant facts and issues will be adequately presented.' " (3 Witkin, Cal. Procedure, supra, Actions, § 21, p. 84.)

In re Tobacco II Cases (2009) 46 Cal.4th 298, 318, includes extensive discussion of the modern concept of standing in UCL class actions. Under Proposition 64, the UCL's substantive purpose of protecting consumers from unfair businesses practices was not altered, and the focus of the initiative "was to address a specific abuse of the UCL's generous standing provision by eliminating that provision in favor of a more stringent standing requirement." (In re Tobacco II Cases, supra, at p. 324; Californians for Disability Rights v. Mervyn's (2006) 39 Cal.4th 223, 232.) The court held that a class representative must be capable of demonstrating traditional standing in terms of alleging actual injury and causation, including actual reliance on acts of unlawful or fraudulent competition. However, a broader rule was used for the required standing showing for a potential class member. (In re Tobacco Cases, supra, at pp. 319-322.)

Slip op., at 16-17.  The Court then applied all of its prior discussion of the contours of accrual and standing to the facts before it:

In our case, there should be no difficulty in analyzing UCL standing rules as of the date of all of the events that allegedly occurred, including the 2007-2008 efforts to obtain a deficiency judgment. We disagree with cross-defendants that the only relevant time period for assessing standing and/or accrual of a statutory cause of action is 2003, when the defective NOI was sent. Rather, Appellant should be allowed to make a greater effort to plead that she did not incur actual injury until the 2007-2008 attempts to enforce the allegedly inadequate NOI were made, through the demand letter and judicial procedures to obtain a deficiency judgment. That would not amount to splitting her cause of action, where the NOI procedure serves two separate statutory purposes: permitting reinstatement, and/or allowing a deficiency judgment, if proper notice was given. (See Miller v. Lakeside Village Condo. Assn. (1991) 1 Cal.App.4th 1611, 1622-1623.) This is not a case of a plaintiff resting upon her rights. (Davies, supra, 14 Cal.3d at p. 515.)

Moreover, we think that the Supreme Court's analysis of standing of a class representative, to assert violations of the Act, in Fireside Bank, supra, 40 Cal.4th 1069, 1089-1090, goes beyond technical class certification questions. That plaintiff, Gonzalez, was claiming she was deprived of a fair opportunity to redeem the financed vehicle, "followed by an unlawful demand for payment. The record demonstrates Fireside Bank repossessed Gonzalez's vehicle and pursued a deficiency judgment against her. She thus has standing to seek a declaration that Fireside Bank is unlawfully asserting a debt against her, as well as an injunction against all further collection efforts. The record further shows Gonzalez (or someone on her behalf) made a postrepossession payment against the alleged deficiency; upon proof she made that payment, Gonzalez also has standing to seek restitution." (Id. at p. 1090, italics added.) From that analysis, we think the courts may be receptive to a properly pled allegation that postponed accrual of a statutory cause of action may exist, under circumstances in which a deficiency judgment is sought based upon a defective NOI.

Slip op., at 18-19.  The unintended consequences of using the initiative process to tinker with laws are fascinating to behold.  While the Court didn't declare that the consumer could successfully amend, it certainly gave a pretty clear roadmap about how go about crafting that amendment.  The opinion all but states that the consumer wasn't injured, for UCL purposes, by the defective NOI until an attempt to secure a deficiency judgment based on it was attempted many years later.  This was despite the consumer's failure to exercise the reinstatement right triggered by the NOI.

Class allegations stricken in suit alleging defective control panels in certain Whirlpool and Kenmore machines

United States District Court Judge Jeremy Fogel (Northern District of California) granted, with leave to amend, a motion to strike class allegations in a suit alleging a defect in Whirlpool-manufactured top-loading Kenmore Elite Oasis automatic washing machines (“the Machines”) that Sears marketed, advertised, distributed, warranted, and offered to repair.  Tietsworth v. Sears Roebuck and Co., et al., 2010 WL 1268093 (N.D. Cal. Mar. 31, 2010).  The alleged defect in an electronic control board causes machines to stop mid-cycle.

The Court concluded that the class was not ascertainable as defined:

[T]he putative classes alleged in paragraph 98 cannot be ascertained because they include members who have not experienced any problems with their Machines' Electronic Control Boards-or for that matter with any other part of the Machine. “Such members have no injury and no standing to sue.” Hovsepian v. Apple, Inc., No. 08-5788 JF (PVT), 2009 WL 5069144, at *6 (N.D.Cal.2009); see also Bishop, 1996 WL 33150020, at *5 (“courts have refused to certify class actions based on similar ‘tendency to fail’ theories because the purported class includes members who have suffered no injury and therefore lack standing to sue.”).

Order, at 19.

The opinion also includes an extensive discussion of pleading standards applicable to many different claims for relief predicated on failure to disclose or concealment allegations.

Flat panel price fixing claims by indirect purchasers certified

United States District Court Judge Susan Illston (Northern District of California) certified a class of indirect purchasers harmed by an alleged global price-fixing conspiracy in the market for Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) panels.  In re TFT-LCD (Flat Panel) Antitrust Litigation, 2010 WL 1286478 (N.D. Cal. Mar 28, 2010).

The opinion explains what a TFT-LCD panel is:

TFT-LCD panels are made by sandwiching liquid crystal compound between two pieces of glass called substrates. The resulting screen contains hundreds of thousands of electrically charged dots, called pixels, which form an image. The panel is then combined with a backlight unit, a driver, and other equipment to create a “module” allowing the panel to operate and be integrated into a television, computer monitor, or other product.

Order, at 1.

The Plaintiffs alleged that during the class period, defendants formed a cartel to interfere with the normal cycle of supply and demand for TFT-LCD panels. According to plaintiffs, defendants agreed on prices, agreed to limit production, and agreed to manipulate the supply of TFT-LCD panels and products so that prices remained artificially high.  But the plaintiffs had quite a bit more to go on than mere allegation.  Thus far, in connection with DOJ investigations that are ongoing, seven corporate defendants in the action have also pled guilty to Sherman Act violations relating to suppressing and eliminating competition by fixing the prices of TFT-LCD panels. Those defendants are Sharp Corporation (CR 08-802 SI); LG Display Co. Ltd. and LG Display America, Inc. (CR 08-803 SI), Chunghwa Picture Tubes, Ltd. (CR 08-804 SI); Hitachi Displays Ltd. (CR 09-247 SI); Epson Imaging Devices Corporation (CR 09-854 SI); and Chi Mei Optoelectronics Corporation (CR 09-1166 SI).

The defendants also sought to strike modifications to the class definition.  The court denied the request:

Defendants have moved to strike the proposed modifications to the class definitions on the ground that plaintiffs should be required to seek leave of Court and/or the consent of defendants in order to modify the class definition. Defendants rely on this Court's decision in Jordan v. Paul Financial LLC, No. C 09-4496 SI, 2009 WL 192888 (N.D.Cal. Jan.27, 2009), in which the Court denied the plaintiff's request, made at the class certification hearing, to withdraw the pending class certification motion in order to substantively redefine the class and conduct additional discovery. However, Jordan is distinguishable in that there the proposed redefinition of the class was significant, and would have required additional discovery. Here, the proposed modifications are minor, require no additional discovery, and cause no prejudice to defendants. The Court DENIES defendants' motion to strike the modified class definitions.

Order, at 5.

The opinion has some interesting comments about damage proof models at certification and conspiracy allegations.