a California-centric collection of comments and resources about complex litigation and class action practice
The California Supreme Court held its (usually) weekly conference on November 18, 2009. The only notable event was:
In January 2008, class plaintiffs who purchased the hair regrowth formula Avacor prevailed at trial against Global Vision Products, Inc. The plaintiff alleged that Avacor was not an all natural or herbal formulation, but contained the drug Minoxidil (Rogaine). The initial verdict for the plaintiff class was approximately $37 million. However, Global Vision Products filed for bankruptcy protection.
Today, after a second phase of trial, a jury returned a verdict against individual defendants Robert DeBenedictis and Henry Edelson on an alter ego theory.
I will provide some additional information about this verdict after reviewing materials from the trial. Until then, Courtroom View Network, which recorded video of the entire trial, has provided access to a free clip from the trial.
After a short quiet spell, class actions return with a splash. In Barboza v. West Coast Digital GSM, Inc., the Court of Appeal (Second Appellate District, Division Four) had the opportunity to discuss the extent of class counsel's obligations to a certified class. The conundrum arose when class counsel learned that the defendant had ceased operations, sold its assets to a third party, and intended to file for bankruptcy:
What are the obligations of class counsel when he learns that the defendant in the class action he is prosecuting has ceased operations, sold its assets to a third party, and intends to file for bankruptcy? In the case before us, counsel obtained a stipulated default and a default judgment that included more than $4 million in aggregate damages for the class, plus more than $1 million in prejudgment interest. So far, so good. But counsel then asserted that his job would be completed once his motion for attorney fees was heard, i.e., that he had no obligation to enforce the judgment on behalf of the class. The trial court disagreed. It ruled that “by assuming the responsibility of pursuing claims on behalf of the class, class counsel assumed the obligation to pursue it until the end (i.e., enforcement of the judgment) and not just until judgment.” Based upon the principles guiding class actions, we agree that class counsel's obligations to the class do not end with the entry of judgment, and hold that class counsel's obligations continue until all class issues are resolved, which may include enforcement of the judgment.
Slip op., at 2. In its analysis, the Court of Appeal examined the sources of the obligations owed by class counsel (and the named plaintiff) to the certified class:
First, the representative plaintiffs must establish that they will adequately represent the class before a class may be certified. (Sav-On, supra, 34 Cal.4th at p. 326.) Part of that showing involves establishing that the counsel they have chosen can and will adequately represent the interests of the class as a whole. (Cal Pak Delivery, Inc. v. United Parcel Service, Inc. (1997) 52 Cal.App.4th 1, 12; McGhee v. Bank of America (1976) 60 Cal.App.3d 442, 450.) Second, both the representative plaintiffs and the counsel they have chosen owe absent class members a fiduciary duty to protect the absentees‟ interests throughout the litigation. (Janik v. Rudy, Exelrod & Zieff, supra, 119 Cal.App.4th at p. 938.) Finally, the trial court, “as the guardian of the rights of the absentees, is vested broad administrative, as well as adjudicative, power.” (Greenfield v. Villager Industries, Inc., supra, 483 F.2d at p. 832.) Thus, unlike situations in which the litigant has retained an attorney to conduct litigation, where the litigant and the attorney agree upon the scope of the engagement, and their rights and duties are governed by their agreement, in class actions, where there is no agreement with absentee class members to define the scope of the engagement, class counsel must represent all of the absent class members' interests throughout the litigation to the extent there are class issues, and it is the duty of the trial court to ensure at every stage of the proceeding that counsel is adequately representing those interests.
Slip op., at 7-8. Ultimately, the Court of Appeal described a reasonable way out of the quandry faced by class counsel that must collect a judgment from an insolvent debtor:
It may be that, given the specialized knowledge needed to enforce judgments, class counsel is not competent to provide enforcement services without assistance. But nothing prevents class counsel from associating in counsel with that expertise, and the cost of that association can be paid by the class from any recovery achieved. And if, after diligent inquiry, class counsel determines there are no recoverable assets, counsel may present such findings to the trial court, and the trial court, as guardian of the rights of the absent class members, may determine whether counsel should be relieved of any further obligations to the class.
Slip op., at 8-9.
This opinion is a necessary reminder of the extent of the duty assumed by class counsel when that fateful line is crossed and the proposed class is certified.
To Westlaw and Lexis:
You have a big head start, but the world's largest search monster just left the land of nightmares and placed itself squarely in your rearview mirrors. Google has surfaced search functionality that will return full-text opinions from state and federal courts. Google Scholar, still in "beta," allows searches by case name, topic, or key words. Advanced filters allow for creative search construction. The November 17, 2009 announcement on Google's blog is here.
I did some test searches, and the results are good, but not quite as current as Westlaw or Lexis would provide. Each case, when viewed, includes a "how cited" tab that, rather than explaining the correct citation syntax, provides a list of other cases citing to that case and an interesting list of case quotes showing how the case is cited in context. Testing with Tobacco II, I was able to find that Cohen v. DirecTV cites Tobacco II, but Cohen isn't yet returned as a result when searching for it by name. Either Google is waiting for finality before providing access to opinions, or its data source is slow to update. As another plus, the cases include pagination information.
Setting all else aside, it's free and it's simple. At this point, Westlaw and Lexis should stock up on clean underwear.
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.
The Court of Appeal (Second Appellate District, Division Eight) generated a good bit of commentary with their construction of In re Tobacco II Cases, 46 Cal.4th 298 (2009). Cohen v. DIRECTV, Inc. (October 28, 2009) was discussed in detail on this blog, and The UCL Practitioner had an extensive post as well. In Princess Cruise Lines, Ltd. v. Superior Court (November 10, 2009), the Second Appellate District, Division Eight tackles reliance and Tobacco II for the second time. But, in an interesting twist, Cohen receives no mention in this Opinion.
Princess Cruise Lines is, ostensibly, a summary judgment opinion. Although it is not discussed in any detail, it appears that the summary judgment motion was brought pre-certification. The Court described the causes of action asserted and the basics of the trial court's ruling:
The plaintiffs, real parties in interest in the proceedings before us, H. Roger Wang and Vivine Wang (from time to time collectively referred to as the Wangs), sued petitioner Princess Cruise Lines, Ltd., over charges added to the price of shore excursions taken during a cruise conducted by petitioner. The Wangs asserted five causes of action. The first three were based on Business and Professions Code sections 17200 (first cause of action) and 17500 (second) and on Civil Code section 1750 et seq. (third). Respectively, these statutes are California’s Unfair Competition Law (UCL), False Advertising Law (FAL) and Consumers Legal Remedies Act (CLRA). The fourth and fifth causes of action were based respectively on common law fraud and negligent misrepresentation.
Petitioner moved for summary judgment and summary adjudication. The trial court granted summary adjudication on the fourth and fifth causes of action because the Wangs could not show they relied on petitioner’s alleged misrepresentations. The trial court, however, denied the motion for summary judgment because it concluded that on the UCL, FAL and CLRA causes of action the Wangs did not have to show that they relied on petitioner’s alleged misrepresentations.
Slip op., at 2. After summarizing the discovery in the action and the trial court's rulings, the Court of Appeal discussed the issue of reliance in UCL and CLRA actions:
The court in Tobacco II first concluded that only the class representatives must meet the standing requirement under California’s UCL. The court then proceeded to the next topic, which was “the causation requirement for purposes of establishing standing under the UCL, and in particular what is the meaning of the phrase ‘as a result of’ in [Business and Professions Code] section 17204? We conclude that a class representative proceeding on a claim of misrepresentation as the basis of his or her UCL action must demonstrate actual reliance on the allegedly deceptive or misleading statements, in accordance with well-settled principles regarding the element of reliance in ordinary fraud actions.” (Tobacco II, supra, 46 Cal.4th 298, 306.)
There are two aspects to this holding. First, it is very clear that reliance is required in a UCL action. Second, it is also clear that this is true of UCL actions involving some form of fraud, but not all UCL actions. As the court put it: “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 . . . .’ ([Bus. & Prof. Code,] § 17200.) 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 298, 325, fn. 17.)
Slip op., at 6-7. Unlike Cohen, this Opinion presents as an effort to identify specific circumstances where it is valid to consider reliance in a UCL claim, using Tobacco II. In fact, its almost as if the Court was sensitive to potential fallout from describing Tobacco II as irrelevant.
In any event, the Court then, as one would expect in a summary judgment analysis, focused on the evidence presented by the plaintiffs:
The problem, from a pragmatic perspective, with the Wangs’ contentions about reliance is that it made no difference to them how much the excursions cost. As Vivine Wang put it in her deposition, she told her travel agent that she wanted to go on the same excursions that her traveling group had booked and that “I want to go on the shore excursion . . . whatever it cost [sic]. It’s fine.” At the threshold, therefore, it must be said that there was no reliance, i.e., the Wangs would have gone on the excursions whatever the price was and without reference to anything petitioner said or did in connection with the excursions. It therefore follows that it is immaterial how the Wangs heard about the excursions and what, if anything, petitioner said or wrote about the excursions.
It must also be said that we are not inclined to ignore the Wangs’ repeated admissions that they had no contact with petitioner and received nothing from the petitioner.
Slip op., at 8. The Court does its best to circumvent the reliance questions it raised in Cohen by citing Tobacco II for the contention that there is a limited area under the UCL where reliance can be an element of the claim, followed by a finding that the record contains admissions of absolutely no reliance.
Next, the Court issued an interesting holding that the Tobacco II discussion about reliance in certain limited situations in UCL cases applies to CLRA actions as well:
Civil Code section 1780, subdivision (a) provides: “Any consumer who suffers any damage as a result of the use or employment by any person of a method, act, or practice declared to be unlawful by Section 1770 may bring an action against that person to recover or obtain any of the following: [listing generic types of recoveries].” (Italics added.)
It appears that the analysis of the phrase “as a result” found in Tobacco II, supra, 46 Cal.4th 298, 324-326, applies to this phrase in Civil Code section 1780, subdivision (a), which means that reliance is required for CLRA actions, with the limitations noted in Tobacco II.
Slip op., at 11-12.
So, if Cohen is enough of a lightning rod to elicit review, this one may escape that same fate.
Today's Daily Journal includes my article, entitled "When Courts Disagree," in the Perspective column. It discusses with some interesting data my perception of a rift between the California Supreme Court and the lower courts of California. The article is posted below with permission of Daily Journal Corp. (2009).
If you have difficulty viewing the flash object, the direct link is here. I thank the editorial staff of the Daily Journal for quickly providing the posting permission.
Trenton H. Norris, a defense lawyer and partner at Arnold & Porter LLP, responded to my column with a letter to the Editor. In my opinion, Mr. Norris misleadingly chose to cast my column as an attack on the hard-working judges throughout California. I would take no issue with Mr. Norris stating, for example, that my construction of Cohen and Tobacco II is incorrect. But Mr. Norris, whose practice is devoted to advising and defending companies in regards to California's unique toxics and labeling law, Proposition 65, and California's expansive consumer protection laws, did not do that. Instead, my column was used as an opportunity to construct inaccurate statements regarding my views about the many judges of this state. Nothing in my column stated a lack of appreciation for the hard work that Courts do, and my blog has frequently noted those opinions where Courts were called upon to determine exceedingly difficult issues, doing so above the call of duty.
I want to be clear about the purpose of my column: I take issue with Courts that view Supreme Court decisions as irrelevant, a disturbing conclusion for any lower Court to reach. My column also notes that, based upon numbers of cases and statistics, there is a low probability that a lower Court will see any particular case reviewed. This fact, alone, eliminates recourse in most cases where a party views an appellate court's decision as inconsistent with controlling Supreme Court authority. It is also my belief, expressed through my column, that views about the utility of California's consumer protection laws have become increasingly polarized. Thus, Mr. Norris' disagreement is unsurprising. What is surprising is the way in which it was expressed.
As an advocate, I'm more than entitled to express the opinion that various Court decisions are not consistent with controlling law. In my view, Cohen is one such opinion that cannot be faithfully reconciled with Tobacco II. But that is just my opinion. I am confident that the vast majority of judges understand that the nature of their work necessarily results in disagreement over outcomes in most instances. I am also confident that the vast majority of judges appreciate and support my right to disagree with their rulings.
While it deserves a more substantial discussion, Evans v. Lasco Bathware, Inc. (November 6, 2009) requires at least a brief mention. In Evans, the Court of Appeal (Fourth Appellate District, Division One) reviewed an Order denying class certification. The Court of Appeal affirmed. The interesting elements of the opinion include (1) a discussion of when, in the Evans Court's view, damages become an issue of sufficient complexity to justify a denial of certification and (2) a discussion of "liability only" certification. In this case, the complications arising when a defective shower pan caused varying degrees of damages in different homes convinced the Court to reject the "liability only" certification option in this case. Nevertheless, that aspect of class actions is so infrequently discussed in California that it is of note that it was even considered here.
The California Supreme Court held its (usually) weekly conference on October 28, 2009. Notable results include:
The least loved may be the greedy insurance companies. In Zhang v. Superior Court (California Capital Insurance Company) (October 29, 2009), the Court of Appeal (Fourth Appellate District, Division Two) was called upon to determine whether the alleged failure of an insurance company to adequately pay a loss claim was actionable in light of Insurance Code section 790.03 et seq., Moradi-Shalal v. Fireman’s Fund Ins. Companies, 46 Cal.3d 287 (1988) and Textron Financial Corp. v. National Union Fire Ins. Co., 118 Cal.App.4th 1061 (2004):
This case presents the question of whether fraudulent conduct by an insurer, which is connected with conduct that would violate Insurance Code section 790.03 et seq.—sometimes referred to as the “Unfair Insurance Practices Act”—can also give rise to a private civil cause of action under the Unfair Competition Law (UCL), Business and Professions Code section 17200 et seq. The trial court ruled that it does not and, therefore, sustained defendant and real party in interest California Capital Insurance Company's demurrer to a cause of action under the UCL. We disagree and will direct the trial court to reinstate the cause of action.
Slip op., at 2. After a thorough analysis of Moradi-Shalal in particular, the Court concluded that, because the plaintiff had also alleged false advertising, a prohibition on a private claim arising under the Unfair Insurance Practices Act was not at issue:
We take from Manufacturers Life that there is no reason to treat insurers differently from other businesses when it comes to actions under the UCL except as required by Moradi-Shalal. We understand that if a plaintiff relies on conduct that violates the Unfair Insurance Practices Act but is not otherwise prohibited, Moradi-Shalal requires that a civil action under the UCL be considered barred. Thus, if the plaintiff in this case had attempted to sue California Casualty under the UCL because the latter had “[n]ot attempt[ed] in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear” (Ins. Code, § 790.03, subd. (h)(5)) or “failing, after payment of a claim, to inform insureds or beneficiaries, upon request by them, of the coverage under which payment [was] made” (Ins. Code, § 790.03, subd. (h)(9)), a somewhat closer question would be presented. (But see fn. 1, ante.) But that is not this case.
Slip op., at 8-9.
The UCL Practitioner, with the focus on all things UCL, has much more on this decision and cross-referenced material about Textron. By the way, I asked The UCL Practitioner if her blog was the UCL Practitioner or The UCL Practitioner (the URL giving me pause as to which was right), and the definitive blog name is The UCL Practitioner. I obviously burn a lot of calories wondering about fringe issues.
The Complex Litigator reports on developments in related areas of class action and complex litigation. It is a resource for legal professionals to use as a tool for examining different viewpoints related to changing legal precedent. H. Scott Leviant is the editor-in-chief and primary author of The Complex Litigator.
