Continuing accrual applies to UCL claims

When does a claim under the UCL accrue?  When the first wrong occurs?  No so, says the California Supreme Court!  Recurring wrongs give rise to continuing accrual.  In Aryeh v. Canon Business Solutions, Inc. (January 24, 2013), the Supreme Court examined continuing accrual, concluding that the theory applies to actions brought under the UCL:

The common law theory of continuous accrual posits that a cause of action challenging a recurring wrong may accrue not once but each time a new wrong is committed. We consider whether the theory can apply to actions under the unfair competition law (Bus. & Prof. Code, § 17200 et seq.; hereafter UCL) and, if so, whether it applies here to save plaintiff Jamshid Aryeh‟s suit from a limitations bar. We conclude: (1) the text and legislative history of the UCL leave UCL claims as subject to the common law rules of accrual as any other cause of action, and (2) continuous accrual principles prevent Aryeh‟s complaint from being dismissed at the demurrer stage on statute of limitations grounds. Accordingly, we reverse the Court of Appeal‟s judgment.

Slip op., at 1.  The plaintiff leased a copier under terms that required montly payments with a copoy cap.  After noting discrepancies between copies made and copies billed, the plaintiff concluded that during service visits, Canon employees were running test copies (at least 5,028 copies over the course of 17 service visits). These copies resulted in the plaintiff exceeding his monthly allowances and owing excess copy charges and late fees to Canon.  The issue was whether the UCL claim accrued at the first instance of plaintiff's discovery of the overcharge, or whether each overcharge was an independent wrong, giving rise to a new claim.  The trial court and a divided court of appeal agreed that the UCL claim accrues with the first wrong.

But it's not how you start, it's how you finish.  Congratulations to my colleagues on this result.  Jennifer L. Connor wrote the appellate briefs while at her prior firm, and J. Mark Moore and Denise Diaz authored portions of an amicus brief on behalf of CAOC, in support of plaintiff.  Jennifer's sister, Sarah, took no part in the briefing due to her demanding project defending humanity from evil, self-aware robots bent on the destruction.

Pendergrass Rule Ends Run a Little Shy of 80 Years

Since Bank of America etc. Assn. v. Pendergrass, 4 Cal. 2d 258, 263 (1935) (Pendergrass), California Courts have, to various degrees, excluded evidence of fraud when the fraud is directly contrary to the terms of a written agreement.  In Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Association (January 14, 2013), the California Supreme Court revisited the Pendergrass rule, concluding that it was time to overrule Pendergrass.

The plaintiffs in Riverisland restructured debt, secured by real property. They defaulted and the Association recorded a notice of default. After the plaintiffs repaid their loan, the Association dismissed the foreclosure proceedings. The plaintiffs then sued for fraud, contending that they were promised two years of forbearance by the Association’s Vice President in exchange for additional collateral. The plaintiffs did not read the subsequently prepared agreement and simply signed it. The trial court granted summary judgment, excluding evidence of fraud at odds with the writing pursuant to the Pendergrass rule. On appeal, the Court of Appeal reversed, narrowly construing Pendergrass. The Supreme Court granted review.

The Supreme Court observed that the Pendergrass rule has been criticized but followed by California courts, although Courts attempting to avoid its result have narrowly construed it.  The Supreme Court noted that the Court of Appeal in this case adopted such a narrow construction, deciding that evidence of an alleged oral misrepresentation of the written terms themselves is not barred by the Pendergrass rule.

Plaintiffs asked the Supreme Court to reconsider Pendergrass.  The Court agreed that there were good reasons to do so:

There are good reasons for doing so. The Pendergrass limitation finds no support in the language of the statute codifying the parol evidence rule and the exception for evidence of fraud. It is difficult to apply. It conflicts with the doctrine of the Restatements, most treatises, and the majority of our sister-state jurisdictions. Furthermore, while intended to prevent fraud, the rule established in Pendergrass may actually provide a shield for fraudulent conduct. Finally, Pendergrass departed from established California law at the time it was decided, and neither acknowledged nor justified the abrogation. We now conclude that Pendergrass was ill-considered, and should be overruled.

Slip op., at 2.

While this case arises in the context of an individual suit for fraud, it provides substantial relief for consumer class action cases alleging claims of fraud stemming from misrepresentations about the subject of a later written agreement.

In Ayyad v. Sprint Spectrum, L.P., Sprint's call cannot be completed as dialed

I did warn you, but in the post below, so you might not be aware that you were warned.  In Ayyad v. Sprint Spectrum, L.P. (October 29, 2012), the Court of Appeal (First Appellate District, Division Five) had yet more work to do in the long-running saga of the Cellphone Termination Fee Cases.  In Cellphone Termination Fee Cases, 193 Cal. App. 4th 298 (2011) the Court affirmed a December 2008 judgment in favor of the plaintiffs in this class action against Sprint Spectrum, L.P. (Sprint).  The Court also affirmed the trial court's order granting Plaintiffs a partial new trial on the issue of Sprint's actual damages and the calculation of a setoff to which Sprint might be entitled.  The case was then remanded for further proceedings limited to those issues.  But, when the matter returned to the trial court, Sprint moved to compel arbitration of the named plaintiffs' claims, the same claims addressed in the Court's affirmance of the 2008 judgment.  The trial court declined to consider the motion, finding that jurisdiction on remand was limited to the issues set forth in the Court's opinion.

While this sounds like it could be a case about arbitration law, it isn't.  It is entirely a decision about trial court jurisdiction after an appeal and remand with directions:

As the language of the cited cases indicates, the rule requiring a trial court to follow the terms of the remittitur is jurisdictional in nature. (People v. Dutra (2006) 145 Cal.App.4th 1359, 1367 (Dutra).) The issues the trial court may address in the remand proceedings are therefore limited to those specified in the reviewing court‘s directions, and if the reviewing court does not direct the trial court to take a particular action or make a particular determination, the trial court is not authorized to do so. (Bach, supra, 215 Cal.App.3d at pp. 302, 303, 304; accord, Hanna v. City of Los Angeles (1989) 212 Cal.App.3d 363, 376 (Hanna) [where on prior appeal reviewing court did not direct trial court on remand to determine whether statutory violations had occurred, any such determination would be in excess of jurisdiction on remand].)

Slip op., at 8.  The Court then explained that a new trial on damages only did not open the door for the trial court to consider other issues raised by Sprint.

Court of Appeal declines to extend Lebrilla "crash parts" holding to all non-OEM parts installed under insurance policy

Lebrilla v. Farmers Group, Inc., 119 Cal. App. 4th 1070 (2004) reversed a trial court's denial of certification in a suit against an automobile insurer.  The suit alleged that sheet metal parts known as "crash parts" were used to effectuate accident repairs, but the "crash parts" were not manufactured by original equipment manufacturers.  The use of "crash parts" allegedly resulted in substandard repairs that did not restore damaged vehicles to pre-loss condition.  In Ortega v. Topa Insurance Company (May 24, 2012), the Court of Appeal (Second Appellate District, Division Three) examined a similar, but not identical situation, in which non-OEM parts were used to complete repairs to vehicles.  The trial court concluded that common issues could not predominate when evaluation of a breach of contract claim would require a comparison of each installed non-OEM part to the OEM equivalent to determine whether the repair part was inferior to the OEM part.

The Court of Appeal agreed:

We do not read Lebrilla v. Farmers Group, Inc., supra, 119 Cal.App.4th 1070, to suggest, for example, that all non-OEM replacement parts are uniformly inferior. That case addressed crash parts. (Id. at p. 1073 & fn. 1.) In this case, to recover damages each member of the putative Steered Claimant Class (Class B) must identify the non-OEM part, which includes radiators and heat and cooling systems, among others, and prove the particular manufacturer's part is inferior. Thus, unlike Lebrilla, the court would have to determine whether the installed repair part is inferior. As alleged, common issues do not predominate.

Slip op., at 18.  Pretty straightforward analysis.  When the issue was the adequacy of "crash parts," the question of their adequacy could be resolved on a classwide basis.  Here, the the issue of adequacy could vary wildly, depending upon what part was replaced and what manufacturer supplied the replacement part.  This particular case provides an example of the relatively narrow category of class complaints that reveal predominance issues on the face of the complaint itself.

Certiorari denied in Ticketmaster, et al. v. Stearns, et al.

On the consumer litigation front, today the United States Supreme Court denied certiorari in Ticketmaster, et al. v. Stearns, et al. (Sup. Ct. Case No. 11-983).  Stearns v. Ticketmaster Corp., 655 F.3d 1013 (9th Cir. 2011) examined a number of consumer law concepts in the class context.  For example, the Ninth Circuit shot down the federal court standing challenge attempted in UCL actions post-Tobacco II.  And, on the issue of reliance in CLRA claims, the Court said:

A CLRA claim warrants an analysis different from a UCL claim because the CLRA requires each class member to have an actual injury caused by the unlawful practice. Steroid Hormone Prod. Cases, 181 Cal.App.4th 145, 155-56, 104 Cal. Rptr.3d 329, 337 (2010). But "[c]ausation, on a classwide basis, may be established by materiality. If the trial court finds that material misrepresentations have been made to the entire class, an inference of reliance arises as to the class." Vioxx, 180 Cal.App.4th at 129, 103 Cal.Rptr.3d at 95; see also Vasquez v. Superior Court, 4 Cal.3d 800, 814, 484 P.2d 964, 973, 94 Cal.Rptr. 796, 805 (1971); Steroid, 181 Cal. App.4th at 156-57, 104 Cal.Rptr.3d at 338. This rule applies to cases regarding omissions or "failures to disclose" as well. See McAdams v. Monier, Inc., 182 Cal.App.4th 174, 184, 105 Cal.Rptr.3d 704, 711 (2010) (holding that because of defendant's failure to disclose information "which would have been material to any reasonable person who purchased" the product, a presumption of reliance was justified); Mass. Mut. Life Ins. Co. v. Superior Court, 97 Cal. App. 4th 1282, 1293, 119 Cal.Rptr.2d 190, 198 (2002) ("[H]ere the record permits an inference of common reliance. Plaintiffs contend Mass Mutual failed to disclose its own concerns about the premiums it was paying and that those concerns would have been material to any reasonable person contemplating the purchase...." If proved, that would "be sufficient to give rise to the inference of common reliance on representations which were materially deficient.").

Stearns, at 1022.

"Hot gas" case against Chevron lives to fight another day in Klein v. Chevron U.S.A., Inc.

Hot gas.  This is not a term of art describing oral argument.  It literally refers to gasoline, and its propensity to expand as it gets warmer.  In Klein v. Chevron U.S.A., Inc. (January 25, 2012), the Court of Appeal (Second Appellate District, Division Seven) dispensed wisdom, a drop at a time, about the viability of claims related to hot gas.  Before I pump up this case any more, allow me to fuel your appetite with some background.  After that we'll motor on to the significant holdings.

How does hot gas work again?  The Court explained:

Motor fuel expands in volume as it is heated. As a result of this thermal expansion, a gallon of motor fuel at a warmer temperature has less mass and less energy content than a gallon of motor fuel at a cooler temperature. A temperature increase of 15 degrees causes motor fuel to expand in volume by approximately one percent, with a corresponding one percent decrease in energy output. For example, when 231 cubic inches of motor fuel, which equals one volumetric gallon, is heated from 60 degrees Fahrenheit to 75 degrees Fahrenheit, the motor fuel will expand to occupy a volume of approximately 233 cubic inches.

Slip op., at 4.  Ahh.  Anyhow, after a lot of discussion about regulations, and how fuel must be temperature adjusted if sold in amounts about 5,000 gallons, the Court turned to the theories impacted by the trial court's rulings on a demmurer and motion for judgment on the pleadings.

First, the Court held that the trial court erred when it dismissed the plaintiffs' claims arising under the CLRA and UCL:

Chevron's arguments are predicated on the assumption that the only possible form of relief in this case is a court order mandating that Chevron offer its retail consumers temperature-adjusted motor fuel through the implementation of ATC technology or other similar technologies. The plaintiffs' complaint, however, seeks other relief, including a disclosure requirement that, if granted, might not require substantial changes to the way Chevron currently sells motor fuel at the retail level.

Slip op., at 26.  That "other relief" mentioned by the Court includes injunctive relief compelling disclosure to consumers.  The Court next concluded that no alternative means exist for addressing the plaintiffs' issues.  On that basis, the Court concluded that judicial abstention was improper.

The Court then turned to specific claims, beginning with a half-hearted standing challenge.  The Court wasn't impressed: "Chevron concedes that, at the pleading stage, a plaintiff asserting a UCL or CLRA claim 'satisfies its burden of demonstrating standing by alleging an economic injury.' (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 254.)"  Slip op., at 35.  (Had to get that Boschma cite in there - my colleague, J. Mark Moore, argued that appeal.)

Next, the Court tackled the prongs of the UCL, beginning with the "unfair" prong:

At the pleading stage, we cannot presume that these alleged harms are not “substantial” or are otherwise outweighed by benefits that consumers derive from Chevron's practice of selling non-temperature adjusted motor fuel at the retail level. (Camacho, supra, 142 Cal.App.4th at p. 1403.) Although the evidence in this case may show that consumers do not suffer any substantial injury from the sale of nontemperature adjusted fuel or that the costs associated with remedying such injuries outweigh any benefit to consumers, we agree with the trial court‟s conclusion that such issues must “be determined on a developed factual basis.”

Slip op., at 37.  Chevron argued that it was not obligated to pass along or disclose its profit margins.  The Court distinguished Chevron's authority:

There are, however, important distinctions between this case and McCann. First, the holding in McCann has no relevance to plaintiffs' claim that, by selling non-temperature adjusted fuel at retail, Chevron is able to charge consumers more in purported motor fuel tax than it is required to pay to the government. Plaintiffs' tax-based claim has nothing to do with Chevron's failure to disclose its profit margins or the price at which it procures motor fuel at wholesale.

Second, unlike in McCann, the “gist” of plaintiffs‟ unfairness claim is not that Chevron was required to “disclose their own costs or profit margins” to consumers. (McCann, supra, 129 Cal.App.4th at pp. 1387, 1395 [“gist” of plaintiff's claim was that defendant “fails to disclose . . . that it gets a more advantageous rate of exchange on the wholesale market than it gives the customer”].) Instead, plaintiffs argue that, by failing to compensate for temperature variations in retail motor fuel, Chevron is engaging in a practice that misleads consumers as to the actual amount of motor fuel they are purchasing and the actual price that they are paying for that fuel. By contrast, the plaintiffs in McCann were informed of the specific exchange rate they would receive in their retail transactions (id. at p. 1382), but argued that the money transmitter had a duty to disclose the more favorable wholesale rate at which it was able to purchase foreign currency and pass those benefits on to consumers.

Were plaintiffs in this case simply alleging that Chevron had a duty to disclose the price at which it procured motor fuel at wholesale, McCann might foreclose such a claim. However, nothing in McCann suggests that the UCL does not, as a matter of law, apply to conduct that allows a retailer to charge more in taxes than it is required to pay to the government or to obscure the true cost of goods at retail.

Slip op., at 39.  The Court then dismantled a "safe harbor" argument, explaining that the "safe harbor" statute must "explictly" prohibit liability for the conduct.  Chevron's attempt to fashion a "safe harbor" by implication was rejected.

The Court then concluded that plaintiffs stated a claim under the "fraudulent" prong:

At the pleadings stage, we cannot say, as a matter of law, that consumers are not likely to be deceived in the manner alleged by plaintiffs. As the trial court observed, plaintiffs have alleged “facts which, if true, may reveal that members of the public . . . [assumed] that . . . they were receiving standardized units of motor fuel when, in fact, the energy content of each gallon depended on the temperature of the motor fuel at the time of purchase.” Plaintiffs have also alleged facts that, if true, may reveal that consumers were deceived as to the true price of motor fuel, which may vary depending on the temperature at which it is sold.

Slip op., at 43.  The Court distinguished Bardin v. Daimlerchrysler Corp. (2006) 136 Cal.App.4th 1255 on the ground that the plaintiffs alleged a specific expectation in the public about what they receive at a gasoline pump.  Following that discussion, the Court immediately turned to the CLRA, noting that conduct which is "fraudulent" under the UCL also violates the CLRA.  And, stay with me here, since the plaintiffs stated a claim under the CLRA, based on the same deceptive conduct that satisfied a UCL "fraudulent" claim, they, by definition, stated a UCL claim under the "unlawful" prong, since it borrows the CLRA violation.  Presto.

The breach of contract and unjust enrichment claims didn't do so well.  Saved you eight pages of reading right there.

And to think that I was not impressed with the "hot gas" theory when I heard it years ago.  What was I thinking?

Alvarez v. Brookstone Company, Inc. holds that Pineda v. Williams-Sonoma Stores, Inc. applies retrospectively

Pineda v. Williams-Sonoma Stores, Inc., 51 Cal. 4th 524 (2011) (Pineda) held that the collection of ZIP codes as part of a credit card transaction is conduct that violates Civil Code section 1747.08.  In Alvarez v. Brookstone Company, Inc. (pub. ord. January 18, 2012), the Court of Appeal (Fourth Appellate District, Division One) considered whether Pineda applied retrospectively to conduct occurring prior to that decision.  The Court had little difficulty concluding that the holding of Pineda applied retrospectively:

Pineda expressly concluded: "[T]he only reasonable interpretation of section 1747.08 is that personal identification information includes a cardholder's ZIP code." (Pineda, supra, 51 Cal.4th at p. 534, italics added.) Therefore, despite Brookstone's attempts to show the contrary, the California Supreme Court held that its interpretation of section 1747.08 was the only reasonable interpretation of that statute. Pineda further concluded section 1747.08 "provides constitutionally adequate notice of proscribed conduct." (Id. at p. 536.) We reject Brookstone's due process argument that it did not have fair notice or warning of section 1747.08's prohibition against requesting and recording the ZIP codes of customers during credit card transactions.

Slip op., at 7.

Court revives claims of failure to disclose and active concealment of defects from computer purchasers

Reporting on this case pains me greatly.  I should be pleased to report on a CLRA and UCL decision that revives consumer claims.  But all I feel is pain.  Let me explain by quoting from the case.  The very first sentence says, "In this class action alleging a failure to disclose a computer defect involving a microchip that controlled floppy disk data transmission, plaintiffs Tammy Collins and Rudolph Roma appeal from a judgment on the pleadings."  Huh?  Floppy disk data transmission.  Rings a bell.  Nope, can't place it.  Must be some highfalutin, newfangled technology.  I recognize "data."  Anyhow, in Collins v. eMachines, Inc. (pub. ord. December 21, 2011), the Court reviewed a trial court order granting a motion for judgment on the pleadings.

It was alleged that defendant failed to disclose and actively concealed the disk controller defect from potential purchasers. Despite knowing of the defect and knowing that the defect could result in critical data corruption, executives of eMachines directed the company to continue to sell the defective computers after October 31, 1999. eMachines actively concealed the existence of the defect from purchasers by, among other practices specified in the FAC, continuing to issue the warranty knowing the computers had the defect, and engaging in misleading “customer service” practices that concealed the defect in online “customer support” guides, in customer service diagnoses of computer problems, and at call centers.  The case was stayed for four years while cases in other states moved forward.

Turning first to the CLRA, the Court restated the LiMandri circumstances giving rise to actionable deceit.  The Court recognized the FAC as alleging factor (2), when the defendant has exclusive knowledge of material facts not known or reasonably accessible to the plaintiff, and factor (3), when the defendant actively conceals a material fact from the plaintiff.  The Court then agreed that a "reasonable" consumer would certainly find data corruption to be material information in connection with a computer.

Next, the Court distinguished Daugherty, observing that, in Daugherty, the only represetation made was the warranty, and the vehicles performed adequately as warranted.  The Court was similarly dismissive of Bardin, in which it was alleged that exhaust manifolds were likely to fail after the warranty period.  The Court explained that the manifolds in Bardin worked they way they were supposed to under the warranty.  Contrasting the circumstances, the Court said, "Because a floppy disk, at the time of the complaint, was integral to the storage, access, and transport of accurate computer data, the floppy disk was central to the function of a computer as a computer. The exhaust manifolds at issue in Bardin, by contrast, were just blowing smoke."  Slip op., at 12.  That's funny.  You see, the exhaust manifold vents combustion byproducts...

Regarding the UCL, the Court relied on its discussion about Daugherty and Bardin to conclude that a claim under the UCL was easily stated as well.  The Court agreed that consumers certainly had an expectation about data integrity when they purchased the affected computers.

After also concluding that the allegations supported a claim for common law fraud, the Court concluded that legal remedies were adequate, rendering an unjust enrichment claim unnecessary.

I should also tag this one with "Dinosaurs," given the discussion of floppy disk drives.  That reminds me that I should tell you about the time I saved data on a bent floppy disk drive by removing the casing and putting the raw disk in a disk drive.  The year was 1985.  Madonna, Huey Lewis, Duran Duran and Wham! were dominating the charts...

[extended period of blank stares]

...and that's how I saved all that data!

"Actual cash value" isn't fair market value, says George v. Automobile Club of Southern California

Here's one from the backlog stack, but it isn't too exciting, so you didn't miss much.  In George v. Automobile Club of Southern California (December 12, 2011), the Court of Appeal (Second Appellate District, Division Eight) reviewed the trial court's decision to sustain a demurrer without leave to amend in a putative class action alleging it was impropre for defendant to declare the "actual cash value" of a vehicle in an insurance policy but then refuse to pay that amount in the event of a total loss, instead paying the fair market value of the car at the time of the loss.   The result didn't seem to be in doubt, based on the policy language noted by the trial court and Court of Apeal:

The declarations page, when read together with the rest of the policy, unambiguously provides that in the event of a total loss, the policy will pay the actual cash value of the car up to $25,000, less the deductible. The ordinary meaning of these words is that if the car is stolen and forever lost, the policy will pay the fair market value, or actual cash value, of the car on the date of the claim, less the deductible, but in any event, not more than $25,000.

Slip op., at 16.  This isn't really a class action case in that the issue was solely one of contractual interpretation, but I include it as a cautionary note for anyone else looking into bringing such a claim. 

Another arbitration-friendly decision from the U.S. Supreme Court in CompuCredit Corp. v. Greenwood

Today the United States Supreme Court issued its decision in CompuCredit Corp. v. Greenwood (Jan. 10, 2012).  At issue was whether a sentence in that act, at 15 U. S. C. §1679c(a), which says, "You have a right to sue a credit repair organization that violates the [Act]," preserves the right to sue in court.  Because the Credit Repair Organizations Act is silent as to whether claims may be heard in an arbitration forum, the Court held, 8-1, that the arbitration agreement in question should be enforced according to its terms.  Justice Ginsburg dissented strongly, and the short concurring opinion by Justices Sotomayor and Kagan stated that the case was a much closer call than the majority opinion suggests, noting good points raised in the dissenting opinion of Ginsburg.  In particular there seems to be a strong disagreement about whether Congressional intent must be explicitly stated or may be inferred from a consistent set of statements suggesting a specific intent.  Not much more to say about this, other than to note that its essentially a tautology that the majority gets to decide whether they see a clear Congressional intent or not.  If they say there isn't an intent, then they are right by default.