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.