In Rose v. Bank of America, California Supreme Court holds that UCL may borrow federal laws even after civil action provisions are removed


This will be a very short post on the subject, but the California Supreme Court issued a decision today on the question of whether a UCL claim may be based on the violation of a federal statute after  the civil remedy provision was repealed by Congress.  In Rose v. Bank of America (August 1, 2013), the Supreme Court held that it could.  Describing the issue, the Court said:   "May a claim of unlawful business practice under California's unfair competition law be based on violations of a federal statute, after Congress has repealed a provision of that statute authorizing civil actions for damages?"  Slip op., at 1. 

The Court unanimously held that it could: 

 Whether framed in terms of preemption or not, the issue before us is a narrow one The Bank and the courts below have taken the position that Congress ruled out any private enforcement of TISA by repealing former section 4310.  However, considerations of congressional intent favor plaintiffsBy leaving TISA’s savings clause in place, Congress explicitly approved the enforcement of state laws “relating to the disclosure of yields payable or terms for accounts . . . except to the extent that those laws are inconsistent with the provisions of this subtitle, and then only to the extent of the inconsistency.  (§ 4312.)  The UCL is such a state law.

Slip op., at 4.   The Court then emphasized that the UCL does not "enforce" other laws.  A violation of the UCL is independently actionable in its own right:

Contrary to the Bank’s insistence that plaintiffs are suing to enforce TISA, a UCL action does not “enforce” the law on which a claim of unlawful business practice is based.  “By proscribing any unlawful business practice, [Business and Professions Code] ‘section 17200 borrows violations of other laws and treats them as unlawful practices that the [UCL] makes independently actionable.  [Citations.]”  (Cel-Tech, supra, 20 Cal.4th at p. 180, italics added.)  In Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 570 (Stop Youth Addiction), we explained the independent nature of a UCL action.  There the UCL claim was based on alleged violations of Penal Code section 308, which bans the sale of cigarettes to minors.  The defendant contended the suit was barred because Penal Code section 308 and the Stop Tobacco Access to Kids Enforcement Act (STAKE Act; Bus. & Prof. Code, §§ 22950- 22959) embodie[d] the Legislatures intent to create a comprehensive, exclusive scheme for combating the sale of tobacco to minors.”  (Stop Youth Addiction, at p. 560.)  We rejected this argument, and emphasized that the plaintiff was enforcing the UCL, not the statutes underlying their claim of unlawful business practice. 

Slip op., at 6.  UCL still has teeth in the view of the California Supreme Court, it would seem.  Check with The UCL Practitioner later for Kim Kralowec's write-up on this case.  She will no doubt have some other interesting observations.

Fourth Appellate District, Division Three, scoffs at notion that Concepcion preempts all state unconscionability law

As soon as a blockbuster decision hits the street, zealous litigators work to stretch it as far as it can go.   AT&T Mobility LLC v. Concepcion (April 27, 2011) is getting that elastic band treatment right now.  For example, AT&T Mobility (Concepcion) was the subject of a brief aside in Mission Viejo Emergency Medical Associates v. Beta Healthcare Group (July 25, 2007).  In a lawsuit between an insured and the insurer, a motion to compel arbitration of a dispute arising out of the policy was denied by the trial court.  The Court of Appeal reversed and remanded for further proceedings regarding a claim of unconscionability.  In the course of the discussion, the Court said:

We invited the parties to provide their comments on the recent United States Supreme Court case, AT&T Mobility LLC v. Concepcion (2011) __ U.S. __ [131 S.Ct. 1740] (AT&T). Defendants appear to argue that AT&T essentially preempts all California law relating to unconscionability. We disagree, as the case simply does not go that far. General state law doctrine pertaining to unconscionability is preserved unless it involves a defense that applies "only to arbitration or that derive[s] [its] meaning from the fact that an agreement to arbitrate is at issue." (Id. at p. __ [131 S.Ct. at p.1746].) This simply does not apply here.

Slip op., at 13, n. 4.  The Court then concluded that the asserted unconscionable provisions in the arbitration agreement could be dealt with by the trial court when it considered any motion to sever provisions:

The specific provisions that plaintiffs raise — regarding arbitration in San Francisco, the even split of the cost, and the nonarbitrability of discretionary decisions — can be the subject of a motion to sever before the trial court if the parties cannot reach agreement on the terms of arbitration. (Civ. Code, § 1670.5, subd. (a).) Although we may decide this issue as a matter of first impression (see Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1251), given the relative lack of factual development as to these issues, we believe that deference to the trial court would better serve the ends of justice.

Slip op., at 15.

So there you have it from the Fourth Appellate District, Division Three: AT&T Mobility (Concepcion) doesn't preempt all California law on the subject of contractual unconscionability.  They didn't even break a sweat figuring that out.  Interestingly, this is the second decision (Brown v. Ralphs being the first) that asked for supplemental briefing on AT&T Mobility (Concepcion) but issued a decision that is relatively unaffected by it. 

California Grocers Association v. City of Los Angeles holds that City may regulate wholesale replacement of a workforce after purchase of a business

In California Grocers Association v. City of Los Angeles (July 18, 2011), the California Supreme Court considered whether a worker retention ordinance -- regulating the ability of some employers to summarily replace a workforce after purchasing the business -- is preempted as intruding upon either matters of health and safety already regulated by the state or matters of employee organization and collective bargaining fully occupied by federal law.  The six Justices in the majority explained in their 38-page opinion that the neutral ordinace promulaged by the City of Los Angeles did not run afoul of preemption landmines.  The dissenting opinion, all 27 pages of it, concluded otherwise, essentially on the ground that the NLRA is intended to confer upon employers the right to hire anyone they want.  The majority wasn't persuaded by this analysis, opining instead that the NLRA was actually passed to protect employees and regulate employers.  Crazy talk.

The City of Los Angeles passed an ordinance much like those passed in other municipalities.  The Los Angeles Ordinance, focused on grocery stores, was summarized by the Court:

For grocery stores of a specific size (15,000 square feet or larger) that undergo a change of ownership, the Ordinance vests current employees with certain individual rights during a 90-day transition period. First, the incumbent owner is to prepare a list of nonmanagerial employees with at least six months' employment as of the date of transfer in ownership, and the successor employer must hire from that list during the transition period. (L.A. Mun. Code, § 181.02.) Second, during that same period, the hired employees may be discharged only for cause. (Id., § 181.03(A)-(C).) Third, at the conclusion of the transition period, the successor employer must prepare a written evaluation of each employee's performance. The Ordinance does not require that anyone be retained, but if an employee's performance is satisfactory, the employer must "consider" offering continued employment. (Id., § 181.03(D).) If the workforce is unionized, however, the union and the employer may agree on terms that supersede the Ordinance. (Id., § 181.06.)

Slip op., at 2.  The California Grocers Association did not like this ordinance and sued to enjoin its implementation.

The Court began its analysis with state law preemption in the health and safety field.  The majority had little difficulty explaining why an ordinance regulating mass terminations had little direct impact on any health and safety regulations controlling how food is handled in grocery stores.

Next, the Court examined federal preemption:

We consider as well whether the Ordinance is preempted by the NLRA, a federal law enacted to protect "the right of employees to organize and bargain collectively." (29 U.S.C. § 151.)

Slip op., at 11.  Summarizing the post-Machinists preemption cases, the Court first explained that preemption was directed at regulations of bargaining process, not local employment laws setting substantive minimum labor standards for all employees.  Next, the Court considered whether there was evidence of a clear and manifest congressional intent to bar at any level the regulation of employee retention during ownership transitions.  Working their way through the history of such decisions, the Court found solid support for the notion that the NLRA was silent as to an obligation to hire the employees of a purchased business.  The Court finished its analysis by concluding that the retention ordinance should not have a meaningful impact on successorship obligations.

Finally, the Court declined to set aside the ordinance on equal protection grounds, observing that a rational relationship exists between the stated goal of the ordinance and the decision to focus on large grocery stores.

The dissent contested the majority's decision by asserting, again and again, that the NLRA provides employers with a protected right to hire as they see fit.  The majority directly dispatched this argument with great brevity, and the length of the dissent does not make it more persuasive in my view.

Ninth Circuit agrees with other Courts and applies Wyeth v. Levine in holding that failure-to-warn claims are not pre-empted for generic drug manufacturers.

I don't spend too much time on products liability issues, but Wyeth v. Levine was a major ruling in the area of federal preemption, and its reach is still being tested.  In Gaeta v. Perrigo Pharmaceuticals Company (9th Cir. Jan. 24, 2011), the Ninth Circuit agreed with two Courts of Appeals and all of the district courts to consider the issue of whether federal law preempts state law failure-to-warn claims against generic manufacturers.

In Wyeth v. Levine, 129 S. Ct. 1187 (2009), the Supreme Court determined that state law failure-to-warn claims against brand name manufacturers were not preempted by federal law.  However, it was unclear whether the holdilng applied to generic manufacturers.  Applying the Levine analysis, two other Courts of Appeals, and all of the district courts to consider the issue, held that federal law does not preempt state law failure-to-warn claims against generic manufacturers, provided there is no “clear evidence” that the FDA would not have approved the proposed stronger warning. We agree and hold that the district court erred in applying federal preemption. The Ninth Circuit agreed, reversing and remanding.