In Lambert v. Nutraceutical Corp., the Ninth Circuit examines Rule 23(f) petitions

I won't diminish the expectant quality of your Friday by providing a blow-by-blow of the decision, but Lambert v. Nutraceutical Corp. (9th Cir. Sept. 15, 2017) takes a thorough look at the timing requirements of Fed. R. Civ. P. 23(f) petitions, concluding that the 14-day filing deadline of Rule 23(f) is not jurisdictional and can be extended or tolled for a variety of reasons.  The opinion also reversed the District Court's decertification order in the consumer class action, concluding that it erred in its treatment of the plaintiff's damage model.

Appellant was successfully represented by Gregory Weston (argued) and David Elliott, The Weston Firm, San Diego, California; and, Ronald A. Marron, The Law Offices of Ronald A. Marron APLC, San Diego, California.

Overreach results in rare class action dismissal via demurrer in Schermer v. Tatum

While getting a class certified is often a serious fight, defeating class allegations at the demurrer stage is generally rare.  But never say never.  In Schermer v. Tatum (March 18, 2016), the Fourth Appellate District, Division One, affirmed a trial court ruling sustaining a demurrer to class allegations in the plaintiffs' second amended complaint (SAC).  The plaintiffs brought a class action on behalf of residents who live in the 18 mobilehome parks.  The plaintiffs alleged they were subjected to uniform unconscionable lease agreements and leasing practices by a collection of related defendants.  The SAC involved 18 mobilehome parks allegedly owned and/or operated by two defendants (Tatums and Kaplan), and were managed through defendant Mobile Community Management Company (MCM).  The plaintiffs also named as defendants the 18 "single-purpose" business entities that are each described as the owners of one of the mobilehome park in California.

The Court of Appeal began by summarizing the first amended complaint, the demurrer hearing related to it, and the SAC. And that summary is all you need to read to know where things are headed.  The Court described the "highlights" of the FAC as follows:

In the FAC, plaintiffs again alleged defendants Tatum and Kaplan, through MCM, engaged in unlawful conduct at each of the 18 mobilehome parks.  Specifically, they alleged defendants "charg[ed] excessive rent, pursu[ed] arbitrary evictions, and implement[ed] unreasonable polices."  Plaintiffs further alleged in their FAC that defendants Tatum and Kaplan took "advantage of vulnerable prospective and current residents" including "non-[E]nglish speaking and elderly residents" who, plaintiffs claimed, were "especially susceptible" to defendants' unlawful business practices.  Plaintiffs alleged defendants "most egregious practice" was the use of a "one-sided, standardized lease" agreement.  Plaintiffs provided 32 examples of lease clauses that allegedly violated California's Mobilehome Residency Law (Civ. Code, § 798 et seq.; MRL).

 Plaintiffs' FAC also set forth about 11 "factors" that plaintiffs alleged showed procedural unconscionability between plaintiffs and the putative class, on the one hand, and defendants, on the other.  Such factors included among others "residents' poor socio-economic background" and defendants' "knowledge of residents' vulnerability to oppression."  Plaintiffs also listed about 17 examples of substantive unconscionability in their FAC in connection with defendants' use of the standardized lease agreement in the 18 mobilehome parks.  As before, plaintiffs' class action allegations included any person who had an ownership interest in a mobilehome in any of the 18 parks, and a senior citizen and non-English-speaking subclass. 

Slip op., at 3-4.  Then, discussing the hearing on the demurrer to the FAC, the Court said, "At the demurrer hearing, plaintiffs' counsel agreed with the court that plaintiffs' FAC was 'a mess' and counsel admitted they 'did a horrible job in succinctly and systematically putting forth facts that show what the [FAC] -- what the case is about and how it shows a pattern of conduct that is deserving of being treated in a class action.' "  Slip op., at 4.  Not looking good.

Describing the subsequently issued Order on the demurrer to the FAC, the Court set forth key parts of the trial court's ruling:

"Plaintiffs allege multiple causes of action, all of which related in some way to the Lease Agreements utilized at the Defendants['] parks.  Based upon the allegations in the [FAC], it appears that some of the claims involved the alleged unconscionability of the contracts themselves, while others involve each Defendant's alleged actions in executing or enforcing the individual contracts as to individual Plaintiffs.  [¶]  The Court finds that multiple factual allegations predominate.  Plaintiffs['] measure of damages will be unique to each park.  The proposed class does not all reside at the same location or under the same circumstances.  Each putative class member is/was a resident at one of the eighteen separate mobilehome parks located throughout the State of California, giving rise to individualized factual questions related to causation, liability, and damages.

"Example of the individualized issues include the remedy (determining excess rents paid at each space requires a factual showing of fair market values for rents in a particular area [at] a particular time and park-by[-]park appraisal).  Further, there appear to be multiple lease agreements.  Although Plaintiffs allege Defendants used a 'standardized' Lease Agreement, they attach at least five different variations of the Lease Agreement and/or Amendments to the Lease Agreement.  (See Exhibits 'A,' 'B,' 'C,' 'D,' and 'E,' attached to the [FAC].)

Slip op., at 5. The trial court went on to identify additional issues, including the fact that many class members would not be able to state certain claims if they had not attempted to sell their homes, and there were no putative class representative plaintiffs for many of the mobilehome parks.

The SAC filed by the plaintiffs attempted to address many of the trial court's concerns, but a number of its allegations were found by the trial court to be conclusory assertions about defendants, and not allegations of fact.  The SAC did not address damage issues that would arise, which included the fact that several of the mobilehome parks were in cities with their own rent control ordinances.  The trial court was particularly concerned by the fact that each agreement at each park with each potential class member was individually negotiated and by the fact that a unique damage calculation would be required for each park and each person at each park. Moreover, the trial court took notice of the fact that many individuals were involved in their own litigation with their own park.

After discussing the procedural background, the Court made sure to note that it is undisputed that class allegations can be decided on demurrer:

It is beyond dispute that trial courts are permitted to decide the issue of class certification on demurrer.  (Tucker, supra, 208 Cal.App.4th at p. 212; see Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 440 [noting the issue is "settled" that courts are authorized to "weed[] out" legally meritless class action suits prior to certification by demurrer or pretrial motion].)  A trial court may sustain a demurrer to class action allegations where " 'it concludes as a matter of law that, assuming the truth of the factual allegations in the complaint, there is no reasonable possibility that the requirements for class certification will be satisfied.  [Citations.]'  [Citations.]"  (Tucker, at p. 211, italics added; see Canon U.S.A., Inc. v. Superior Court (1998) 68 Cal.App.4th 1, 5 [noting that when the "invalidity of the class allegations is revealed on the face of the complaint, and/or by matters subject to judicial notice, the class issue may be properly disposed of by demurrer or motion to strike," and noting that "[i]n such circumstances, there is no need to incur the expense of an evidentiary hearing or class-related discovery"].)

Slip op., at 14. Much of the discussion that follows is unsurprising, given the discussion of the trial court's analysis.  The Court did wade into the murky waters of attempting to categorize an allegation as either an "ultimate fact" or a "conclusion":

We conclude plaintiffs' allegations in their SAC—which were noticeably absent from their original complaint—that defendants implemented a uniform policy and procedure in each and every lease transaction with plaintiffs and the putative class members over a four-year period (i.e., the proposed class period), in each of the 18 mobilehome parks owned and/or operated by Tatum and Kaplan, are not properly admitted for purposes of demurrer because such allegations are not ultimate facts but rather merely contentions and/or improper factual conclusions.

Slip op., at 17-18. In my experience, this is very much an eye-of-the-beholder call that deserves a clarifying opinion with more objective guidance as to how to distinguish between the two.

In any event, the Court agreed with the trial court's assessments, finding, in particular, that the individual nature of the transactions was such that each course of dealing is unique, and damages, because of different circumstances, park locations, and local ordinances, are also unique to each potential class member.  The Court declined to grant leave to amend to the plaintiffs, agreeing with the trial court that the problems were insurmountable.  The lesson here is that overreach can be fatal.  It might have been more workable to describe uniform leasing practices at one mobilehome park and seek class relief for the aspects of the transaction that were common to all of the residents, while, at the same time, addressing how damages will be calculated and distributed.

The "separate location" argument seems better suited to this sort of consumer circumstance than it is in the wage & hour context, where defendants nevertheless try the "each of our stores is unique and different" argument, as if they have no uniform policies regulating employees and allow each store to run their own affairs like the wild West. Hey, at least this Court cited Brinker (but it felt like an ironic cite to me).

Pro per meets bad bank in Fleet v. Bank of America

When despicable loan modification practices meet desperate homeowners filing their own lawsuit, you get Fleet v. Bank of America (pub ord. September 24, 2014), from the Court of Appeal (Fourth Appellate, Division Three).

Luckey v. Superior Court says no to temporary judges for class settlement approval

In Luckey v. Superior Court (July 22, 2014), the Court of Appeal (Second Appellate District, Division Three), the Court considered a writ following the denial of a stipulation to utilize a temporary judge to handle a class settlement approval.  Plaintiff filed a putative class action alleging violation of FACTA arising from printing “more than the last 5 digits of the card number or the expiration date” on an electronically printed receipt provided to the cardholder at the point of the transaction. (15 U.S.C. § 1681c(g).) The operative complaint alleged causes of action for violation of FACTA, negligence, and declaratory relief.  Plaintiff defined the putative class as “All individuals who purchased merchandise using a personal credit card or personal debit card at any retail store operated by Defendant within the United States during the Class Period2 who: [¶] Subclass A: Were issued an electronically printed receipt that reflected more than the last five digits of the card; and/or [¶] Subclass B: Were issued an electronically printed receipt that reflected the card's expiration date....” Plaintiff sought, on behalf of the class, damages of between $100 and $1000 for each receipt which violated FACTA (with separate damages for each violation), punitive damages, and reasonable attorney fees. Plaintiff also sought an order declaring that Cotton On's credit and debit card receipt practices violate FACTA and an order enjoining Cotton On from continuing to do so.  No responsive pleading was filed. The only other documents filed in this case consisted of stipulations for continuance of the initial status conference, and the stipulation for appointment of a temporary judge which is at issue in this writ proceeding. Plaintiff represented that, from the time the complaint was filed, the parties engaged in “informal discovery and exchanged information” in preparation for a mediation.

The mediation was held before a retired superior court judge. A class action settlement was reached at the mediation, and memorialized in a written settlement agreement. It is a class settlement, defining the settlement class as “all individuals who purchased merchandise using a personal credit card or personal debit card at any retail store operated by Cotton On within the United States since May 9, 2008, who were issued an electronically printed receipt that reflected more than the last five digits of the card and/or were issued an electronically printed receipt that reflected the card's expiration date.” It excludes persons who validly opt out of the class.

Under the terms of the settlement, the class was to receive compensation in the form of “Merchandise Credits,” which was really a $5 credit on any transaction at or exceeding $25 at one of Cotton On's retail stores, during one pre-selected week. Notice was to be provided to the class by means of e-mail notice to be provided “to all [Cotton On]'s customers in the United States for whom [Cotton On] possesses a valid e-mail address.” Notice would also be given on Cotton On's website and near each of its retail stores' cash registers.

Cotton On agreed to fund the settlement in the amount of $1,000,000. Of that amount, the parties agreed that Luckey's counsel could seek an award of attorney's fees and costs in an amount of $302,000. The parties also agreed that Luckey himself could receive a payment of $5,000 as class representative, and that $135,000 would be allocated to the administrative costs of the settlement.

In sum the settlement provided as for: (1) $5,000 paid to Luckey (whereas each class member would receive, at most, a merchandise credit for one one-thousandth of that amount); (2) $302,000 paid to Luckey's counsel (for work which, to that point, consisted of filing a complaint and amended complaint, and preparing for and attending a one-day mediation); and (3) a one-week $5 off $25 sale, of which Cotton On would send notice to its e-mail customer list.

Pursuant to the settlement agreement, the parties stipulated for appointment of a temporary judge to hear the matter “until final determination thereof.” Specifically, the parties intended to submit to the temporary judge the issues related to preliminary and final approval of the class action settlement. The same retired judge who had served as the mediator in this matter was identified by the parties as the proposed temporary judge. The temporary judge would be privately compensated by the parties.

The stipulation was presented to the Supervising Judge of the Civil Division, as required by the Superior Court of Los Angeles County, Local Rules, rule 2.24(a)(1). On June 2, 2014, the court issued a minute order declining to approve the stipulation. The court's analysis explained that, although plaintiff’s counsel could stipulate to the appointment of the temporary judge on behalf of the plaintiff, the “submitted papers do not demonstrate that the named plaintiffs or the attorneys are authorized to speak for all class members.” Without the stipulation of all putative class members, the case could not be transferred to a temporary judge.  The plaintiff filed a petition for a writ to compel appointment of the temporary judge. The Court of Appeal issued an Order to Show cause.

In responding to the Court of Appeal, the plaintiff challenged the Superior Court’s standing to oppose the writ petition:

In this case, Luckey suggests that the Superior Court lacked standing to oppose his writ petition because the Superior Court “has presented no evidence that the issues presented impact the operations or procedures of the Court or that the decision will impose any financial obligations on the court's operations.” The argument is puzzling given the arguments Luckey makes in support of his petition. First, Luckey argues that he is, in fact, challenging a procedure of the court, not merely an isolated ruling. Luckey represents that the Superior Court previously “routinely issued orders appointing temporary judges to preside over class action matters,” but, “in or around November 2013,” the court “stopped” approving those stipulations and began denying them. Second, Luckey argues at length, although without evidentiary basis, that the court's financial obligations are, in fact, at issue. Luckey argues that lengthy delays are now the reality in class action litigation, and that parties should be permitted to avoid these delays by the use of temporary judges—a procedure which, according to Luckey, would “alleviate[ ] space for other litigants” at Superior Court. Indeed, Luckey represents that the Superior Court previously appointed temporary judges to serve in class action matters “in part[ ] due to congested and backlogged dockets.” As the Superior Court's procedures and financial obligations are at issue, the Superior Court has a right to appear.

Slip op., at 15-16.  The Court then examined whether the trial court erred when it denied the stipulation of the parties to use a “temporary judge” to decide the fairness of the class settlement.  The Court began by examining the complex question of whether absent putative class members are “parties” for purposes of the stipulation at issue.  The Court concluded they were not:

[W]hile Luckey and Cotton On were the only “parties litigant” at the time of the stipulation to the temporary judge, they were also the only parties who could be bound by such a stipulation.  As the conceded purpose of the stipulation was to bind all putative class members to the stipulation, and they could not be bound until they had been given notice and an opportunity to appear, the stipulation was ineffective.  The state Constitution provides that, for a stipulation to a temporary judge to be effective, that stipulation must be made by the parties litigant.  In a pre-certification class action, the parties litigant have not yet been identified; thus, no such stipulation can be effectively made.

Slip op., at 22-23.  Next, the Court concluded that the Rules of Court directed the same conclusion, because of the right of objectors to intervene:

Our consideration of the applicable rules of court leads us to the same conclusion. California Rules of Court, rule 2.835(b) governs requests to intervene in matters pending before temporary judges. It states, in pertinent part, “A motion for leave to file a complaint for intervention in a case pending before a temporary judge requested by the parties must be filed with the court and served on all parties and the temporary judge. The motion must be heard by the trial court judge to whom the case is assigned or, if the case has not been assigned, by the presiding judge or his or her designee. If intervention is allowed, the case must be returned to the trial court docket unless all parties stipulate ... to proceed before the temporary judge.” In other words, when a party seeks to intervene in a matter pending before a temporary judge, that party's right to intervene must be determined by the trial court, not the temporary judge. Furthermore, if intervention is permitted, the case must be returned to trial court unless the intervenor also agrees to the temporary judge.

Slip op., at 23-24.  Finally, the Court observed that public policy concerns weighed against the procedure advocated by the petitioner, having earlier observed: “A class member objecting to the settlement as unfair will certainly believe he or she is facing an uphill battle in convincing the temporary judge of the merits of the objection; the temporary judge clearly believed in the propriety of the settlement when acting as a mediator.  This could well raise a question of an appearance of impropriety.”

A bit of clarity added to lodestar fee applications

I've had a long-running debate going with several of the judges in the complex litigation program regarding fee awards in class actions.  I contend that California has long recognized contingent fee awards, and there is nothing about class actions that justifies a "lodestar first" approach that seems to be a trend.  A decision issued yesterday didn't settle the debate (it's a decision in a lodestar award situation, not a common fund recovery), but it adds a bit of clarity in other respects.  If you are a plaintiff-side practitioner, you need to know about this one.  In Concepcion v. Amscan Holdings, Inc. (February 18, 2014), the Court of Appeal (Second Appellate District, Division Seven) considered a defendant's appeal of a $350,000 fee award following settlement of a Song-Beverly Credit Card Act suit.

Counsel for plaintiffs submitted declarations describing, in general terms, the categories of work they performed.  The trial court then required the in camera submission of billing records that were not provided to the defendant's attorneys. On appeal, the defendant argued that class counsel failed to submit sufficient evidence to justify the fee award and, in particular, did not demonstrate the time expended by the six law firms involved was reasonably necessary and nonduplicative.  The defendant also argued that the trial court’s in camera review of class counsel’s billing records to support the award was fundamentally unfair and denied it due process.  The Court agreed that it was improper for the court to rely upon billing information not provided to the defendant, preventing any opportunity to challenge it.

Upon learning that the Court rejected in camera review of billing records, you might be tempted to conclude that this means that detailed billing records must be provided to the defendant.  That is not required, and it is also why this case is important.

As the Court explained, it is not necessary to provide detailed billing records in order to support a fee award:

It is not necessary to provide detailed billing timesheets to support an award of attorney fees under the lodestar method. (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 254 [affirming lodestar fee award based on “declarations evidencing the reasonable hourly rate for [the attorneys’] services and establishing the number of hours spent working on the case”; “California case law permits fee awards in the absence of detailed time sheets”]; see Mardirossian & Associates v. Ersoff (2007) 153 Cal.App.4th 257, 269 [“there is no legal requirement that an attorney supply billing statements to support a claim for attorney fees”].) Declarations of counsel setting forth the reasonable hourly rate, the number of hours worked and the tasks performed are sufficient. (Steiny & Co. v. California Electric Supply Co. (2000) 79 Cal.App.4th 285, 293 [“[a]n attorney’s testimony as to the number of hours worked is sufficient to support an award of attorney fees, even in the absence of detailed time records”].) “‘Although a fee request ordinarily should be documented in great detail, it cannot be said . . . that the absence of time records and billing statements deprive[s] [a] trial court of substantial evidence to support an award . . . .’” (City of Colton v. Singletary (2012)
206 Cal.App.4th 751, 784-785.)

Slip op., at 17.  The Court then noted that, while the declarations of counsel provided total hours, the declarations, for the most part, did not break out the total number of hours each attorney spent on each type of work in a category.  This spartan showing was found to be insufficient by the Court:

As discussed, class counsel had the burden of proving the reasonable number of hours they devoted to the litigation, whether through declarations or redacted or unredacted time sheets or billing records. (See, e.g., Ellis v. Toshiba America Information Systems, Inc. (2013) 218 Cal.App.4th 853, 883; El Escorial Owners’  Assn. v. DLC Plastering, Inc., supra, 154 Cal.App.4th at p. 1366.) “A trial court may not rubberstamp a request for attorney fees, but must determine the number of hours reasonably expended.” (Donahue v. Donahue (2010) 182 Cal.App.4th 259, 271.)

Slip op., at 18.  The clear message is that, while it is proper for counsel to decline to submit billing sheets, the "reasonable" fees must be supported with a detailed declaration as an alternative approach.  It would appear that, to be definitely safe, a declaration for this purpose must include a thorough summary of the number of hours spent on various categories of work in the case.  But the practice of requiring the submission of detailed billing records is improper.  Whether you want to go that route and tell the trial court it is improper is another story.

Next, the Court considered the argument that the review of billing records in camera denied defendant a due process right to challenge the records.  The Court swiftly concluded that it did: "Under our adversarial system of justice, once class counsel presented evidence to support their fee request, Party City was entitled to see and respond to it and to present its own arguments as to why it failed to justify the fees requested."  Slip op., at 18.)

The Court essentially held that, while billing records weren't necessary to support a fee request, once provided, they had to be shared.  The Court dismissed the argument that the records were likely to contain a large volume of privileged information, suggesting that redaction would suffice.  The Court also found that cursory declarations with total numbers of hours were insufficient.  So, sufficient lies somewhere between billing records and cursory declarations with total hours listed.  Now you know what you can't do, what you don't have to do, and what you probably ought to do.

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 plaintiffs.  By 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 Legislature’s 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.

AAA escapes class action alleging backdating of late renewals

Still playing catch-up.  Today's edition of blog from the past concerns the Automobile Club of Southern California, an organization that inspires mixed feelings in me.  On the one hand, they do provide what I consider to be excellent insurance services.  But I can't help but feel that there is a dark underbelly at AAA of SoCal.  Some of that underbelly was challenged but escaped unscathed in Thompson v. Automobile Club of Southern California (pub. Ord. June 27, 2013), in which the Court of Appeal (Fourth Appellate District, Division Three) affirmed the trial court's denial of class certification in a case alleging claims based on the backdating of the membership renewals when the renewal is late.

The plaintiff specifically challenged the practice of “backdating” late renewals to the member’s original expiration date if the renewal occurs within 95 days.   The plaintiff contended that this practice resulted in late-renewing members receiving less than a full year of services. The Auto Club argued that the 95-day period is a “grace period” and that members are generally permitted to continue receiving services, particularly during the first 31 days, and saves members the $20 fee to start a new membership.  The plaintiff moved for class certification.  The trial court denied the motion, finding that the class members could not be ascertained and that individual questions predominated.

With respect to the factual issues surrounding class certification, we afford the trial court “ ‘great discretion in granting or denying certification.’ ” (In re Tobacco II Cases (2009) 46 Cal.4th 298, 311.) The trial court’s ruling will be reversed only if a “ ‘manifest abuse of discretion’ ” is present. (Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1022.) “ ‘A certification order generally will not be disturbed unless (1) it is unsupported by substantial evidence, (2) it rests on improper criteria, or (3) it rests on erroneous legal assumptions. [Citations.]’ [Citations.]” (Ibid.)

Slip op., at 6.  The Court said, “ ‘We may not reverse, however, simply because some of the court’s reasoning was faulty, so long as any of the stated reasons are sufficient to justify the order. [Citation.]’ (Kaldenbach v. Mutual of Omaha Life Ins. Co. (2009) 178 Cal.App.4th 830, 843-844.)”  Slip op., at 6-7.

The Court then examined the bases of the trial court’s decision.  Looking first at the trial court’s ascertainability finding, the Court concluded that the class definition was significantly overbroad, and thus not ascertainable from the available records:

If putative class members either received benefits during the delinquency period, were not damaged as a result of the renewal policy, or renewed after the Auto Club’s membership policy was disclosed, their ability to recover is called into serious question. If class members received benefits during the delinquency period or they were told about the Auto Club’s renewal practices, they cannot maintain a cause of action under the UCL.  If they were not economically damaged, they cannot recover on a breach of contract, under the CLRA, or through an unjust enrichment claim.  (See Civ. Code., § 1780, subd. (a); Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388; Lectrodryer v. SeoulBank (2000) 77 Cal.App.4th 723, 726.)

Slip op., at 11.  As it so happens, I disagree that the ability to identify the class from available records is the touchstone of ascertainability.  Certainly that is one very useful way, but the purpose of a class definition is to allow a potential class member to determine when reading the definition whether they are a member of the class.  Consider consumer class actions involving retail transactions.  Often, there is no way to know the identity of purchasers of a product; but the purchasers know.  The notion that the class can only be ascertained if they are identified in available records is simply an invitation to maintain shoddy records and a strangely narrow view of what it means to have an ascertainable class.  This portion of the opinion is horse hockey.

You can sense when the outcome won't go your way as the plaintiff when the Court of Appeal began by strongly emphasizing the discretion given to the trial court’s ruling on certification:

Anyhow, the Court of Appeal then agreed that the same issues impacting the ability to identify the class (under the Court's narrow view of ascertainability) presented individualized issues that predominated over common questions:

The trial court found that individual issues predominate: “(A) Individual issues predominate regarding whether a putative class member is entitled to recover on any of Plaintiff’s causes of action. This is because, as stated above, there were members who suffered no injury because they (i) received services during their delinquency, (ii) had the Auto Club’s renewal policy explicitly disclosed to them, and/or (iii) were economically better off under the Auto Club’s system of renewal than they would have been if they had begun new memberships on the date of payment and paid the $20 new enrollment fee. Determining whether a member falls into any of these categories and would therefore not be entitled to recover from the Auto Club on any of Plaintiff's theories of liability, can only be done on a case-by-case basis.” The court went on to explain that essentially the same reasons applied to each cause of action.

Slip op., at 13-14.  The Court concluded by finding that the arguments concerning typicality and superiority were not significant because of the substantial problems with ascertainability and commonality.  The decision presents an example of the potential for a serious entanglement of merits questions with certification issues when the Court considered the viability of the plaintiff’s theory.

In Ramirez v. Balboa Thrift and Loan, Court of Appeal directs reconsideration of certification denial in UCL case

The Rees-Levering Motor Vehicle Sales and Finance Act protects consumers involved in, you guessed it, motor vehicle sales and finance transactions.  In Ramirez v. Balboa Thrift and Loan (pub. Ord. April 12, 2013 and published April 22, 2013), the Court of Appeal (Fourth Appellate District, Division One) concluded that the trial court's decision to deny class certification of Plaintiffs' UCL claim asserting violation of the Rees-Levering Act was predicated upon an erroneous legal analysis.

​Ramirez financed a car, but didn't make many payments in a timely manner.  Ramirez then voluntarily surrendered the car.  Balboa sold the car and asserted a deficiency.  Ramirez then sued, contending that the NOI failed to comply with the Act.

On the legal issue, the Court said:​

[A] seller cannot recover a deficiency unless the NOI specifically and timely notifies the buyer of the conditions precedent to loan reinstatement OR timely notifies the buyer that there is no right of reinstatement and provides a statement of reasons for this conclusion. Reading together sections 2983.2 and 2983.3, a seller/holder who wishes to preserve its rights to claim a deficiency must determine within a 60-day period after repossession whether a buyer is entitled to a reinstatement, and then notify the buyer of this decision. Given the Legislature's manifest intent to set forth the exclusive process for creditors to obtain a deficiency balance after a vehicle repossession or surrender, there is no room for reading additional exceptions into the statutory scheme.​

Slip op., at 18.​  More interesting for class purposes, the Court also noted the following:

Equally important for class certification purposes, even assuming the statutory exception could be asserted after the statutory time period had expired, Balboa did not proffer any facts showing that any such exception would apply to any of the other class members. Instead, it merely stated that individual issues would predominate because it should be provided the right to "investigate" each class member to determine whether it could find any facts showing the applicability of any of the statutory exceptions. Without any foundational basis showing that such evidence could or would be discovered, this possibility does not raise a likelihood that individual issues would predominate over common issues in the litigation. (See Brinker, supra, 53 Cal.4th at p. 1025 [in deciding certification question court must examine the plaintiff's theory of recovery and "assess the nature of the legal and factual disputes likely to be presented," italics added].)​

Slip op., at 20.  While plaintiffs often consider their obligations only at the time of certification, this is a reminder to examine the defendant's showing in opposition carefully; if the defendant failed to support a contention, point it out.

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.