The tort of "Trespass to Chattel," by itself, does not support a UCL violation

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I just wanted to write “trespass to chattel,” so this case gets a post just for that. In Pneuma International, Inc. v. Cho (June 24, 2019), the Court of Appeal (First Appellate District, Division One) was asked to review an assortment of complaints about the outcome of a trial. One issue was whether the failure to transfer ownership of a domain, the “trespass to chattel” that was at issue, constituted a fraudulent or unfair practice under the UCL. While Pneuma argued that the UCL’s “unlawful” prong is construed broadly, so there should be no resistance to borrowing the tort to serve as the predicate violation, the Court was not persuaded. After noting the dearth of authority on that particular tort, the Court said:

Although not directly relevant to whether Pneuma may “borrow” a tort as a basis for a UCL cause of action, respondents correctly observe that Pneuma may not recover damages under a UCL cause of action because remedies under the act are purely equitable in nature. (E.g., Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1150-1151 [remedies provided under UCL “are limited” and “it is well established that individuals may not recover damages”].) Pneuma does not identify what additional relief it would be entitled to if it prevailed on its UCL cause of action. The trial court already ordered the equitable relief of transferring the egpak.com website to Pneuma after it prevailed on a cause of action for trespass to chattel.

Slip op., at 15. So, does this mean that, where the UCL could supply some additional relief, a common law tort could serve as a predicate violation of the UCL? More realistically, can you even concoct a scenario where it would make sense to say that a common law tort constituted the predicate violation?

Court of Appeal examines "economic injury" and "causation" under the UCL in Veera v. Banana Republic, LLC

Very briefly, I direct your attention to Veera v. Banana Repulic, LLC (December 15, 2016), decided by the California Court of Appeal (Second Appellate District, Division Four).  In Veera, the Court examined the evidence necessary to create a triable issue of fact as to whether an advertisement of a sale resulted in an actionable economic injury caused by an unfair business practice.

The plaintiffs alleged that signs in Banana Republic store windows advertising a 40 percent off sale were false or misleading because they did not state that the discount applied only to certain items. The plaintiffs introduced evidence indicating that, in reliance on the allegedly false advertising, they were induced to shop at certain Banana Republic stores and selected various items for purchase at the advertised discount. However, as the items were being rung up at the cash register, they were told for the first time that the advertised discount did not apply to their chosen merchandise. The plaintiffs claimed that, after waiting in line to purchase the selected items, and due to frustration and embarrassment, they just bought some of the items they chose even though the discount did not apply.  Applying Kwikset, the Court of Appeal concluded that this evidence was sufficient to create a triable issue and defeat summary judgment.

One Justice dissented in the result. The dissent raises the interesting question of whether lost opportunity costs and time are sufficient to create injury under the UCL and/or the FAL.

Appellants were represented by Jones, Bell, Abbott, Fleming & Fitzgerald, William M. Turner, Asha Dhillon; Grignon Law Firm, Anne M. Grignon and Margaret M. Grignon.

In Ebner v. Fresh, Inc., the Ninth Circuit affirms dismissal of a putative consumer class action

The Ninth Circuit, by virtue of geography, periodically has to rule on claims based upon California's consumer protection laws.  In Ebner v. Fresh, Inc. (Sept. 27, 2016), the Ninth Circuit reviewed a District Court's dismissal with prejudice of a putative class action alleging that the defendant deceived consumers about the quantity of lip balm in the defendant's product line.

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

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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.

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

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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.

AT&T Mobility LLC receives some due process love from the Ninth Circuit, this time as a plaintiff

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When the Ninth Circuit decided, Mazza v. Am. Honda Motor Co., 666 F.3d 581 (9th Cir. 2012), the immediate reaction from the commentator class was to conclude that it was a substantial setback for plaintiffs and a "pro-defense" decision.  However, a recent decision of the Ninth Circuit suggests that, possibly, a black-and-white reading of Mazza could be inaccurate.  In AT&T Mobility LLC v. AU Optronics Corp. (Feb. 14, 2013), the Ninth Circuit considered whether the District Court erred when it dismissed California anti-competition state law claims based on purchases that occurred outside California.  The Court concluded that, to the extent conspiratorial conduct was sufficiently connected to California, the application of California law would be neither arbitrary nor fundamentally unfair.

The Court explained that allegations of a conspiracy to price fix, occurring in California, were sufficient to render the allegations constitutionally sound:

Nor would the application of California law impermissibly undermine the policies of other states, as Defendants contend. Because the Due Process Clause does nothing but circumscribe the universe of state laws that can be constitutionally applied to a given case, we “need not . . . balance the competing interests of California and [other states].” United Farm Workers of Am., AFL-CIO v. Ariz. Agric. Emp’t Relations Bd., 669 F.2d 1249, 1256 (9th Cir. 1982); see also Allstate, 449 U.S. at 308 n.10 (“[T]he Court has since abandoned the weighing-of-interests requirement.”). Objections based on the interests of other states are more properly raised under a choice of law analysis, or potentially under a challenge predicated on some other provision of the U.S. Constitution. Defendants raised no such arguments before the district court.

Slip op., at 15.

The question, then, is whether the focus on the conspiracy situated in California would change the analysis of Mazza, which turned on the issue of where consumers received allegedly misleading advertisements.  California can certainly articulate a sound basis for its interest in deterring price-fixing conspiracies occurring within its borders.

Ordinary agency principles apply in UCL and FAL cases

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And now I get to try and play catch-up after spending so much time with the back-end issues that have to be ironed out to start a podcast.  To many visitors, this may be old news, but I'd like to note significant cases from the last month so they are here for reference.  I've faced down the issue of whether agency principles apply in UCL and FAC cases.  In People v. JTH Tax, Inc. (January 17, 2013), the Court of Appeal (First Appellate District, Division Two) tackled that exact issue.  Of primary significance as far as I am concerned is the fact that the Court criticized two cases commonly cited by defendants on this issue, People v. Toomey, 157 Cal.App.3d 1 (1985) and Emery v. Visa Internat. Service Assn., 95 Cal. App. 4th 952 (2002).

The background is complex, but a brief summary puts the discussion in context.  Liberty provides certain tax preparation and related loan services throughout the United States.  Liberty had more than 2,000 franchised and company-owned stores throughout the United States.  Liberty offered tax preparation services, e-filing, “refund anticipation loans” (RAL) and “electronic refund checks” (ERC).  The Attorney General filed a complaint against Liberty, alleging that Liberty had violated the UCL and the FAL.  The lawsuit claimed there were misleading or deceptive statements in print and television advertising by Liberty and its franchisees regarding Liberty's RAL's and ERC's and inadequate disclosures to customers in Liberty's RAL and ERC applications regarding debt collection, certain costs and interest on the extension of credit, the time it takes to receive money under refund options offered, and other matters. The remedies the People sought included injunctive relief, civil penalties, and an order of restitution.

When the Court turned to the legal issue of agency liability for UCL and FAL violations, the Court said:

Also, as the People point out, our Supreme Court has held, without the limitations urged by Liberty in the present case, that “section 17500 [the FAL] incorporates the concept of principal-agent liability.” (Ford Dealers Assn. v. Department of Motor Vehicles (1982) 32 Cal.3d 347, 361 ( Ford Dealers ).) Since violations of the UCL “include any . . . unfair, deceptive, untrue or misleading advertising and any act prohibited by [the FAL]” (§ 17200), Ford Dealers establishes that persons can be found liable for misleading advertising and unfair business practices under normal agency theory. To the extent that Toomey, supra, 157 Cal.App.3d 1, or Emery, supra, 95 Cal.App.4th 952 hold otherwise, which defendant implies without stating outright in the course of arguing its limiting theories, these cases are mistaken.

It is clear that, as the trial court recognized, we must be mindful that we are applying agency theory in the context of the franchisor-franchisee relationship. A franchisee, by definition, operates a business “under a marketing plan or system prescribed in substantial part by a franchisor,” which operation “is substantially associated with the franchisor's trademark, service mark, trade name, logotype, advertising or other commercial symbol designating the franchisor . . . .” (Corp. Code, § 31005, subd. (a)(1), (2).) Accordingly, “the franchisor's interest in the reputation of its entire [marketing] system allows it to exercise certain controls over the enterprise without running the risk of transforming its independent contractor franchise into an agent.” (Cislaw , supra, 4 Cal.App.4th at p. 1292, quoted in Kaplan, supra, 59 Cal.App.4th at p. 745.) Thus, a franchisor may exercise a right of control over such activities as advertising to protect its marks and goodwill.

However, it is equally clear that the franchisor's unique interests do not eliminate or alter the application of agency theory if the franchisor exercises a right of control that goes beyond its interests in its marks and goodwill. It is a question of fact as to whether, as the court considered in Cislaw, the franchisor retains " 'the right to control the means and manner in which the result is achieved' " and exercises "complete or substantial control over the franchisee." ( Cislaw, supra, 4 Cal.App.4th at p. 1288.) This is precisely the standard applied by the trial court. Therefore, Liberty's argument that the court applied the wrong legal standard to determine that it was liable for its franchisees' misleading advertising lacks merit.

Slip op., at 24-25.  The opinion, overall, is massive, since much of the discussion focuses on the factual record in the trial court.  The legal discussion of principle-agent liability for UCL and FAL violations is sure to work its way into civil litigation.

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.

Do NOT cite opinions after review is granted by the California Supreme Court (even if you claim you aren't relying on them). Stop. No. Don't. I see that.

Generally speaking, unpublished cases cannot be cited or relied upon by parties or courts.  California Rules of Court, rule 8.1115 states, in part: "Except as provided in (b), an opinion of a California Court of Appeal or superior court appellate division that is not certified for publication or ordered published must not be cited or relied on by a court or a party in any other action."  Cal. Rules Ct., rule 8.1115(a).  The only exceptions arise when the same parties are involved, or the conduct of a party in one case is relevant in criminal or disciplinary proceedings in another.  When review of a published case is granted by the California Supreme Court, it is depublished: "Unless otherwise ordered under (2), an opinion is no longer considered published if the Supreme Court grants review or the rendering court grants rehearing."  Cal. Rules Ct., rule 8.1105(e).  In The People v. E*Poly Star, Inc. (May 14, 2012), the Court of Appeal (Second Appellate District, Division Seven) let E*Poly and the Trial Court have it for referencing Aryeh v. Canon Business Solutions, Inc. (2010) 185 Cal.App.4th 1159, review granted Oct. 20, 2010 (S184929) (Aryeh).

On the issue of improper citation of an unpublished decision, the Court said:

Supreme Court review in Aryeh was granted on October 20, 2010 (S184929), more than a month prior to the filing of the district attorneys' lawsuit. As of that date any citation to, or reliance upon, that decision was expressly prohibited by rule 8.1115(a) of the California Rules of Court except under the limited circumstances set forth in rule 8.1115(b), none of which appears to be applicable to the case at bar. (See rule 8.1105(e)(1) [“[u]nless otherwise ordered . . ., an opinion is no longer considered published if the Supreme Court grants review”].) Nonetheless, employing something akin to the rhetorical device formally known as paraleipsis or apophasis—that is, mentioning something while disclaiming any intention of mentioning it—E*Poly Star in the trial court and once again in its brief in this court, after noting the Court of Appeal decision in Aryeh is not citable, has discussed the case at length and argues we should defer to its reasoning.  This use of an unpublished, noncitable opinion is a direct violation of rule 8.1115(a) and is wholly unacceptable. (Cf. rule 8.276(a)(4) [authorizing sanctions on the court's own motion for any unreasonable violation of the Rules of Court].)

Slip op., at 12-13 (footnote references omitted).  But the Court wasn't done, stating in a footnote:

E*Poly Star's improper use of Aryeh transcends suggesting we consider the case for its persuasive value. While purporting to recognize the split panel decision by our colleagues in Division Eight is no longer even citable, E*Poly Star contends it is, in fact, binding on us: “It is respectfully submitted that it is not the function of this reviewing court to second-guess itself and re-address a prior published decision, merely and especially because the decision is being reviewed by the State Supreme Court.” That is simply wrong. Even were the case still published, we would not be obligated to adopt its result; there is no “horizontal stare decisis” in the Court of Appeal. (Jessen v. Mentor Corp. (2008) 158 Cal.App.4th 1480, 1489, fn. 10; In re Marriage of Shaban (2001) 88 Cal.App.4th 398, 409.) Although, as E*Poly Star states, we frequently follow a prior decision by another division of this court or another district, we will not do so if there is reason to disagree with the conclusion of that case. (People v. Kim (2011) 193 Cal.App.4th 836, 847; Greyhound Lines, Inc. v. County of Santa Clara (1986) 187 Cal.App.3d 480, 485.)

Slip op., at 12.  "Horizontal stare decisis."  Priceless.  There really ARE some things money can't buy.

Ending its discussion of the use of uncitable authority, the Court also chided the Trial Court:

Similarly, the trial court's reference to the Aryeh opinion and its implicit adoption of its holding with the statement it “agrees with Aryeh's analysis” constitute an impermissible use of a noncitable decision. If the trial court is somehow familiar with an unpublished opinion and finds its analysis persuasive, then it is free to utilize that analysis, just as courts may adopt as their own the analysis contained in the parties' briefs. Any reference to the unpublished case itself, however, violates rule 8.1115(a) even if, as here, accompanied by the qualification, “even though not citable.”

Slip op., at 13.  I saw this happen several times while Brinker was pending.  A number of trial courts observed that Brinker was under review but then said that they agreed with its analysis and were adopting it.  Naughty.

The Court also discusses statute of limitation and accrual issues that may be impacted by Aryeh, but I thought the discussion of uncitable authority was a lot more entertaining than a discussion that could be mooted by Aryeh and might be nullified on a grant and hold pending Aryeh in any event.

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.