Source: http://thecomplexlitigator.com/post-data/category/Class+Actions%3A+CLRA
Timestamp: 2019-04-22 05:11:28+00:00

Document:
Opinions concerning arbitration issues seem less about uniformity of analysis these days and more about the politics of arbitration. Sophistry comes to mind. Consider the following observation: "Section 2 of the Federal Arbitration Act (FAA) provides that an arbitration provision 'shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.' 9 U.S.C. § 2." AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1753, 179 L. Ed. 2d 742 (2011), J. Thomas conc. This seems straightforward enough. And yet, in Caron v. Mercedes-Benz Financial Services USA LLC (July 30, 2012), the Court of Appeal (Fourth Appellate District, Division Three), managed to conclude that the Consumer Legal Remedies Act (CLRA) prohibition on class action waivers in any consumer contract was pre-empted by the FAA. A rule prohibiting class action waivers in any form of consumer contract is, according to this reasoning, not a ground in law for the revocation of such contracts. It is, instead, a provision that "interferes" with the FAA.
Defendants argue the trial court erred because the FAA preempts the CLRA's prohibition against class action waivers and therefore the trial court could not rely on the CLRA as a ground for denying Defendants' petitions. Based on the United State Supreme Court's decision in AT&T Mobility LLC v. Concepcion (2011) ___ U.S. ___, ___; 131 S.Ct. 1740 (AT&T Mobility), we agree the FAA preempts the CLRA's anti-waiver provision because the provision acts as an obstacle to the FAA's intention of enforcing arbitration agreements according to their terms.
If any part of this Arbitration Clause, other than waivers of class action rights, is deemed or found to be unenforceable for any reason, the remainder shall remain enforceable. If a waiver of class action rights is deemed or found to be unenforceable for any reason in a case in which class action allegations have been made, the remainder or this Arbitration Clause shall be unenforceable.
Slip op., at 4. This agreement anticipates the potential illegality of the clause at issue. By its own terms, the agreement chooses to reject arbitration if it must occur in the class context. There is no law banning arbitration here. There is a general rule govering consumer contracts that specifies the lawful terms of those agreements. The agreement contains a self-executing kill switch. Had the agreement been silent, the Stolt-Neilsen analysis should have concluded that, aware of California law, the parties anticipated the potential for a class action. But how the Court concludes that the CLRA's regulation of consumer contracts constitutes "interference" with consumer contracts sufficient to pre-empt the CLRA's general regulation of consumer contracts is beyond me.
Section 2 of the FAA is not a nugatory clause. Efforts to interpret it out of existence should be rejected. Given that Caron diverges from Fisher v. DCH Temecula Imports LLC, 187 Cal. App. 4th 601 (2010), it appears that further guidance from the California Supreme Court would benefit parties to consumer contracts.
Certiorari denied in Ticketmaster, et al. v. Stearns, et al.
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.").
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.
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.
...and that's how I saved all that data!
With AT&T Mobility LLC v. Concepcion, ___ U.S. ___, 131 S.Ct. 1740 (2011) in the bank and earning interest, the new defense playbook includes a renewed, direct assault on Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal. 4th 83 (2000). But in Sanchez v. Valencia Holding Company, LLC (October 24, 2011), the Court of Appeal (Second Appellate District, Division One) stongly declared the ongoing viability of Armendariz after Concepcion. In other words, Concepcion is to state law unconscionability analysis as tap water is to vampires - no effect.
The allegations are easy to summarize. Plaintiff Sanchez wanted to buy a used Mercedes. The dealer charged him $3,700 to have the vehicle "certified" as eligible for a lower interest rate. That was a lie. The charge was for an undisclosed and optional extended warranty. The dealer charged him new tire fees when not all of the tires were new. Plaintiff was also told that the vehicle was a "certified" used Mercedes, having been through a rigorous inspection and maintenance process. That was also a lie. Sanchez filed a class action alleging, among other things, violations of the CLRA, ASFA, UCL, Song-Beverly Act, and Public Resources Code section 42885.
Valencia moved to compel arbitration. The trial court denied the motion, stating that the CLRA expressly provides for class actions and declares the right to a class action to be unwaivable. (See Civ. Code, §§ 1781, 1751.) As a consequence, the class action waiver in the arbitration provision was unenforceable. Further, because the agreement included a poison pill clause, the unenforceability of the class action waiver made the entire arbitration provision unenforceable. The trial court therefore denied the motion. Valencia appealed.
We do not address whether the class action waiver is unenforceable. Rather, we conclude the arbitration provision as a whole is unconscionable: The provision is procedurally unconscionable because it is adhesive and satisfies the elements of oppression and surprise; it is substantively unconscionable because it contains terms that are one-sided in favor of the car dealer to the detriment of the buyer. Because the provision contains multiple invalid terms, it is permeated with unconscionability and unenforceable. Severance of the offending terms is not appropriate. It follows that the case should be heard in a court of law.
Slip op., at 11-12. In the balance of the opinion, the Court found procedural unconscionability (one-sided and surprise) and substantive unconscionability (several terms favoring dealer). The Court then concluded that some of the substantive defects could not be cured by striking provisions.
The Court explicity declined to address the issue of whether the CLRA rendered the class action waiver provision unenforceable.
Justice Rothschild concurred in the judgment.
Mr. Johnson may bring these UCL and CLRA claims on behalf of a class. Although Proposition 64 requires that Mr. Johnson actually relied on General Mills' alleged misrepresentations to bring his UCL claim, that requirement does not apply to absent class members. See In re Tobacco II Cases, 46 Cal.4th 298, 321, 326 (2009) (finding that Proposition 64 “was not intended to have any effect at all on unnamed members of UCL class actions”). Indeed, “relief under the UCL is available without individualized proof of deception, reliance and injury.” Id. at 320; see also In re Steroid Hormone Prod. Cases, 181 Cal.App. 4th 145, 154 (2010) (explaining that once the named plaintiff meets standing requirements “no further individualized proof of injury or causation is required to impose restitution liability [under the UCL] against the defendant in favor of absent class members”).
As the Supreme Court of California has explained in the UCL context, " ‘a presumption, or at least an inference, of reliance arises whenever there is a showing that a misrepresentation was material.’ " In re Tobacco II Cases, 46 Cal.4th at 327 (quoting Engalla v. Permanente Med. Grp., Inc., 15 Cal.4th 951, 977 (1997)). Similarly, a CLRA claim can be litigated on a classwide basis when the “record permits an ‘inference of common reliance’ to the class.” McAdams v. Monier, Inc., 182 Cal.App. 4th 174, 183 (2010) (quoting Mass. Mut. Life Ins. Co. v. Superior Court, 97 Cal.App. 4th 1282, 1293 (2002)). A representation is material “if a reasonable man would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question.” In re Tobacco II Cases, 46 Cal.4th at 327 (internal quotation marks omitted); see also Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1025 (9th Cir.2008) (explaining that a concealed fact is “material” under the UCL if reasonable consumers are likely to be deceived). This “objective standard ... is susceptible to common proof.” Wolph v. Acer Am. Corp., ––– F.R.D. ––––, No. C 09–01314 JSW, 2011 WL 1110754, at *9 (N.D.Cal. Mar. 25, 2011). And materiality is generally a question of fact for the jury. In re Tobacco II Cases, 46 Cal.4th at 327.
Accordingly, Mr. Johnson's UCL and CLRA claims present core issues of law and fact that are common and suitable for adjudication on a classwide basis. These issues include: (1) whether General Mills communicated a representation—through YoPlus packaging and other marketing, including television and print advertisements—that YoPlus promoted digestive health; (2) if so, whether that representation was material to individuals purchasing YoPlus; (3) if the representation was material, whether it was truthful; in other words, whether YoPlus does confer a digestive health benefit that ordinary yogurt does not; and (4) if reasonable California consumers who purchased YoPlus were deceived by a material misrepresentation as to YoPlus' digestive health benefit, what is the proper method for calculating their damages. The commonality requirement is also met here.
Slip op., at 2-3. Seems like products claiming digestive health benefits inevitably cause indigestion for the companies making those claims.
Will the Ninth Circuit affirm nationwide certification of state law claims?
In the matter of Mazza, et al v. American Honda Motor Company, the Ninth Circuit will hear oral argument on June 9, 2010, at 9:30 a.m., in Pasadena, California. Defendant's Rule 23 Petition was granted after the District Court certified UCL and CLRA claims on a nationwide basis. The District Court's extensive discussion of choice-of-law analysis may be the primary focus. The outcome may prove to be significant for the many Toyota acceleration cases assigned to Judge Selna in the same Central District from which Mazza was issued. I would like to attend and provide a detailed account of the argument, but my schedule may not permit it. If I cannot attend, I will try to arrange for someone to report in my absence.
Sharp Healthcare is responsible for two of the three published decisions issued today that concern class action issues. Hale v. Sharp Healthcare (April 19, 2010) and Durell v. Sharp Healthcare (April 19, 2010) both concern putative class actions. Both involve billing practices by Sharp Healthcare related to its "regular" billing rate. Both concern trial court orders sustaining demurrers to UCL causes of action. And both pronounce new situations where "reliance" is required for UCL claims. However, the outcomes in the two appeals differ by the width of, at most, a couple of sentences of allegations; one passes muster as a "reliance" allegations and one does not.
Both cases concern the basic theory that Sharp engaged in deceptive and unfair practices by billing uninsured patients its full standardized rates for services, when it substantially discounts those rates for patients covered by Medicare or private insurance. Both cases questioned, in slightly different ways, what actually constitutes the "regular rates" charged to patients.
The court sustained the demurrer to the UCL cause of action without leave to amend on the ground Durell lacks standing to pursue the claim. The court found the SAC insufficiently alleges "injury in fact" and causation. (Bus. & Prof. Code, § 17204.) As to causation, the court explained the SAC fails to allege Durell was harmed "as a result of" Sharp's conduct. (Ibid.) For instance, the SAC does not allege he "relied on Sharp charging its 'usual and customary rates' in receiving treatment." We turn first to the causation issue, which we find dispositive.
The SAC does not allege Durell relied on either Sharp's Web site representations or on the language in the Agreement for Services in going to Sharp Grossmont Hospital or in seeking or accepting services once he was transported there. Indeed, the SAC does not allege Durell ever visited Sharp's Web site or even that he ever read the Agreement for Services.
Even though the SAC alleges Hale has paid only $500 of her $14,447.65 medical bill, it also alleges the Admission Agreement obligates her to pay Sharp the balance on her account. Thus, she faces at least an imminent invasion or injury to a legally protected interest. (See Troyk, supra, 171 Cal.App.4th at p. 1346.) The term "imminent" is defined as "ready to take place," "hanging threateningly over one's head," and "menacingly near." (Webster's 3d New Internat. Dict. (1993) p. 1130.) Certainly, this is not the type of action Proposition 64 was intended to squelch. Hale was a bona fide consumer of medical services.
We agree with Hale, however, that "to the extent [she] is bringing a fraud-based claim under the UCL, she has reasonably pled reliance." The SAC alleges Hale signed the Admission Agreement, and "at the time of signing the contract, she was expecting to be charged 'regular rates,' and certainly not the grossly excessive rates that she was subsequently billed." (Italics added.) This allegation appears in the breach of contract cause of action, but the UCL cause of action incorporates the allegations of all other causes of action. We must interpret the complaint reasonably, "reading it as a whole and its parts in their context." (Stearn v. County of San Bernardino (2009) 170 Cal.App.4th 434, 439.) As Hale notes, the "difference between 'expecting' to be charged regular rates and 'relying' on being charged regular rates is a distinction without a difference." We see no utility in requiring Hale to amend her complaint to exchange the term "expecting" for the term "relying."
Hale, at 14-15. Lesson one from these cases is that small differences in pleading facts can make a big difference.
Here, the court's order does not specifically address the "unfair" prong of the UCL. The SAC alleges Sharp's conduct violates public policy, and is "immoral, unethical, oppressive, and unscrupulous," a vague test of unfairness this court rejects. The SAC does not allege the conduct is tethered to any underlying constitutional, statutory or regulatory provision, or that it threatens an incipient violation of an antitrust law, or violates the policy or spirit of an antitrust law. In his briefing, Durell does not address Cel-Tech, supra, 20 Cal.4th 163, and its affect on the definition of "unfair" in consumer UCL cases, or this court's opinions in Scripps Clinic, supra, 108 Cal.App.4th 917, and Byars, supra, 109 Cal.App.4th 1134. We conclude the court properly granted the demurrer as to the claim under the "unfair" prong of the UCL.
Again, however, to the extent Hale's CLRA claim is fraud-based, the SAC adequately alleges the reliance element. Thus, the court erred by sustaining the demurrer to the CLRA cause of action.
I will look forward to reading The UCL Practitioner's assessment of these two opinions.
United States District Court Judge Jeremy Fogel (Northern District of California) granted, with leave to amend, a motion to strike class allegations in a suit alleging a defect in Whirlpool-manufactured top-loading Kenmore Elite Oasis automatic washing machines (“the Machines”) that Sears marketed, advertised, distributed, warranted, and offered to repair. Tietsworth v. Sears Roebuck and Co., et al., 2010 WL 1268093 (N.D. Cal. Mar. 31, 2010). The alleged defect in an electronic control board causes machines to stop mid-cycle.
[T]he putative classes alleged in paragraph 98 cannot be ascertained because they include members who have not experienced any problems with their Machines' Electronic Control Boards-or for that matter with any other part of the Machine. “Such members have no injury and no standing to sue.” Hovsepian v. Apple, Inc., No. 08-5788 JF (PVT), 2009 WL 5069144, at *6 (N.D.Cal.2009); see also Bishop, 1996 WL 33150020, at *5 (“courts have refused to certify class actions based on similar ‘tendency to fail’ theories because the purported class includes members who have suffered no injury and therefore lack standing to sue.”).
The opinion also includes an extensive discussion of pleading standards applicable to many different claims for relief predicated on failure to disclose or concealment allegations.
In a prior published opinion, McAdams v. Monier, Inc. (May 30, 2007, C051841), as mod. June 25, 2007, reversed a trial court order denying certification of the proposed CLRA and UCL classes. The gravamen of the complaint was an alleged failure to disclose that the color composition of defendant's roof tiles would erode away, leaving bare concrete, well before the end of the tiles‟ represented 50-year lifetime. Then, the Supreme Court granted review and deferred the matter (grant and hold) in light of In re Tobacco II Cases (2009) 46 Cal.4th 298 (Tobacco II), pending on the Supreme Court's docket at the time. After Tobacco II was decided, the Supreme Court remanded with directions to vacate the decision and reconsider in light of Tobacco II.
As for the UCL, we remand for the trial court to determine if the representative plaintiff meets the Proposition 64 standing requirements, as interpreted in Tobacco II. Otherwise, we find the UCL action suitable for class certification.
The opinion is extensive in its analysis of both the CLRA and the UCL. The CLRA discussion is interesting for many reasons, including approving citation of the standing analysis in Chamberlan v. Ford Motor Co. (N.D.Cal. 2005) 369 F.Supp.2d 1138 (slip op., at 17) and clarification (and, to a degree, limitation) of the extent of the misrepresentation/omission discussion in Outboard Marine Corp. v. Superior Court (1975) 52 Cal.App.3d 30 (slip op., at 13-16).
The UCL discussion is also interesting on many levels. For instance, the Court provides a simple reminder about what happened in Tobacco II: "In Tobacco II, the high court reversed an order that had denied class certification in a UCL lawsuit." Slip op., at 21. In other words, it reversed every element of the trial court order and Court of Appeal Opinion necessary to support that order. Ultimately, the Court applied much of its certification analysis discusses in its CLRA discussion to the UCL claim, concluding that certification was appropriate. The Court then directed the trial court "to determine whether the representative plaintiff can establish UCL standing as defined in Tobacco II and, if not, whether amendment should be permitted to add a new class representative." Slip op., at 28.
Check The UCL Practitioner for more on Monier. Ms. Kralowec has reported extensively on this case and has promised to post detailed comments soon.
The Higher Education Act (HEA) was passed “to keep the college door open to all students of ability, regardless of socioeconomic background.” Rowe v. Educ. Credit Mgmt. Corp., 559 F.3d 1028, 1030 (9th Cir. 2009). Congress also Congress established the Federal Family Education Loan Program (FFELP), a system of loan guarantees meant to encourage lenders to loan money to students and their parents on favorable terms. See 20 U.S.C. §§ 1071-1087-4; Rowe, 559 F.3d at 1030. In Chae, et al. v. SLM Corporation, dba Sallie Mae, et al. (9th Cir. January 25, 2010), the Ninth Circuit considered whether the HEA and FFELP preempted state law consumer protection claims in a putative class action alleging false and misleading disclosures about billing practices.
The Court excluded field preemption from its analysis, noting: "Turning now to the issues before us, we have previously held that field preemption does not apply to the HEA." Chae, at 1382. With that, the Court analyzed whether "express preemption" or "conflict preemption" were present.
Congress has enacted several express preemption provisions applicable to FFELP participants. See, e.g., 20 U.S.C. §§ 1078(d), 1091a(a)(2)(B), 1091a(b)(1)-(3), 1095a(a), 1098g. These provisions expressly preempt the operation of state usury laws, statutes of limitations, limitations on recovering the costs of debt collection, infancy defenses to contract liability, wage garnishment limitations, and disclosure requirements. This last provision, 20 U.S.C. § 1098g, is entitled, “Exemption from State disclosure requirements.” The text of the statute reads: “Loans made, insured, or guaranteed pursuant to a program authorized by Title IV of the Higher Education Act . . . shall not be subject to any disclosure requirements of any State law.” Id. The FFELP falls within Title IV of the HEA, and is thus subject to its express preemption provision.
At bottom, the plaintiffs’ misrepresentation claims are improper-disclosure claims. The plaintiffs do not contend that California law prevents Sallie Mae from employing any of the three loan-servicing practices at issue. We consider these allegations in substance to be a challenge to the allegedly misleading method Sallie Mae used to communicate with the plaintiffs about its practices. In this context, the state-law prohibition on misrepresenting a business practice “is merely the converse” of a state-law requirement that alternate disclosures be made. See Cipollone, 505 U.S. at 527.
Chae, at 1384. The Court was not sympathetic to the plaintiffs' argument that a finding of preemption would eliminate any recourse for unfair practices by Sallie Mae. The Court, in a footnote, suggested that the plaintiffs' only remedy was to complain to the Department of Education. Chae, at 1384-85, n. 6.
Finally, the Court concluded, after a lengthy discussion, that application of state consumer protection laws would directly conflict with the uniformity and stability goal behind the FFELP.

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