Opinion ID: 1801796
Heading Depth: 4
Heading Rank: 1

Heading: Who Must Meet the Standing Requirement in a UCL Class Action, the Representative Plaintiff or All Class Members?

Text: As noted, in granting defendants' motion for decertification, the trial court concluded that the simple language of Prop[osition] 64 required each class member to show injury in fact and causation. Thus, the trial court construed the text of Proposition 64 as requiring absent members to affirmatively demonstrate that they met Proposition 64's standing requirementsinjury in fact and the loss of money or property as a result of the unfair practice. We conclude that the trial court's construction of Proposition 64 was erroneous. The trial court did not identify the simple language in Proposition 64 upon which it based its conclusion. In fact, as we demonstrate, no such language appearsa point that even defendants' counsel conceded at argumentnor is such a construction necessary to address the very specific abuse of the prior UCL standing provision at which Proposition 64 was directed. (8) The first principle of statutory construction requires us to interpret the words of the statute themselves, giving them their ordinary meaning, and reading them in context of the statute (or, here, the initiative) as a whole. If the language is unambiguous, there is no need for further construction. If, however, the language is susceptible of more than one reasonable meaning, we may consider the ballot summaries and arguments to determine how the voters understood the ballot measure and what they intended in enacting it. ( Professional Engineers in California Government v. Kempton (2007) 40 Cal.4th 1016, 1037 [56 Cal.Rptr.3d 814, 155 P.3d 226].) Applying the first principle of construction to the initiative, it is obvious that nothing in its plain language supports the trial court's construction of it as imposing the standing requirement on absent class members. Section 17204 now provides in pertinent part: Actions for relief pursuant to this chapter shall be prosecuted exclusively in a court of competent jurisdiction by the Attorney General or a district attorney or by a county counsel . . . [or] city attorney . . . [or] city prosecutor . . . or upon the complaint of a board, officer, person, corporation, or association, or by a person who has suffered injury in fact and has lost money or property as a result of the unfair competition. Section 17203the statute authorizing representative actionsstates in part: Any person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of Section 17204 and complies with Section 382 of the Code of Civil Procedure, but these limitations do not apply to claims brought under this chapter by the Attorney General, or any district attorney, county counsel, city attorney, or city prosecutor in this state. (9) Notably, the references in section 17203 to one who wishes to pursue UCL claims on behalf of others are in the singular; that is, the person and the claimant who pursues such claims must meet the standing requirements of section 17204 and comply with Code of Civil Procedure section 382. The conclusion that must be drawn from these words is that only this individual the representative plaintiffis required to meet the standing requirements. Thus, the plain language of the statute lends no support to the trial court's conclusion that all unnamed class members in a UCL class action must demonstrate section 17204 standing. (10) `If there is no ambiguity in the language of the statute, then the Legislature [or electorate] is presumed to have meant what it said, and the plain meaning of the language governs.' ( People v. Tindall (2000) 24 Cal.4th 767, 772 [102 Cal.Rptr.2d 533, 14 P.3d 207].) (11) Just as nothing in the initiative's language supports the trial court's conclusion, neither does that conclusion find any support in Proposition 64's ballot materials. (See Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 279 [46 Cal.Rptr.3d 638, 139 P.3d 30] [even though recourse to extrinsic material is unnecessary given plain language of statute, we may consult it for material that buttresses our construction of the statutory language].) The specific abuse of the UCL at which Proposition 64 was directed was its use by unscrupulous lawyers who exploited the generous standing requirement of the UCL to file shakedown suits to extort money from small businesses. Attorneys form[ed] a front `watchdog' or `consumer' organization. They scour[ed] public records on the Internet for what [were] often ridiculously minor violations of some regulation or law by a small business, and sue[d] that business in the name of the front organization. Since even frivolous lawsuits can have economic nuisance value, the attorneys then contact[ed] the business (often owned by immigrants for whom English is a second language), and point[ed] out that a quick settlement (usually around a few thousand dollars) would be in the business's long-term interest. ( People ex rel. Lockyer v. Brar (2004) 115 Cal.App.4th 1315, 1317 [9 Cal.Rptr.3d 844].) In Proposition 64, as stated in the measure's preamble, the voters found and declared that the UCL's broad grant of standing had encouraged `[f]rivolous unfair competition lawsuits [that] clog our courts[,] cost taxpayers' and `threaten[] the survival of small businesses . . . .' (Prop. 64, § 1, subd. (c) [`Findings and Declarations of Purpose'].) The former law, the voters determined, had been `misused by some private attorneys who' `[f]ile frivolous lawsuits as a means of generating attorney's fees without creating a corresponding public benefit,' `[f]ile lawsuits where no client has been injured in fact,' `[f]ile lawsuits for clients who have not used the defendant's product or service, viewed the defendant's advertising, or had any other business dealing with the defendant,' and `[f]ile lawsuits on behalf of the general public without any accountability to the public and without adequate court supervision.' (Prop. 64, § 1, subd. (b)(1)-(4).) `[T]he intent of California voters in enacting' Proposition 64 was to limit such abuses by `prohibit[ing] private attorneys from filing lawsuits for unfair competition where they have no client who has been injured in fact' ( id., § 1, subd. (e)) and by providing `that only the California Attorney General and local public officials be authorized to file and prosecute actions on behalf of the general public' ( id., § 1, subd. (f)). ( Mervyn's, supra, 39 Cal.4th at p. 228, italics added.) On the other hand, the ballot materials also support the conclusion that Proposition 64 did not propose to curb the broad remedial purpose of the UCL or the use of class actions to effect that purpose, but targeted only the specific abuse described above. The proponents' statement in the voter information guide for Proposition 64 described the purpose of the initiative as protect[ing] small businesses from frivolous lawsuits generated by [s]hakedown lawyers [who] `appoint' themselves to act like the Attorney General and file lawsuits on behalf of the people of the State of California, demanding thousands of dollars from small business that can't afford to fight in court. (Voter Information Guide, Gen. Elec. (Nov. 2, 2004) argument in favor of Prop. 64, p. 40, capitalization omitted.) At the same time, the proponents proclaimed that Proposition 64 [p]rotects your right to file a lawsuit if you've been damaged. (Voter Information Guide, Gen. Elec., supra, argument in favor of Prop. 64, p. 40, italics omitted.) [10] Opponents of Proposition 64 argued that the initiative would adversely impact the ability of private groups to enforce consumer protection statutes, including enforcing the laws against selling tobacco to children. (Voter Information Guide, Gen. Elec., supra, argument against Prop. 64, p. 41.) In response, the proponents emphasized:  Proposition 64 doesn't change any of these laws,  and  Proposition 64 would permit ALL the suits cited by its opponents.  (Voter Information Guide, Gen. Elec., supra, rebuttal to argument against Prop. 64, p. 41.) Indeed, the findings and declarations of the purpose of Proposition 64 state quite plainly: `It is the intent of California voters in enacting this act to eliminate frivolous unfair competition lawsuits while protecting the right of individuals to retain an attorney and file an action for relief pursuant to [this chapter].' (Prop. 64, § 1, subd. (d), as reprinted in 4D West's Ann. Bus. & Prof. Code (2008 ed.) foll. § 17203, p. 409.) [11] (12) Notably absent from the ballot materials is any indication that the purpose of the initiative was to alter the way in which class actions operate in the context of the UCL. Indeed, other than the requirement that the representative plaintiff comply with Code of Civil Procedure section 382, the ballot materials contain no reference whatsoever to class actions nor is there any indication that Proposition 64 was intended in any way to alter the rules surrounding class action certification. Those rules do not require that unnamed class members establish standing but, insofar as standing is concerned, focus on the class representative. This is demonstrated by federal law, to which we look when seeking guidance on issues of class action procedure. ( Caro v. Procter & Gamble Co. (1993) 18 Cal.App.4th 644, 656, fn. 7 [22 Cal.Rptr.2d 419].) Under rule 23(a) of the Federal Rules of Civil Procedure (28 U.S.C.), a class action is authorized only if: [¶] (1) the class is so numerous that joinder of all members is impracticable; [¶] (2) there are questions of law or fact common to the class; [¶] (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and [¶] (4) the representative parties will fairly and adequately protect the interests of the class. These requirements are analogous to the requirements for class certification under Code of Civil Procedure section 382. ( Fireside Bank v. Superior Court, supra, 40 Cal.4th at p. 1089.) Under both federal and state procedure, a prerequisite to class certification is the existence of an ascertainable class. ( McElhaney v. Eli Lilly & Co. (D.S.D. 1982) 93 F.R.D. 875, 877 [Prior to a consideration of the criteria established by Rule 23, the Court must determine whether a class exists, and is capable of legal definition.]; American Suzuki Motor Corp. v. Superior Court (1995) 37 Cal.App.4th 1291, 1294 [44 Cal.Rptr.2d 526] [A prerequisite to the maintenance of a class action is the existence of an ascertainable class.].) Although, with respect to whether such a class exists, it has been said that [t]he definition of a class should not be so broad as to include individuals who are without standing to maintain the action on their own behalf ( Clay v. American Tobacco Company (S.D.Ill. 1999) 188 F.R.D. 483, 490), such references do not support the proposition that all class members must individually show they have the same standing as the class representative in order to be part of the class. [12] Rather, federal case law is clear that the question of standing in class actions involves the standing of the class representative and not the class members. (13) Generally standing in a class action is assessed solely with respect to class representatives, not unnamed members of the class. ( In re General Motors Corporation Dex-Cool Products Liability Litigation (S.D.Ill. 2007) 241 F.R.D. 305, 310; see 1 Newberg & Conte, Newberg on Class Actions (3d ed. 1992) § 2.07, p. 2-41 [the standing issue focuses on whether the plaintiff is properly before the court, not whether . . . absent class members are properly before the court].) Representative parties who have a direct and substantial interest have standing; the question whether they may be allowed to present claims on behalf of others who have similar, but not identical, interests depends not on standing, but on an assessment of typicality and adequacy of representation. (7AA Wright et al., Federal Practice and Procedure (3d ed. 2005) § 1785.1, pp. 388-389.) In a class action, then, the trial court initially must address whether the named plaintiffs have standing under Article III to assert their individual claims. If that initial test is met, the court must then scrutinize the putative class and its representatives to determine whether the relationship between them is such that under the requirements of Rule 23 the named plaintiffs may represent the class. The trial court generally need not address the final question of whether the class itself, after certification, has standing. If that court, guided by the nature and purpose of the substantive law on which the plaintiffs base their claims, properly applies Rule 23, then the certified class must necessarily have standing as an entity. ( Vuyanich v. Republic National Bank of Dallas (N.D.Tex. 1979) 82 F.R.D. 420, 428.) As noted, nothing in the text of Proposition 64, nor in the accompanying ballot materials, makes any reference to altering class action procedures to impose upon all absent class members the standing requirement imposed upon the class representative. Moreover, Proposition 64 left intact provisions of the UCL that support the conclusion that the initiative was not intended to have any effect on absent class members. Specifically, Proposition 64 did not amend the remedies provision of section 17203. This is significant because under section 17203, the primary form of relief available under the UCL to protect consumers from unfair business practices is an injunction, along with ancillary relief in the form of such restitution as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition. (§ 17203.) Neither form of relief requires that the absent class members, on whose behalf such relief is sought, meet the same standing requirements as are imposed upon the class representative. Injunctive relief operates `in futuro.' ( Koebke v. Bernardo Heights Country Club (2005) 36 Cal.4th 824, 837 [31 Cal.Rptr.3d 565, 115 P.3d 1212].) The purpose of such relief, in the context of a UCL action, is to protect California's consumers against unfair business practices by stopping such practices in their tracks. An injunction would not serve the purpose of prevention of future harm if only those who had already been injured by the practice were entitled to that relief. Indeed, [a]n injunction should not be granted as punishment for past acts where it is unlikely that they will recur. ( Choice-in-Education League v. Los Angeles Unified School Dist. (1993) 17 Cal.App.4th 415, 422 [21 Cal.Rptr.2d 303].) [13] Similarly, the language of section 17203 with respect to those entitled to restitutionto restore to any person in interest any money or property, real or personal, which may have been acquired  (italics added) by means of the unfair practiceis patently less stringent than the standing requirement for the class representativea person who has suffered injury in fact and has lost money or property as a result of the unfair competition. (§ 17204, italics added.) This language, construed in light of the concern that wrongdoers not retain the benefits of their misconduct ( Fletcher v. Security Pacific National Bank, supra, 23 Cal.3d 442, 452) has led courts repeatedly and consistently to hold that relief under the UCL is available without individualized proof of deception, reliance and injury. (E.g., Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1267 [10 Cal.Rptr.2d 538, 833 P.2d 545]; Committee on Children's Television, Inc. v. General Foods Corp., supra, 35 Cal.3d at p. 211.) Accordingly, to hold that the absent class members on whose behalf a private UCL action is prosecuted must show on an individualized basis that they have lost money or property as a result of the unfair competition (§ 17204) would conflict with the language in section 17203 authorizing broader reliefthe may have been acquired languageand implicitly overrule a fundamental holding in our previous decisions, including Fletcher, Bank of the West and Committee on Children's Television. Had this been the intention of the drafters of Proposition 64to limit the availability of class actions under the UCL only to those absent class members who met Proposition 64's standing requirementspresumably they would have amended section 17203 to reflect this intention. Plainly, they did not. [14] To conclude: (1) there is nothing in the express language of Proposition 64 that purports to alter accepted principles of class action procedure that treat the issue of standing as referring only to the class representative and not the absent class members; (2) nor is there any indication in the ballot pamphlet materials that would have alerted the voters that such alteration in class action procedure was an intended result of passage of the initiative; (3) imposing such a novel requirement is not necessary to remedy the specific abuse of the UCL at which Proposition 64 was directed; (4) but, on the other hand, imposing this unprecedented requirement would undermine the guarantee made by Proposition 64's proponents that the initiative would not undermine the efficacy of the UCL as a means of protecting consumer rights, because requiring all unnamed members of a class action to individually establish standing would effectively eliminate the class action lawsuit as a vehicle for the vindication of such rights; and (5) the remedies provision of UCL, left unchanged by Proposition 64, offers additional support for the conclusion that the initiative was not intended to have any effect at all on unnamed members of UCL class actions. At argument, defendants acknowledged that the text of Proposition 64 does not apply the standing requirements to unnamed class members. Defendants maintained, rather, that application of these requirements to absent class members is mandated by class action principles, specifically, that a class member must have standing to bring the action individually and that the aggregation of individual claims into a class action cannot be used to transform the underlying claim. We reject these arguments. In concluding that Proposition 64 required absent class members to demonstrate standing, the lower courts and defendants here uncritically cited a single sentence in Collins v. Safeway Stores, Inc. (1986) 187 Cal.App.3d 62 [231 Cal.Rptr. 638] stating that `[e]ach class member must have standing to bring the suit in his own right.' ( Id. at p. 73, quoting McElhaney v. Eli Lilly & Co., supra, 93 F.R.D. at p. 878.) A closer reading of Collins reveals that it is inapposite; the question in Collins was whether a class existed at all and not whether unnamed members of a certified class must demonstrate standing. In Collins, the putative class representatives bought eggs produced by the defendant egg producer and sold by the defendant supermarket chain; some of the eggs had been contaminated by a pesticide. The contaminated eggs were mixed in with uncontaminated eggs and once the contamination was known, all cartons from the producer were pulled from the supermarket chain's shelves and destroyed. The proposed class was divided into two subclasses: (1) all California consumers who had purchased eggs from Safeway within a five-month period (the economic class), and (2) all persons who had ingested the eggs and sustained damage. The trial court declined to certify the first class on the grounds that the proposed class was not ascertainable as an economic class that had suffered an economic loss. ( Collins v. Safeway Stores, Inc., supra, 187 Cal.App.3d at p. 67.) The Court of Appeal affirmed. As the court observed, under the particular facts of the case before it, no individual member of the defined economic class will ever be able to come forward and prove that their purchased eggs were contaminated in whole or in part. Due to the commingling of 20 percent contaminated eggs with 80 percent noncontaminated eggs, each carton may have contained one or more contaminated eggs, or none at all.  ( Collins v. Safeway Stores, Inc., supra, 187 Cal.App.3d at p. 69.) Thus, the court declined to certify an economic class where not all products sold to the class were defective and where the class members themselves do not know, and never will know, whether they purchased a defective product. ( Id. at p. 70.) It was therefore in this context  in which it could not be established that any member of the alleged class had suffered any injury caused by the defendants' conduct  that the court quoted the McElhaney court's observation that each class member must have standing to bring the action on his or her own behalf. ( Id. at p. 73.) Importantly, the class certification discussion in Collins was not framed in the context of the UCL. Indeed, the only hint that the UCL was involved in Collins is a brief reference in a footnote that, among the plaintiffs' theories of recovery were violations of sections of the . . . Business and Professions Code. ( Collins v. Safeway Stores, Inc., supra, 187 Cal.App.3d at p. 66, fn. 2.) Moreover, to the extent that the UCL was involved, the Court of Appeal's conclusion that the plaintiff's had failed to describe a certifiable class is questionable. It is clear in Collins that some of the purchasers in question may have purchased contaminated eggs  therefore, the money or property of the entire class of purchasers may have been acquired by means of an unfair practice (§ 17203), thus entitling them to restitution for their loss. [15] (14) Collins does not address the question before us of whether absent class members in a UCL action are required to establish standing, and is therefore inapposite. ( Ginns v. Savage (1964) 61 Cal.2d 520, 524, fn. 2 [39 Cal.Rptr. 377, 393 P.2d 689] [an opinion is not authority for a proposition not therein considered].) Rather, Collins involved the preliminary step of identifying the existence of an ascertainable class. The reference to standing must be understood in this context  that is, as part of the requirement that a class `be sufficiently definite so that it is administratively feasible for the Court to determine whether a particular individual is a member of the proposed class.' ( Miller v. Janssen Pharmaceutica Products, L.P. (S.D.Ill. 2007) 2007 WL 1295824, p. .) (15) Here, the trial court certified a class. Its subsequent decertification was not based on any deficiency by plaintiffs in having described the class in the first place, but on the trial court's erroneous view that changes in the UCL's standing requirement were now applicable to all class members. In other words, the trial court did not conclude that the class was no longer ascertainable, but that the absent class members were now required in a UCL action to individually demonstrate standing in order to remain in the class. As we have demonstrated, the trial court's conclusion is not supported either by principles of class action procedure or by the language of Proposition 64 itself. Defendants also argue that Proposition 64's standing requirement must be applied to all class members because otherwise the class representative would be permitted to assert `claims' that the absent class members do not have. According to defendants this would violate the principle that the aggregation of individual claims into a class action does not serve to enlarge substantive rights or remedies. ( Feitelberg v. Credit Suisse First Boston, LLC., supra, 134 Cal.App.4th at p. 1014.) We disagree. The substantive right extended to the public by the UCL is the `right to protection from fraud, deceit, and unlawful conduct' ( Prata v. Superior Court (2001) 91 Cal.App.4th 1128, 1137 [111 Cal.Rptr.2d 296]), and the focus of the statute is on the defendant's conduct. As we have already observed, the proponents of Proposition 64 told the electorate that the initiative would not alter the statute's fundamental purpose of protecting consumers from unfair businesses practices. Rather, the purpose of the initiative was to address a specific abuse of the UCL's generous standing provision by eliminating that provision in favor of a more stringent standing requirement. That change, as we observed in Mervyn's, did not change the substantive law. ( Mervyn's, supra, 39 Cal.4th at p. 232.) The underlying claim in the instant case is that defendants have engaged in a long-term campaign of deceptive advertising and misrepresentations to the consumers of its products regarding the health risks of those products. The class, as certified, consists of members of the public who were exposed to defendants' allegedly deceptive advertisements and misrepresentations and who were also consumers of defendants' products during a specific period of time. The nature of the claim is the same  the right to be protected against defendants' alleged deceit  and the remedies remain the same  injunctive relief and restitution. Applying Proposition 64's standing requirements to the class representative but not the absent class members enlarges neither the substantive rights nor the remedies of the class. (16) We therefore conclude that Proposition 64 was not intended to, and does not, impose section 17204's standing requirements on absent class members in a UCL class action where class requirements have otherwise been found to exist.