Opinion ID: 1801796
Heading Depth: 4
Heading Rank: 2

Heading: What Is Required to Establish Standing Under the UCL As Amended by Proposition 64?

Text: The second question before us is the meaning of the phrase as a result of in section 17204's requirement that a private enforcement action under the UCL can only be brought by a person who has suffered injury in fact and has lost money or property as a result of the unfair competition. (§ 17204.) While it is clear that the phrase indicates there must be some connection between the injury and the defendant's conduct, the parties disagree about the type of causation the plaintiff must demonstrate. Defendants claim that the phrase as a result of introduced a tort causation element into UCL actions. In the context of this case, this would appear to require a showing of actual reliance on the deceptive advertising and misrepresentations as a result of which the loss of money or property was sustained. Plaintiffs, on the other hand, maintain that the new standing requirement did not impose any type of tort causation requirement. Plaintiffs argue that the phrase merely requires a factual nexus between a defendant's conduct and a plaintiff's injury: the representative plaintiff need only be one of the people from whom the defendant obtained money or property while engaging in its unfair business practice. [16] The phrase is not defined by other provisions of the statute. Moreover, examination of the ballot materials does not shed any light on whether it was the intent of the electorate in enacting Proposition 64 to impose actual reliance where a UCL claim is based on fraud. [17] Causation merits only a passing mention in the Attorney General's summary. The summary describes the purpose of the initiative as limiting the right of an individual to sue by allowing private enforcement of the UCL only by a person who was actually injured by, and suffered financial/property loss because of, an unfair business practice. (Voter Information Guide, Gen. Elec., supra, official title and summary, p. 38, italics added.) In describing the changes to the UCL that would result from the initiative, the analysis by the Legislative Analyst does not refer to causation at all: This measure prohibits any person, other than the Attorney General and local public prosecutors, from bringing a lawsuit for unfair competition unless the person has suffered injury and lost money or property. (Voter Information Guide, Gen. Elec., supra, analysis of Prop. 64 by Legis. Analyst, p. 38.) Moreover, as noted, before Proposition 64, California courts have repeatedly held that relief under the UCL is available without individualized proof of deception, reliance and injury. ( Massachusetts Mutual Life Ins. Co. v. Superior Court (2002) 97 Cal.App.4th 1282, 1288 [119 Cal.Rptr.2d 190].) (17) On the other hand, there is no doubt that reliance is the causal mechanism of fraud. ( Molko v. Holy Spirit Assn. (1988) 46 Cal.3d 1092, 1108 [252 Cal.Rptr. 122, 762 P.2d 46].) Additionally, because it is clear that the overriding purpose of Proposition 64 was to impose limits on private enforcement actions under the UCL, we must construe the phrase as a result of in light of this intention to limit such actions. ( People v. Cooper (2002) 27 Cal.4th 38, 45 [115 Cal.Rptr.2d 219, 37 P.3d 403] [To determine the meaning of a statute, we seek to discern the sense of its language, in full context, in light of its purpose.].) Therefore, we conclude that this language imposes an actual reliance requirement on plaintiffs prosecuting a private enforcement action under the UCL's fraud prong. This conclusion, however, is the beginning, not the end, of the analysis of what a plaintiff must plead and prove under the fraud prong of the UCL. Reliance is an essential element of . . . fraud . . . . [¶] [R]eliance is proved by showing that the defendant's misrepresentation or nondisclosure was `an immediate cause' of the plaintiff's injury-producing conduct. [Citation.] A plaintiff may establish that the defendant's misrepresentation is an `immediate cause' of the plaintiff's conduct by showing that in its absence the plaintiff `in all reasonable probability' would not have engaged in the injury-producing conduct. ( Mirkin v. Wasserman (1993) 5 Cal.4th 1082, 1110-1111 [23 Cal.Rptr.2d 101, 858 P.2d 568] (conc. & dis. opn. of Kennard, J.).) (18) While a plaintiff must show that the misrepresentation was an immediate cause of the injury-producing conduct, the plaintiff need not demonstrate it was the only cause. `It is not . . . necessary that [the plaintiff's] reliance upon the truth of the fraudulent misrepresentation be the sole or even the predominant or decisive factor in influencing his conduct.. . . It is enough that the representation has played a substantial part, and so has been a substantial factor, in influencing his decision.' [Citation.] [¶] Moreover, a presumption, or at least an inference, of reliance arises wherever there is a showing that a misrepresentation was material. [Citations.] A misrepresentation is judged to be `material' if `a reasonable man would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question' [citations], and as such materiality is generally a question of fact unless the `fact misrepresented is so obviously unimportant that the jury could not reasonably find that a reasonable man would have been influenced by it.' [Citation.] ( Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 976-977 [64 Cal.Rptr.2d 843, 938 P.2d 903].) Nor does a plaintiff need to demonstrate individualized reliance on specific misrepresentations to satisfy the reliance requirement. This principle is illustrated in a pair of tobacco case decisions that upheld verdicts for the plaintiffs against substantial evidence challenges, specifically focusing on the sufficiency of the evidence supporting reliance. ( Boeken v. Philip Morris, Inc. (2005) 127 Cal.App.4th 1640 [26 Cal.Rptr.3d 638] ( Boeken ); Whiteley v. Philip Morris, Inc. (2004) 117 Cal.App.4th 635 [11 Cal.Rptr.3d 807] ( Whiteley ).) In each case, the defendants argued that the evidence was insufficient to support the judgments because the plaintiffs had failed to prove they heard and had relied on specific misrepresentations about the health hazards of cigarette smoking. ( Boeken, supra, 127 Cal.App.4th at p. 1657; Whiteley, supra, 117 Cal.App.4th at pp. 667-678.) In both Boeken and Whiteley, evidence was admitted to prove the decades-long campaign of the tobacco industry to conceal the health risks of its product while minimizing the growing consensus regarding the link between cigarette smoking and lung cancer and, simultaneously, engaging in saturation advertising targeting adolescents, the age group from which new smokers must come. ( Whiteley, supra, 117 Cal.App.4th at p. 647; see Boeken, supra, 127 Cal.App.4th at p. 1660 [Even before Boeken became a target member of the group of addicted smokers, Philip Morris targeted Boeken as a member of another group  adolescent boys.].) In each case, the plaintiffs testified that their decision to begin smoking was influenced and reinforced by cigarette advertising, though neither could point to specific advertisements. ( Boeken, supra, 127 Cal.App.4th at pp. 1662-1663; Whiteley, supra, 117 Cal.App.4th at p. 679.) Each plaintiff also testified that, despite awareness of the controversy surrounding smoking, he or she believed the tobacco industry's assurances that there was no definitive connection between cigarette smoking and various diseases. ( Boeken, supra, 127 Cal.App.4th at pp. 1664-1665; Whiteley, supra, 117 Cal.App.4th at p. 679.) Based on this record, the Boeken court concluded that there was substantial evidence that Boeken began to smoke for reasons that track Philip Morris's advertising of the time ( Boeken, at p. 1663), notwithstanding his inability to recall specific advertisements, that he relied on the defendant's false statements regarding the health risks of cigarette smoking notwithstanding his awareness of contrary statements, and that his reliance was justified. ( Boeken, at pp. 1664-1667.) Similarly, in Whiteley, the court concluded that substantial evidence supported the conclusion that Whiteley's justifiably relied on the defendant's false assurances and denials regarding the hazard of smoking. ( Whiteley, supra, 117 Cal.App.4th at p. 679.) (19) These decisions provide a framework for what plaintiffs must plead and prove in UCL fraud actions in terms of reliance. These cases teach that, while a plaintiff must allege that the defendant's misrepresentations were an immediate cause of the injury-causing conduct, the plaintiff is not required to allege that those misrepresentations were the sole or even the decisive cause of the injury-producing conduct. Furthermore, where, as here, a plaintiff alleges exposure to a long-term advertising campaign, the plaintiff is not required to plead with an unrealistic degree of specificity that the plaintiff relied on particular advertisements or statements. Finally, an allegation of reliance is not defeated merely because there was alternative information available to the consumer-plaintiff, even regarding an issue as prominent as whether cigarette smoking causes cancer. (See Grisham v. Philip Morris U.S.A., Inc. (2007) 40 Cal.4th 623, 638 [54 Cal.Rptr.3d 735, 151 P.3d 1151] [there is no special presumption under California law based on common knowledge that a plaintiff is aware that smoking is addictive or harmful].) Accordingly, we conclude that a plaintiff must plead and prove actual reliance to satisfy the standing requirement of section 17204 but, consistent with the principles set forth above, is not required to necessarily plead and prove individualized reliance on specific misrepresentations or false statements where, as here, those misrepresentations and false statements were part of an extensive and long-term advertising campaign. (20) In granting the motion to decertify the class, and in concluding that the entire class was required to demonstrate standing, the trial court's order also stated, Further, it appears from the record that not even Plaintiffs' named representatives satisfy Prop[osition] 64's standing requirement. The trial court did not elaborate on the basis for its conclusion and we cannot be certain what it meant. Moreover, even assuming that, in light of Proposition 64, the named representatives are no longer adequate representatives of the class because they lack standing, the proper procedure would not be to decertify the class but grant leave to amend to redefine the class or add a new class representative. This rule is usually applied in situations where the class representative originally had standing, but has since lost it by intervening law or facts. ( First American Title Ins. Co. v. Superior Court (2007) 146 Cal.App.4th 1564, 1574 [53 Cal.Rptr.3d 734].) We ourselves sanctioned this procedure in a post-Proposition 64 case. ( Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 243 [46 Cal.Rptr.3d 66, 138 P.3d 214] [courts have permitted plaintiffs who have been determined to lack standing, or who have lost standing after the complaint was filed, to substitute as plaintiffs the true real parties in interest].) Accordingly, we reverse the order granting the decertification motion and remand the case for further proceedings to determine whether these plaintiffs can establish standing as we have now defined it and, if not, whether amendment should be permitted.