The UCL Practitioner
Thursday, January 06, 2005
More on the United Investors oral argument yesterday
Many thanks to Sharon Ben-Shahar, a reader who attended yesterday's oral argument in United Investors and sent me this very illuminating report (including the bracketed comments):
To understand the unexpected events at oral argument today, it is important to understand the context from which today's argument arose. As best we can figure out, here is what happened before today's argument.

The trial court sustained a demurrer without leave to amend. Plaintiff/Appellant filed a notice of appeal in July 2004. In mid-November 2004, before merits briefing even began, the [Defendant/Appellee] filed a motion to dismiss the appeal on the ground that Prop 64 eliminated Plaintiff/Appellant's standing to raise the claims that it attempted to raise at the trial court level. Thus, Defendant/Appellee argued, even if the trial court's ruling on demurrer was improper at the time it was entered, Prop 64 has since barred Plaintiff/Appellant from prosecuting its case. Hence, the case should be dismissed before any consideration of the merits on the underlying rule.

While today's argument was expected to focus on the question of whether Prop 64 applies to pending cases, Justice Turner threw the parties a curve ball. There was no argument permitted on that issue. Instead, Justice Turner implicitly questioned whether the issue was properly raised on a motion to dismiss at all, as opposed to addressing it together with the merits of the case.

Justice Turner asked counsel for defendant, who filed the motion to dismiss, whether plaintiff has standing to appeal even if it lacks standing to prosecute the underlying action. It later became clear that Justice Turner was really raising the issue of whether the application of Prop 64 is properly considered on a motion to dismiss, which is the proper method for challenging issues such as standing to appeal, or whether it should be raised in the merits briefing, which has not yet been completed.

He asked defense counsel whether Prop 64 was intended to alter CCP § 902, which provides that an aggrieved party has standing to appeal. At the close of the argument, Justice Turner referred the parties to the Court of Appeal's holding in In re Catherine H., 102 Cal. App. 4th 1284 (2002), which holds that even if a party lacks standing at the trial court level, it is still "aggrieved" by the trial court's dismissal for lack of standing, and may therefore appeal that ruling.

The gist of Justice Turner's comments and the case he cited suggest that the Prop 64 issue has been raised prematurely and therefore resolution of the Prop 64 issue must await merits briefing; it should not be addressed on a motion to dismiss. But Justice Turner apparently sought to elicit argument from Defendant/Appellee in support of the proposition that Prop 64 effectively altered/modified CCP 902, thereby divesting the appellate court of jurisdiction for considering an appeal filed by a UCL plaintiff who lacks standing under Prop 64. [If defendant could establish that point then, presumably, the issue could properly be raised in a pre-merits motion to dismiss.]

Defendant/Appellee Waddell & Reed did not bite. Instead, counsel argued that his client did not challenge Plaintiff/Appellant United Investors' standing on appeal, but only its standing to bring a cause of action under § 17200 in light of Prop 64. That "concession" did not seem to answer Justice Turner's concern, which in hindsight appears to be that the matter has been raised prematurely.

Justice Turner attempted again to elicit an argument from Defendant that somehow Prop 64 altered CCP § 902, thereby divesting the appellate court of jurisdiction to hear an appeal from a UCL plaintiff without "injury in fact" standing. Turner suggested that Defendant might not want to be so quick to concede appellate jurisdiction. If the trial court's ruling is appealable under CCP § 902, then Plaintiff can argue that, even if Prop 64 does apply to pending cases, Plaintiff can and should be permitted to amend its complaint to allege an injury in fact. [This makes sense because when the case was at the trial court level, Prop 64 had not yet passed, so Plaintiff/Appellant should now have opportunity to allege standing.]

In response, Defendant/Appellee argued the Plaintiff/Appellant United Investors had specifically elected not to sue on its own behalf but rather on behalf of the policy holders, so it should not be allowed to amend the complaint after three years of litigation. However, in response to the Court's question, Defendant/Appellee agreed that United Investors may file a separate §17200 action on its own behalf.

When counsel for Plaintiff/Appellant United Investors attempted to reach the issue of the applicability of Prop 64 to pending cases, Justice Turner stated that there was no need to reach that issue at this time. Despite that, however, Justice Turner offered that it appeared to him that Defendant/Appellee - who argued that Prop 64 applies to pending cases - had a strong argument.

The Court ended the hearing by deferring submission of the motion for 10 days and ordering the parties to submit briefs no later than 1/14/05 on the issue of the distinction between standing to prosecute a cause of action and standing on appeal in light of the requirement of Code of Civil Procedure § 902.

Based on this, it seems that the motion to dismiss will be denied, without prejudice to raising the Prop 64 argument in the merits briefs.
That's a very interesting summary. If Prop. 64 cannot be raised by moving to dismiss a pending appeal, that could also impact Benson v. Kwikset Corp., 120 Cal.App.4th 301 (2004) (opinion vacated), Fourth Appellate District, Division Three, case no. G030956, in which a motion to dismiss has been filed based on Prop. 64.
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