Trial judge holds Prop. 64 inapplicable to pending cases
On November 10, 2004—just a week after Proposition 64 went into effect—a Sacramento County Superior Court judge issued the following order in Twomey v. Hansen Information Technologies (no. 03AS03632):

The court has received and considered the supplemental briefs filed by both parties as to the effect of the passage of Proposition 64. There is no dispute that the initiative is immediately effective. However, the parties disagree on whether it may be applied to this case.

The well-settled rule is that statutes, and initiatives, are presumed to operate prospectively only absent an explicit expression otherwise. Tapia v. Superior Court (1991) 53 Cal.3d 282, 287. The language of Proposition 64 is completely silent on whether it is to be applied retroactively. The voter information material is similarly silent. In such cases, it may be applied only prospectively. Evangelatos v. Superior Court (1988) 44 Cal.3d 1188, 1194 (holding that Proposition 51 operated prospectively only as the language did not indicate the measure was to apply retroactively). Compare, Jenkins v. County of Los Angeles (1999) 74 Cal.App.4th 524, 536 (language of Proposition 213 included statement that the act “shall apply to all actions in which the initial trial has not commenced prior to January 1, 1997.”). The Court notes that Propositions 69 and 66 on this year’s ballot each include express language concerning retroactive application.

Defendant’s contention that this Court may infer an intent that the initiative apply retroactively from language concerning the seriousness of the problem it addresses is the same argument made to the Court in Evangelatos and rejected. Evangelatos, supra, 44 Cal.3d. at 1209-12.

Defendant’s contention that Proposition 64 operates prospectively, and therefore applies to this action, because its only effect is on how trial is conducted is not persuasive. In Tapia, supra, the California Supreme Court held that certain portions of Proposition 115 applied to pending actions because their only effect was on how trial was to be conducted, e.g. jury voir dire. The requirement for standing imposed by Proposition 64 is not a procedure affecting only how trial is to be conducted. Rather, the requirement of actual injury for standing goes to the very existence of a cause of action under Bus. & Prof. Code section 17200.

In conclusion, the Court finds that Proposition 64 does not apply to this action. Therefore, the tentative ruling granting plaintiff’s motion for further responses to interrogatories ... is affirmed with the following addition. Defendant's position that the language of the initiative itself, e.g. the word "eliminate," resolves this issue is not persuasive. The language is not specific enough to overcome the general presumption against retroactive application to pending cases.

This is the first and only order I'm aware of that addresses the Proposition 64 retroactivity issue. If you know of any others, please email me. (UPDATED to include additional language from the order. Also, many thanks to the colleague who forwarded this order to me yesterday.)
- posted by Kim Kralowec @ 5:30 AM  | Comments (1) |

 
MCLE program tomorrow on Proposition 64 retroactivity
The State Bar's Antitrust and Unfair Competition Law Section is conducting an MCLE program tomorrow at noon in San Francisco and Los Angeles. For details, click here.
- posted by Kim Kralowec @ 11:29 AM  | Comments (0) |

 
"17200: Motions Seek Prop 64 Retroactivity"
This week's Orange County Business Journal has the story (subscription required).
- posted by Kim Kralowec @ 10:14 AM  | Comments (0) |

 
Happy Thanksgiving!
On a somewhat tangentially related note, the Supreme Court issued a press release yesterday announcing the formation of a committee to study whether the rules governing publication of appellate opinions should be revised. Changes to those rules could impact the development of UCL jurisprudence, because there are a great many unpublished UCL decisions (most of which I do not report on here).

That having been said, I hope that over the next few days, we can all focus our energies on something other than the appellate rules and Proposition 64 retroactivity—such as family, friends and good food. Talk to you next week!
- posted by Kim Kralowec @ 12:15 PM  | Comments (0) |

 
And then there were three
There are now at least three pending appeals in which the Proposition 64 issue has been raised. Last week in Benson v. Kwikset Corp., formerly published at 120 Cal.App.4th 301 (2004), the Fourth Appellate District, Division Three, issed the following order (quoted verbatim from the docket):

Defendants and aplts Kwikset Corp. and Black & Decker Corp., plus
resp Technolok, S.A. de C.V., have filed a mtn to vacate the trial crt's judgment and postjudgment order awarding costs and atty fees on the ground the enactment of prop 64 withdrew the statutory basis for plaintiff and aplt James Benson to prosecute this action against them. Plaintiff and resp may file a response to the mtn on or before 11/29/04.

As you might recall, the original Benson opinion affirmed a UCL judgment against a lock manufacturer for mislabling its products as "Made in America" when many of the component parts were manufactured overseas. The dissenting opinion heartily criticized the UCL in general, and its application in that case in particular. My original posts on Benson are here and here.

If anyone knows of any other appeals in which the Proposition 64 issue has been raised, I'd like to hear about them.
- posted by Kim Kralowec @ 10:35 AM  | Comments (0) |

 
"Lawyers Rush To Join Fight on Prop. 64's Scope"
And the Recorder has this story. It says that Lerach, Coughlin is stepping in to handle the supplemental briefing in the Consumer Advocates v. DaimlerChrysler case. That's great news.
- posted by Kim Kralowec @ 12:13 PM  | Comments (0) |

 
"Appeal Court Seeks Clarity in Prop. 64's Quagmire"
Today's Daily Journal has the story. Two appellate courts are now on the verge of deciding the Proposition 64 retroactivity issue.

In a pending appeal called Consumer Advocates v. DaimlerChrysler Corp., No. G029811, the Fourth Appellate District, Division 3, issued the following order just five days after Proposition 64 went into effect (copied verbatim from the docket):

On the crt's own mtn, the previous order submitting this case is hereby vacated. It appears to the crt the issues involved in this appeal may be affected by the provisions of prop 64. The parties are invited to address the following issues: (1) are the causes of action asserted in the complaint, or any of them, barred by the provisions of prop 64; and (2) if so, should prop 64 be applied to pending cases? The briefs shall be in informal ltr form and shall be filed no later than 12/03/04. Upon filing of the supp ltr briefs, the matter will be resubmitted for the time allowed by law.

(UPDATE: Here are the minutes for 11/08/04.)

In addition, a petition for rehearing has been filed in Krumme v. Mercury Ins. Co., ___ Cal.App.4th ___ (Oct. 29, 2004), in which the First Appellate District, Division Four, observed that the plaintiff was "utterly disinterested" in the controversy because he had never done business with the defendant insurance company, but nonetheless allowed the case to proceed because of the UCL's liberal standing rules. Here is the Krumme docket, and here is my original post on the decision.
- posted by Kim Kralowec @ 11:37 AM  | Comments (2) |

 
Let the retroactivity battle begin
We all know that the motions to dismiss have already started. This article observes: "Due to Prop. 64's silence on the issue of retroactivity, its application to currently pending cases will be decided by the courts. Retroactive application could potentially deprive countless plaintiffs of standing to sue under the UCL. Along these lines, we have learned that several motions to dismiss, seeking retroactive application of these more stringent requirements, have already been filed throughout California." And this article reports that "since Election Day, several opposing attorneys have pulled out of settlement agreements in 17200 suits ..., hoping instead to get the suits dismissed by convincing courts that Prop 64 is retroactive."

If you are a plaintiffs' lawyer facing a motion to dismiss based on the argument that Proposition 64 is retroactive, and you want to brainstorm with other plaintiffs' lawyers who are also facing such motions, email me and I will put you in touch with each other.
- posted by Kim Kralowec @ 6:30 AM  | Comments (1) |

 
"New JAMS rule rejects ban on class actions"
Now that the UCL has been amended to require class certification (at least in cases filed after its effective date of 11/03/04), this story from Monday's Recorder is of interest. JAMS arbitrators will no longer enforce contractual arbitration clauses that ban class actions. The JAMS press release reads:

JAMS unequivocally takes the position that it is inappropriate for a company to restrict the right of a consumer to be a member of a class action arbitration or to initiate a class action arbitration. The implementation of this policy means that JAMS will not enforce these clauses in class action arbitrations and will require that they be waived in individual cases. JAMS hopes that companies that utilize consumer arbitration will remove class action preclusion clauses from their arbitration clauses, understanding that the inclusion of such clauses is an unfair restriction on the rights of the individual consumer.

This is, as the Recorder notes, a victory for the plaintiffs' bar. The Recorder goes on to observe that the courts have not entirely resolved whether such contract clauses are enforceable. Decisions addressing this issue include Szetela v. Discover Bank, 97 Cal.App.4th 1094 (2002) and Ting v. AT&T, 319 F.3d 1126 (9th Cir. 2003).
- posted by Kim Kralowec @ 8:44 PM  | Comments (0) |

 
17200 blog hiatus
I probably won't post much, if at all, next week, because I'll be traveling on business. Please email me with news, cases, interesting thoughts about the UCL ...
- posted by Kim Kralowec @ 10:54 AM  | Comments (0) |

 
Wasting no time
The defense bar has been hard at work creating client alerts on Proposition 64. A few examples:

"California Voters Limit Private Enforcement of Unfair Competition Law," by Pillsbury Winthrop LLP

"Proposition 64 -- When Does It Take Effect and to What Cases Does It Apply?," by the Civil Justice Association of California

"California Voters Approve Proposition 64, Adding Standing and Class Action Requirements to California's Unfair Competition and False Advertising Laws," by Gibson, Dunn & Crutcher

"Proposition 64, titled 'Limits on Private Enforcement of Unfair Business Competition Laws,' Passes Easily in California," by Nixon Peabody LLP
- posted by Kim Kralowec @ 8:50 AM  | Comments (0) |

 
Most recent Supreme Court word on retroactivity
The day after Proposition 64 became effective, the California Supreme Court issued McClung v. Employment Development Dept., ___ Cal.4th ___ (Nov. 4, 2004), in which it reconfirmed the strong presumption against retroactive application of statutory amendments: "'[T]he presumption against retroactive legislation is deeply rooted in our jurisprudence, and embodies a legal doctrine centuries older than our Republic.' .... '[A] statute may be applied retroactively only if it contains express language of retroactivity or if other sources provide a clear and unavoidable implication that the Legislature intended retroactive application.'" Slip op. at 8, 9 (quoting Myers v. Philip Morris Co., 28 Cal.4th 828, 844 (2002); Evangelatos v. Superior Court, 44 Cal.3d 1188, 1206-08 (1988)). McClung involved a very different type of statutory amendment, but nonetheless could not be more forceful in its language disfavoring retroactivity. Proposition 64 contains no retroactivity language. (Thanks to California Labor and Employment Law for pointing out this aspect of McClung.)
- posted by Kim Kralowec @ 8:29 AM  | Comments (0) |

 
Some lawyer named Mike agrees with me
Thanks to Lexicon for quoting my analysis of why people should vote No on Proposition 64. Unfortunately, the effort was too little, too late.
- posted by Kim Kralowec @ 8:25 AM  | Comments (1) |

 
Can Proposition 64 be undone at the ballot box in 2006?
Election Watchdog, which took the lead in campaigning against Proposition 64, is hinting about a possible ballot measure in 2006 to reverse the impact of Proposition 64. For that ambitious plan to work, there will have to be a lot of press about cases like Krumme v. Mercury Insurance Co., ___ Cal.App.4th ___ (Oct. 29, 2004), which the court itself recognized as beneficial to the public, but which could not have been brought under Proposition 64's amendments to the UCL. There is very little public discussion of the good that can be done under the statute. That needs to change.
- posted by Kim Kralowec @ 12:45 PM  | Comments (0) |

 
"Prop 64 victory makes finding a plaintiff crucial"
This morning's Recorder has the story, which reports that defense motions to dismiss have already started to be filed based on Proposition 64. The article also quotes Lerach Coughlin partner Reid Kathrein, who "hopes that an unintended consequence of Prop 64 may be to ease the [class] certification process. 'The courts may be more likely to certify them ... if the alternative is not granting any relief,' he said." That's a very interesting thought. The Daily Journal also has a piece by a defense attorney, "Toss Suits Affected by Proposition 64," which asserts without any real analysis that the amendments will apply retroactively to all pending cases. It also points out that the California Constitution, Article II, sec. 10(a) states that initiative measures take effect the day after the election.
- posted by Kim Kralowec @ 9:16 AM  | Comments (2) |

 
Two new UCL decisions: Blanchard v. DIRECTV, Inc. and Krumme v. Mercury Ins. Co.
Last Friday, the Court of Appeal issued two new decisions involving UCL claims—possibly the last pre-Prop. 64 decisions we'll see. They illustrate the good and the bad of the former UCL.

In Blanchard v. DIRECTV, Inc., ___ Cal.App.4th ___ (Oct. 29, 2004), the Court of Appeal granted a defendant's SLAPP motion against several UCL plaintiffs who challenged the defendant's practice of "send[ing] demand letters to thousands of people who purchased certain devices that can pirate [the defendant's] television programming, requesting the recipients cease using the devices" or be sued. Slip op. at 2, 4. The Court determined that the suit was not brought in the "public interest" under Code of Civil Procedure section 425.17(b), despite plaintiffs' assertion that the defendant sent demand letters to everyone who had purchased a piracy device even though the devices have other, legal purposes. The Court explained:

Based on the allegations of the complaint, plaintiffs want to enjoin DIRECTV from sending this particular demand letter concerning this specific electronic device to users of this device. They are not seeking to assert some general right not to receive demand letters or notices. Nor do they seek a declaration about demand letters in general. Notwithstanding the number of the recipients of the letters rank in the thousands, there is no public interest principle being vindicated by this action. Regardless of the outcome of this lawsuit, properly worded demand letters will remain a standard practice designed to avoid the necessity of legal action. .... Therefore, if plaintiff's UCL claim were successful, it would establish no ringing declaration of the rights of all pirating-device purchasers, nor would it lead to a wholesale change in the practice of sending demand letters.

Slip op. at 9-10 (citations omitted). The Court went on:

No matter how they characterize their complaint, plaintiffs' stake is personal to them as recipients of this particular demand letter. They do not seek to protect the public's right to use these devices or to be free of demand letters. We are unconvinced by plaintiffs' portrayal of themselves as the public-interest David against the corporate Goliath. The complaint's prayer exposes this cause of action as motivated by personal gain. This lawsuit is not protected from the anti-SLAPP statute by section 425.17.

Slip op. at 11-12. Because the demand letters were protected by the litigation privilege (Civ. Code §47(b)), plaintiffs could not establish a reasonable probability of success on the merits of their claim, so the SLAPP motion was properly granted. Id. at 14-18. The Court of Appeal also affirmed the $97,222.10 attorneys' fees award against plaintiffs, and ruled that the defendant may recover fees on appeal as well. Id. at 19-20.

The other UCL case decided last Friday, Krumme v. Mercury Insurance Co., ___ Cal.App.4th ___ (Oct. 29, 2004), is quite different. In Krumme, the Court of Appeal held that the Legislature had not created a Cel-Tech "safe harbor" that would allow insurance companies to employ "broker-agents" who are not "appointed agents" within the meaning of the Insurance Code. Therefore, it affirmed the trial court's order permanently enjoining the practice. Evidently, using "broker-agents" results in higher costs to consumers. In so holding, the court made two interesting observations about the Cel-Tech "safe harbor." Slip op. at 16 n.5. First, it said that only statutes, rather than administrative regulations, can create a "safe harbor." Second, it said that the safe harbor must be explicit; "an implied safe harbor is contrary to the approach adopted by our Supreme Court" in Cel-Tech. Id. This is the first decision that I'm aware of in which either of those points was decided. The Court of Appeal also affirmed the attorney's fees award, including a 1.5 multiplier, because the plaintiff had "enforced an important right affecting the public interest" and "conferred a significant benefit upon ... a large class of persons." Id. at 25. The Insurance Commissioner supported the case as an amicus curiae. Id. at 11. Despite all that, it appears that this case could not have been brought after Proposition 64, since the plaintiff "never purchased a policy from [the defendant] and is therefore utterly disinterested in the controversy he began." Slip op. at 11.

UPDATE: Declarations and Exclusions has a really good discussion of the two types of insurance agents and why the Court of Appeal found "broker-agents" offensive.
- posted by Kim Kralowec @ 9:02 AM  | Comments (2) |

 
"Struggle Starts in Prop 64 Application"
This morning's Daily Journal has this story, which offers several different views on whether Proposition 64 applies retroactively. That's a good question. Several readers have raised it in comments and emails. I'm sure the appellate courts will resolve the issue relatively quickly, probably in an appeal that's already pending. At this point, I'm not yet ready to venture a guess. I think arguments can be made on both sides.
- posted by Kim Kralowec @ 9:15 AM  | Comments (0) |

 
"Prop 64 took plaintiff bar by surprise"
You can say that again. This morning's Recorder has the story.
- posted by Kim Kralowec @ 8:29 AM  | Comments (1) |

 
Proposition 64 has passed
The Secretary of State reports this morning that Proposition 64 has passed, 58.9% in favor to 41.1% against, with 100% of precincts reporting. Here is a map of the voting. It will be very interesting to see how this pans out. The UCL Practitioner will, of course, continue to report on developments.
- posted by Kim Kralowec @ 7:57 AM  | Comments (2) |

 
No on Proposition 64
For two reasons, I urge my readers to vote NO on Proposition 64.

First, Proposition 64 rests on a faulty premise. It assumes that essentially all UCL actions are "frivolous" and that existing law does nothing to prevent "frivolous" filings. The ballot argument in favor of Proposition 64 goes so far as to say that the UCL currently "allows private lawyers to file frivolous lawsuits ...." Nonsense. No law allows anyone to file frivolous lawsuits. Code of Civil Procedure section 128.7 and Business & Professions Code section 6068 specifically prohibit it. Lawyers who file frivolous lawsuits have to answer to the State Bar. They can be sanctioned. Code Civ. Proc. §128.7. Their attorneys' fees requests can be denied (as in Baxter v. Salutary Sportsclubs, Inc., ___ Cal.App.4th ___ (Sept. 28, 2004)). They can be SLAPPED with attorneys' fees awards themselves (as in Blanchard v. DIRECTV, Inc., ___ Cal.App.4th ___ (Oct. 29, 2004)). In particularly egregious cases, the Attorney General's office steps in. The AG's office just obtained a $1.8 million default judgment against one lawyer accused of frivolous UCL filings. In short, as The Trevor Law Group's downfall demonstrates, there are many effective ways to deal with lawyers who file "frivolous" cases under the UCL or otherwise. Proposition 64 is overkill.

Second, Proposition 64 would allow suits to be brought only by one who "has suffered injury in fact and has lost money or property ...." (Emphasis added.) Read the proposed language carefully. It would require "injury in fact" and loss of "money or property." That would mean that to bring a UCL case, a plaintiff would have to establish a level of injury far beyond what would be required in almost any other kind of case. As a result, Proposition 64 would curtail the enforcement of a wide variety of laws, as Attorney General Bill Lockyer, among others, has recognized. Some disagree with this assessment of Proposition 64, but that is because they accept the premise (discussed above) that no meritorious UCL case is ever filed. I believe that the UCL is often put to very good use, and that Proposition 64 would therefore weaken the enforcement of important environmental, privacy, and other laws.

Those engaged in UCL abuses get a lot of press, but they are the exception, not the rule. Most plaintiffs' lawyers approach the UCL with respect, like any other law. Proposition 64's proponents are using relatively rare examples of UCL abuse as an excuse to try to gut the entire law. A simple amendment mandating court approval of all UCL settlements would eliminate virtually all abuses cited by Proposition 64's proponents. The proposition goes far beyond what is reasonably necessary to curtail any abuse that actually exists.

I am not alone in opposing Proposition 64. The editors of all of these papers recommend a "no" vote as well:
The Sacramento Bee: "Bars private 'unfair business' lawsuits if monetary loss could not be established. Vote No."
The San Jose Mercury News: "Proposition 64 would stop the abuse. But it would do so by taking a sledgehammer to a law that ought to be fixed with a scalpel. It's the wrong solution to a real problem."
The Fresno Bee: "The state's wealthiest corporations have contributed a staggering $8.2 million to bankroll Proposition 64. They say they want to shield themselves from shakedown lawsuits, but this initiative does much more than that -- too much more. Voters should reject it -- and tell their lawmakers to come up with a more balanced way to fix the real problems with the laws."
The Pasadena Star News: "Proposition 64 uses a cannon to kill a gnat."
The San Francisco Bay Guardian: "NO, NO, NO."
The Point Reyes Light: "The Unfair Business Competition Law needs fixing, but this proposition doesn’t fix it. No on Proposition 64."
The Visalia Times-Delta: "Vote NO. In attempting to fix a problem with a law, it goes too far and limits people's ability to recover damages in court for legitimate injuries."

The following organizations also oppose Proposition 64:
Consumers Union
Congress of California Seniors
Center for Environmental Health
California Advocates for Nursing Home Reform
Foundation for Taxpayer and Consumer Rights
Sierra Club California
California Nurses Association
American Lung Association of California
California League of Conservation Voters
Los Angeles City Council
And more...

Join The UCL Practitioner in voting No on Proposition 64.

- posted by Kim Kralowec @ 6:00 PM  | Comments (1) |