The UCL Practitioner
Monday, January 31, 2005
Court of Appeal issues unpublished opinion in Consumer Advocates v. DaimlerChrysler
This afternoon, the Court of Appeal (Fourth Appellate District, Division Three), issued an unpublished opinion in the Consumer Advocates case. The docket entry reads: "Reversed; motion to dismiss denied. Not for publication." The unpublished opinion is not yet available on the Court's website. At this point, without a copy of the opinion, it is impossible to determine how the Court handled the Prop. 64 retroactivity issue. If anyone has more information, please post a comment or send me an email.
Two new pro-plaintiff Prop. 64 rulings
Two more judges, in San Diego and Sacramento Counties, have issued rulings that Proposition 64 does not apply to pending cases:
I do not have a copy of a formal order in the City Financial case; if and when I obtain it, I will update this post. UPDATE: The City Financial tentative ruling is accessible at this link. Also, I've preserved the Carpenters tentative ruling here.
Friday, January 28, 2005
"Lawsuits Take Aim at Ads for Alcohol"
This article from yesterday's Los Angeles Times mentions Judge Lichtman's Prop. 64 order in Goodwin v. Anheuser-Busch Cos., Los Angeles County Superior Court case no. BC310105 (order dated 12/13/04). The Los Angeles Times also had this short article on the United Investors decision last week. The article noted, "Experts say a definitive ruling [on Prop. 64 retroactivity] could be months off."
First District to consider Prop. 64 retroactivity issue
I have it on good authority that the Proposition 64 retroactivity issue was raised in a motion to dismiss filed on December 6, 2004 in Californians for Disability Rights v. Mervyn's California, Inc., case no. A106199 (First Appellate District, Division Four). The motion to dismiss was orally argued earlier this week, on January 25, and an order is expected on February 7. If the First District follows the Second District's lead in United Investors Life Ins. Co. v. Waddell & Reed, Inc., ___ Cal.App.4th ___ (Jan. 20, 2005), we will have to wait until briefing on the merits is completed before we get a substantive ruling. For more on United Investors, see this post.
Thursday, January 27, 2005
By popular demand, some Prop. 64 briefs
More than one plaintiffs' attorney has asked me for trial-level briefs opposing the various Proposition 64 retroactivity arguments. Here are two: The first brief (which I obtained from the court's website) is in opposition to a Prop. 64 motion that will be heard on February 10. The second brief (which counsel graciously forwarded to me) resulted in Judge Kramer's famous non-retroactivity order. A number of very good appellate briefs are also accessible here.
I heard it through the grapevine ...
Rumor has it that Alameda County Superior Court Judge Ronald M. Sabraw recently issued another order very similar to this one in the FATE v. Covenant Care case. If anyone knows anything about this order, please let me know.
Wednesday, January 26, 2005
Contingency fees as taxable income to the client?
Monday's Supreme Court decision in Commissioner v. Banks, ___ U.S. ___ (Jan. 24, 2005), could have an impact on some UCL settlements. In Banks, the Supreme Court unanimously held that "when a litigant's recovery constitutes income, the litigant's income includes the portion of the recovery paid to the attorney as a contingent fee." Evidently, there are statutory exceptions for certain employment, civil rights, and personal injury cases. (One of the statutory exceptions was enacted while the Banks case was pending, but the Supreme Court refused to give it retroactive effect.) It also appears that although attorney's fees constitute "income" in some types of cases, they are deductible unless the client is subject to the alternative minimum tax. It's all very complicated, and the lesson to be learned is to make sure that any fees award or settlement in your UCL case is expressly tied to Code of Civil Procedure section 1021.5, the "private attorney general" fee-shifting statute, rather than to the contingency fee agreement. The Supreme Court expressly declined to decide whether fees awarded pursuant to a fee-shifting statute are subject to the same rule. Yesterday's Daily Journal and Recorder both had articles on the case, as did the Los Angeles Times. Two blogs, TaxProf Blog and TaxBiz, both have more on the decision. If anyone reading is a tax law expert and can provide some thoughts on how this decision might impact UCL settlements, please post a comment.
Tuesday, January 25, 2005
Latest issue of Competition
The Fall 2004/Winter 2005 issue of Competition, the journal of the State Bar's Antitrust and Unfair Competition Law Section, is now out. The new issue includes an article entitled "What is 'Unfair'? Developments in 17200 Law After Cel-Tech [Communications, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal.4th 163 (1999)]." The article is quite interesting, and addresses whether the pre- or post-Cel-Tech formulation of "unfair" applies to consumer actions. Because the Cel-Tech court expressly declined to decide that question (id. at 187 n.12), the appellate courts have been struggling with it ever since. The article emphasizes a few recent cases in which the courts have concluded that a modified Cel-Tech formulation of "unfair" should apply in consumer actions. In quite a few other cases, however, the courts have declined to import the Cel-Tech formulation into the consumer arena. In addition to those cited in the article, see Searle v. Wyndham Int’l, Inc., 102 Cal.App.4th 1327, 1334 (2002); Gafcon, Inc. v. Ponsor & Assoc., 98 Cal.App.4th 1388, 1425 n.15 (2002); Smith v. State Farm Mut. Auto. Ins. Co., 93 Cal.App.4th 700, 718 n.23 (2001); People ex rel. Renne v. Servantes, 86 Cal.App.4th 1081, 1095 (2001); South Bay Chevrolet v. General Motors Acceptance Corp., 72 Cal.App.4th 861, 886-87 & n.24 (1999).
Another update on Bivens
I recently learned that the Bivens tentative ruling was NOT adopted. The matter has been taken under submission pending a further hearing in May. Therefore, I've crossed it off my list of Prop. 64 orders. Many thanks to counsel in the Bivens case for providing that update.
Monday, January 24, 2005
Welcome, Recorder readers
This morning's Recorder has a piece (subscription required) on yours truly and this blog! Welcome, new readers!
New UCL decision: State of California ex rel. Harris v. PricewaterhouseCoopers LLP
On Thursday, the Court of Appeal (First Appellate District, Division Four) issued State of California ex rel. Harris v. PricewaterhouseCoopers LLP, ___ Cal.App.4th ___ (Jan. 20, 2005). The decision is 80 pages long and contains a lengthy discussion of many different aspects of the UCL, including UCL preemption, "restitution" under the UCL, class certification of UCL claims, the scope of public penalties available under the UCL, and "primary jurisdiction" issues surrounding the UCL. The decision does not mention Proposition 64, probably because the private plaintiffs were actually injured and sought class certification.
Friday, January 21, 2005
Welcome, Bridgeport seminar attendees
I heard that William L. Stern, a speaker at today's Bridgeport conference on 17200, mentioned the blog in very favorable terms this morning. Thank you, Will, and welcome, new readers! I was unable to attend the conference myself, so please write in with any interesting tidbits.
New pro-plaintiff Prop. 64 order: Insurance Broker Commission Litigation v. Omni Insurance Co.
Many thanks to the reader who informed me that on Tuesday, January 18, San Francisco County Superior Court Judge Richard A. Kramer issued another order favorable to plaintiffs on the Proposition 64 retroactivity issue.
Judge Kramer's other Prop. 64 order is accessible here.
Yesterday's appellate oral arguments on Prop. 64
As many of you know, yesterday the Court of Appeal, Fourth Appellate District, Division Three, heard oral arguments in two appeals in which the Court, sua sponte, requested supplemental briefing on the Prop. 64 retroactivity issue. Reader Thomas R. Freeman of Bird Marella in Century City attended the hearing, and sent me the following very interesting and well-written summary:
The Court of Appeal, 4th App. Dist., Div. 3 (Justices Rylaarsdam, Bedsworth & Moore), heard oral argument this afternoon in Jones v. Citibank and Wilens v. JP Morgan, which were consolidated for argument and will likely be consolidated on the merits when the opinion is issued. In both cases, plaintiffs/respondents were represented by Jeffrey Wilens, and defendants/appellants were represented by Julia Strickland.

These appeals raised an interesting question of law, separate and apart from the Prop 64 issue. Not having read the briefs, my best guess is that the question is whether California Courts may properly decline to enforce foreign law that results in a waiver of a California-residing plaintiff's right to bring a class action lawsuit when the foreign state's substantive law otherwise applies under California's choice-of-law rules. Does California's fundamental policy against such waivers justify a refusal to enforce the foreign law. If so, does enforcement of this fundamental state policy violate the Supremacy Clause of the US Constitution if applied in a case subject to the Federal Arbitration Act?

On the way to this dance before the appellate court, however, California voters passed Prop 64. The appellate court ordered the parties to file letter briefs addressing whether Prop 64 applies to this case, which was pending on appeal at the time it passed.

Before describing the Prop 64 argument, it is important to note the foolishness of trying to read too much into the questions and comments of the justices. Towards the end of oral argument, Justice Rylaarsdam stated that "we have not yet decided what to do with Prop 64." That caveat should dissuade any reasonable person from attempting to read too much into the questions and comments of the justices at today's hearing. But sadly dear reader, I am not a reasonable person, as evident from the fact that I drove from LA to Santa Ana in the middle of a work day for no reason other than to test my skills as a legal soothsayer. So here goes.

Justice Moore led off the Prop 64 discussion by asking defense counsel the following question: "What if we rule in your favor on Prop 64? Should it go back to the trial court to allow your opponent to amend and correct the deficiency?" Ms. Strickland argued that there was no need to send the case back to the trial court for that purpose because plaintiffs failed to allege facts sufficient to establish injury in fact under Prop 64. In responding, defense counsel acknowledged that one of the plaintiffs was a cardholder, but that alone would not justify an inference that the bank policy under attack caused that person to lose money or property. Justice Moore asked whether the appellate court should make the determination that the plaintiff cannot possibly amend the complaint to allege facts sufficient to establish an injury in fact; she asked whether the appellate court could properly make such a determination, suggesting (but not stating) that this issue is properly decided by the trial court after plaintiff has attempted to allege facts supporting an injury in fact.

Justice Rylaarsdam followed up to defense counsel's response by stating: "But this was plead before Prop 64. So shouldn't they have an opportunity to re-plead?" While Ms. Strickland did not concede the point, she indicated that the issue was not as important to her as whether Prop 64 applied to the case, which is the key Prop 64 issue.

When Prop 64 was raised with plaintiffs' counsel, Mr. Wilens, he argued that the plaintiffs have already alleged facts sufficient to support "injury in fact" under Prop 64. He then argued that, although Prop 64 does not terminate his clients' claims, it nevertheless should not be applied to pending cases as a matter of fundamental fairness. He argued that a voter-passed initiative should be construed strictly according to its language and where, as here, that language and the voter pamphlet materials say not a word about the statute's application to pending cases, then the initiative should not be applied to pending cases.

Justice Rylaarsdam responded that the UCL is a statutory remedy and Prop 64 simply takes away a statutory remedy. He then asked Mr. Wilens whether he would agree that it is well established black letter law that if a statutory remedy exists and is repealed then the remedy cannot be applied in pending cases. Rylaarsdam continued by asking Wilens to put aside Prop 64 and 17200 for the moment and consider only this one simple proposition: The repeal of a statutory remedy applies to cases pending at the time of repeal.

Wilens agreed with that general proposition, but stated that the proposition has no application to Prop 64 because prop 64 eliminates a "cause of action" not a remedy. Prop 64 takes away a "cause of action" because this plaintiff cannot sue upon its passage. Justice Rylaarsdam's questions, however, suggested that he believes that Prop 64 simply limits the remedy, without taking away the "cause of action."

That is, Prop 64 does not eliminate the cause of action based on unfair, unlawful or deceptive business acts or practices, it just limits the "remedy" by allowing only the Attorney General and individuals suffering injury in fact to bring such a claim. He said "we are not talking about [taking a cause of action away from] a plaintiff who is injured."

At that point, Justice Bedsworth asked Mr. Wilens whether his position was that his client has lost a "cause of action" not just a remedy? Wilens responded that this was his position, and he stated that a plaintiff, acting as a "pure" Private Attorney General (which he also said that his clients were not, since they have suffered injury) has lost the right to bring a "cause of action."

At that point, Justice Rylaarsdam stated that "we have not yet decided what to do with Prop 64." He also said that, whatever the ruling in this case, the losing party will likely file a petition for review, either on the Prop 64 issue or the waiver issue, which is presently before the state supreme court. So, he said, no matter what, this case will not be "over" for a while. But he also noted that the court would not defer its decision until the waiver issue is resolved by the supreme court, as defense counsel requested.

Time to read the tea leaves. Justice Rylaarsdam's questions and comments suggest that he believes that Prop 64 is properly applied to pending cases. First, he seems to accept to defense-side argument that a statutory remedy created by the legislature terminates upon repeal, absent a savings clause. This principle, if applied, would require application of Prop 64 to pending cases. But his comments went further by suggesting a distinction between the repeal of a "remedy" and a "cause of action." The repealer rule argued by defendants throughout the state does not seem to hinge on this remedy/cause of action distinction. But I believe Justice Rylaarsdam's point is that the claimed unfairness of applying Prop 64 to pending cases is not significant because Prop 64 does not terminate the right to bring a UCL claim by anyone who actually suffers an injury. It simply limits the "private attorney general" mechanism for enforcement of the law, which is perhaps akin to a merely procedural change, as opposed to a substantive law change. Courts will apply procedural changes retroactively. But whatever the significance of the distinction between remedy and cause of action, it seems that Justice Rylaarsdam believes that Prop 64 applies to pending cases.

Justice Bedsworth did not say enough on this issue to draw any conclusions. As for Justice Moore, she seemed very focused on an issue that arises only if Prop 64 is deemed to apply to pending cases: Whether plaintiffs should have an opportunity to amend their complaints to allege facts sufficient to establish injury in fact. I think she is staking out a position that is important only because the Division is about to hold that Prop 64 applies to pending cases. That opinion may well come through a different case, presumably the [Consumer Advocates v.] Daimler-Chrysler case, which shares only one common member with this panel. But I cannot believe that this issue has not been the subject of analysis and discussion by the entire Division, and I doubt very much that there will be a split within the Division.
Many thanks to Tom for providing such a great report. Another oral argument is scheduled for today in the same District and Division, but before a slightly different panel: Justices Rylaarsdam, Bedsworth, and Fybel.
Thursday, January 20, 2005
Hot off the presses: Court of Appeal decision in United Investors v. Waddell & Reed, Inc.
This afternoon, the Court of Appeal (Second Appellate District, Division Five) issued its eagerly-anticipated decision in United Investors Life Ins. Co. v. Waddell & Reed, Inc., ___ Cal.App.4th ___ (Jan. 20, 2005). As predicted by the reader whose summary of the oral argument I posted here, the Court did not decide the Prop. 64 retroactivity question. Instead, in denying the defendant's motion to dismiss the appeal, the Court held that United Investors is an "aggrieved" party with appellate-level standing, regardless of whether Prop. 64 stripped away its trial-level standing:
[T]he Courts of Appeal have refused to dismiss appeals on the ground the appellate court might ultimately determine the appellant did not have standing to assert its claims in the trial court. .... Even if plaintiff has no authority to maintain its suit in superior court, it is sufficiently aggrieved by the dismissal of its complaint that it has standing to appeal under Code of Civil Procedure section 902.
(Slip op. at 5-6.) It is unclear at this point whether this decision will impact any of the other pending appeals in which the Prop. 64 retroactivity issue has been raised. Many thanks to the reader who wrote in to alert me to this decision.
New UCL case filed against Wal-Mart
Today the San Francisco Chronicle has the story, which quotes my colleague, "Jessica Grant of the well-known Fred Furth plaintiff's law firm in San Francisco."
Two new Prop. 64 orders: Gonzalez and Tsukroff
Many thanks to the readers who informed me of two new orders on the Prop. 64 retroactivity issue. In Gonzalez, San Joaquin County Superior Court Judge K. Peter Saiers overruled a demurrer in which the Prop. 64 issue was raised (when I receive the formal order, I'll put it up). In Tsukroff, Napa County Superior Court Judge W. Scott Snowden reached the opposite conclusion on retroactivity. And the coolest thing of all is that the Tsukroff order mentions this blog!

Wednesday, January 19, 2005
Supreme Court denies Krumme petition for review
Today, the Supreme Court denied the petition for review and depublication request in Krumme v. Mercury Insurance Co., 123 Cal.App.4th 924 (2004). The docket is accessible here. As you probably know, Krumme is one of the first pending appeals in which the Proposition 64 retroactivity issue was raised. The original opinion was issued on October 29, 2004, the Friday before the election. The Court of Appeal affirmed a UCL judgment in the plaintiff's favor, even though the plaintiff was not one of the defendant's policyholders and was "utterly 'disinterested' in the controversy he began." Under the law in effect at that time, the plaintiff's "disinterestedness" was no impediment to his suit. After Proposition 64 passed, the defendant sought rehearing, which the Court of Appeal denied. A petition for review followed, along with a depublication request, both of which were denied today.
Upcoming Alameda County hearing on Prop. 64 issues
On February 10, 2005 at 9:00 a.m., Judge Ronald M. Sabraw of the Alameda County Superior Court Complex Litigation Department will be holding a hearing on a variety of Proposition 64 issues, including the retroactivity issue, pursuant to this order. Virtually all putative class actions filed in Alameda County are assigned to Judge Sabraw's department, which means that most UCL cases end up there as well. Judge Sabraw poses some thought-provoking questions about the impact of Proposition 64.
Tuesday, January 18, 2005
New Prop. 64 order: Branick v. Homecoming
Last Friday, Judge Wendell Mortimer, Jr. of the Los Angeles County Superior Court held that Proposition 64 may be applied to pending cases. He granted a defense motion for judgment on the pleadings, but gave plaintiffs leave to amend their complaint to satisfy the new "actual injury" requirement. Branick v. Homecoming, Los Angeles County Superior Court case no. BC280759, Judge Wendell Mortimer, Jr. (tentative ruling dated 01/14/05). My list of Prop. 64 orders has been updated accordingly.
Monday, January 17, 2005
Upcoming appellate oral arguments on Proposition 64
Happy Martin Luther King, Jr. Day!

According to the Court of Appeal's website, several pending appeals raising the Proposition 64 retroactivity issue have been scheduled for oral argument in the near future:

  • Wilens v. J.P. Morgan, case no. G033660, Fourth Appellate District, Division Three (Rylaarsdam, Bedsworth & Moore, JJ.)

  • Jones v. Citigroup, case no. G033663, Fourth Appellate District, Division Three (Rylaarsdam, Bedsworth & Moore, JJ.)
  • Schulz v. Ginix Corp., case no. G033879, Fourth Appellate District, Division Three (Rylaarsdam, Bedsworth & Fybel, JJ.)
I've already got one roving reporter signed up to attend the arguments on January 20 (although additional reports are always welcome). If you can volunteer to attend one or more of the other arguments and send me a report, please let me know. I urge all those who are planning to attend these arguments to double-check the court's calendar yourselves to make sure the arguments haven't been rescheduled. (And by the way, did you know that Justice Bedsworth is a blogger?)
Saturday, January 15, 2005
Digression: "Why There's No Escaping the BLOG"
The current issue of Fortune magazine has this article. Its subtitle reads: "Freewheeling bloggers can boost your product—or destroy it. Either way, they've become a force business can't afford to ignore." Another recent Fortune article refers to bloggers as "a tiny but highly influential audience." And, in other blogging news, a recent study by the Pew Internet & American Life Project shows that 27% of internet users read blogs (although only 38% of internet users know what blogs are). According to the study, "those who knew about blogs were well-educated, internet veterans (about half those with at least six years of experience knew what a blog is) and heavy users of the internet."
Friday, January 14, 2005
"Court to decide when lawsuit limit began"
This news is a bit old, but on January 5, the San Francisco Chronicle had this article on Proposition 64. Among other things, it talks about the United Investors oral argument.
Thursday, January 13, 2005
New Prop. 64 order: Jarvis v. Royal Numico N.V.
Many thanks to the reader who informed me that yesterday, Judge Robert L. Dondero of the Superior Court for the City and County of San Francisco denied a defense motion for judgment on the pleadings based on Proposition 64, observing:
[A]t this juncture, a Judgment on the Pleadings barring [plaintiff's UCL] claim would be premature because the retroactivity of the initiative change is a matter of considerable debate. Still, the Court believes that Defendants should be allowed to conduct reasonable discovery to determine whether the current Plaintiffs in this case would have a valid claim if Proposition 64 is deemed retroactive, and whether the particular Plaintiffs satisfy the current standing requirements of Proposition 64. Therefore, the Court is going to vacate the trial date set for January 25, 2005.
Jarvis v. Royal Numico N.V., San Francisco County Superior Court case no. CGC 02 403532, Judge Robert L. Dondero (order dated 01/12/05).
Supreme Court acts in two Proposition 64 cases
Yesterday, the Supreme Court took action in two pending cases in which the Prop. 64 retroactivity issue has been raised.

First, the Court denied the petition for review in Poirer v. State Farm Mut. Auto Ins. Co. In that case, the Prop. 64 issue was raised in a short, final section of a brief mostly focused on other substantive topics. (I know this because I went to the Supreme Court clerk's office last month and read the brief.)

Second, the Court asked for additional briefing in Virtual Media Group v. Superior Court. Prop. 64 retroactivity is the only issue raised in the review petition in that case. The petition was filed on December 8, and no response had been submitted yet (a common strategy in Supreme Court practice). Now, however, an informal response and a reply will be due on January 24 and 28, respectively.

At least two other cases filed in the Supreme Court, listed here, raise the Prop. 64 issue.
Wednesday, January 12, 2005
New UCL decision: PETA v. California Milk Producers Advisory Board
Yesterday, the Court of Appeal issued its decision in People for the Ethical Treatment of Animals v. California Milk Producers Advisory Board, ___ Cal.App.4th ___ (Jan. 11, 2005), in which it held that "public entities, including CMAB, are not 'persons' who are subject to suit under the UCL." Slip op. at 2. "[H]ad the Legislature wanted to include governmental entities in its definition of 'person' for purposes of the UCL, it would have done so." Id. at 7. The Daily Journal has an article on the case this morning called "Cow Suit Tipped" (groan).

This issue is already the subject of a pending California Supreme Court case. On June 24, 2004, the Supreme Court granted review in Wells v. One2One Learning Foundation, 116 Cal.App.4th 515 (Mar. 4, 2004) (discussed in my post here), in which the Court of Appeal held that governmental entities are not bound by the UCL because they are not "persons" as the UCL defines that term. (Here is the docket in that case.)
MCLE for my friends in So Cal
My post yesterday on MCLE programs mentioned only San Francisco events. A reader writes in:
For Southern California attorneys, the Orange County Bar Association will be holding its "Last Dash" program on January 21st and 22nd. The program spans a day and a half, and includes a total of 22 sessions from which to choose. More information about "Last Dash" is available by following the link on the OCBA home page.
The registration form lists a program called "Practicing Under Section 17200 in 2005," which will be offered Friday afternoon, January 21st, at 3:30.
Tuesday, January 11, 2005
Update on Bivens
I heard through the grapevine that the Bivens tentative ruling has not yet been adopted, and that a hearing is coming up later this month. If you have more information on this tentative ruling, please write in.
Two upcoming MCLE programs on the UCL
There are two upcoming MCLE programs on the UCL, one of which will focus on Proposition 64 in particular:
My former partner, William L. Stern of Severson & Werson, will be a speaker at both of these MCLE programs. Will is the author of the Rutter Group guide on 17200 practice, which the Court of Appeal has described as "a leading treatise" on the UCL. Corbett v. Superior Court, 101 Cal.App.4th 649, 654 n.2 (2002). All UCL practitioners should have a copy.
Monday, January 10, 2005
Yet another pro-plaintiff Prop. 64 order: Munoz v. Petrini Van & Storage, Inc.
Here is another order on the Prop. 64 retroactivity issue:

This one is also quite detailed, and holds that Prop. 64 may not be applied to pending cases. Like the Goodwin order, this order also invites immediate appellate review under Code of Civil Procedure section 166.1. (I searched for a writ petition in the Goodwin case, and couldn't find one, although it's been a month since that order was issued.)

In addition, I'm told that the court rejected (without analysis) a Prop. 64 retroactivity argument in:
UPDATE:The San Mateo County Superior Court keeps its tentative rulings available online for only about a week, so I've archived the Austria tentative ruling here.
Friday, January 07, 2005
Another pro-plaintiff Prop. 64 order: Americare v. Medical Capital Corp.
Many thanks to the reader who forwarded a copy of a Prop. 64 order issued on November 29. Orange County Superior Court Judge David T. McEachen held, after a detailed analysis, that Prop. 64 may not be applied to pending cases. Americare v. Medical Capital Corp., Orange County Superior Court case no. 03CC01256, Judge David T. McEachen (order dated 11/29/04). My list of Prop. 64 trial court orders has been updated accordingly.
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.
"Panel Ponders Proposition 64 Retroactivity"
This morning's Daily Journal reports here on the oral argument yesterday in United Investors Life Insurance Co. v. Waddell & Reed, Inc., Second Appellate District, Division Five, case no. B176546. (I wonder why the docket says that oral argument was "waived" in open court?) The article has interesting background information on the case, but says nothing about whether the panel gave any hint of its leanings on the retroactivity question.
Wednesday, January 05, 2005
"Retroactivity of Proposition 64 Reaches Appellate Court Today"
An article in today's Daily Journal begins, "The first appellate arguments aimed at determining whether Proposition 64 can be invoked retroactively to throw out lawsuits brought under the state's Unfair Competition Act are set to be delivered today in Los Angeles." The docket in United Investors Life Insurance Co. v. Waddell & Reed, Inc., Second Appellate District, Division Five, case no. B176546, indicates that oral argument was waived in open court and that the parties were ordered to file letter briefs by January 14.
More Prop. 64 orders
I've received word of two more trial court orders on Prop. 64, both holding that the amendments may be applied to pending cases:
Many thanks to the readers who sent me these orders.
More on Krumme
Defendant Mercury Insurance Corp. filed a reply to the answer to its petition for review in the Krumme case yesterday. Thanks to counsel for Mercury for sending it to me. This brief is also excellent. It will be interesting to see whether the Supreme Court takes this case. One the one hand, counsel for Mr. Krumme is right to point out that the Prop. 64 retroactivity issue is poorly framed from a procedural standpoint in this particular case. On the other hand, as a third-party bystander (who also represents plaintiffs), I think this case could be a very good vehicle for addressing the issue, since the case is obviously meritorious—clearly not a so-called "shakedown" suit of the kind made infamous by a handful of former lawyers from down South—and both parties are represented by very competent counsel who can be expected to file excellent and thorough briefs. But from the standpoint of appellate procedure, the Virtual Media review petition presents a better opportunity for the Supreme Court to act.
Tuesday, January 04, 2005
"Blogging the Law"
Yesterday's Sacramento Bee had this piece (scroll down) about yours truly and this blog! Welcome, Sacramento Bee readers!

As an aside, the blog passed the 10,000 hits mark this morning. I've been tracking hits since April, and yesterday was the biggest total hits day by far, with nearly 450.
"Unfair Competition Law Does Not Apply to Employees"
Today's Daily Journal has this practice article on the UCL and employment law. The authors argue that "[a]fter Proposition 64, ... Unfair Competition Law plaintiffs must have suffered a competitive injury, such as is suffered by a business or consumer, not simply a monetary loss." (Emphasis added.) I don't see anything in Prop. 64 that supports that conclusion. Before and after Prop. 64, if an employee suffers loss of money or property as a result of an employer's "unfair," "fraudulent," or "unlawful" conduct, there is no reason why the employee cannot seek relief under the UCL. The argument about "competitive" harm existed before Prop. 64 and has been roundly rejected in employment cases (including Cortez, for example). If Prop. 64 changes the definition of "unfair" or "fraudulent" conduct by limiting it to "competitive" harm, as the authors of this article suggest, then it is a substantive amendment that cannot be applied retroactively to pending cases. Comments, anyone?
Krumme update
An answer to the petition for review was filed in the Krumme case on December 21. (Many thanks to counsel for Mr. Krumme for sending me his, once again, excellent brief.) A depublication request was filed on December 28, according to the docket. For more on the Court of Appeal's decision in Krumme v. Mercury Ins. Corp., 123 Cal.App.4th 924 (2004) (rehearing denied 11/29/04), please see these posts.
Monday, January 03, 2005
Welcome Daily Journal readers
An article in this morning's Daily Journal mentions this blog twice! The article is called "Judge Denies Retroactivity of Proposition 64" and reports on Judge Kramer's order from last Wednesday. Welcome Daily Journal readers!
What I did during my vacation ...
The Proposition 64 orders list has been updated to include Judge Kramer's order. Also, I've created a list of all of the appellate proceedings raising Proposition 64 of which I'm aware, as well as a sampling of the appellate briefs that have been filed on the issue. If you know of other orders, pending appeals, or briefs that should be listed, please write in.

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© 2003-2005 by Kimberly A. Kralowec