California's Consumer Legal Remedies Act


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The Consumers Legal Remedies Act Plaintiffs Perspective The 5th Annual Unfair Competition Law Program May 18, 2007 Millennium Biltmore Hotel Los Angeles Reed R. Kathrein
Hagens Berman Sobel & Shapiro LLP
Managing Partner, San Francisco Office

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California's Consumer Legal Remedies Act

  1. 1. The Consumers Legal Remedies Act Plaintiffs Perspective The 5th Annual Unfair Competition Law Program May 18, 2007 Millennium Biltmore Hotel Los Angeles Reed R. Kathrein Hagens Berman Sobel & Shapiro LLP Managing Partner, San Francisco Office
  2. 2. Scope of CLRA and UCL Compared
  3. 3. CLRA UCL <ul><li>Relief from 23 types of “unlawful” activities, which occur during a transaction mostly involving the sale or lease of goods to a consumer. </li></ul><ul><li>Relief from any “unlawful,” “unfair,” or “fraudulent” conduct. (Bus. & Prof. Code, § 17200.) </li></ul>
  4. 4. Unlawful Acts under the CLRA
  5. 5. Fake Goods <ul><li>(1) Passing off goods or services as those of another. </li></ul><ul><li>(2) Misrepresenting the source, sponsorship, approval, or certification of goods or services. </li></ul><ul><li>(3) Misrepresenting the affiliation, connection, or association with, or certification by, another. </li></ul><ul><li>(4) Using deceptive representations or designations of geographic origin in connection with goods or services. </li></ul><ul><li>(5) Representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have or that a person has a sponsorship, approval, status, affiliation, or connection which he or she does not have. </li></ul>
  6. 6. Untrue Quality <ul><li>(6) Representing that goods are original or new if they have deteriorated unreasonably or are altered, reconditioned, reclaimed, used, or secondhand. </li></ul><ul><li>(7) Representing that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another. </li></ul><ul><li>(8) Disparaging the goods, services, or business of another by false or misleading representation of fact. </li></ul>
  7. 7. Competitive Disparagement <ul><li>(8) Disparaging the goods, services, or business of another by false or misleading representation of fact. </li></ul>
  8. 8. False Advertising <ul><li>(9) Advertising goods or services with intent not to sell them as advertised. </li></ul><ul><li>(10) Advertising goods or services with intent not to supply reasonably expectable demand, unless the advertisement discloses a limitation of quantity. </li></ul><ul><li>(11) Advertising furniture without clearly indicating that it is unassembled if that is the case. </li></ul><ul><li>(12) Advertising the price of unassembled furniture without clearly indicating the assembled price of that furniture if the same furniture is available assembled from the seller. </li></ul>
  9. 9. False Price Reductions <ul><li>(13) Making false or misleading statements of fact concerning reasons for, existence of, or amounts of price reductions. </li></ul>
  10. 10. Bait & Switch <ul><li>(14) Representing that a transaction confers or involves rights, remedies, or obligations which it does not have or involve , or which are prohibited by law. (Parol Evidence Rule does not apply. Wang v. Massey Chevorlet, 97 Cal. App. 4 th 856 (2002) </li></ul><ul><li>(15) Representing that a part, replacement, or repair service is needed when it is not. </li></ul><ul><li>(16) Representing that the subject of a transaction has been supplied in accordance with a previous representation when it has not. </li></ul><ul><li>(17) Representing that the consumer will receive a rebate, discount, or other economic benefit, if the earning of the benefit is contingent on an event to occur subsequent to the consummation of the transaction. </li></ul>
  11. 11. Unfair Negotiations & Terms <ul><li>(18) Misrepresenting the authority of a salesperson, representative, or agent to negotiate the final terms of a transaction with a consumer. </li></ul><ul><li>(19) Inserting an unconscionable provision in the contract . </li></ul>
  12. 12. Cost Plus Advertising <ul><li>(20) Advertising that a product is being offered at a specific price plus a specific percentage of that price unless (1) the total price is set forth in the advertisement, which may include, but is not limited to, shelf tags, displays, and media advertising, in a size larger than any other price in that advertisement, and (2) the specific price plus a specific percentage of that price represents a markup from the seller's costs or from the wholesale price of the product. </li></ul><ul><li>This subdivision shall not apply to in-store advertising by businesses which are open only to members or cooperative organizations organized pursuant to Division 3 (commencing with Section 12000) of Title 1 of the Corporations Code where more than 50 percent of purchases are made at the specific price set forth in the advertisement. </li></ul>
  13. 13. Grey Market Goods <ul><li>(21) Selling or leasing goods in violation of Chapter 4 (commencing with Section 1797.8) of Title 1.7. </li></ul><ul><li>“ the term &quot;grey market goods&quot; means consumer goods bearing a trademark and normally accompanied by an express written warranty valid in the United States of America which are imported into the United States through channels other than the manufacturer's authorized United States distributor and which are not accompanied by the manufacturer's express written warranty valid in the United States.” </li></ul>
  14. 14. Solicitation <ul><li>(22) (A) Disseminating an unsolicited prerecorded message by telephone without an unrecorded, natural voice first informing the person answering the telephone of the name of the caller [ etc.] and without obtaining the consent of that person to listen to the prerecorded message. </li></ul><ul><li>(23) The home solicitation, as defined in subdivision (h) of Section 1761, of a consumer who is a senior citizen where a loan is made encumbering the primary residence of that consumer for the purposes of paying for home improvements and where the transaction is part of a pattern or practice in violation of either subsection (h) or (i) of Section 1639 of Title 15 of the United States Code… </li></ul>
  15. 15. Standing Compared
  16. 16. CLCR UCL <ul><li>Plaintiff must be damaged. </li></ul><ul><li>Pecuniary loss not required for injunctive relief. </li></ul><ul><li>Class not required for injunction. </li></ul><ul><li>Requires “injury in fact” and “loss of money or property” for standing to bring suit. </li></ul>
  17. 17. Loss of Money or Property Not Required to Recover <ul><li>1770. (a) The following unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer are unlawful: </li></ul><ul><li>1780. (a) Any consumer who suffers any damage as a result of the use or employment by any person of a method, act, or practice declared to be unlawful by Section 1770 may bring an action </li></ul><ul><li>Acual damage is not required to recover. See, Flynn v. A. Diamond Production, Inc., Alameda County Superior Court case no. RG03113097, order dated 05/10/04.) (“actual damages is not an element of a CLRA claim.”…“definition of ‘damage’ is ... not limited to monetary loss.” ) </li></ul><ul><li>Damages “include the infringement of any legal right” defined in CLRA. Kagan v. Gibraltar Sav. & Loan Assn. 35 Cal.3d 582, 593 (1984); Chamberlan v. Ford Motor Co., 369 F.Supp.2d 1138, 1147 (N.D. Cal. 2005)(CLRA does not require “particular pecuniary losses.”) </li></ul>
  18. 18. Causation and Reliance <ul><li>In order to obtain actual damages a CLRA plaintiff must prove loss causation. See Wilens v. TD Waterhouse Group, Inc., 120 Cal. App. 4th 746, 754 (2003) (“Relief under the CLRA is specifically limited to those who suffer damages, making causation a necessary element of proof”). </li></ul><ul><li>May be inferred based on the materiality of the defendant’s misrepresentations, particularly in non-disclosure cases. Massachusetts Mutual Life Ins. Co. v. Superior Court, 97 Cal.App.4th 1282, 1292-93 (2002). </li></ul>
  19. 19. Class Certification Compared
  20. 20. UCL Class Certification <ul><li>Private UCL plaintiff “may pursue representative claims for relief on behalf of others only if the claimant ... complies with Section 382 of the Code of Civil Procedure.” (Bus. & Prof. Code, § 17203.) </li></ul><ul><li>Section 382 requires proof of an “ascertainable class” sharing a “well-defined community of interest.” Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326. </li></ul><ul><li>The “community of interest” element requires predominating questions of law or fact and class representatives whose claims are typical of those of the class and who can adequately represent the class. Sav-On Drug at p. 326.) </li></ul><ul><li>Section 382 also requires that class treatment be “superior” to other potential ways of resolving the dispute. Id . at 326. </li></ul>
  21. 21. CLRA Class Certification <ul><li>CLRA requires only four of the traditional elements: numerosity, commonality, adequacy and typicality. § 1781(b)(1)-(4).) </li></ul><ul><li>Neither superiority nor ascertainability is a listed element, so neither need be proven. Corbett v. Superior Court, 101 Cal.App.4th 649, 670 fn.9 (2002); </li></ul><ul><li>Trial court “shall” certify CLRA claim if the four listed elements are established. § 1781(b); Caro v. Procter & Gamble Co., 18 Cal.App.4th 644, 654 (1993).   </li></ul>
  22. 22. Relief Compared
  23. 23. Relief Compared <ul><li>1780. (a) Any consumer who suffers any damage as a result of the use or employment by any person of a method, act, or practice declared to be unlawful by Section 1770 may bring an action against that person to recover or obtain any of the following: </li></ul><ul><li>(1) Actual damages, but in no case shall the total award of damages in a class action be less than one thousand dollars ($1,000). </li></ul><ul><li>(2) An order enjoining the methods, acts, or practices. </li></ul><ul><li>(3) Restitution of property. </li></ul><ul><li>(4) Punitive damages. </li></ul><ul><li>(5) Any other relief that the court deems proper. </li></ul>
  24. 24. Monetary Relief Compared <ul><li>Under UCL “restitution,” not “damages,” may be recovered. Korea Supply Co. Question on disgorgement exists. </li></ul><ul><li>Retail intermediaries may cut off a defendant’s liability for “restitution,” because the plaintiff paid no money “directly” to the defendant. (See, e.g., Phillips v. DaimlerChrysler Corp., Sacramento County Superior Court case no. 03AS05615, order dated 4/22/04.) </li></ul><ul><li>If money paid can be traced to the defendant’s “restitution” remains an available remedy. (See, e.g., Conroy v. Fresh Del Monte Produce, Alameda County Superior Court case no. RG04-146298, order dated 03/07/05; In re Tobacco Cases II, San Diego County Superior Court, JCCP no. 4042, order dated 05/23/03.) </li></ul><ul><li>Measure “restitution” in the context of sales of goods may be limited. See In Colgan v. Leatherman Tool Group, Inc. 135 Cal.App.4th 663 (2006).(Restitution should be measured based on the portion of the purchase price attributable to the misrepresentation, </li></ul>
  25. 25. Monetary Relief Compared <ul><li>CLRA litigants can simply recover both “restitution” and “actual damages.” § 1780(a)(1), (2). </li></ul><ul><li>Statutory minimum damages in a class action is $1,000, and punitive damages are also recoverable. § 1780(b)(1), (b)(4). </li></ul><ul><li>If the plaintiff is over 65 or disabled, statutory penalties up to $5000 are available.§ 1780(b). </li></ul>
  26. 26. Injunctive Relief Compared
  27. 27. UCL Injunctive Relief <ul><li>UCL permits injunctions “to prevent ... any practice which constitutes unfair competition ....” (Bus. & Prof. Code, § 17203.) </li></ul><ul><li>UCL injunctions are generally designed to prevent recurrence of activity. Scripps Health v. Marin 72 Cal.App.4th 324, 332 (1999). </li></ul><ul><li>But may also have a restitutionary element. See Hewlett v. Squaw Valley Ski Corp. 54 Cal.App.4th 499 (1997) (Requiring defendants to reforest unlawfully denuded wilderness areas); People v. Toomey 157 Cal.App.3d 1 (1984) )(establish and “maintain an impound account” to fund restitution payments) </li></ul><ul><li>Colgan v. Leatherman Tool Group, Inc.,135 Cal.App.4th 663 (publcize misrepresentations and accept product returns.) </li></ul><ul><li>Consumers Union of U.S., Inc. v. Alta-Dena Certified Dairy 4 Cal.App.4th 963, 966 (1992).(“[A]n injunction against future violations ... is only a partial remedy since it does not correct the consequences of past conduct. An order which commands [a party] only to go and sin no more simply allows every violator a free bite at the apple.” ) </li></ul>
  28. 28. CLRA Injunctive Relief <ul><li>CLRA authorizes orders “enjoining the [unlawful] methods, acts, or practices.” (Civ. Code, § 1780(a)(2). </li></ul><ul><li>Public injunctions may be ordered under the CLRA without class certification. See, e.g., Cruz v. Pacificare Health Systems, Inc. 30 Cal.4th 303, 312 (2003);Thompson v. 10,000 RV Sales, Inc. 130 Cal.App.4th 950, 980 (2005). </li></ul><ul><li>Mandatory arbitration clauses can be avoided because CLRA injunctive relief claims are not arbitrable. Cruz at 316; Broughton v. Cigna Healthplans 21 Cal.4th 1066, 1080-85 (1999). </li></ul><ul><li>No removal under the Class Action Fairness Act of 2005 (“CAFA”) if not pleaded as a class action. 28 U.S.C., § 1711 (2). </li></ul>
  29. 29. Attorneys Fees Compared <ul><li>Under UCL, fees are typically recovered under the private attorney general doctrine of Code of Civil Procedure § 1021. </li></ul><ul><li>Under CLRA, fees are mandatory to a successful plaintiff. (Civ. Code, § 1780(d).) </li></ul><ul><li>CLRA’s fees are reciprocal.Court has discretion to award “[r]easonable attorney’s fees” to prevailing defendants if “the plaintiff’s prosecution of the action was not in good faith.” </li></ul><ul><li>To justify a fees award, the plaintiff must have acted with “subjective bad faith.” Corbett v. Hayward Dodge, Inc., 119 Cal.App.4th 915, 925-26(2004) </li></ul>
  30. 30. Statute of Limitations Compared <ul><li>CLRA -- 3 years -- § 1783 </li></ul><ul><li>UCL – 4 years -- BPC § 17208 </li></ul><ul><li>Consider malpractice claim allowed in Janik v. Rudy, Exelrod & Zieff 119 Cal.App.4th 930 (2004), where attorneys failed to pursue UCL claim. </li></ul>
  31. 31. Summary Adjudication <ul><li>UCL--- Ordinary summary judgment rules of CCP § 437c will apply. </li></ul><ul><li>CLRA prohibits summary judgment. </li></ul><ul><li>But provides a process by which a defendant can make a motion that the given action has no merit. Cal. Civ. Code § 1781(c)(3). </li></ul>
  32. 32. Pre-Litigation Demand Compared <ul><li>To recover damages, a plaintiff must satisfy the CLRA’s 30-day demand letter requirement. § 1782. See also, Outboard Marine Corp. v. Superior Court 52 Cal.App.3d 30, 40-41(1975) </li></ul><ul><li>UCL has no such requirement. But see, Graham v. DaimlerChrysler Corp., 34 Cal.4th 553 (2004)(“Catalyst theory” of attorneys’ fees, requires a demand letter prior to filing.) </li></ul>
  33. 33. Conclusion <ul><li>The CLRA is a powerful tool for consumer rights that was overshadowed by the UCL. </li></ul><ul><li>Now with the UCL having been sliced up, more plaintiffs will turn to and explore the CLRA. </li></ul>