United States: 2017 Annual Overview Of California's Unfair Competition Law And Consumers Legal Remedies Act

OVERVIEW OF DEVELOPMENTS1

Class action lawyers in California wield two powerful tools: the Unfair Competition Law, California Business and Professions Code sections 17200 - 17209 ("UCL"); and the Consumers Legal Remedies Act, California Civil Code sections 1750 - 1784 ("CLRA"). The UCL forbids "unlawful, unfair or fraudulent" conduct in connection with virtually any type of business activity.2 With its sweeping liability standards and broad equitable remedies, the UCL has long been a weapon of choice for plaintiffs' lawyers. The CLRA is more defined in structure, but no less potent. The CLRA applies to any "consumer" transaction involving the "sale or lease of goods or services"3 and authorizes recovery of actual, statutory and punitive damages.4 The CLRA, which explicitly prohibits 24 separate business acts or practices, provides for streamlined class certification and dispositive motion proceedings.

Decisions from California and Federal courts in 2016 provided important direction in areas of liability, reliance and causation, preemption, injunctive relief, and other issues under the UCL and CLRA.

First, the trial courts are constantly fleshing out what is an "unfair" business practice under the UCL. In Bickoff v. Wells Fargo Bank N.A.,5 the United States District Court, Central District of California, determined that it was not unfair for a bank to foreclose on an overdue construction loan where it could show, contrary to the borrower's claims, that it had not guaranteed permanent financing. In Abramson v. Marriott Ownership Resorts, Inc.,6 another Central District court found that a timeshare "points" system was not unfair, even if it allegedly made it more difficult to reserve higher quality rooms. In both Hodsdon v. Mars, Inc.7 and McCoy v. Nestle USA, Inc.,8 courts found that the UCL does not require candy companies to disclose on packaging that their chocolate products may contain cocoa beans picked under child or slave labor conditions, drawing a distinction between the deplorable conditions themselves and the companies' duties to disclose on candy wrappers. But in In re Anthem, Inc. Data Breach Litigation,9 the court allowed members of a health care plan who alleged their personal information had been hacked to pursue a UCL claim against health insurance companies based on "California's public policy of protecting consumer data."

Second, the gatekeeping concepts of reliance and causation were stretched to allow a consumer to challenge a retailer's alleged "bait and switch" scheme in Veera v. Banana Republic, LLC.10 In that case, a clothing retailer advertised a 40% off sale, but customers alleged they were not informed that certain goods were not included in the sale until they reached the register, where they faced the dilemma whether to buy the goods anyway, knowing at that point the goods were not on sale. After the trial court granted summary judgment on behalf of the retailer, the California Court of Appeal, Second District, reversed and remanded, allowing the UCL claim to proceed. The court reasoned that if a consumer is "influenced by the momentum to buy," there is a factual question whether they suffered economic injury caused by the false advertising.11 A dissent in Veera challenged whether the plaintiff could show reliance: "I see the majority's 'momentum to buy' theory as both a departure from well-settled principles regarding reliance in ordinary fraud actions and as a dilution of the Prop. 64 requirement that the plaintiff suffer economic injury as a result of the defendant's improper conduct."12

Third, courts continue to define the contours of preemption of UCL and CLRA claims. In In re Fontem US, Inc.,13 for example, plaintiffs' claims regarding omissions of material fact regarding e-cigarettes were preempted by the Family Smoking Prevention and Tobacco Control Act with respect to product labeling, but not with respect to off-label warning requirements under California's Proposition 65. In Fisher v. Monster Beverage Corp.,14 the United States Court of Appeals, Ninth Circuit, determined that the federal Food, Drug and Cosmetic Act preempted plaintiff's claim that a drink manufacturer failed to warn consumers about caffeine content, but in Monster Beverage Corp. v. Herrera,15 the Ninth Circuit applied the Younger abstention doctrine and the Anti-Injunction Act to allow UCL claims filed by a city attorney to proceed in state court against the same manufacturer. In People ex rel. Harris v. Delta Air Lines, Inc.,16 the federal Airline Deregulation Act preempted a UCL action for enforcement of California's Online Privacy Protection Act's privacy policy requirements for an airline's consumer mobile application. In Roberts v. United Healthcare Services, Inc.,17 the California Court of Appeal, Second District, held that UCL claims for misrepresentation in a medical insurer's marketing materials were preempted by the Medicare Act, possibly teeing up a split with two other California appellate districts that have held otherwise regarding the scope of preemption with respect to Medicare.

Fourth, several cases focused on the availability of injunctive relief for UCL and CLRA claims in the face of consumer awareness of the challenged practice. In In re Fluidmaster, Inc.,18 the court dismissed claims for injunctive relief under the UCL and CLRA because there was a disconnect between the alleged harm and the requested relief, such that prohibiting further sales and requiring notices regarding design modification would not reduce the probability of the plaintiff's future harm due to allegedly faulty plumbing hoses. In Le v. Kohls Dep't Stores, Inc.,19 the court allowed plaintiff to seek injunctive relief to prohibit an alleged deceptive pricing practice, finding that the plaintiff's general awareness of the practice did not deprive him of Article III standing. But in Strumlauf v. Starbucks Corp.,20 consumers alleging that their lattes were underfilled (a First World problem) lacked standing to pursue injunctive relief because, in light of their allegation they would not have purchased the drinks on the same terms had they known the drinks were underfilled, the court reasoned they could not allege a threat of repeated injury.21 And in Moss v. Infinity Ins. Co.,22 the court dismissed an insured's UCL claim to the extent that it was based on an alleged breach of contract, reasoning that the restitutionary remedy available under the UCL was "entirely inconsistent" with the primary remedy sought by the insured, which was the payment of damages.

Litigation trends included more cases challenging claims relating to food products and nutritional supplements,23 complaints about "slack-fill" in packaging,24 and false price referencing in retail stores.25

Other important cases involved when the "learned intermediary" doctrine applies in UCL suits,26 when principals may be liable under the UCL for the actions of their agents,27 whether subsequent purchasers can be consumers under the CLRA,28 and whether timeshares29 or an online authentication program30 are "goods" or "services" under the CLRA.

To read this article in full, please click here.

Footnotes

1 The research in this Overview is current through January 31, 2017. The purpose of the Overview is to provide information and perspective. As a result, we sometimes reference unpublished and/or noncitable opinions to demonstrate reasoning, illustrate trends, etc. The authors thank Stroock special counsel Shannon Dudic, associates Holly Farless, Erick Kuylman and Donny Simkin, paralegal Andrew Aquino and librarian Evelyn Egbeighu for their invaluable assistance with this year's Overview.

2 Cal. Bus. & Prof. Code § 17200.

3 Cal. Civ. Code §§ 1770(a) (stating prohibited practices), 1761 (definitions).

4 See Cal. Civ. Code § 1780(a).

5 No. 14CV1065 BEN (WVG), 2016 WL 3280439, at *15-16 (S.D. Cal. June 14, 2016), appeal filed, No. 16-55965 (9th Cir. July 6, 2016); see also Harris v. Wells Fargo Bank N.A., No. 5:16-cv-00645- CAS(KKx), 2016 WL 3410161, at *4 (C.D. Cal. June 15, 2016) (not unfair for bank to record notice of default against secured real property prior to completion of borrower's loan modification application).

6 155 F. Supp. 3d 1056 (C.D. Cal. 2016).

7 162 F. Supp. 3d 1016, 1026 (N.D. Cal. 2016), appeal filed, No. 16-15444 (9th Cir. Mar. 16, 2016).

8 173 F. Supp. 3d 954, 967 (N.D. Cal. 2016), appeal filed, No. 16-15794 (9th Cir. Apr. 29, 2016).

9 162 F. Supp. 3d 953, 990 (N.D. Cal. 2016).

10 6 Cal. App. 5th 907 (2016).

11 Id. at 921-22 (finding that plaintiffs raised a triable issue of fact as to standing and causation when they were "lured" into a store by signs proclaiming a 40% off sale, but, after learning at the register that the sale did not apply to every item in the store, chose to purchase certain items at full price).

12 Id. at 926 (Bigelow, P.J., dissenting).

13 No. SACV 15-01026 JVS (RAOx), 2016 WL 6520142, at *6 (C.D. Cal. Nov. 1, 2016).

14 656 F. App'x 819, 823 (9th Cir. 2016).

15 650 F. App'x 344, 346 (9th Cir. 2016) (explaining that the Younger abstention doctrine applied because "[t]here was an ongoing state proceeding when the district court considered the motion to dismiss at issue," and that application of the doctrine was appropriate because "the People of California have a strong interest in ensuring that a company providing consumer products is doing so in a manner consistent with the state's unfair business practices laws").

16 247 Cal. App. 4th 884, 906 (2016).

17 206 Cal. Rptr. 3d 158, 160 (2016).

18 149 F. Supp. 3d 940, 951 (N.D. Ill. 2016).

19 160 F. Supp. 3d 1096, 1109 (E.D. Wis. 2016).

20 192 F. Supp. 3d 1025, 1034-35 (N.D. Cal. 2016).

21 Accord Machlan v. Procter & Gamble Co., 77 F. Supp. 3d 954, 960-62 (N.D. Cal. 2015) (plaintiff asserting a UCL claim based on a deceptive business practice of describing moistened wipes as "flushable" did not have Article III standing to pursue injunctive relief).

22 No. 15-CV-03456-JSC, 2016 WL 3753109 (N.D. Cal. July 14, 2016).

23 See, e.g., Lengen v. Gen. Mills, Inc., 185 F. Supp. 3d 1213, 1221 (E.D. Cal. 2016) (challenging gluten levels in cereal product marketed as "gluten-free"); Quesada v. Herb Thyme Farms, Inc., 62 Cal. 4th 298, 323-24 (2015) (challenging marketing of "organic" herbs); Vasic v. PatentHealth, L.L.C., 171 F. Supp. 3d 1034, 1043 (S.D. Cal. 2016) (challenging marketing claims regarding joint health for glucosamine-based supplements).

24 See, e.g., Ebner v. Fresh, Inc., 838 F.3d 958 (9th Cir. 2016) (amount of accessible product in lip balm packaging); Strumlauf, 192 F. Supp. 3d 1025 (volume in lattes); Hafer v. Nestlé U.S.A., Inc., No. 2:17- cv-00034 (C.D. Cal. Jan. 3, 2017) (alleging 40% slack-fill in Raisinets); Vigil v. Mars, Inc., No. 16-cv- 03818-VC (N.D. Cal. Jan. 9, 2017) (denying motion to dismiss mislabeling claim regarding number of servings of Ready Rice per container).

25 See, e.g., Spann v. J.C. Penney Corp., No. SACV 12-0215 FMO (KESx), 2016 WL 5844606 (C.D. Cal. Sept. 30, 2016) (challenging advertising of sale prices); Veera, 6 Cal. App. 5th 907 (challenging advertising of 40% off sale); Le, 160 F. Supp. 3d at 1109.

26 Andren v. Alere, Inc., No. 16-cv-1255-GPC (NLS), 2016 WL 4761806 (S.D. Cal. Sept. 13, 2016) (if medical device was prescribed to plaintiff by doctor, California's "learned intermediary" doctrine would apply because the manufacturer's duty to warn users of risks associated with the device runs to the physician, not the patient or public).

27 Daniels v. Select Portfolio Servs., Inc., 246 Cal. App. 4th 1150, 1188 (2016) (allowing appellants to amend UCL claims against several principals based on alleged conduct of agent).

28 In re Fluidmaster, Inc., 149 F. Supp. 3d at 951 (homebuyers allowed to pursue CLRA claims against manufacturer of water supply lines).

29 Abramson, 155 F. Supp. 3d at 1066 (questioning whether a dispute regarding a timeshare involved "goods" or "services" under the CLRA).

30 Rojas-Lozano v. Google, Inc., 159 F. Supp. 3d 1101, 1116-17 (N.D. Cal. 2016) (Google's reCAPTCHA identification program was not a "good" or "service" under the CLRA).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.