Thursday, May 12, 2022

"The usual California claims"

A constant reader asked for this and now I will try to link to it when I use the phrase.

California has three statutes that consumer plaintiffs often use (along with warranty claims, which I will not discuss here). They are: the Unfair Competition Law (UCL); the False Advertising Law (FAL); and the Consumer Legal Remedies Act (CLRA). While they often cover the same conduct in false advertising cases and are cumulative of each other, they have differences.

UCL: The UCL, California Business and Professions Code § 17200 et seq., forbids unfair competition, which is defined as “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by” the False Advertising Law (FAL). § 17200. The UCL’s “ ‘purpose is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.’ ” Abbott Laboratories v. Superior Court, 9 Cal.5th 642, 651 (2020). The UCL reaches beyond advertising to “anything that can properly be called a business practice and that at the same time is forbidden by law.” Id.

There are three key words defining the scope of the UCL, each with a different coverage.

Unlawful: The UCL “borrows” violations of other laws: if something is “unlawful,” and a person covered by the UCL suffers harm as a result, then there is a remedy under the UCL. Deception is not required, though deception is often the mechanism by which plaintiffs allege a causal relationship between the unlawfulness and their lost money or property; in such cases, “unlawful” and “fraudulent” conduct will be linked.

Unfair: This term makes clear that even if a practice is not specifically banned by some other law, it may be unfair. In order to put some limit on the concept, courts have developed two competing standards for what constitutes unfairness. Here too, deception is not required, with the same caveat about causation.

The proper test for whether an action violates the unfair prong of the UCL is “currently in flux among California courts,” Hodsdon v. Mars, Inc., 891 F.3d 857, 866 (9th Cir. 2018) (cleaned up), or at least the test changes depending on the situation. When consumers are plaintiffs, courts often say that an “unfair” practice is that which “offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.” Id. (cleaned up). Under the other standard, which courts most often apply to competitor-plaintiffs, unfairness is “conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition.” Id. (cleaned up).

Fraudulent: The courts have given this term the same meaning as “untrue or misleading” in the FAL, to be discussed in further detail below. Thus, both false and technically true but misleading claims are covered by the UCL. The UCL will be violated if consumers are likely to be deceived. The UCL, like the FAL, “is broad and sweeping to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.” Pulaski & Middleman, LLC v. Google, Inc., 802 F.3d 979, 985 (9th Cir. 2015) (cleaned up). Thus, it is readily used in the class action context.

UCL actions may be brought by the Attorney General, designated public prosecutors, or persons who have suffered injury in fact and lost money or property due to the unfair competition. § 17204. The primary form of relief available under the UCL is an injunction. UCL remedies are equitable in nature, and recovery of damages is not available, though restitution may be.

Because the UCL is equitable, federal courts have been cutting back on its scope in two key ways: First, they hold that the equitable remedy of restitution is only available in federal court if legal remedies are unavailable, and they are usually available. Sonner v. Premier Nutrition Corp., 971 F.3d 834, 841 (9th Cir. 2020). Second, they hold that named plaintiffs lack standing to seek injunctive relief in many circumstances, because by definition the named plaintiffs now know the truth about the allegedly false advertising. However, in some cases, a sufficiently concrete desire to buy the product again if it were truthfully labeled, and an inability to rely on the current advertising because of the alleged falsehood, can suffice to provide standing to seek injunctive relief. See, e.g., In re Coca-Cola Products Marketing & Sales Practices Litig. (No. II), 2021 WL 3878654, No. 20-15742 (9th Cir. Aug. 31, 2021). One perhaps quixotic result is that UCL standing may be unavailable if the defendant’s product is worthless—since a consumer would never want to buy a worthless product again—but available if the product is worth something, just not as much as the defendant charged for it.

The AG and other authorized public prosecutors may also seek civil penalties of up to $2,500.  Civil penalties “are mandatory once a violation of [the UCL] is established, and a penalty must be imposed for each violation.” People v. First Federal Credit Corp., 104 Cal.App.4th 721, 732 (2002).

FAL: The FAL, California Business and Professions Code § 17500 et seq., makes it unlawful “for any person or business to make or distribute any statement to induce the public to enter into a transaction ‘which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading.’ ” Nationwide Biweekly Administration, Inc. v. Superior Court, 9 Cal.5th 279, 306 (2020) (quoting § 17500). The standard for what is “untrue or misleading” is broad and focuses on the reasonable consumer; both false and misleading statements are covered—that is, ads that are technically true but cause consumers to reach mistaken conclusions. The challenged advertisement or practice is typically viewed through the eyes of the ordinary target consumer acting reasonably under the circumstances. Unlike Lanham Act doctrine, FAL doctrine does not distinguish between false and misleading claims in its proof requirements; consumer surveys are not required even if the challenged ad is technically true, and factfinders may rely on the ad itself as the primary evidence of its effect.

Many traditional limits on common-law fraud do not apply, such as reasonable reliance, which is replaced by causation (the consumer must have lost money or property as a result of the speaker’s conduct). While the fault requirement (the speaker knew or should have known of the falsity) might seem significant, it is rarely litigated at the motion to dismiss or summary judgment stage, given that the facts that could establish falsity or misleadingness also generally allow an inference of knowledge. Thus, as long as members of the public are likely to be deceived, there is a claim under the FAL.

FAL claims are often suited to class action treatment, because a FAL analysis “does not require ‘individualized proof of deception, reliance and injury.’ ” Pulaski & Middleman, LLC v. Google, Inc., 802 F.3d 979, 986 (9th Cir. 2015) (cleaned up). If the plaintiff shows that a false or misleading statement is material to consumers—likely to affect their purchasing decisions—then deception, reliance and injury may be presumed on a classwide basis. To show materiality, a plaintiff is not required to show that the challenged statement is the “sole or even the decisive cause” influencing decisions to buy, but only that reasonable consumers would attach importance to the statement in making decisions. Kwikset Corp. v. Superior Ct., 51 Cal.4th 310, 327 (2011).

The available remedies are injunctive relief and restitution (with the caveats discussed for the UCL); the courts are authorized to “restore to any person in interest any money or property, real or personal, which may have been acquired by means of any practice in this chapter declared to be unlawful.” § 17535.

FAL actions may be brought by the Attorney General, designated public prosecutors, or “any person who has suffered injury in fact and has lost money or property” as a result of a violation of the FAL. Id. Under the FAL, the Attorney General and other public prosecutors may require advertisers to substantiate their factual claims, but “lack of substantiation” claims are not available to consumer-plaintiffs, who must show falsity or misleadingness affirmatively. The Attorney General and other public prosecutors may seek civil penalties not to exceed $2,500 for each violation of the FAL, as with the UCL. § 17536(a). These penalties are cumulative, which means that conduct violating both the UCL and FAL can result in two separate penalties per violation. People v. Toomey, 157 Cal.App.3d 1, 22 (1984) (the UCL and FAL “allow for cumulative remedies, indicating a legislative intent to allow ... double fines”).

CLRA: The CLRA prohibits “unfair methods of competition and unfair or deceptive acts or practices” in transactions for the sale or lease of goods to consumers. Cal. Civ. Code § 1770(a). It includes a specific list of unlawful practices, including the commonly pled practices of “[r]epresenting that goods or services have ... characteristics ... [and] benefits ... which they do not have,” § 1770(a)(5), and “[r]epresenting that goods ... are of a particular standard, quality, or grade ... if they are of another.” § 1770(a)(7).

The other provisions vary greatly in specificity, covering conduct including “[p]assing off goods or services as those of another” and related conduct; bait and switch advertising; advertising unassembled furniture without clearly indicating that it is unassembled; “[m]aking false or misleading statements of fact concerning reasons for, existence of, or amounts of, price reductions”; “[i]nserting an unconscionable provision in the contract”; and others.

In practice, CLRA analysis is generally quite similar to FAL and UCL analysis. To establish a CLRA claim, the plaintiff must show that: (1) the defendant’s conduct was deceptive; and (2) the deception caused plaintiff harm, again in the form of lost money or property. As with FAL and UCL claims, causation may be established by showing materiality.

CLRA remedies are broader than FAL and UCL remedies. The statute authorizes “[a]ny 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 the CLRA to sue for actual damages (or at least $1,000 in a class action); injunctive relief; restitution; punitive damages; and “”[a]ny other relief that the court deems proper.” Penalties are enhanced in certain circumstances if consumer-victims are senior citizens or disabled.

However, in order to be eligible for damages, consumers must notify the accused violator in writing thirty days or more prior to filing suit and demand repair, replacement, or other rectification of the violative goods or services. And limitations on seeking restitution, an equitable remedy, in federal court also apply under Sonner.


Because these statutes have such significant overlap, courts generally treat them very similarly. “For purposes of class certification, the UCL, FAL, and CLRA are materially indistinguishable.” Townsend v. Monster Beverage Corp., 303 F.Supp.3d 1010, 1043 (C.D. Cal. 2018) (cleaned up).

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