Saturday, April 21, 2012

FYI: Cal App Ct Allows Class Plaintiff to Proceed on § 17200 Claim Without "Actual Reliance"

The California Court of Appeal, Second District, recently held that a class action plaintiff had standing to assert a claim under California's Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.), where the named plaintiff did not prove "injury in fact" and economic loss based on actual reliance, but instead showed a purchase following failure to provide required disclosures
A copy of the opinion is available at:
Plaintiff-appellant ("Buyer") purchased a motorcycle and later filed a class action complaint against defendant motorcycle dealer ("Dealer"), claiming that the Dealer had violated California's Unfair Competition Law ("UCL") and the Consumer Legal Remedies Act ("CLRA") by failing to attach to new motorcycles so-called "hang tags" required by California's Vehicle Code that showed a breakdown of various charges, including the manufacturer's suggested retail price and dealer-added charges for accessories, freight and destination.  The Buyer asserted in part that the Dealer's sale of new motorcycles without hang tags was an unlawful business practice, a fraudulent business practice, and was deceptive and misleading advertising.  The Buyer also claimed that the Dealer had improperly failed to list its add-on charges on the hang tags that were attached to motorcycles.
The Buyer's complaint also alleged that she was not informed of dealer-added charges or the total price of the motorcycle she purchased until she was presented with the sales contract and began price negotiations with the Dealer.  Seeking restitution, the Buyer claimed that the Dealer's failure to attach the hang tag to the motorcycle she bought resulted in her paying undisclosed dealer charges of over $2,000.
In a prior appeal in this case, the Court of Appeal directed the trial court to certify the class, ruling that issues common to the class outweighed the individual issues.  Following remand, the trial court granted the Dealer's motion for judgment, concluding that the Buyer lacked standing to recover under the UCL or CLRA as she had been informed of all the dealer-added charges prior to signing the contract and had failed to establish that she or any other class member had been injured by the Dealer's conduct.
The Buyer appealed.  The Court of Appeal reversed as to the UCL claim, but affirmed as to the CLRA claim.
As you may recall, the UCL prohibits as unfair competition "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising" and further provides that a private right of action exists only where the person bringing the action "has suffered injury in fact and has lost money or property as a result of the unfair competition." Bus. &  Prof. Code § 17200; § 17204.
In addition, the  California Vehicle Code prohibits a vehicle dealer from selling or displaying a new vehicle without a hang tag indicating, among other things, the suggested retail price and the price of any dealer-added charges for transportation, assembly, and accessories.  See Cal. Vehicle Code § 11712.5; § 24014.
In addressing the UCL's standing requirement, the Court of Appeal noted that the current version of the UCL requires that a plaintiff in a class action must have suffered injury in fact and economic loss.  In so doing, the court rejected the Buyer's contention that the UCL's standing requirement only applied at the time of class certification.  
Nevertheless, the court took issue with the trial court's requirement of a showing of actual reliance and the lower court's determination that the Buyer lacked standing due to a lack of injury since the dealer-added charges were disclosed in the sales contract.  Here, the court observed that the trial court's analysis only addressed the UCL's fraudulent prong, and failed to address the other UCL prongs that are not based on a fraud theory and do not require a showing of actual reliance.  Thus, the court ruled that a UCL action based on unlawful business practices other than fraud or false advertising requires the Buyer to establish both injury in fact and economic injury, but not actual reliance. 
Citing a California Supreme Court opinion, the court noted that "injury in fact" requires a showing of a concrete, particularized, "invasion of a legally protected interest," but that an allegation of some specific identifiable injury suffices. See Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 322-25 (2011).
Based in part on the Dealer's sales techniques, the court ruled that the Buyer had introduced sufficient evidence at trial showing an injury in fact as a result of the lack of receiving required disclosures prior to the Buyer's purchase of the motorcycle.  The court also ruled that the Buyer had presented evidence of an economic injury caused by the alleged UCL violation in that she still owed a substantial amount of money on a motorcycle that supposedly lacked required disclosures prior to the time of purchase.
Noting that in a class action situation, the UCL requires only the named plaintiff to have standing, the court ruled that the Buyer's showing of injury in fact and economic loss satisfied that requirement and thus conferred standing on her to pursue the class action lawsuit. 
Turning to the CLRA claim, the court affirmed the lower court's ruling, concluding that the Buyer had failed to adequately brief the CLRA claim.  Accordingly, the court remanded only the UCL claim for further proceedings.

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
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Chicago, Illinois 60602
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