Articles from February 2018

In Flores v. Southcoast Automotive Liquidators, Inc., No. B268271 (2nd District, Div. 5, Nov. 27, 2017) (slip op. available here), the California Court of Appeal affirmed that “an appropriate correction offer under the Consumers Legal Remedies Act [“CLRA”] does not prevent a consumer from pursuing causes of action for fraud and violation of the UCL [Unfair Competition Law] based on the same conduct, because the remedies are cumulative.” Slip op. at 2.

In 2013, defendant-appellant Southcoast Automotive Liquidators, a car dealership, marketed its inventory of used cars in print and online. Print ads included the caveat that the advertised price expires at 12:00 p.m. on the day of publication, though online advertisements (which were only posted for three hours at a time) did not contain this fine print regarding expiration. Slip op. at 3. Plaintiff-respondent Flores saw and printed an internet ad offering the car she intended to purchase the next day for $9,995. Ms. Flores, who was buying her first car, was assisted by her parents, who spoke to the dealership’s employees by phone to confirm the car’s price and condition. Id. at 3-4. When they arrived the following day, the advertised vehicle was not available, but the dealer offered the same model with more than twice as many miles and in worse condition for the same price. Id. at 4. The plaintiff accepted the deal; although the loan paperwork she signed listed higher prices, the dealership assured her the correct price would be inserted later. Id. at 5. The vehicle broke down almost immediately, and Ms. Flores eventually retained counsel, who sent the dealer a letter on May 31, 2013, asserting “that Dealer’s acts constituted unfair methods of competition and/or unfair or deceptive acts in violation of the CLRA.” Id. at 6.

On June 7, 2013, the plaintiff sued Southcoast Automotive alleging several causes of action, including violations of the CLRA, UCL, and Song-Beverly Consumer Warranty Act (Cal. Civ. Code, § 1790, et seq.); she sought an injunction under the CLRA and alleged violations of all three prongs of the UCL (unlawful, unfair, and fraudulent). On June 25, 2013, the dealership offered complete rescission of the purchase agreement with no offset for the payments Flores already made, plus $1,500 for incidental costs (a negotiable amount, so long as Flores provided receipts for incidental damages such as civil penalties and attorney fees). Then, on July 3, 2013, in response to the counter-demand for $15,000 for civil penalties and attorneys’ fees, the dealer fully denied her claims but offered to rescind the contract, refund all payments, and pay $1,500 for incidental costs. If Ms. Flores rejected the offer, Southcoast Automotive stated it “would deposit with the court the amount that Dealer believed to be a full remedy and seek a determination that it was the prevailing party entitled to fees and costs, including attorney fees, for being forced to respond to a complaint after a full remedy was offered.” Slip op. at 7-8.

Unable to resolve her claims, in February 2015, Ms. Flores filed an ex parte motion for permission to file an amended complaint seeking damages and restitution under the CLRA, in addition to injunctive relief. The defendant argued that Ms. Flores’ claims under the UCL were derivative of and precluded by the claim under the CLRA. Slip op. at 7-8. Ultimately, in a revised judgment entered on June 9, 2015, from which the Southcoast Automotive appealed, the trial court found in favor of the plaintiff but held that the dealership had made a valid settlement offer in good faith that precluded damages under the CLRA. Id. at 9. Relief included rescission of the purchase contract and a permanent injunction against the dealer under the UCL, “enjoining advertising any vehicle for sale in print or on the internet without clearly stating the date and time of any expiration.” Id. at 12.

The Court of Appeal subsequently affirmed the judgment in a decision based on the dealer’s contention that the CLRA is the exclusive remedy for the misconduct at issue. Slip op. at 14. Offering an extensive analysis of the statute, the court held that the CLRA expressly provides that remedies are cumulative, even for the same set of facts, noting that “plaintiffs routinely plead fraud, UCL, and CLRA claims based on similar allegations.” Id. at 15-16. Because the UCL claim “was based directly on evidence of fraudulent advertising practices [pursuant to statute] and was not dependent on finding an underlying violation of the CLRA,” the fact that damages under the CLRA were precluded by a reasonable correction offer had no effect on the viability of the plaintiff’s other causes of action. Id. at 18.

The Flores decision is good news for the plaintiffs’ bar, confirming that claims may be pleaded under the CLRA, UCL, and fraud for the same nucleus of operative facts, provided that they are applied appropriately to each cause of action.

Authored by:
Karen Wallace, Associate
CAPSTONE LAW APC

On December 7, 2017, in a published order, the Ninth Circuit rejected dismissal of an appeal of the denial of class certification by two plaintiff employees who had settled their individual claims and preserved certain class and representative claims for appeal, because the parties’ mutual settlement for consideration did not amount to “sham tactics” to manufacture an appealable final judgment under recent Supreme Court precedent. Brown v. Cinemark USA, Inc., No. 16-15377 (9th Cir. Dec. 7, 2017) (Ms. Brown and Mr. De La Rosa are represented by Capstone Law APC) (order available here). In an unpublished memorandum filed with the order, the panel reversed the denial of class certification and the dismissal of the claim under the Private Attorneys General Act (“PAGA”), finding that the district court had erred in denying class certification based on the pleadings and had erroneously dismissed the PAGA claim for failure to exhaust administrative remedies under Williams v. Superior Court, 3 Cal.5th 531 (2017), a case decided after the district court had issued its order (memorandum available here).

Plaintiffs Brown and De La Rosa were movie theater employees who brought a wage and hour class and representative action against their employer and consolidated their case with another action. The district court denied the plaintiffs’ joint motion for class certification, which, among others, sought to certify a direct wage statement claim under Labor Code section 226(a). The district court’s ruling was based solely on the pleadings, finding the wage statement claims had been pleaded derivatively rather than directly, and provided no Rule 23 class certification analysis. The court also dismissed the direct wage statement PAGA claim for failure to exhaust administrative remedies, finding that the PAGA notice letters had not provided sufficient information. Finally, the district court denied leave to amend the complaint and the remaining individual claims were set for trial. However, prior to trial, the parties settled all remaining individual claims for consideration, reserving the right to challenge the district court’s denial of class certification and the dismissal of Ms. Brown’s PAGA claim. Order at 4. Both plaintiffs appealed the issues reserved by the settlement. Id.

Cinemark subsequently brought a motion to dismiss the appeal in light of Microsoft Corp. v. Baker, 137 S. Ct. 1702 (2017), which was issued after the notice of appeal was filed. The Ninth Circuit denied the motion to dismiss the appeal. First, the Ninth Circuit distinguished Baker, noting that in Baker, the district court had denied class certification and the Ninth Circuit had denied discretionary interlocutory review under Rule 23(f). Order at 4. Then, “rather than pursue their individual claims on the merits, the plaintiffs voluntarily dismissed their own claims with the express purpose of creating a final judgment for appeal.” Id. The Baker plaintiffs subsequently only appealed the district court’s interlocutory order denying class certification. The Supreme Court of the United States found that such a voluntary dismissal did not qualify as a “final decision” within the parameters of 28 U.S.C. § 1291 and was a tactic that would undermine section 1291’s firm finality principle. Id. Here, however, the Ninth Circuit found that “unlike Baker, where the plaintiffs openly intended to sidestep Rule 23(f) when they voluntarily dismissed their claims[,]” after the district court denied certification, the Brown plaintiffs continued litigating their remaining individual claims, some of which resolved in favor of the defendants and some resulted in settlement. Id. at 5. The Brown plaintiffs did not engage in any “sham tactics to achieve an appealable final judgment,” and “the parties’ mutual settlement for consideration in this case does not raise the same concerns.” Id.

Second, the Ninth Circuit reversed the district court’s dismissal of Ms. Brown’s PAGA claim based on a failure to exhaust administrative remedies “[g]iven the import of Williams.” Memorandum at 2. The panel found that the PAGA notice letter “pleaded facts and theories sufficient to put the Defendants and the California Labor and Workforce Development Agency [LWDA] on notice for potential investigation, which satisfies the policy goal of California Labor Code section 2699.3(a).” Id. at 2-3. Quoting the California Supreme Court’s unanimous decision verbatim, the Ninth Circuit underscored that “[h]urdles that impede the effective prosecution of representative PAGA actions undermine the Legislature’s objectives.” Id. at 3. The panel further relied on the powerful dicta in Williams setting a very modest standard for PAGA notice letter sufficiency, recognizing that “[n]othing in Labor Code section 2699.3, subdivision (a)(1)(A), indicates the ‘facts and theories’ provided in support of ‘alleged’ violations must satisfy a particular threshold of weightiness, beyond the requirements of nonfrivolousness generally applicable to any civil filing.” Id.

Third, the Ninth Circuit found the district court erred in denying class certification of the direct wage statement claim on the basis of the pleadings. Memorandum at 3. Because the district court based its decision to deny certification solely on the pleadings rather than a Rule 23 analysis, the Ninth Circuit reviewed that decision de novo rather than applying the more deferential abuse of discretion normally reserved for certification rulings. It concluded that the pleadings put the defendants on sufficient notice of wage statement violations, whether direct or derivative, and further found that the plaintiffs’ pleadings merited a Rule 23 analysis for their direct wage statement claim. Id. It thus vacated the order and remanded for the district court to conduct a Rule 23 analysis.

The import of the Brown rulings is that Baker does not necessarily preclude federal appellate review of certification orders pursuant to partial settlements for consideration, particularly when the parties continue litigation. Further, with respect to PAGA notice letters, the Ninth Circuit has demonstrated that the California Supreme Court’s recent pronouncement in Williams is key—that PAGA notice letters need not meet any “threshold of weightiness,” but need only put defendants and the LWDA on notice of potential investigations, a low bar that need only pass the requirements of “non-frivolousness.”

Authored By:
Liana Carter, Senior Counsel
CAPSTONE LAW APC