Posts belonging to Category Caselaw Developments

The California Supreme Court’s contingent fee decision last year, County of Santa Clara v. Superior Court, 235 P.3d 21 (Cal. 2010), is a little remarked upon, but important, victory for government entities as well as a significant development for the plaintiffs’ bar. Though complex and somewhat technical in its particulars, the essential holding in County of Santa Clara is clear: private lawyers may represent the government on a contingent-fee basis in public nuisance actions. Id. at 36. And because the decision was not limited to its facts and set a flexible standard applicable beyond nuisance cases, it is likely that County of Santa Clara will be the basis for rulings in trial courts and the Court of Appeal approving contingent-fee arrangements between private lawyers and local government entities—a win for plaintiffs’ lawyers, of course, but also a benefit generally, because public enforcement resources are already stretched to their limit.

The County of Santa Clara outcome had been in some doubt because an earlier precedent, People ex. rel. Clancy v. Superior Court, 705 P.2d 347 (Cal. 1985), was thought to generally prohibit private lawyers from entering into contingent-fee arrangements with government entities. However, Chief Justice George’s unanimous opinion distinguished the “constitutional and institutional interests present in a criminal case” (County of Santa Clara at 31), as in Clancy, and set forth an objective and broadly applicable standard for assessing the permissibility of private-public contingent-fee arrangements. So long as “neutral, conflict-free government attorneys retain the power to control and supervise the litigation,” such an arrangement is permissible. County of Santa Clara at 36.

As one of the George Court’s capstone decisions, County of Santa Clara exemplifies a moderate-to-progressive legacy that few anticipated when the former Chief Justice was elevated to that position by Governor Pete Wilson in 1996.

The United States Supreme Court’s review of the Ninth Circuit’s en banc decision in Dukes v. Wal-Mart, 603 F.3d. 571 (9th Cir.) (en banc), cert granted, 131 S. Ct. 795 (Dec. 6, 2010) (No. 10-277), has sparked a great deal of interest and debate among the plaintiff’s bar and big business. Apart from more detailed analysis, this is the first in a periodic series of updates concerning the status of Dukes and what others are saying.

In a recent article, the Wall Street Journal speculated that, in an effort to appear more “business friendly,” the Obama Administration could deploy the Solicitor General to argue for a ruling on Dukes that entails the reversal of class certification and the implementation of new Rule 23 jurisprudence. Characterizing “how [President Obama’s] Justice Department comes down on” Dukes as a prominent “test” of the President’s overtures to business, the Journal is likely engaging more in wishful thinking than well-founded analysis. The full article is available here. Despite the State of the Union Address having been peppered with broadly positive statements about economic efficiency and unassailable critiques of waste (the president’s salmon anecdote particularly connected on this score), the administration’s substantive record doesn’t imply the disposition toward Dukes that the Journal suggests. First, there is no indication that the President is inclined to alienate his base by taking a radically anti-class action position. Moreover, this is an administration that has substantially expanded enforcement actions by the Department of Labor. Still, with the dynamics of the 2012 election already beginning to emerge, we will watch with interest how the administration decides to handle Dukes.

Briefs & Deadlines

Wal-Mart’s brief was filed on January 20, 2011. You can view it here. Respondents’ brief was filed on February 22, 2011. You can view it here.

The Dukes oral argument is set for March 29, 2011.

Interesting Case Facts:

• 1.6 million class members
• Filed in 2001
• The Dukes Ninth Circuit panel: Stephen Reinhardt, Michael Daly Hawkins, Susan P. Graber, Raymond C. Fisher, Richard A. Paez, and Marsha S. Berzon (majority); and Alex Kozinski, Pamela Ann Rymer, Barry G. Silverman, Carlos T. Bea, and Sandra S. Ikuta (dissent)
• Plaintiff’s Counsel: Brad Seigelman (Impact Fund); Joseph M. Sellers (Cohen Milstein Sellers & Toll PLLC)
• Defense Counsel: Ted Boutros (Gibson Dunn)
• 24 Amicus Briefs have been filed with the Supreme Court, all in support of Wal-Mart

The California Supreme Court recently elaborated on the meaning of “injury in fact” in Kwikset Corp. v. Superior Court, No. S171845, 2011 Cal. LEXIS 532 (Cal. Jan. 27, 2011). The full opinion is available here.

Kwikset arose from the defendant’s sale of portable locks labeled “Made in U.S.A.,” and the plaintiffs’ subsequent lawsuit alleging unfair competition and false advertising because the Kwikset locks contained some foreign-made components. Kwikset at *3. The trial court overruled the defendant’s demurrer, but the Court of Appeal directed the trial court to sustain the demurrer and enter a judgment dismissing the action because “while [the plaintiffs’] ‘patriotic desire to buy fully American-made products was frustrated,’ that injury was insufficient to satisfy the standing requirements of [Bus. & Prof. Code] sections 17204 and 17535.’ ” Id. at *11. The Supreme Court reversed, in a majority opinion by Justice Werdegar.

In Kwikset, the Supreme Court held that standing under the Unfair Competition Law (UCL), Cal. Bus. & Prof. Code, §§ 17200 et seq., extends only to “[a] ‘person who has suffered injury in fact and has lost money or property’ as a result of unfair competition.” Id. at *13 (citing Bus. & Prof. Code § 17204 [emphasis added]). But because “a party who has lost money or property generally has suffered injury in fact,” Id. at *16, Kwikset is chiefly devoted to determining those circumstances that constitute “lost money or property,” as satisfaction of that requirement will invariably satisfy the less onerous “injury in fact” requirement. See Id. at *16.

Kwikset thus implies that pecuniary or property loss is also different from “injury” and that actual damages are something more than the mere “identifiable trifle” that is “injury in fact.” “[I]njury in fact is ‘an invasion of a legally protected interest which is (a) concrete and particularized . . . and (b) “actual or imminent, not ‘conjectural’ or ‘hypothetical,’ ” ’. ” Id. at *18, (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)). Per Kwikset, therefore, the UCL’s “injury” requirement is satisfied by the allegation of some “identifiable trifle.” Id.

Kwikset affirms California’s long-standing embrace of the “injury” definition set forth in Black’s Law Dictionary: Under California law, injury is the “invasion of a legal right or entitlement,” and nothing more.

The lead-up to the Supreme Court’s oral argument last fall in AT&T v. Concepcion inspired extensive conjecture regarding a potentially alarming outcome: that retailers and employers could avoid class actions altogether. Although the Ninth Circuit had invalidated as unconscionable a class action waiver that was part of the arbitration clause in the service agreement between AT&T and the plaintiff, legal observers speculate that, were the Supreme Court to reverse the Ninth Circuit—by holding that the Federal Arbitration Act preempts the state-law unconscionability doctrine that was the basis for invalidating the AT&T arbitration clause/class action waiver—then that could provide the impetus for consumer and employment contracts alike to include class action waivers immune to an unconscionability challenge. At least in the realm of consumer and employment law, that outcome could significantly impact the availability of the class action procedure.

In sizing up the Supreme Court oral argument, the plaintiff’s bar naturally looked to the Court’s progressive wing for support, as well as to signals from Justice Anthony Kennedy, the closest the Roberts Court has to a swing vote. However, it was a potential defection from the conservative bloc, and from perhaps its most ardent member, Justice Antonin Scalia, that produced hope that a worst-case scenario would be avoided. Justice Scalia, likely motivated by a desire for procedural continuity and an aversion to encroaching on state autonomy, asked: “Are we going to tell the State of California what it has to consider unconscionable?” Similarly, one Wall Street Journal blog following the oral argument was headlined “Class-Action Lawyers Breathing Easier After Oral Argument,” giving particular emphasis to Scalia’s apparent receptiveness to this version of states’ rights.

A decision in AT&T v. Concepcion is expected late this spring.

A full transcript of the oral argument is available here. A recording of the oral argument is available here.