OPINION
Prior to the 2004 amendment of the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.), by Proposition 64, "[a]ctions for any relief [under the UCL could be] prosecuted . . . by the Attorney General or any district attorney or by any county counsel . . . [or] by a city prosecutor . . . [or] by a city attorney . . . or upon the complaint of any board, officer, person, corporation or association or by any person acting for the interests of itself, its members or the general public." (Bus. & Prof. Code, former § 17204, as amended by Stats. 1993, ch. 926, § 2, p. 5198; see also Californians for Disability Rights v. Mervyn's, LLC (2006) 39 Cal.4th 223,
The complaint before us alleges that the tobacco industry defendants violated the UCL by conducting a decades-long campaign of deceptive advertising and misleading statements about the addictive nature of nicotine and the relationship between tobacco use and disease. Prior to passage of Proposition 64, the trial court had certified the case as a class action. The class was defined as "All people who at the time they were residents of California, smoked in California one or more cigarettes between June 10, 1993 to April 23, 2001, and who were exposed to Defendants' marketing and advertising activities in California." After Proposition 64 was approved, the trial court granted defendants' motion to decertify the class on the grounds that each class member was now required to show an injury in fact, consisting of lost money or property, as a result of the alleged unfair competition. The Court of Appeal affirmed.
On review, we address two questions: First, who in a UCL class action must comply with Proposition 64's standing requirements, the class representatives or all unnamed class members, in order for the class action to proceed? We conclude that standing requirements are applicable only to the class representatives, and not all absent class members. Second, what is the causation requirement for purposes of establishing standing under the UCL, and in particular what is the meaning of the phrase "as a result of" in section 17204? We conclude that a class representative proceeding on a claim of misrepresentation as the basis of his or her UCL action must demonstrate actual reliance on the allegedly deceptive or misleading statements, in accordance with well-settled principles regarding the element of reliance in ordinary fraud actions. Those same principles, however, do not require the class representative to plead or prove an unrealistic degree of specificity that the plaintiff relied on particular advertisements or statements when the unfair practice is a fraudulent advertising campaign. Accordingly, we reverse the order of decertification to the extent it was based upon the conclusion that all class members were required to demonstrate Proposition 64 standing, and remand for further proceedings regarding whether the class representatives in this case have, or can demonstrate, standing.
I. STATEMENT OF THE CASE
A. Introduction
The original complaint in this action was filed on June 10, 1997, and was thereafter amended numerous times, ultimately resulting in the current, ninth amended complaint. The UCL cause of action was added in the sixth amended complaint. Class certification of the UCL cause of action was granted in connection with the seventh amended complaint. The relevant allegations of the seventh and the ninth amended complaints are substantially the same. Therefore, we examine the seventh amended complaint as background for our discussion of the class certification issues.
B. The Seventh Amended Complaint
The seventh amended complaint was filed in January 2001. In it, plaintiff Willard Brown, acting "individually, on behalf of the General Public of the State of California, as well as on Behalf of All Others Similarly Situated," sued the American Tobacco Company, Philip Morris USA Inc., R.J. Reynolds Tobacco Company, Brown & Williamson Tobacco Corporation, British American Tobacco Co., Ltd., Liggett & Myers, Inc., Hill and Knowlton, Inc., the Council for Tobacco Research-U.S.A., Inc., the Tobacco Institute, Inc., United States Tobacco Company, and Lorillard Tobacco Company, alleging causes of action for unfair competition under the UCL; false and misleading advertisement under the false advertising law (§ 17500 et seq.); violation of the Consumers Legal Remedies Act (Civ. Code, § 1750 et seq.) (CLRA); breach of express warranty; fraud and intentional misrepresentation; breach of undertaking of special duty; negligence; and breach of implied warranty of merchantability.
The prefatory allegations stated: "Through a fraudulent course of conduct that has spanned decades, Defendants have manufactured, promoted, distributed or sold tobacco products to Plaintiff and thousands of California citizens and residents, knowing, but denying and concealing that Defendants' tobacco products contain a highly addictive drug known as nicotine. Unbeknownst to the public, Defendants have intentionally controlled and manipulated the amount and bio-availability of nicotine in their tobacco products to create and sustain addiction to their products."
Following the class action allegations was a lengthy section captioned "FACTUAL ALLEGATIONS COMMON TO ALL COUNTS," which set forth in specific detail the alleged concealment by the tobacco industry of the relationship between its product and various diseases. Pertinently, the complaint alleged that defendants had engaged in a "public disinformation strategy . . . concerning the health effects of cigarette smoking," beginning in the 1960's with magazine articles that questioned the link between cigarette smoking and lung cancer. It was further alleged that "[o]ther public statements by the Defendants over the years have repeated the misrepresentations that Defendants were dedicated to the pursuit and dissemination of the scientific truth regarding smoking and health."
The UCL claim was alleged as the first cause of action: "The acts complained of in each of the preceding paragraphs of this complaint, and each of them, constitute unfair and/or unlawful acts in competition in violation of Section 17200 of the California Business and Professions Code. Such acts and violations have not abated and will continue to occur unless enjoined."
C. The Motion for Class Certification
Plaintiff Brown moved for class certification of the UCL and false advertising causes of action in his seventh amended complaint. He sought to certify as a class "those people who are residents of California and who, while
Defendants also maintained that issues of causation and injury would require individual proof as to each class member to justify the remedy of restitution under the UCL. Defendants argued: "Given the multitude of different alleged unfair and deceptive practices which plaintiff says were committed over a forty year plus history by eleven different defendants, it is beyond reasonable dispute that proof of causation cannot be made on a class-wide basis."
In granting the motion, the trial court stated: "While the court agrees with Defendants that a myriad of distinct issues exist as to each class member's exposure to the alleged deceptive marketing, reliance thereon, whether same was a causal factor of the person's smoking and whether each class member sustained injury, such does not defeat the otherwise finding [sic] of substantial commonality as such issues are wholly outside the purview of B & P Code §§ 17200 et seq. and 17500 et seq." The court explained: "All class claims are brought under B & P §§ 17200 et seq. and 17500, et seq. and assert identically that Defendants, by way of concealment and affirmative misrepresentation, manipulated the chemical constituent content of tobacco products and by way of deceptive advertising and marketing acts, misled the smoking public of the health risks and addictive nature of smoking and targeted the putative class uniformly in an alleged class-wide effort to seduce and induce people to smoke." The court concluded: "As the class is defined as including those people that smoked in California one or more cigarettes during the applicable class period and were exposed to Defendants' marketing and advertising activities in California, it must be said the class is readily ascertainable." The trial court's order granting the certification motion specified that the "class period for said class is June 10, 1993 to April 23, 2001."
D. The Class Decertification Motion
Following class certification, plaintiff filed an eighth and then a ninth amended complaint. The ninth amended complaint, the operative pleading
Following the passage of Proposition 64 in November 2004, defendants moved for class decertification. Defendants argued that the new standing requirement imposed on plaintiffs bringing a UCL action by Proposition 64—that such persons must have suffered injury in fact and lost money or property as a result of the alleged UCL violation—applied to every class member. Therefore "numerous individualized issues now predominate, including: (1) whether each class member was actually exposed to the allegedly false and misleading statements on which Plaintiffs' remaining UCL and [false advertising] claims are based; (2) whether, assuming such exposure, each class member was actually affected in some manner by the statement (e.g., did they believe some or all of the statement[s] to be true); and (3) whether each class member actually spent money to purchase cigarettes manufactured by any of the Defendants in this case as a result of his or her exposure to, and belief in the veracity of, the allegedly false and misleading statement, which the class member would not have spent in the absence of such alleged statement."
Plaintiffs responded that Proposition 64's class action compliance requirement "adds nothing to the substantive analysis of whether this action has been properly certified. Neither before nor after Prop. 64 does the class action procedure impose different substantive elements on the prosecution of a claim. There is no evidence supporting defendants' argument that the voters intended to or did add additional substantive elements to the definition of what constitutes unlawful, unfair or fraudulent business practices."
The trial court granted defendants' motion. Most of its ruling addressed the question whether Proposition 64 applied to pending cases and its discussion of Proposition 64's standing requirement was brief. The trial court found that the "simple language" of Proposition 64 required that "for standing purposes,
Plaintiffs appealed. The Court of Appeal affirmed, agreeing with the trial court that, post Proposition 64, individual issues of exposure to the allegedly deceptive statements and reliance upon them, predominated over class issues. We granted plaintiffs' petition for review.
II. DISCUSSION
A. Standard of Review
"Because trial courts are ideally situated to evaluate the efficiencies and practicalities of permitting group action, they are afforded great discretion in granting or denying certification. . . . [I]n the absence of other error, a trial court ruling supported by substantial evidence generally will not be disturbed `unless (1) improper criteria were used [citation]; or (2) erroneous legal assumptions were made [citation].'" (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435-436 [97 Cal.Rptr.2d 179, 2 P.3d 27]; see People v. Superior Court (Humberto S.) (2008) 43 Cal.4th 737, 746 [76 Cal.Rptr.3d 276, 182 P.3d 600] ["[W]hen a trial court's decision rests on an error of law, that decision is an abuse of discretion."].) Additionally, the issues before us involve the meaning of certain language in the UCL as amended by Proposition 64 and, as such, present questions of law that we review de novo. (Jones v. Pierce (1988) 199 Cal.App.3d 736, 741 [245 Cal.Rptr. 149] ["Questions of statutory interpretation are, of course, pure matters of law upon which we may exercise our independent judgment."].)
B. Purpose and Scope of the Fraud Prong of the UCL
C. Class Actions and the UCL; Impact of Proposition 64
Thus, the UCL class action is a procedural device that enforces substantive law by aggregating many individual claims into a single claim, in compliance with Code of Civil Procedure section 382, to achieve the remedial goals outlined above. It does not change that substantive law, however. (City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 462 [115 Cal.Rptr. 797, 525 P.2d 701] ["Class actions are provided only as a means to enforce substantive law."].)
"Proposition 64 accomplishes its goals in relatively few words. The measure amends section 17204, which prescribes who may sue to enforce the UCL, by deleting the language that had formerly authorized suits by any person `acting for the interests of itself, its members or the general public,' and by replacing it with the phrase, `who has suffered injury in fact and has lost money or property as a result of such unfair competition.' The measure also amends section 17203, which authorizes courts to enjoin unfair competition, by adding the following words: `Any person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of Section 17204 and complies with Section 382 of the Code of Civil Procedure, but these limitations do not apply to claims brought under this chapter by the Attorney General, or any district attorney, county counsel, city attorney, or city prosecutor in this state.' (§ 17203.)" (Mervyn's, supra, 39 Cal.4th at pp. 228-229.) Thus, the effect of Proposition 64 is to "prevent uninjured private persons from suing for restitution on behalf of others." (39 Cal.4th at p. 232, italics omitted.)
With this background in mind, we turn to the questions before us.
D. Analysis
1. Who Must Meet the Standing Requirement in a UCL Class Action, the Representative Plaintiff or All Class Members?
As noted, in granting defendants' motion for decertification, the trial court concluded that "the simple language of Prop[osition] 64" required each class
The trial court did not identify the "simple language" in Proposition 64 upon which it based its conclusion. In fact, as we demonstrate, no such language appears—a point that even defendants' counsel conceded at argument—nor is such a construction necessary to address the very specific abuse of the prior UCL standing provision at which Proposition 64 was directed.
Section 17204 now provides in pertinent part: "Actions for relief pursuant to this chapter shall be prosecuted exclusively in a court of competent jurisdiction by the Attorney General or a district attorney or by a county counsel . . . [or] city attorney . . . [or] city prosecutor . . . or upon the complaint of a board, officer, person, corporation, or association, or by a person who has suffered injury in fact and has lost money or property as a result of the unfair competition." Section 17203—the statute authorizing representative actions—states in part: "Any person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of Section 17204 and complies with Section 382 of the Code of Civil Procedure, but these limitations do not apply to claims brought under this chapter by the Attorney General, or any district attorney, county counsel, city attorney, or city prosecutor in this state."
The specific abuse of the UCL at which Proposition 64 was directed was its use by unscrupulous lawyers who exploited the generous standing requirement of the UCL to file "shakedown" suits to extort money from small businesses. "Attorneys form[ed] a front `watchdog' or `consumer' organization. They scour[ed] public records on the Internet for what [were] often ridiculously minor violations of some regulation or law by a small business, and sue[d] that business in the name of the front organization. Since even frivolous lawsuits can have economic nuisance value, the attorneys then contact[ed] the business (often owned by immigrants for whom English is a second language), and point[ed] out that a quick settlement (usually around a few thousand dollars) would be in the business's long-term interest." (People ex rel. Lockyer v. Brar (2004) 115 Cal.App.4th 1315, 1317 [9 Cal.Rptr.3d 844].)
"In Proposition 64, as stated in the measure's preamble, the voters found and declared that the UCL's broad grant of standing had encouraged `[f]rivolous unfair competition lawsuits [that] clog our courts[,] cost taxpayers' and `threaten[] the survival of small businesses . . . .' (Prop. 64, § 1, subd. (c) [`Findings and Declarations of Purpose'].) The former law, the voters determined, had been `misused by some private attorneys who' `[f]ile frivolous lawsuits as a means of generating attorney's fees without creating a corresponding public benefit,' `[f]ile lawsuits where no client has been injured in fact,' `[f]ile lawsuits for clients who have not used the defendant's product or service, viewed the defendant's advertising, or had any other business dealing with the defendant,' and `[f]ile lawsuits on behalf of the general public without any accountability to the public and without adequate court supervision.' (Prop. 64, § 1, subd. (b)(1)-(4).) `[T]he intent of California voters in enacting' Proposition 64 was to limit such abuses by `prohibit[ing] private
On the other hand, the ballot materials also support the conclusion that Proposition 64 did not propose to curb the broad remedial purpose of the UCL or the use of class actions to effect that purpose, but targeted only the specific abuse described above. The proponents' statement in the voter information guide for Proposition 64 described the purpose of the initiative as "protect[ing] small businesses from frivolous lawsuits" generated by "[s]hakedown lawyers [who] `appoint' themselves to act like the Attorney General and file lawsuits on behalf of the people of the State of California, demanding thousands of dollars from small business that can't afford to fight in court." (Voter Information Guide, Gen. Elec. (Nov. 2, 2004) argument in favor of Prop. 64, p. 40, capitalization omitted.)
At the same time, the proponents proclaimed that Proposition 64 "[p]rotects your right to file a lawsuit if you've been damaged." (Voter Information Guide, Gen. Elec., supra, argument in favor of Prop. 64, p. 40, italics omitted.)
Opponents of Proposition 64 argued that the initiative would adversely impact the ability of private groups to enforce consumer protection statutes, including "enforcing the laws against selling tobacco to children." (Voter Information Guide, Gen. Elec., supra, argument against Prop. 64, p. 41.) In response, the proponents emphasized: "Proposition 64 doesn't change any of these laws," and "Proposition 64 would permit ALL the suits cited by its opponents." (Voter Information Guide, Gen. Elec., supra, rebuttal to argument against Prop. 64, p. 41.) Indeed, the findings and declarations of the purpose of Proposition 64 state quite plainly: "`It is the intent of California voters in enacting this act to eliminate frivolous unfair competition lawsuits while protecting the right of individuals to retain an attorney and file an action for relief pursuant to [this chapter].'" (Prop. 64, § 1, subd. (d), as reprinted in 4D West's Ann. Bus. & Prof. Code (2008 ed.) foll. § 17203, p. 409.)
Under rule 23(a) of the Federal Rules of Civil Procedure (28 U.S.C.), a class action is authorized "only if: [¶] (1) the class is so numerous that joinder of all members is impracticable; [¶] (2) there are questions of law or fact common to the class; [¶] (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and [¶] (4) the representative parties will fairly and adequately protect the interests of the class." These requirements are analogous to the requirements for class certification under Code of Civil Procedure section 382. (Fireside Bank v. Superior Court, supra, 40 Cal.4th at p. 1089.) Under both federal and state procedure, a prerequisite to class certification is the existence of an ascertainable class. (McElhaney v. Eli Lilly & Co. (D.S.D. 1982) 93 F.R.D. 875, 877 ["Prior to a consideration of the criteria established by Rule 23, the Court must determine whether a class exists, and is capable of legal definition."]; American Suzuki Motor Corp. v. Superior Court (1995) 37 Cal.App.4th 1291, 1294 [44 Cal.Rptr.2d 526] ["A prerequisite to the maintenance of a class action is the existence of an ascertainable class."].)
Although, with respect to whether such a class exists, it has been said that "[t]he definition of a class should not be so broad as to include individuals who are without standing to maintain the action on their own behalf" (Clay v. American Tobacco Company (S.D.Ill. 1999) 188 F.R.D. 483, 490), such references do not support the proposition that all class members must individually show they have the same standing as the class representative in order to be part of the class.
As noted, nothing in the text of Proposition 64, nor in the accompanying ballot materials, makes any reference to altering class action procedures to impose upon all absent class members the standing requirement imposed upon the class representative. Moreover, Proposition 64 left intact provisions of the UCL that support the conclusion that the initiative was not intended to have any effect on absent class members. Specifically, Proposition 64 did not amend the remedies provision of section 17203. This is significant because under section 17203, the primary form of relief available under the UCL to protect consumers from unfair business practices is an injunction, along with ancillary relief in the form of such restitution "as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition." (§ 17203.)
Similarly, the language of section 17203 with respect to those entitled to restitution—"to restore to any person in interest any money or property, real or personal, which may have been acquired" (italics added) by means of the unfair practice—is patently less stringent than the standing requirement for the class representative—"a person who has suffered injury in fact and has lost money or property as a result of the unfair competition." (§ 17204, italics added.) This language, construed in light of the "concern that wrongdoers not retain the benefits of their misconduct" (Fletcher v. Security Pacific National Bank, supra, 23 Cal.3d 442, 452) has led courts repeatedly and consistently to hold that relief under the UCL is available without individualized proof of deception, reliance and injury. (E.g., Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1267 [10 Cal.Rptr.2d 538, 833 P.2d 545]; Committee on Children's Television, Inc. v. General Foods Corp., supra, 35 Cal.3d at p. 211.) Accordingly, to hold that the absent class members on whose behalf a private UCL action is prosecuted must show on an individualized basis that they have "lost money or property as a result of the unfair competition" (§ 17204) would conflict with the language in section 17203 authorizing broader relief—the "may have been acquired" language—and implicitly overrule a fundamental holding in our previous decisions, including Fletcher, Bank of the West and Committee on Children's Television. Had this been the intention of the drafters of Proposition 64—to limit the availability of class actions under the UCL only to those absent class members who met Proposition 64's standing requirements—presumably they would have amended section 17203 to reflect this intention. Plainly, they did not.
At argument, defendants acknowledged that the text of Proposition 64 does not apply the standing requirements to unnamed class members. Defendants maintained, rather, that application of these requirements to absent class members is mandated by class action principles, specifically, that a class member must have standing to bring the action individually and that the aggregation of individual claims into a class action cannot be used to transform the underlying claim. We reject these arguments.
In concluding that Proposition 64 required absent class members to demonstrate standing, the lower courts and defendants here uncritically cited a single sentence in Collins v. Safeway Stores, Inc. (1986) 187 Cal.App.3d 62 [231 Cal.Rptr. 638] stating that "`[e]ach class member must have standing to bring the suit in his own right.'" (Id. at p. 73, quoting McElhaney v. Eli
In Collins, the putative class representatives bought eggs produced by the defendant egg producer and sold by the defendant supermarket chain; some of the eggs had been contaminated by a pesticide. The contaminated eggs were mixed in with uncontaminated eggs and once the contamination was known, all cartons from the producer were pulled from the supermarket chain's shelves and destroyed. The proposed class was divided into two subclasses: (1) all California consumers who had purchased eggs from Safeway within a five-month period (the economic class), and (2) all persons who had ingested the eggs and sustained damage. The trial court declined to certify the first class on the grounds that the proposed "class was not ascertainable as an economic class that had suffered an economic loss." (Collins v. Safeway Stores, Inc., supra, 187 Cal.App.3d at p. 67.)
The Court of Appeal affirmed. As the court observed, under the particular facts of the case before it, "no individual member of the defined economic class will ever be able to come forward and prove that their purchased eggs were contaminated in whole or in part. Due to the commingling of 20 percent contaminated eggs with 80 percent noncontaminated eggs, each carton may have contained one or more contaminated eggs, or none at all." (Collins v. Safeway Stores, Inc., supra, 187 Cal.App.3d at p. 69.) Thus, the court declined "to certify an economic class where not all products sold to the class were defective and where the class members themselves do not know, and never will know, whether they purchased a defective product." (Id. at p. 70.) It was therefore in this context — in which it could not be established that any member of the alleged class had suffered any injury caused by the defendants' conduct — that the court quoted the McElhaney court's observation that each class member must have standing to bring the action on his or her own behalf. (Id. at p. 73.)
Importantly, the class certification discussion in Collins was not framed in the context of the UCL. Indeed, the only hint that the UCL was involved in Collins is a brief reference in a footnote that, among the plaintiffs' "theories of recovery" were "violations of sections of the . . . Business and Professions Code." (Collins v. Safeway Stores, Inc., supra, 187 Cal.App.3d at p. 66, fn. 2.) Moreover, to the extent that the UCL was involved, the Court of Appeal's conclusion that the plaintiff's had failed to describe a certifiable class is questionable. It is clear in Collins that some of the purchasers in question may have purchased contaminated eggs — therefore, the "money or property"
Defendants also argue that Proposition 64's standing requirement must be applied to all class members because otherwise the class representative would be permitted "to assert `claims' that the absent class members do not have." According to defendants this would violate the principle that the aggregation of individual claims into a class action "does not serve to enlarge substantive rights or remedies." (Feitelberg v. Credit Suisse First Boston, LLC., supra, 134 Cal.App.4th at p. 1014.) We disagree.
The substantive right extended to the public by the UCL is the "`"right to protection from fraud, deceit, and unlawful conduct"'" (Prata v. Superior Court (2001) 91 Cal.App.4th 1128, 1137 [111 Cal.Rptr.2d 296]), and the focus of the statute is on the defendant's conduct. As we have already observed, the proponents of Proposition 64 told the electorate that the initiative would not alter the statute's fundamental purpose of protecting consumers from unfair businesses practices. Rather, the purpose of the initiative was to address a specific abuse of the UCL's generous standing provision by eliminating that provision in favor of a more stringent standing requirement. That change, as we observed in Mervyn's, did not change the substantive law. (Mervyn's, supra, 39 Cal.4th at p. 232.)
The underlying claim in the instant case is that defendants have engaged in a long-term campaign of deceptive advertising and misrepresentations to the consumers of its products regarding the health risks of those products. The class, as certified, consists of members of the public who were exposed to defendants' allegedly deceptive advertisements and misrepresentations and who were also consumers of defendants' products during a specific period of time. The nature of the claim is the same — the right to be protected against defendants' alleged deceit — and the remedies remain the same — injunctive relief and restitution. Applying Proposition 64's standing requirements to the class representative but not the absent class members enlarges neither the substantive rights nor the remedies of the class.
2. What Is Required to Establish Standing Under the UCL As Amended by Proposition 64?
The second question before us is the meaning of the phrase "as a result of" in section 17204's requirement that a private enforcement action under the
Defendants claim that the phrase "as a result of" introduced a tort causation element into UCL actions. In the context of this case, this would appear to require a showing of actual reliance on the deceptive advertising and misrepresentations as a result of which the loss of money or property was sustained. Plaintiffs, on the other hand, maintain that the new standing requirement did not impose any type of tort causation requirement. Plaintiffs argue that the phrase merely requires "a factual nexus" between a defendant's conduct and a plaintiff's injury: "the representative plaintiff need only be one of the people from whom the defendant obtained money or property while engaging in its unfair business practice."
The phrase is not defined by other provisions of the statute. Moreover, examination of the ballot materials does not shed any light on whether it was the intent of the electorate in enacting Proposition 64 to impose actual reliance where a UCL claim is based on fraud.
Moreover, as noted, before Proposition 64, "California courts have repeatedly held that relief under the UCL is available without individualized proof of deception, reliance and injury." (Massachusetts Mutual Life Ins. Co. v. Superior Court (2002) 97 Cal.App.4th 1282, 1288 [119 Cal.Rptr.2d 190].)
This conclusion, however, is the beginning, not the end, of the analysis of what a plaintiff must plead and prove under the fraud prong of the UCL. Reliance is "an essential element of . . . fraud . . . . [¶] [R]eliance is proved by showing that the defendant's misrepresentation or nondisclosure was `an immediate cause' of the plaintiff's injury-producing conduct. [Citation.] A plaintiff may establish that the defendant's misrepresentation is an `immediate cause' of the plaintiff's conduct by showing that in its absence the plaintiff `in all reasonable probability' would not have engaged in the injury-producing conduct." (Mirkin v. Wasserman (1993) 5 Cal.4th 1082, 1110-1111 [23 Cal.Rptr.2d 101, 858 P.2d 568] (conc. & dis. opn. of Kennard, J.).)
Nor does a plaintiff need to demonstrate individualized reliance on specific misrepresentations to satisfy the reliance requirement. This principle is illustrated in a pair of tobacco case decisions that upheld verdicts for the plaintiffs against substantial evidence challenges, specifically focusing on the sufficiency of the evidence supporting reliance. (Boeken v. Philip Morris, Inc. (2005) 127 Cal.App.4th 1640 [26 Cal.Rptr.3d 638] (Boeken); Whiteley v. Philip Morris, Inc. (2004) 117 Cal.App.4th 635 [11 Cal.Rptr.3d 807] (Whiteley).) In each case, the defendants argued that the evidence was insufficient to support the judgments because the plaintiffs had failed to prove they heard and had relied on specific misrepresentations about the health hazards of cigarette smoking. (Boeken, supra, 127 Cal.App.4th at p. 1657; Whiteley, supra, 117 Cal.App.4th at pp. 667-678.) In both Boeken and Whiteley, evidence was admitted to prove the decades-long campaign of the tobacco industry to conceal the health risks of its product while minimizing the growing consensus regarding the link between cigarette smoking and lung cancer and, simultaneously, engaging in "saturation advertising targeting adolescents, the age group from which new smokers must come." (Whiteley, supra, 117 Cal.App.4th at p. 647; see Boeken, supra, 127 Cal.App.4th at p. 1660 ["Even before Boeken became a target member of the group of addicted smokers, Philip Morris targeted Boeken as a member of another group — adolescent boys."].)
In each case, the plaintiffs testified that their decision to begin smoking was influenced and reinforced by cigarette advertising, though neither could point to specific advertisements. (Boeken, supra, 127 Cal.App.4th at pp. 1662-1663; Whiteley, supra, 117 Cal.App.4th at p. 679.) Each plaintiff also testified that, despite awareness of the controversy surrounding smoking, he or she believed the tobacco industry's assurances that there was no definitive connection between cigarette smoking and various diseases. (Boeken, supra, 127 Cal.App.4th at pp. 1664-1665; Whiteley, supra, 117 Cal.App.4th at p. 679.) Based on this record, the Boeken court concluded that there was substantial evidence that Boeken began to smoke "for reasons that track Philip Morris's advertising of the time" (Boeken, at p. 1663), notwithstanding his inability to recall specific advertisements, that he relied on the
DISPOSITION
The order granting defendants' decertification motion is reversed and the matter is remanded for further proceedings consistent with this opinion.
Kennard, Acting C. J., Werdegar, J., and Moore, J.,
Proposition 64, an initiative measure adopted by the voters at the November 2004 election, worked a sea change in litigation to enforce the unfair competition law (UCL; Bus. & Prof. Code, § 17200 et seq.).
Advised that the broad power accorded to "private attorneys general" under the UCL had led to abusive "shakedown" suits, the voters, through Proposition 64, adopted crucial reforms. Proposition 64 left intact the authority of the enumerated public officials to maintain UCL actions on the public's behalf, and therein to obtain injunctive relief and restitution of profits generally associated with the alleged unfair practice. However, the measure severely restricted the UCL enforcement powers of private persons in two ways.
First, it provided that any private person bringing a UCL suit must have suffered "injury in fact and . . . lost money or property as a result of the unfair competition." (§ 17204, italics added.) Second, it specified that a private person may pursue representative claims on behalf of others only if he
Code of Civil Procedure section 382 is the statute that authorizes class actions, and the ballot pamphlet materials for Proposition 64 leave no doubt the voters understood the reference to this statute as requiring all representative UCL suits by private persons to proceed under the rules and principles governing class actions.
Applying these principles to the issues before us, I concur in the majority's conclusion that, under Proposition 64's injury-in-fact and causation requirements, the named plaintiffs in a UCL action alleging deceptive or fraudulent advertising of an injurious product must plead and prove they purchased the product in actual reliance on the false advertising. I also agree the named plaintiffs need not allege or establish that the asserted false advertising was the sole cause of the purchases. Nor, where the defendant has engaged in a pervasive campaign of false claims over a long period of time, need the named plaintiffs cite a specific advertisement or advertisements that influenced their purchases.
However, I respectfully disagree with the majority insofar as it concludes that unnamed class members in a private UCL class action need not meet the injury-in-fact and causation requirements of Proposition 64. In this UCL suit alleging that tobacco companies engaged in false advertising about the health risks of their products, the majority applies its mistaken holding to conclude, in effect, that so long as the named plaintiffs actually relied on the allegedly deceptive advertising claims when buying and smoking cigarettes, they may seek injunctive and restitutionary relief on behalf of all California smokers who simply saw or heard such ads during the period at issue, regardless of whether false claims contained in those ads had anything to do with any class member's decision to buy and smoke cigarettes.
Even if the majority's holding has some sympathetic appeal on the particular facts alleged here, the rule the majority announces will apply
As indicated above, Proposition 64 requires all UCL suits brought by private persons on behalf of others to comply with Code of Civil Procedure section 382 by proceeding as class actions. It is well settled that maintenance of a class suit requires proof, among other things, of a sufficiently numerous, ascertainable class with a well-defined community of interest. The "community of interest" requirement has three aspects: (1) predominant common questions of law and fact, (2) class representatives with claims or defenses typical of the class, and (3) class representatives who can adequately represent the class. (E.g., Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069, 1089 [56 Cal.Rptr.3d 861, 155 P.3d 268]; Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326 [17 Cal.Rptr.3d 906, 96 P.3d 194]; Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435 [97 Cal.Rptr.2d 179, 2 P.3d 27]; Richmond v. Dart Industries, Inc. (1981) 29 Cal.3d 462, 470 [174 Cal.Rptr. 515, 629 P.2d 23].) As the majority notes, these criteria are analogous to those set forth in Federal Rules of Civil Procedure rule 23(a) (28 U.S.C.), and we look to federal decisions under that rule for guidance in matters of class action procedure.
Ascertainability and typicality both require that members of a certified class themselves have causes of action against the defendant. Courts, state and federal, repeatedly have stressed that the definition of a class cannot be so broad as to include persons who would lack standing to bring suit in their own names. (E.g., American Suzuki Motor Corp. v. Superior Court (1995) 37 Cal.App.4th 1291, 1294-1295 [44 Cal.Rptr.2d 526] [class action for breach of warranty based on motorcycle design defect could not be maintained on behalf of purchasers who suffered no injury or property damage from alleged defect]; Collins v. Safeway Stores, Inc. (1986) 187 Cal.App.3d 62, 69, 72-73 [231 Cal.Rptr. 638] (Collins) [in action alleging defendant's distribution of 20 percent contaminated and 80 percent uncontaminated eggs, randomly commingled, no class could be ascertained because it was impossible to tell whether any particular putative class member bought contaminated eggs]; Oshana v. Coca-Cola Co. (7th Cir. 2006) 472 F.3d 506, 514-515 [in statutory consumer-fraud action claiming defendant misrepresented ingredients in its fountain diet soda, requirements of ascertainability and typicality were not met where proposed class included persons who did not rely on misrepresentations when buying defendant's fountain soda]; Denney v. Deutsche Bank AG (2d Cir. 2006) 443 F.3d 253, 264 [stating that, while class members need not make individual showings of standing at the certification stage, "no class may be certified that contains members lacking . . . standing [under U.S. Const., art. III]"]; Adashunas v. Negley (7th Cir. 1980) 626 F.2d 600, 604 [stating, in
In this private UCL action alleging fraudulent advertising by tobacco companies, the majority agrees the named plaintiffs could not sue without meeting Proposition 64's standing requirement of personal loss stemming from their actual reliance on the deceptive ads. Under well-established class action rules, the putative class the named plaintiffs seek to represent may include only persons who could themselves bring similar UCL claims in their own behalves. They could do so only if they themselves met Proposition 64's standing requirement. It follows inexorably that any UCL class certified in this action must be limited to those individuals who also actually relied on defendants' alleged deceptive advertising campaign when purchasing and smoking cigarettes, and thereby suffered loss.
The majority notes that the words of Proposition 64 say only that the "claimant" — the named plaintiff in a private representative UCL action — must "meet[] the standing requirements of [s]ection 17204" (§ 17203), that is, must have suffered "injury in fact and [loss of] money or property" as a result of the unfair practice. (§ 17204.) The initiative's language, the majority stresses, does not impose similar express limitations on the persons to be represented. However, those limitations are incorporated into the UCL by Proposition 64's additional specification that, to maintain a representative action, a private person must "compl[y] with [s]ection 382 of the Code of Civil Procedure" (§ 17203) — i.e., must satisfy the procedural rules governing class actions. As we have seen, those rules provide that the putative class cannot include persons to whom an alleged unfair practice caused no actual injury or loss, and who thus could not bring suit in their own names.
The majority insists Proposition 64 sought only to end a single, narrow form of abuse — "shakedown" suits by uninjured named plaintiffs — and did not otherwise restrict the role of private representative actions in enforcing the UCL's prohibition of unfair business practices. However, the ballot materials for the initiative measure indicate otherwise.
Nothing in these statements and arguments suggested a private lawyer could sue on behalf of the public so long as he or she had a single client to whom the unfair practice had caused actual injury and loss, and who could thus serve as a named plaintiff. On the contrary, Proposition 64 clearly sought to eliminate the UCL's former "private attorney general" enforcement feature by precluding individuals, even if themselves injured, from suing on behalf of others except under the rules normally attendant on class actions. Thus, just as Proposition 64 eliminated the right of uninjured private persons to represent those who have been injured (Californians for Disability Rights v. Mervyn's, LLC (2006) 39 Cal.4th 223, 232 [46 Cal.Rptr.3d 57, 138 P.3d 207] (Mervyn's)), it also eliminated any private right, even of injured persons, to represent those who have not been injured.
Indeed, the majority's holding encourages the very sort of abusive shakedown suits that Proposition 64 was designed to curb. That holding can be applied not only to the unsympathetic facts alleged in this case — i.e., that large tobacco companies lured consumers into nicotine addiction by falsely
Consider the following scenario: A local chain of family-owned supermarkets receives a large shipment of ground beef and puts it out for sale. The stores' meat departments label and display the meat as "ground round," the leanest grade. The stores' regular price for ground round is $5.99 per pound, but the display labels offer the meat from this shipment at a "reduced price" of $4.99 per pound. The company has not intentionally misrepresented the product. However, in the exercise of due care, it should have known the meat is ground sirloin, a wholesome but slightly fattier grade. The chain is actually selling other quantities of ground sirloin, correctly labeled, at its regular $4.99 per pound price.
Customer A visits one of the stores, seeking to buy ground beef. Concerned about his fat intake, he does not intend to purchase any grade other than ground round and would not knowingly do so. Relying upon the incorrect "ground round" label, he buys a pound of the meat, so labeled, at the $4.99 price, and consumes it. A substantial number of other customers also see the incorrect "ground round" labels. However, many do not care about the grade of ground beef they eat, do not realize the significance of the label, and are not influenced by it. Nonetheless, they also buy substantial quantities of the mislabeled meat and happily consume it.
Customer A later discovers the labeling mistake. He obtains counsel and brings a UCL action alleging false advertising that caused him actual injury or loss in the amount of $4.99. He claims restitution to himself in that amount. In the suit, he further seeks to certify a class of all other customers who saw the incorrect labels and purchased the mistakenly mislabeled meat. Regardless of whether these persons relied on the incorrect description when purchasing the mislabeled product, he prays for restitution, on their behalf, of all profits the stores received from such purchases.
Under the majority's concept of no-injury class actions, the plaintiff, Customer A, may well succeed in this endeavor if the case proceeds in court. Realizing this, the company quickly settles. That cannot be what the voters intended when they adopted the substantial reforms set forth in Proposition 64.
The majority's reasoning contains an even more fundamental flaw. As explained above, under the majority's construction of Proposition 64, a person may be a party to a UCL private representative action as a class member even though he or she could not sue in his or her own name. Thus, an individual whose personal effort to bring a UCL action failed because he or she could not demonstrate any personal injury or loss caused by the unfair
The majority insists Proposition 64 did not alter the remedies the court may order in a private representative UCL action, including injunctive relief and, of particular note, the "restor[ation] to any person in interest [of] any money or property, real or personal, which may have been acquired by means of [the alleged] unfair competition." (§ 17203, italics added.) In pre-Proposition 64 cases, the majority points out, we held that this "may have" language promotes the UCL's purpose of ensuring that wrongdoers do not profit by their misconduct, and allows the court to order restitutionary relief under the UCL without individualized proof of deception, reliance, and injury. (E.g., Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1267 [10 Cal.Rptr.2d 538, 833 P.2d 545]; Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 211 [197 Cal.Rptr. 783, 673 P.2d 660]; Fletcher v. Security Pacific National Bank (1979) 23 Cal.3d 442, 449-454 [153 Cal.Rptr. 28, 591 P.2d 51] (Fletcher).) Hence, the majority reasons, even after Proposition 64, an individual who was actually injured and suffered the loss of money or property as a result of a defendant's unfair practice must still be able to sue on behalf of other persons from whom the defendant merely "may" have obtained money or property by wrongful means.
In my view, therefore, the Court of Appeal properly upheld the trial court's order granting defendants' motion to decertify the UCL class approved prior to the adoption of Proposition 64. That class had been defined to include all persons who, as residents of California, "smoked . . . one or more cigarettes between June 10, 1993 [and] April 23, 2001, and who were exposed to [d]efendants' marketing and advertising activities in California." (Italics added.)
Chin, J., and Corrigan, J., concurred.
FootNotes
Nothing in Proposition 64 explicitly extends the standing requirement of the representative plaintiff to the unnamed class members; the fact that the "may have been acquired" language in section 17203 was unchanged by the initiative undermines the dissent's conclusion that it was the intention of the electorate to do so. We must take the initiative as it is, neither reading into it language that is not in it, nor reading out of it language that is to support some presumed intention of the electorate.
As defendants contend, and as a fair reading of the trial court's order indicates it understood, the true "class standing" issue at the certification stage is simply one of class definition. As applied under Proposition 64, this means only that any class to be certified in a private UCL action must be defined or described to include only those (as yet unidentified) persons who, like the named plaintiffs, have suffered actual injury and loss of money or property as a result of the alleged unfair business practice. That limitation may lead, in turn, as it did here, to a determination that individual issues of proof ultimately would predominate over common ones, thus negating the benefits of a class proceeding.
Proposition 64 confirmed these principles. It expressly requires both (1) that a private person may sue under the UCL only if money or property was taken from him or her by means of an unfair business practice and (2) that he or she may represent others only under the rules generally pertaining to class actions. The measure thus made clear that all UCL class members must have suffered actual loss of money or property caused by the unfair practice. Where, as here, the gravamen of the complaint is fraudulent inducement, all class members in a private UCL suit must therefore meet the standard of actual reliance upon which such a claim depends. In such an action, a smoker who may have been "exposed" to, but was not deceived by, the alleged false advertising claims is not entitled to restitution of the money he or she paid for cigarettes.
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