Landmark Supreme Court Decision Reaffirms Consumer Protections Under the UCL

On May 18, 2009, the California Supreme Court issued its long-awaited decision in In Re Tobacco II Cases, S147435. In a 4-3 decision, the Court held that for a fraudulent business practice claim under the State’s Unfair Competition Law, Bus. & Prof. Code Section 17200 et seq., as amended by Proposition 64 in 2004, the class representative needs to plead and prove actual reliance to satisfy the standing requirement of 17204, but the class members do not.

In addition, the representative is not required to plead and prove individualized reliance on specific misrepresentations, particularly where statements are part of an extensive and long-term advertising campaign. The following summarizes several highlights from that opinion:

“We therefore conclude that Proposition 64 was not intended to, and does not, impose section 17204’s standing requirements on absent class members in a UCL class action where class requirements have otherwise been found to exist.”

“Class actions have often been the vehicle through which UCL actions have been brought. Code of Civil Procedure section 382 has been judicially construed as the authorizing statute for class suits in California. (Washington Mutual Bank v. Superior Court (2001) 24 Cal.4th 906, 913.)[1] [“Section 382 has also been interpreted as permitting associations to sue on behalf of their members.” (Mervyn’s, supra, 39 Cal.4th at p. 232, fn. 4; see Raven’s Cove Townhomes, Inc. v. Knuppe Development Co. (1981) 114 Cal.App.3d 783, 793.)]”

“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 – “any 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.”

“While a plaintiff must show that the misrepresentation was an immediate cause of the injury-producing conduct, the plaintiff need not demonstrate it was the only cause. ” ‘It is not . . . necessary that [the plaintiff’s] reliance upon the truth of the fraudulent misrepresentation be the sole or even the predominant or decisive factor influencing his conduct. . . . It is enough that the representation has played a substantial part, and so had been a substantial factor, in influencing his decision.’ [Citation.] [¶] Moreover, a presumption, or at least an inference, of reliance arises wherever there is a showing that a misrepresentation was material.”

“Accordingly, we conclude that a plaintiff must plead and prove actual reliance to satisfy the standing requirement of section 17204 but, consistent with the principles set forth above, is not required to necessarily plead and prove individualized reliance on specific misrepresentations or false statements where, as here, those misrepresentations and false statements were part of an extensive and long-term advertising campaign.”

Read the In Re Tobacco II Cases opinion. [PDF]