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LeVEE/LOVRIEN/TUNICK: California Supreme Court Expands Class Actions Under Unfair Competition Law - Jones Day  

On May 18, 2009, the California Supreme Court in In re Tobacco II Cases (No. S147345), issued a landmark opinion addressing Proposition 64, in the context of fraud and false advertising. The Court's decision should be of interest to all companies that do business with California consumers or face class action claims in the state. The Court's 4-3 decision potentially permits plaintiffs who have not suffered injury to band together with thousands of other uninjured class members to seek monetary restitution and injunctive relief, provided they can find just one plaintiff who actually was injured to serve as the named class plaintiff. The plaintiffs' bar is ecstatic.

The Court's decision is in many ways an unwelcome return to the pre-Proposition 64 days. . . .

Under this reasoning, companies can expect to see plaintiffs' attorneys trolling for a plaintiff with actual injury, in an attempt to construct a large class of absent plaintiffs without regard to whether any of the absent members were injured. If courts permit these types of suits, California will have returned to a world in which plaintiffs can bring a representative action on behalf of thousands of people who might not have suffered any actual injury. . . .

Justice Moreno provided a framework for pleading actual reliance: the plaintiff must allege that the defendant's misrepresentations were an immediate cause, but need not show they were the sole cause or even the decisive cause of plaintiffs' injury. The allegation of reliance is not defeated where there is alternative information available to the consumer "even regarding an issue as prominent as whether cigarette smoking causes cancer." . . .

Regrettably, the Supreme Court's decision likely will reinvigorate the use of Section 17200 as a tool by which plaintiffs attempt to extract money from businesses. There had been a strong trend since the passage of Proposition 64 to reject putative class actions that seemed to involve little "real" injury to consumers. This new opinion will reverse that trend and leave California businesses exposed to more costly litigation.

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