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July 23, 2012 / Admin

In re Tobacco II and the Myth of the Uninjured Restitutionary Class

In its recent opinion in the Tobacco II Cases, the California Supreme Court rejected extension of Proposition 64 standing requirements to putative class members on the grounds that doing so would invalidate the “patently less stringent” remedies afforded under Business & Professions Code Section 17203.  See In re Tobacco II Cases, 46 Cal. 4th 298, 320 (2009).  In practical terms, the Court’s decision requires only the named plaintiff in a UCL action to establish that he or she in fact “has lost money or property as a result of the unfair competition”, whereas putative class members would be entitled to restitution of money or property “which may have been acquired’ [] by means of the unfair practice.” See id. (italics in original). This distinction has been the subject of significant debate – leading some to reject a literal reading of the Court’s analysis based on the perception that it would improperly permit a certified UCL restitution class to include putative class members who may not have actually been injured. Such a criticism is unfounded, as it disregards fundamental tenants of the UCL reaffirmed in the Court’s opinion.

Unlike other tort remedies, the UCL is intended to uproot burgeoning deceptive business practices before they have an opportunity to bloom. To achieve this objective, the UCL focuses solely on a defendant’s business conduct – imposing liability based on a liberal “likely to deceive” standard without any concern as to whether consumers were actually deceived or sustained an injury by relying on a deceptive practice. Yet, that a UCL class includes persons who did not act in reliance on the challenged practice does not mean that the class includes members who were not injured. Such a conclusion is flawed, as it disregards the fact that the overall impact of a deceptive business practice will generally be distributed evenly among the entire purchaser/client base. For example, even when only a handful of consumers purchase a product based on a deceptive advertising campaign, the cost of the deceptive advertising campaign itself is passed on to all purchasers as a component of the purchase price of that product. Similarly, where a business promotes a deceptive feature of a product to justify a purchase price that is above the price of the competing brand, all purchasers are damaged by having to pay the enhanced price whether they relied on the deceptive representation or not. Permitting restitution in such cases is consistent with the UCL’s objective that “wrongdoers not retain the benefits of their misconduct….” Id.

In short, Tobacco II does not create an issue as to whether a class action may be certified on behalf of a class encompassing persons who never relied on a deceptive business practice – that is the question the Court resolved. Efforts to reframe the issue by claiming the Court’s decision left unsolved the issue of whether a UCL class may include members that are uninjured conflates the clear distinction drawn by the Court between standing requirements imposed on the named plaintiff versus the broad relief afforded to member of the class.

 

 

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