California Supreme Court issues significant decision regarding Class Actions
May, 2009
By
Ronald L. Richman,
Andrew B. Downs
In a case that is likely to lead to an expansion of the use of unfair competition class actions in California, the California Supreme Court has held that that the standing requirements of Proposition 64, California Business & Professions Code § 17203, apply only to the class representatives and not to all members of the plaintiff class.
In Re Tobacco II Cases (No. S147345, 5/18/2009) is a class action against the Tobacco industry alleging claims based on allegedly misleading statements in the marketing of cigarettes. The putative class consisted of every California resident who had smoked at least one cigarette in California between June 1993 and April 2001. For a class action to proceed in state or federal court, the plaintiffs have to prove that the common questions of law and fact that apply to the class as a whole predominate over those issues that require evidence regarding the individual circumstances of each member of the class.
In this case, the Tobacco industry defendants argued that under section 17203, each member of the class had to prove that he or she had read or heard a misleading communication from the defendants and that the class member had been in some way misled or deceived about the health risks of smoking. The California Supreme Court disagreed. It held that the standing requirements of section 17203 applied only to the named representative plaintiffs, not the unnamed members of the class, and only those plaintiffs needed to prove receipt of the allegedly misleading communications and reliance upon them. The court's decision turned on its interpretation of Proposition 64, a 2004 initiative that added the standing requirement to section 17203.
Although the Supreme Court's opinion is limited to claims under the California Unfair Competition statute, California Business & Professions Code § 17200 et seq., it is possible that class action plaintiffs will attempt to expand it to other class actions where reliance is an element. More directly, this decision will make it easier for class actions to be brought in situations where the claim has a plaintiff-specific element, such as reliance, and the claim is within the scope of the Unfair Competition statute.