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Robert helps sophisticated business clients address complex disputes and competitive challenges to their products, services, and business practices.

A California federal court recently relied on the so-called “pass-on defense” to deny class certification in a lawsuit asserting claims under California’s Unfair Competition Law (UCL).  Elite Logistics Corp. v. MOL Am., Inc., No. CV1102952DDPPLAX, 2016 WL 409650, at *3 (C.D. Cal. Feb. 2, 2016). Consumer products companies will want to take note of this decision and determine whether it can help them in defending similar UCL claims.

What is the pass-on defense?

“Passing on” describes the action of an overcharged buyer who passes the extra expense on to those who buy from it.  54 Am. Jur. 2d Monopolies and Restraints of Trade § 396.  In many cases, defendants have argued that the plaintiff does not have standing or any injury because it passed any unlawful charge on to others, thus eliminating any harm.

California Supreme Court limits pass-on defense

In Clayworth v. Pfizer, Inc., 49 Cal. 4th 758 (2010), the California Supreme Court limited the pass-on defense in a case asserting claims for violation of the Cartwright Act and for restitution and injunctive relief under the UCL.  Defendant argued that the plaintiffs did not have standing under the UCL because they were able to pass-on any overcharges to their ultimate customers.  The Court rejected this argument, concluding that it “conflates the issue of standing with the issue of the remedies to which a party may be entitled. “  Id. at 789.


Continue Reading Pass-On Defense Still Alive and Well

Consumer products companies that face class action litigation in California most often see two causes of action: (i) claims that the company violated California’s infamous Unfair Competition Law (UCL); and (ii) claims that the company has violated the Consumer Legal Remedies Act (CLRA).

These statutes are similar in some ways, but they have an important difference. A UCL claim is equitable, providing only for restitution and injunctive relief. Gardner v. Safeco Ins. Co. of Am., No. 14-CV-02024-JCS, 2014 WL 2568895, at *7 (N.D. Cal. June 6, 2014) (“The remedies available under the UCL are generally limited to the equitable remedies of restitution and injunctive relief.”) In contrast, the CLRA allows for damages.


Continue Reading Class Action Defense Tip – Don’t Forget that UCL Claims Are Equitable

I attended the ABA’s National Institute on Class Actions last week in Chicago, and one theme was clear. Plaintiffs’ lawyers are increasingly fond of asking courts to certify cases so-called “issue classes,” invoking Rule 23(c)(4). They believe that they can pressure companies to settle cases by defining a relatively narrow, yet critical, issue for certification and pushing for trial on that “class issue.” This article takes a closer look at issue classes and potential arguments consumer products companies can use to fend them off.

Before we begin, let me put in a plug for the ABA’s National Institute on Class Actions. This is an outstanding program, with numerous federal judges attending, as well as the entire Advisory Committee on Rule 23. The program was in Chicago this year, but New Orleans looks to be the location for 2015. It’s usually in October, so mark your calendars and plan to attend.

Background on Issue Classes

When appropriate, an action may be brought or maintained as a class action with respect to particular issues. Fed. R. Civ. Proc. 23(c)(4).

The text of Rule 23(c)(4) raises more questions than it answers. The subsection appears in the part of the Rule entitled “Certification Order; Notice to Class Members; Judgment; Issues Classes; Subclasses,” and is separate from subsections (a) and (b), which delineate the “Prerequisites” of class certification and the “Types of Class Actions” that can be maintained. The Rule does not explain what “when appropriate” means. Nor does it explain what “with respect to particular issues” means.
Continue Reading Growing Risk for Consumer Products Companies – Issue Classes

a href=”https://www.gtlaw-consumerproductscounselor.com/files/2014/07/shutterstock_153943454.jpg”>GavelAs the Supreme Court has tightened the requirements for certifying a damages class action, some in the plaintiff’s bar have responded by focusing on class actions seeking injunctive relief, particularly in cases against consumer products companies.  To certify a class under Rule 23(b)(2), a plaintiff does not have to demonstrate predominance or superiority, and thus an injunctive class should, at least in theory, be easier to certify.  But a class action seeking injunctive relief has its own challenges, one of which is establishing that the named plaintiff has standing.

Standing to seek an injunction

In the context of a consumer fraud class action, standing can be a particular challenge.  A plaintiff seeking injunctive relief “must demonstrate that he has suffered or is threatened with a ‘concrete and particularized’ legal harm, coupled with ‘a sufficient likelihood that he will again be wronged in a similar way.’” Bates v. United Parcel Serv., Inc., 511 F.3d 974, 985 (9th Cir. 2007). The plaintiff must “establish a ‘real and immediate threat of repeated injury’ ” that “must be likely to be redressed by the prospective injunctive relief.” Id. “Unless the named plaintiffs are themselves entitled to seek injunctive relief, they may not represent a class seeking that relief.” Hodgers–Durgin v. de la Vina, 199 F.3d 1037, 1045 (9th Cir. 1999).  Thus, without a threat of future harm, injunctive relief is not available.
Continue Reading The Injunction Conundrum – When Can a Class Action Plaintiff Sue for Injunctive Relief?

Several class actions have been filed recently against companies offering music and video subscription services online for allegedly not complying with California’s Automatic Renewal Laws (California Business and Professions Code § 17602). This statute may apply whenever a company enrolls a California resident in an “automatic renewal” or “continuous service” Yes-Nooffering, where the customer’s subscription or service is renewed until he or she cancels. To comply, a business must take three steps:  (1) clear and conspicuous disclosure of essential terms of the subscription offer, (2) obtain affirmative agreement by the subscriber to those terms, and (3) provide a copy of the terms, including how to cancel the subscription, in a form that the subscriber can keep for his or her records.
Continue Reading New Class Action Threat: Is Your Company Complying With California’s Automatic Renewal Laws?