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Abby Adams is an associate in the firm's San Francisco office, where her practice focuses on civil litigation including products liability, toxic tort, professional malpractice and employment law litigation. In addition, Abby has experience negotiating business and event contracts on behalf of small to medium-sized businesses.

Asbestos(Cropped)On Friday, June 2, 2017, the California Court of Appeal for the Second District, issued an unpublished opinion holding that Shell Oil Company owed a duty to protect from asbestos exposure the wife of a former machinist who worked at Shell facilities from approximately 1954 to 1992. Beckering v. Shell Oil Company (Cal. Ct. App., June 2, 2017, No. B256407), “Beckering II”). In this recent opinion, the Court of Appeal reversed its own earlier ruling from 2014 which initially held that a premises owner has no duty to protect a family member from secondary exposure to asbestos off the premises (Beckering v. Shell Oil Company (Cal. Ct. App., Nov. 21, 2014, No. B256407), “Beckering I”).

Beckering II, the latest appellate decision regarding the scope of duty owed in secondary asbestos exposure or “take home” cases, is the result of the trickledown effect of the California Supreme Court’s December 2016 decision Kesner v. Superior Court (2016) 1 Cal.5th 1132.

 

Kesner v. Superior Court

In Kesner, the California Supreme Court examined whether employers and landowners owe a duty of care to prevent secondary exposure to asbestos and held that “the duty of employers and premises owners to exercise ordinary care in their use of asbestos includes preventing exposure to asbestos carried by the bodies and clothing of on-site workers.” Kesner v. Superior Court (2016) 1 Cal.5th 1132, 1140. In so holding, the Court found it was “reasonably foreseeable that workers, their clothing, or personal effects will act as vectors carrying asbestos from the premises to household members [and that, therefore] employers have a duty to take reasonable care to prevent this means of transmission.” Id. Notably, “[t]his duty also applies to premises owners who use asbestos on their property” regardless of whether the premises owner is the vector’s employer, although the Court recognized that premises liability includes a number of affirmative defenses and exceptions which may be applicable depending on the facts of the case. See Id., at 1140, 1160.

To arrive at this conclusion, the Supreme Court examined and applied the well-established “Rowland factors” which, when balanced together, can justify a departure from the general rule of ordinary care: (1) the foreseeability of harm to the plaintiff; (2) the degree of certainty that the plaintiff suffered injury; (3) the closeness of the connection between the defendant’s conduct and the injury suffered; (4) the moral blame attached to the defendant’s conduct; (5) the policy of preventing future harm; (6) the extent of the burden to the defendant and consequences to the community of imposing a duty to exercise care with resulting liability for breach; (7) and the availability, cost, and prevalence of insurance for the risk involved. Kesner, 1 Cal.5th at 1145; see Cabral v. Ralphs Grocery Co. (2011) 51 Cal.4th 764, 771; Rowland v. Christian (1968) 69 Cal.2d 105, 112; see also Parsons v. Crown Disposal Co. (1997) 15 Cal.4th 456, 472.

 

In finding that “[t]he most important [Rowland] factor” is whether the injury in question was foreseeable (although not wholly determinative), the Supreme Court concluded that “proper application of the Rowland factors supports the conclusion that defendants had a duty of ordinary care to prevent take-home asbestos exposure. Such exposure and its resulting harms to human health were reasonably foreseeable to large-scale users of asbestos by the 1970s, and the OSHA Standard affirmed the commonsense reality that asbestos fibers could be carried on the person or clothing of employees to their homes and could be inhaled there by household members.” Kesner, 1 Cal.5th at 1145, 1156. Notably, the Court attempted to put some boundaries on its holding limiting the class of potential plaintiffs solely to members of a worker’s household. Id., at 1140.

 

It is with the Kesner framework that the California Court of Appeals reversed its prior decision in Beckering I.

 

Beckering I and II

 

In Beckering, a former Shell Oil Company’s employee’s[1] wife brought a lawsuit against Shell alleging she laundered her husband’s work clothes for 38 years and developed mesothelioma as a result. Against Shell, Plaintiff brought a cause of action for negligence arising out of premises liability. Shell filed a motion for summary judgment in January 2014 arguing that Plaintiff’s premises liability claim was barred as a matter of law because, under the then-current legal test (as this was prior to Kesner), a property owner had no duty to protect family members of workers from secondary or off-site exposure to asbestos carried home on the worker’s clothing even it was foreseeable. See Beckering I, at 3.

 

Although the Court of Appeal originally affirmed the trial court’s ruling granting summary judgment in favor of Shell, in Beckering II the Court applied Kesner and reversed and remanded the case. See Beckering II, at 10.

 

In a footnote, Beckering II cited Kesner and cautioned: “It must be remembered that a finding of duty is not a finding of liability. To obtain a judgment, a plaintiff must [still] prove that the defendant breached its duty of ordinary care and that the breach proximately caused the plaintiff’s injury, and the defendant may assert defenses and submit contrary evidence on each of these elements.” Beckering II, at n.2 (quoting Kesner, 1 Cal.5th at 1157).

 

Despite the self-proclaimed limits both Kesner and Beckering II have attempted to define as integral components to their holdings, it appears that dispositive motions premised upon the legal issue of an employer’s or premises owner’s absence of duty in California are, and will be for the foreseeable future, futile.  Although unpublished, Beckering II will undoubtedly guide the lower courts on the application of Kesner going forward.

 

 

[1] The Court of Appeals’ opinion is not clear as to whether Decedent was actually employed by Shell; however, Plaintiff’s opening appellate brief indicates that Shell did employ Decedent during the putative time frame. Wanda L. Beckering, Plaintiff and Appellant, v. Shell Oil Company, Defendant and Respondent (Aug. 6, 2014) WL 4254334 (Cal.App. 2 Dist.), at *3.

 

california-160550_960_720California’s Unfair Competition Law

The Legislature enacted California’s Unfair Competition Law (the “UCL”) to deter unfair business practices and protect consumers from exploitations in the marketplace. Allen v. Hyland’s Inc. (C.D. Cal. 2014) 300 F.R.D. 643, 667. Under the UCL “unfair competition” means “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act.” Bus. & Prof. Code, §§ 17200; 17500. The Legislature initially imposed no standing requirements for private litigants to bring suit and, “[a]s a result, a private individual or entity with no relationship to the alleged wrongful practice could use the statute to force a business to repay substantial sums arguably acquired through a UCL violation.” In re Tobacco II Cases (2009) 46 Cal.4th 298, 329 (dissenting opinion).

In November 2004, California voters passed Proposition 64, a ballot proposition designed to prevent “shakedown suits” brought under the UCL. In re Tobacco II Cases, 46 Cal.4th at 316. Lawmakers aimed Proposition 64 at “unscrupulous lawyers” who exploited the UCL’s generous standing requirement to extort money from small businesses by bringing frivolous lawsuits. Id.[1]  

Proposition 64 required that for private litigants to bring an action under the UCL the litigant must suffer an actual economic injury as a result of the unfair business practice at issue. Bus. & Prof. Code, § 17204. Critically, under Proposition 64, local public prosecutors can still bring UCL lawsuits without meeting the more stringent standing requirements applicable to private litigants. Bus. & Prof. Code, § 17204. Thus, while Proposition 64 limited private litigants’ standing to sue under the UCL, government prosecutors’ standing was in no way affected by this law. Californians For Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 232.

The Aftermath of Proposition 64

Ever since the Legislature amended the UCL pursuant to Proposition 64, California courts have been faced with the issue of interpreting the “as a result of” language under the UCL. The California Supreme Court has opined the “as a result of” language requires that a putative plaintiff actually relies on the conduct at issue in order to have standing to sue under the UCL. In re Tobacco II Cases (2009) 46 Cal.4th 298, 326. The actual reliance need not be the only cause of the plaintiff’s harm; so long as the reliance is a substantial factor in actually influencing the plaintiff’s decision, standing will lie. Id., at 326-27.

In 2016 the Court of Appeal for the Second District recognized that the “as a result of” language required “reliance on a statement for its truth and accuracy.” Goonewardene v. ADP, LLC (2016) 5 Cal.App.5th 154, 185 (citing Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 327).

Veera v. Banana Republic, LLC

The California Supreme Court will have another opportunity to further define “as a result of” under the UCL in a case which appellant Banana Republic recently filed for review. In Veera v. Banana Republic, LLC the plaintiffs alleged that they were “lured” into a Banana Republic store by a 40% off sign only to be told at the register that some of the items they chose to purchase were not subject to the sale and were full priced. (2016) 6 Cal.App.5th 907, 910. According to the plaintiffs, they ultimately purchased some of the items at full price, despite the fact that they were informed that the clothing they chose was not subject to the sale, because they felt “embarrassed” because lines were forming behind them. Id.

Based on the foregoing, the plaintiffs brought claims pursuant to the UCL.[2] Banana Republic moved for summary judgment arguing that the plaintiffs did not have standing to sue because they did not suffer from a legally cognizable injury under the UCL as amended under Proposition 64, which the trial court granted. Veera, 6 Cal.App.5th at 911-12. In reversing the trial court’s order of summary judgment in a 2:1 decision, the Court of Appeals found a triable issue of material fact as to whether the plaintiffs actually relied on the 40% off sign to make their purchase. Id., at 919. The Court reasoned that plaintiffs’ reliance on the advertising “informed their decision to buy, which culminated in the embarrassment and frustration they felt when, as items were being rung up, they learned the discount did not apply,” thus concluding that the alleged misleading advertising was a substantial factor in causing their ultimate decision to buy. Id., at 920.

The dissenting justice, the Honorable Patricia A. Bigelow, honed in on the fact that the plaintiffs learned of the full price prior to buying the items, and that accordingly, the plaintiffs themselves were ultimately responsible for their “induced” purchases: “The only legally cognizable economic injury the plaintiffs in this case allege they suffered was the money they spent on full-priced clothes. Whether or not the store window signs were ambiguous or misleading, it is undisputed that before the plaintiffs incurred any economic injury, they learned the clothes they had selected were not 40 percent off. They then changed their purchase decisions, choosing to buy only some of the items they had selected, fully aware they were not discounted.” Veera, 6 Cal.App.5th at 924 (emphasis added). Ultimately, the dissenting justice reasoned that where a putative plaintiff “knows the true facts before consummating the transaction that causes the injury” this is, in effect, a superseding cause to any economic harm experienced by the plaintiff. Id., at 926 (emphasis added).

The Court of Appeals Diminished the Standing Requirement of the UCL

Given the purpose of Proposition 64, it seems the Court of Appeal’s interpretation and application of the UCL in Veera is a departure from the voter-chosen amendment and the Supreme Court’s interpretations of that amendment. Although protecting California’s citizens from unfair competition is a noble and necessary mission, “protecting” consumers from an action which they ultimately enter into with their eyes wide open is not consistent with the spirit of the UCL. Plaintiffs themselves broke the causal chain when they, with the knowledge that the price of the clothing was not discounted 40%, chose to proceed with the purchase anyway. Thus, the 40% off advertisement was no factor, let alone a substantial factor, in the plaintiffs’ ultimate purchasing decision.

Such a ruling, which allows plaintiffs to bring suit, despite the fact that the purchaser knew the items were full priced prior to making the purchase (i.e., prior to incurring any actual damages), is not what the Legislature, nor the voters, intended. Ultimately the Court of Appeals’ interpretation of the UCL renders Proposition 64 at 60% of its intended strength, that is, 40% off its voted-for value.

We expect this case will be subject to further scrutiny by the California Supreme Court.  Hopefully, it will hear this case and, consistent with the state of the law, affirm the trial court’s ruling which granted Banana Republic’s motion for summary judgment.

[1] See also http://blogs.wsj.com/law/2011/01/28/calif-high-court-to-corporate-america-labels-matter/?mg=id-wsj; http://vigarchive.sos.ca.gov/2004/general/propositions/prop64-title.htm

[2] Plaintiffs also brought causes of action under the False Advertising Law (Bus. & Prof. Code, § 17500 et seq.) and the Consumers Legal Remedies Act (Civ. Code, § 1750 et seq.).