California Supreme Court

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
Continue Reading Veera v. Banana Republic, LLC: How the California Court of Appeals Has Reduced Proposition 64 (2004) to 40% Off its Intended Value

Lady JusticeEver since the United States Supreme Court’s 2014 decision in Daimler A.G. v. Bauman, 134 S. Ct. 746 (2014), in which the Court held that general personal jurisdiction exists over a corporation only where the corporation is fairly regarded as “at home,” many plaintiffs and state courts have attempted to distinguish Daimler in an effort to expand the boundaries of a court’s exercise of personal jurisdiction. It should come as no surprise then that the U.S. Supreme Court, with five personal jurisdiction cases before it and its Daimler decision seemingly under attack, ultimately decided to grant review of two such cases in 2017: BNSF Railway Co. v. Tyrrell, and Bristol-Myers Squibb Co. v. The Superior Court of San Francisco County, which attack the Daimler holding from very different perspectives.

As you may recall from your first year law school basics, personal jurisdiction requires, among other things, that the “the defendant’s conduct and connection with the forum state are such that he should reasonably anticipate being haled into court there.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).  This can be established through either specific jurisdiction, where the defendant has sufficient contacts with the forum state which directly relate to the underlying controversy, or general jurisdiction, where “the [ defendant’s] affiliations with the [forum s]tate are so ‘continuous and systematic’ as to render them essentially at home in the forum [s]tate.” Daimler, 134 S. Ct. at 748-49, 760.

BNSF Railway, begs the question as to whether a state court may decline to follow the Supreme Court’s decision in Daimler, as The Montana Supreme Court directly challenged the limitations on general personal jurisdiction established by the Daimler Court. It did so by holding that the Federal Employers Liability Act (“FELA”) essentially creates an exception to the “at home” requirements of Daimler.  The plaintiffs in BNSF Railway are two employees who seek damages from the company pursuant to FELA, which provides railroad employees with a federal cause of action for personal injuries caused by their employer’s negligence. Neither plaintiff resides in Montana, nor did the injuries occur in Montana. Yet, plaintiffs brought suit in Montana. Under Daimler, BNSF should not have been considered “at home” in Montana, as it is incorporated in Delaware and has its principal place of business in Texas. Despite these facts, the Montana Supreme Court held that Montana courts could exercise general jurisdiction over BNSF.  The Montana Supreme Court reasoned that Section 56 of FELA allows a plaintiff to bring suit in any federal district court in which the defendant does business, and also confers concurrent jurisdiction over FELA suits to state courts. As such, the Court reasoned that state courts should have general jurisdiction in FELA matters over defendants in any state in which the defendant did business.  Tyrrell v. BNSF Ry. Co., 373 P.3d 1 (Mont. 2016).

As previously reported, in Bristol-Myers Squibb the California Supreme Court took a different approach to challenging the limits of the exercise of personal jurisdiction. 
Continue Reading U.S. Supreme Court to Weigh In on Personal Jurisdiction as State Courts Have Gone Rogue

California Supreme Court
California Supreme Court

The United States Supreme Court’s decision in Daimler A.G. v. Bauman, 571 U.S. __, 134 S.Ct. 746 (2014), has played a significant role this year in cases pending in Delaware and Rhode Island. Most recently, the California Supreme Court has weighed in, changing what we thought we knew about personal jurisdiction, at least in California.

In Daimler, the U.S. Supreme Court held that a court can exercise general jurisdiction (whereby a state court asserts jurisdiction over a defendant on claims unrelated to the defendant’s activities in the forum state) only when the defendant can be said to be “at home” in the forum – the paradigm being the state in which it is incorporated or has its principal place of business. The California Supreme Court has now found a way to turn that decision on its head. It held in Bristol-Meyers Squibb Co. v. Superior Court, 377 P.3d 874 (Cal. 2016) that plaintiffs from outside California whose claims do not arise out of anything involving California can sue a non-California defendant in a California court.

Bristol-Myers argued, pursuant to Daimler, that it was not subject to personal jurisdiction in the California courts for the suits of 592 non-California plaintiffs. First of all, it argued that it was not subject to specific personal jurisdiction because none of the 592 lawsuits by non-California plaintiffs arose out of anything plaintiff or defendant did in California. Moreover, it argued that it was not subject to general personal jurisdiction because it was not “at home” in California, based on the fact that it was neither headquartered nor incorporated in California.

The California Supreme Court agreed that there was no basis for the exercise of general jurisdiction, but instead found that a “new wave” specific jurisdiction existed because Bristol-Myers engaged in “nationwide marketing, promotion and distribution [that] created a substantial nexus between the non-resident plaintiffs’ claims and the company’s contacts in California . . . .” And, according to the Bristol-Meyers court, the more wide-ranging the defendant’s forum contacts, the more readily a “connection” between the defendant’s forum contacts and the claims by the non-resident plaintiffs can be found.

This decision of the California Supreme Court appears to basically moot the Daimler decision and may make any company that does business nationally subject to personal jurisdiction in California. Bristol-Meyers has filed a writ of certiorari with the U.S. Supreme Court, so this decision may have a short shelf life. For the time being, however, companies should be prepared to litigate in California, as the Bristol-Meyers decision is likely to factor into plaintiffs’ decision when choosing a forum in which to litigate.
Continue Reading CA Supreme Court Offers Interpretation of Personal Jurisdiction Decision

The California Supreme Court recently resolved conflicting opinions from state appellate intermediary courts on the subject of whether, or under what circumstances, a plaintiff may sue a dissolved out of State corporation in California. In Greb v. Diamond International Company, 56 Cal. 4th 243 (2013) the Court held that dissolved foreign corporations are not subject to suit in California where a direct conflict exists between California Corporations Code Section 2010 (which permits Plaintiffs to sue dissolved corporations for an indefinite period of time), and the corporate survival laws of the dissolved company’s state of incorporation.  See, Greb v. Diamond International Company, 56 Cal. 4th 243 (2013). (pdf download )

Factual Background of Case

In December of 2008, Plaintiff Greb filed an asbestos-related personal injury complaint in San Francisco Superior Court. His Complaint named Diamond International Company, a Delaware Corporation that had filed for dissolution in July of 2005, but which still had funds remaining on its liability insurance policy.

Defendant Diamond International Company, a dissolved Delaware corporation, filed a demurrer to the Complaint on the ground that, under Delaware’s corporate survival law, the action was not permitted because it was initiated more than three years after the corporation was dissolved.  Plaintiffs opposed the demurrer, arguing that California Corporations Code 2010 took precedence over Delaware law, and citing prior appellate court decisions and choice-of-law analysis. (pdf download of North American Asbestos decision)

The trial sustained the demurrer without leave to amend. The Court of Appeal affirmed.

The Supreme Court’s Decision

On final appeal, published February 21, 2013, the California Supreme Court affirmed and held that California Corporations Code Section 2010 only applied to dissolved California Corporations, not to foreign corporations. Notably, the Supreme Court considered and expressly rejected Plaintiffs’ alternative argument that, because Defendant was qualified to and did in fact conduct a large portion of its business prior to dissolution in the State of California, that it was a quasi-California corporation subject to California corporate survival law. In rejecting  Plaintiffs argument the Court stated: “We discern in the statutes no evidence that the Legislature intended…to accomplish the dramatic result ascribed to it by Plaintiffs – essentially, imposing on all…foreign corporations that are qualified to undertake repeated and successive business in California, the burden of complying with all provisions of…[California’s corporation code]…subject to what would often be a difficult choice of law analysis with regard to each California statutory provision that conflicts with a provision governing the corporation in its state of formation. As defendant suggests, such a scheme would require foreign corporations to “follow a litany of requirements regarding various corporate activities that their home state already regulates, creating innumerable, treacherous conflicts of law that the corporation would find impossible to navigate.”

Although not expressly referenced in the opinion, the California Supreme Court issued its ruling in the Greb within weeks of a seemingly related Delaware Court of Chancery decision holding that, even when funds remain on a dissolved Delaware corporation’s insurance policy,
Continue Reading CALIFORNIA SUPREME COURT PUBLISHES ANOTHER OPINION LIMITING POOL OF DEFENDANTS AVAILABLE TO PLAINTIFFS IN CALIFORNIA ASBESTOS LITIGATION