Big Tobacco and other major businesses took a hit Monday when the California Supreme Court ruled that class actions over alleged fraud can go forward, even if it's impossible to tell whether every plaintiff was harmed by deceptive ads.
"We conclude that standing requirements are applicable only to the class representatives, and not all absent class members," Justice Carlos Moreno wrote for a 4-3 court.
The ruling is important because it clarifies that Proposition 64, passed by the voters in 2004, doesn't prevent average citizens from acting as so-called private attorneys general in class actions under the state's unfair competition law. Some experts had argued that the ballot initiative limited the filing of UCL suits to government officials, such as the attorney general.
"This is a great day for the consumers of California," Mark Robinson, a partner in Newport Beach, Calif.'s Robinson, Calcagnie & Robinson who represented the plaintiffs, said during a conference call. "The reality is that this gives the consumers rights to protect themselves from fraudulent advertising."
Smoker Willard Brown filed the class action against Philip Morris USA Inc. and several other tobacco manufacturers in 1997, accusing them of violating the state's unfair competition law by allegedly denying that smoking causes serious illnesses, such as cancer, and advertising cigarettes as non-addictive. The class was seeking only injunctive relief and restitution.
San Diego County Superior Court Judge Ronald Prager granted class certification in 2001, permitting smokers who resided in California between June 10, 1993, and April 23, 2001, to pursue their claims. But after the passage of Prop 64 -- which was aimed at stopping the filing of nitpicky suits against small businesses -- Prager decertified the class, saying the law had been amended to prevent class members from having standing to sue unless they had actually been harmed or suffered a loss of money or property.
The 4th District Court of Appeal's San Diego branch affirmed in 2006.
In reversing on Monday, the Supreme Court said the plain language of Prop 64 lends no support to the lower courts' rulings that every class member must show reliance on misleading ads.
"Notably, the references in [Business and Professions Code] §17203 to one who wishes to pursue UCL claims on behalf of others are in the singular," Moreno wrote. "That is, the 'person' and the 'claimant' who pursues such claims must meet the standing requirements.
"The conclusion that must be drawn from these words," he added, "is that only this individual -- the representative plaintiff -- is required to meet the standing requirements."
Moreno was joined by Justices Joyce Kennard, Kathryn Mickle Werdegar and Eileen Moore, the latter sitting by designation from the 4th District's Santa Ana branch. Chief Justice Ronald George recused himself for undisclosed reasons.
The decision remands the case to San Diego for further proceedings.
Justice Marvin Baxter, joined by conservative allies Ming Chin and Carol Corrigan, dissented, arguing that Prop 64 requires a class member to be someone who could bring suit on his or her own behalf. In other words, all must be able to show they relied on the deceptive ads in continuing to smoke.
"Even if the majority's holding has some sympathetic appeal on the particular facts alleged here," Baxter wrote, "the rule the majority announces will apply equally to less egregious cases, where it invites the very kinds of mischief Proposition 64 was intended to curtail." He said the ruling "turns class action law upside down and contravenes the initiative measure's plain intent."
The majority's ruling also made it easier for the named plaintiffs -- or the class representatives -- to have standing.
"While a plaintiff must allege that the defendant's misrepresentations were an immediate cause of the injury-causing conduct, the plaintiff is not required to allege that those misrepresentations were the sole or even the decisive cause of the injury-producing conduct," Moreno wrote. "Furthermore, where, as here, a plaintiff alleges exposure to a long-term advertising campaign, the plaintiff is not required to plead with an unrealistic degree of specificity that the plaintiff relied on particular advertisements or statements."
Daniel Collins, a partner with Los Angeles' Munger, Tolles & Olson who represented the tobacco companies, referred calls to Altria Client Services, a Richmond, Va., company that spoke on behalf of Philip Morris.
"We continue to have many significant defenses to both class certification and on the merits," Vice President and Associate General Counsel Murray Garnick said in a prepared statement, "and we believe this case should ultimately be dismissed."
The ruling is In re Tobacco II Cases, 09 C.D.O.S. 5993.