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On Nov. 2, California voters passed Proposition 64, significantly curtailing the reach of California’s unfair competition law in two key respects. First, private plaintiffs suing under the law must now show they have suffered an injury in fact and have “lost money or property” as a result. Second, private plaintiffs seeking to assert a “representative” action must now meet the requirements of Civil Procedure Code � 382, California’s class action statute. The effect of the amendments going forward is clear; the burning question is whether Prop 64 applies to cases pending before the proposition took effect. We think it does. Prior to the passage of Prop 64, the unfair competition law, or Business & Professions Code � 17200, allowed any person to file a lawsuit challenging any “unfair,” “unlawful” or “fraudulent” business practice. Moreover, anyone could file such a lawsuit regardless of whether they had suffered harm and could assert the claim on behalf of the general public without satisfying traditional class action requirements. The threat of adverse decisions and attorneys fees awards often forced defendants to settle non-meritorious actions. The same problems existed with regard to the Deceptive, False, and Misleading Advertising Statute (Business & Professions Code &# 16717500). IMPACT OF PROP 64 ON LITIGATION One purpose of Prop 64 is to end frivolous and abusive unfair competition law actions by requiring UCL plaintiffs to have suffered injury in order to sue. Thus, Business & Professions Code � 17204 now requires: “Actions for relief pursuant to this chapter shall be prosecuted exclusively in a court of competent jurisdiction by the attorney general or any district attorney � or by any person who has suffered injury in fact and has lost money or property as a result of such unfair competition.” This change in � 17204 imposes traditional “standing” requirements on unfair competition law plaintiffs. Equally important, Prop 64 amends Business & Professions Code � 17203 to require that private plaintiffs, who purport to sue on behalf of others, meet the class certification requirements of � 382. Prior to Prop 64, a plaintiff could file a UCL action purporting to represent a class and in a representative capacity on behalf of the general public, a situation where class certification would not be required (commonly referred to as a “private attorney general” action). Therefore, the defendant who successfully defeated class certification would still be confronted with a private attorney general action with many of the same risks of a class action, but without the procedural safeguards (such as the res judicataeffect of judgments against absent class members). Prop 64 should eliminate this problem: The 17200 plaintiff seeking to represent other individuals must comply with the � 382 class action requirements. Prop 64 makes the same changes to the Deceptive, False and Misleading Advertising Statute, imposing a standing requirement and requiring compliance with � 382. The Prop 64 amendments to the UCL took effect on Nov. 3 (the day after Election Day). The immediate impact of the amendments will be to reduce the exposure of California businesses to meritless UCL actions. Now, only a truly aggrieved plaintiff may bring a UCL action, and it will be far more difficult for UCL plaintiffs to use the threat of a representative action to leverage settlement of weak claims. The biggest question with Prop 64 is its applicability to actions pending as of Nov. 3. In the weeks since Election Day, several courts in California have addressed the issue. On Nov. 15, a Los Angeles County Superior Court judge sustained a demurrer to a UCL claim based on lack of standing, in what appears to be the first decision in the state to apply Prop 64 retroactively. In Alameda County, Superior Court Judge Ronald Sabraw has requested briefing on the retroactivity question in nursing home UCL litigation, with a hearing set for February. Also, the Fourth District Court of Appeal has requested briefing on the issue in a car warranty UCL dispute, Consumer Advocates v. DaimlerChrysler, G029811. APPLYING PROP 64 RETROACTIVELY There are two arguments for why Prop 64 should apply to pending cases. • Prop 64 only makes procedural changes to the UCL. New laws that affect only procedural changes apply immediately. Tapia v. Superior Court, 53 Cal.3d 282, 288 (1991). • Prop 64 changes only statutory rights. The repeal of a statutory cause of action or a statutory remedy takes immediate effect, applying to all pending cases, including those on appeal. Brenton v. Metabolife International, 116 Cal.App.4th 679, 690 (2004). The general rule, likely to be seized on by the plaintiff bar, is that statutory changes, silent as to retrospective application, apply prospectively. Evangelatos v. Superior Court of Los Angeles County, 44 Cal.3d 1188, 1207 (1988). But, even where a new statute is silent on retrospective application, as the Prop 64 amendments are, “there remains the question of what the terms ‘prospective’ and ‘retrospective’ mean.” Tapia, 53 Cal.3d at 288. Courts have broadly distinguished between substantive and procedural statutes to assess whether applying a new statute would have improper retrospective application and have avoided applying a statute retrospectively when doing so would “change the legal consequences of the parties’ past conduct.” Brenton, 116 Cal.App.4th at 688. Therefore, “if a statutory change is substantive, because it would impose new, additional or different liabilities based on past conduct, courts are loath to interpret it as having retrospective application.” Id. (citing Tapia, 53 Cal.3d at 290-91). Plaintiffs who have UCL actions that were pending on Nov. 3 will argue that Prop 64 should not apply retrospectively because those changes affect their substantive rights. But, in contrast, changes in procedural laws apply to pending cases. Id. at 689 (citing Tapia, 53 Cal. 3d at 288). “The effect of such statutes is actually prospective in nature since they relate to the procedure to be followed in the future.” The imposition of class certification requirements should be seen as a procedural change. See Alch v. Superior Court, 122 Cal.App.4th 339, 388 n.45 (2004) (agreeing that “a class action is merely a procedural device for collectively litigating substantive claims”). Similarly, the change in the UCL’s “standing” requirements should be considered procedural. Several courts have indicated that standing requirements implicate procedural requirements, as opposed to substantive rights. See, e.g., Stocks v. City of Irvine, 114 Cal.App.3d 520, 533 (1981) (observing that “one court has noted the ‘marked accommodation of formerly strict procedural requirements of standing to sue’”); see Kona Enterprises v. Estate of Bishop, 179 F.3d 767, 769 (9th Cir. 1999) (noting federal standing rule for derivative securities actions is “procedural” not “substantive” in nature). PENDING CASES Regardless of whether Prop 64 affects “substantive” rights, the amendments still should apply to litigants whose claims were pending on Nov. 3. A “cause of action or remedy dependent on a statute falls with a repeal of the statute, even after the action thereon is pending, in the absence of a saving clause in the repealing statute.” Brenton, 116 Cal.App.4th at 690 (citing Callett v. Alioto, 210 Cal.65, 67-68 (1930)). Where “the Legislature has conferred a remedy and withdraws it by amendment or repeal of the remedial statute, the new statutory scheme may be applied to pending actions without triggering retrospectivity concerns.” (The rule is different for changes to statutory causes of action that increase liability. McClung v. Employment Dev. Dep’t, 2004 WL 2472297 (Cal. Sup. Ct. Nov. 4, 2004). McClung, however, did not address, and did not purport to change, the rule that the Legislature can take away a remedy or cause of action it has created. Alioto, 210 Cal. at 67-68; see also Younger v. Superior Court, 21 Cal.3d 102, 109 (1978).) This rule is justified because “all statutory remedies are pursued with full realization that the legislature may abolish the right � at any time.” Id. The origin of the UCL action in California shows it creates a statutory remedy that may be abolished by the Legislature (or the people of California by voter initiative). While liability for unfair competition was originally grounded in the tort of interference with prospective advantage, this cause of action was limited to suits instituted between business competitors (“Prevention of Unfair Business Practices in California: A Proposal for Effective Regulation,” 32 Hastings L.J. 229, 237 (1980)). Prior to the Prop 64 amendments, a UCL plaintiff need not have suffered any injury to bring an action. Educational Testing Service v. Simon, 95 F.Supp.2d 1081, 1090-91 (C.D. Cal. 1999). Moreover, as the California Supreme Court recognized, “the Legislature has provided that suit may be brought by any person acting in his own behalf or on behalf of the general public.” Committee on Children’s Television v. General Foods, 35 Cal.3d 197, 215 (1983). Because any “rights” that a plaintiff may have under the UCL have been created by statute (not by common law), those rights can be curtailed at any time without concern about retroactivity. See Brenton, 116 Cal.App.4th at 690 (“when a remedial statute is amended or repealed before a final judgment is entered in the pending action, the court will apply the law in force at the time of the decision”). While the plaintiff bar will no doubt vigorously contest the application of the Prop 64 amendments to cases that were pending on Nov. 3, defendants in such cases should argue that the weight of the authority shows that the changes to the UCL should be applied to pending cases. Lawrence Gornick is a partner, Peter Meier is an associate and Sean Unger is an associate in the litigation department of Paul, Hastings, Janofsky &Walker in San Francisco. Their work focuses on consumer class actions, unfair business practices, product liability, construction, toxic torts and mass tort litigation. The authors can be reached at [email protected]. • Practice Center articles inform readers on developments in substantive law, practice issues or law firm management. Contact News Editor Candice McFarland with submissions or questions at [email protected]or go to www.therecorder.com/submissions.html.

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