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In a major ruling on Proposition 64, a Los Angeles appellate court has made it far more difficult for false advertising class actions to be filed under the state’s unfair competition law. In a 21-page ruling released late Tuesday, the Second District Court of Appeal held that under Prop 64 � the 2004 ballot measure that restricted private attorney general suits � the “mere likelihood” of injury is no longer enough to have standing to file a class action under the UCL’s fraudulent acts provision. The three-justice panel also ruled that each member of a proposed class � not just the lead plaintiff � must have suffered real harm and that any plaintiff must have actually relied on false advertising to maintain a valid claim. “Given the new restrictions on private enforcement under the UCL and the [false advertising law],” Justice Joan Dempsey Klein wrote, “enforcement of these statutes in legitimate cases is increasingly the responsibility of a vigilant state attorney general and/or local public prosecutors.” Justices H. Walter Croskey and Patti Sue Kitching concurred. “It’s a significant ruling,” Sacramento lawyer Fred Hiestand, who represented the California Chamber of Commerce and three other groups in the case as amici curiae, said Wednesday. “It fulfills the intent and purpose of Prop 64 in tightening the UCL so people with just general grievances … now must show they themselves were actually injured by the practice they were complaining about.” The California attorney general’s office, which had participated as an amicus curiaein league with class plaintiff Steve Galfano, feels the ruling is disastrous. “Californians should be able to defend themselves in court against false advertisements,” spokesman Aaron Carruthers said. “This has always been key in enforcing unfair competition laws. This ruling makes that almost impossible. “We believe this ruling reaches beyond the voters’ intent in passing Prop 64,” he continued. “We hope the state Supreme Court gets a chance to make it right.” Kimberly Kralowec, an of counsel at The Furth Firm in San Francisco who maintains a blog on Prop 64, called the issues addressed in Tuesday’s ruling the “three big ones,” and believes there’s a chance the opinion could even influence the high court’s thinking on retroactivity. The Supreme Court heard retroactivity arguments in two Prop 64 cases on May 31, focusing much of the time on whether the ballot measure’s amendments to the UCL � also known as Business and Professions Code �17200 � were simply procedural or substantially affected plaintiffs’ rights and obligations. If deemed substantial � as Tuesday’s appeal court ruling appears to say in regard to false advertising � Prop 64′s amendments shouldn’t apply retroactively. “So the Supreme Court,” Kralowec said, “could very well say that looking at how the courts have interpreted these amendments, they are substantive and cannot be applied retroactively.” On the other hand, she added, “the Supreme Court could certainly overrule this court.” In passing Prop 64, the state’s voters approved amendments that would limit the filing of UCL suits to individuals actually injured by � or who lost money or property because of � someone else’s illegal acts. In Tuesday’s ruling � Pfizer Inc. v. Superior Court( Galfano), 06 C.D.O.S. 6279� the plaintiff filed a class action against Pfizer for allegedly misleading consumers by advertising that its Listerine breath freshener was so effective in reducing plaque and gingivitis that it could be used instead of floss. Los Angeles County Superior Court Judge Carl West certified the class in November 2005, even though he believed it remained an “open issue” as to whether standing requirements for class members had changed under Prop 64. On Tuesday, the Second District granted Pfizer’s request for a writ of mandate, saying that “in view of the changes in the law brought about by Proposition 64, the class definition is plainly overbroad and must be set aside.” The court’s contention that the mere likelihood of harm is no longer sufficient for standing to sue, and that every single class member must have suffered actual harm, are huge barriers to plaintiffs. In the past, UCL claims had been filed as a class even when only the lead plaintiff had been hurt. Industry representatives were also gratified that the court said potential plaintiffs must have “actually relied” on false ads in order to state a claim. Without that holding, Hiestand said, “Prop 64 would have been much ado about nothing.” Bryant Haskins, a New York-based spokesman for Pfizer, said company executives were relieved by the ruling. “The court rightfully held,” he said, “that each plaintiff in a class action must actually see and be influenced by advertising claims to buy a product, and then suffer injury as a result of using that product.” Michael Spencer, a partner in Milberg Weiss Bershad & Schulman’s New York office who represented two plaintiffs in one of the cases now pending before the California Supreme Court, said he didn’t believe Tuesday’s ruling would have any impact on the retroactivity issue. “However,” he said in an e-mail, “this court’s notion that Prop 64 should be read to completely disembowel false advertising class actions is really far-fetched. The electorate was told that Prop 64 was about standing [who can sue], not about the substance of permissible claims.” Long Beach attorney Duane Westrup, whose Westrup, Klick & Associates firm represented plaintiff Galfano, said by e-mail Wednesday that he plans to petition the Supreme Court. “If this decision stands,” he said, “it will constitute the biggest rollback of consumer protections ever in California history.”

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