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In an unusually lengthy and interactive oral argument Wednesday, three California 1st District Court of Appeal justices in San Francisco came away seemingly divided about whether California consumers can file class actions against businesses believed to have violated the state’s Unfair Competition Law. For almost 90 minutes, Justice Paul Haerle fired hard questions at the consumers’ lawyers, while Justice J. Anthony Kline pounded more on the business-side attorneys. Justice James Lambden appeared to be in the middle of the road, perhaps leaning toward siding with Kline. During the argument, the justices noted that the high-stakes question has led trial judges around the state to reach different conclusions. “As you can tell, we’re extremely interested in this issue,” Kline told the lawyers afterward. In another long argument Wednesday, Kline, Haerle and Lambden seemed ready to uphold a Contra Costa County judge’s order granting a new trial for a woman convicted of abusing two “drug babies” placed in her foster care. The judge found that the woman — accused at times of suffering from Munchausen Syndrome by Proxy, a disease in which a caregiver hurts children for attention — had ineffective trial counsel. In the business case, Thomas Corbett sued Hayward Dodge Inc. and Bank of America for allegedly misleading car buyers into entering into financial arrangements with an “approved” annual percentage rate, while actually increasing the APR to include a dealer participation fee that the bank and Hayward Dodge later split. (The amount of profit wasn’t clear.) Corbett filed a class action on behalf of himself and other allegedly deceived car buyers, but did so through state Business & Professions Code � 17200, also known as the Unfair Competition Law, which is aimed at preventing businesses from retaining ill-gotten gains. Consumers contend that class actions under the UCL are the only way to ensure that companies don’t make windfalls off unfair practices, while businesses say the law is meant to provide injunctive relief and disgorgement of profits, not to compensate a class of private individuals. On Wednesday, Hayward Dodge and Bank of America argued that the Legislature never intended class actions to come under the UCL. They also argued that in Kraus v. Trinity Management Services, 23 Cal.4th 116, a UCL case decided two years ago, the state supreme court said a so-called fluid recovery fund — a pot of money set aside to compensate individuals wronged by the challenged practice — can only be obtained through a class action. Alameda County Superior Court Judge Ronald Sabraw agreed with Dodge and Bank of America late last year and denied class certification. Justice Haerle took the early offensive Wednesday, challenging Corbett’s appellate lawyer, Brad Seligman of the Impact Fund in Berkeley, on several fronts. Among them, he asked if the case were sent back to Sabraw how Seligman would get around the requirement that plaintiffs in class actions be typical of the claimants. After all, Haerle noted, Judge Sabraw has already found Corbett atypical because he never read the contract with the APR language. “The knowledge of the class of whether there is a contract or not is not germane,” Seligman responded. Haerle’s back-and-forth banter with Seligman was so overwhelming that Justice Kline, no shy guy, managed to wedge in only one question. But then he went to work on the attorneys for Bank of America and Hayward Dodge — Steefel, Levitt & Weiss partner Barry Lee and Laura Christa, a partner at Christa & Jackson in Los Angeles. Courts all across California, particularly in Los Angeles and San Diego counties, are approving class actions in UCLs all the time, Kline noted. If the state’s two largest counties are doing it, he said, why not Alameda? “It’s our position,” Christa said, “that those courts should take a closer look, because UCL claims should not be treated as class actions.” The UCL was aimed at providing individuals with “quick, streamlined relief,” she said, whereas that doesn’t happen with class actions. “If this Hayward Dodge case is the example,” Kline interjected, “that’s not the truth.” It has been under way for years, he said. Plus, Kline said, he thinks the basic idea of the UCL statute isn’t quickness, but to prevent illicit profits by businesses engaged in unfair practices. “In certain UCL cases, that cannot happen without a certified class and fluid recovery,” Kline said. “The UCL does not say these cannot be [by] a class action.” Referring to an earlier scenario posed to Seligman, Kline asked Christa what happens if a UCL action proceeds and of 3,841 possible claimants, 1,000 can’t be located? Will Bank of America and Hayward Dodge keep the allegedly illicit profits that can’t be returned to those 1,000? “That’s what the UCL says,” Christa responded. “But under your scenario,” Kline argued, “unfair business practices will be cost-effective, because they’ll never find those thousand people. This has no deterrent effect.” Justice Lambden admitted the issue is difficult. “The courts are struggling with this,” he said. “Some are allowing class actions, some are not. There is no clear answer yet.” Afterward, neither side would predict an outcome, saying the bench looked fairly divided. They also traded charges about the other’s motives. Jackson said it’s obvious the plaintiffs want to increase the amount of monetary relief, while Amanda Wilson, a lawyer with Soquel’s Law Offices of Sharon Kinsey, who represented Corbett at trial, said plaintiffs only want to ensure that defendants “are not allowed to keep a windfall.” ABUSE CASE In the abuse case, the attorney general’s office was appealing an order granting a new trial to Yvonne Eldridge, a Contra Costa County woman accused of abusing two foster children — toddler Tasha and infant Denisha — so badly that they were constantly getting treatment at local hospitals. Eldridge claimed that the children’s many problems were the result of being born to drug-addicted mothers, but prosecutors say Eldridge was the sole source of the girls’ problems, possibly because of Munchausen Syndrome by Proxy. At the trial court level two years ago, Contra Costa County Superior Court Judge Peter Spinetta granted a new trial after finding that Chief Deputy Public Defender William Egan had erred by not calling a medical expert for an overall evaluation of the case. That sounded good enough to Kline, Haerle and Lamden, especially considering the case had been up on appeal once before and Spinetta had ruled the same way twice. “The question at that hearing was whether the defense could — which it did not — provide medical evidence on defense,” Kline said. “There’s no doubt in my mind that the defense’s failure to call a medical expert is a major factor in this trial.” San Francisco Supervising Deputy Attorney General Joyce Blair represented the state, while San Francisco solo Zenia Gilg was Eldridge’s lawyer. The cases heard Wednesday were Corbett v. Superior Court, A097495, and People v. Eldridge, A094113.

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