Monday, May 9, 2005
C.A. Revives Fraud Claims by ‘Avon Ladies’ Against Company
By KENNETH OFGANG, Staff Writer/Appellate Courts
Claims by independent sales representatives that the Avon beauty products company with forcing them to pay for unordered, returned merchandise was reinstated Friday by this district’s Court of Appeal.
Los Angeles Superior Court Judge Wendell Mortimer Jr. erred in concluding that the plaintiffs did not state a cause of action for unfair and fraudulent business practices, and in striking class action allegations at the pleading stage, Justice Paul Boland wrote for Div. Eight.
The plaintiffs, four of the “Avon Ladies” who have sold the company’s products for more than a century, accuse Avon of boosting revenues through “channel stuffing.” The saleswomen, they claim, are sent unordered products, or excessive quantities of ordered products, and are then coerced by Avon into accepting and paying for such products even after they have been returned to the company for credit, in addition to which they have been forced to pay for the shipping.
The practices have continued, the plaintiffs say, despite Avon’s stated policy of instant credit for returned product. And those who refuse to pay for the returned goods, they allege, lose their businesses and/or are hounded by collection agencies.
Trial Court Ruling
Mortimer dismissed three of the plaintiffs from the lawsuit, saying they had not pled damages and were not proper class representatives. He also threw out the plaintiffs’ claims for fraudulent concealment, breach of contract, and unfair competition, leaving only one plaintiff with an unjust enrichment claim that she paid $79 for product that she returned but received no credit for.
The suit could not proceed as a class action, the judge further ruled, because the remaining plaintiff’s claim was “not typical.” There were no “common questions,” the judge said, as “[t]he reasons stated as to why a representative paid for an unordered product have been varied and are inconsistent with the alleged return policy which allowed for instant credit.”
But Boland, in an unpublished portion of Friday’s opinion, said all of the plaintiffs had pled claims for fraudulent concealment and breach of contract. If, as the plaintiffs alleged, Avon told the representatives that they could return unordered products for full and immediate credit, then carried out an “undisclosed actual practice” that was “the precise opposite of that policy,” the company engaged in fraudulent concealment and violated the implied covenant of good faith and fair dealing under California law, Boland said.
UCL Claim Revived
In the published portion of his opinion, the justice said the trial judge was correct in concluding that the plaintiffs could not maintain an unfair competition claim based on a federal statute allowing consumers to keep unordered merchandise without paying for it. The statute does not apply, Boland said, because the plaintiffs are salespersons, not consumers.
But the plaintiffs still have a claim under the Unfair Competition Law, Boland said.
The statute, the justice explained, allows a plaintiff to sue if the defendant engages in a business practice that is unfair, fraudulent, or unlawful. While the lack of a statute specifically banning “channel stuffing” precludes a suit under the “unlawful” prong, the practices described by the plaintiffs can still be held unfair and fraudulent within the meaning of the UCL, Boland wrote.
It was further error for the trial judge to strike the class action allegations in ruling on a demurrer, the justice said.
“[I]t is impossible to read the complaint without understanding that the class alleged consists of Avon representatives who received unordered products, returned them, paid for them, and now want a credit or a refund,” Boland said. The named plaintiffs, he concluded, “are clearly typical of the class.”
The justice cautioned that the Court of Appeal was not ordering the trial court to certify a class. But since the defendant did not make a “strong” showing on the face of the complaint that individual issues will predominate over class-wide ones in determining liability, the question of class certification must be decided at a later stage of the litigation, Boland said.
The case was argued in the Court of Appeal by Jeff Huron of Century City’s Huron Maki & Johnson for the plaintiffs and by Dennis S. Ellis of Paul, Hastings, Janofsky & Walker’s Los Angeles office for Avon.
The case is Blakemore v. Superior Court (Avon Products, Inc.) B174825.
Copyright 2005, Metropolitan News Company