Metropolitan News-Enterprise


Tuesday, July 25, 2006


Page 1


Proposition 64 Applies to Pending Cases, Supreme Court Rules




Proposition 64’s limitations on private enforcement of unfair competition laws apply to lawsuits filed before its effective date of Nov. 3, 2004, the California Supreme Court unanimously ruled yesterday.

In an opinion by Justice Kathryn M. Werdegar, the court concluded that the First District Court of Appeal’s Div. Four erred in allowing a disability rights group to appeal Alameda Superior Court Judge Henry Needham Jr.’s ruling that the Mervyn’s department store chain had not engaged in unlawful business practices. 

Californians for Disability Rights sued Mervyn’s, LLC, alleging that the company—which operates 125 stores across California—discriminated against those with mobility disabilities by failing to provide adequate pathway space between merchandise displays. The complaint cited the Unruh Civil Rights Act and the Disabled Persons Act as authority.

Needham held a bench trial in August 2003 and granted final judgment several months later. While the appeal was pending, voters approved Proposition 64, an initiative barring unfair competition actions by private persons unless the plaintiff has suffered economic injury and can qualify as a class representative. 

The Court of Appeal said the presumption against retroactive application of laws where that would revoke vested rights applies to Proposition 64, but the high court agreed with Mervyn’s that Proposition 64 was a change in procedural rules, so that a dismissal would be a prospective, not a retroactive, application.

No Voter Intent

Werdegar rejected Mervyn’s contention that intent on the part of voters that the law apply retroactively could be inferred from the language of the initiative, which the justice said was ambiguous on the issue. But the justice accepted the alternative argument that the new standing rules were not being applied “retroactively” within the meaning of prior high court decisions.

Werdegar explained:

“The measure left entirely unchanged the substantive rules governing business and competitive conduct.  Nothing a business might lawfully do before Proposition 64 is unlawful now, and nothing earlier forbidden is now permitted.  Nor does the measure eliminate any right to recover.  Now, as before, no one may recover damages under the UCL…and now, as before, a private person may recover restitution only of those profits that the defendant has unfairly obtained from such person or in which such person has an ownership interest.”

She continued:

“Proposition 64 does prevent uninjured  private persons from suing for restitution on behalf of others. … In effect, [the initiative] withdraws the standing of persons who have not been harmed to represent those who have.  But the section need not for that reason be described as operating retroactively.  For a lawsuit properly to be allowed to continue, standing must exist at all times until judgment is entered and not just on the date the complaint is filed.”

The case was argued on appeal by James C. Sturdevant of The Sturdevant Law Firm in San Francisco for the plaintiff and David F. McDowell of Morrison & Foerster for Mervyn’s.

Among the groups filing amicus briefs were Consumer Attorneys of California, the Environmental Protection Information Center, the Electronic Frontier Foundation, and the American Association of Retired Persons in favor of the plaintiff and The Civil Justice Association of California,  the California Chamber of Commerce, the California Bankers Association, the California Financial Services Association, the California Manufacturers & Technology Association the California Motor Car Dealers Association,  the Association of California Insurance Companies and the Pacific Legal Foundation for the defendant.

McDowell, Mervyn’s lead counsel, said in a statement:

“Companies doing business in California can no longer be subjected to claims by uninjured plaintiffs who purportedly sue on behalf of unidentifiable persons.  California has thankfully brought itself into the mainstream by requiring that plaintiffs suffer an actual injury before suing and requiring the protections of class actions before entering broad relief.

‘Baseless Claims’

He asserted that the changes brought about by Proposition 64 eliminated some of the worst aspects of the UCL that have given California a reputation as a bad place to do business.  “Retailers, which especially have been prey to meritless [UCL] cases, have considerable reason to rejoice over the court’s ruling, which frees them from baseless claims of unfair practices.”    

The Foundation for Taxpayer and Consumer Rights, which opposed Proposition 64, took a contrary view.

“Today’s ruling throws a roadblock in front of the legitimate public interest cases that Prop. 64’s donors promised would not be harmed,” the group said in a release. “The ability of public interest organizations to represent the interests of California consumers and taxpayers has suffered a blow that can only be remedied by returning to the legislature to enact stronger consumer protections in place of those eliminated by Prop. 64.”  

In a companion case, the court held that the usual rules for amending complaints determine whether a UCL complaint filed prior to Nov. 2, 2004 can be amended to replace a non-injured class representative with a class representative who has suffered the requisite actual injury, and whether that amendment relates back to the filing date of the original complaint so as to avoid the bar of the statute of limitations.

The cases are Californians for Disability Rights v. Mervyn’s, LLC, 06 S.O.S. 3846 and Branick v. Downey Savings and Loan Association, 06 S.O.S. 3849.


Copyright 2006, Metropolitan News Company