If a Consumer Never Sees an Ad, Can It Deceive Her?

Downey v. Public Storage, Inc., No. B291662 (D2d2 Feb. 6, 2020)

False advertising class action based on deceptive advertisements of a $1 first month promotional rate for storage spaces. There are apparently taxes, insurance, locks, and fees that arguably make that rate higher. Defendant has been advertising the deal, in a wide variety of media, for the last 37 years. The class is defined as everyone who paid the promotional rate. The issue is whether, in order to certify that class, the plaintiff needs to show that both the exposure of the class to the advertisements and the deceptiveness of the ads are subject to common proof. The trial court ruled they were and denied certification. Plaintiff took an appeal under the death knell doctrine. 

About a decade ago, the California Supreme Court held that a class action for violations of the UCL or FAL did not require individualized proof that members of the class relied on a false advertisement. In re Tobacco II Cases (2009) 46 Cal.4th 298. The logic is similar to the fraud on the market theory in a securities case. Because Proposition 64 requires a plaintiff to have lost money or property, a named plaintiff in a false advertising case must establish her own reliance and injury. But the reliance of the absent class members can be inferred if she can show: (1) the members of the class were exposed; (2) to an ad containing a misrepresentation; (3) that is material, and (4) they bought the product. Since since the UCL and FAL permit restitution of money that “may have been acquired” though false advertising, see Bus. & Prof. Code §§ 17203, 17535, that’s good enough to get relief for rest of the class.

The question then, is whether a plaintiff needs to show that elements (1) and (2) are nonetheless subject to common proof to merit certifying a class. Relying on a fair amount of prior precedent, the Court of Appeal here holds she does. It declines to read some stray language from Tobacco II so broadly as to permit absent class members to obtain restitution without some proof that they were actually exposed to false advertising. To do so would permit restitution of money that was “definitively not acquired” though a false ad. 

The evidence before the trial court showed that Defendant gave the promotional rate to customers who never asked for it. It was also possible for a consumer to pay the promotional rate without having seen any advertising. Because the class was defined as anyone who paid—as opposed to anyone who saw—that means the defined class contained individuals who were definitely not entitled to restitution. So substantial evidence thus supported the trial court’s conclusion that exposure wasn’t subject to uniform proof.

Similarly for deceptiveness, Plaintiff challenged 37 years’ worth of advertising, in multiple media, in different locations. Some of these ads contained disclaimers about the other fees and taxes. And on other occasions, a customer was nonetheless warned of the additional costs before the transaction was complete. Depending on the nature of the ad and the context, such disclosures could render some of the ads not deceptive. Given the great variety of advertising, there was substantial evidence in support of the trial court’s finding that deceptiveness also was not subject to common proof. 

Affirmed.

UCL Penalties Case Goes to a Jury

Nationwide Biweekly Admin., Inc. v. Superior Court, No. A150264 (D1d1 Jun 12, 2018)

Before yesterday, had I been asked whether there’s a right to jury trial in an case brought by a public prosecutor seeking statutory penalties under the Unfair Competition Law, off of the top of my head, I would have guessed no. I vaguely recall having read some cases that say that. Plus the UCL is, so far as California state law goes, a beast of equity. That’s probably what the Court of Appeal first thought too, when it summarily denied a writ Defendant in this case took from the superior court’s striking their jury trail demand. But the Supreme Court granted review and transferred the case back to the Court of Appeal, ordering an assessment of the merits.

And when they got into the merit of it, it turns out everyone’s assumptions were wrong. In a solid, thoughtful analysis, the Court holds that an enforcement action for penalties under the UCL is more closely equivalent to an action at law in the common law of England in 1850 than something at equity. (That’s the test for when there’s a jury trial right under the state constitution.) The Court primarily relies on a U.S. Supreme Court case, Tull v. United States, 481 U.S. 412 (1987) and an older decision of the California Supreme Court, People v. One 1941 Chevrolet Coupe, 37 Cal.2d 283 (1951) to hold that the gist of an enforcement action seeking statutory penalties is to punish, which is a legal, not equitable, practice. The Court holds however, that the jury right applies only to liability. Much like a criminal sentence, a calculation of civil penalties is classically within the discretionary power of the court.

As I recollected, there are a handful of Court of Appeal cases that seemingly go the other way. But the Court plows through them, showing that: (1) they deny a right to jury trial under the Sixth Amendment (although a civil penalties case is punitive, it is not criminal); or (2) they contain cursory or no analysis, or blindly cite to the Sixth Amendment cases, to deny the right without doing any requisite Seventh Amendment (or in California, Article I, § 16) analysis that looks to remedies and equivalents at common law. Finding no other case that has actually done the work, the Court finds these cases unconvincing.

Tthe People also suggest that they could sever off the penalties issue and have their demand for injunctive relief tried first to the court. Because that would necessarily entail a liability ruling, doing so would effectively foreclose Defendant’s jury trial right on liability in any later trial on penalties. But the Court of Appeal rejects that argument. It is true that in California procedure (unlike federal procedure) a court can try a equitable cause of action first, with the court’s fact finding in that trial being preclusive on a later jury trial. Although there’s good authority to do that on a cause-of-action-by-cause-of-action basis, nothing supports to ability to so finely parse the legal and equitable remedies that flow from a single claim.

Writ granted.