UCL ClassAction Standards are Clarified By California Supreme Court -- In re Tobacco Cases II

In re Tobacco Cases II, is the California Supreme Court’s most recent attempt to clarify the requirements for bringing a class action under the of California Unfair Competition Law, Business and Professions Code section 17200 et seq. (“UCL”). While the case involved claims of deceptive advertising by the Tobacco Industry, the opinion is also extremely important for employment class actions – the majority of which are also brought under the UCL.

The old version of the UCL allowed any person or organization to file a lawsuit on behalf of the "general public."  Prop 64 curbed the perceived abuses of lawyers who were filing case without any real plaintiff involved in the case.  Prop 64 did this by prohibiting anyone from representing the general public unless he "has some skin in the game" -- i.e., he must also have been injured in roughly the same way as those he is seeking to represent. 

The gist of the Supreme Court's Tobacco II decision is that the same standard now applies for class certification of UCL and non-UCL class actions. In other words, while the standing requirement added by Prop 64 requires proof that the named plaintiff suffered some "injury," this imposes no higher standard than in any other class action.

As the Supreme Court explained, “the effect of Proposition 64 is to prevent uninjured private persons from suing for restitution on behalf of others.” An individual may therefore serve as a class representative in a UCL lawsuit so long as he has suffered some loss “as a result of” the alleged unfair business practice. But this requirement is pretty easily satisfied. For example, where the wrongful conduct is a false or deceptive statement, “the plaintiff is not required to allege that those misrepresentations were the sole or even the decisive cause of the injury-producing conduct.” Rather, he must only allege that the misrepresentations had some effect on his conduct – and even this minimal level of causation may be presumed where the defendant’s misrepresentations involved a material issue.  This is the same injury standard applicable to individuals who file UCL actions solely on their own behalf.

On the other hand, the Court specifically rejected the argument that “all class members must individually show they have the same standing as the class representative in order to be part of the class.” Indeed, the Court repeatedly emphasized that “the UCL focus [is] on the defendant’s conduct rather, rather than the plaintiff’s damages.” Thus it is no defense to class certification to argue that some class members were not injured and could not recover under Prop 64. Instead, a class with sufficiently similar interests that meets the normal requirements of “typicality and adequacy of representation” has standing to sue “as an entity.”

The bottom line is that the UCL will continue to be a potent weapon for seeking certification in California, including class claims for unpaid wages and other employment claims.

Supreme Court Upholds "Grandfathered" Seniority System -- AT&T v. Hulteen

When Congress passed Title VII in 1964 it did not initially ban pregnancy discrimination.  In fact, it was not until the passage of the Pregnancy Discrimination Act (PDA) in 1978 that Congress finally added pregnancy as an expressly protected status.  

In AT&T v. Hulteen, however, the plaintiff challenged AT&T's current retirement payments on the ground that they are based on seniority calculations that fail to give adequate credit for pregnancy leaves which were taken before pregnancy was protected under Title VII.  The High Court came down squarely on the side of the seniority system.

Although adopting a service credit rule unfavorable to those out on pregnancy leave would violate Title VII today, a seniority system does not necessarily violate the statute when it gives current effect to such rules that operated before the PDA.  Seniority systems are afforded special treatment under Title VII . . . reflecting Congress's understanding that their stability is valuable in its own right.When Congress passed Title VII in 1964 it included a special provision that the continued operation of a "bona fide seniority system" may not be deemed unlawful. Moreover, it was not until 1978 that Congress added pregnancy as a protected status under the statute.

As a matter of statutory construction, the Court's result seems solid.  Applying the 7-2 opinion in other cases may not always be so clear cut, however.  In part this is because Souter's opinion intertwines what are really two independent grounds for upholding the employer's payment calculations -- i.e.,  (1) that they are based on decisions which were not illegal when they were made; and (2) that they fell within the express "bona fide seniority system" carve out.   

Finally, despite the characterization of some early commentators, the opinion really has nothing to do with the Lily Ledbetter Fair Pay Act of 2009, which only extends the statute of limitations for employment decisions that were illegal at the the time they were made.