Some attorneys are warning that California businesses may want to brace for the effects of a recent state Supreme Court decision that could “open the floodgates” to frivolous and nuisance class-action lawsuits. Proposition 64 was a 2004 ballot measure aimed at reining in such lawsuits. But, according to some, the 4-3 California Supreme Court decision against tobacco companies in the latest round of class-actions against them appears to have negated some of that proposition’s intent. After years in which California had what corporate defense attorneys characterized as the most liberal class-action standing requirements in the nation, many believed the passage of Proposition 64 would usher in an era of fewer so-called frivolous lawsuits. “The impact remains to be seen, but this may mean the unraveling of Proposition 64,” said Horvitz and Levy partner, Brad Pauley, who added that, recently, there had been signs that unmerited class-action suits were slowing. But, according to Pauley, prior to 64, anyone could sue a company for just about anything as long it could be argued that it had engaged in unfair competition regardless of whether or not they had personally suffered a loss of money or property. “In 2004, voters imposed limits on the unfair competition law (UCL), which is the statute under which most class actions are filed,” Pauley said. “In 64, voters were saying anyone bringing an action has to have suffered the loss of money or property as a direct result of the challenged practice.” The standard for establishing loss as a direct result of unfair competition practices, such as deceptive advertising, represented a notably higher bar for what is called “standing,” or having a legitimate interest in a case. The court agreed there was a need for the higher standard in principle, yet still decided to overturn a lower court’s decision that required unnamed class members suing tobacco companies for deceptive advertising to meet that standard. “We conclude that a class representative proceeding on a claim of misrepresentation as the basis of his or her UCL action must demonstrate actual reliance on the allegedly deceptive or misleading statements,” wrote Justice Carlos R. Moreno in the majority opinion. Nevertheless, the court ruled to overturn an appeals decision that would have decertified the standing of the majority of the class action members in a case known as Tobacco II. In essence, in writing for the majority, Justice Moreno said the tobacco companies’ argument that every one of the individual class-action plaintiffs must show that a particular, deceptive advertisement compelled them to go out and buy cigarettes was unreasonable. Thus, the court sent it back for trial, allowing tobacco companies to be sued by plaintiffs for having been deceived into smoking. Justices did not duck the issue of possibly negating the voters’ intent when they passed Proposition 64, acknowledging, however vaguely, that the decision in Tobacco II bypasses the measure. For its part, the San Fernando Valley Bar Association is staying neutral on the matter of class-action certification. That’s no surprise, given the fact that its members are attorneys from both sides of the issue. “We don’t have a position on this case or Prop. 64,” said Bar Association president, Tamila Jensen, of the Law Offices of Tamila Jensen. “That is, other than to say we support a plaintiff’s right to sue, and a defendant’s prerogative to contest certification.” However, she doubts the contention that the court’s decision in Tobacco II effectively nullifies Proposition 64. “Going forward, I’m not sure what they would do if we were back in a situation with the kind of case we all thought Prop. 64 was meant to stop,” Jensen said. “If it wasn’t this kind of case with tobacco companies as the defendants and somebody brought a case against a mom-and-pop business, I’m not sure we would find ourselves with this type of decision.” Pauley agrees, the jury is still out on how the decision will affect the viability of the anti-frivolous-lawsuit measure.
