California’s Unfair Competition Law and Consumers Legal Remedies Act 2020 Annual Overview MARCH 2020 New York · Los Angeles · Miami · Washington, DC Copyright ©2020 All Rights Reserved STROOCK’S FINANCIAL SERVICES LITIGATION, REGULATION AND ENFORCEMENT GROUP Stroock is nationally recognized as a leader in the representation of companies in the full range of compliance, regulatory and litigation matters. We have achieved prominence in the defense and settlement of the consumer class actions routinely brought against financial services companies. Over the years, our litigators have defended and settled, including through innovative settlement structures, hundreds of actions addressing a wide range of class action- related issues. We have argued three times to the California Supreme Court on issues of critical concern in connection with the defense of class actions—Washington Mutual Bank v. Superior Court (Briseno), Discover Bank v. Superior Court (Boehr) and McGill v. Citibank—and routinely appear before federal and state appellate courts around the country. Our clients include, among others, commercial and consumer banks, residential lenders, student lending companies, automobile finance companies, credit card issuers, payment processors, investment banks, e-commerce companies, telecommunications companies and insurance companies. We have litigated virtually all aspects of the financial services business, including matters regarding lending and servicing, retail banking, unfair practices, insolvency and federal and state regulatory compliance. Our group has extensive experience also in representing financial institutions, and their officers, directors, and employees, in administrative and judicial enforcement actions brought by the various state and federal financial institutions’ regulatory agencies, including state Attorneys General, the Department of Justice, the Bureau of Consumer Financial Protection, the Federal Reserve Board, the Financial Industry Regulatory Authority, the Federal Deposit Insurance Corporation (“FDIC”), the Federal Trade Commission (“FTC”), the Office of the Comptroller of the Currency (“OCC”) and the U.S. Securities and Exchange Commission. Drawing on our unique resources, we have played a central role in numerous multi-state regulatory investigations. Based on this extensive experience, we offer a broad base of specialized knowledge regarding the legal and business issues faced by our clients, as well as the ability and commitment to handle matters efficiently and in a results-oriented fashion. OVERVIEW OF DEVELOPMENTS1 In California, class action lawyers wield two powerful tools: the Unfair Competition Law, California Business and Professions Code sections 17200–17209 (“UCL”); and the Consumers Legal Remedies Act, California Civil Code sections 1750–1784 (“CLRA”). The UCL forbids “unlawful, unfair or fraudulent” conduct in connection with virtually any type of business activity.2 With its sweeping liability standards and broad equitable remedies, the UCL is the weapon of choice for plaintiffs’ lawyers. The CLRA is more defined in structure, but no less potent. The CLRA applies to any “consumer” transaction involving the “sale or lease of goods or services”3 and authorizes recovery of actual, statutory and punitive damages.4 The CLRA, which explicitly prohibits 24 separate business acts and practices, provides for streamlined class certification and dispositive motion proceedings. Decisions from California and federal courts in 2019 provided important direction under the UCL and CLRA in the areas of arbitration, Article III standing and statutory standing, the time to bring a class action to trial and the limits on classwide financial relief under the UCL and CLRA, the standards for “unfairness” under the UCL and other issues. First, the California Supreme Court’s 2017 decision in McGill v. Citibank, N.A.5 continues to cast a long shadow over the enforceability of arbitration provisions in California. In McGill, the Court ruled that a provision in an arbitration agreement precluding an arbitrator from awarding public injunctive relief under the UCL and CLRA—specifically, injunctive relief having the “‘primary purpose and effect of’ prohibiting unlawful acts that threaten future injury to the general public”6—is unenforceable under California public policy. Analyzing the rule announced in McGill, the Ninth Circuit held in Blair v. Rent-A-Center, Inc.,7 that the Federal Arbitration Act8 does not preempt the McGill rule because the rule is a “generally applicable contract defense” that does not impermissibly interfere with arbitration.9 The Ninth Circuit further stated, in a footnote and without any analysis, that the injunctive relief plaintiff sought in Blair was “public” injunctive relief as defined in McGill because plaintiff sought “to enjoin future violations of California’s consumer protection statutes, [which was] 1 The research in this Overview is current through February 2019. The purpose of the Overview is to provide information and perspective. We sometimes reference unpublished and/or noncitable opinions to demonstrate reasoning, illustrate trends, etc. The authors thank Stroock associates Gaganjyot K. Sandhu and Jihyuk Song and paralegal Andrew Aquino for their invaluable assistance with this year’s Overview. 2 Cal. Bus. & Prof. Code § 17200. The UCL also expressly prohibits “unfair, deceptive, untrue or misleading advertising” and incorporates California’s False Advertising Law, Cal. Bus. & Prof. Code § 17500 et seq. (“FAL”). See id. Because the standards for liability under the UCL and FAL are similar, and the remedies are co-extensive, claims under the FAL are typically pleaded as UCL claims. 3 Cal. Civ. Code §§ 1770(a) (stating prohibited practices), 1761 (definitions). 4 See Cal. Civ. Code § 1780(a). 5 2 Cal. 5th 945 (2017). 6 Id. at 955. 7 928 F.3d 819 (9th Cir. 2019). 8 9 U.S.C. §§ 1-16 (the “FAA”). 9 Blair, 928 F.3d at 827-29. -i- relief oriented to and for the benefit of the general public.”10 The Ninth Circuit concurrently issued unpublished opinions in two companion cases, reaching the same result.11 Ultimately, this issue might reach the Supreme Court. With FAA preemption at least seemingly off the table, defendants in a number of cases have argued—with some success—that McGill is factually distinguishable and does not preclude enforcement of an arbitration agreement where the relief sought is not the type of “public” injunctive relief at issue in McGill, but rather “private” relief even when sought on behalf of a putative class. In an important decision, the California Court of Appeal recently endorsed this approach in Clifford v. Quest Software, Inc.,12 where the appellate court held that an injunction requiring defendant to comply with wage and hour laws was not “public” relief because such relief primarily would benefit plaintiff and individuals similarly situated to plaintiff rather than the general public.13 Federal district courts in California have continued to reach conflicting results depending on the facts of the particular case, with some courts broadly applying McGill,14 and others taking a more narrow approach.15 At least one court declined to reach the issue where the agreement at issue authorized the arbitrator to award public injunctive relief.16 10 Id. at 831 n.3. 11 See McArdle v. AT&T Mobility LLC, 772 F. App’x 575, 575 (9th Cir. 2019) (affirming district court’s denial of defendant’s motion to compel arbitration for the reasons set forth in Blair), pet. for cert. filed (Feb. 27, 2020); Tillage v. Comcast Corp., 772 F. App’x 569, 569 (9th Cir. 2019) (affirming district court’s denial of defendant’s motion to compel arbitration for the reasons set forth in Blair), pet. for cert. filed (Feb. 27, 2020). 12 38 Cal. App. 5th 745 (2019), review denied (Nov. 13, 2019). 13 See id. (citing McGill, 2 Cal. 5th at 955). 14 See Delisle v. Speedy Cash, No. 3:18-CV-2042-GPC-RBB, 2019 WL 2423090, at *8 (S.D. Cal. June 10, 2019) (denying motion to compel arbitration of UCL and CLRA claims seeking to enjoin defendant’s practice of charging allegedly excessive interest rates and to require defendant to provide corrective advertising and notice to the public), appeal filed, No. 19-55794 (9th Cir. July 10, 2019); Eiess v. USAA Fed. Sav. Bank, No. 19-cv-00108-EMC, 2019 WL 3997463, at *11, *13 (N.D. Cal. Aug. 23, 2019) (granting motion to compel arbitration to the extent plaintiff sought monetary relief or a determination of liability under the UCL and CLRA but denying motion to the extent plaintiff sought public injunctive relief in the form of an order requiring defendant to amend its deposit agreement to better reflect its practice of charging multiple NSF fees); Fernandez v. Bridgecrest Credit Co., LLC, No. EDCV 19-877-MWF-SHK, 2019 WL 7842449, at *6 (C.D. Cal. Oct. 29, 2019) (finding that plaintiff sought public injunctive relief based, in part, on the “unique relationship between consumers and car loan lenders”). 15 See Sponheim v. Citibank, N.A., No. SACV19264JVSADSX, 2019 WL 2498938, at *1, *4-5 (C.D. Cal. June 10, 2019) (holding that UCL claims seeking an “order on behalf of the general public enjoining [defendant] from continuing to misrepresent its [fee] policies in its publicly available documents and marketing materials” was arbitrable under McGill because plaintiff was “seek[ing] public injunctive relief as a mere incidental benefit to his primary aim of gaining compensation for injury for himself and others similarly situated”); Colopy v. Uber Techs. Inc., No. 19-CV-06462-EMC, 2019 WL 6841218, at *2 (N.D. Cal. Dec. 16, 2019) (analyzing claims and determining plaintiff sought private, not public, injunctive relief under McGill); Magana v. DoorDash, Inc., 343 F. Supp. 3d 891, 901 (N.D. Cal. 2018) (“[P]laintiff's argument makes clear that the injunctive relief he seeks would be entirely opposite of what McGill requires—any benefit to the public would be derivate of and ancillary to the benefit to [defendant’s] employees . Therefore, [plaintiff] does not assert a claim for public injunctive relief under state law.” (emphasis in original)); McGovern v.