Class Action Plaintiff must Suffer Loss of Money or Property to have Standing to Prosecute UCL (Unfair Competition Law) Class Action and must Establish Causal Connection Between Alleged Loss and Defendants Conduct California State Court Holds
Plaintiff filed a putative action lawsuit against various Time Inc. entities for violations of Californias unfair competition law (UCL) by allegedly tricking people into buying books as part of a free trial period program. Hall v. Time Inc., 158 Cal.App.4th 847, 70 Cal.Rptr.3d 466, 467 (Cal.App. January 28, 2008). The gravamen of the class action was that Time engaged in a scheme by which it induced consumers to purchase books by offering a free preview period during which the consumer had 21 days in which to review the book and return it to Time with no obligation to buy. Id. The class action complaint alleged that after the consumer reviews the book pursuant to an ostensible no obligation free trial basis, Time employs a scheme to obtain immediate payment from the consumer throughmisleading and deceitful tactics. Id. Defense attorneys moved to dismiss the class action on the ground that plaintiff did not suffer an injury in fact and thus lacked standing to prosecute the class action; the trial court agreed and dismissed the class action complaint. Id. The Court of Appeal affirmed.
Plaintiff alleged that he ordered a book from Time. Hall, at 468. The class action alleged that Time sent a bill with the book that encouraged him to pay for the book immediately but made clear that he was under no obligation to do so and that he had 21 days to return the book at Times expense, id., at 467-68. Plaintiff admits he kept the book and did not pay for it. Id., at 468. According to the allegations in the class action complaint, after the trial period ended Time began sending bills to plaintiff demanding payment; when plaintiff failed to pay, the matter was referred to collection. Id. Ultimately, plaintiff paid for the book and then filed the class action complaint alleging that Time had engaged in an ongoing, unfair and/or fraudulent and/or unlawful business practice by sending invoices before the expiration of the free trial period to obtain immediate payment for the book requested. Id. The trial court granted Times motion to dismiss the class action for lack of standing, finding that plaintiff got the book that he asked for, at the price he asked for it, and the payment schedule he wanted. Id.
In order to have standing to prosecute a UCL claim in California, a plaintiff must have suffered injury in fact and must have lost money or property as a result of such unfair competition. Hall, at 469 (citations omitted). Plaintiff alleged he suffered an injury in fact, id. Few caseshave directly addressed what constitutes injury in fact or loss of money as a result of unfair competition for purposes of determining standing. Id., at 470. The appellate court summarized existing case law as requiring that a plaintiff have (1) expend[ed] money due to the defendants act of unfair competition [citations]; (2) lost money or property [citation]; or (3) been denied money to which he or she has a cognizable claim [citations]. Id., at 470-71. In this case, plaintiff alleged he paid Time $29.51, but he received a book in exchange and the class action complaint [does] not allege he did not want the book, the book was unsatisfactory, or the book was worth less than what he paid for it. Id., at 471.
The Court of Appeal additional held that the causation element for UCL standing did not exist. Under this test, plaintiff was required to show that he lost money or property as a result of Times conduct, Hall, at 471, and the appellate court held at pages 471 and 472 that [t]he phrase as a result of in its plain and ordinary sense means caused by and requires a showing of a causal connection or reliance on the alleged misrepresentation. Here, the class action did not allege that plaintiff lost money or property as a result of Times act of alleged unfair competition, id., at 473. Rather, the complaint alleged that Time caused the customer to believe he or she did not have a free trial period and was obligated to keep and pay for the book upon receipt. Id. Plaintiff did not fall within this alleged class as he did not remit payment until 10 months after receiving the book – long after the free trial period had expired. Id. Put simply, the class action complaint did not allege that plaintiff did not want the book or that Times conduct induced him to keep the book; as plaintiff never sought (or apparently desired) to return the book within the free trial period, he failed to establish a causal connection between Times conduct and his alleged loss. Id. Accordingly, the court affirmed the trial court order granting the defense motion to dismiss the complaint. Id., at 474.