The opinion in Nelson v. Pearson Ford Co. (July 15, 2010) is hot off the presses and over 50 pages long.  Plaintiff Nelson sued Pearson Ford, alleging violations of the Automobile Sales Finance Act (ASFA) (Civ. Code, § 2981 et seq.), California's unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.), and the Consumers Legal Remedies Act (CLRA) (Civ. Code, § 1750 et seq.)  The trial court certified the matter as a class action, with two classes: the backdating class and the insurance class. After a bench trial, the trial court found Pearson Ford not liable under the ASFA to the backdating class, but liable under the ASFA to the insurance class. It also found Pearson Ford liable to both classes under the UCL, but not the CLRA. The trial court issued certain remedies under the ASFA and the UCL, and awarded Nelson his attorney fees and costs under the ASFA. Both parties appealed.

With a 50-page-plus opinion, there is a lot to digest, but the comments regarding UCL "causation" are so valuable in and of themselves that I wanted to post them in full immediately:

A. Liability

The UCL defines "unlawful competition" to include an "unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising . . . ." (Bus. & Prof. Code, § 17200.) "By proscribing 'any unlawful' business practice, '[Business & Professions Code,] section 17200 "borrows" violations of other laws and treats them as unlawful practices' that the unfair competition law makes independently actionable." (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180 (Cel-Tech).) After the 2004 amendment of the UCL by Proposition 64, a private person has standing to sue only if he or she "'has suffered injury in fact and has lost money or property as a result of [such] unfair competition.'" (In re Tobacco II Cases (2009) 46 Cal.4th 298, 305 (Tobacco II), citing Bus. & Prof. Code, § 17204, italics added.) In the context of a class action, only the class representatives must meet Proposition 64's standing requirements of actual injury and causation. (Tobacco II, supra, at pp. 315-316.)

The actual payment of money by a plaintiff, as wrongfully required by a defendant, "constitute[s] an 'injury in fact' for purposes of Business and Professions Code section 17204. [Citations.]" (Troyk v. Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1347 (Troyk).) Causation for UCL standing purposes is satisfied if "a causal connection [exists] between the harm suffered and the unlawful business activity." (Daro v. Superior Court (2007) 151 Cal.App.4th 1079, 1099 (Daro); accord, Troyk, supra, at p. 1349.) However, "[t]hat causal connection is broken when a complaining party would suffer the same harm whether or not a defendant complied with the law." (Daro, supra, at p. 1099.)

For example, in Troyk, an insured filed a class action against his automobile insurer alleging the insurer violated the UCL by requiring him to pay a service charge for payment of his automobile insurance policy premium and, because the service charge was not stated in his policy, the insurer violated Insurance Code section 381, subdivision (f), requiring that this be done. (Troyk, supra, 171 Cal.App.4th at p. 1314.) Although the Troyk court found that the insurer had violated the Insurance Code as alleged (id., at p. 1334), it concluded that causation under the UCL did not exist because plaintiff did not show that had the insurer disclosed the monthly service charges in the policy documents as required by the Insurance Code, he would not have paid them. (Id. at p. 1350.) Significantly, the lack of disclosure of proper charges, not illegal charges, violated the UCL in Troyk.

Here, the trial court impliedly found that Pearson Ford had violated the UCL as to both classes through its violations of the ASFA, and we have affirmed that Pearson Ford is liable for its violations of the ASFA. (Ante, part II.A.2.) Pearson Ford does not challenge the conclusion that its violations of the ASFA support Nelson's UCL claims; rather its appeal is limited to the trial court's finding that Nelson had standing to pursue claims under the UCL. Pearson Ford focuses its argument on whether Nelson suffered injury "as a result of" its unfair competition under the UCL. (Bus. & Prof. Code, § 17204.) Relying on Troyk, Pearson Ford contends that Nelson needed to prove he would not have bought the car if he had known that the second contract: (1) charged him pre-consummation interest; (2) misstated the APR; and (3) failed to separately itemize the $250 insurance premium. We disagree.

The failure of Pearson Ford to comply with the ASFA caused Nelson to suffer an injury and lose money as to both classes because he paid pre-consummation interest (the backdating class), and paid sales tax and financing charges on the insurance premium (the insurance class). Unlike Troyk, these illegal charges violated the UCL and Pearson Ford improperly collected additional funds from Nelson. UCL causation exists because Nelson would not have paid pre-consummation interest, or sales tax and financing charges on the insurance premium had Pearson Ford complied with the ASFA. Because Nelson had standing to pursue claims under the UCL, we reject Pearson Ford's argument that the judgment in favor of both classes should be vacated to the extent it grants relief under the UCL.

Slip op., at 32-34.  This discussion adds some clarity to the situation where an unlawful act underlies the imposition of a charge or fee.  The plaintiff need not plead that the product or service wouldn't have been purchased had the truth been disclosed.  Instead, it is enough to plead that money was spent on the product or service and that the amount charged included some unlawful component that would not have been charged had the law been followed.  This won't resolve all cases alleging fraud or omissions, but it does offer some blunt guidance about so-called "causation" under the UCL.

I don't know if I will get around to posting more about Nelson, but you can follow the link above to peruse it yourself if automobile financing just gets you crazy with anticipation.