October 25, 2020

Volume X, Number 299

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October 23, 2020

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California Consumers Can’t Escape Federal Jury Trial by Abandoning Available Damages Claims

The Ninth Circuit affirmed dismissal of a consumer fraud class action pursuing restitution under California’s Unfair Competition Law (UCL) because the plaintiff failed to show she lacked an adequate legal remedy. Sonner v. Premier Nutrition, No. 18-15890 (9th Cir. June 18, 2020). In doing so, the Ninth Circuit resolved a split in the California federal courts regarding whether plaintiffs may pursue solely equitable relief under the UCL, Consumer Legal Remedies Act (CLRA), or False Advertising Law (FAL) when legal damages under the CLRA are available in the same amount for the same alleged harm. This decision has important implications for consumer class actions in California federal courts.

The Facts

The Sonner complaint alleged that Premier Nutrition marketed its dietary supplement beverage Joint Juice as supporting cartilage, lubricating joints, and improving joint comfort, but that Joint Juice failed to provide these benefits. The complaint demanded injunctive relief, restitution under the UCL and CLRA, and damages under the CLRA. (For those not familiar with the California statutes, the UCL authorizes only restitution, not damages, whereas the CLRA allows both. Restitution is considered an equitable remedy, even though it functions similarly to a damages award.)

Less than two months before trial, Sonner sought leave to file an amended complaint that dropped the CLRA damages claim. This was a transparent strategic move — by dropping the CLRA damages claim, Sonner could request that the judge award $32 million as restitution in a bench trial, rather than having to persuade a jury to award this amount as damages. Premier opposed, arguing that Sonner’s proposed amended complaint would require dismissing the restitution claims because there was an adequate remedy at law for the same injury. The district court allowed amendment, but warned that if Premier successfully dismissed the restitution claims, the court would not allow another amendment to resurrect the damages claims.

Undeterred, Sonner filed her amended complaint. Premier moved to dismiss, and the district court granted the motion, holding that the UCL and CLRA claims were subject to California’s inadequate-remedy-at-law doctrine, and the plaintiff had an adequate remedy at law under the CLRA.

Intra-Circuit Split

The district court’s holding placed it on one side of an intra-circuit split. On one side, courts held that plaintiffs alleging claims providing an adequate remedy at law were barred from pursuing claims for equitable relief, including under California’s consumer protection statutes, unless they could show why the available legal damages were inadequate. See, e.g.Munning v. Gap, Inc., 238 F. Supp. 3d 1195, 1203–04 (N.D. Cal. 2017); Duttweiler v. Triumph Motorcycles, 2015 WL 4941780 at *8 (N.D. Cal. Aug. 19, 2015).

The other side held that, because the UCL and CLRA state that their remedies are “cumulative” to the remedies available under other state laws, the availability of damages did not bar a claim for equitable relief under the UCL and CLRA. See, e.g.Luong v. Subaru of Am., Inc., 2018 WL 2047646 at *7 (N.D. Cal. May 2, 2018); Estakhrian v. Obenstine, 233 F. Supp. 3d 824, 846 (C.D. Cal. 2017).

The Ninth Circuit Decision

The Ninth Circuit affirmed Sonner, but on federal rather than state grounds. It held that federal common law controls a federal court’s equitable authority, and state law cannot expand or limit that authority. As a result, a federal court must apply traditional equitable principles before awarding restitution under the UCL and CLRA.

Consequently, before awarding equitable relief under the UCL, CLRA, or FAL, a federal court must find that the plaintiff has an inadequate remedy at law. In consumer fraud cases seeking restitution, that will rarely be the case, because the same recovery available as “restitution” under the UCL and FAL is generally available as “damages” under the CLRA. That was the outcome in Sonner because the class sought the same sum in equitable restitution — a full refund of the purchase price equaling $32 million — as it requested in damages to compensate for past harm.

Implications for California Consumer Class Actions in Federal Courts

The Ninth Circuit’s decision prevents plaintiffs in consumer class actions from eliminating the defendant’s right to a jury trial by seeking monetary recovery under the guise of “restitution” that is equally available as “damages.” As the Sonner court recognized, this is one of the core reasons for the inadequate-remedy-at-law requirement in the first place — to protect the constitutional right to trial by jury.

Open questions remain. For instance, can a plaintiff pursue a UCL claim at all if they have a viable remedy under the CLRA? Sonner arguably suggests no, but it does not directly answer the question since Sonner abandoned her CLRA claim, rather than pursuing it simultaneously with a UCL claim. If consumer plaintiffs are indeed compelled to abandon their UCL claims where the CLRA affords identical relief, they also will be required to meet the CLRA’s more demanding causation requirement, which could affect class certification.

Similarly, must a plaintiff allege an inadequate legal remedy in her complaint to avoid dismissal of equitable claims? This is another issue on which California federal courts are divided. Compare Robinson v. J.M. Smucker Co., 2019 WL 2029069, at *6 (N.D. Cal. May 8, 2019) (dismissing UCL and FAL claims where plaintiff’s complaint pled an adequate legal remedy under the CLRA), with Wildin v. FCA US LLC, 2018 WL 3032986, at *6–7 (S.D. Cal. June 19, 2018) (allowing plaintiff to plead “alternative remedies” for equitable and legal relief). Because Sonner was decided on the eve of trial, it does not address whether courts may or must decide this issue at the pleading stage.

© 2020 Faegre Drinker Biddle & Reath LLP. All Rights Reserved.National Law Review, Volume X, Number 177
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About this Author

Emily Bodtke Zambrana Litigation Attorney Faegre Drinker Biddle & Reath Minneapolis, MN
Associate

Emily Bodtke Zambrana defends food and agribusiness companies and medical device manufacturers in litigation. As a member of the firm’s nationally ranked product liability practice, Emily represents clients in a wide variety of litigation matters, including consumer fraud, toxic tort, personal injury, and contract disputes.

Food Company Litigation

Emily represents Fortune 500 food companies and retailers facing consumer fraud class actions. Her clients have won motions to dismiss and negotiated favorable individual and class settlements. Emily frequently writes and speaks...

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