Corbett v. Superior Court

125 Cal. Rptr. 2d 46, 101 Cal. App. 4th 649, 2002 Daily Journal DAR 9881, 2002 Cal. Daily Op. Serv. 7911, 2002 Cal. App. LEXIS 4566
CourtCalifornia Court of Appeal
DecidedAugust 27, 2002
DocketA097495
StatusPublished
Cited by31 cases

This text of 125 Cal. Rptr. 2d 46 (Corbett v. Superior Court) is published on Counsel Stack Legal Research, covering California Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Corbett v. Superior Court, 125 Cal. Rptr. 2d 46, 101 Cal. App. 4th 649, 2002 Daily Journal DAR 9881, 2002 Cal. Daily Op. Serv. 7911, 2002 Cal. App. LEXIS 4566 (Cal. Ct. App. 2002).

Opinions

Opinion

LAMBDEN, J.

In the case before us, Thomas Corbett (Corbett) filed his petition for extraordinary relief challenging the trial court’s conclusion, as a [654]*654matter of law, that it could not certify a class to pursue a claim for violating the unfair competition law (UCL), Business and Professions Code section 17200 et seq.1 The court struck the portion of Corbett’s pleading against Bank of America, N.A., Bancamerica Auto Finance Corporation, Bank of America Corporation (collectively Bank of America), and Hayward Dodge, Inc. (Hayward Dodge) for disgorgement of unlawful profits into a fluid recovery fund.

Although numerous courts have presumed they have the authority to certify UCL claims as class actions2 and reviewing courts have considered what factors must be considered when certifying a class in a UCL lawsuit (e.g., Fletcher v. Security Pacific National Bank (1979) 23 Cal.3d 442, 454 [153 Cal.Rptr. 28, 591 P.2d 51] (Fletcher)), no appellate court has directly addressed the question of whether UCL and class actions are fundamentally incompatible. The question before us is therefore one of first impression. Bank of America and Hayward Dodge, however, maintain that the Supreme Court in Kraus v. Trinity Management Services, Inc. (2000) 23 Cal.4th 116, 137 [96 Cal.Rptr.2d 485, 999 P.2d 718] (Kraus) already settled this question when it concluded that “section 17203 does not authorize orders for disgorgement into a fluid recovery fund.”

We do not agree that Kraus holds that class actions and UCL claims are mutually exclusive. The Supreme Court in Kraus made it clear that the question before it was whether a fluid recovery remedy, which it had “sanctioned” only in class actions, was also authorized by the UCL. (Kraus, supra, 23 Cal.4th at p. 127.) The court concluded that “the Legislature has not expressly authorized monetary relief other than restitution in UCL actions, but has authorized disgorgement into a fluid recovery fund in class actions.” (Id. at p. 137.) Thus, its holding barred a liquid recovery remedy in non-class UCL actions and did not address class UCL actions.

The interpretation of Kraus advocated by Hayward Dodge and Bank of America would have required the Supreme Court to disapprove of its earlier [655]*655opinion in Fletcher. In Fletcher, the Supreme Court implicitly ruled that a UCL claim could properly be brought as a class action when it held that the trial court improperly rejected class certification of a UCL claim because plaintiffs could not prove that each individual borrower lacked knowledge of the bank’s unfair practice. (Fletcher, supra, 23 Cal.3d at p. 453.) Not only did the Supreme Court in Kraus quote approvingly from Fletcher, but it pointed out that it had already held in Fletcher that “once an unfair trade practice was established, a class action could proceed without individualized proof of lack of knowledge of the fraud.” (Kraus, supra, 23 Cal.4th at p. 134, italics added, citing Fletcher, supra, 23 Cal.3d at p. 450.)

In addition to the language in Kraus approving of class UCL claims, nothing in the language of the UCL or in its legislative history suggests that UCL claims and class actions are incompatible. Despite numerous modifications to the UCL, the Legislature has never added language barring class actions. Furthermore, section 17205 expressly provides that the remedies under the UCL “are cumulative to each other and to the remedies or penalties available under all other laws of this state.” Consequently, a plaintiff in a class UCL action is expressly entitled to an injunction and restitution, authorized under the UCL, and to disgorgement into a fluid recovery, as authorized under the class action statutes.

Finally, public policy also compels us to reject the argument of Hayward Dodge and Bank of America. Refusing to ever permit a liquid recovery in a UCL claim would thwart the purpose of the UCL because it would permit defendants to keep a portion of their illicit profits (see, e.g., Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1267 [10 Cal.Rptr.2d 538, 833 P.2d 545]). If a plaintiff in a UCL action was precluded from seeking disgorgement into a fluid recovery, those ill-gotten profits that could not be returned to identifiable injured or deceived parties would be retained by the defendants. This would “ ‘impair the full impact of the deterrent force that is essential if adequate enforcement’ ” of the UCL is to be achieved. (Fletcher, supra, 23 Cal.3d at p. 451.)

Accordingly, we hold that UCL claims and class actions are not mutually exclusive as matter of law. Where a class has properly been certified, a plaintiff in a UCL action may seek disgorgement of unlawful profits into a fluid recovery fund.

Background

On April 17, 2000, Corbett, individually and on behalf of all others similarly situated, filed a class action complaint for damages and for an [656]*656injunction against Bank of America and Hayward Dodge. On August 27, 2001, the court denied without prejudice Corbett’s motion for class certification for failure to set forth evidence in support of his motion.

On August 30, 2001, Corbett filed a third amended complaint and alleged that he purchased a motor vehicle under a five-year simple interest motor vehicle installment contract and security interest, financed by Bank of America. According to the pleading, Hayward Dodge arranged the financing. Corbett was unaware that Bank of America had approved his loan application at an interest rate of approximately 12.50 percent, but Hayward Dodge prepared the loan documents for an interest rate of 17.50 percent. Bank of America and Hayward Dodge shared the difference between the interest rate approved and the interest rate charged. Neither Bank of America nor Hayward Dodge disclosed any of this information to the consumer. Corbett alleged on behalf of himself and all other consumers who had similarly been harmed by this deceptive and misleading business practice causes of action for violating the Consumers Legal Remedies Act (Civ. Code, § 1750 et seq.), fraud, intentional interference with prospective contract, permanent injunction under Civil Code section 1780, subdivision (a)(2), and violating the UCL (§ 17200 et seq.).

On September 19, 2001, Hayward Dodge filed a motion to, among other things, strike Corbett’s “allegations seeking disgorgement of ill-gotten gains and profits, as that relief is not recoverable under the unfair competition statutes.” On November 8, 2001, the court granted the motion to strike the prayer for disgorgement relief related to the claim under section 17200. The court stated: “Motion of Hayward Dodge to strike the prayer for disgorgement relief related to the 5th cause of action under Business and Professions Code 17200 is Granted. Kraus v. Trinity Management Services, Inc.[, supra,] 23 Cal.4th 116, 138, holds that disgorgement is not a remedy in and of itself. Rather, Kraus holds that disgorgement of allegedly ill-gotten profits is a remedy only insofar as it [is] a mechanism to permit restitution of funds.

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125 Cal. Rptr. 2d 46, 101 Cal. App. 4th 649, 2002 Daily Journal DAR 9881, 2002 Cal. Daily Op. Serv. 7911, 2002 Cal. App. LEXIS 4566, Counsel Stack Legal Research, https://law.counselstack.com/opinion/corbett-v-superior-court-calctapp-2002.