Filed 7/24/06 (This opn. should follow companion case, S131798, also filed 7/24/06)
IN THE SUPREME COURT OF CALIFORNIA
THOMAS BRANICK et al.,
)
)
Plaintiffs and Appellants,
)
)
v.
)
)
DOWNEY SAVINGS AND LOAN
)
ASSOCIATION,
)
)
Defendant and Respondent. )
___________________________________ )
S132433
Ct.App. 2/5 B172981
Los Angeles County
Super. Ct. No. BC280755
In the companion case of Californians for Disability Rights v. Mervyn’s LLC,
(July 24, 2006, S131798) __ Cal.4th __ (CDR), we hold that Proposition 64 (Gen.
Elec. (Nov. 2, 2004)), which limited standing to sue under California’s statutory
unfair competition and false advertising laws (Bus. & Prof. Code,1 §§ 17200 et
seq., 17500 et seq.; see §§ 17203, 17204, 17535), governs pending cases. We
granted review in this case to decide whether plaintiffs, whose standing
Proposition 64 has revoked, may amend their complaint to substitute a new
plaintiff who does enjoy standing and, if so, whether such an amendment relates
back for purposes of the statute of limitations to the date on which the original
complaint was filed.
1
All further statutory citations are to the Business and Professions Code,
except as noted.
We hold as follows: Proposition 64 does not affect the ordinary rules
governing the amendment of complaints and their relation back. We thus reject
defendant’s contention that courts may never permit a plaintiff to amend a
complaint to satisfy Proposition 64’s standing requirements. Whether plaintiffs in
this case may amend, however, cannot be determined at this stage of the
proceedings because plaintiffs have not yet filed a motion for leave to amend,
identified any person who might be named as a plaintiff, or described the claims
such a person might assert. On remand, should plaintiffs in fact file a motion to
amend, the superior court should decide the motion by applying the established
rules governing leave to amend (Code Civ. Proc., § 473) and the relation back of
amended complaints (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 408-409).
I. INTRODUCTION
On February 3, 2003, before the voters approved Proposition 64, plaintiffs
Thomas Branick and Ardra Campbell filed a complaint against defendant Downey
Savings and Loan Association under the unfair competition and false advertising
laws. (§§ 17200 et seq., 17500 et seq.) Plaintiffs alleged defendant had
misrepresented and overcharged customers for fees charged by governmental
entities to record official documents used in real estate transactions, such as deeds,
reconveyances and powers of attorney, among others. Plaintiffs did not allege
they had transacted business with defendant, paid fees to defendant, suffered
injury in fact, or lost money or property as a result of defendant’s alleged
practices. Instead, plaintiffs claimed standing to sue on behalf of “the general
public” under the language of former sections 17204 and 17535. As relief,
2
plaintiffs sought restitution, interest, injunctive relief, and costs and attorneys’ fees
under Code of Civil Procedure section 1021.5.2
Defendant moved for judgment on the pleadings on the ground that the
federal Home Owners’ Loan Act (12 U.S.C. § 1461 et seq.) and the regulations
promulgated thereunder by the Office of Thrift Supervision (12 C.F.R. § 560.2
(2006)) preempted plaintiffs’ claims. The superior court granted the motion and
entered judgment for defendant.
Plaintiffs appealed. On November 3, 2004, while the appeal was pending,
Proposition 64 took effect, having been approved by the voters the preceding day.
(See Cal. Const., art. II, § 10, subd. (a).) The Court of Appeal, after considering
the parties’ supplemental briefs on the effect of Proposition 64, reversed. Relying
on Gibson v. World Savings & Loan Assn. (2002) 103 Cal.App.4th 1291, the Court
of Appeal held federal law did not preempt plaintiffs’ claims. Concerning
Proposition 64, the court concluded the measure’s standing provisions governed
pending cases and thus revoked the standing of plaintiffs, who did not allege that
they had “suffered injury in fact and [had] lost money or property as a result of
[the alleged] unfair competition.” (§ 17204.) Finally, the Court of Appeal
“remand[ed] the matter to the trial court to determine whether, if there is a request
to amend the amended complaint, the circumstances of this case warrant granting
leave to amend.” “[T]hat issue,” the Court of Appeal observed, “was not before
the trial court at the time it granted the motion for judgment on the pleadings and
dismissed the case . . . .”
2
Code of Civil Procedure section 1021.5 permits courts to award attorneys’
fees to successful parties in certain actions that have resulted in the enforcement of
important rights affecting the public interest.
3
Defendant petitioned for review. We granted the petition, directing the
parties to brief and argue the following issue: “If the standing limitations of
Proposition 64 apply to actions under the Unfair Competition Law that were
pending on November 3, 2004, may a plaintiff amend his or her complaint to
substitute in or add a party that satisfies [the] standing requirements of Business
and Professions Code section 17204, as amended, and does such an amended
complaint relate back to the initial complaint for statute of limitations purposes?” 3
II. DISCUSSION
After Proposition 64, only those private persons “who [have] suffered injury
in fact and [have] lost money or property” (§§ 17204, 17535) may sue to enforce
the unfair competition and false advertising laws. Uninjured persons may not sue
(§§ 17204, 17535), and private persons may no longer sue on behalf of the general
public (Prop. 64, § 1, subd. (f)).4 Because Proposition 64 applies to pending cases
(see CDR, supra, __ Cal.4th __), uninjured plaintiffs who filed suit on behalf of
the general public before the measure passed have now lost standing.5
Proposition 64 does not expressly address the question whether uninjured
plaintiffs whose complaints were pending when the measure took effect may
amend their complaints to substitute new plaintiffs who enjoy standing to sue
under current law. Defendant argues that to allow substitution would contradict
3
Defendant also challenged the Court of Appeal’s conclusion that federal
law did not preempt plaintiffs’ claims. We did not, however, designate that issue
for briefing and argument. (See Cal. Rules of Court, rule 29(a)(1).)
4
The uncodified section 1, subdivision (f) of Proposition 64 provides: “It is
the intent of California voters in enacting this act that only the California Attorney
General and local public officials be authorized to file and prosecute actions on
behalf of the general public.”
5
Given our holding in CDR, supra, __ Cal.4th __, we need not address
plaintiffs’ alternative argument that Proposition 64 does not apply to this case.
4
the policy objectives underlying Proposition 64 and is, thus, implicitly forbidden.
Defendant refers to the “Findings and Declarations of Purpose” accompanying the
measure, in which the voters expressed their understanding that the unfair
competition laws were “being misused by some private attorneys who” “[f]ile
frivolous lawsuits as a means of generating attorney’s fees without creating a
corresponding public benefit,” “[f]ile lawsuits where no client has been injured in
fact,” “[f]ile lawsuits for clients who have not used the defendant’s product or
service, viewed the defendant’s advertising, or had any other business dealing with
the defendant,” and “[f]ile lawsuits on behalf of the general public without any
accountability to the public and without adequate court supervision.” (Prop. 64,
§ 1, subd. (b)(1)-(4).) “Plaintiffs’ counsel,” defendant argues, “should not benefit
from their impermissible actions by substituting new plaintiffs and having the new
allegations ‘relate back’ to the filing of the initial complaint.”
The argument is not convincing. The policy objectives underlying
Proposition 64 are fully achieved by applying the measure to pending cases, as we
have concluded it must be applied. (See CDR, supra, __ Cal.4th __.) An
additional rule barring amendments to comply with Proposition 64 does not
rationally further any goal the voters articulated. Proposition 64, as applied to
pending cases, does not permit uninjured private persons to file or to continue
prosecuting actions under the unfair competition law. (§§ 17204, 17535; cf. Prop.
64, §§ 1, subds. (b)(2), (e).) Frivolous actions (cf. Prop. 64, § 1, subd. (b)(1)),
both before and after Proposition 64, implicate the rules against malicious
prosecution (see Bertero v. National General Corp. (1974) 13 Cal.3d 43, 50) and
abuse of process (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1056-1057), and may
also lead to sanctions for frivolous conduct (Code Civ. Proc., § 128.7). In
contrast, to bar a meritorious action prosecuted by a substituted plaintiff “who has
suffered injury in fact and has lost money or property as a result of” unfair
5
competition or false advertising (§§ 17204, 17535, italics added), serves none of
the voters’ articulated objectives. Neither can the substitution of plaintiffs with
standing under current law fairly be described as permitting plaintiffs’ attorneys to
“benefit from . . . impermissible actions.” To file suit on behalf of an uninjured
client before Proposition 64 was not impermissible. To the contrary, the former
law expressly conferred standing to sue upon “any person acting for the interests
of . . . the general public” without requiring a showing of actual injury. (Former
§§ 17204, as amended by Stats. 1993, ch. 926, § 2, p. 5198, 17535, as amended by
Stats. 1972, ch. 711, § 3, p. 1300; see Stop Youth Addiction, Inc. v. Lucky Stores,
Inc. (1998) 17 Cal.4th 553, 561; Committee on Children’s Television, Inc. v.
General Foods Corp. (1983) 35 Cal.3d 197, 211.)
Having thus concluded that Proposition 64 does not expressly or implicitly
forbid the amendment of complaints to substitute new plaintiffs, the question
remains whether plaintiffs in this case may amend. Code of Civil Procedure
section 473 states the governing rule: “The court may, in furtherance of justice,
and on any terms as may be proper, allow a party to amend any pleading or
proceeding by adding or striking out the name of any party . . . .” (Id., subd.
(a)(1).)6 “Leave to amend a complaint is thus entrusted to the sound discretion of
the trial court. ‘. . . The exercise of that discretion will not be disturbed on appeal
6
The relevant subdivision provides in full: “The court may, in furtherance
of justice, and on any terms as may be proper, allow a party to amend any pleading
or proceeding by adding or striking out the name of any party, or by correcting a
mistake in the name of a party, or a mistake in any other respect; and may, upon
like terms, enlarge the time for answer or demurrer. The court may likewise, in its
discretion, after notice to the adverse party, allow, upon any terms as may be just,
an amendment to any pleading or proceeding in other particulars; and may upon
like terms allow an answer to be made after the time limited by this code.” (Code
Civ. Proc., § 473, subd. (a)(1).)
6
absent a clear showing of abuse. More importantly, the discretion to be exercised
is that of the trial court, not that of the reviewing court. Thus, even if the
reviewing court might have ruled otherwise in the first instance, the trial court's
order will yet not be reversed unless, as a matter of law, it is not supported by the
record.’ ” (Haley v. Dow Lewis Motors, Inc. (1999) 72 Cal.App.4th 497, 506,
italics added [permitting plaintiffs to substitute their trustee in bankruptcy]; see
generally Klopstock v. Superior Court (1941) 17 Cal.2d 13, 19-21.)
Because the voters adopted Proposition 64 while this case was on appeal,
plaintiffs have had no opportunity to file a motion in the superior court for leave to
amend. We thus do not know the facts that would necessarily inform the superior
court’s discretionary decision on such a motion, such as the identity of any person
plaintiffs might attempt to substitute and the nature of the claims any substituted
plaintiff might assert. For this reason, and because the decision properly belongs
to the superior court in the first instance (Haley v. Dow Lewis Motors, Inc., supra,
72 Cal.App.4th 497, 506), the Court of Appeal correctly concluded the matter
must be remanded to the superior court to determine whether, if plaintiffs do move
to amend their complaint, the circumstances of this case warrant granting leave to
amend.
To avoid prejudicing the superior court’s decision, we will not attempt to
render an advisory opinion on a motion plaintiffs have not yet filed. (Cf. Salazar
v. Eastin (1995) 9 Cal.4th 836, 860 [“ ‘The rendering of advisory opinions falls
within neither the functions nor the jurisdiction of this court.’ ”].) We may,
however, properly address and reject certain categorical arguments defendant has
advanced against the granting of leave to amend.
Defendants argue plaintiffs should not be permitted to substitute a new
plaintiff because their failure to name the new plaintiff in their original complaint
was not a mistake. No such rule exists. To the contrary, courts have permitted
7
plaintiffs who have been determined to lack standing, or who have lost standing
after the complaint was filed, to substitute as plaintiffs the true real parties in
interest. (Klopstock v. Superior Court, supra, 17 Cal.2d 13, 19-21 [administrator
of deceased shareholder’s estate substituted as plaintiff in corporate derivative
action]; see also Haley v. Dow Lewis Motors, Inc., supra, 72 Cal.App.4th 497,
506-509 [trustee in bankruptcy substituted for bankrupt debtors]; California Air
Resources Bd. v. Hart (1993) 21 Cal.App.4th 289, 300-301 [Attorney General
substituted for state administrative agency]; Jensen v. Royal Pools (1975) 48
Cal.App.3d 717, 720-723 [condominium owners substituted for owners’
association]; Powers v. Ashton (1975) 45 Cal.App.3d 783, 790 [trustees
substituted for nontrustee administrator].) Amendments for this purpose are
liberally allowed. (Klopstock v. Superior Court, supra, at pp. 19-21; 5 Witkin,
Cal. Procedure (4th ed. 1997) Pleading, § 1126, p. 581; id., § 1155, p. 614.)
The important limitation on the rule just mentioned is that the plaintiff
proposed to be substituted may not “state facts which give rise to a wholly distinct
and different legal obligation against the defendant.” (Klopstock v. Superior
Court, supra, 17 Cal.2d 13, 20.) For this purpose, “[i]n determining whether a
wholly different cause of action is introduced by the amendment technical
considerations or ancient formulae are not controlling; nothing more is meant than
that the defendant not be required to answer a wholly different legal liability or
obligation from that originally stated.” (Ibid.) Similar principles govern the
question whether an amendment relates back, for purposes of the statute of
limitations, to the date on which the original complaint was filed. “The relationback doctrine requires that the amended complaint must (1) rest on the same
general set of facts, (2) involve the same injury, and (3) refer to the same
instrumentality, as the original one. [Citations.]” (Norgart v. Upjohn Co., supra,
21 Cal.4th 383, 408-409.)
8
Invoking the rules just mentioned, defendant argues that leave to amend must
be denied because persons with standing under Proposition 64 would necessarily
seek to enforce a different legal obligation than would the current, uninjured
plaintiffs. This question, as we have already noted, properly belongs in the first
instance to the superior court. As a practical matter, we cannot in any event
decide the question before plaintiffs have filed a motion for leave to amend.
Given the question’s potential factual and legal complexity, and without knowing
the identity of the hypothetical new plaintiff or the nature of the claims he or she
might assert, for this court to attempt to decide at this stage of the proceedings
whether any possible amendment would impermissibly change the nature of the
action would be inappropriate.7
Finally, defendant argues that plaintiffs who never had standing may not
substitute plaintiffs with standing. Defendant relies on Summit Office Park v.
United States Steel Corp. (5th Cir. 1981) 639 F.2d 1278, an antitrust case in which
a federal court refused to permit indirect purchasers to substitute direct purchasers
as plaintiffs, after the high court held8 while the action was pending that indirect
purchasers had no standing to sue. The court wrote that, “where a plaintiff never
had standing to assert a claim against the defendants, it does not have standing to
amend the complaint and control the litigation by substituting new plaintiffs, a
7
The opinion in Diliberti v. Stage Call Corp. (1992) 4 Cal.App.4th 1468,
which defendant describes as involving “[t]he closest factual scenario” to the case
before us, is not helpful. In that case, the court did not permit the plaintiff, who
had not been injured in the subject automobile accident, to substitute the injured
sister in whose place she had mistakenly been named. Plaintiffs in the case before
us were not named by mistake; they were properly named as plaintiffs with
standing to sue on behalf of the general public (see former §§ 17204, 17535)
before Proposition 64 took effect.
8
In Illinois Brick Co. v. Illinois (1977) 431 U.S. 720.
9
new class, and a new cause of action.” (Summit Office Park, at p. 1282.) The
cited authority is not on point. Plaintiffs here did have standing to sue at the time
they filed their complaint. In any event, as we have already explained,
California’s courts have not followed the same rule. (See ante, at pp. 7-8.)
III. DISPOSITION
The judgment of the Court of Appeal is affirmed.
WERDEGAR, J.
WE CONCUR:
GEORGE, C.J.
KENNARD, J.
BAXTER, J.
CHIN, J.
MORENO, J.
CORRIGAN, J.
10
See last page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion Branick v. Downey Savings and Loan Association
__________________________________________________________________________________
Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XXX 126 Cal.App.4th 828
Rehearing Granted
__________________________________________________________________________________
Opinion No. S132433
Date Filed: July 24, 2006
__________________________________________________________________________________
Court: Superior
County: Los Angeles
Judge: Wendell Mortimer, Jr.
__________________________________________________________________________________
Attorneys for Appellant:
Milberg Weiss Bershad & Schulman, Jeff S. Westerman, Sabrina S. Kim, Kristin McCulloch, Peter Sloane,
Ann M. Lipton, Michael Spencer; Kiesel, Boucher & Larson, Paul R. Kiesel, Raymond D. Boucher, Patrick
DeBlase, Anthony M. DeMarco; Lerach Coughlin Stoia Geller Rudman & Robbins, Pamela M. Parker,
Timothy G. Blood and Kevin K. Green for Plaintiffs and Appellants.
Thomas Osborne, Michael Schuster and Barbara Jones for AARP as Amicus Curiae on behalf of Plaintiffs
and Appellants.
Rothken Law Firm, Ira P. Rothken; Locks Law Firm, Seth Lesser; Jackson, DeMarco Tidus &
Peckenpaugh, William M. Hensley; Klafter & Olsen and Jeffrey A. Klafter for California Law Institute as
Amicus Curiae on behalf of Plaintiffs and Appellants.
Law Office of Richard R. Wiebe and Richard R. Wiebe for Center for Biological Diversity, Inc.,
Environmental Protection Information Center and Electronic Frontier Foundation as Amici Curiae on
behalf of Plaintiffs and Appellants.
Neighborhood Legal Services, David Pallack; Western Center on Law and Poverty, Richard A. Rothschild;
National Immigration Law Center, Sonal Amegaokar and Linton Joaquin for Consumers Union, Asian
Pacific American Legal Center, Maintenance Cooperation Trust Fund and Juan and Manuela Zermeno as
Amici Curiae on behalf of Plaintiffs and Appellants.
Roxborough, Pomerance & Nye, Drew E. Pomerance, Vincent S. Gannuscio; Goshgarian & Marshall,
Mark Goshgarian and John A. Marshall for Steven Poirer, Douglas Ryan and Dana Poss as Amici Curiae
on behalf of Plaintiffs and Appellants.
__________________________________________________________________________________
Attorneys for Respondent:
Hodel Briggs Winter, Matthew A. Hodel, Elizabeth Van Horn, Jennifer D. Henderson, Michael S. Leboff;
Snell & Wilmer and Richard A. Deveran for Defendant and Respondent.
Page 2 – S132433 – counsel continued
Attorneys for Respondent:
Heller Ehrman, Vanessa Wells, Warrington S. Parker III and Daniel K. Slaughter for State Farm Mutual
Automobile Insurance Company, The Hertz Corporation and Visa U.S.A. Inc., as Amici Curiae on behalf
of Defendant and Respondent.
Pillsbury Winthrop Shaw Pittman, Bruce A. Ericson, John M. Grenfell, Michael J. Kass and Ranah L.
Esmali for California Bankers Association as Amicus Curiae on behalf of Defendant and Respondent.
Mayer, Brown, Rowe & Maw, Evan M. Tager and Donald M. Falk for Cingular Wireless LLC as Amicus
Curiae on behalf of Defendant and Respondent.
Munger, Tolles & Olson, Ronald L. Olson, Steven B. Weisburd and Dean N. Kawamoto for the California
Chamber of Commerce, the California Manufacturers & Technology Association, the California Financial
Services Association and the California Motor Car Dealers Association as Amici Curiae on behalf of
Defendant and Respondent.
Fred J. Hiestand for The Civil Justice Association of California as Amicus Curiae on behalf of Defendant
and Respondent.
Counsel who argued in Supreme Court (not intended for publication with opinion):
Michael Spencer
Milberg Weiss Bershad & Schulman
355 South Grand Avenue, Suite 4170
Los Angeles, CA 90071
(213) 617-1200
Matthew A. Hodel
Hodel Briggs Winter
8105 Irvine Center Drive, Suite 1400
Irvine, CA 92618
(949) 450-8040
