Steroid Hormone Product Cases
Opinion
—This class action case is one of several coordinated cases involving over-the-counter sales of products containing anabolic steroids. The named plaintiff in this case, Diego Martinez, alleged causes of action against defendant General Nutrition Companies, Inc. (GNC), for violation of the unfair competition law (
Martinez sought to certify a class of all persons who purchased products containing androstenediol in California between February 17, 2000, and April 1, 2004. The trial court denied his motion to certify, finding that common issues did not predominate because class members would be required to individually litigate issues of causation and injury. Martinez appeals, arguing that the trial court’s denial was based upon improper criteria or incorrect legal assumptions. We agree, and reverse the order denying certification.
BACKGROUND
The original complaint in this case was filed in Contra Costa Superior Court in February 2004 by Santiago Guzman. In June 2004, the action was coordinated with five other class actions in Los Angeles Superior Court, as Judicial Council Coordination Proceeding No. 4363. Guzman subsequently amended his complaint to add Martinez and William Thomas as additional
The operative complaint, the third amended complaint, alleged that GNC sold products containing androstenediol without requiring a prescription and without notifying customers that the products contained a controlled substance. The complaint alleged that, by selling the androstenediol products as over-the-counter nutritional supplements, GNC violated the CLRA, specifically Civil Code section 1770, subdivision (a)(2), (5), and (7).
3
The complaint also alleged that GNC’s conduct violated the UCL because its sale of androstenediol products violated state statutes, including Health and Safety Code
Martinez moved for class certification in February 2008. He supported his motion with, among other things, (1) his declaration that he had spent over $2,500 on androstenediol products between 1999 and 2004, and that he would not have purchased those products had he known they were illegal-to possess without a prescription; (2) a letter sent by California’s Attorney General to GNC on September 12, 2003, to “assure that [GNC is] aware” that androstenediol is identified under the California Uniform Controlled Substances Act (
GNC opposed the motion for class certification on the grounds that (1) common issues do not predominate over individual issues because eаch class member will need to establish what information he or she relied upon in deciding to purchase androstenediol products and how he or she was injured by such purchases (which GNC argued would depend upon each class member’s subjective belief as to the value of the product); and (2) Martinez’s claims are not typical of the class and he is not an adequate representative because he sought to assert personal injury and efficacy claims rather than claims based upon the illegality of the products. GNC supported its opposition with, among other things, portions of Martinez’s depositions frоm his original lawsuit (in which he challenged the efficacy and safety of androstenediol products sold by GNC and others) and the instant lawsuit. In those depositions, Martinez testified about the factors that went into his purchase of androstenediol products, and his concerns about those products, which appeared to be focused (in the deposition portions provided) 6 more on health risk issues rather than illegality issues.
The trial court denied the certification motion in September 2008. The court incorporated by reference its February 2008 ruling denying a class certification motion in one of the other coordinated cases
{Ayala v. Met-Rx USA, Inc.
(Super. Ct. L.A. County, 2008, No. BC289455)
{Ayala)),
in which the court found that commоn questions did not predominate as to causation and injury with regard to both the CLRA and UCL claims, because the
In its ruling on Martinez’s motion, the court reiterated that “the central issue” under both the CLRA and the UCL was “whether the illicit nature of defendant’s products was material to those who purchased them,” and that “[t]o recover, . . . each class member must demonstrate, or it must be inferable classwide, that the alleged injury was material.” The court concludеd that materiality could not be inferred classwide, observing that it “requires no imaginative leap” to conclude that there exist “person[s] to whom legality is immaterial,” because “andro[stenediol] products are classified only as Schedule III substances; the proscriptions asserted by plaintiffs apply only against distributors, not buyers;1 7 1 and at any rate, a substantial black market exists in disregard of any proscription.” Therefore, as in Ayala, the court found that establishing causation and injury under both the CLRA and the UCL required an individualized inquiry into whether the illegality of the androstenediol products was material to each class member, and thus individual issues predominated over common issuеs.
Martinez timely filed a notice of appeal from the order denying class certification.
DISCUSSION
A. Standards for Class Actions
Code of Civil Procedure section 382, which governs UCL claims brought as class actions (see
A CLRA claim brought as a class action is governed exclusively by Civil Code section 1781, which sets out the four conditions that, if met, mandate certification of a class: “(1) It is impracticable to bring all members of the class before the court. [][] (2) The questions of law оr fact common to the class are substantially similar and predominate over the questions affecting the individual members. HQ (3) The claims or defenses of the representative plaintiffs are typical of the claims or defenses of the class, [f] (4) The representative plaintiffs will fairly and adequately protect the interests of the class.” (
Under either statute, “[t]he certification question is ‘essentially a procedural one that does not ask whether an action is legally or factually meritorious.’ [Citation.] A trial court ruling on a certification motion determines ‘whether . . . the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.’ [Citations.]”
(Sav-On Drug Stores, Inc.
v.
Superior Court
(2004)
In the present case, the trial court denied class certification on the ground that, with regard to both the UCL claim and the CLRA claim, an individualized inquiry would have to be conducted into whether the illegality of androstenediol products was material to each purchaser, to determine whether GNC’s alleged conduct caused injury to that purchaser. We examine this reason as it pertains to each of Martinez’s claims.
“The UCL defines unfair competition as ‘any unlawful, unfair or fraudulent business act or practice . . . .’ ([Bus. & Prof. Code,]
Before the November 2004 General Election, when the voters approved Proposition 64, California courts consistently held that liability for restitution under the UCL could be imposed against a defendant without any individualized proof of causation or injury; the plaintiff needed only to show that the defendant engaged in a practice that was unlawful, unfair, or fraudulent and that the defendant may have acquired money or property by means of that practice.
(Tobacco II, supra, 46
Cal.4th at p. 320; see also
Massachusetts Mutual Life Ins. Co v. Superior Court
(2002)
Questions arose as to the effect of the Proposition 64 amendments on UCL class actions, particularly whether each class member must now establish that he or she suffered injury in fact and lost money as a result of the unfair competition. The Califоrnia Supreme Court answered this question in
Tobacco II,
concluding that the standing provision added by Proposition 64 “was not intended to have any effect at all on unnamed members of UCL class actions.”
(Tobacco II, supra,
C. The CLRA Claim
The CLRA claim requires a different analysis than the UCL claim, because the CLRA requires a showing of actual injury as to each class member. The CLRA makes unlawful various “unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer.” (
In moving for certification of the class, Martinez argued that causation and injury could be established by showing that the alleged misrepresentation— that the androstenediol products were legal over-the-counter supplements— was material, and therefore was an issue common to the class. In opposing the motion, GNC argued that the issue was not common to the class because “the existence and manner of incurring damages” for each class member would depend upon each class member’s subjective belief regarding the “actual value” of the androstenediol products he or she bought. In denying class certification, the trial court agreed that the causation/injury issue depended upon materiality, but found that materiality could not be decided on a classwide basis because “the illicit nature of a product impacts its value only to the extent the buyer knows about the illegality or cares,” and the perceived value was an issue requiring an individualized inquiry.
In ruling that the materiality question depended upon each class member’s subjective belief regarding value, the trial court was led astray by GNC’s erronеous legal assumption. GNC’s argument that the examination of each class member’s subjective belief was necessary was based upon its assumption that the showing of “damage” required under the CLRA is governed by Civil Code section 3343, i.e., the measure of actual damages for persons defrauded in the purchase of property. That assumption is incorrect. The “damage” that a plaintiff in a CLRA action must show under Civil Code
The “damage” Martinez alleged in this case is that, in reliance on GNC’s deceptive conduct, he bought an illegal product he would not have bought had he known it was illegal. He does not seek actual damages, but instead seeks restitution. He correctly argues that he is entitled to show that GNC’s alleged deceptive conduct caused the same damage to the class by showing that the alleged misrepresentation was material, even if GNC might be able to show that some class members would have bought the products even if they had known they were unlawful to sell or possess without a
Materiality of the alleged misrepresentation generally is judged by a “reasonable man” standard. In othеr words, a misrepresentation is deemed material “if ‘a reasonable man would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question’ [citations], and as such materiality is generally a question of fact unless the ‘fact misrepresented is so obviously unimportant that the jury could not reasonably find that a reasonable man would have been influenced by it.’ ”
(Engalla
v.
Permanente Medical Group, Inc.
(1997)
GNC appears to argue that the proper analysis is not whether legality is important to a generic reasonable person but rather, whether it is important to bodybuilders, and Martinez failed to establish materiality because he failed to show that the legality of the androstenediol products is important to bodybuilders. Even if the reasonable person standard must be applied in this case from the perspective of a reasonable bodybuilder (although there is no evidence that bodybuilders were the only people who purchased androstenediol products from GNC), there is no reason to believe that, as a rule, bodybuilders care less about legality than nonbodybuilders. And even if there may be some people who bought androstenediol products from GNC with the knowledge that the products were unlawful to sell or possess in California without a prescription—and there is no evidence in the record that there are—their existence would not defeat class certification.
D. Recent Appellate Cases on Class Certification
After we issued our opinion, GNC petitioned for rehearing, arguing that two recent cases from the Second Appellate
District—Cohen v. DIRECTV, Inc.
(2009)
In Cohen, the plaintiff alleged that DIRECTV violated the UCL and the CLRA by inducing subscribers to purchase high definition television services through misrepresentations in DIRECTV’s advertising that DIRECTV’s broadcast of those channels would meet certain technical specifications. (Cohen, supra, 178 Cal.App.4th at pp. 969-970.) In opposing class certification, DIRECTV submitted evidence that many subscribers had never seen, or did not remember seeing, advertisements with the alleged misrepresentations about the technical specifications, and purchased the services at issue due to other factors. (Id. at p. 970.) The trial court found that common issues of fact did not predominate because the allegedly fraudulent representations were not uniformly made to or considered by the class members. (Id. at p. 973.)
The appellate court affirmed. In discussing the UCL claim, the appellate court noted that
Tobacco II, supra,
We agree that
Tobacco II
did not dispense with the commonality requirement for class certification. But to the extent the appellate court’s opinion might be understood to hold that plaintiffs must show class members’ reliance on the alleged misrepresentations under the UCL, we disagree. As
Tobacco II
made clear, Proposition 64 did not change the substantive law governing UCL claims, other than the standing requirements for the named plaintiffs, and “before Proposition 64, ‘California courts have repeatedly held that relief under the UCL is available without individualized proof of deception, reliance and injury.’ [Citation.]”
(Tobacco II, supra,
46 Cal.4th at
Vioxx
is similarly distinguishable. In that case, the plaintiffs asserted causes of action under the UCL and CLRA based upon allegations that the manufacturer of the medication Vioxx knew about cardiovascular risks associated with the medication but engaged in a campaign to hide or explain away those risks.
(Vioxx, supra,
The trial court denied class certification largely on the ground that common issues did not predominate because two key aspects of the plaintiffs’ case required individual inquiry. The court found—based upon extensive medical and other evidence—that the determination of whether Vioxx was no more effective and less safe than the generic medication “is dependent on each individual patient’s specific medical needs and history,” as is the determination of whether the mоre expensive Vioxx was better than the generic medication.
(Vioxx, supra,
The appellate court affirmed. As to the CLRA claim, the appellate court concluded that, in light of the individualized issues regarding Vioxx’s effectiveness and safety, the trial court was correct that the plaintiffs could not establish materiality and reliance on a classwide basis.
(Vioxx, supra,
180 Cal.App.4th at pp. 133-134.) As to the UCL claim, the appellate court noted that the plaintiffs needed to be able to show the existence of a “ ‘measurable amount’ ” of restitution supported by the evidence, and the plaintiffs’ assertion that that amount is the difference between the cost of Vioxx and the cost of the generic medication failed because the generic medication was not a valid comparator due to the differences among patients who take those kinds of medications. (
Neither issue is relevant to this case. As wе explained, there is no impediment to establishing reliance on a classwide basis for the CLRA claim
In short, neither Cohen nor Vioxx has any impact on our analysis of this case.
DISPOSITION
The order denying class certificatiоn is reversed. Martinez shall recover his costs on appeal.
Epstein, P. J., and Suzukawa, J., concurred.
A petition for a rehearing was denied February 8, 2010, and the opinion was modified to read as printed above. The petition of respondent General Nutrition Companies, Inc., for review by the Supreme Court was denied April 14, 2010, SI80584. George, C. J., did not participate therein.
Notes
Although androstenediol was defined as a schedule HI controlled substance under California law throughout the period relevant to this lawsuit, it was not considered a schedule in controlled substance under federal law until 2004. (See
Thomas and Martinez had filed a class action complaint in San Diego County in March 2004 against GNC and other defendants based upon the failure of products containing androstenediol to perform as those defendants had advertised. Apparently, Thomas and Martinez’s request to include that action in the coordinated proceedings was denied. Thomas and Martinez were added to Guzman’s complaint in June 2005.
Those subdivisions provide that the following unfair methods of competition or deceptive acts or practices are unlawful: “Misrepresenting the source, sponsorship, approval, or certification of goods or services” (
We note that Health and Safety Code
Although the complaint also included a claim for unjust enrichment, and included a prayer for compensatory and punitive damages under Civil Code section 1782, the motion for class certification sought certification only with regard to restitution and injunctive relief under the UCL and CLRA claims.
Although the entire transcript of each deposition was included in the joint appendix on appeal, there is no indication that those transcripts were before the trial court—indeed, in the index to the joint appendix, the filing date for those transcripts (and another deposition transcript that was included) was listed as “N/A.” Inclusion in a joint appendix of documents that were not filed with the trial court is improper. (
The trial court was mistaken that the proscriptions apply only against distributors, and not buyers. Health and Safety Code
GNC tries to avoid the required reversal by arguing in its respondent’s brief thаt the trial court’s ruling does not conflict with
Tobacco II
because
Tobacco II
addressed standing, while the trial court specifically stated that standing was irrelevant to the certification analysis. Although the court did state that standing was irrelevant, it nevertheless found that Proposition 64 added actual injury as an element of a cause of action for restitution under the UCL, and therefore injury must be established for each class member.
Tobacco II
made clear, however, that Proposition 64 only affected the named plaintiff’s standing in a UCL class action seeking restitution; it did not add an additional element to be satisfied by all class members.
(Tobacco II, supra,
We note that GNC presented no such evidence in opposition to the class certification motion.