California Supreme Court Restricts Suits Under Consumers Legal Remedies Act Cases; Requires "Some Damage" for Injunctive and Declaratory Relief Claims
February 16, 2009
On January 29, 2009, the California Supreme Court issued its decision in Meyer v. Sprint Spectrum L.P., (1) holding that the mere exposure to an unlawful practice is insufficient to confer standing under the Consumers Legal Remedies Act ("CLRA"), California Civil Code Section 1750 et seq., and (2) affirming the denial of declaratory relief where the plaintiff had not shown that resolution of the dispute would result in any practical consequence.
In Meyer, several plaintiffs sued Sprint alleging that certain provisions of its customer service agreement were unconscionable and unlawful under the CLRA. See Cal. Civ. Code 1770(a)(14) and 1770(a)(19). The plaintiffs did not allege that they were personally damaged by the agreement's provisions or that Sprint had sought to enforce the provisions against them. Nonetheless, they maintained that they could seek injunctive relief under the CLRA by the mere existence of the unconscionable and illegal term's existence in the contract.
Plaintiffs Must Suffer Some Damage to Have CLRA Standing
The Supreme Court disagreed. Relying on the plain language of the statute, the Court held that "in order to bring a CLRA action, not only must a consumer be exposed to an unlawful practice, but some kind of damage must result" from it. See Civil Code § 1780(a) ("Any consumer who suffers any damage as a result of the use or employment by any person of a method, act, or practice declared to be unlawful by Section 1770 may bring an action" under the CLRA.). Referring to the juxtaposition of the terms "any damage" and "actual damages" in the statute, the Court acknowledged that the damage required to create standing need not be pecuniary, although pecuniary damage will certainly suffice. Under the Court's reasoning, the threshold for damage is low, but palpable, and in some circumstances may be shown by transaction costs or opportunity costs.
Because Sprint had not enforced the agreement's terms against the plaintiffs, the unlawful act alone could not be shown to have caused "any damage" under the CLRA, thereby making the act, no matter how unlawful, insufficient to confer standing.
In reaching this result, the Court expressly rejected often relied upon dicta in Kagan v. Gibraltar Sav. & Loan Assn. (1984) 35 Cal.3d 582. In Kagan, the Supreme Court had suggested in dicta that the infringement of a legal right, by itself, constituted "any damage" as used in Civil Code section 1780(a). The Meyer opinion expressly disapproved this reading of Kagan, making clear that a consumer cannot bring a claim under the CLRA unless he or she shows a causal link between the unlawful act and the damage suffered, and noting that Kagan would have had standing, even under Meyer, because the bank in Kagan had made clear its intent to deduct a fee from Kagan's account and Kagan was only able to avoid the fee by spending the time and energy to threaten (and ultimately bring) a lawsuit.
A Claim For Declaratory Relief Cannot Survive Without Damage Either
The Supreme Court further held that the trial court did not abuse its discretion when dismissing the plaintiffs' claim for declaratory relief. Although there was a present controversy between the parties - whether certain terms of the customer service agreement were unconscionable and unenforceable - the Court nonetheless found that no practical consequence would result from resolving that dispute in the absence of damage. Nothing had occurred to bring the provisions at issue into play and, further, plaintiffs did not allege that their contractual relationship with Sprint depended upon the dispute's resolution. Under these circumstances, claims for declaratory relief are properly dismissed.
Future decisions will have to resolve what kinds of non-pecuniary damages cause "some kind of tangible increased cost or burden to the consumer" that will give rise to liability under Section 1780.
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