By Steven Allison, Samrah Mahmoud and Sheila Chen

Law360 (April 23, 2020, 5:36 PM EDT) --

Steven Allison

Samrah Mahmoud

Sheila Chen

In the past two months, hundreds of COVID-19-related consumer class action lawsuits have been filed across the country ranging from claims related to cancelled events to consumer privacy concerns.

This is particularly true in California, a fertile ground for class actions with its broad consumer protection statutes. This article identifies early trends among the first wave of California COVID-19-related class actions and analyzes important nuances and key defenses for these types of lawsuits.

Early Trends

California will likely see a significant influx of COVID-19-related class actions attempting to use California's range of consumer-friendly statutes as the basis for expansive claims against a defendant's business practices. Examples of these statutes include:
 

• The Unfair Competition Law, or UCL, which broadly prohibits unlawful, unfair or fraudulent business practices and unfair, deceptive, untrue or misleading advertising;[1]
  
  
• The False Advertising Law, or FAL, which generally prohibits false or misleading statements to consumers about any product or service;[2] and
  
  
• The California Consumers Legal Remedies Act, or CLRA, which also broadly prohibits "unfair methods of competition and unfair or deceptive acts or practices" in connection with the sale or lease of goods or services to consumers.[3]

Unsurprisingly, California has already seen many COVID-19-related class actions, where a common theme is the wide-ranging usage of California's consumer protection statutes. Consumers who purchased services that have been cancelled or services that are unavailable during government-mandated COVID-19 quarantines have attempted to use these statutes to not only seek full refunds but also to seek punitive damages, attorney fees and sometimes other types of compensatory damages.

Examples of these types of claims include lawsuits against defendants who operate subscription-based dating events, a vacation tour company, an operator of a music festival, and members-only gyms. Indeed, some of these lawsuits have used the UCL and its prohibition on unlawful business practices to assert derivative claims for violations of other less litigated statutes; for example, a class action brought against 24 Hour Fitness USA Inc. related to membership fees included a UCL claim based in part on a violation of California's Health Studio Services Contract Law, a statute that is not often litigated independently.

Likewise, consumers have started using the UCL, FAL and CLRA to bring far-reaching claims against manufacturers and sellers of home care and safety products based on the defendants' alleged misrepresentation about the use and effectiveness of their product against COVID-19.

An example of this is a lawsuit brought in the Southern District of California against the maker of Germ-X, David v. Vi-Jon Inc., for representations related to their hand sanitizing products. The lawsuit includes common law misrepresentation claims in addition to claims asserted under the various prongs of the UCL, FAL and CLRA.

Lastly, consumers have started to use these statutes and the state's newly enacted California Consumer Privacy Act to bring claims related to misrepresentations regarding data privacy and the disclosure of private consumer information.

For instance, in Cullen v. Zoom Video Communications Inc., a class of consumers who either used the Zoom platform for free or paid for a subscription service to the platform sued for alleged disclosure of private information, misrepresentations regarding data privacy, and failure to take measures to protect against privacy invasions by hackers. The Zoom class action includes claims under the UCL, CLRA, CCPA and California Constitution, among others.

While the efficacy of these claims remains to be seen, one thing is clear: California's expansive consumer protection statutes provide a tempting basis for creative plaintiffs lawyers looking to bring COVID-19-related class actions. As the risk of exposure to COVID-19 and related government-mandated lockdowns continue there will surely be more of the above lawsuits as well as new class actions asserting novel claims.

Unique Nuances and Important Defenses

Though California's consumer protection statutes are broad, they are not unlimited, and there are several considerations and defenses that businesses should keep in mind in responding to these claims.

First, though plaintiffs in COVID-19-related class actions often seek to represent a nationwide class in these suits, the U.S. Court of Appeals for the Ninth Circuit's 2012 ruling in Mazza v. American Honda Motor Co., virtually forecloses nationwide classes involving these California-specific consumer protection statutes.[4] While oftentimes this will be a fight left for class certification, some courts in the Ninth Circuit have granted motions to dismiss nationwide class action allegations under California consumer protection statutes like the UCL, CLRA and FAL.[5]

Second, in addition to Article III standing requirements, California consumer protection statutes often have standing requirements of their own. For instance, the FAL and UCL require that plaintiffs prove they suffered injury in fact and lost money or property as a result of the defendant's alleged wrongful conduct.[6] Likewise, the CLRA requires plaintiffs to prove they suffered damages.

This may be a defense in cases where plaintiffs seek to represent a class of consumers who used a free product during the COVID-19 pandemic, like in the Zoom class action where one of the classes asserted are consumers who simply used the service. Indeed, this may become a bigger issue as more corporations offer free trial services and free products to consumers during the pandemic.

Third, while the UCL can be used to shoehorn violations of other statutes even if those statutes do not provide for private rights of actions, plaintiffs must still prove a violation of the underlying statute in order to prove a UCL claim. The underlying statutes often have unique elements and defenses that cannot be ignored simply by using a UCL cause of action.

Finally, plaintiffs often overreach on remedies, as the UCL and FAL allow only for restitution rather than damages. This again may become a bigger issue in COVID-19-related class actions where plaintiffs sue over services for which they did not pay, or where the service or event is merely delayed. It also may become an issue in cases involving cancelled events where plaintiffs may seek to recover not only what they paid to the defendant for the event but also compensation for other related costs (including flights and accommodations).

In short, defendants operating in California should learn the nuances and limitations of California's broad consumer protection statutes, as California will remain a key battleground for COVID-19-related class actions.

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Steven D. Allison and Samrah R. Mahmoud are partners, and Sheila Z. Chen is an associate at Troutman Sanders LLP.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] Cal. Bus. & Prof. Code § 17200, et. seq.

[2] Cal. Bus. & Prof. Code § 17500, et. seq.

[3] Cal. Civ. Code § 1750, et. seq.

[4] 666 F.3d 581 (9th Cir. 2012) (reversing class certification in case asserting nationwide class under CLRA, UCL, and FAL).

[5] See, e.g., Azimpour v. Sears, Roebuck & Co. , No. 15-CV-2798 JLS (WVG), 2017 WL 1496255, at *10 (S.D. Cal. Apr. 26, 2017); Cover v. Windsor Surry Co. , No. 14-CV-05262-WHO, 2016 WL 520991, at *5 (N.D. Cal. Feb. 10, 2016).

[6] Cal. Bus. & Prof. Code §§ 17204, 17535.

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