Treated Like Cattle

The recent, highly publicized recall of more than 143 million pounds of beef may make Animal Legal Defense Fund v. Mendes, case no. F052009 (5th Dist. Feb. 15, 2008) more relevant to some people than it otherwise would have been. 

It’s a suit brought by the Fund against a calf rancher, alleging violation of Penal Code section 597t for confining animals without an “adequate exercise area.”  Plaintiffs also include consumers who allege violation of the unfair competition statutes.  The consumers “reasonably presumed” that dairy products they purchased were produced from animals kept in compliance with the law and alleged that they lost money by purchasing dairy products that were illegally produced. 

The trial court sustained the demurrer without leave to amend.  The Court of Appeal affirms.

On the Fund’s cause of action for violation of the penal code, the court determines that the legislature did not intend a private right of action by private parties. The comprehensive legislative scheme for the incorporation of humane societies for the prevention of cruelty for animals effectively “deputizes” those societies “to aid local authorities in the enforcement of anticruelty laws,” indicating that there was no legislative intent to create a private right of action by enacting Penal Code section 597t.

The consumers’ claim fails because they fail to allege injury.  They failed to allege any misrepresentations, that the dairy products they purchased originated with the defendant, or that the products were inferior in any way.  Their complaint merely alleged that they were deprived of the “benefit of the bargain” — not enough for standing.  They argued on appeal that the products were morally tainted by the treatment of the calves that later joined dairy herds.  That might have been enough prior to 2004, the court notes, but the amended UCL requires that a private plaintiff have suffered “injury in fact and [have] lost money or property.”  (Bus. & Prof. Code, § 17204.)  Economic harm is required; moral taint doesn’t suffice.

A New Take on Tobacco Litigation

In Sanders v. Brown, case no. 05-15676 (9th Cir. Sept. 26, 2007), a smoker sued four tobacco companies. Old news, right? But Mr. Sanders didn’t sue them for making him sick. Nor for defrauding him about the addicitveness or ill health effects of tobacco. Nor for engineering cigarettes to enhance their addictive properties. No, Mr. Sanders sued because these companies were charging him too much for a pack of smokes.

Specifically, Sanders alleged that the companies were engaged in a price-fixing scheme enabled by the terms of the Master Settlement Agreement reached between the companies and 46 states (and several territories) and the various state statutes implementing the MSA terms. Thus, he also sued California’s attorney general.

In a decision addressing issues of preemption and immunity, the Ninth affirms dismissal under rule 12(b)(6), Federal Rules of Civil Procedure.

UPDATE (9/26/07): Those hungry for a little more detail on the merits should check out the coverage at California Appellate Report.

Prop. 64 Knocks Out Unfair Competition Plaintiff Initially on Standing; Insufficient Substantive Allegations Finish Him Off

In Schulz v. Neovi Data Corp., case no. G033879 (June 15, 2007), a decision following remand from the California Supreme Court, the Fourth District Court of Appeal tackles the issue of whether plaintiff can amend his complaint to state a cause of action against online payment services Neovi, PayPal, Inc., PaySystems, Inc., and Ginix, Inc. for abetting an alleged unlawful “matrix scheme” run by EZExpo.com by allowing their payment services to be used by participants to make payments into the scheme.  (This Wikipedia entry gives more background on matrix schemes and claims that EZExpo.com is widely believed to be the first such known scheme.  The decision itself also describes the scheme fairly well.)  All of the defendants’ demurrers to plaintiff’s second amended complaint were sustained by the trial court.

Proposition 64 was enacted while the case was on appeal.  It requires a plaintiff suing on behalf of the public for unfair competition under Business and Professions Code section 17200 et seq. to allege his own injury in fact. The Court of Appeal held that under Prop. 64, Schulz lacked standing to sue anyone but Ginix, since Ginix was the only service he used.  The Supreme Court granted review and eventually remanded the case to the Court of Appeal to reevaluate under the holding of Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, in which the Supreme Court held that an unfair competition plaintiff who lost standing due to the enactment of Prop. 64 must be given an opportunity to seek leave to amend the complaint to substitute new plaintiffs who would have standing under the amended provisions of the unfair competition law.

On remand, the Court of Appeal reverses as to two defendants but affirms as to Paypal and Neovi.  Even if Schulz could amend to name plaintiffs with standing to sue Neovi and PayPal, the substantive pleading deficiencies against these two defendants are enough to sustain the demurrer.  Conclusory allegations of the defendants’ knowledge of the alleged matrix scheme were not enough to meet the knowledge element, especially when compared to the detailed allegations against the other defendants.  Further, since Schulz had already amended his complaint twice and did not suggest how he might cure the defects, the court found no reasonable possibility that he could successfully amend.