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Best Practices For Defending Claims
Under the Consumer Legal Remedies Act
Presented by: Steven D. Atlee
ACCA–SoCal DoubleHeader®:
Preparing For The Rebound
November 17, 2009
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Consumer Legal Remedies Act (“CLRA”)
• The CLRA is a California statute intended to protect
consumers against unfair and deceptive business
practices
• Identifies 24 practices that are unlawful in connection with
“a transaction intended to result in the sale or lease of goods or
services to any consumer” 1
• Allows a consumer to bring a lawsuit to obtain actual damages,
injunctive relief, restitution, attorney’s fees and punitive
damages, typically in the form of a class action 2
1
Cal. Civ. Code § 1770(a); 2 Cal. Civ. Code § 1780
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CLRA Demand Letter
• CLRA requires a consumer who seeks to recover
damages to send a written demand letter and wait 30
days before initiating an action for damages
• The letter must provide notice of the alleged wrongdoing
and demand that the company correct, repair, replace or
rectify the alleged violation
• The letter must meet other statutory requirements 3
3 Cal.
Civ. Code § 1782(a)
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30-Day Demand Period
• Once you receive the letter, you have 30 days to
respond
• Your actions in these 30 days can help fend off a lawsuit
or at least improve your company’s position if a lawsuit is
inevitable
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Proactive Steps to Avoid Litigation
• Was the demand letter sent by a consumer?
• Was the consumer damaged?
• Can your company cure the alleged violation effectively?
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Was the Demand Letter Sent by a
Consumer?
• The claimant must be a consumer in order to bring an
individual action or maintain a class action under CLRA
• A consumer is “an individual who seeks or acquires, by
purchase or lease, any goods or services for person, family,
or household purposes” 4
• Example: a wife who received an engagement ring is not a
consumer, but her husband who purchased the ring is a consumer 5
• Example: a trade group of grocers were not consumers of services
for personal, family, or household purposes when they wanted to
challenge a bank’s unconscionable contract provisions 6
4
Cal. Civ. Code § 1761(d); 5 Shauer v. Mandarin Gems of Cal., Inc., 125 Cal. App. 4th 205 (1994); 6 Cal.
Grocers Assn. v. Bank of Am., 22 Cal. App. 4th 205 (1994)
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Did the Consumer Suffer Any
Damage?
• The claimant must have suffered damage within the
meaning of the CLRA
• The alleged unlawful practice must have “resulted in
some kind of tangible increased cost or burden to the
consumer”
• Example: the expenditure of a transaction cost to avoid the
consequences of a deceptive practice or the opportunity costs
incurred from being deceived by the practice are sufficient
damage
• The claimant’s expenditure of time and money in
bringing the lawsuit may count as sufficient damage 7
7 Meyer
v. Sprint Spectrum, L.P., 45 Cal.4th 634, 641, 643 (2009).
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Consider Whether Your Company Can
Cure Effectively
• If your company is able to cure the alleged violation
within the 30 days or within a reasonable time, the
claimant cannot maintain an action for damages8
• Identify consumers that are similarly situated to the claimant
• Notify all consumers that they will be provided relief upon
request
• Provide the remedy
• Cease all prohibited practices as soon as possible
8
Cal. Civ. Code § 1782 (b), (c)
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Examples of Possible Cures
• Repair or replace the product
• Extend the product warranty
• Provide additional disclosures to consumers
• Depend upon facts and circumstances
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Efforts to Cure Cannot Be Used
Against You
• Attempts to cure the wrongful behavior alleged in the
demand letter cannot be considered an admission of
engaging in an act or practice declared unlawful by the
CLRA 9
• Evidence of your company’s attempts to cure may even
be introduced as evidence of good faith 10
9
Cal. Civ. Code § 1782 (c); 10 Cal. Civ. Code § 1782 (e)
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Was the Alleged Violation An
Unintentional Error?
• No award of damages may be given if the violation was
not intentional and resulted from a bona fide error
• You must be able to demonstrate that reasonable
procedures were in place to avoid the error 11
11
Cal. Civ. Code § 1784
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Preparing For A Potential Class Action
• A CLRA suit can proceed as a class action if:
(1) it is impracticable to bring all members of the class before the
court
(2) the common questions of law or fact are similar for all
individuals of the class
(3) the claims of the claimant represent those of the class
(4) the claimant protects the interests of the class 12
12
Cal. Civ. Code § 1782
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Preparing For A Potential Class Action
• Determine whether the number of individuals in the
proposed class is manageable
• Identify ways that the claimant’s situation is unique
• Develop differences among class members in the
existence of damages or in the manner damages were
incurred
• Determine if the claimant’s attorney is qualified to
conduct the litigation or if the claimant’s interests are
antagonistic to the interests of the class
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Preparing For A Potential Class Action
• If the claims relate to an alleged misrepresentation, the
claimant must demonstrate the misrepresentation was
“material” 13
• Example: when an insurance company failed to disclose its own
concerns about the premiums it was paying, plaintiffs were
required to prove that those concerns would have been material
to any reasonable person contemplating the purchase of that
premium payment plan 14
• Attempt to develop facts that show the alleged
misrepresentation did not “induce the [claimant] to alter
his position to his detriment” 15
13
Mass. Mutual Life Ins. Co. v. Superior Court of San Diego, 97 Cal. App. 4th 1282, 1292 (2002); 14 Id. ; 15 Id.
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Preparing Your Response Letter
• You must draft a response letter to the consumer before
your 30 days has elapsed
• Describe cures or fixes your company has undertaken
and offer a remedy if possible
• Avoid misstating or overstating any facts
• State the facts learned in your investigation that would
help you fend off class certification
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Conclusion
• If you receive a CLRA demand letter, remember that these
suggestions can help successfully guide your company
through the important first 30 days and beyond
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