By Laura Sitar
In a recent national seminar regarding consumer protection class actions, elder abuse was specifically identified as a burgeoning area for class action litigation. Courts have increasingly disfavored class certification for personal injury and wrongful death cases, making “traditional’ elder abuse cases all but impossible to certify as class actions. Not to be left out of the class action arena with its impressive financial rewards, plaintiffs’ counsel are increasingly filing consumer protection class actions against groups of skilled nursing homes and residential care facilities under both California’s Unfair Competition Law and Consumer Legal Remedies Act. These claims take the traditional elder abuse allegations of intentional under-funding and under-staffing and turn them into broader violations of business practices and consumers’ rights. The resulting class action litigation targets a previously untapped source of monetary awards in the elder abuse arena.
While thoroughly covering the issues involved in evaluating and defending consumer protection class actions based on traditional elder abuse allegations would require an extensive treatise, the following article is intended to provide an overview of the subject matter.
Typical California Consumer Protection Class Actions
California based consumer protection class actions founded on traditional elder abuse allegations are generally filed under the following California statutes:
Violation of the Unfair Competition Law
California Business and Professions Code section 17200 et seq. is commonly known as the Unfair Competition Law (UCL) Under section 17200, unfair competition is defined as any unlawful, unfair or fraudulent business act or practice and any unfair, deceptive, untrue or misleading advertising. It’s apparent from the language of the code that covered acts or practices are virtually limitless. Plaintiffs need simply allege defendants violated any of a number of Health and Safety codes and regulations as they relate to skilled nursing facilities (SNFs) or residential care facilities for the elderly (RCFEs) to show a pattern of misconduct and violations that constitute unfair business practices. The theory follows that defendants’ violation of Health and Safety codes and regulations give them unfair advantage over other facilities who abide by the rules. Citations issued by the Department of Social Services or Department of Health Services provide important supporting evidence for such class action complaints.
Violation of the False Advertising Act
California Business and Professions Code section 17500 et seq. is commonly known as the False Advertising Act. Under these claims, plaintiffs generally allege defendants advertise they are able to provide necessary care and services to their residents even when defendants know they do not have adequate staff in numbers and training to do so. In essence, defendants systematically disseminate advertising which is false and misleading and which defendants know to be untrue. The alleged false advertising identified by plaintiffs is found on facility web sites, in brochures and through statements made by marketing and admissions personnel. Plaintiffs’ examples of false and misleading statements are often as simple as “We can take care of your needs.”
Violations of Consumer Legal Remedies Act
California Civil Code section 1750 et. seq. is known as the Consumer Legal Remedies Act (CLRA). This act targets unfair methods of competition and unfair or deceptive acts or practices intended to result in the sale of goods or services. Here, a typical allegation states defendants represent to the public that they provide sufficient and lawful care and supervision to their residents. Plaintiffs argue these representations are made through such vehicles as admissions agreements, Department of Social Service and Department of Health Services licensing, and representations to the public through defendant web-sites, brochures, advertising materials and facility personnel. Plaintiffs allege defendants’ actions are intended to entice the elderly to reside or receive care in their facilities, however, due to inadequate funding and staffing those facilities cannot provide the necessary services.
Consumer protection class actions based on “traditional” elder abuse allegations generally seek restitution of payments made by residents for those services which were never provided. The Consumer Legal Remedies Act also authorizes civil penalties of $500 per plaintiff for violation of that statute, as well as punitive damages and attorneys fee. Penalties under CLRA alone could amount to $500,000 in class actions involving only 1000 current and former residents. Finally, these consumer protection class actions generally seek injunctions requiring defendants to immediately cease those acts that constitute unlawful, unfair and fraudulent business practices and false advertising.
What is a Class Action Claim?
A class action is a lawsuit brought by one or more named parties as representatives of a group or “class” of similarly situated parties. Class action representatives sue on behalf of other class members based on a showing that the class action format is necessary and superior to litigation of numerous individual claims.
Class actions generally have two phases, the first being class certification and the second being litigation of the underlying claims, provided certification is approved by the court. In order to obtain certification of the class and thus allowing the claims to proceed as a class action, plaintiffs must demonstrate the class meets certain requirements. Plaintiff must show there are ascertainable class members who can be readily identified. Plaintiff must also show there is a well defined community of interest among those class members. The community of interest requirements include three factors: 1) there must be a predominance of common questions of law and fact among the class members’ claims, 2) class representative(s) must have claims or defenses which are typical of the class, and 3) class representative(s) must be able to adequately represent the class. The community of interest requirement is not satisfied if every member of the alleged class would be required to litigate numerous and substantial questions determining the member’s individual rights to recovery following the class judgment which has resolved issues common to the purported class. Additionally, a class representative must demonstrate he/she is similarly situated to the other members of the class and has the ability to represent the class.
Finally, under all claims except those brought under the CLRA, plaintiff must demonstrate that substantial benefits will accrue to the court and the litigants by proceeding as a class action. Defense of class action claims begins with an attack on the elements needed to be proven by plaintiffs to achieve class certification. If class certification is denied, plaintiffs are left to prosecute individual claims, something which is very unlikely to occur.
Issues To Be Considered
State v. Federal Court:
Unlike traditional elder abuse cases, many class action complaints based on elder abuse allegations may be filed in either state or federal court. In some cases, the decision must be made whether to remain in state court or seek removal to federal court. In 2005, Congress enacted the Class Action Fairness Act (CAFA) which expanded federal jurisdiction over class actions, presumably in an attempt to rein in expanding class action practice. CAFA allows any claim with damages greater than $5,000,000 to be removed to federal court. It also expands the opportunity for removal based on diversity when at least one defendant is a resident of a different state than any plaintiff. Defendants must evaluate whether a move to federal court is likely to be beneficial. Federal courts apply underlying state caselaw, however, they apply federal procedural rules which are often viewed as more restrictive on plaintiffs. On the other hand, Federal courts are generally perceived as being more liberal regarding expanded discovery. One consideration faced in California when deciding whether to remove a class action to Federal court is the make-up of the Ninth Circuit which would hear a likely appeal. The Ninth Circuit has been recognized by experts as a “class action friendly” circuit. Overall, the Ninth Circuit has far outpaced every other circuit in allowing class actions to proceed since CAFA was enacted in 2005.
Jury Trial v. Arbitration
The existence of arbitration agreements between defendants and class members present another important decision to be made early on in the class action litigation process. While claims for injunctive relief cannot be arbitrated, many other claims are amenable to arbitration. In some cases, courts have ordered select causes of action seeking monetary relief to be litigated in arbitration while retaining jurisdiction to hear those claims seeking injunctive relief.
The difficultly faced when contemplating arbitration is the question of whether a qualified neutral arbitrator is available to hear the case and address the numerous issues which arise when adjudicating class actions, including the thorny issues surrounding class certification. Further, the perception that neutral arbitrators tend to “split the baby” becomes more dangerous when an inexperienced arbitrator may be called upon to decide class certification. Finally, binding arbitration is not appealable. On the other hand, defendants must weight the reception the “facts” will receive when presented to a jury as opposed to a panel of arbitrators.
In a recent beneficial ruling for defendants in consumer protection class actions based on elder abuse allegations, the Second District of the California Court of Appeal ruled that it was not an abuse of discretion for the trial court to abstain from hearing a class action based on allegation of violations of the Unfair Competition Law (UCL) against a group of skilled nursing homes. The Court of Appeal agreed adjudication of plaintiffs’ claims would require the trial court to assume general regulatory powers over the health care industry through the guise of enforcing the UCL and that it was reasonable to believe the Department of Health Services was better equipped to determine compliance with the underlying codes and regulations which formed the basis of plaintiffs’ UCL claims. Finally, the appellate court reiterated that courts may abstain from hearing a matter when an administrative agency is better equipped to provide an alternative and more effective remedy. While the class action involved claims particular to the skilled nursing industry, the opinion is applicable in the defense of similar cases brought against residential care facilities for the elderly as well.
It is likely we will see more rulings which shape litigation in these consumer protection class actions against skilled nursing homes and RCFE’s as they continue to be filed and as they work their way through the California judicial system.