Ninth Circuit Courts Confront Attempts by UCL Plaintiffs to Avoid Removal After Sonner

Due to differences in pleading standards, discovery rules, and potential jury pools (among other things), many California consumer class action plaintiffs prefer to litigate their claims in state court, while many class action defendants seek options to remove such suits to federal district court. Often, defendants have a jurisdictional basis to remove consumer class actions filed in state court to federal court under the Class Action Fairness Act of 2005 (CAFA), 28 U.S.C. § 1332(d), which permits removal when there is minimal diversity between the parties, the amount in controversy is greater than $5,000,000, the proposed class contains at least 100 persons, and certain exceptions do not apply.

Recently, however, many California plaintiffs have attempted to defeat removal by asserting claims for purely equitable relief under California’s Unfair Competition Law (UCL), Cal. Bus. & Prof. Code § 17200, while pleading that they do not meet the traditional jurisdictional and standing prerequisites to obtain equitable relief in federal court. This approach has met with some success, as several California district courts have accepted consumer plaintiffs’ representations and remanded putative UCL class actions to state court. Federal district courts may have options in appropriate cases to reject conclusory standing and jurisdictional representations designed to obtain remand. As in other contexts where a plaintiff attempts to destroy federal jurisdiction through carefully crafted allegations, courts may be able to scrutinize anti-jurisdiction allegations to curtail efforts to evade the removal right Congress enacted in CAFA.

Background Legal Rules Governing Removal of UCL Class Actions to Federal Court

California’s UCL allows consumers to bring suit against “any unlawful, unfair or fraudulent business act or practice.” Cal. Bus. & Prof. Code § 17200. The statute does not allow consumers to recover traditional legal damages. Instead, UCL plaintiffs are limited to restitution and injunctive relief (id. § 17203), two traditionally equitable remedies. Because the UCL grants only equitable remedies, two concepts are relevant to whether a putative UCL class action may be removed to federal court: original jurisdiction and equitable jurisdiction.

Original Jurisdiction

A defendant seeking to remove a putative UCL class action from California state court to federal court must show that the federal courts have “original jurisdiction” over the lawsuit. See 28 U.S.C. § 1441(a). Federal courts have original jurisdiction if Congress has passed a statute granting them such jurisdiction and the suit is justiciable under Article III of the Constitution. In general, federal courts have statutory jurisdiction over a California UCL suit if (i) all plaintiffs are diverse from all defendants, and the amount in controversy exceeds $75,000, 28 U.S.C. § 1332(a); or (ii) at least one plaintiff is diverse from at least one defendant, the proposed class contains at least 100 persons, and the amount in controversy exceeds $5,000,000, id. § 1332(d)(2).

A case is justiciable under Article III of the Constitution—i.e., the plaintiff has “Article III standing”—if the plaintiff alleges that the defendant caused the plaintiff concrete harm that is redressable by a favorable judgment. See Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992). The plaintiff must show standing for each type of relief sought. Davidson v. Kimberly-Clark Corp., 889 F.3d 956 (9th Cir. 2018). A UCL plaintiff can establish standing to obtain restitution by alleging an economic injury. See TransUnion LLC v. Ramirez, 594 U.S. 413 (2021). But the plaintiff must show that the plaintiff faces a “threat of injury” that is “actual and imminent” to obtain injunctive relief. Davidson, 889 F.3d at 967 (cleaned up).

Equitable Jurisdiction

Even if federal courts have original jurisdiction over a lawsuit, a UCL plaintiff might not be able to recover restitution or injunctive relief unless the court also has so-called “equitable jurisdiction.” “Equitable jurisdiction is distinct from [original] jurisdiction, although both are required for a federal court to hear the merits of an equitable claim.” Guzman v. Polaris Indus. Inc., 49 F.4th 1308, 1314 (9th Cir. 2022). A federal court has equitable jurisdiction when the plaintiff lacks an adequate remedy at law, which typically means that the plaintiff’s injury cannot be adequately redressed by an award of damages. Some courts have held that a pair of older Supreme Court decisions—Twist v. Prairie Oil & Gas Co., 274 U.S. 684 (1927), and Cates v. Allen, 149 U.S. 451 (1893)—give federal courts discretion to remand putative UCL class actions when the court finds that it lacks equitable jurisdiction to award UCL relief.

Recent Attempts by Plaintiffs to Defeat Removal of UCL Class Actions

In Sonner v. Premier Nutrition Corp., 971 F.3d 834, 844 (9th Cir. 2020), the Ninth Circuit held that federal district courts lack equitable jurisdiction to award restitution under the UCL if the plaintiff could have brought a damages claim seeking essentially the same monetary recovery under a different statute or common-law tort. California’s Consumer Legal Remedies Act (CLRA), Civil Code § 1750 et seq., provides a damages remedy for many of the consumer financial injuries that typically undergird a UCL restitution claim. Thus, following Sonner, many UCL plaintiffs have begun arguing that their UCL claims cannot be removed to federal court because the plaintiffs could have brought a CLRA claim (but chose not to for strategic reasons). Some of these plaintiffs have also pled that they lack standing to obtain injunctive relief because they do not face an imminent threat of future injury. Thus, these plaintiffs argue that because a federal court lacks the equitable jurisdiction necessary to award them restitution or injunctive relief and, due to their lack of standing, lacks the original jurisdiction necessary to award them injunctive relief, their claims should be remanded to state court where they can proceed without meeting these prerequisites.

This strategy has thus far met with mixed results. Some courts have granted plaintiffs’ request for remand, reasoning that if the plaintiff fails to plead that the plaintiff lacks an adequate remedy at law or faces an imminent future injury, federal courts lack any basis to hear the suit. See, e.g., Ruiz v. Bradford Exch., Ltd., No. 3:23-cv-01800-WQH-KSC, 2024 WL 2844625 (S.D. Cal. May 16, 2024); Rogoff v. Transamerica Life Ins. Co., No. EDCV 24-1254 JGB (SPx), 2024 WL 5010642 (C.D. Cal. Dec. 6, 2024), appeal filed, No. 24-7732 (9th Cir. Dec. 24, 2024); Guthrie v. Transamerica Life Ins. Co., 561 F. Supp. 3d 869 (N.D. Cal. 2021).

At least one court denied remand, reasoning that a lack of equitable jurisdiction is not an appropriate reason to remand a case over which Congress has granted the federal courts original jurisdiction. See, e.g., Favell v. Univ. of S. Cal., No. CV 23-3389-GW-MARx, 2023 WL 4680357 (C.D. Cal. July 5, 2023).

And at least one court has held that Sonner is bad law. The UCL provides that its remedies “are cumulative to each other and to the remedies or penalties available under all other laws of” California. Cal. Bus. & Prof. Code § 17205. A few weeks before the Ninth Circuit issued its amended published opinion in Sonner, it held that section 17205 “foreclosed” an “argument that Plaintiffs cannot seek equitable relief under the UCL . . . given an adequate legal remedy under the CLRA.” See Moore v. Mars Petcare US, Inc., 966 F.3d 1007, 1021 n.13 (9th Cir. 2020). When two Ninth Circuit cases conflict, courts are typically required to follow the earlier case, given that one three-judge panel of the Ninth Circuit lacks the power to overrule another panel’s published decision unless it is clearly irreconcilable with intervening higher authority. See Miller v. Gammie, 335 F.3d 889 (9th Cir. 2003) (en banc). Thus, the court in Ferry v. Porsche Cars North America, Inc., No. CV 21-5715-GW-ASx, 2022 WL 1769120 (C.D. Cal. Mar. 11, 2022), report and recommendation adopted, 2022 WL 1769123 (C.D. Cal. Mar. 14, 2022), held that Sonner does not allow a court to refuse to entertain a claim for equitable UCL relief just because the plaintiff could potentially assert a claim for damages.

Courts Have Options to Scrutinize Efforts to Disclaim Equitable Jurisdiction or Standing to Defeat Removal

In many contexts, federal courts carefully scrutinize efforts by plaintiffs to craft their jurisdictional allegations in a way designed to avoid removal of their state court claims to federal court. For example, plaintiffs will sometimes join a nondiverse defendant who was only peripherally related to the events in dispute in an effort to defeat diversity jurisdiction. When this occurs, federal courts sometimes look to extrinsic evidence—even at the pleading stage—to determine whether the plaintiff has a meaningful chance of recovery against the nondiverse defendant and will exercise jurisdiction if it appears that the nondiverse defendant is superfluous to the action. See, e.g., Ritchey v. Upjohn Drug Co., 139 F.3d 1313 (9th Cir. 1998); Joan Steinman et al., 14C Federal Practice & Procedure Jurisdiction § 3723.1 (rev. 4th ed. June 2024).

Courts could also carefully scrutinize efforts to disclaim equitable jurisdiction or Article III standing to pursue UCL relief in federal court. Through CAFA, Congress gave class action defendants a broad right to remove their cases to federal court, subject to minimal prerequisites. It may not always be permissible for UCL plaintiffs to attempt to plead around this right. To that end, there are several steps courts could take in appropriate cases to scrutinize allegations designed to prevent removal of UCL claims.

First, courts could scrutinize claims by plaintiffs that they possess an adequate remedy at law such that the federal court lacks equitable jurisdiction over their UCL claims. For example, if the plaintiff claims that the plaintiff could have filed a CLRA claim but chose not to, a court could permit the defendant to present evidence and argument that the allegations in the plaintiff’s complaint would not have stated a valid CLRA claim. Similar to improper joinder cases, if the defendant is able to demonstrate that the plaintiff could not have maintained a legally viable claim for damages, a court may find that the plaintiff lacks an adequate remedy at law, allowing the plaintiff’s UCL claims to be decided in federal court.

Second, courts could also assess the internal consistency of claims by UCL plaintiffs that they lack a sufficient injury to have Article III standing to seek injunctive relief. In 2004, California voters passed Proposition 64, which added a statutory requirement that UCL plaintiffs must demonstrate that they have “suffered injury in fact” that would confer standing if their claims were brought in federal court. See Cal. Bus. & Prof. Code § 17204; Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 322 (2011) (“injury in fact” requirement in UCL incorporates federal standing requirements). Thus, by asserting a UCL claim, a plaintiff could be understood to be implicitly contending that the plaintiff meets federal standing requirements. If a plaintiff claims a lack of Article III standing to obtain injunctive relief in order to secure remand, the plaintiff could potentially be bound by that admission, and the plaintiff’s claim for injunctive relief may then be subsequently dismissed, whether by a state or federal court.

Third, courts could permit UCL plaintiffs to invoke a lack of equitable jurisdiction as a basis for remand only when their complaint does not assert any claims for legal damages. For example, if a plaintiff pleads both a UCL and a CLRA claim based on the same conduct, the court may decide that it would be inappropriate to remand the case on the ground that it cannot grant relief on the UCL claim. Instead, the court may choose to dismiss the UCL claim for failure to state a claim and allow litigation to proceed on the CLRA claim. Several courts have adopted this or a similar approach. See, e.g., Kim v. Walmart, Inc., No. 2:22-cv-8380-SB-PVC, 2023 WL 196919 (C.D. Cal. Jan. 13, 2023); Demaria v. Big Lots Stores – PNS, LLC, No. 2:23-cv-296-DJC-CKD, 2023 WL 6390151 (E.D. Cal. Sept. 29, 2023); Treinish v. iFit Inc., No. CV 22-4687-DMG (SKx), 2022 WL 5027083 (C.D. Cal. Oct. 3, 2022).

Finally, the Ninth Circuit may wish to take the earliest opportunity to resolve whether Sonner’s conception of equitable jurisdiction principles is good law in the first place. The court in Ferry argued that Sonner conflicts with Moore. Given the stakes for UCL class action litigants, it may be useful for the bench and bar alike for the Ninth Circuit to decide whether lower courts should follow Sonner or Moore going forward. Usually, remands based on a lack of original jurisdiction or defects in removal procedure are not subject to appellate review. See 28 U.S.C. § 1447(d). However, because equitable jurisdiction does not concern original jurisdiction or removal procedure, a remand based on Sonner could be subject to appellate review. See Quackenbush v. Allstate Ins. Co., 517 U.S. 706 (1996).