Alert February 10, 2009

California Supreme Court Holds that CLRA Plaintiffs Must Allege Damages Resulting from Statutory Violation

The Supreme Court of California unanimously held that plaintiffs only have standing to sue under the California Consumer Legal Remedies Act if they allege actual damages resulting from violations of the statute. Plaintiffs sued a cellular phone company, claiming that its contract contained unconscionable terms, including an arbitration provision and waiver of the right to bring a class action suit. Although the phone company had not sought to enforce any of the alleged unconscionable terms against plaintiffs, they contended that the “very presence of unconscionable terms” constituted damage under the CLRA. The Court rejected plaintiffs’ theory, holding that “not only must a consumer be exposed to an unlawful practice, but some kind of damage must result.” The Court reasoned that plaintiffs’ legal costs did not result from the alleged CLRA violations, because there was no dispute or threatened dispute between the parties that implicated the unconscionable contract terms. Because plaintiffs failed to satisfy the statute’s “low but nonetheless palpable threshold of damages,” they had no standing to sue under the CLRA. Click here for Pamela Meyer, et al. v. Sprint Spectrum L.P., No. S153846 (Cal. Supreme Ct. Jan. 29, 2009).