Branick v. Downey Savings & Loan Assn

In Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, the plaintiffs lost standing as a result of the passage of Proposition 64 while their case was pending on appeal. The Supreme Court rejected the defendant's argument that a plaintiff should never be allowed to amend its complaint by substituting a new plaintiff with standing. The court held Proposition 64 did not affect rules governing the amendment of complaints. (Id. at p. 239.) And, because standing was lost on appeal, the plaintiffs never had an opportunity to amend. The court remanded so the plaintiffs could file a motion to amend, if they so chose, which "the superior court should decide . . . by applying the established rules governing leave to amend . . . and the relation back of amended complaints. " (Ibid.) In that case, the plaintiffs filed a complaint under the unfair competition and false advertising laws, alleging the defendant had made misrepresentations to and overcharged its customers; the plaintiffs themselves were not customers of the defendant, and instead filed their lawsuit on behalf of the general public. The trial court granted a motion for judgment on the pleadings based on federal preemption principles. (Id. at pp. 239-240.) While the case was on appeal, Proposition 64 was adopted. The appellate court reversed and remanded, concluding: (1) the case was not preempted by federal law; (2) following Proposition 64, the plaintiffs lacked standing; and (3) if the plaintiffs chose to move for leave to amend the complaint to add a new plaintiff with standing, the trial court should decide whether to permit amendment. (Id. at p. 240.) The Supreme Court granted review only on the issue of amendment of the complaint to add a new plaintiff. (Ibid.) The Supreme Court held: "Proposition 64 does not affect the ordinary rules governing the amendment of complaints and their relation back. We thus reject defendant's contention that courts may never permit a plaintiff to amend a complaint to satisfy Proposition 64's standing requirements. Whether plaintiffs in this case may amend, however, cannot be determined at this stage of the proceedings because plaintiffs have not yet filed a motion for leave to amend, identified any person who might be named as a plaintiff, or described the claims such a person might assert. On remand, should plaintiffs in fact file a motion to amend, the superior court should decide the motion by applying the established rules governing leave to amend and the relation back of amended complaints ." (Branick, supra, 39 Cal.4th at p. 239.) The Supreme Court emphasized that whether amendment should be permitted in any particular case was a matter reserved for the discretion of the trial court; in Branick, the appellate court could not know how the trial court might exercise its discretion, since no motion for leave to amend had ever been filed. (Id. at pp. 242 243.) In Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, the California Supreme Court held Proposition 64 does not itself prohibit the amendment of complaints in pending cases to substitute plaintiffs who meet Proposition 64's standing requirements for UCL claims. (Branick, supra, 39 Cal.4th at p. 239.) The plaintiffs in Branick filed a complaint under the UCL and false advertising laws, alleging the defendant had made misrepresentations to and overcharged its customers. (Ibid.) The plaintiffs themselves were not customers of the defendant, and instead filed their lawsuit on behalf of the general public. (Ibid.) The trial court granted a motion for judgment on the pleadings based on federal preemption principles. (Id. at pp. 239 240.) While the case was on appeal, the voters enacted Proposition 64. The appellate court reversed and remanded, concluding: (1) the case was not preempted by federal law; (2) following Proposition 64, the plaintiffs lacked standing; and (3) if the plaintiffs chose to move for leave to amend the complaint to add a new plaintiff with standing, the trial court should decide whether to permit amendment. (Id. at p. 240.) The Supreme Court granted review only on the issue of amendment of the complaint to add a new plaintiff. (Ibid.) The Supreme Court held: "Proposition 64 does not affect the ordinary rules governing the amendment of complaints and their relation back. We thus reject defendant's contention that courts may never permit a plaintiff to amend a complaint to satisfy Proposition 64's standing requirements. Whether plaintiffs in this case may amend, however, cannot be determined at this stage of the proceedings because plaintiffs have not yet filed a motion for leave to amend, identified any person who might be named as a plaintiff, or described the claims such a person might assert. On remand, should plaintiffs in fact file a motion to amend, the superior court should decide the motion by applying the established rules governing leave to amend and the relation back of amended complaints ." (Branick, supra, 39 Cal.4th at p. 239.) Whether amendment should be permitted in any particular case was a matter reserved for the trial court's discretion if the plaintiff sought leave to amend. (Id. at pp. 242 243.) The Court addressed (1) whether a complaint brought by plaintiffs whose standing had been revoked by Proposition 64 could be amended to add a new plaintiff who met the new standing requirements and (2) whether, for purposes of the statute of limitations, any such amendment related back to the date on which the original complaint was filed. (Id. at p. 239.) The Supreme Court rejected the contention that Proposition 64 barred amendments to add plaintiffs with standing and concluded the ordinary rules governing the amendment of complaints and their relation back applied. (Ibid.) The Supreme Court stated it could not apply the rules concerning amendments and their relation back because the plaintiffs in Branick had not yet (1) filed a motion for leave to amend; (2) identified any person who might be named as a plaintiff; or (3) described the claims such a person might assert. (Ibid.) The Supreme Court stated that, if plaintiffs moved to amend their complaint on remand, the superior court should determine whether the circumstances of the case warranted granting leave to amend and whether relation back was appropriate. (Id. at pp. 238-239.) The California Supreme Court concluded that Proposition 64 does not expressly or implicitly forbid the amendment of complaints to substitute new plaintiffs. Code of Civil Procedure section 473 provides the trial court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading or proceeding by adding or striking out the name of any party. Leave to amend a complaint is entrusted to the sound discretion of the trial court. (Branick, supra, 39 Cal.4th at p. 242.) In Branick, the Supreme Court noted the voters adopted Proposition 64 while the case was on appeal and the plaintiffs had no opportunity to file a motion in the superior court for leave to amend. (Branick, supra, 39 Cal.4th at p. 242.) The Court held: "... We thus do not know the facts that would necessarily inform the superior court's discretionary decision on such a motion, such as the identity of any person plaintiffs might attempt to substitute and the nature of the claims any substituted plaintiff might assert. For this reason, and because the decision properly belongs to the superior court in the first instance , the Court of Appeal correctly concluded the matter must be remanded to the superior court to determine whether, if plaintiffs do move to amend their complaint, the circumstances of this case warrant granting leave to amend. "... This question ... properly belongs in the first instance to the superior court. As a practical matter, we cannot in any event decide the question before plaintiffs have filed a motion for leave to amend. Given the question's potential factual and legal complexity, and without knowing the identity of the hypothetical new plaintiff or the nature of the claims he or she might assert, for this court to attempt to decide at this stage of the proceedings whether any possible amendment would impermissibly change the nature of the action would be inappropriate." (Branick, supra, 39 Cal.4th at pp. 242-244.) In sum, the trial court entered judgment on the pleadings upon finding that UCL claims alleging loan overcharges were preempted by federal law. (Branick, supra, 39 Cal.4th at pp. 239-240.) Plaintiffs appealed and Proposition 64 was enacted while the appeal was pending. (Id. at p. 240.) The Court of Appeal held that federal law did not preempt plaintiff's claim and reversed the judgment. (Ibid.) As to Proposition 64, the court held that the measure's standing provisions governed pending cases but remanded the case to the superior court to determine if the circumstances warranted granting leave to amend to substitute a plaintiff with standing. (Ibid.) The California Supreme Court affirmed the judgment of the Court of Appeal. (Id. at p. 245.) The high court held that Proposition 64 does not forbid the amendment of complaints to substitute new plaintiffs for those who have lost standing under the new measure. (Id. at p. 241-242.) The "ordinary rules governing the amendment of complaints" apply. (Id. at p. 239.)