California Rules

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On February 2, 2021, the Eleventh Circuit reversed the district court’s denial of class certification for failure to prove an administratively feasible method to identify absent class members. The Eleventh Circuit’s rejection of administrative feasibility as a prerequisite to certification under Federal Rule of Civil Procedure 23 has deepened a circuit split on the issue.

While PPE, toilet paper, and groceries make price gouging headlines, consumer goods are not the only goods covered by price gouging laws in many states. Less publicized, but equally important, lodging or housing may be found on lists of products covered by many price gouging statutes.

A recent case in California offers a glimpse. In California, the statute prohibits selling, or offering for sale, a lengthy list of goods and services “for a price of more than 10% greater than the price charged by that person for those goods or services immediately prior to the proclamation or declaration of emergency.” Among other things, California’s price gouging statute covers “housing.”

On November 24, 2020, a class action price gouging claim was filed against a California based operator of casual fine dining restaurants. The class action lawsuit against Hillstone Restaurant Group alleges price gouging in violation of California Penal Code §396. According to the lawsuit, “Hillstone engaged in unfair and unlawful business practices by increasing its price on food items and also unjustifiably charging a 10% or 15% so-called ‘service or packaging fee’ for takeout orders.” The lawsuit further states that “despite increasing the cost of its food items and adding this Fee, there has been no change in the quality or quantity of the food sold or the packaging being offered for pickup by consumers as compared to Hillstone’s pre-pandemic offerings.” Plaintiffs seek restitution, injunctive relief, attorneys’ fees, and punitive damages. The complaint is striking not only because it shows the extent to which plaintiffs will bring claims at the margins of price gouging restrictions, but also for the glimpse it gives into what may be the coming wave of price gouging claims in 2021.

Since the beginning of the pandemic, many governors have issued executive orders targeted at combating price gouging. However, one California state senator, Senator Thomas Umberg, proposed going a step further. In April 2020, Senator Umberg introduced Senate Bill 1196, which would codify many of the provisions in California Governor Gavin Newsom’s Executive Order N-44-20. On September 30, 2020, Governor Newsom signed the bill into law. In connection with the signing, Senator Umberg stated that “[t]his decisive action ensures that fewer of our neighbors will be victims of price gouging.”

Businesses may be wondering whether there is increased risk of price gouging liability when they impose higher penalty terms, ask for higher up-front payments, raise rates, or otherwise seek terms that may be more burdensome. Sellers and service provides should consider the risk of being held liable for non-price terms that result in higher customer costs.

In early March, California Attorney General Xavier Becerra issued a consumer alert on price gouging. Two weeks later, police in San Diego arrested eight people for price gouging. The same week, investigations by Sacramento authorities prompted new warnings from local authorities. Since then, both the Governor and Attorney General have indicated price gouging will remain top of mind. Typically, price gouging laws extend for short periods — weeks or a month — but we now know that California price gouging rules will remain in effect through September.

Federal court judges in California are facing a crisis caused by expanding caseloads coupled with increasing vacancies in judicial seats that remain unfilled. United States District Court Judge Dale A. Drozd of the Eastern District of California recently took matters into his own hands. After three other judges in the Eastern District assumed Senior status or inactive Senior status in the course of two months, Judge Drozd took over Judge Lawrence J. O’Neill’s criminal docket and a portion of Judge O’Neill’s civil docket in addition to his own. The combined docket amounts to roughly 1,050 civil actions and 625 criminal defendants. To address the ongoing “judicial emergency,” Judge Drozd issued a civil Standing Order implementing new “temporary procedures” in early February. (Judge Drozd also issued a criminal standing order, which is not the subject of this post.) In the Standing Order, Judge Drozd prefaced the changes by explaining the track record of the Eastern District as one of the top 10 districts in the country in cases terminated per judgeship for over 20 years. He also noted that the population in the Eastern District has more than tripled since 1978, but the number of judicial seats remains the same. For now, the Standing Order only applies to the cases over which Judge Drozd presides, though the problems it seeks to address are suffered by all judges in the District (and beyond).