which is up from his single dissent last term. All
of the other justices had significantly more dissents: Justice Stanley Mosk dissented in
about 17 percent of the cases, Justice Joyce Kennard in 14 percent of the cases, Justice
Kathryn Werdegar in nine percent of the cases, Justice Janice Brown in eight percent of
the cases, Justice Marvin Baxter in six
percent of the cases, and Justice Ming Chin in five percent of the cases.
The statistics indicate that the most significant correlations in
voting patterns are between Justices Mosk, Kennard and Werdegar, on the one hand, and
Justices Baxter, Brown and Chin, on the other hand. In close cases, the Chief is still the
most important swing vote, confirming his central role on the court.
Now to the highlights from a few of the terms more interesting
Dispersion of powers
The most important protection against governmental abuse is the
dispersion of powers between different branches of government (i.e., separation of
powers), between different levels of government (i.e., federalism and the division of
powers between state and local governments), and between government and the people (i.e.,
bills of rights and, in many states, the powers of the initiative and referendum). Several
decisions by the court this term raise questions about whether too much power has been
ceded by the court to the legislative branch of government.
The first case is Senate of the State of California v. Bill Jones
(1999) 21 Cal.4th 1142, where the court held that Proposition 24, the Let the Voters
Decide Act of 2000, violated the single-subject rule. Proposition 24 contained four
substantive provisions: Section 3 reduced legislative compensation and made further
increases subject to voter approval. Section 4 reduced travel and living expenses for
legislators and provided that further increases were subject to voter approval. Section 5
provided that legislators would forfeit some of their salary and reimbursement for travel
and living expenses if the legislature failed to pass the budget bill by the
constitutional deadline and that forfeited payments could be paid to legislators
retroactively only if approved by the voters. Finally, Section 6 transferred control over
reapportionment from the legislature to the Supreme Court, limited the factors to be used
in reapportionment to essentially objective criteria, and subjected the Supreme
Courts plan to voter approval.
An original proceeding in the Supreme Court of California was filed
on Oct. 28, 1999, seeking an order to keep Proposition 24 from appearing on the March 7,
2000, election ballot. Acting with unusual speed, the court issued an order to show cause
on Nov. 10, 1999, established an expedited briefing schedule, and rendered its decision
only one month later on Dec. 13, 1999.
Chief Justice George wrote the courts opinion for a 5-2
majority, with a dissent filed by Justice Kennard in which Justice Brown concurred. The
Chiefs opinion sets forth the traditional standard for assessing single-subject
challenges, that is, whether all of the parts of an initiative are reasonably
germane to each other and to the general purpose or object of the initiative. In the
courts view, when viewed from a realistic and commonsense perspective, the
provisions of Proposition 24 appear to embrace at least two distinct subjects state
officers compensation and reapportionment. Id., 21 Cal.4th at 1161.
The court correctly rejected the argument advanced by proponents of
Proposition 24 that the common theme linking the propositions provisions was the
requirement of voter approval. As the court noted, the topic of voter approval
is too broad to serve as a constitutionally acceptable unifying subject for purposes of
the single-subject rule since too many entirely unconnected provisions could be swept
under such a broad topic.
The proponents also argued that all of the provisions dealt with the
problem of legislative self-interest. The court rejected this overarching
topic on the somewhat weaker ground that there is no legislative self-interest problem
under current law in how legislative salaries are set since those salaries are set by the
California Citizens Compensation Commission, the members of which are appointed by the
governor and may not be current or former legislators.
weakest part of the opinion rejected the contention that Proposition 24s provisions
could be tied together under the theme of incumbency reform. The problem for
the court here was that it had previously used incumbency reform in
Legislature v. Eu (1991) 54 Cal.3d 492, to approve the term limits initiative which, among
other things, reduced legislative pensions, thereby making an extended career in public
office less available and less attractive to incumbent legislators. In rejecting
incumbency reform as a basis for supporting Proposition 24, the court explained that
Proposition 24 simply combine[s] a measure that would transfer the reapportionment
authority from the legislature to this court with unrelated provisions that would make
various changes pertaining to the compensation of legislators and other state
officers. State Senate, 21 Cal.4th at 1167. This reasoning is not particularly
convincing. Under Legislature v. Eu, Proposition 24s reductions in legislative
salaries would seem to be related to incumbency reform, perhaps even more related than the
pension reform provision in the term limits initiative upheld in Eu. And, Proposition
24s transfer of reapportionment from the legislature to the Supreme Court,
particularly when combined with a modification of the standards for reapportionment, must
be seen as a form of incumbency reform, since it is common knowledge that incumbency
protection is one of the primary goals of reapportionment from a legislative perspective.
There is no question but that State Senate represents a huge victory
for the legislature vis-a-vis the initiative process and the voters. Questions have been
raised by some whether the decision had more to do with the politics of a court that had
become too dependent upon the legislature for full budgets than it did with a proper
interpretation of the single- subject rule. We wont know the answer to those
questions until we see how the court deals with other single-subject challenges and
whether it ultimately appears that the courts decision in State Senate is an
aberrational gift to the legislature or is a principled application of single-subject
The next important case dealing with separation of powers issues is
Obrien v. Jones (2000) 23 Cal.4th 40, where the court upheld the constitutionality of a
statute that took away from the Supreme Court the power to appoint all of the members of
the State Bar Court in favor of an appointment system in which, of the five judges of
State Bar Court hearing department, only two judges were appointed by the court, one was
appointed by the governor, one by the Senate committee on rules, and one by the Speaker of
the Assembly. It would seem at first blush that a power as central to the judiciarys
core as the appointment of subordinate officers to the State Bar Court would be
exclusively held by the judicial branch and that the legislatures attempt to
arrogate to itself that appointment power would violate the separation of powers.
In a close 4-3 decision, however, the court held that in the unique
context of the State Bar disciplinary system that is, a context in which the court
has historically permitted some legislative involvement separation of powers was
not violated so long as the court retained its ultimate power over the structure and
operations of the State Bar Court. The majority reasoned that it retained sufficient
control over appointments because (1) the non-judicial appointing authorities were
statutorily required to make appointments in light of the same set of statutory factors as
had previously existed when all appointments were made by the court, and (2) the court
would continue to require that all appointees be screened, evaluated and approved as
meeting those statutory factors by an Applicant Evaluation and Nomination Committee, the
members of which are appointed by the court. The opinion also noted that the court still
appoints all members of the State Bar Court review department, suggesting that any
problems with the hearing department could essentially be cured by the review department.
Two dissents were filed, one authored by Justice Kennard and joined
by Justice Werdegar, and the second authored by Justice Brown. The dissenting judges
believed that vesting the appointment authority for three of five members of the State Bar
Court hearing department in the governor, Senate rules committee, and Speaker violated
separation of powers.
It is somewhat ironic that the majority took the position that this
new appointment process was constitutional in large part because the court purported to
retain for itself the power to review and approve the non-judicial appointments, a review
and approval process that itself seems to complicate even further the interconnections
between the court, the governor and the legislature.
For example, one can reasonably wonder how the governor, Senate rules
committee, and Speaker would react to having one of their nominees rejected by the
Applicant Nomination and Evaluation Committee or rejected by the court itself. And one can
reasonably wonder whether the Applicant Nomination and Evaluation Committee and the court
will have the self-discipline to reject unqualified nominees when a rejection might be
followed by retaliation by the appointing authority. Even more serious, even if an
appointee is qualified, wont the appointee feel beholden to the appointing
authority? At a minimum, wont there be an appearance of being beholden to the
These decisions, and a few others which I dont have space to
write about, raise concerns about whether the court is being sufficiently attentive to the
concentration of powers in the legislative branch of government. The court protected the
legislature from an incumbency reform initiative and permitted the legislature to become
more involved in the operation of the State Bars disciplinary system. No wonder the court is so popular with
One of the burning issues under Californias Unfair Competition
Law (UCL) has been whether §17203 of the Business and Professions Code
authorized the remedy of disgorgement of the defendants profits into a fluid
recovery fund. The court held this year that it does not authorize that remedy.
A little background will set the stage. In addition to injunctive
relief, §17203 authorizes restitution, which can involve an order requiring the defendant
to disgorge unjust profits received as a result of an unfair practice. The UCL also
permits representative actions in which a private person as the plaintiff
seeks relief on behalf of persons other than or in addition to the plaintiff. Bus. &
Prof. Code §17204. For several years now, plaintiffs have been trying to combine the
representative action provision with disgorgement to create the equivalent of a fluid
recovery fund remedy without satisfying the requirements of a class action. Two court of
appeal decisions had previously approved fluid recoveries in UCL actions that had not been
certified as class actions. People v. Powers (1992) 2 Cal.App.4th 330; People ex rel.
Smith v. Parkmerced Co. (1988) 198 Cal.App.3d 683.
In Kraus v. Trinity Management Services, Inc. (2000) 23 Cal.4th 116,
the court rejected the fluid recovery fund as a remedial device in a representative action
under the UCL absent certification of a class. A few individual plaintiffs filed suit on
their own behalf and on behalf of present and former tenants of the defendants. Among
other things, the defendants required tenants to pay unlawful nonrefundable security
deposits in the amount of $100 at the time of signing the lease. The trial court entered
an order requiring defendants to disgorge all of those deposits received within the
four-year statute of limitations period, which equaled $447,000. This amount was to be
placed in a fluid recovery fund. Pursuant to the courts order, the defendants were
supposed to use due diligence for 90 days to find all present and former
tenants who had paid the unlawful deposits and to pay each person found $100. The residual
funds were to be organized and administered as a trust fund for the purpose of providing
financial assistance for the advancement of legal rights and interests of residential
tenants in the City and County of San Francisco.
The court reversed this remedial order by a vote of 6-1 with an
opinion by Justice Baxter for the court and a dissenting opinion by Justice Werdegar.
Critical to the courts decision was the distinction between disgorgement and
restitution in the context of an action under the UCL.
Restitution, which §17203 clearly authorizes, involves restoring to a
particular victim unjust profits taken by the defendant from the victim. Disgorgement, by
contrast, involves taking all unjust profits away from a defendant resulting from an
unfair practice without regard to whether there is a particular victim to whom the unjust
profits should be paid. If the disgorged profits can be paid to victims by way of
restitution, so much the better, but any disgorged profits that cannot be paid to
particular victims may be put to other uses as part of a fluid recovery fund (which is an
application of the cy pres doctrine to class actions).
The majority explained that when the legislature added restitution to
the list of UCL remedies in the 1970s, there was no authority for a fluid recovery and
that the legislature is therefore unlikely to have intended fluid recoveries under the
UCL. The courts conclusion was fortified when the legislature subsequently endorsed
fluid recoveries in class actions by virtue of the 1993 enactment of what is now C.C.P.
§384, and did not add any language to extend that type of remedy to a representative
action under the UCL.
Rejecting the fluid recovery fund remedy under the UCL will make it
more difficult for plaintiffs to use the UCL as an alternative to a class action. However,
all is not lost for plaintiffs who desire to use the UCL to provide restitution to injured
consumers who are not parties to the action. The court in Kraus clearly approves using a
representative action under the UCL to provide restitution to non-plaintiff consumers who
were injured by an unfair practice. Justice Baxter explained that the trial court
should order defendants to identify, locate, and repay to each former tenant charged
[unlawful fees] the full amount of funds improperly acquired from that tenant, retaining
the power to supervise defendants efforts to ensure that all reasonable means are
used to comply with the courts directives. Id., 23 Cal.4th at 138. Whether
this remedy will be sufficient to attract private attorneys general to bring
representative actions under the UCL remains to be seen. For the time being, however, the
decision in Kraus is a significant victory for business defendants under the UCL.
Business won another big victory in Asmus v. Pacific Bell (2000) 23
Cal.4th 1, a case involving the validity of an employers unilateral termination of
an employment policy that had previously been unilaterally adopted by the employer. In
1986, Pacific Bell adopted a Management Employment Security Policy which
provided that Pacific Bell would offer all management employees who continue to meet
our changing business expectations employment security through reassignment to and
retraining for other management positions, even if their present jobs are eliminated. This
policy will be maintained so long as there is no change that will materially affect
Pacific Bells business plan achievement. Although there was no change
materially affecting Pacific Bells business plan achievement, Pacific Bell
unilaterally discontinued the policy in 1992, precipitating a lawsuit.
The majority held that Pacific Bell could unilaterally terminate the
policy simply by giving reasonable notice to its employees. In support of this result, the
majority held, somewhat unconvincingly, that the final clause, which promised to maintain
the policy so long as there was no material change affecting Pacific Bells business
plan, was so indeterminate as to convert the clause into a promise of indefinite duration.
Because it was a unilateral promise of indefinite duration, it could be terminated on
Chief Justice George authored a strong dissent which was joined by
Justices Mosk and Kennard. Among other things, the Chief argued that the majoritys
holding is contrary to general principles of contract law regarding modification of
contracts which ordinarily require additional consideration and mutual assent to the
modification (especially where the modification amounts to one party simply agreeing to
forego an existing contract right). The Chief properly warns that the majoritys
holding will undermine the efficacy of implied-in-fact employment agreements
since employer promises expressly set forth in employment manuals and handbooks, or
in policy memoranda, would not be enduring promises but rather hollow gestures that could
be repudiated by an employer once they were viewed as no longer necessary or in the
interest of the employer. Id., 23Cal.4th at 38-39 (George, C.J., dissenting).
In addition to its obvious significance to employment contracts,
Asmus may create ripples throughout the law of contracts if its principles are applied to
other consumer contracts. Will a bank, credit card company, online service, or HMO have
similar power unilaterally to terminate unilaterally promised benefits? The court will
clearly have to face this issue in the near future, and its resolution is far from clear
in light of the close division on the court in Asmus. In the meantime, casebook authors
are busy adding Asmus to their yearly supplements.
J. Clark Kelso is a
professor of law and director of the Institute for Legislative Practice, McGeorge School
of Law. He most recently served as acting insurance commissioner of California.