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« Supreme Court addresses the UCL's statute of limitations: Grisham v. Philip Morris U.S.A., Inc. | Main | New attorneys' fees opinion: MBNA America Bank, N.A. v. Gorman »

Tuesday, February 20, 2007

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rb

Important: UCL claim now accrues when economic injury occurs, given Prop. 64.

Does this mean when it first occurs or when it last occurs, in the case of an ongoing unfair act?

Kimberly A. Kralowec

I did not think there was anything particularly earth-shattering about this opinion insofar as it concerns the UCL. The court didn't really say anything new about the accrual of a UCL claim for economic injury. However, the court does seem to believe that ordinary rules governing statutes of limitation generally also apply to the UCL's statute of limitations. That part of its analysis may become very significant. It strongly suggests that the discovery rule does, in fact, apply to the UCL. The court uses broad policy language in discussing the discovery rule, and no reason comes to mind why the policy principles the court articulates should not apply equally to UCL claims.

rb

Let me give you an example of what I'm thinking about. Say a debt collector sues a consumer for an unpaid debt, the consumer has to hire an attorney to defend the action and it turns out the underlying debt is the result of an unfair business practice and the court finds that the debt is not due and owing due to its illegality.

The consumer has not paid the debt and is not, therefore, damaged under the current UCL. Once he succeeds in the underlying case, and having paid his attorney to defend the case, the consumer is only then and there damaged. Or can the consumer sue (in a separate suit?), once she pays the attorney?

Or more simply, the unfair debt is unpaid for 5 years from the date it is purportedly incurred, but then paid in the 5th year. Is that when the action accrues, since both an unfair practice and damages are required?

Kimberly A. Kralowec

The problem the consumer would probably face in your first fact pattern is that attorneys' fees paid to a third party might not constitute "restitution" recoverable from the defendant. In your second, simpler fact pattern, I would argue that the UCL cause of action accrued, at least for restitution purposes, when the unfair debt was paid in the 5th year. The consumer might be able to sue for injunctive relief sooner than that, however, depending on when the consumer learned about the unfair practices.

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