The U.S. Court of Appeals for the Federal Circuit has handed down an opinion in a UCL competitor action. Allergan, Inc. v. Athena Cosmetics, Inc., ___ F.3d ___ (Fed. Cir. May 24, 2011). The case was commenced in the Central District of California, but the Federal Circuit had jurisdiction over the appeal because the case included patent claims. Slip op. at 7.
Applying Kwikset and Clayworth, the Federal Circuit reversed the district court's order dismissing the UCL claim for lack of Prop. 64 standing:
Here, Allergan has plainly alleged an economic injury that was the result of an unfair business practice. The unfair competition that Allergan alleges involves the defendants’ manufacture, marketing and/or sale of hair and eyelash growth products without a prescription, federal or state approval, and proper labeling in violation of federal and California laws. Allergan’s First Am. Compl. 9-14. As a result of these acts, Allergan alleges that it has “lost sales, revenue, market share, and asset value.” Id. at 14. Allergan’s complaint sufficiently alleges an injury that was caused by the defendants’ unfair business practices. Under Kwikset, this satisfies the requirements of section 17204, and therefore Allergan has standing to pursue its claim for relief under the UCL. See Kwikset, 246 P.3d at 894-95; Clayworth, 233 P.3d at 1087.
Id. at 11 (emphasis added). The district court had erroneously applied earlier Court of Appeal opinions, such as Citizens of Humanity, holding that only a restitutionary loss could create Prop. 64 standing. See id. at 6. UCL competitor actions are alive and well.
The court also rejected the defendants' novel argument that Prop. 64 created a so-called "business dealings requirement":
Proposition 64 did not add a “business dealings requirement” to standing under section 17204. The only amendment Proposition 64 made to section 17204 re-quired that a private person bringing an action pursuant to the UCL must have “suffered injury in fact and . . . lost money or property as a result of such unfair competition.” Cal. Prop. 64 § 3. Reading this amendment to encompass a business dealings requirement would contradict the plain language of the statute and improperly elevate one purpose of Proposition 64 over the language of the statute. See City of Chicago v. Envtl. Def. Fund, 511 U.S. 328, 337 (1994) (“[I]t is the statute, and not the [voter’s findings], which is the authoritative expression of the law . . . .”).
The defendants also argued that Kwikset approved of the business dealings requirement. Oral Arg. at 30:00-31:00, available at http://www.cafc.uscourts.gov/oral-argument-recordings/2010-1394/all. The crux of defendants’ argument is the introduction of Kwikset, which states that the purpose of Proposition 64 was to “eliminate standing for those who have not engaged in any business dealings with would-be defendants . . . .” 246 P.3d at 881. This argument disregards the focus of Kwikset, which held that the only requirements to establish standing under section 17204 are that (1) the plaintiff suffered an injury in fact from the loss of money or property; and (2) that this injury was caused by the defendant’s unfair business practice. Id. at 885.
Moreover, the defendants’ argument ignores that there are “innumerable ways” to show economic injury from unfair competition and that the Kwikset court did not “supply an exhaustive list of ways in which unfair competition may cause economic harm.” Id. at 886. While a direct business dealing is certainly one way in which a plaintiff could be harmed, the California courts have also recognized claims under the UCL where a direct business dealing was lacking. See, e.g., Overstock.com, Inc. v. Gradient Analytics, Inc., 151 Cal. App. 4th 688, 716 (Cal. Ct. App. 2007) (finding standing under section 17204 where plaintiff had plead that defendant’s unfair business practices—intentional dissemination of false negative reports—had “result[ed] in diminution in value of [plaintiff’s] assets and decline in its market capitalization and other vested interests”). Thus, standing under section 17204 is not restricted by a direct business dealings requirement. The only standing requirements under 17204 are those in the language of the statute and, as explained in I.B., Allergan has satisfied those requirements.
Slip op. at 12-13 (emphasis added).