In People v. Persolve LLC, ___ Cal.App.4th ___ (Aug. 15 2013), the Court of Appeal (Fifth Appellate District) reinstated a UCL "unlawful" prong claim brought by the Kern County District Attorney against a debt collection company for violation of the Rosenthal Act (Civ. Code §§ 1788 et seq.) and the federal Fair Debt Collection Practices Act (15 U.S.C. §§ 1692 et seq.).
The trial court held that the litigation privilege barred the action because the challenged debt-collection activity related to anticipated litigation. Slip op. at 2. The parties did not really dispute, and the Court of Appeal seemed to agree, that the conduct fell within the scope of the privilege because it bore some relation to anticipated litigation (i.e., a lawsuit to enforce the debt). See id. at 5-6.
The disputed question was whether applying the privilege would make the fair debt collection practices statutes effectively inoperable, and in turn, whether a UCL "unlawful" prong claim predicated on those statutes' violation should be permitted notwithstanding the privilege. See id. at 6-7. The Court of Appeal noted that the privilege is "not without limit," and that "Courts have found exceptions to [it] based on irreconcilable conflicts between the privilege and other coequal state laws." Id. at 6. An earlier decision, Komarova v. National Credit Acceptance, Inc., 175 Cal.App.4th 324 (2009), held that "the privilege cannot be used to shield violations" of the Rosenthal Act. Id. at 7. The same reasoning applied to the federal Act, the Court held. Id. at 8.
The defendants pointed out that the DA's enforcement action was brought under the UCL, not the state or federal debt collection statutes. They relied on two decisions holding that the litigation privilege can bar UCL claims. Id. at 8-9 (citing Rubin v. Green, 4 Cal.4th 1187 (1993); People ex rel. Gallegos v. Pacific Lumber Co., 158 Cal.App.4th 950 (2008) (discussed in this blog post)).
The Court of Appeal was not persuaded:
Where, as here, the “borrowed” statute is more specific than the litigation privilege and the two are irreconcilable, unfair competition law claims based on conduct specifically prohibited by the borrowed statute are excepted from the litigation privilege. Applying the privilege to unlawful practices based on specific violations of the California Act and the Federal Act would effectively render the protections afforded by those acts meaningless. In contrast, in both Rubin and Gallegos, the application of the litigation privilege did not render the prohibitions underlying the unfair competition claims significantly or wholly inoperable. Civil statutes for the protection of the public should be interpreted broadly in favor of their protective purpose. Accordingly, the People’s unfair competition law claims that are based on conduct that is specifically prohibited by the California Act and/or the Federal Act are not barred by the litigation privilege. (Komarova, supra, 175 Cal.App.4th at pp. 339-340.)
Id. at 9-10 (emphasis added). This reasoning should apply not only in public prosecutor actions, but also in cases brought by private litigants.