The opinions handed down yesterday in Rose v. Bank of America, N.A., ___ Cal.4th ___ (Aug. 1, 2013), and Zhang v. Superior Court (Cal. Capital Ins. Co.), ___ Cal.4th ___ (Aug. 1, 2013), were both unanimous and both authored by Justice Corrigan (with a concurrence by Justice Werdegar in Zhang). Both decisions reaffirm the longstanding general rule that a UCL "unlawful" prong claim may be predicated on a violation of any law — state or federal, statutory or court-made — regardless of whether the underlying law independently carries a private right of action.
Here are my thoughts on Rose, and I'll discuss Zhang on Monday.
Rose involved a UCL "unlawful" prong claim predicated on violations of the federal Truth in Savings Act ("TISA") (12 U.S.C. §§ 4301 et seq.). TISA previously carried an explicit statutory private right of action, but Congress allowed that provision to expire 10 years after it was enacted. Rose, slip op. at 1-2. The Court of Appeal held that this (in)action evinced an intention by Congress to preclude private civil enforcment, and that the UCL claim was therefore barred. Id. at 3.
The Supreme Court disagreed, and reversed.
The opinion discusses a series of "familiar principles on which the UCL operates." Id. at 5. One of them is that the UCL's "unlawful" prong may "borrow" a federal statute as the predicate violation even if "Congress has decided not to allow private enforcement of the federal law." Id. The opinion explains:
[W]e have made it clear that by borrowing requirements from other statutes, the UCL does not serve as a mere enforcement mechanism. It provides its own distinct and limited equitable remedies for unlawful business practices, using other laws only to define what is “unlawful.” (See Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1150 [UCL provides equitable avenue for prevention of unfair business practices, with streamlined procedures and limited remedies].) The UCL reflects the Legislature’s intent to discourage business practices that confer unfair advantages in the marketplace to the detriment of both consumers and law-abiding competitors.
Id. at 7.
The only exceptions to this general rule are narrow ones: if the UCL action is actually barred by some other prinicple of law, or if some other law explicitly authorizes or immunizes the challenged conduct, the UCL claim may not proceed. As Rose explains:
It is settled that a UCL action is not precluded “merely because some other statute on the subject does not, itself, provide for the action or prohibit the challenged conduct. To forestall an action under the [UCL], another provision must actually ‘bar’ the action or clearly permit the conduct.” (Cel-Tech, supra, 20 Cal.4th at p. 183; see Zhang v. Superior Court (Aug. 1, 2013, S178542) __ Cal.4th __ [pp. 12-14]; Stop Youth Addiction, supra, 17 Cal.4th at p. 566.)
Id. at 8 (emphasis added). Even evidence of a legislative "intent to create a comprehensive, exclusive scheme" for regulating a particular field is not enough to "actually bar" a UCL action. Id. at 6 (citing Stop Youth Addiction, Inc. v. Lucky Stores, Inc., 17 Cal.4th 553, 560 (1998)). Such an action "enforc[es] the UCL, not the statutes underlying [the] claim of unlawful business practice." Id.
In Rose, no such bar existed. The proposed UCL claim was not actually precluded by any other act of Congress or by any other affirmative expression of legislative intent. On the contrary, an unexpired TISA provision expressly permitted "private actions under state laws consistent with TISA. Thus, the abolition of the TISA remedy does not amount to a bar against UCL claims." Id.
The opinion reiterates this fundamental point:
[T]he UCL ... is meant to provide remedies cumulative to those established by other laws, absent express provision to the contrary. (Bus. & Prof. Code, § 17205.) We have long recognized that the existence of a separate statutory enforcement scheme does not preclude a parallel action under the UCL. (Stop Youth Addiction, supra, 17 Cal.4th at pp. 572-573, citing cases.)
Id. at 9-10 (italics in original; bold added) (footnote omitted).
The opinion ends with an interesting footnote citing Bowen v. Ziasun Technologies, Inc., 116 Cal.App.4th 777 (2004) (discussed in these blog posts). Bowen held that "the UCL does not apply to claims arising from securities transactions." Rose, slip op. at 10 n.8. The Supreme Court observed that "[w]hatever the scope and merits of that holding may be, it does not apply here." Id. (citations omitted). I think this suggests that the Court may view Bowen as inconsistent with the principles reaffirmed in Rose. (In Overstock.com, Inc. v. Gradient Analytics, Inc., 151 Cal.App.4th 688 (2007) (discussed here), another Court of Appeal panel declined to follow Bowen.) The Court has reserved that question for another case and another day.
As between Rose and Zhang, Rose was the more straightforward case. The opinion is shorter (11 vs. 24 pages) and, unlike Zhang, unanimous in its reasoning (7-0 with no concurrence). It does not really break any unbroken ground, and is based instead on "familiar principles" long established in the Supreme Court's UCL jurisprudence. I think the opinion will serve to restrain lower courts from construing the UCL's "unlawful" prong more narrowly than the Supreme Court's older precedents warranted (as may have happened in Bowen, for example, as well as in Rose below, and in another case even more recently).
I will have thoughts on Zhang next week.