The UCL Practitioner

UCL decision from last May: Overstock.com, Inc. v. Gradient Analytics, Inc.

Somehow I missed the Court of Appeal's opinion in Overstock.com, Inc. v. Gradient Analytics, Inc., 151 Cal.App.4th 688 (2007), which the First Appellate District, Division Four handed down on May 30, 2007.

Overstock.com was decided in the context of an anti-SLAPP motion and contains several noteworthy rulings relating to the UCL. First, the Court of Appeal determined that conduct "likely to deceive a reasonable consumer" was actionable under the UCL even if the reasonable consumer is someone other than the plaintiff — in this case, potential investors in the plaintiff's stock. Overstock.com, 151 Cal.App.4th at 714.

Second, the Court of Appeal determined that securities transactions are not excluded from the UCL's coverage, declining to follow Bowen v. Ziasun Technologies, Inc., 116 Cal.App.4th 777 (2004), on this point:

"The UCL contains no language supporting an exclusion for securities, and under the plain language of the UCL, we cannot create such an exclusion." .... Indeed the sweeping language of the UCL is intended " ' to permit tribunals to enjoin on-going wrongful business conduct in whatever context such activity might occur.' "

Id. at 715-16 (quoting Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal.4th. 163, 181 (1999); Roskind v. Morgan Stanley Dean Witter & Co., 80 Cal.App.4th 345, 355 (2000)). (For more discussion of the UCL and securities claims, see this blog post.)

The Court also noted that "the California UCL contains no directive to interpret our consumer protection statute consistently with the FTC Act." Id. at 715. This holding tends to undermine Camacho v. Automobile Club of Southern California, 142 Cal.App.4th 1394, 1403 (2006), in which the Court of Appeal relied on the FTC Act in adopting a third formulation of the UCL's "unfair" prong.

Finally, the Court of Appeal held that the plaintiff satisified the Prop. 64 "injury in fact" requirement by alleging that the defendant's unfair, unlawful and fraudulent conduct "result[ed] in diminution in value of its assets and decline in its market capitalization and other vested interests. This meets the statutory requirement of 'injury in fact' resulting from defendants' misconduct." Overstock.com, 151 Cal.App.4th at 716. This holding is directly contrary to at least one federal decision, Walker v. USAA Casualty Ins. Co., 474 F.Supp.2d 1168 (E.D. Cal. 2007), in which the court held that to qualify as "injury in fact," the monetary loss must also be recoverable as "restitution" under the UCL. As I have explained before, that holding seemed to me contrary to the plain language of Prop. 64, and Overstock.com confirms this.

Several new UCL and class action decisions

A bunch of new UCL and class action decisions have been handed down over the past week and a half:

• Schultz v. Neovi Data Corp., ___ Cal.App.4th ___ (June 15, 2007) (Fourth Appellate District, Division Three) (a Mervyn's "grant and hold" case on remand to the Court of Appeal)

• Linear Technologies Corp. v. Applied Materials, Inc., ___ Cal.App.4th ___ (June 18, 2007) (Sixth Appellate District) (a UCL competitor action)

• Gatton v. T-Mobile USA, Inc., ___ Cal.App.4th ___ (June 22, 2007) (First Appellate District, Division Five) (another case invalidating a no-class-action arbitration clause)

• In re: Ocwen Loan Servicing, LLC Mortgage Servicing Litigation, ___ F.3d ___ (7th Cir. June 22, 2007) (the Seventh Circuit mentions the UCL again, and the CLRA, too, and warns lawyers not to file "a hideous sprawling mess" of a complaint)

• Lott v. Pfizer, Inc., ___ F.3d ___ (7th Cir. June 25, 2007) (addresses CAFA and the right to recover attorneys' fees after improper removal; see this post on the Seventh Circuit's prior opinion in the same case)

• McAdams v. Monier, Inc., ___ Cal.App.4th ___ (May 30, 2007, modified June 25, 2007) (Third Appellate District) (court just issued an order modifying the original opinion; an interesting change in wording re "restitution" "reliance")

• Juarez v. Arcadia Financial., Ltd., ___ Cal.App.4th ___ (June 26, 2007) (Fourth Appellate District, Division One) (probably the most interesting of the bunch; addresses UCL remedies)

I've had limited time to read or analyze these decisions. Time permitting, I will post more about them later on.

New UCL competitor action: Stevenson Real Est. Servs. v. CB Richard Ellis Real Est. Servs.

In Stevenson Real Estate Servs., Inc. v. CB Richard Ellis Real Estate Servs., Inc., ___ Cal.App.4th ___ (Apr. 26, 2006), the complaint attempted to plead a cause of action for intentional interference with prospective economic advantage, using an alleged UCL violation as the "independently wrongful act" required to plead that cause of action under Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134 (2003). Slip op. at 3-4. To count as an "independently wrongful act," the conduct must be "proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.” Id. at 5 (citing Korea Supply, 29 Cal.4th at 1159). The Court of Appeal (Second Appellate District, Division Eight) held that the trial court properly granted judgment on the pleadings because the complaint did not adequately allege a violation of the UCL's "unfair" prong as interpreted in Cel-Tech Communications, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal.4th 163, 187 (1999), which governs competitor actions. Slip op. at 10-11. The opinion seems to assume that the "fraudulent" prong does not apply to competitor actions. See id. at 11 n.4. Nor was the "unlawful" prong mentioned — presumably because if the plaintiff could have alleged some other violation of law, it would not have needed to rely on the UCL to state a claim for intentional interference with prospective economic advantage.