The UCL Practitioner

Live blog of "UCL Remedies" panel at the 2022 Golden State Institute

Today I'm attending the 2022 Golden State Antitrust and Unfair Competition Law Institute at the Julia Morgan Ballroom in San Francisco. The 3:00 p.m. panel is entitled: "UCL Remedies: You Can't Always Get What You Want." The speakers are Andre Mura of Gibbs Law Group LLP; Zoe Savitsky of the Oakland City Attorney's Office; Steven E. Swaney of Veneable LLP; and Betsy C. Manifold of Wolf Haldenstein as moderator. This promises to be an excellent talk. 

It's been a very long time since I've done a live blog, but my plan is to cite new decisions of interest mentioned by the panel that I haven't previously covered on the blog. Here we go:

1. New California Supreme Court opinion on civil penalties recoverable in a UCL public prosecutor action and the equitable nature of that remedy: Nationwide Biweekly Administration, Inc. v. Superior Court, 9 Cal.5th 279 (2020).
2. New California Supreme Court opinion on geographic scope of UCL remedies in a public prosecutor action; local prosecutors may recover statewide civil penalties as well as statewide injunctive relief: Abbott Laboratories v. Superior Court, 9 Cal.5th 642 (2020).
3. Johnson & Johnson public prosecutor action involving cervical mesh extensively addressed issue of how civil penalties are calculated.
4. Court of Appeal rejects argument that harms resulting from lost market share is recoverable as UCL restitution in a competitor action: Lee v. Luxottica Retail N. Am., Inc., 65 Cal.App.5th 793, 797 (2021).
5. New Ninth Circuit opinions on "adequate legal remedy" defense to UCL claims:
   1. Sonner v. Premier Nutrition Corp., 971 F.3d 834 (9th Cir. 2020) (Sonner I) (action involved misrepresentations regarding a dietary supplement; UCL and CLRA claims brought; Ninth Circuit affirmed dismissal of UCL claim because CLRA provided adequate legal remedy--importantly, as a matter of federal common law under Eire)
   2. Sonner v. Premier Nutrition Corp., 49 F.4th 1300 (9th Cir. 2022) (Sonner II) (same plaintiff re-filed her case in state court (Alameda County); defendant's motion to enjoin state-court proceeding was denied due to uncertainty over jurisdictional issue)
   3. Guzman v. Polaris Indus., 49 F.4th 1308 (9th Cir. 2022) (decided Sept. 29, 2022) (affirmed dismissal of UCL claim with directions to dismiss without prejudice to re-filing in state court)
   4. The above case summaries are by panelist Steven Swaney. My takeaway is these decisions may provide a way to avoid federal jurisdiction, allowing your UCL class action to proceed in state court.  Panelist Andre Mura just pointed out that this may be a pyrrhic victory for defendants. I agree. Panelist Swaney is now pointing out that defendants should think long and hard before moving to dismiss UCL claims under Sonner.
6. Several new opinions on "public injunctive relief" in private UCL litigation. The issue is coming up a lot, according to panelist Mura, because it's relevant to whether the UCL claim is arbitrable under McGill (see this blog post).
   
   1. Hodges v. Comcast Cable Communications, LLC, 21 F.4th 535, 542 (9th Cir. 2021) (held that the injunction sought was "public" rather than private)
   2. Stover v. Experian Holdings, Inc., 978 F.3d 1082 (9th Cir. 2020) (addressing Article III standing)
   3. Rogers v. Lyft, Inc., 452 F.Supp.3d 904, 919 (N.D. Cal. 2020) (addressing Prop. 64 standing)
   4. DiCarlo v. MoneyLion, Inc., 988 F.3d 1148 (9th Cir. 2021) (construing McGill)

As you can imagine, the panel had much more to say about the new decisions, and they also provided an interesting and useful summary of each form of UCL remedy. Many thanks to the panelists for a great discussion. That's all for today's live blog.

New UCL Prop. 64 standing opinion: Two Jinn, Inc. v. Government Payment Service, Inc.

In Two Jinn, Inc. v. Government Payment Service, Inc., ___ Cal.App.4th ___ (Feb. 2, 2015), the Court of Appeal (First Appellate District, Division Four) addressed Prop. 64 standing in the context of a UCL competitor action, and affirmed the trial court's grant of summary judgment in the defendant's favor.

The plaintiff (Aladdin Bail Bonds) advanced a couple of standing arguments, each of which the Court rejected.

Aladdin contends that GPS's allegedly unfair business practices caused it economic injury when customers who would otherwise have used Aladdin's services used GPS's services instead. We disagree because the summary judgment evidence shows that any diversion of customers from Aladdin to GPS did not result from the fact that GPS does not have a bail bond license, or that it does not comply with other regulations governing the activities of licensed bail bond agents.

Slip op. at 9.

Alternatively, Aladdin contends it has standing because it suffered an economic injury by incurring “significant costs and expenses” to investigate the “nature, scope and extent of Defendant's conduct.” .... Aladdin paid money to hire outside counsel, obtain copies of GPS's contracts, and to determine which California counties were involved with GPS's allegedly unlawful activities ... [and] incurred expenses by diverting staff to investigate GPS's activities. ....

 

These “pre-litigation” costs do not establish standing to bring a UCL claim because they are not an economic injury caused by the business practices that Aladdin characterizes as unlawful. Rather, as Pinney's declaration confirms, the reason Aladdin incurred pre-litigation expenses was to generate evidence. Aladdin then used that evidence to support this lawsuit. “Plaintiffs cannot establish standing to pursue a UCL claim based on expenses incurred in order to bring their UCL claim. If they could, the requirement that individuals show they lost money or property ‘as a result’ of the challenged practice in order to have standing to sue under the UCL would be meaningless. [Citation.]” (Robinson v. HSBC Bank USA (N.D.Cal.2010) 732 F.Supp.2d 976, 989.)

Slip op. at 12-13.

This part of the opinion stands in contrast to Glen Oaks Estates Homeowners Assn. v. Re/Max Premier Properties, Inc., 203 Cal.App.4th 913 (2012) (discussed in this blog post), which held that investigative costs are sufficient "injury in fact" to confer standing under Kwikset.

The opinion then goes on to hold that, even if the plaintiff did have standing, the defendant's conduct was neither "unlawful" nor "unfair" within the meaning of the UCL.  Slip op. at 15-24.

U.S. Supreme Court relists class certification cases: Whirlpool v. Glaser and Sears v. Butler (Updated)

These two cases, involving class certification of claims related to mold growth in front-load washers, were distributed for consideration during the U.S. Supreme Court's conference of last Friday, January 10, 2013 2014.  (Oops, still trying to get used to the fact that it is now the year 2014.  And by the way, where's my flying car, my jetpak, and my robot maid?)

The dockets were both updated Monday morning to show that the cases have been relisted and redistributed for conference on Friday, January 17, 2013 2014.  Whirlpool Corp. v. Glaser, No. 13-431 (U.S.); Sears, Roebuck & Co. v. Butler, No. 13-430 (U.S.). 

For more details on these cases, including links to the lower court opinions and some of the briefs, see this blog post. 

In other news, the Court granted cert. in a case I've been following because the underlying action includes a UCL claim.  POM Wonderful LLC v. The Coca Cola Co., No. 12-761 (U.S.).  Before cert. was granted last Friday, the matter had been relisted once, and the Solicitor General was invited to file an amicus curiae brief, which it did in late November.  

Given the question presented as stated in the cert. petition, it appears unlikely that the Court's opinion in the case will touch on any UCL-related issues: 

Whether the court of appeals erred in holding that a private party cannot bring a Lanham Act claim challenging a product label regulated under the Food, Drug, and Cosmetic Act.

The Ninth Circuit's opinion is Pom Wonderful LLC v. The Coca-Cola Co., 679 F.3d 1170 (9th Cir. 2012), discussed in this blog post.  The UCL claim was allowed to proceed, but the Lanham Act claim was not.  The cert. petition does not appear to have challenged the former ruling.  Indeed, a footnote in the solicitor general's amicus brief states as follows:

Petitioner also brought claims under various California laws.  Those claims are not at issue in this Court.  See pet. 1.  The district court granted summary judgment to respondent on those claims, No. 08-CV-6237, 2013 WL 543361 (C.D. Cal. Feb. 13, 2013), and petitioner's appeal is pending, No. 13-5570 (9th Cir).

Amicus Curiae Brief of United States at 5 n.2. In the cited decision, the district court held that the UCL claim was preempted by federal law. 

SCOTUSblog's case page for this matter has links to more of the briefs. 

New UCL competitor and Prop. 64 standing opinion: Law Offices of Mathew Higbee v. Expungement Assistance Services

In Law Offices of Mathew Higbee v. Expungement Assistance Services, ___ Cal.App.4th ___ (Mar. 14, 2013), the Court of Appeal (Fourth Appellate District, Division Three) held that Prop. 64 did not eliminate UCL actions brought against a competitor whose unlawful business practices were stealing away the plaintiff's customers, market share and profits. 

To me, the issues raised in this case should have been no-brainers.  Nothing in Prop. 64 suggested an intention by voters to elimimate UCL competitor actions, and after the Supreme Court's holdings in Clayworth and Kwikset, there should have been no doubt that a competitor who loses customers, market share and profits (that is, suffers monetary "injury in fact") because of the unfair competition of a competing business can bring a UCL action and seek injunctive relief. 

Nevertheless, the defendant in Higbee argued that the plaintiff business competitor lacked Prop. 64 standing because it could allege no "direct" business dealings with the defendant.  Slip op. at 2.  The opinion approaches this argument as though it had some conceivable merit.  It does not, as the opinion correctly concludes.

In Hibgee, the plaintiff was a law firm specializing in providing record expungement services.  The defendant provided the same services, but did so using employees who were neither licensed to practice law nor registered or bonded as "legal document assistants" under the Business and Professions Code:

Higbee argues the allegation that EAS violated section 6125 et seq. (pertaining to the requirement of an active law license), section 6400 et seq. (pertaining to the registration and bonding of, and permissible activities of, legal document assistants), and Penal Code section 4852.2 (pertaining to the requirement of a law license for the handling of certain criminal matters), constituted an allegation of an unlawful business practice within the meaning of the UCL.  He says he is entitled to base a UCL lawsuit on those statutes, citing Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553 (superseded in part by Prop. 64, as recognized in Californians for Disability Rights v. Mervyn’s, LLC, supra, 39 Cal.4th at p. 227).

Slip op. at 9-10 (footnotes omitted).

As a preliminary matter, the Court agreed that the UCL "borrows" violations of other laws and makes them independently actionable, and found "no reason why the alleged violations of statutes concerning the unauthorized practice of law cannot serve as a predicate for Higbee's UCL action."  Id. at 9-12.

Next, the Court considered, and rejected, the defendant's argument that the plaintiff lacked post-Prop. 64 standing because it had not suffered the right type of injury.  Id. at 12-20. 

The operative complaint alleged that "as a result of EAS’s unauthorized practice of law, advertisement of illegal services, and representation that it could perform the same legal services as [plaintiff] did, he had been forced, in order to compete, to lower his prices and to expend more money on advertising, he had lost clients and revenue, and the value of his law firm had diminished."  Id. at 13.  The defendant argued that "a loss of market share is not the type of economic injury that qualifies as an injury in fact for the purposes of standing under the UCL.  Id.

The Court of Appeal disagreed, citing, among other cases, Clayworth, Kwikset, Saunders v. Superior Court, 27 Cal.App.4th 832 (1994), Allergan, Inc. v. Athena Cosmetics, Inc., 640 F.3d 1377 (Fed. Cir. 2011) (discussed in this blog post), Pom Wonderful LLC v. Coca-Cola Co., 679 F.3d 1170 (9th Cir. 2012) (discussed here), and VP Racing Fuels, Inc. v. General Petroleum Corp., 673 F.Supp.2d 1073 (E.D. Cal. 2009).  In Saunders, Allergan, and VP Racing, "the alleged injury was based on reduced market share."  Slip op. at 16.

This was sufficient for UCL standing: 

As we have observed, the original purpose of the unfair competition laws was to protect against “wrongful conduct in commercial enterprises which resulted in business loss to another, ordinarily by the use of unfair means in drawing away customers from a competitor.”  (People ex rel. Mosk v. National Research Co. of Cal., supra, 201 Cal.App.2d at p. 770.)  Although the UCL was ultimately expanded to provide equitable relief to consumers in addition to business competitors (ibid.), this does not mean that the UCL no longer protects business competitors (Kwikset Corp. v. Superior Court, supra, 51 Cal.4th at p. 320).

As the Supreme Court stated in Kwikset Corp. v. Superior Court, supra, 51 Cal.4th 310, the purpose of the UCL “‘is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.’  [Citations.]”  (Id. at p. 320; accord, Hall v. Time Inc. (2008) 158 Cal.App.4th 847, 852.)  Put another way, the UCL “governs ‘anti-competitive business practices’ as well as injuries to consumers, and has as a major purpose ‘the preservation of fair business competition.’  [Citations.]”  (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.)

“There are innumerable ways in which economic injury from unfair competition may be shown.  A plaintiff may (1) surrender in a transaction more, or acquire in a transaction less, than he or she otherwise would have; (2) have a present or future property interest diminished; (3) be deprived of money or property to which he or she has a cognizable claim; or (4) be required to enter into a transaction, costing money or property, that would otherwise have been unnecessary.  [Citation.]”  (Kwikset Corp. v. Superior Court, supra, 51 Cal.4th at p. 323.)  The foregoing list is not exhaustive and the notion of “lost money” under the UCL is not limited.  (Ibid.)  Moreover, “the quantum of lost money or property necessary to show standing is only so much as would suffice to establish injury in fact” and “it suffices . . . to ‘“allege[] some specific, ‘identifiable trifle’ of injury.”’  [Citations.]”  (Id. at pp. 324-325, fn. omitted.)  “‘“The basic idea . . . is that an identifiable trifle is enough for standing to fight out a question of principle; the trifle is the basis for standing and the principle supplies the motivation.”’  [Citations.]”  (Id. at p. 325, fn. 7.)

In the matter before us, we hold that Higbee, having alleged that he had been forced to pay increased advertising costs and to reduce his prices for services in order to compete, and that he had lost business and the value of his law practice had diminished, succeeded in alleging at least an identifiable trifle of injury as necessary for standing under the UCL.

Slip op. at 19-20 (emphasis added).

Finally, the Court reached the defendant's core argument that the plaintiff "cannot demonstrate standing to bring a UCL claim because he never engaged in any business dealings with EAS."  Id. at 21.  The defendant relied wholly on Clayworth, where the Supreme Court stated:  "While the voters clearly intended to restrict UCL standing, they just as plainly preserved standing for those who had had business dealings with a defendant and had lost money or property as a result of the defendant’s unfair business practices."  Id. (quoting Clayworth v. Pfizer, Inc., 49 Cal.4th 758, 788 (2010)).    

The Court of Appeal carefully considered Clayworth and determined that the Supreme Court did not "intend[] to engraft upon section 17204 a requirement that all plaintiffs must, in every event, have engaged in business dealings with a defendant in order to demonstrate UCL standing."  Id. at 23.  The Court observed that it is possible to "allege facts sufficient to support causation in the absence of direct business dealings" (id.), and concluded:

The language of the UCL does not leave the court hamstrung, unable to even consider an action seeking injunctive relief just because the defendant engages in its purportedly unlawful activity via the Internet and has not had any direct business dealings with the plaintiff.

Id. at 24.

A final interesting aspect of this opinion is that it rejected as irrelevant, in an "unlawful" prong case, decisions involving the UCL's "fraudulent" prong, which interpreted "as a result of" to mean "reliance on":

EAS’s citations to cases pertaining to the requirement to allege reliance in order to show causation in cases based on fraud (see, e.g., In re Tobacco II Cases (2009) 46 Cal.4th 298; Pfizer Inc. v. Superior Court (2010) 182 Cal.App.4th 622) do not convince us otherwise.

Id.; see also Medrazo v. Honda of North Hollywood, 205 Cal.App.4th 1 (2012) (discussing Supreme Court's Tobacco II footnote, which states that "there are doubtless many types of unfair business practices in which the concept of reliance, as discussed here, has no application") (see this blog post for more on Medrazo).

In the last sentence of the opinion, the Court of Appeal directed the clerk to forward a copy of the opinion to the Attorney General, presumably so that her office can take appropriate action against the defendant, perhaps including an action for civil penalties under the UCL. Slip op. at 25.

Congratulations to Mat Higbee, who represented himself in this case. 

"Unfair-competition suit reinstated"

Bob Egelko of the San Francisco Chronicle had this article in yesterday's paper on the Court of Appeal's opinion last week in Law Offices of Mathew Higbee v. Expungement Assistance Services, ___ Cal.App.4th ___ (Mar. 14, 2013).

Higbee is a UCL competitor action and the opinion is quite interesting.   From the article:

A state appeals court has reinstated a lawyer's suit against a company offering cut-rate legal services, ruling that - despite a voter-approved law limiting unfair-competition suits - a business that's being undercut by a rival's practices can still seek redress in court.

I will have more on the opinion in a later post. 

Ninth Circuit addresses UCL standing: Pom Wonderful LLC v. The Coca-Cola Co.

The end of a recent Ninth Circuit opinion, Pom Wonderful LLC v. The Coca-Cola Co., ___ F.3d ___ (9th Cir. May 17, 2012), contains this passage on UCL standing:

To have standing to bring a claim under the UCL, a private plaintiff must show that it “has suffered injury in fact and has lost money or property as a result of” unfair competition; to have standing under the FAL, a private plaintiff must make the same showing of injury and loss as a result of an FAL  violation. Cal. Bus. & Prof’l Code §§ 17204, 17535. The district court interpreted the “lost money or property” language to require a plaintiff to show that it is entitled to restitution from the defendant—even if the plaintiff seeks only injunctive relief. That was error. The California Supreme Court has now made clear that standing under section 17204 (the UCL standing provision) does not depend on eligibility for restitution. See Kwikset Corp. v. Superior Ct., 246 P.3d 877, 895 (Cal. 2011); Clayworth v. Pfizer, Inc., 233 P.3d 1066, 1088 (Cal. 2010). We are inclined to interpret the materially identical language in section 17535 (the FAL standing provision) the same way. Nevertheless, because these cases came down after the district court entered judgment in this case, we will vacate the judgment as to Pom’s state law claims and remand to the district court to rule on standing in light of Kwikset and Clayworth.

Slip op. at 5258-59.

This was a UCL competitor and Lanham Act case brought by Pom Wonderful against Coca-Cola over the labeling of the latter's "Pomegranate Blueberry" juice, which "contains about 99.4% apple and grape juices, 0.3% pomegranate juice, 0.2% blueberry juice, and 0.1% raspberry juice."  Id. at 5248.  In the first part of its analysis, the Ninth Circuit held that the federal Food, Drug and Cosmetic Act did not bar the Lanham Act claim.  Id. at 5252-58. 

New UCL competitor decision: Allergan, Inc. v. Athena Cosmetics,Inc.

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).

New UCL competitor action applying Clayworth: Finelite, Inc. v. Ledalite Architectural Products

Many thanks to the blog reader who forwarded a recent decision by U.S. District Judge Maxine Chesney, Finelite, Inc. v. Ledalite Architectural Products, 2010 WL 3385027 (N.D. Cal. Aug. 26, 2010).  Finelite is competitor action arising from misstatements by one competitor that allegedly stole away sales from the other competitor, impacting that competitor's profits.   The defendant moved to dismiss the UCL claim (which sought injunctive relief only) for lack of standing, arguing that to obtain any form of relief under the UCL, the plaintiff must have suffered a loss that would be compensable as restitution.  Lost profits would be damages, not recoverable under the UCL.  Id. at *1.

Judge Chesney denied the motion, applying the Supreme Court's recent holding in Clayworth v. Pfizer:  

Ledalite also relies on cases that have held a plaintiff cannot seek injunctive relief under § 17200 if the plaintiff does not have standing to seek restitution. See Pom Wonderful LLC v. Welch Foods, Inc., 2009 WL 5184422, *3-5 (C.D.Cal.2009) (holding plaintiff lacked standing to seek injunctive relief where plaintiff failed to allege entitlement to restitution); Walker v. GEICO General Ins. Co., 474 F.Supp.2d 1168, 1172 (E.D.Cal.2007) (holding plaintiff lacked standing to assert “any UCL claim” because plaintiff could not show “either prior possession or a vested legal interest in the money or property allegedly lost”). As the California Supreme Court has more recently explained, however, “the right to seek injunctive relief under section 17200 is not dependent on the right to seek restitution; the two are wholly independent remedies.” See Clayworth v. Pfizer, Inc., 49 Cal.4th 758, 790, 111 Cal.Rptr.3d 666, 233 P.3d 1066 (2010) (rejecting argument that plaintiffs alleging claim under § 17200 “could not seek injunctive relief unless they could also seek restitution”); see also Fulford v. Logitech, Inc., 2009 WL 1299088, at *1 (N.D.Cal.2009) (noting “a number of courts, subsequent to the enactment of the UCL standing requirement ..., have found [the] plaintiff has standing under the UCL, irrespective of any such plaintiff's inability to seek restitution from the defendant”); G & C Auto Body, Inc. v. GEICO General Ins. Co., 2007 WL 4350907, at *3-5 (N.D.Cal.2007) (holding, although plaintiffs could not establish entitlement to restitution, plaintiffs had standing to seek injunction based on plaintiffs' “loss of business caused by [d]efendants' steering of customers away from [p]laintiffs' [businesses]”); White v. Trans Union, LLC, 462 F.Supp.2d 1079, 1083 (C.D.Cal.2006) (holding that although plaintiffs “would be required to show that [defendant] took money directly from them in order to obtain [restitution], no such burden exists [ ] where [p]laintiffs seek only injunctive relief” under § 17200). Consequently, any inability by Finelite to state a claim for restitution does not constitute a bar to Finelite's seeking injunctive relief.

Id. at *2 (footnotes omitted) (emphasis added).  Finelite confirms that Prop. 64 did not do away with UCL competitor actions for injunctive relief. 

New Unfair Practices Act decision: Bay Guardian Co. v. New Times Media LLC

In Bay Guardian Co. v. New Times Media LLC, ___ Cal.App.4th ___ (Aug. 11, 2010), the Court of Appeal (First Appellate District, Division One) construed Business & Profession Code section 17043, which is part of the Unfair Practices Act (adjacent to the UCL).  Section 17043 reads:

It is unlawful for any person engaged in business within this State to sell any article or product at less than the cost thereof to such vendor, or to give away any article or product, for the purpose of injuring competitors or destroying competition.

(Emphasis added.) The Court of Appeal first addressed the statute's scienter requirement (which the UCL itself does not share), and explained:

The intent requirement imposed by section 17043 is an especially stringent one. “Section 17043 uses the word ‘purpose,’ not ‘intent,’ not ‘knowledge.’ ” (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., supra, 20 Cal.4th 163, 174.) Therefore, the California Supreme Court has concluded “that to violate section 17043, a company must act with the purpose, i.e., the desire, of injuring competitors or destroying competition.” (Id. at pp. 174–175; see also Chicago Title Ins. Co. v. Great Western Financial Corp. (1968) 69 Cal.2d 305, 323 [70 Cal.Rptr. 849, 444 P.2d 481]; Fisherman’s Wharf Bay Cruise Corp. v. Superior Court, supra, 114 Cal.App.4th 309, 330.)

Slip op. at 16.  However, "section 17043 does not require an anticompetitive impact. '[A]n injurious effect is not an essential element of the violation. The violation is complete when sales below cost are made with the requisite intent and not within any of the exceptions.' (People v. Pay Less Drug Store (1944) 25 Cal.2d 108, 113–114 [153 P.2d 9].)" Id.

The main point of contention was over the defendant's asserted "recoupment defense," i.e., whether "'objectively reasonable probability of recouping' losses 'through later monopoly pricing' must be established by the plaintiff in a section 17043 action." Id. at 11. The Court of Appeal answered that question in the negative. Id. at 11-20. 

The rest of the opinion focuses on several claims of instructional error and other issues. 

New UCL competitor decision: Silvaco Data Systems v. Intel Corp.

Silvaco Data Systems v. Intel Corp., ___ Cal.App.4th ___ (Apr. 29, 2010) is a case for misappropriation of trade secrets in which the plaintiff also brought a UCL claim.  See pp. 37-41 for the Sixth District's discussion of standing (which, strangely, makes no mention of Tobacco II, a case undoubtedly relevant to the discussion). 

Recent UCL "unfair" prong case: Drum v. San Fernando Valley Bar Association

In Drum v. San Fernando Valley Bar Association, ___ Cal.App.4th ___ (Feb. 24, 2010), the Court of Appeal (Second Appellate District, Division Five) upheld a judgment entered after the defendant's demurrer to the plaintiff's UCL claim was sustained without leave to amend. 

Plaintiff was a former attorney and private mediator who sought to buy the San Fernando Valley Bar Association's membership list so that he could market his services to its members.  Slip op. at 2.  The Association refused to sell it to him, so he filed suit under the UCL seeking a mandatory injunction.  Id.  The Court of Appeal held (without deciding whether this was a "consumer" or a "competitor" action) that the Association's conduct was not "unfair" under any of the three formulations:

A voluntary bar association’s unilateral refusal to sell its membership list to any particular buyer, even if the association’s reason was to protect some of its members from price competition, is not an “unlawful, unfair or fraudulent business act or practice” under the UCL (§ 17200).

Id. at 5.  The Court of Appeal also observed that plaintiff "did not allege that he lost or expended or was denied any money or property as the result of the Association’s refusal to sell him its membership mailing list," and therefore lacked Prop. 64 standing to bring the action.  Id. at 4.

Recent Ninth Circuit UCL competitor decision: Sybersound Records, Inc. v. UAV Corp.

In Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137 (9th Cir. 2008), the Ninth Circuit construed the UCL in the context of a competitor action. The plaintiff, a producer of karaoke records, alleged that the defendant, a competing karaoke producer, falsely represented to its customers (who are "distributors and retailers that resell these records to the public") that all songs on their records are 100% licensed for copyright purposes. This conduct, the plaintiff alleged, gave the defendant a competitive advantage, and the plaintiff lost money as a result. Id. at 1141, 1152 & n.7. The district court dismissed the plaintiff's UCL claim, and the Ninth Circuit affirmed.

As an initial matter, the Ninth Circuit set forth the standards governing UCL "unlawful," "unfair," and "fraudulent" prong claims in competitor actions, notably reciting the pre-Prop. 64 formulation of "fraudulent":

California’s statutory unfair competition laws broadly prohibit unlawful, unfair, and fraudulent business acts. Korea Supply Co., 63 P.3d at 943. Unlawful acts are “anything that can properly be called a business practice and that at the same time is forbidden by law . . . be it civil, criminal, federal, state, or municipal, statutory, regulatory, or court-made,” where court-made law is, “for example a violation of a prior court order.” Nat’l Rural Telecomm. Coop. v. DIRECTV, Inc., 319 F. Supp. 2d 1059, 1074 & n.22 (C.D. Cal. 2003) (quoting Smith v. State Farm Mut. Auto. Ins. Co., 113 Cal. Rptr. 2d 399, 414 (Ct. App. 2001); Saunders v. Superior Court, 33 Cal. Rptr. 2d 438, 441 (Ct. App. 1994)) (internal quotations omitted). Unfair acts among competitors means “conduct that threatens an incipient violation of an antitrust law, or violates the spirit or policy of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition.” Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co., 973 P.2d 527, 544 (Cal. 1999). Finally, fraudulent acts are ones where members of the public are likely to be deceived. Nat’l Rural Telecomm. Coop., 319 F. Supp. 2d at 1077-78.

Id. at 1151-52. In the Ninth Circuit's view, this particular UCL claim was predicated largely on the terms of the contracts between the defendant karaoke producer and the retailers/distributors, which are what obligated the producer to obtain full copyright licenses for the songs in the first place:

We first address the claims based on contracts and misrepresentations to which Sybersound was not a party, namely the misrepresentations to the Customers and copyright holders about payment of royalties and licenses, which sound in contract law. Under the sweeping standing provisions of California’s UCL, “[s]ection 17200 does not require that a plaintiff prove that he or she was directly injured by the unfair practice or that the predicate law provides for a private right of action.” Gregory v. Albertson’s Inc., 128 Cal. Rptr. 2d 389, 392 (Ct. App. 2002). “[A] breach of contract may form the predicate for a section 17200 claim, provided it also constitutes conduct that is unlawful, or unfair, or fraudulent.” Nat’l Rural Telecomm. Coop., 319 F. Supp. 2d at 1074 (internal quotation and citation omitted). Sybersound, however, has not pled that the breaches of contract are independently unlawful, unfair, or fraudulent, merely that the Corporation Defendants do not pay royalties or acquire licenses from other co-owners, in breach of their contracts with licensors and the Customers.

Id. at 1152 (footnote omitted). The Ninth Circuit concluded, for reasons akin to the concerns that underlie the equitable abstension doctrine, that the plaintiff should not be allowed to bring these UCL claims on behalf of the sophisticated contracting parties:

Because the unfair competition claim is based upon the misrepresentations that occurred in separate business relationships among karaoke records producers, licensors, and the Customers, the court would be placed in the awkward situation of enforcing private contracts among sophisticated parties who are not all parties to this lawsuit. See Gregory, 128 Cal. Rptr. 2d at 396 (dismissing a UCL claim and noting that the specific remedy sought under the UCL would “cause the court to assume the roles of real estate broker or property manager . . . [and] require the court to make competitive business judgments.” (internal quotation omitted)).

In this case, forcing “Defendants to fully license their products” and enforcing sales and royalties contracts through this litigation may “leave victims worse off than they would be if they filed individual actions against [defendants].” Rosenbluth Int’l, Inc. v. Superior Court, 124 Cal. Rptr. 2d 844, 847 (Ct. App. 2002) (dismissing a UCL claim that was based on a contract where the public in general was not harmed by the defendant’s unlawful practices, but where the victims of the unlawful actions were sophisticated corporations that negotiated their individual contracts with defendants). Courts are institutionally ill-suited to enforce and superintend private contracts among business entities where the concerned entities themselves are not parties to the suit.

Id. at 1153. As for any non-contract-based misrepresentations, the Ninth Circuit disposed of them as follows:

Sybersound’s allegations that [the defendants] falsely told the Customers that Sybersound’s karaoke recordings infringed on copyrights also fail to state a claim. Since Sybersound cannot state a claim under the Lanham Act or the Copyright Act and has not pled any other unlawful acts under which this claim would fall, it cannot meet the unlawful conduct prong of the UCL. Moreover, Sybersound has also not pled an act that would be an incipient violation of antitrust law, as required under Cel-Tech for claims against competitors. Finally, Sybersound has not pled that these misrepresentations are likely to deceive members of the general public.

Accordingly, we conclude that the UCL claim was also properly dismissed by the district court.

Id. This opinion's approach to the UCL is much more conservative than that of another Ninth Circuit panel in a case handed down just two months later. Williams v. Gerber Products Co., 523 F.3d 934 (9th Cir. 2008) (discussed in this blog post).

Craigslist sues eBay for UCL violations

On May 14, 2008, the Recorder reported on a new UCL competitor action filed by Craigslist against eBay. Zusha Elinson, "Craigslist Fires Back at eBay," The Recorder (May 14, 2008) (subscription). The complaint, filed in San Francisco Superior Court on May 13, 2008, is very detailed and quite interesting. It separately alleges violations of the "unlawful" and "unfair" prongs, and asserts violations of certain common-law rules (as well as various statutes) as the basis for the "unlawful" prong claim. Complaint at pp. 15-19. It correctly alleges the post-Cel-Tech formulation of the "unfair" prong (which governs competitor actions). Id. at 16-17.

On May 19, 2008, the Daily Journal reported that "Craigslist and eBay Vie for Edge in Venue" (subscription). The Daily Journal article reports that by the time Craiglist filed suit in San Francisco Superior Court (on May 13), eBay had already sued Craigslist in Delaware Chancery Court (on April 30). "'It's a corporate blood war,' said Fred Lambert, a professor at UC Hastings College of the Law who is an expert on corporations and securities law."

"SF Weekly penalty could rise to $15.6 million"

In today's San Francisco Chronicle, Bob Egelko reports that "SF Weekly penalty could rise to $15.6 million":

Judge Marla Miller of San Francisco Superior Court said she believes she's required under state law to increase the damages and issue an injunction in light of the jury's March 5 verdict that the SF Weekly, part of a national chain of alternative newspapers, cut its advertising rates below its costs to undermine the locally owned Guardian.

The jury awarded $6.3 million to the Guardian for its losses. Miller, in what she described as a tentative decision, said Friday she would triple the portion of those damages that equals one year of losses, bringing the total to $15.6 million, and prohibit the Weekly from selling below-cost ads in order to hurt the Guardian.

My prior post on this interesting Unfair Practices Act (and UCL) case is here. Business & Professions Code section 17082 requires trebling of any damages award in a UPA case ("any plaintiff in any such action shall be entitled to recover three times the amount of the actual damages, if any, sustained by the plaintiff"). It is unclear why the trebling would be limited to "one year of losses," however.

UPDATE: On May 20, 2008, the Daily Journal reported that "Judge Increases Jury Award for S.F. Newspaper" (subscription). According to the article, Judge Miller trebled the damages to $15.6 million and "issued a 10-year injunction forbidding SF Weekly, the Guardian's competitor and the defendant in the unfair competition case, from selling display advertisements below cost."

Verdict in rare Unfair Practices Act case

Today's Recorder reports on a $15.6 million jury verdict in a case brought under the Unfair Practices Act (Bus. & Prof. Code §§17000-17101). Matthew Hirsch, "Newspaper Wins $15.6M in Suit Over Ads" (subscription), The Recorder (Mar. 6, 2008). According to the article, the lawsuit was predicated on the defendant newspaper's alleged violation of Business & Professions Code section 17043, which reads:

It is unlawful for any person engaged in business within this State to sell any article or product at less than the cost thereof to such vendor, or to give away any article or product, for the purpose of injuring competitors or destroying competition.

The Recorder also posted a copy of the jury verdict. It is unclear from the article whether a UCL claim was also pleaded, but my guess would be yes. That claim would be decided by the judge, not the jury. The jury's finding that the defendant violated the UPA probably compels the judge to also find a violation of the UCL's "unlawful" prong. It is doubtful, however, that any monetary relief that the UCL might afford would exceed the damages that the jury already awarded. If the judgment is appealed, the case is sure to be an interesting one to follow.

The San Francisco Chronicle also reports that "Bay Guardian wins suit with SF Weekly." In that article, a lawyer for SF Weekly is quoted as saying that an appeal is planned.

UPDATE: In an article in which I am quoted, Competition Law 360 reports that "$15.6M Awarded In San Francisco Newspaper Clash" (March 6, 2008) (subscription).

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.

Recent UCL "unfair" prong decision: RLH Industries v. SBC Communications

RLH Industries, Inc. v. SBC Communications, Inc., ___ Cal.App.4th ___ (Nov. 3, 2005) (Fourth Appellate District, Division Three) is another recent UCL opinion in an action between competitors. Like Eddins v. Sumner Redstone, ___ Cal.App.4th ___ (Nov. 22, 2005), discussed in the post immediately below, it involved a Cartwright Act claim and construed Chavez v. Whirlpool Corp., 93 Cal.App.4th 363 (2001). The Court of Appeal applied the Cel-Tech formulation of "unfair," holding that "nothing suggests [the defendant's challenged] policy 'threatens an incipient violation' of the Cartwright Act, violates its policy or spirit, or otherwise threatens competition. .... Even if some unfair competition causes of action can survive independently of an actual antitrust violation, this one does not." Slip op. at 8-9 (citing Chavez, 93 Cal.App.4th at 375). The Court of Appeal affirmed the trial court's order granting summary judgment to one of the two defendants.

As for the other defendant, summary judgment should not have been granted. The Court of Appeal rejected that defendant's argument that the United States Constitution's dormant commerce clause bars UCL and antitrust claims against an out-of-state defendant for out-of-state anticompetitive conduct that impacts Californians. Slip op. at 14-16.

New UCL "unfair" prong decision: Eddins v. Sumner Redstone

In Eddins v. Sumner Redstone, ___ Cal.App.4th ___ (Nov. 22, 2005), the Court of Appeal (Second Appellate District, Division Eight) construed the UCL's "unlawful" prong in the context of an action between business competitors. The Court determined that the trial court properly granted summary adjudication of the plaintiffs' Cartwright Act claim, but erred in also granting summary adjudication of the UCL claim. The trial court relied on Chavez v. Whirlpool Corp., 93 Cal.App.4th 363, 375 (2001), which held that conduct is not "unfair" within the meaning of the UCL if it is "deemed reasonable and condoned under the antitrust laws." Citing Cel-Tech, the Court of Appeal found that Chavez only applies to a UCL "unlawful" prong claim predicated on the Cartwright Act, but not to a UCL "unfair" prong claim. I've always thought that this aspect of Chavez was inconsistent with Cel-Tech, so it's nice to see another panel decline to follow it.

New UCL decision: People's Choice Wireless, Inc. v. Verizon Wireless

Last Thursday, the Court of Appeal (Second Appellate District, Division Two) handed down People's Choice Wireless, Inc. v. Verizon Wireless, ___ Cal.App.4th ___ (July 28, 2005), and held that the trial court properly sustained the defendant's demurrer to the plaintiff's UCL claim. Because it was an action between competitors, the Court applied the post-Cel-Tech formulation of "unfair." This case probably represents the most detailed exposition of the post-Cel-Tech formulation in a competitor action since Cel-Tech itself was decided.