The UCL Practitioner

S.B. 376 - UCL's public prosecutor provisions amended

Legal Pad reports that on June 28, 2007, Governor Schwarzenegger signed S.B. 376, which amends Business and Professions Code sections 17204 and 17206 to permit the City and County of San Francisco to continue to pursue public UCL enforcement actions even if its population falls below 750,000. Now, public UCL enforcement actions may be brought by:

the Attorney General or any district attorney or by any county counsel authorized by agreement with the district attorney in actions involving violation of a county ordinance, or any city attorney of a city having a population in excess of 750,000, or by a city attorney in any city and county and, with the consent of the district attorney, by a city prosecutor in any city having a full-time city prosecutor ....

Bus. & Prof. Code § 17204 (as amended). A Recorder article from February 2006 has more on a previous, but unsuccessful, effort to pass similar legislation. My February 2006 blog post on the subject is also of interest.

"'Payday loan' firm sued by city attorney"

Yesterday's San Francisco Chronicle reported that City Attorney Dennis Herrera filed a UCL action against a group of "payday loan" firms for "marketing of short-term installment loans at unlawful interest rates to low-income borrowers." A copy of the complaint, which seeks injunctive relief, restitution, and civil penalties under the UCL, is available at this link, along with the city attorney's press release.

The complaint invokes the UCL's "unlawful" prong by alleging violations of the California Deferred Deposit Transaction Law (Fin. Code §§23000 et seq.), the California Finance Lenders Law (Fin. Code §§22000 et seq.), and other laws. The complaint also invokes the "unfair" prong by alleging that the defendants' "lending and brokering practices constitute unfair business practices because they offend established public policy, and because the harm they cause to consumers in California greatly outweights any benefits associated with those practices." This, of course, is the pre-Cel-Tech formulation of "unfair." The complaint's "aiding and abetting" allegations are also interesting.

"Judge Limits Hiring of Outside Law Firms"

Today's Daily Journal reports (subscription) on what sounds like a very interesting order by Judge Komar in Santa Clara County Superior Court. Citing People ex rel. Clancy v. Superior Court, 39 Cal.3d 740 (1985), he ruled that public-entity plaintiffs may not retain outside attorneys on a contingency fee basis to handle public nuisance lawsuits (in this case, against the lead paint industry). A copy of the order is available at this link (via the blog Valueplays). It sounds like an appeal is inevitable. The reason I find this interesting is I wonder what impact, if any, this development might have on public entities' efforts to retain outside counsel to handle UCL litigation (an idea that was discussed a lot in the wake of Prop. 64).

UPDATE: Today's Recorder also has an article on the decision ("Judge Stops Fee Pacts in Lead Paint Suit") (subscription) that expresses that very concern:

Some lawyers from both sides say Komar's ruling, even if upheld on appeal, would only apply to affirmative litigation based on a public nuisance cause of action. Still, [Santa Clara County Counsel Ann] Ravel is likely to appeal.

"I believe Judge Komar is clearly wrong, and if that decision stands, it will impair the ability of cash-strapped public entities from proceeding against defendants who create nuisances in their communities," Ravel said.

The types of suits Ravel is concerned about include not only environmental and zoning-related suits brought as public nuisance claims, but also tobacco litigation and other claims that might be brought under § 17200 of the state's Business and Professions Code.

"The reasoning could certainly impact those cases," Ravel said.

A.B. 759 - proposed amendment to UCL's public prosecutor provisions

The Recorder recently reported on amendments to A.B. 759, which would ensure that the San Francisco City Attorney may continue to bring UCL actions on behalf of the general public. Business & Professions Code section 17204 permits "any city attorney of a city, or city and county, having a population in excess of 750,000" to seek relief on behalf of the general public. According to the Recorder article, some defendants have begun challenging the City Attorney's standing, arguing that San Francisco's population has dropped below 750,000. The 2004 census indicates that the population shrank by over 4% since 2000 and is now estimated at 744,230.

A.B. 759 would not lower the 750,000 minimum, but would create, in effect, an exception for San Francisco. The Assembly Floor Analysis states that A.B. 759:

Ensures that the City and County of San Francisco will maintain its standing to bring actions under California's Unfair Competition Law (UCL). Specifically, this bill ensures San Francisco's standing by authorizing the city attorney of a consolidated city and county to bring an action under the UCL.

San Francisco is the only consolidated city and county in California. As a resident of San Francisco for almost ten years now, I see no reason why a population drop of 6,000 residents should result in dismissal of the city's pending enforcement actions, or why the city's efforts in that regard should be halted. San Francisco City Attorney Dennis Herrera's 2004 speech, "Public Prosecution: Using §17200 to Police the Marketplace," is of interest. The bill passed in the Assembly on January 30 and is now being reviewed in the Senate Committee on the Judiciary.

More on California v. Altus Finance, S.A.

As promised, here are some more thoughts on California v. Altus Finance, S.A., ___ Cal.4th ___ (Aug. 15, 2005).

The case involved the scope of the Attorney General's power to obtain UCL remedies against an insolvent insurance company whose assets were under control of the Insurance Commissioner. In 1999, the AG intervened in a qui tam action against the insolvent insurer, which was later removed to federal court. The Ninth Circuit asked the California Supreme Court to decide whether the AG's suit could proceed concurrently with another action (also removed to federal court) that the Insurance Commissioner was pursuing. (Slip op. at 1-5.) The Supreme Court separately addressed each UCL remedy that the AG sought (restitution, civil penalties, and injunctive relief).

The opinion (authored by Justice Moreno) mentions Prop. 64 several times, but does not breathe a word about retroactivity, which is logical, since Prop. 64 did not really change anything for public prosecutors. A few things are interesting about the opinion from the perspective of private UCL litigation.

First, the Court quotes the post-Prop. 64 language about "injury in fact" even though there was no reason to mention it given that the AG's suit was based, of course, on the public prosecutor provisions:

"Through the UCL a plaintiff may obtain restitution and/or injunctive relief against unfair or unlawful practices in order to protect the public and restore to the parties in interest money or property taken by means of unfair competition." (Kraus v. Trinity Management Services, Inc. (2000) 23 Cal.4th 116, 126 (Kraus); see Bus. & Prof. Code, § 17204.) A UCL action may be prosecuted by the Attorney General, by certain specified local law enforcement officials, "or by any person who has suffered injury in fact and has lost money or property as a result of such unfair competition.” (Ibid.)

(Slip op. at 19-20; see also id. at 25-26 (also quoting Prop. 64).) The quotation from Kraus suggests that the Court believes that the underlying definition of "restitution" is unchanged, and that Prop. 64 only affected who can file the suit.

Next, the Court held:

Business and Professions Code section 17205 provides: "Unless otherwise expressly provided, the remedies or penalties provided by [the UCL] are cumulative to each other and to the remedies or penalties available under all other laws of this state." Therefore, the fact that there are alternative remedies under a specific statute does not preclude a UCL remedy, unless the statute itself provides that the remedy is to be exclusive. (See Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 573 (Stop Youth Addiction).) We conclude that Insurance Code section 1037, subdivision (f) is such an express limit on the authority of the Attorney General to seek a restitutionary remedy under the UCL.

(Slip op. at 20.) Such express limits are relatively rare; most published cases involve less clear-cut situations. As the Court observed: "We have left open the question whether Business and Professions Code section 17205 precludes the Legislature from impliedly repealing a UCL remedy if the two are 'clearly repugnant and so inconsistent that the two cannot have concurrent operation.' (Stop Youth Addiction, supra, 17 Cal.4th at p. 574.) Because we decide the limit on UCL remedies is express in the present case, we need not decide that question." (Slip op. at 20 n.6.)