Federal decision on UCL "unlawful" prong: Gabana Gulf Distribution, Ltd. v. GAP Intern. Sales, Inc.

In Gabana Gulf Distribution, Ltd. v. GAP Intern. Sales, Inc., 2008 WL 111223 (N.D. Cal. Jan. 9, 2008), the Court (Judge Charles R. Breyer) held that a UCL "unlawful" prong claim may be predicated on violation of a common-law rule (specifically, breach of the implied covenant of good faith and fair dealing):

Because the Court has denied summary judgment to Gap on the breach of covenant claim, summary judgment must also be DENIED as to the § 17200 claim because Gabana may use the covenant claim as a predicate for § 17200 liability. Although the state of § 17200 jurisprudence is in rapid flux, California courts have not yet foreclosed common law theories--such as breach of the covenant of good faith--as a basis for actions pursuant to § 17200. See Mercado v. Allstate Ins. Co., 340 F.3d 824, 828 n. 3 (9th Cir.2003); Diaz v. Allstate Ins. Group, 185 F.R.D. 581, 595 (C.D.Cal.1998) ("[A]llegations of fraudulent and unfair business activity are sufficient to state a cause of action for relief under the UCA.").

As I explained in this prior post, such a holding is significant because few decisions have confirmed that an "unlawful" prong claim may be predicated on violation of a common-law rule (although plenty of published opinions say in general terms that violations of "court-made" law are actionable under the "unlawful" prong).