California Litigation
JULY 2004
Proposed Changes to California Unfair Competition Law
(B&P Section 17200, et seq.) are Likely to be Taken to
California Voters in the November 2004 Election
In the recent past, business groups and their supporters
have attempted to materially alter the provisions of the
California Unfair Competition Law (“UCL”) by
proposing new legislation in the California Legislature.
However, all such efforts have either stalled or failed.
In 2003 alone, eleven separate bills were introduced in
the California Legislature to reform the UCL, all of
which were eventually defeated in their first policy
committee hearing or abandoned as futile by year-end.
Fed up with the California legislative process,
businesses and their supporters have turned to the
infamous California initiative process. This initiative
process allows proposed changes in state law to be
taken directly to California voters for approval. In
October 2003, a coalition calling itself “Californians to
Stop Shakedown Lawsuits”
(www.stopshakedownlawsuits.com) began circulating
an initiative measure to be placed on the November
2004 election ballot. By April 2004, the coalition had
submitted approximately 650,000 signatures to county
election officials to qualify the measure for the
November general election ballot. Given that only
373,816 valid signatures are required for qualification,
it is virtually certain that the initiative will be presented
to voters at that time.
BACKGROUND
California’s UCL, also known as “Section 17200,”
prohibits business practices that are “unlawful,”
“unfair,” or “fraudulent,” as well as false and
misleading advertising. Section 17204 of the Business
and Professions Code allows “any person” — even
someone who suffers no injury — to act as a “private
attorney general” to sue on behalf of the general public
to enforce its provisions. A “private attorney general”
may obtain an injunction barring a business practice
and may force a business to pay restitution to people
affected by the prohibited business practice. A “private
attorney general” may also recover attorneys’ fees for
bringing suit, which has created a “bounty hunter”
mentality. California business leaders have long
asserted that plaintiffs’ lawyers abuse the “private
attorney general” features of Section 17200.
THE BACKERS OF THE INITIATIVE
The initiative to amend the UCL is principally backed
by the Civil Justice Association of California, an
industry-backed group (formerly known as the
Association for California Tort Reform), the California
Chamber of Commerce, the California Motor Car
Dealer Association, and the Coalition for Reform of
Frivolous Lawsuits. Numerous state and local officials
have also indicated that they will back the initiative.
The speculation is that Governor Arnold
Schwartzenegger will also support the measure.
THE PROVISIONS OF THE INITIATIVE
The Statement of Declarations of Purpose that precedes
the proposed changes to the UCL sets forth in no
uncertain terms the reasons for the initiative. It states
Kirkpatrick & Lockhart LLP
that the UCL is “being misused by some private
attorneys” who, among other things, “file lawsuits
where no client has been injured in fact, [and] for
clients who have not used the defendant’s product or
service, viewed the defendant’s advertising, or had any
other business dealing with the defendant.” The
preamble further states that “[f]rivolous unfair
competition lawsuits clog our courts and cost
taxpayers”, and explains that the burden of these
lawsuits threaten both jobs and economic prosperity in
California.
The initiative itself proposes the following principal
amendments to the UCL:
BATTLE LINES HAVE BEEN DRAWN
The battle over amendments to the UCL will pit old
rivals against one another. The powerful personal
injury attorneys’ lobby, and others, who have been
successful in derailing significant legislative changes to
the UCL in the past are gathering their war chests for
the battle with businesses and conservative legislators
and groups. It is sure to be a spirited fight, and pundits
predict that California voters will be inundated with an
avalanche of pro and con appeals for their votes before
Election Day. If your business has been affected, or is
potentially affected, by the UCL and the proposed
amendments, now might be the time to review the
initiative and take a side in the battle for reform.
1. It requires anyone other than the Attorney General
of California or a local public prosecutor who seeks
relief under the act to have suffered injury in fact
and to have lost money or property as a result of the
alleged act of unfair competition.
2. It requires anyone other than the Attorney General
of California or a local public prosecutor who seeks
to pursue a representative claim under the act to
satisfy the requirements of Section 382 of the Code
of Civil Procedure relating to class actions.
3. It requires all penalties collected by the Attorney
General of California or a local public prosecutor
under the act to be used exclusively by the Attorney
General or public prosecutorial agency for the
enforcement of consumer protection laws.
4. It specifies that the provisions of the initiative shall
supercede and nullify any inconsistent legislation
enacted after July 1, 2003.
PAUL W. SWEENEY JR.
psweeney@kl.com
310.552.5055
If you would like to discuss California’s Unfair Competition
Law in greater detail, please contact the author of this artticle,
or any one of the following K&L California Litigation Group
lawyers:
Los Angeles
Richard P. Crane
310.552.5089
rcrane@kl.com
Dennis M. P. Ehling 310.552.5090
dehling@kl.com
Robert Feyder
310.552.5023
rfeyder@kl.com
Michael Mallow
310.552.5038
mmallow@kl.com
Tom Petrides
310.552.5077
tpetrides@kl.com
David Schack
310.552.5061
dschack@kl.com
Ron Stevens
310.552.5000
rstevens@kl.com
Paul Sweeney Jr.
310.552.5055
psweeney@kl.com
Fred Ufkes
310.552.5079
fufkes@kl.com
San Francisco
Jon Cohen
Ed Sangster
415.249.1001
415.249.1028
jcohen@kl.com
esangster@kl.com
Addresses
10100 Santa Monica Boulevard, Seventh Floor
Los Angeles, California 90067
Four Embarcadero Center, 10th Floor
San Francisco, California 94111
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This bulletin is for informational purposes and does not contain or convey legal advice. The information herein
should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer.
© 2004 KIRKPATRICK & LOCKHART LLP.
ALL RIGHTS RESERVED.