THE DEFENSE OF PRIVATE AND
GOVERNMENTAL UNFAIR COMPETITION LAW CLAIMS
Gail E. Lees
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, CA 90071
(213) 229-7000
glees@gibsondunn.com
2003 Gail E. Lees
Gibson, Dunn & Crutcher
All Rights Reserved
TABLE OF CONTENTS
Page
I. SCOPE OF STATUTES ............................................................................................... 1
A.
Substantive Violations................................................................................ 1
1.
Unfair Competition Law ................................................................... 1
a.
Unlawful................................................................................ 2
b.
Unfair .................................................................................... 3
c.
Fraudulent ............................................................................ 6
d.
Business Act or Practice....................................................... 7
e.
Deceptive Advertising ........................................................... 8
f.
False Advertising Act Violation ............................................. 9
2.
False Advertising Act ...................................................................... 9
3.
Consumers Legal Remedies Act ..................................................... 9
B.
Practical Reach of the Statutes ................................................................ 10
C.
Statutory Enforcement ............................................................................. 15
D.
1.
Governmental Enforcement .......................................................... 15
2.
Private Enforcement...................................................................... 15
a.
Unfair Competition Law ...................................................... 15
b.
Consumers Legal Remedies Act ........................................ 16
c.
False Advertising Act .......................................................... 17
Remedies Under The Unfair Competition Act .......................................... 17
1.
Monetary Penalties ....................................................................... 17
a.
Civil Penalties Under The UCL. .......................................... 17
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Page(s)
b.
2.
E.
Criminal Penalties Under The UCL. ................................... 20
Injunction and Restitution .............................................................. 20
a.
Injunction. ........................................................................... 21
b.
Restitution. ......................................................................... 21
c.
Compensatory and Punitive Damages Not Available. ........ 22
Remedies Under The False Advertising Act. ........................................... 22
II. INTERNAL INVESTIGATIONS.................................................................................. 22
A.
Advisability ............................................................................................... 22
B.
Preserving the Attorney-Client Privilege and Attorney Work Product
Doctrine ................................................................................................... 23
III. GOVERNMENTAL ENFORCEMENT....................................................................... 23
A.
Possibility of Multifaceted Attack .............................................................. 23
B.
Government's Limited Resources to Pursue Case to Trial ...................... 23
C.
Adverse Publicity Can Create a Two-Front War ...................................... 24
IV. PRIVATE ENFORCEMENT ..................................................................................... 24
A.
Private Actions ......................................................................................... 24
B.
Attorneys' Fees ........................................................................................ 24
C.
Consumer Attorney Associations ............................................................. 25
V. PUBLICITY ISSUES ................................................................................................. 25
VI. INSURANCE COVERAGE ...................................................................................... 25
VII. CLASS ACTIONS ................................................................................................... 27
A.
Prerequisites ............................................................................................ 27
B.
Additional Requirements .......................................................................... 28
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Page(s)
VIII. DEFENSES ........................................................................................................... 29
A.
Fraud and Class Action Defenses Are Unavailing ................................... 29
B.
One Hundred Six Defense Arguments ..................................................... 30
1.
Abstention ..................................................................................... 30
2.
Adequate Remedy at Law ............................................................. 31
3.
Administrative Law Doctrines ........................................................ 32
a.
Exhaustion of Administrative Remedies ............................. 32
b.
Primary Jurisdiction ............................................................ 32
c.
Deference to Administrative Interpretation ......................... 34
4.
Alternative Source ......................................................................... 35
5.
Amendment or Repeal of Underlying Law ..................................... 36
6.
Anti-SLAPP Motion to Strike ......................................................... 37
7.
Arbitration ...................................................................................... 37
a.
Federal Preemption Under Federal Arbitration Act ............. 37
b.
State Arbitration Law .......................................................... 38
c.
Class Claims ...................................................................... 40
8.
Breach of Contract ........................................................................ 41
9.
Business Judgment Rule .............................................................. 41
10.
Business Justification / "Everybody Does It" ................................. 41
11.
Class Certification ......................................................................... 42
12.
Commercial Relationship .............................................................. 43
13.
Constitutional Defenses ................................................................ 44
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Page(s)
a.
Case or Controversy .......................................................... 44
b.
Commerce Clause .............................................................. 45
c.
Double Jeopardy ................................................................ 46
d.
Due Process Attacks .......................................................... 47
(1)
Procedural Due Process .......................................... 47
(2)
Substantive Due Process ........................................ 48
e.
Equal Protection Clause ..................................................... 51
f.
Excessive Fines Clause ..................................................... 51
g.
Federal Preemption ............................................................ 52
h.
First Amendment ................................................................ 60
(1)
Disclaimer ................................................................ 64
(2)
Political Conduct ...................................................... 64
(3)
Deceptive Advertising .............................................. 65
(4)
Opinion .................................................................... 66
(5)
"Of and Concerning" ................................................ 66
i.
Selective Prosecution ......................................................... 66
j.
Separation of Powers ......................................................... 66
14.
Consumer Survey or Expert Testimony ........................................ 67
15.
Context .......................................................................................... 68
16.
Cy Pres ......................................................................................... 69
17.
Contractual Limitation of Damages ............................................... 69
18.
Damages Unavailable ................................................................... 70
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19.
Disgorgement Unavailable ............................................................ 72
20.
De Minimis Violation...................................................................... 73
21.
Deception Not Shown ................................................................... 73
22.
Dischargeability ............................................................................. 75
23.
Discontinued or Completed Act ..................................................... 75
24.
Enjoining Breach of Contract ........................................................ 77
25.
Evidence Regarding Quasi-Class Members ................................. 77
26.
Equitable Defenses ....................................................................... 77
27.
Estoppel ........................................................................................ 78
28.
Extra-Territorial Reach .................................................................. 78
29.
Failure To Describe Claim With Reasonable Particularity ............. 81
30.
Failure To Read Contract .............................................................. 83
31.
Filed Rate Doctrine ....................................................................... 83
32.
Filing With California Attorney General ......................................... 83
33.
Flawed Injunction .......................................................................... 84
34.
Financial Condition........................................................................ 84
35.
Fluid Recovery .............................................................................. 85
36.
Full Disclosure............................................................................... 85
37.
Harm to Defendant ........................................................................ 85
38.
Future Criminal Conduct ............................................................... 86
39.
Good Faith .................................................................................... 86
40.
In Pari Delicto Defense ................................................................. 86
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41.
Injunction Against Ancillary Wrong ................................................ 87
42.
Insurance Agents .......................................................................... 87
43.
Joint and Several Liability ............................................................. 87
44.
Judicial Communications .............................................................. 88
45.
Jury Demands ............................................................................... 88
46.
Justification ................................................................................... 89
47.
Lack of Intent................................................................................. 89
48.
Legislative History ......................................................................... 89
49.
Manageability ................................................................................ 90
50.
Mandatory Injunctions ................................................................... 90
51.
No Bond ........................................................................................ 91
52.
No Causation ................................................................................ 91
53.
No Competitive or Consumer Injury .............................................. 91
54.
No Intent to Injure or Violate the Law ............................................ 93
55.
No Knowledge of Falsity ............................................................... 93
56.
No Likelihood of Confusion ........................................................... 93
57.
No Likelihood of Deception ........................................................... 94
58.
No Power to Declare Economic Policy .......................................... 96
59.
No Previous Finding Of Unfairness ............................................... 96
60.
No Private Right of Action ............................................................. 97
61.
No Receipt Of Benefits.................................................................. 99
62.
No Reliance ................................................................................ 100
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63.
No Threat of Future Violations .................................................... 100
64.
No Satisfaction of Traditional Equitable Requirements for
Injunction ..................................................................................... 101
65.
Non-Residents ............................................................................ 102
66.
Not Competent Plaintiff ............................................................... 102
67.
Not Commerce ............................................................................ 102
68.
Not a "Person"............................................................................. 103
69.
Not "Primary Business" ............................................................... 103
70.
Not a "Practice" ........................................................................... 104
71.
Not "Palming Off" ........................................................................ 105
72.
Not "Unfair" Where Contract or Law Requires ............................ 106
73.
Not Unfair .................................................................................... 106
74.
Not Unlawful ................................................................................ 110
75.
Parallel Statutory Scheme ........................................................... 115
76.
Parol Evidence Rule.................................................................... 116
77.
Preemptive Strike ........................................................................ 116
78.
Prior Case Pending ..................................................................... 117
79.
Public Entity Immunity ................................................................. 118
80.
Puffing ......................................................................................... 118
81.
Punitive Damages Standards Inapplicable .................................. 119
82.
Punitive Damages Unavailable ................................................... 119
83.
Rate Setting ................................................................................ 120
84.
Ratification or Waiver .................................................................. 121
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85.
Regulatory Approval.................................................................... 121
86.
Reliance on Advice of Counsel ................................................... 121
87.
Removal ...................................................................................... 122
a.
Federal Question .............................................................. 122
b.
Diversity............................................................................ 125
88.
Repetitive Litigation: Res Judicata and Collateral Estoppel ....... 125
89.
Restitution for Absent Parties ...................................................... 130
90.
Restitution Measure .................................................................... 131
91.
Restitution Without Injunction ...................................................... 132
92.
Securities Transactions ............................................................... 133
93.
Seller's Good Faith ...................................................................... 136
94.
Standing ...................................................................................... 136
95.
Statutes of Limitation................................................................... 141
96.
Statutory Interpretation................................................................ 143
97.
Subsequent Disclosure ............................................................... 143
98.
Summary Judgment .................................................................... 144
99.
Tolling of Statute of Limitations ................................................... 144
100.
Truth As Defense ........................................................................ 145
101.
Unclean Hands............................................................................ 147
102.
"Unfair" Act Not Actionable If Not Unlawful ................................. 147
103.
Unlawful Usurpation of Legislative Power ................................... 148
104.
Venue.......................................................................................... 149
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105.
Vicarious Liability ........................................................................ 150
106.
Waiver ......................................................................................... 151
IX. ATTORNEYS FEES............................................................................................... 151
X. RECOVERY OF COSTS ........................................................................................ 152
XI. SETTLEMENT ....................................................................................................... 152
A.
Class Actions. ........................................................................................ 152
1.
Fairness Hearing ......................................................................... 152
2.
Fiduciary Duty ............................................................................. 152
3.
Adequate Representative ............................................................ 153
B.
Quasi-Class Actions Under the UCL ...................................................... 153
C.
Private Letter Agreement ....................................................................... 155
D.
Adding True Class Claims ..................................................................... 155
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TABLE OF AUTHORITIES
Page(s)
CASES
A & M Records, Inc. v. Heilman, 75 Cal. App. 3d 554, (1977)..................................... 105
Abada v. Charles Schwab & co., 127 F. Supp. 2d 1101 (S.D. Cal. 2000) ................... 123
Abba Rubber Co. v. Seaquist, 235 Cal. App. 3d 1 (1991) ............................................. 91
Abbott v. Chemical Trust, 2001 U.S. Dist. LEXIS 6214 (D. Kan. 2001) ............... 109, 114
ABC Int'l Traders, Inc. v. Matsushita Elec. Corp., 38 Cal. App. 4th 398
(1996) ................................................................................................................ 83, 132
Abelleria v. District Court of Appeal, 17 Cal. 2d 280 (1941) .......................................... 32
Academy of Motion Picture Arts & Sciences v. Creative House Promotions,
944 F.2d 1446 (9th Cir. 1991) .............................................................................. 68, 94
Adams v. Murakami, 54 Cal. 3d 105, 108-09 (1991) ................................................... 119
Aetna Cas. & Sur. Co. v. Trans World Assurance Co., 745 F. Supp. 1524
(N.D. Cal. 1990) ......................................................................................................... 27
Aetna Cas. & Sur. Co. v. Watercloud Bed Co., 1988 U.S. Dist. LEXIS
17572 (C.D. Cal. Nov. 17, 1988) ............................................................................... 27
Aetna Fin. Co. v. Consumers Union (San Francisco Superior Court No.
926772) ................................................................................................................... 155
Aflex Corp. v. Underwriters Lab. Inc., 1989 U.S. Dist. LEXIS 6935 (C.D.
Mar. 21, 1989) ........................................................................................................... 66
Agroindustrias Vezel v. H.P. Schmid, Inc., 1991 U.S. Dist. LEXIS 18783
(N.D. Cal. 1991) ......................................................................................................... 41
Aguilar v. Atlantic Richfield Co., 25 Cal. 4th 826 (2001) ...................................... 106, 144
AICCO, Inc. v. Ins. Co. of N. Am., 90 Cal. App. 4th 579 (2001) ............ 33, 101, 121, 148
Aiello v. First Alliance Mortgage Co., 2002 U.S. Dist. LEXIS 844 (C.D. Cal.
2002) ................................................................................................................. 59, 109
Alaska Sport Fishing Ass'n v. Exxon Corp., 34 F.3d 769 (9th Cir. 1994) .................... 129
Alchemy II Inc. v. Yes! Entertainment Corp., 844 F. Supp 560 (C.D. Cal.
1997) ................................................................................................................. 73, 145
Alexandra v. Lucky Stores, Inc. (Alameda County S. Ct. No. 727750-4
(1994)) ..................................................................................................................... 128
Alicke v. MCI Communications, Inc., 111 F. 3d 909 (D.C. Cir 1997) ............................. 83
Alliance Ins. Co. v. Colella, 995 F.2d 944 (9th Cir. 1993) .............................................. 26
Allied Grape Growers v. Bronco Wine Co., 203 Cal. App. 3d 432 (1988) ... 7, 12, 97, 104
Allied-Bruce Terminix v. Dobson, 115 U.S. 834, 63 U.S.L.W. 4079 (1995) ................... 37
A-Mark Fin. Corp. v. Cigna Property and Cas. Cos., 34 Cal. App. 4th 1179
(1995) ........................................................................................................................ 26
America Online, Inc. v. Super. Ct. of Alameda County, 90 Cal. App. 4th 1
(2001) ................................................................................................................ 79, 150
American Booksellers Assn., Inc. v. Barnes & Noble, Inc., 135 F. Supp. 2d
1031 (N.D. Cal. 2001) ........................................................................................ 77, 114
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American Computech, Inc. v. National Med. Care, Inc., 1992 U.S. App.
LEXIS 6460 (9th Cir. 1992)...................................................................................... 120
American Fin. Servs. Ass'n v. FTC, 767 F.2d 957 (D.C. Cir. 1985)................................. 5
American Int'l Group, Inc. v. Superior Court of Los Angeles County,
234 Cal. App. 3d 749 (1991) ................................................................................ 54, 56
American Int'l Indus. v. Superior Court, 70 Cal. App. 4th 406 (1999) .......................... 127
American Med. Ass'n v. FTC, 638 F.2d 433 (2d Cir. 1980) ........................................... 62
American Philatelic Society v. Claibourne, 3 Cal. 2d 689 (1935) .................................... 6
American States Ins. Co. v. Canyon Creek, 786 F. Supp. 821 (N.D. Cal.
1991) ......................................................................................................................... 26
Americana Trading Inc. v. Russ Berrie & Co., 1988 U.S. Dist. LEXIS 15580
(N.D. June 27, 1988) ................................................................................................. 94
Andrews v. Trans Union Corp., 7 F. Supp. 2d 1056 (C.D. Cal. 1998) ................. 2, 22, 98
Aquino v. Credit Control Servs., 4 F. Supp. 2d 927 (N.D. Cal 1998) ........................... 114
Arriaga v. Cross Country Bank, 163 F. Supp. 2d 1189 (S.D. Cal. 2001) ................. 37, 40
As You Sow v. Sherwin-Williams Co., 1993 U.S. Dist. LEXIS 18310
(N.D. Cal. 1993) ....................................................................................................... 140
Association of Nat'l Advertisers, Inc. v. Grocery Mfrs. of Am., Inc., 44 F.3d
726 (9th Cir. 1994) ..................................................................................................... 61
Association of Nat'l Advertisers, Inc. v. Lungren, 44 F. 3d 726 (9th Cir
1994) ............................................................................................................. 50, 51, 63
Atari Corp. v. 3 DO Co., 31 U.S.P.Q. 2d 1636, 1994 WL 723601 (N.D. Cal.
1994) ....................................................................................................................... 118
Athens Lodge No. 70 v. Wilson, 117 Cal. App. 2d 322 (1953) ........................................ 7
Audio Fidelity v. High Fidelity Recordings, 283 F.2d 551 (9th Cir. 1960) .................... 146
Aurigemma v. Arco Petroleum Prods. Co., 734 F. Supp. 1025 (D. Conn.
1990) ......................................................................................................................... 12
Autohaus, Inc. v. Aguilar, 794 S.W.2d 459 (Tex. App. 1990) ...................................... 119
Automotive Prods. PLC v. Tilton Eng'g, Inc., 1993 U.S. Dist. LEXIS 20813,
33 U.S.P.Q. 2d 1065 (Sept. 16, 1993) ................................................................. 46, 80
Avis Rent-a-Car Sys. v. Hertz Corp., 782 F.2d 381 (2d Cir. 1986) ................................ 68
B.W.I. Custom Kitchen v. Owens-Illinois, Inc., 191 Cal. App. 3d 1341
(1987) ........................................................................................................................ 11
Badie v. Bank of America, 67 Cal. App. 4th 779 (1998) ................................................ 11
Ball v. GTE Mobilnet of California, 81 Cal. App. 4th 529 (2000).................................... 53
Ballard v. Equifax Check Serv., 158 F. Supp. 2d 1163 (E.D. Cal. 2001) ..................... 109
Bank of the West v. Superior Court, 2 Cal. 4th 1254 (1992) ............. 1, 22, 25, 70, 95, 99
Barndt v. County of Los Angeles, 211 Cal. App. 3d 397 (1989) .................................... 77
Barquis v. Merchants Collection Ass'n of Oakland, Inc., 7 Cal. 3d 94 (1972)15, 75, 92, 103
Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299 (1985) ............................ 86
Baugh v. CBS, Inc., 828 F. Supp. 745 (N.D. Cal. 1993) ...................................... 100, 115
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Beasley v. Wells Fargo Bank, 235 Cal. App. 3d 1383 (1991)................................ 11, 120
Bell Atlantic Bus. Sys. Servs., Inc. v. Hitachi Am. Ltd., 1995 U.S. Dist.
LEXIS 15531 (March 10, 1995) ........................................................................... 11, 71
Bell Atlantic Bus. Sys. Servs., Inc. v. Hitachi Data Sys. Corp., 1995 U.S.
Dist. LEXIS 15471 (N.D. Cal. 1995)......................................................................... 115
Beltran v. Allstate Ins. Co., 2001 U.S. Dist. LEXIS 9614 (S.D. Cal. 2001) .................. 109
Beneficial Corp. v. FTC, 542 F.2d 611 (3d Cir. 1976) ............................... 62, 68, 89, 101
Benton v. Allstate Ins. Co., 2001 U.S. Dist. LEXIS 9448 (C.D. Cal. Mar. 1,
2001) ....................................................................................................................... 114
Bergen Brunswig Corp. v. Safety Mut. Cas. Corp., 1993 U.S. App. LEXIS
2205 (9th Cir. 1993) ................................................................................................... 26
Berman v. Health Net, 80 Cal. App. 4th 1359 (2000) .................................................... 39
Bertram v. Terayon Communications Systems, Inc., 2001 U.S. Dist. LEXIS
6215 (C.D. Cal. 2001) ........................................................................................ 57, 123
Biljac Assoc. v. First Interstate Bank of Oregon, 218 Cal. App. 3d 1410
(1990) ...................................................................................................................... 113
Black v. Financial Freedom Senior Funding Corp., 92 Cal. App. 4th 917
(2001) ........................................................................................................................ 55
Blank v. Kirwin, 39 Cal. 3d 311 (1985) .................................................................. 64, 147
Blatty v. New York Times Co., 42 Cal. 3d 1033 (1986) ........................................... 60, 61
Bloom v. Universal City Studios, Inc., 734 F. Supp. 1553 (C.D. Cal. 1990) .................. 58
Blue Cross of California v. Superior Court, 67 Cal. App. 4th 42 (1998) ......................... 38
Board of Trustees of the State University of New York v. Fox, 492 U.S. 469
(1989) ........................................................................................................................ 63
Bondanza v. Peninsula Hosp. and Med. Ctr., 23 Cal. 3d 260 (1979) .............. 3, 7, 12, 13
Bone v. Hibernia Bank, 493 F.2d 135 (9th Cir. 1974) .................................................... 31
Boyle v. MTV Networks, Inc., 766 F. Supp. 809 (N.D. Cal. 1991) ........... 52, 59, 124, 140
Braco v. MCI Worldcom Communications, Inc., 138 F. Supp. 2d 1260
(C.D. Cal. 2001) ......................................................................................................... 59
Braco v. Superior Court, 2002 Cal. App. LEXIS 3477 (Mar. 28, 2002) ................ 126, 137
Break-Away Tours, Inc. v. British Caledonian Airways, 704 F. Supp. 178
(S.D. Cal. 1988) ................................................................................................... 72, 93
Breed v. Hughes Aircraft Co., 2002 U.S. App. Lexis 7084 (Fed. Cir. Apr. 5,
2002) ....................................................................................................................... 142
Bright v. Washington Mut. Bank, 2002 Cal. App. LEXIS 3250 (Mar. 25,
2002) ......................................................................................................................... 53
Bristol Hotels & Resorts v. Nat'l Council on Compensation Ins., Inc., 2002
Cal. App. LEXIS 2947 (Mar. 13, 2002) ................................................ 33, 94, 107, 149
Bronco Wine Co. v. Frank A. Logoluso Farms, 214 Cal. App. 3d 699 (1989)21, 127, 130, 131
Broughton v. Cigna Healthplans, 21 Cal. 4th 1066 (1999) ............................................ 38
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Brown v. Allstate Ins. Co., 1998 U.S. Dist. LEXIS 11759 (S.D. Cal. July 31,
1998) ................................................................................................................... 19, 70
Brown v. Market Dev., Inc., 41 Oh. Misc. 57, 322 N.E.2d 367 (1974) ........................... 80
Browning Ferris Indus. of Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S.
257 (1989) ................................................................................................................. 51
Bull Publ'g Co., v. Sandoz Nutrition Co., 1989 U.S. Dist. LEXIS 16622
(N.D. Cal. July 7, 1989) ............................................................................................. 58
Bullet Golf, Inc. v. United States Golf Ass'n, 1995 U.S. Dist. LEXIS 6189
(C.D. Cal. Mar. 20, 1995)....................................................................................... 9, 66
Bureerong v. UVWAS, 922 F. Supp. 1450 (C.D. Cal. 1996) ......................................... 99
Burks v. Poppy Constr. Co., 57 Cal. 2d 463 (1962) ........................................................ 7
Burt v. Danforth, 742 F. Supp. 1043 (E.D. Mo. 1990) ........................................... 72, 141
Bush v. California Conservation Corps, 136 Cal. App. 3d 194 (1982) ........................... 76
C & R Clothiers, Inc. v. Men's Warehouse, Inc., 1990 U.S. Dist. LEXIS
10424 (N.D. Cal. 1990) .............................................................................................. 71
C. Pappas Co. v. E. & J. Gallo Winery, 610 F. Supp. 662 (E.D. Cal. 1985) .................. 76
Cabot Corp. v. Baddour, 394 Mass. 720, 477 N.E.2d 399 (1985) ............................... 135
Cairns v. Franklin Mint Co., 107 F. Supp. 2d 1212 (C.D. Cal. 2000) ........................... 145
California ARCO Distrib., Inc. v. Atlantic Richfield Co., 158 Cal. App. 3d
349 (1984) ................................................................................................................. 54
California Ass'n of Dispensing Opticians v. Pearle Vision Ctr., 143 Cal.
App. 3d 419 (1983) ........................................................................................ 20, 45, 65
California Bankers Ass'n v. Bank of America, 22 Cal. App. 4th 205 (1994) ................ 149
California Grocers Ass'n v. Bank of America, 22 Cal. App. 4th 205 (1994) 11, 35, 96, 120
California Med. Ass'n v. Healthcare of California, Inc., 94 Cal. App. 4th 151
(2001) .............................................................................................................. 111, 149
California Med. Ass'n v. Regents of University of California, 79 Cal. App.
4th 542 (2000) ......................................................................................................... 118
California Medical Association v. Aetna U.S. Healthcare of California, Inc.,
94 Cal. App. 4th 151, 169 (2001) ............................................................................. 137
California Serv. Station and Automotive Repair Ass'n v. Union Oil Co. of
California, 232 Cal. App. 3d 44 (1991)................................................................. 12, 75
California State Elec. Ass'n v. Zeos Int'l Ltd., 41 Cal. App. 4th 1270 (1996) ............... 112
California Travel Parks Ass'n v. California, 1994 U.S. Dist. LEXIS 7899
(N.D. Cal. 1994) ....................................................................................................... 115
California Wholesale Elec. Co. v. Micro Switch, Honeywell, Inc., 1983-1
Trade Cas. (CCH) ¶ 65,253 ....................................................................................... 44
Californians for Population Stabilization v. Hewlett-Packard Co., 58 Cal.
App. 4th 273 (1997) ........................................................................... 84, 106, 112, 151
Caro v. Procter & Gamble Co., 18 Cal. App. 4th 644 (1993) ........................... 29, 83, 127
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Castro v. Providian Nat'l Bank, 2000 U.S. Dist. LEXIS 19062 (N.D. Cal.
Jan. 2, 2001) ............................................................................................................ 123
Cellular Plus, Inc. v. Superior Court, 14 Cal. App. 4th 1224 (1993) .............................. 34
Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co.,
20 Cal. 4th 163 (1999) ............................................................. 3, 4, 106, 110, 147, 149
Central Hudson Gas & Electric Corp. v. Public Services Commission,
447 U.S. 557 (1980) .................................................................................................. 63
Central Pathology Serv. Med. Clinic, Inc. v. Superior Court, 3 Cal. 4th 181
(1992) ...................................................................................................................... 143
Chabner v. United of Omaha Life Ins. Co., 225 F.3d 1042 (9th Cir. 2000)12, 26, 34, 98, 99
Chapman v. Farr, 132 Cal. App. 3d 1021 (1982) .......................................................... 36
Chatton v. National Union Fire Ins. Co., 10 Cal. App. 4th 846 (1992) ........................... 26
Chavez v. Citizens for a Fair Farm Labor Law, 84 Cal. App. 3d 77 (1978) ................... 64
Chavez v. Whirlpool Corp., 93 Cal. App. 4th 363 (2001) ..................................... 107, 111
Cher v. Forum Int'l, Ltd., 7 Media L. Rep. 2593 (C.D. Cal. 1982) ................................ 110
Chern v. Bank of America, 15 Cal. 3d 866 (1976)6, 8, 11, 20, 24, 42, 70, 74, 85, 121, 143
Christensen v. Superior Court (Los Angeles), 230 Cal. App. 3d 798 (1990) ............... 137
Chronicle Publ'g Co. v. Chronicle Publications, Inc., 733 F. Supp. 1371
(N.D. Cal. 1989) ......................................................................................................... 13
Chrysler Corp. v. FTC, 561 F.2d 357 (D.C. Cir. 1977) ................................................ 136
Cisneros v. U.D. Registry, Inc., 39 Cal. App. 4th 548 (1995) ........................................ 77
City and County of San Francisco v. Sainez, 77 Cal. 4th 1302 (2000) .......................... 52
City of Chino v. Superior Court, 255 Cal. App. 2d 747 (1967) ..................................... 153
City of Cincinnati v. Discovery Network, Inc., 507 U.S. 410 (1993) ............................... 61
Cleary v. News Corp., 30 F.3d 1255 (1994) .................................................................. 13
Clothesrigger, Inc. v. GTE Corp., 191 Cal. App. 3d 605 (1987) .................................... 48
Coast & Southern Fed. S & L Ass'n v. Transcoast S & L Ass'n, 16 Cal. App.
3d 205 (1971) .......................................................................................................... 121
Coast Plaza Doctors Hosp. v. Blue Cross of Calif., 83 Cal. App. 4th 677
(2000) ........................................................................................................................ 39
Cobarrubias v. Allstate Ins. Co., 1998 U.S. Dist. LEXIS 10955 (C.D. Cal.
July 10, 1998) ...................................................................................................... 24, 82
College of Psychological and Soc. Studies v. Board of Behavioral Science
Exam'rs, 41 Cal. App. 3d 367 (1974) ............................................................... 113, 146
Commins v. Johnson & Higgins, Inc., 1988 U.S. Dist. LEXIS 15574
(N.D. Cal. Sept. 29, 1988) ....................................................................................... 132
Committee on Children's Television, Inc. v. General Foods Corp., 35 Cal.
3d 197 (1983) ........................................................................ 6, 8, 9, 15, 21, 67, 81, 97
Committee to Defend Reprod. Rights v. A Free Pregnancy Ctr., 229 Cal.
App. 3d 633 (1991) .......................................................................................... 127, 151
Commodore Home Sys. v. Superior Court, 32 Cal. 3d 211 (1982) ............................... 90
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Community Assisting Recovery, Inc. v. Aegis Sec. Ins. Co., 92 Cal. App.
4th 886 (2001) ................................................................................................. 107, 111
Community Memorial Hospital v. County of Ventura, 50 Cal. App. 4th 199
(1996) .............................................................................................................. 103, 118
Cong. of Cal. Seniors v. Catholic Healthcare W., 87 Cal. App. 4th 491
(2001) .................................................................................................................. 31, 53
Consumer Justice Center v. Olympian Labs, Inc., 99 Cal. App. 4th 1056,
1060-61 (2002) .......................................................................................................... 55
Consumers Union of U.S., Inc. v. Alta-Dena Certified Dairy, 4 Cal. App. 4th
963 (1992) ..................................................................................................... 66, 67, 91
Consumers Union of U.S., Inc. v. Fisher Dev., Inc., 208 Cal. App. 3d 1433
(1989) ................................................................................................................ 15, 138
Contemporary Servs. Corp. v. Universal City Studios, Inc., 655 F. Supp.
885 (C.D. Cal. 1987) ................................................................................................ 124
Continental Baking Co. v. Katz, 68 Cal. 2d 512 (1968) ................................................. 91
Cook, Perkiss & Liehe, Inc. v. Northern California Collection Service, Inc.,
911 F.2d 242 (9th Cir. 1990) .................................................................................... 118
Coonley v. Rotan Mosle, Inc., 630 F. Supp. 404 (W.D. Tex. 1985) ......................... 38, 40
Cooper v. American Sav. & Loan Ass'n, 55 Cal. App. 3d 274 (1976)............................ 28
Copperstone v. TCSI Corp., No. 775199-1 (Alameda County S. Ct. Apr. 2,
1997) ....................................................................................................................... 133
Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984) ......................... 87
Cortez v. Purolator Air Filtration Prods. Co., 23 Cal. 4th 163 (2000) ............... 72, 77, 142
County of Los Angeles v. Farmers Ins. Exch., 132 Cal. App. 3d 77 (1982)................... 32
Cozad v. Board of Chiropractic Exam'rs, 153 Cal. App. 2d 249 (1957) ................. 61, 146
Crawford v. Farmers Group, Inc., 160 Cal. App. 3d 1164 (1984) ................................ 112
Creager v. Russ Togs, Inc., 218 U.S.P.Q. (BNA) 582 (C.D. Cal. 1982) ........................ 96
Crusader Ins. Co. v. Scottsdale Ins. Co., 54 Cal. App. 4th 121 (1997) ................... 30, 33
Cruz v. Pacific Care, 91 Ca. 4th 1179 (2001), 34 P. 3d 288 (2001) .............................. 38
Cundiff v. Bell Atlantic Corp., 101 Cal. App. 4th 1395, 1411, 1413 (2002) .................... 33
Czechowski v. Tandy Corp., 731 F. Supp 406 (N.D. Cal. 1990) ................................. 120
Daddona v. Liberty Mobile Home Sales, Inc., 209 Conn. 243, 550 A.2d
1061 (1988) ................................................................................................................. 6
Daniels v. Philip Morris Companies, 1998 U.S. Dist. LEXIS 13950
(S.D. Cal. Aug. 7, 1998)........................................................................................... 125
Davis v. American Bldg. Maintenance Co., 2001 U.S. Dist. LEXIS 9474
(N.D. Cal. 2001) ......................................................................................................... 57
Davis v. Gulf Oil Corp., 572 F. Supp. 1393 (C.D. Cal. 1983)....................................... 109
Day v. AT&T Corp., 63 Cal. App. 4th 325 (1998) .......................................... 83, 131, 146
Dean Witter Reynolds, Inc. v. Superior Court (Alameda), 211 Cal. App. 3d
758 (1989) ................................................................. 16, 29, 35, 43, 70, 128, 130, 131
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Del Madera Properties v. Rhodes and Gardner, Inc., 820 F.2d 973 (9th Cir.
1987) ......................................................................................................................... 57
Demonet Indus. v. Transamerica Ins. Co., 6 Cal. App. 4th 31 (1991) ............................. 4
Denbicare, Inc. v. Toys "R" Us, Inc., 1988 U.S. Dist. LEXIS 15948
(N.D. Cal. Jan. 13, 1988) ......................................................................................... 147
Desert Healthcare Dist. v. PacifiCare, FHP, Inc., 94 Cal. App. 4th 781
(2001) ........................................................................................................ 31, 107, 111
Destination Ventures, Ltd. v FCC, 46 F.3d 54 (9th Cir. 1995) ....................................... 63
Determined Prod., Inc. v. Koster, 1992 U.S. Dist. LEXIS 20030 (N.D. Cal.
1992) ................................................................................................................... 58, 71
Diamond-Chase Co. v. Stretch Devices, Inc., 16 U.S.P.Q. 2d 1568,
1990 U.S. Dist. LEXIS 19432 (C.D. Cal. 1990) ........................................................ 150
Diaz v. Kay-Dix Ranch, 9 Cal. App. 3d 588 (1970) ................................................... 2, 31
Discover Bank v. Superior Court, 105 Cal. App. 4th 326 (2003) ................................... 38
Dixon Mobile Homes, Inc. v. Walters, 48 Cal. App. 3d 964 (1975) .............................. 118
Drennan v. Security Pac. Nat'l Bank, 28 Cal. 3d 764 (1981) ................................... 30, 35
Drouet v. Super. Ct. of S.F. County, Cal. App. 4th 1237 (Cal. 2001) ............................ 55
Duncan v. Stuetzle, 1996 U.S. App. LEXIS 2584 (9th Cir. Feb. 21, 1996) .................... 70
DuPont Merck Pharm. Co. v. Superior Court, 78 Cal. App. 4th 562 (2000)................... 60
E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280 (1992) .................................... 68
E.W. French & Sons, Inc. v. General Portland, Inc., 889 F.2d 1392 (9th Cir.
1989) ......................................................................................................................... 70
EA Eng'g, Science, & Tech., Inc. v. Environmental Audit, Inc., 703 F. Supp.
853 (C.D. Cal. 1989) ............................................................................................ 93, 94
Eckert v. Bay Area Cellular Tel. Co., 85 Cal. App. 4th 1369 (2001) .............................. 53
Edgar v. Mite Corp., 457 U.S. 624 (1982) ..................................................................... 46
Eichman v. Fotomat Corp., 880 F.2d 149 (9th Cir. 1989) .................................... 106, 142
Elder v. Coronet Ins. Co., 201 Ill. App. 3d 733, 558 N.E.2d 1312 (Ill. App.
1990) ......................................................................................................................... 12
Fairchild v. Nat'l Home Ins. Co., 2001 U.S. App. LEXIS 19487 (9th Cir.
2001) ......................................................................................................................... 40
Fardella v. Downey Savings & Loan Ass'n, 2001 U.S. Dist. LEXIS 6037
(N.D. Cal. 2001) ....................................................................................................... 123
Farmers Ins. Exch. v. Superior Court of Los Angeles County, 2 Cal. 4th 377
(1992) ................................................................................................................ 1, 2, 32
FAS Techs., Ltd. v. Dainippon Screen Mfg., Co., 2001 U.S. Dist. LEXIS
7503 (N.D. Cal. 2001) ........................................................................................ 70, 140
FDIC v. Philadelphia Gear Corp., 476 U.S. 426 (1986) ................................................. 31
Feather River Trailer Sales, Inc. v. Sillas, 96 Cal. App. 3d 234 (1979)...................... 8, 89
Federal Automotive Servs. v. Lane Buick Co., 204 Cal. App. 2d 689 (1962) ................ 21
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Feldman v. Glaze, [1989 Transfer Binder] Fed. Sec. L. Rep. (CCH)
¶ 94,450,] 1989 U.S. Dist. LEXIS 8364 (N.D. Cal. Apr. 12, 1989) ............... 72, 87, 135
Fenning v. Glenfed, Inc., 40 Cal. App. 4th 1285 (1995) .......................................... 34, 55
Ferrari S.p.A. Esercizio Fabbriche Automobili E. Corse v. McBurnie
Coachcraft, Inc., 1988 U.S. Dist. LEXIS 16314 (S.D. Cal. Sept. 6, 1988) 120, 130, 141
Ferrari v. Read-Rite Corp., No. CV762735 (Santa Clara County S. Ct., May
20, 1997) ................................................................................................................. 133
Firestone Tire & Rubber Co. v. FTC, 481 F.2d 246 (6th Cir.) .................................. 68, 74
First Alliance Mortgage Co. v. First Alliance Mortgage Co., 2001 U.S. Dist.
LEXIS 19931 (C.D. Cal. 2001) ................................................................................... 30
Fleet v. CBS, Inc., 1196 Cal. App. LEXIS 1119 (1996) ................................................. 54
Fletcher v. Security Pac. Nat'l Bank, 23 Cal. 3d 442 (1979) ............ 11, 16, 100, 121, 132
Flower World of Am., Inc. v. Wenzel, 594 P.2d 1015, 122 Ariz. 319 (App.
1978) ......................................................................................................................... 40
Ford Motor Credit Co. v. Milhollin, 444 U.S. 555 (1980) ................................................ 31
Forrest LeBlanc v. Belt Ctr., Inc., 509 S.2d 134 (La. Ct. App. 1987) ............................. 12
Frank Pisano &Assocs. v. Taggart, 29 Cal. App. 3d 1 (1972) ....................................... 88
Frazier v. City of Richmond, 184 Cal. App. 3d 1491 (1986) ........................................ 153
Freedom Newspaper, Inc. v. Orange County Employees Retirement Sys.
Bd. of Dirs., 6 Cal. 4th 821 (1993) ........................................................................... 143
Freeman v. Time, Inc., 68 F.3d 285 (9th Cir. 1995) ................................................ 68, 95
Frogface v. Network Solutions, Inc., 2002 U.S. Dist. LEXIS 2594 (N.D. Cal.
2002) ............................................................................................................... 109, 114
FTC v. Colgate-Palmolive Co., 38 U.S. 374 (1965) ..................................................... 118
FTC v. Sperry & Hutchinson Co., 405 U.S. 233 (1972) ................................................... 3
Gallin v. Superior Court, 230 Cal. App. 3d 541 (1991) ................................................ 150
Garrett v. Coast & S. Fed. Sav. & Loan Ass'n, 9 Cal. 3d 731 (1973) ............................ 11
Gates v. Superior Court of Los Angeles County, 178 Cal. App. 3d 301
(1986) .............................................................................................................. 128, 153
Geoffrey, Inc. v. Douglas S. Stratton, 16 U.S.P.Q. 2d 1691, 1990 U.S. Dist.
LEXIS 19504 (C.D. Cal. 1990) ................................................................................... 78
Geophysical Sys. Corp. v. Raytheon Co., Inc., 1993 U.S. App. LEXIS 3559
(9th Cir. 1993) ............................................................................................................ 93
Gibson v. Chrysler Corp., 1998 U.S. Dist. LEXIS 11343 (N.D. Cal. July 20,
1998) ....................................................................................................................... 125
Gibson v. World Savings and Loan Association, 103 Cal. App. 4th 1291,
1306-07 (2002) .......................................................................................................... 55
Gladstone v. Hillel, 203 Cal. App. 3d 977 (1988) .......................................................... 56
Glue-Fold v. Slautterback, 82 Cal. App. 4th 1018 (2000) ............................................ 142
Goldberg v. Storm Tech., Inc., No. CV764797 (Santa Clara County Super.
Ct., Aug. 25, 1997)................................................................................................... 133
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Gour v. Daray Motor Co., 373 S.2d 571 (La. Ct. App. 1979) ....................................... 116
Governing Bd. v. Mann, 18 Cal. 3d 819 (1977) ............................................................. 36
Gray v. Conseco Fin. Inc., 2000 U.S. Dist. LEXIS 14821 (C.D. Cal. 2000) ................... 40
Gray v. Safeway (Alameda County S. Ct. No. H-171057-9 (1994)) .................... 129, 155
Greenleaf Eng'g & Constr. v. Teradyne, 15 Mass. App. 571 (1983).............................. 40
Greenlining Institute v. Public Utilities Commission, 103 Cal. App. 4th 1324,
1330-1331 (2002) ...................................................................................................... 33
Grolier, Inc. v. FTC, 699 F. 2d 983 (1983)..................................................................... 61
Groom v. Health Net, 82 Cal. App. 4th 1189 (2000) ...................................................... 39
Hale v. Morgan, 22 Cal 3d 388 (1978) .......................................................................... 51
Hamelin v. Allstate Ins. Co., 2002 U.S. Dist. LEXIS 5093 (C.D. Cal. 2002) ................ 139
Hangarter v. Paul Revere Life Ins. Co., 2001 U.S. Dist. LEXIS 17975 (N.D.
Cal. 2001) .................................................................................................................. 98
Hansberry v. Lee, 311 U.S. 32 (5th Cir. 1940) ............................................................ 154
Harris v. Capital Growth Investors XIV, 52 Cal. 3d 1142 (1991) ................................. 149
Harris v. Chase Manhattan Bank, 34 Cal. App. 4th 1563 (1994)................................... 56
Harris v. Duty Free Shoppers Ltd., 1988 U.S. Dist. LEXIS 11406 (N.D. Cal.
Feb. 24, 1998) ........................................................................................................... 82
Harris v. Time, Inc., 191 Cal. App. 3d 449 (1987) ......................................................... 73
Hartley v. Stamford Towers Ltd. Partnership, 1994 U.S. App. LEXIS 23543
(9th Cir. Aug. 26, 1994) ........................................................................... 120, 129, 139
Haskell v. Time, Inc., 857 F. Supp. 1392 (E.D. Cal. 1994) .................................... 68, 119
Heastie v. Community Bank of Greater Peoria, 727 F. Supp. 1133 (N.D. Ill.
1989) ........................................................................................................................... 5
Heerema Marine Contractors v. Santa Fe Int'l Corp., 582 F. Supp 445
(C.D. Cal. 1984) ....................................................................................................... 105
Hendricks v. Dynergy Power Mktg., Inc., 160 F. Supp. 2d 1155 (S.D. Cal.
2001) ......................................................................................................................... 59
Hernandez v. Atlantic Fin. Co. of Los Angeles, 105 Cal. App. 3d 65 (1980) ........... 4, 138
Hernandez v. Stabach, 145 Cal. App. 3d 309 (1983) .................................................... 20
Hewlett v. Squaw Valley Ski Corp., 54 Cal. App. 4th 499 (1997) ........ 34, 35, 49, 78, 151
Hill Physicians Med. Group, Inc. v. Pacificare of California, 2001 U.S. Dist.
LEXIS 6051 (N.D. Cal. 2001) ..................................................................................... 59
Hitz v. First Interstate Bank, 38 Cal. App. 4th 274 (1995) ........................................... 131
Hobby Indus. Ass'n of Am., Inc. v. Younger, 101 Cal. App. 3d 358 (1980)42, 78, 113, 148
Hobby Industrial Association of America, Inc. v. Younger, 101 Cal. App. 3d
358 (1980) ............................................................................................................... 110
Holcomb v. Bingham Toyota, Inc., 1987 U.S. Dist. LEXIS 15151 (E.D. Cal.
1987) ......................................................................................................................... 58
Home Sav. & Loan Ass'n v. Superior Court of Los Angeles, 42 Cal. App. 3d
1006 (1975) ....................................................................................................... 47, 128
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Home Sav. & Loan Ass'n v. Superior Court of Los Angeles, 54 Cal. App. 3d
208 (1976) ................................................................................................................. 47
Home Sav. of Am., F.A., v. U.S. Home Sav. & Loan Assoc., No. 84-0560
K(m), slip op. (S.D. Cal. 1984) ................................................................................. 109
Howard Gunty Profit Sharing v. Quantum Corp., No. CV760370 (Santa
Clara County S. Ct. Feb. 28, 1997).......................................................................... 133
Hudgins v. Neiman Marcus Group, Inc., 34 Cal. App. 4th 1109 (1995) ................... 13, 35
Hunting World, Inc. v. Reboans, Inc., 33 U.S.P.Q. 2d 1780, 1994 U.S. Dist.
LEXIS 19961 (N.D. Cal. 1994) ............................................................................. 88, 89
Ibanez v. Florida Department of Business & Professional Regulation, 114
S. Ct. 2084 (1994) ..................................................................................................... 63
In re Cantanella Sec. Litig., 583 F. Supp. 1388 (E.D. Pa. 1984) ................................. 135
In re Ingle Co., 1997 U.S. App. LEXIS 423, 1997-1 Trade TAX. (CCH)
¶ 71,782 (9th Cir. Jan. 7, 1997) ................................................................................. 41
In Re Papst Licensing, 2000 U.S. Dist. LEXIS 18316 (E.D. La. 2000) ........................ 141
In re R.N.J., 455 U.S. 191 (1982) .................................................................................. 64
In re Taite, 76 BR 764 (C.D. Cal 1987) ................................................................... 18, 75
In re Terazonsin Hydrochloride Antitrust Litigation, 160 F. Supp. 2d 1365
(S. D. Fla. 2001) ...................................................................................................... 139
In re Thortec Sec. Litig., 1989 U.S. Dist. LEXIS 6003 (N.D. Cal. Jan. 26,
1989) ....................................................................................................................... 132
Independent Cellular Tel., Inc. v. Daniels & Assoc., 863 F. Supp. 1109
(N.D. Cal. 1994) ....................................................................................................... 115
Independent Hous. Servs. of San Francisco, et al. v. Fillmore Assoc.,
1991 U.S. Dist. LEXIS 14960 (N.D. Cal. 1991) ........................................................ 105
Industrial Indem. Co. v. Superior Court, 209 Cal. App. 3d 1093 (1989) .......... 70, 98, 138
Informix Software, Inc. v. Oracle Corp., 1996 U.S. Dist. LEXIS 8430
(N.D. Cal. May 30, 1996) ......................................................................................... 106
Interactive Network, Inc. v. NTN Communications, Inc., 875 F. Supp. 1398
(N.D. Cal. 1995) ......................................................................................................... 59
Intermedics, Inc. v. Ventritex, Inc., 822 F. Supp (N.D. Cal. 1993) ............................... 143
International Evangelical Church of the Soldiers of the Cross of Christ v.
Church of the Soldiers of the Cross of Christ of the State of California,
54 F.3d 587 (9th Cir. 1995).............................................................................. 102, 129
International Order of Job's Daughters v. Lindeburg & Co., 633 F.2d 912
(9th Cir. 1952) ............................................................................................................ 94
Intex Plastics Sales Co. v. United Nat'l Ins. Co., 18 U.S.P.Q. 2d 1567
(C.D. Cal. Dec. 7, 1990) ............................................................................................ 27
Int'l Ass'n of Cleaning and Dye House Workers v. Landowitz, 20 Cal. 2d
418 (1942) ................................................................................................................. 36
Irwin v. Mascott, 2001 U.S. Dist. LEXIS 3285 (N.D. Cal. 2001) .................................... 44
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Isuzu Motors, Ltd. v. Consumers Union of U.S., Inc., 12 F. Supp. 2d 1035
(C.D. Cal. 1998) ......................................................................................................... 62
J & K Cement Constr., Inc. v. Montalbano Builders, 119 Ill. App. 3d 524
(1983) ........................................................................................................................ 40
Jackson v. Roe, 273 F.3d 1192 (9th Cir. 2001) ........................................................... 109
Janis v. California State Lottery Commission, 68 Cal. App. 4th 824 (1998) 110, 112, 118
Joe Conte Toyota, Inc. v. Louisiana Motor Vehicle Commission, 24 F.3d
754 (5th Cir. 1994) ..................................................................................................... 63
John Paul Mitchell Sys. v. Eslami, Nos. 95-55820, 95-55856, 1997 U.S.
App. LEXIS 5974 (9th Cir. 1997) ..................................................................... 101, 139
Joyner v. Triple Check Fin. Serv., 782 F. Supp. 364 (W.D. Tenn. 1991) .................... 134
Kagan v. Carwell Corp., 2001 U.S. Dist. LEXIS 4544 (C.D. Cal. 2001) ...................... 123
Kagan v. Gibralter Sav. & Loan Ass'n, 35 Cal. 3d 582 (1984) ..................................... 152
Kainos Lab., Inc. v Beacon Diagnostics, Inc., No. C-97-4618 MHP
(N.D. Cal. Sep. 14, 1998) ........................................................................................ 134
Kalwaytys v. FTC, 237 F.2d 654 (7th Cir. 1956) ......................................................... 146
Kamm v. California City Dev. Co., 509 F.2d 205 (9th Cir. 1975) ................................. 154
Kapsimallis v. Allstate Insurance Co., 104 Cal. App. 4th 667, 671 (2002) .................... 86
Karl Storz Endoscopy America, Inc., v. Surgical Techs., Inc., 285 F.3d 848
(9th Cir. 2001) .................................................................................................... 93, 102
Karlin v. Zalta, 154 Cal. App. 3d 953 (1984) ................................................................. 32
Kasky v. Nike, Inc., 2002 Cal. LEXIS 2591 (2002) .................................................. 60, 64
Kates v. Crocker Nat'l Bank, 776 F.2d 1392 (9th Cir. 1985).......................................... 70
Keating v. Superior Court of Alameda County, 31 Cal. 3d 584 (1982) .......................... 41
Keimer v. Buena Vista Books, Inc., 75 Cal. App. 4th 1220 (1999) ................................ 61
Kelly Blue Book v. Car-Smarts, Inc., 802 F. Supp. 27 (C.D. Cal. 1992) .................. 14, 21
Kenneth Rothschild Trust v. Morgan Stanley Dean Witter, 2002 U.S. Dist.
LEXIS 6439 (C.D. Cal. 2002) ........................................................................... 122, 125
Kentmaster Mfg. Co. v. Jarvis Prods. Corp., 146 F.3d 691 (9th Cir. 1998) ................. 113
Kentucky Cent. Life Ins. Co. v. Leduc, 814 F. Supp. 832 (N.D. Cal. 1992) ................... 99
Khan v. Medical Bd. of California, 12 Cal. App. 4th 1834 (1993) .................................. 89
Khoury v. Maly's of California, Inc., 14 Cal. App. 4th 612 (1993) .................................. 81
Kimmel v. DowElanco, 2001 U.S. App. LEXIS 15440 (9th Cir. 2001) ........................... 57
Kingvision Pay-Per-View, Ltd. v. Chavez, 2000 U.S. Dis. LEXIS 18078
(N.D. Cal. 2000) ......................................................................................................... 70
Klein v. Earth Elements, Inc., 59 Cal. App. 4th 965 (1997) ......................................... 104
Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 979 (9th Cir. 2001) .......................... 5
Kodadek v. MTV Networks, Inc., 1998 U.S. App. LEXIS 21175 (9th Cir.
Aug. 31, 1998) ........................................................................................................... 57
Korea Supply Co. v. Lockheed Martin Corp., 90 Cal App. 4th 902 (2001) ........ 55, 73, 98
Korens v. R. W. Zukin Corp., 212 Cal. App. 3d 1054 (1989) ............................... 113, 149
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Kraus v. Trinity Management Services, Inc., 23 Cal. 4th 116 (2000)16, 21, 48, 69, 72, 73,
.................................................................................... 85, 90, 102, 126, 130, 131, 145
Kugler v. Haitian Tours, Inc., 120 N.J. Super. 260, 293 A.2d 706 (1972) ...................... 80
La Mar v. H. & B. Novelty & Loan Co., 489 F.2d 461 (9th Cir. 1973) .................... 29, 153
La Sala v. American Sav. & Loan Ass'n, 5 Cal. 3d 864 (1971).................................... 152
Lagatree v. Luce, Forward, Hamilton & Scripps, 74 Cal. App. 4th 1105
(1999) ...................................................................................................................... 111
Larez v. Oberti, 23 Cal. App. 3d 217 (1972) ................................................................ 101
Laughlin v. Evanston Hosp., 133 Ill. 2d 374, 550 N.E.2d 986 (1990) .............................. 6
Lavie v. Procter & Gamble Co., 105 Cal. App. 4th 496 (2003) ........................................ 7
Lazar v. Trans Union LLC, 195 F.R.D. 665 (C.D. Cal. 2000) ................................ 43, 131
Lee v. Gates, 141 Cal. App. 3d 989 (1983) ................................................................. 100
Lee v. Interinsurance Exch. of the Auto. Club of S. California, 50 Cal. App.
4th 694 (1996) ......................................................................................................... 145
Lee v. Interinsurance Exchange, 50 Cal. App. 4th 694 (1996) ...................................... 41
Lentz v. Woolley, 1989 U.S. Dist. LEXIS 12651 (C.D. Cal. June 14, 1989) .................. 22
Levine v. Diamonthuset, Inc., 722 F. Supp. 579 (N.D. Cal. 1989) ................. 82, 134, 143
LeVine v. Weis, 90 Cal. App. 4th 201 (Cal. Ct. App., 2d Dist., 6th Div. 2001) ............. 118
Lewis v. Hankins, 214 Cal. App. 3d 195 (1989) .................................................... 21, 128
Lickhalter v. System Dev. Corp., [1984 Transfer Binder] Fed. Sec. L. Rep.
(CCH) ¶ 91,459 (C.D. Cal. 1984) ............................................................................. 135
Lindemuth Co. v. Shannon Fin. Corp., 637 F. Supp. 991 (N.D. Cal. 1986) ................. 133
Lindner v. Durham Hosiery Mills, Inc., 761 F.2d 162 (4th Cir. 1985) ........................... 134
Little Oil Co. v. Atlantic Richfield Co., 852 F.2d 441 (9th Cir. 1988) .............................. 70
Littledove v. JBC & Assocs. Inc., 2000 U.S. Dist. LEXIS 18490 (E.D. Cal.
2000) ......................................................................................................................... 45
Lockheed Info. Mgmt. Serv. Co. v. City of Inglewood, 17 Cal. 4th 170
(1998) ...................................................................................................................... 112
Locomotor USA, Inc. v. Korus Co., Inc., 1993 U.S. Dist. LEXIS 19609
(1993) ........................................................................................................................ 14
Loe v. State Farm Ins. Co., 1997 U.S. App LEXIS 25308, 124 F.3d 212 (9th
Cir 1997) .................................................................................................................. 114
Loe v. State Farm Ins. Co., 2000 U.S. App. LEXIS 25633 (9th Cir. 2000) .................... 87
Lopez v. Washington Mut. Bank, Inc., 284 F.3d 990 (9th Cir. 2002) ............................. 58
Lopez v. World Savings & Loan Association, 2003 Cal. App. LEXIS 96
(January 23, 2003)..................................................................................................... 52
Los Angeles Cellular Tel. Co. v. Superior Court of Los Angeles County,
65 Cal. App. 4th 1013 (1998) ..................................................................................... 69
Loska v. Superior Court, 188 Cal. App. 3d 569 (1986) .................................................. 63
Lusardi Construction Co. v. California Occupational Safety and Health
Appeals Board, 1 Cal. App. 4th 639 (1991) ............................................................... 34
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MAI Sys. Corp. v. QUIPS, 856 F. Supp. 538 (N.D. Cal. 1994) ...................................... 71
Maler v. Superior Court, 220 Cal. App. 3d 1592 (1990) ................................................ 98
Mallon v. City of Long Beach, 164 Cal. App. 2d 178 (1958) .................................. 76, 100
Mangini v. Aerojet-General Corp., 230 Cal. App. 3d 1125 (1991) ................................. 76
Mangini v. R.J. Reynolds Tobacco Co., 7 Cal. 4th 1057 (1992) .................................... 54
Mangini v. R.J. Reynolds Tobacco Co., 793 F. Supp. 925 (N.D. Cal. 1992) ............... 124
Manibog v. MediaOne of Los Angeles, Inc., 81 Cal. App. 4th 1366 (Cal. Ct.
App., 2d Dist., 3d Div. 2000) .................................................................................... 112
Manufacturers Life Ins. Co. v. Superior Court, 10 Cal. 4th 257 (1995) ................ 1, 16, 98
Manufacturers Life Ins. Co. v. Taylor, 481 U.S. 58 (1987) ............................................ 56
Marcus v. AT&T, 138 F. 3d 46 (2d Cir 1998)................................................................. 83
Mass. Mut. Life Ins. Co. v. Superior Court, 2002 Cal. App. LEXIS 4029
(Cal. Ct. App., 4th Dist., 1st Div. April 29, 2002) .......................................... 42, 74, 100
Mathews v. Government Employees Insurance Co., 23 F.2d 1160 (S.D.
Cal. 1998) .................................................................................................................. 76
McCall v. PacifiCare of California, Inc., 25 Cal. 4th 412 (2001)..................................... 54
McCarthy v. Recordex Serv., Inc., 80 F.3d 842 (3d Cir. 1996) .................................... 139
McDonald's Corp. v. Arche Technologies, Inc., 17 U.S.P.Q. 2d 1557,
1990 U.S. Dist. LEXIS 18545 (N.D. Cal. 1990) ........................................................ 115
McFetters v. Amplicon, Inc., 82 Cal. App. 4th 200 (2000) ............................................. 49
McLaughlin v. National Union Fire Ins. Co., 23 Cal. App. 4th 1132 (1994) ................... 26
Medical Copier Cases II and III (San Francisco Superior Court Nos. JCC
3045 and JCC 3020).................................................................................................. 13
MediMatch, Inc., v. Lucent Techs, Inc., 120 F. Supp. 2d 842 (N.D. Cal.
2000) ....................................................................................................................... 142
Mercer v. Jaffe, Snider, Raitt & Heuer, P.C., 713 F. Supp. 1019 (W.D.
Mich. (1989)) ........................................................................................................... 134
Mergia v. Municipal Court, 15 Cal. 3d 286 (1975) ......................................................... 67
Merrell Dow Pharm., Inc. v. Thomson, 474 U.S. 804 (1986) ....................................... 122
Meta-Film Assocs., Inc. v. MCA, Inc., 586 F. Supp. 1346 (C.D. Cal. 1984) .................... 5
Metro Publ'g, Ltd. v. San Jose Mercury News, 861 F. Supp. 870 (N.D. Cal.
1994) ....................................................................................................................... 115
Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58 (1987).............................................. 122
Meyers v. Unizest Home Loan, Inc., (N.D. Cal. 1993 W. L. 307747) ............................ 40
Mid-Peninsula Citizens For Fair Hous. v. Westwood Investors, 221 Cal.
App. 3d 1377 (1990) ............................................................................ 16, 76, 136, 138
Miron v. Herbalife International, Inc., 2001 U.S. App. LEXIS 10923 (9th Cir.
2001) ......................................................................................................................... 82
Monroe Bounds v. Figurettes, Inc., 135 Cal. App. 3d 1 (1982)...................................... 14
Moore v. California State Bd. of Accountancy, 2 Cal. 4th 999 (1992) ..................... 67, 74
Morales v. Trans World Airlines, Inc., 504 U.S. 374 (1992)................................... 56, 117
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Morehart v. County of Santa Barbara, 7 Cal. 4th 725 (1994) ...................................... 143
Morris v. Gilbert, 649 F. Supp. 1491 (E.D.N.Y. 1986) ................................................. 135
Morrison v. Viacom, Inc., 1998 Cal. App. LEXIS 756 (Sept. 1, 1998) ......................... 112
Mortera v. N. Am. Mortgage Co., 172 F. Supp. 2d 1240 (N.D. Cal. 2001) .................. 139
Moser v. FTC, 46 F.3d 970 (9th Cir. 1995).................................................................... 63
Mother & Unborn Baby Care, Inc. v. State, 749 S.W.2d 533 (Tex. App.
1988), cert. denied, 490 U.S. 1090 (1989)................................................................... 8
Motors, Inc. v. Times Mirror Co., 102 Cal. App. 3d 735 (1980) . 3, 5, 42, 89, 97, 110, 144
Motown Record Corp. v. George A. Hormel & Co., 657 F. Supp. 1236
(C.D. Cal. 1987) ......................................................................................................... 58
Moy v. Schreiber Deed Sec. Co., 572 A.2d 758 (Pa. Super. 1990) ............................... 34
Mullins Coal Co. v. Director, Office of Workers' Compensation Programs,
United States Dep't of Labor, 484 U.S. 135 (1987).................................................... 31
Murphy v. McNamara, 36 Conn. Supp. 183, 416 A.2d 170 (1979) .............................. 116
Myers v. Merrill Lynch & Co., 249 F.3d 1087 (9th Cir. 2001)....................................... 125
Myers v. Merrill Lynch, 249 F. 3d 1087 (9th Cir. 2001).................................................. 57
N.J. Gendron Lumber Co. v. Great N. Homes, Inc., 8 Mass. App. 411, 395
N.E.2d 457 (1979) ....................................................................................................... 6
Naftzger v. American Numismatic Soc'y, 42 Cal. App. 4th 421 (1996) .......................... 14
National Commission on Egg Nutrition v. FTC, 570 F.2d 157 (7th Cir. 1977) ............... 63
National Committee of the Reform Party of the United States v. Democratic
National Committee, 168 F. 3d 360 (9th Cir 1999) .................................................... 65
National Union, United Mine Workers of America v. Bagwell, 512 U.S. 821,
114 S. Ct. 2552 (1994) .............................................................................................. 52
National Van Lines, Inc. v. Dean, 237 F.3d 688 (9th Cir. 1956) ........ 21, 70, 73, 136, 145
Nationwide Mut. Ins. Co. v Dynasty Solar, Inc., 753 F. Supp. 853 (N.D Cal.
1990) ................................................................................................................... 27, 93
Nedlloyd Lines B.V. v. Superior Court, 3 Cal. 4th 459 (1992) ....................................... 79
Nelsen v. Bd. of Health of the State of California, 70 Cal. App. 2d 202
(1945) ........................................................................................................................ 82
New Kids on the Block v. New Am. Publ'g, Inc., 745 F. Supp. 1540
(C.D. Cal. 1990) ......................................................................................................... 62
Newport Components v. NEC Home Elec., 671 F. Supp 1525 (C.D. Cal.
1987) ......................................................................................................................... 72
Nichols v. Merrill Lynch, Pierce, Fenner & Smith, 706 F. Supp. 1309 (M.D.
Tenn. 1989) ............................................................................................................. 135
Nicholson v. Marine Corp. W. Fed. Credit Union, 953 F. Supp. 1012 (N.D.
ILL. 1997) ................................................................................................................ 102
Nikkal Industries, Ltd. v. Salton, Inc., 735 F. Supp. 1127 (S.D.N.Y. 1990) .................. 119
Norwest Mortgage v. Superior Court of San Diego, 72 Cal. App. 4th 214
(1999) .................................................................................................................. 42, 80
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Notrica v. State Comp. Ins. Fund, 70 Cal. App. 4th 911 (1999) .............. 49, 84, 103, 108
Nutley v. Varian Assoc., Inc., 625 F. Supp. 104 (N.D. Cal. 1985) ................................. 58
O'Connor v. Boeing N. Am., Inc., 197 F.R.D. 404 (C.D. Cal. 2000) .............................. 43
O'Connor v. Superior Court, 177 Cal. App. 3d 1013 (1986) .......................................... 64
Ohio Cas. Ins. Co. v. Hubbard, 162 Cal. App. 3d 939 (1984)........................................ 26
Okura & Co., Inc. v. Careau Group, 783 F. Supp. 482 (C.D. Cal. 1991) ......................... 5
Olszewski v. Scrippshealth, 88 Cal. App. 4th 1268, 111 Cal. Rptr. 2d 687
(2001) .................................................................................................................. 53, 88
Orange Micro, Inc. v. Pacific Blue Micro, 223 U.S.P.Q. (BNA) 4 (C.D. Cal.
1983) ....................................................................................................................... 110
Orden v. Cranshaw Mortgage & Inv. Co., 109 Cal. App. 3d 141 (1980) ........................ 36
Orion Pictures Distrib. Corp. v. Snufy Enter., 829 F.2d 946 (9th Cir. 1987) .................. 97
Orkin Exterminating Co. v. FTC, 849 F.2d 1354 (11th Cir. 1988)............................ 5, 136
Oxycal Laboratories, Inc. v. Jeffers, 909 F. Supp. 719 (S.D. Cal. 1995) ....................... 62
Pachmayer Gun Works, Inc. v. Olin Mathieson Chem. Corp., 502 F.2d 802
(9th Cir. 1974) .................................................................................................... 25, 152
Palmer v. Agee, 87 Cal. App. 3d 377 (1978) ................................................................. 90
Pantazis v. Fior d'Italia, Inc., 1994 U.S. Dist. LEXIS 13622 (N.D. Cal. 1994) ................ 58
Patenaude v. The Equitable Life Assurance Society of the United States,
2002 U.S.App. LEXIS 9124 (9th Cir. 2002) ............................................................. 122
Patterson v. ITT Consumer Fin. Corp., 14 Cal. App. 4th 1659 (1993) ..................... 39, 98
Payne v. Nat'l Collection Sys., Inc., 90 Cal. App. 4th 130 (2001) ................................ 127
Payne v. United California Bank, 23 Cal. App. 3d 850 (1972) ......... 5, 6, 15, 29, 103, 144
Payne, et. al. v. Aztar Corp., et al., San Diego Superior Court No. 698592 .................. 45
Peel v. Attorney Registration and Disciplinary Commission of Illinois, 496
U.S. 91 (1990) ........................................................................................................... 61
Pena v. McArthur, 889 F. Supp. 403 (E.D. Cal. 1994)................................................. 105
People ex rel. Dep't of Transp. v. Naegele Outdoor Adver. Co. of California,
Inc., 38 Cal. 3d 509 (1985) ........................................................................................ 30
People v. Beltz Travel Serv., Inc., 379 F. Supp. 948 (N.D. Cal. 1974) ................ 124, 141
People v. Bestline Prods., Inc., 61 Cal. App. 3d 879 (1976).................................. 14, 115
People v. Cappuccio, Inc., 204 Cal. App. 3d 750 (1988) ......................... 6, 42, 89, 92, 93
People v. Casa Blanca Convalescent Homes, Inc., 159 Cal. App. 3d 509
(1984) .......................................................................................... 3, 4, 12, 42, 104, 121
People v. Cimarusti, 81 Cal. App. 3d 314 (1978) .......................................................... 19
People v. Columbia Research Corp., 71 Cal. App. 3d 607 (1977) .................... 19, 20, 50
People v. Custom Craft Carpets, Inc., 159 Cal. App. 3d 676 (1984) ....................... 18, 82
People v. Damon, 51 Cal. App. 4th 958 (1996) ............................................................. 46
People v. Dollar Rent-A-Car Sys., Inc., 211 Cal. App. 3d 119 (1989)6, 9, 83, 88, 104, 150
People v. Duz-More Diagnostic Laboratory, Inc., 68 Cal. App. 4th 654
(1998) ................................................................................................................ 35, 112
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People v. E.W.A.P., Inc., 106 Cal. App. 3d 315 (1980) ............................. 64, 86, 92, 103
People v. First Federal Credit Corp., 104 Cal. App. 4th 721, 734 (2002) .. 84, 87, 88, 119
People v. Forest E. Olson, Inc., 137 Cal. App. 3d 137 (1982) ................................... 8, 47
People v. Fremont Gen. Corp., 89 Cal. App. 4th 1260 (2001)..................................... 152
People v. General Motors Corp., 431 F.2d 732 (9th Cir. 1970) ................................... 122
People v. Green Acres Trust, 127 Ariz. 160, 618 P.2d 1086 (Ariz. App.
1980) ....................................................................................................................... 116
People v. H&H Properties, 154 Cal. App. 3d 894 (1984)............................................... 49
People v. Hacker Emporium, Inc., 15 Cal. App. 3d 474 (1971) ................................... 103
People v. Health Lab. of N. Am., Inc., 87 Cal. App. 4th 442 (2001) .............................. 65
People v. Henderson, 255 Cal. App. 3d 1129 (1990) .................................................. 153
People v. Highland, 14 Cal. App. 4th 1692 (1993) ........................................................ 54
People v. Hill, 66 Cal. App. 3d 320 (1977) .............................................................. 19, 20
People v. Hy-Lond Enters., Inc., 93 Cal. App. 3d 734 (1979) ...................................... 153
People v. James, 122 Cal. App. 3rd 25 (1981) .......................................... 3, 97, 138, 147
People v. K. Sakai Co., 56 Cal. App. 3d 531 (1976) ..................................................... 92
People v. Keating, MDL 90-834 as RMB, (9th Cir. 1992) .............................. 76, 122, 132
People v. Kelley, 70 Cal. App. 3d 418 (1977) ................................................................ 50
People v. Levi Strauss, 41 Cal. 3d 460 (1986) .............................................................. 69
People v. Los Angeles Palm, Inc., 121 Cal. App. 3d 25 (1981) ............................... 13, 97
People v. Lynam, 253 Cal. App. 2d 963 (1967) ............................................. 13, 144, 146
People v. McKale, 25 Cal. 3d 626 (1979) .................................................. 12, 15, 75, 137
People v. Mobile Magic Sales, Inc., 96 Cal. App. 3d 1 (1979)................................. 21, 67
People v. Morse, 21 Cal. App. 4th 259 (1993) ................................ 17, 20, 49, 52, 61, 65
People v. National Research Co. of California, 201 Cal. App. 2d 765 (1962) ......... 50, 80
People v. Nat'l Ass'n of Realtors, 120 Cal. App. 3d 459 (1981) ...................... 11, 76, 100
People v. Nat'l Ass'n of Realtors, 155 Cal. App. 3d 578 (1984) ...................... 17, 51, 121
People v. Pac. Bell, 89 Cal. App. 4th 844, 112 Cal. Rptr. 2d 259 (2001) ...................... 53
People v. Pacific Land Research Co., 20 Cal. 3d 10 (1977) ............................... 126, 154
People v. Parkmerced Co., 198 Cal. App. 3d 683 (1988)........................................ 18, 69
People v. Rath Packing Co., 85 Cal. App. 3d 308 (1978)...................................... 54, 128
People v. Regan, 95 Cal. App. 3d Supp. 1 (1979) ...................................................... 150
People v. Sacramento Valley Ambulance Ass'n, 1994 WL 160104 (Cal.
Superior Court Jan. 7, 1994) ..................................................................................... 19
People v. Sangani, 22 Cal. App. 4th 1120 (1994) ......................................................... 50
People v. Sangiacomo, 128 Cal. App. 3d 942, 180 Cal. Rptr. 595 (1982) .............. 50, 61
People v. Sanyo Electric, Inc., 1982 WL 11211 (Cal. Superior Aug. 30,
1982) ......................................................................................................................... 19
People v. Schmitt, 155 Cal. App. 2d 87 (1957) ............................................................. 10
People v. Servantes, 86 Cal. App. 4th 1081 (2001) ...................................... 55, 112, 148
People v. Steelcase, Inc., 1992 WL 286586 (Cal. Superior Feb. 2, 1993) .................... 19
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People v. Steelcase, Inc., 792 F. Supp. 84 (C.D. Cal. 1992)....................................... 124
People v. Superior Court (Caswell), 46 Cal. 3d 381 (1988)..................................... 49, 50
People v. Superior Court (Good), 17 Cal. 3d 732 (1976) ............................................ 154
People v. Superior Court (Jayhill), 9 Cal. 3d 283 (1973) ..................... 8, 17, 81, 119, 132
People v. Superior Court (Olson), 96 Cal. App. 3d 181 (1979) ......................... 18, 20, 64
People v. Superior Court (Solano), 35 Cal. App. 3d 710 (1973) ............................ 17, 119
People v. Thomas Shelton Powers, M.D., Inc., 2 Cal. App. 4th 330 (1992)48, 49, 69, 132
People v. Toomey, 157 Cal. App. 3d 1 (1984) .................................. 17, 76, 88, 136, 150
People v. Wahl, 39 Cal. App. 2d Supp. 771 (1940) ............................................... 89, 146
People v. Warnes, 10 Cal. App. 4th Supp. 35 (1992) .................................................... 51
People v. Western Airlines, Inc., 155 Cal. App. 3d 597 (1984)................................ 45, 56
People v. Witzerman, 29 Cal. App. 3d 169 (1972) .................................................. 50, 88
Perdue v. Crocker Nat'l Bank, 38 Cal. 3d 913 (1985).............................................. 11, 55
Perera v. Chiron Corp., 1996 WL 251936 (N.D. Cal., May 8, 1996) ............................ 134
Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134 (1968) .................. 87
Perovich v. Humphrey, 1997 U.S. Dist. LEXIS 16949 (1997 N.D. Ill) .......................... 150
Pesce v. Department of Alcoholic Beverage Control, 51 Cal. 2d 310 (1958) .............. 143
Peterson v. Wells Fargo Bank, Nat'l Ass'n, 556 F. Supp. 1100 (N.D. Cal.
1981) ....................................................................................................................... 115
Pharmacare v. Caremark, 965 F. Supp. 1411 (D. Haw 1996) ......................... 22, 45, 140
Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985) .......................................... 48, 154
Phillips v. Crocker-Citizen Nat'l Bank, 38 Cal. App. 3d 901 (1974) ............................... 29
Phipps v. Saddleback Valley Sch. Dist., 204 Cal. App. 3d 1110 (1988) ...................... 136
Pines v. Tomson, 160 Cal. App. 3d 370 (1984) ................................................. 7, 14, 138
Plasticolor Molded Prods. v. Ford Motor Co., 713 F. Supp. 1329 (C.D. Cal.
1989) ......................................................................................................................... 13
Plotkin v. Tanner's Vacuums, 53 Cal. App. 3d 454 (1975) ............................................ 92
Podolsky v. First Healthcare Corporation, 50 Cal. App. 4th 632 (1996) .... 2, 3, 6, 20, 104
Posadas de Puerto Rico Assoc. v. Tourism Co., 478 U.S. 328 (1986).......................... 62
Prata v. Superior Court, 91 Cal. App. 4th 1128 (2001) ............................................ 29, 74
Prego Ltd. 1981 v. Getty Oil Co., 1991 U.S. Dist. LEXIS 17671 (E.D. Cal.
1991) ......................................................................................................................... 71
Professional Real Estate Investors, Inc. v. Columbia Pictures Industries,
Inc., 508 U.S. 49 (1993)............................................................................................. 65
Project Management Sys., Inc. v. WST Corp., 1991 U.S. Dist. LEXIS 11652
(N.D. Cal 1991) .......................................................................................... 71, 104, 105
Provience v. Valley Clerks Trust Fund, 509 F. Supp. 388 (E.D. Cal. 1981) ................. 58
Prudential Home Mortgage Co. v. Superior Court, 66 Cal. App. 4th 1236
(1998) ........................................................................................................................ 31
Prudential-Bache Sec., Inc. v. Union Bank, 1991 U.S. Dist. LEXIS 6643
(N.D. Cal 1991) .......................................................................................................... 71
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Pynchon v. Bursell, No. CIVIL S-82-615 LKK, slip. op. (E.D. Cal. 1984) ..................... 133
Quelimane Co. v. Stuart Title Guaranty Co., 19 Cal. 4th 26, 55 (1998)........................... 7
Quielimane Co. v. Stewart Title Guaranty Co., 19 Cal. 4th 26 (1998) ........................... 32
Raines v. Switch Mfg., 1997 U.S. Dist. LEXIS 13621 (N.D. Cal. 1997) ....................... 114
Rath Packing Co. v. M.H. Becker, 530 F.2d 1295 (9th Cir. 1975) ................................. 57
Rawson v. Tosco Ref. Co., 1996 U.S. Dist. LEXIS 1006 (N.D. Cal. 1996) .................. 124
Redding v. St. Francis Med. Ctr., 208 Cal. App. 3d 98 (1989) .................................... 108
Rent Control Bd. v. Bluvshtein, 230 Cal. App. 3d 308 (1991)...................................... 137
Resort Car Rental System, Inc. v. FTC, 518 F.2d 962 (9th Cir. 1975) ........................ 143
Rice v. Fox Broad. Co., 148 F. Supp. 2d 1029 (C.D. Cal. 2001) ................................... 57
Rich v. Schwab, 64 Cal. App. 4th 803, 816-17 (1998) ................................................ 119
Richmond v. Dart Indus., Inc., 196 Cal. App. 3d 869 (1987) ....................................... 113
Riley v. National Federation for the Blind, 47 U.S. 781, 795 Hudson, 96
(1988) ........................................................................................................................ 63
Roach v. Woltmann, 879 F. Supp. 1039 (C.D. Cal. 1994) ........................................... 134
Rodgers Builders, Inc. v. McQueen, 331 S.E.2d 726 (N.C. App. 1985) ........................ 40
Rogers v. Nationscredit Financial Services, 233 B.R. 98 (N.D. Cal. 1999) ................... 57
Rolex Watch U.S.A., Inc. v Borgerson, Civil Action No. 81-1040 (Gx), slip.
op. (C.D. Cal. 1981) ................................................................................................. 110
Rolex Watch U.S.A., Inc. v. Thalheimer Co., Inc., 217 U.S.P.Q. (BNA) 964
(N.D. Cal. 1982) ....................................................................................................... 110
Rosales v. Citibank, Fed. Savings Bank, 133 F. Supp. 2d 1177 (N.D. Cal.
2001) ................................................................................................................. 43, 132
Roskind v. Morgan Stanley Dean Witter & Co., 2001 U.S. Dist. LEXIS 4528
(N.D. Cal. 2001) ....................................................................................................... 123
Roskind v. Morgan Stanley Dean Witter, 80 Cal. App. 4th 345 (2000) ........................ 133
Rothschild v. Tyco Int'l, Inc., 83 Cal. App. 4th 488 (2000) ........................................... 127
Rubin v. Green, 4 Cal. 4th 1187 (1993)........................................................... 16, 98, 117
Russell v. Dean Witter Reynolds, Inc., 200 Conn. 172, 510 A.2d 972 (1986) ............. 135
Rynsburger v. Dairymen's Fertilizer Coop., Inc., 266 Cal. App. 2d 269
(1968) ...................................................................................................................... 153
Safeco Ins. Co. v. Superior Court of Los Angeles, 216 Cal. App. 3d 1491
(1990) ........................................................................................................................ 98
Saks & Co. v. Hill, 843 F. Supp. 620 (S.D. Cal. 1993)................................................... 92
Salcido v. Pacific Weathershield, Inc., 1997 U.S. Dist. LEXIS 18191
(N.D. Cal. 1997) ....................................................................................................... 123
Sammons & Sons v. Ladd-Fab, Inc., 138 Cal. App. 3d 306 (1982) ............... 18, 108, 113
Samura v. Kaiser Found. Health Plan, Inc., 17 Cal. App. 4th 1284 (1993) 3, 33, 112, 149
San Diego Committee v. Governing Board, 790 F. 2d 1471 (9th Cir 1986)................... 61
San Jose v. Superior Court, 12 Cal. 447 (1974) ............................................................ 28
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Sandlin v. Shapiro & Fishman, 1997 U.S. Dist. LEXIS 4062 (M.D. Fla.
1997) ......................................................................................................................... 43
Saunders v. Superior Court (Los Angeles), 27 Cal. App. 4th 832 (1994) ............ 3, 81, 97
Schnall v. Hertz Corp., 78 Cal. App. 4th 1144 (2000).................................. 4, 35, 95, 108
Schwartz v. Upper Deck Co., 967 F. Supp. 405 (S.D. Cal. 1997) ................................... 2
Schwartz v. Visa Int'l Corp., 2001 U.S. Dist. LEXIS 105 (N.D. Cal. 2001) ................... 123
Schwarzschild v. Tse, 69 F.3d 293 (1995) .................................................................... 28
Sebago, Inc. v. City of Alameda, 211 Cal. App. 3d 1372 (1989) ................................... 90
Sega Enterprises Ltd. v. Accolade, Inc., 1992 U.S. Dist. LEXIS 4621
(N.D. Cal. 1992) ......................................................................................................... 11
Sepulveda v. Highland Fed. Sav. & Loan, 14 Cal. App. 4th 1692 (1993) ...................... 56
Setliff Brothers Service v. Bureau of Automotive Repair, 53 Cal. App. 4th
1491 (1997) ............................................................................................................... 46
Shadoan v. World Sav. & Loan Ass'n, 219 Cal. App. 3d 97 (1990) ................. 11, 35, 148
Shearson Lehman Bros. Inc. v. Greenberg, 1995 U.S. App. LEXIS 17313
(9th Cir. July 3, 1995) ........................................................................................ 46, 134
Shekhter v. Fin. Indem. Co., 89 Cal. App. 4th 141 (2001) ............................................. 60
Show Management v. Hearst Publ'g Co., Inc., 196 Cal. App. 2d 606 (1961) ...... 8, 92, 95
Shvarts v. Budget Group, 81 Cal. App. 4th 1153 (2000) ....................... 4, 35, 74, 94, 107
Siegel v. American Savings & Loan, 210 Cal. App. 3d 953 (1989) ............................... 54
Silvaco Data Sys., Inc. v. Technology Modeling Assoc., Inc., 896 F. Supp.
973 (N.D. Cal. 1995) .................................................................................................. 57
Simeon Management Corp. v. FTC, 579 F.2d 1137 (9th Cir. 1978) ............................ 110
Sinclair v. Fotomat Corp., 140 Cal. App. 3d 217 (1983) ................................................ 13
Singer v. Dean Witter Reynolds, Inc., 614 F. Supp. 1141 (D. Mass. 1985) ................. 135
Sipes v. Equitable Life Ins., 1996 U.S. Dist. LEXIS 12325 (N.D. Cal. 1996) ................. 99
Skinner v. E.F. Hutton, 333 S.E.2d 236 (N.C. 1985) ................................................... 135
Skinner v. Superior Court of Santa Clara County, 69 Cal. App. 3d 183
(1977) ........................................................................................................................ 47
Smiley v. Citibank, 517 U.S. 735 (1996)........................................................................ 56
Smith v. City of Los Angeles, 190 Cal. App. 2d 112 (1961)......................................... 128
Smith v. Cooper/T. Smith Corp., 846 F.2d 325 (5th Cir. 1988).................................... 134
Smith v. State Farm Mut. Automobile Ins. Co., 93 Cal. App. 4th 700 (2001)............... 106
Solem v. Helm, 463 U.S. 277 (1983) ............................................................................. 51
Solomon v. North Am. Life & Cas. Ins. Co., 1998 U.S. App. LEXIS 14907
(9th Cir. June 4, 1998) ................................................................................. 36, 82, 142
Solorzano v. Superior Court, 10 Cal. App. 4th 1135 (1992) .......................................... 56
Sony Pictures Entm't, Inc. v. Fireworks Entm't Group, Inc., 156 F. Supp. 2d
1148 (C.D. Cal. 2001) .............................................................................................. 140
South Bay Chevrolet v. General Motors Acceptance Corp., 72 Cal. App. 4th
1380 (1999) ................................................................................................... 42, 67, 90
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Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134 (9th Cir. 1997) ............ 92, 118
Southwest Airlines Co. v. Texas Int'l Airlines, 546 F.2d 84 (5th Cir. 1977) .......... 130, 154
Southwest Marine, Inc. v. Triple A Mach. Shop, Inc., 720 F. Supp. 805
(N.D. Cal. 1989) ................................................................................................. 72, 120
Souza v. Lauppe, 59 Cal. App. 4th 865 (1997) ........................................................... 112
Sperry Rand Corp. v. Seawol Distrib., 140 U.S.P.Q. 532 (1964) .................................. 68
Spiegel, Inc. v. FTC, 540 F.2d 287 (7th Cir. 1976) ...................................................... 110
Spinner Corp. v. Princeville Dev. Corp., 849 F.2d 388 (9th Cir. 1988) ........................ 134
Standard Fire Ins. Co. v. Peoples Church of Fresno, 985 F.2d 446 (9th Cir.
1993) ............................................................................................................... 5, 25, 26
Standard Oil Co. of California v. FTC, 577 F.2d 653 (9th Cir. 1978) ............................. 62
Starbuck v. Kaiser Found. Health Plan, Inc., 275 Cal. 444 (1991) .............................. 103
Starter Corp. v. Eurostar, 1993 U.S. Dist. LEXIS 19955 (C.D. Cal. 1993),
28 U.S.P.Q. 2d (BNA) 1844 ..................................................................................... 144
State Bd. of Funeral Dirs. & Embalmers v. Mortuary in Westminster Mem'l
Park, 271 Cal. App. 2d 638, 76 Cal. Rptr. 832 (1969) ............................................... 95
State Farm Ins. Co. v. Superior Court, 45 Cal. App. 4th 1093 (1996) ..................... 3, 4, 6
State v. Piedmont Funding Corp., 119 R.I. 695, 382 A.2d 819 (1978) ........................ 135
State v. Rhoades, 275 S.C. 104, 267 S.E.2d 539 (1980) .................................... 116, 135
State v. Texaco, Inc., 46 Cal. 3d 1147 (1988) ................................................... 7, 75, 104
Stationary Eng'rs Local 39 Health and Welfare Trust Fund v. Philip Morris,
Inc., 1998 U.S. Dist. LEXIS 8302 (N.D. Cal. 1998) ...................................... 45, 91, 140
Stephenson v. Paine Webber Jackson & Curtis, Inc., 839 F.2d 1095
(5th Cir. 1988) .......................................................................................................... 134
Stoiber v. Honeychuck, 101 Cal. App. 3d 903 (1980) ................................................. 138
Stop Youth Addiction v. Lucky Stores, 17 Cal. 4th 553 (1998) .......................... 1, 97, 137
Stutz Motor Car of Am., Inc. v. Reebok Int'l, Ltd., 909 F. Supp 1358
(C.D. Cal. 1995) ............................................................................................... 141, 143
Suburban Restoration Co. v. ACMAT Corp., 700 F.2d 98 (2d Cir. 1983) ...................... 65
Suh v. Yang, 1997 U.S. Dist. LEXIS 20073 (N.D. Cal. Nov. 6, 1997) ......................... 143
Summit Mach. Tool Mfg. Corp. v. Victor CNC Sys., Inc., 7 F.3d 1434
(9th Cir. 1993) ............................................................................................................ 59
Summit Tech., Inc. v. High-Line Med. Instruments Co., Inc., 922 F. Supp.
299 (C.D. Cal. 1996) .................................................................................. 99, 114, 115
Sunbelt Television, Inc. v. Jones Intercable, Inc., 795 F. Supp. 333
(C.D. Cal. 1992) ................................................................................................... 11, 62
Surber v. Reliance Nat'l Indem. Co., 110 F. Supp. 2d 1227 (N.D. Cal. 2000) ............. 125
Sure Safe Indus. v. McGrath Rentcorp, 2001 Cal. App. LEXIS 2689 (filed
Nov. 26, 2001) ................................................................................................... 42, 107
Swanson v. St. John's Reg'l Med. Ctr., 97 Cal. App. 4th 245 (2002) .......................... 149
Swenson v. Engelstad, 626 F.2d 421 (5th Cir. 1980) .......................................... 134, 136
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Szetela v. Discover Bank, 2002 Cal. App. LEXIS 4007 (filed Apr. 22, 2002) ................ 39
Takiguchi v. Podorean, [1987 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶
93,319 (Haw. Cir. Ct. 1987) ..................................................................................... 134
Tall Club of Silicon Valley v. Am. Airlines, 2000 U.S. Dist. LEXIS 11302
(N.D. Cal. June 19, 2000) ........................................................................................ 123
Taylor v. Bear Stearns & Co., 572 F. Supp. 667 (N.D. Ga. 1983) ............................... 135
Tenants Ass'n v. Beverly Southers, 222 Cal. App. 3d 1293 (1990) ....................... 29, 138
Tigera Group v. Commerce and Indus. Ins. Co., 753 F. Supp. 858
(N.D. Cal. 1991) ................................................................................................... 25, 27
Tippett v. Terrich, 37 Cal. App. 4th 1517 (1995) ........................................................... 95
Titan Sports, Inc. v. 3-G Prod., 19 U.S.P.Q. 1867, 1991 U.S. Dist. LEXIS
15945 (C.D. Cal. 1991) ............................................................................................ 124
Toho Co., Ltd. v. Sears Roebuck & Co., 645 F.2d 788 (9th Cir. 1981) ......................... 95
Total TV v. Palmer Communications, Inc., 69 F.3d 298 (9th Cir. 1995) ........................ 59
Toxic Injuries Corp. v. Safety-Kleen Corp., 57 F. Supp. 2d 947 (C.D. Cal.
1999) ............................................................................................................... 123, 140
Trans World Airlines, Inc. v. Mattox, 897 F.2d 773 (5th Cir. 1990) ................................ 57
Trinkle v. Cal. State Lottery, 71 Cal. App. 4th 1198 (1995) ................................. 103, 118
Trotsky v. Los Angeles Fed. Sav. & Loan Ass'n, 48 Cal. App. 3d 134
(1975) ...................................................................................................................... 153
Truta v. Avis Rent A Car Sys., 192 Cal. App. 3d 802 (1987) ....................................... 103
Tudor v. Jewel Food Stores, Inc., 681 N.E.2d 6 (Ill. App. 1997) .................................... 36
Twohey v. Lincoln Nat'l Life Ins., 2000 U.S. Dist. LEXIS 10096 (N.D. Cal.
July 11, 2000) ............................................................................................................ 57
U.S. Healthcare v. Blue Cross of Greater Philadelphia, 898 F.2d 914
(3rd Cir.), cert. denied, 111 S. Ct. 58 (1990) .............................................................. 63
U.S. v. Certain Real Property and Premises, 954 F. 2d 29 (2d Cir 1992) ..................... 52
U.S. v. Halper, 490 U.S. 435 (1989) .............................................................................. 52
U.S. v. ITT Rayonier, Inc., 627 F.2d 996 (9th Cir. 1980) ............................................. 129
U.S. v. O'Brien, 391 U.S. 367 (1968) ............................................................................ 61
U.S. v. Ramiro, 986 F.3d 333 (9th Cir. 1993) ................................................................ 52
U.S. v. Traylor, 978 F.2d 1131 (9th Cir. 1992) .............................................................. 47
Udall v. Tallman, 380 U.S. 1 (1965) .............................................................................. 30
Unit Process Co. v. Raychem Corp., 2002 Cal. App. LEXIS 1283 (Feb. 5,
2002) ......................................................................................................................... 45
United Farm Workers of Am. v. Dutra Farms, 83 Cal. App. 4th 1146 (2000) .............. 104
United Farm Workers of Am. v. Superior Court, 47 Cal. App. 3d 334 (1975) .............. 138
United Parcel Serv., Inc. v. Package Am., Inc., 1996 U.S. Dist. LEXIS 8148
(N.D. Cal. 1996) ......................................................................................................... 14
Upjohn Co. v. American Home Products Corp., 598 F. Supp. 550 (S.D.N.Y.
1984) ......................................................................................................................... 68
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Upper Deck Authenticated v. CPG Direct, 971 F. Supp. 1337 (S.D. Cal.
1997) ........................................................................................................................... 2
Van de Kamp v. Bank of America, 204 Cal. App. 3d 819 (1988)........................... 74, 113
Van Ness v. Blue Cross of Cal., 87 Cal. App. 4th 364 (2001) ..................................... 148
Vermont Agency of Natural Resources v. United States, 529 U.S. 765, 120
S. Ct. 1858 (2000) ................................................................................................... 139
Victor v. Thomas F White & Co., 1990 U.S. Dist. LEXIS 19803 (N.D. Cal.
1990) ................................................................................................................... 71, 72
Vidal Sassoon, Inc. v. Bristol-Myers Co., 661 F.2d 272 (2d Cir. 1981).......................... 68
Virgin Enter. Ltd. v. Am. Longevity, 2001 U.S. Dist. LEXIS 2046 (S.D.N.Y.
Feb. 28, 2001) ................................................................................................... 66, 140
Visa Int'l Serv. Ass'n v. Bankcard Holders of Am., 211 U.S.P.Q. (BNA) 28
(N.D. Cal. 1981) ......................................................................................... 14, 101, 146
Walker v. Allstate Indemnity Co., 77 Cal. App. 4th 750 (2000)...................................... 33
Walker v. Superior Court, 47 Cal. 3d 112 (1988) .......................................................... 50
Wang v. Massey Chevrolet, 2002 Cal. App. LEXIS 3273, at *23 (filed Mar.
21, 2002) ................................................................................................................. 116
Warner-Lambert Co. v. FTC, 562 F.2d 749 (D.C. Cir. 1977) ......................................... 89
Washington Mutual Bank v. Super. Ct., 95 Cal. App. 4th 606 (2002) ............................ 53
Washington Mutual Bank v. Superior Court, 24 Cal. 4th 906 (2001) ............................. 79
Washington Mutual Bank, F.A. v. Superior Court, 75 Cal. App. 4th 773
(1993) ........................................................................................................................ 54
Watson Lab. v. Rhone-Poulenc Rorer, Inc., 178 F. Supp. 2d 1099 (C.D.
Cal. 2001) .................................................................................................. 73, 108, 114
Webb v. Eldorado Colleges, Inc., 61 Cal. App. 4th 1450 (1998) ................................... 39
Webster v. Omnitrition Int'l, Inc., 1996 U.S. App. LEXIS 3873 (9th Cir. Mar.
4, 1996) ....................................................................................................................... 4
Wershba v. Apple Computer, Inc., 91 Cal. App. 4th 224 (2001) .............................. 43, 80
Whitaker v. Tandy Corp., 1997 U.S. Dist. LEXIS 1708 (N.D. Cal. 1997) ....................... 95
Whiteside v. Tenet Healthcare Corp., 101 Cal. App. 4th 693, 706 (2002) ................... 111
Wilder v. Squires, 315 S.E.2d 63 (N.C. App. 1984) ....................................................... 13
William O'Neil + Co. v. Validea.com, 2002 U.S. Dist. LEXIS 8392 (C.D. Cal.
Jan. 31, 2002) ............................................................................................................ 62
Williams v. State Farm Fire and Cas., 216 Cal. App. 3d 1540 (1990) ......................... 145
Willis v. Superior Court of Los Angeles County, 112 Cal. App. 3d 277
(1980) ...................................................................................................................... 151
Wilner v. Sunset Life Insurance Co., 78 Cal. App. 4th 952 (2000) .................. 48, 90, 127
Winter v. G.P. Putnam's Sons, 938 F.2d 1033 (9th Cir. 1991) ...................................... 61
Wise v. Pacific Gas & Electric Co., 77 Cal. App. 4th 287 (1999) ................................... 33
Wolfe v. State Farm Fire & Cas. Ins. Co., 46 Cal. App. 4th 554 (1996) ................ 96, 149
Woods v. Superior Court of Monterey County, 102 Cal. App. 3d 608 (1980) ...... 101, 115
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Wyatt v. Union Mortgage Co., 24 Cal. 3d 773 (1979) .................................................. 142
Xerox Corp. v. Apple Computer, Inc., 734 F. Supp. 1542 (N.D. Cal. 1990)................... 58
Yamaha Corp. of Am. v. ABC Int'l Traders, Corp., 703 F. Supp. 1398
(C.D. Cal. 1988) ......................................................................................................... 94
Yancy v. American Sav. and Loan Ass'n, 215 Cal. App. 3d 1076 (1989) .................... 138
Younger v. Superior Court, 21 Cal. 3d 102 (1978) ........................................................ 36
Yu v. Signet Bank/Virginia, 103 Cal. App. 4th 298 (2002) ....................................... 15, 37
Zakarian v. Dekov, 2002 Cal. App. LEXIS 4093 (May 8, 2002)..................................... 38
Zauderer v. Office of Disciplinary Council of the Supreme Court of Ohio,
471 U.S. 626 (1985) .................................................................................................. 64
STATUTES
15 U.S.C. § 45(a) ............................................................................................................ 1
28 U.S.C. § 1441(b) .................................................................................................... 122
9 U.S.C. § 1................................................................................................................... 37
Ariz. Rev. Stat. Ann. § 44-1523 (1987)........................................................................ 116
Ark. Stat. Ann. § 70-913(a).......................................................................................... 116
Cal. Bus. & Prof. Code § 12601 .................................................................................. 148
Cal. Bus. & Prof. Code § 17000 ...................................................................................... 1
Cal. Bus. & Prof. Code § 17001 ...................................................................................... 1
Cal. Bus. & Prof. Code § 17200 ...................7, 8, 9, 25, 36, 47, 89, 97, 98, 121, 133, 141
Cal. Bus. & Prof. Code § 17202 .................................................................................... 86
Cal. Bus. & Prof. Code § 17203 .................................................... 15, 20, 75, 78, 97, 149
Cal. Bus. & Prof. Code § 17204 ...................................................................... 15, 24, 137
Cal. Bus. & Prof. Code § 17205 .................................................................................... 17
Cal. Bus. & Prof. Code § 17206 .............................................................................. 15, 17
Cal. Bus. & Prof. Code § 17206.1 ................................................................................. 17
Cal. Bus. & Prof. Code § 17208 .................................................................................. 141
Cal. Bus. & Prof. Code § 17209 .................................................................................... 83
Cal. Bus. & Prof. Code § 17500 ................................................ 8, 9, 20, 89, 93, 133, 137
Cal. Bus. & Prof. Code § 17535 ............................................................................ 20, 137
Cal. Bus. & Prof. Code § 17536 ............................................................................ 20, 141
Cal. Bus. & Prof. Code § 2234 ...................................................................................... 99
Cal. Civ. Code § 1750 ..................................................................................................... 1
Cal. Civ. Code § 1781 ................................................................................................... 27
Cal. Civ. Code § 1782 ............................................................................................. 16, 17
Cal. Civ. Code § 1936 ........................................................................................... 95, 108
Cal. Civ. Code § 384 ..................................................................................................... 69
Cal. Civ. Code § 47 ................................................................................................. 88, 98
Cal. Civ. Code § 51 ......................................................................................................... 7
Cal. Civ. Code § 790.03 ................................................................................................ 98
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Cal. Civ. Code §§ 1750, et seq. .................................................................................... 75
Cal. Civ. Code §§ 1750-84 .............................................................................................. 1
Cal. Civ. Proc. Code § 1021.5 ......................................................................... 24, 25, 151
Cal. Civ. Proc. Code § 338 .......................................................................................... 141
Cal. Civ. Proc. Code § 340 .......................................................................................... 141
Cal. Civ. Proc. Code § 343 .......................................................................................... 141
Cal. Civ. Proc. Code § 393 .......................................................................................... 149
Cal. Civ. Proc. Code § 430.10 ..................................................................................... 117
Cal. Civ. Proc. Code § 529 ............................................................................................ 91
Cal. Civ. Proc. Code § 995.220 ..................................................................................... 91
Cal. Civ. Proc. Code § 995.240 ..................................................................................... 91
Cal. Civ. Proc. Code § 998 .......................................................................................... 152
Cal. Evid. Code § 1105 ............................................................................................... 104
Cal. Evid. Code § 1152 ................................................................................................. 17
Cal. Health & Safety Code § 1541 .............................................................................. 101
Cal. Health & Safety Code § 26271 .............................................................................. 82
Cal. Ins. Code § 10144.................................................................................................. 98
Cal. Ins. Code § 11873................................................................................................ 103
Cal. Ins. Code § 2071.................................................................................................. 107
Cal. Ins. Code § 790.03................................................................................................. 98
Cal. Penal Code § 308 .................................................................................................. 97
Cal. Penal Code § 311.2 ............................................................................................... 86
Colo. Rev. Stat. § 6-1-106(1)(a) .................................................................................. 116
Del. Code Ann. tit. XI, § 2513(b) (1975) ...................................................................... 116
Fed. R. Civ. P. § 23 ........................................................................... 27, 28, 29, 152, 153
La. Rev. Stat. Ann. § 51:1406(4) ................................................................................. 116
Mo. Ann. Stat. § 407.020(1) ........................................................................................ 116
N.H. Rev. Stat. Ann. § 358-A:3 ................................................................................... 116
OTHER AUTHORITIES
"Lungren Role In Computer Lawsuit Criticized," Los Angeles Times
(Sept. 28, 1995) ......................................................................................................... 23
"Private AG's New Cause: Toy Oven That Doesn't Cook Fast Enough,"
Recorder (Apr. 18, 1995) ........................................................................................... 10
Fellmeth, "Unfair Competition Law Enforcement by Agencies, Prosecutors
and Private Litigants: Who's On First?" 15 Cal. Reg. L. Rep. 1 (1995) ................... 126
Stern, "California's Unfair Business Practices Statutes: Settling the
'Nonclass Class' Action and Fighting the 'Two Front War,'" 12 CEB Civ.
Litigation Rep. 95 (May, 1990) ................................................................................. 126
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I. SCOPE OF STATUTES
A. Substantive Violations
Across the country, every one of the states has adopted a local version of
section 5 of the Federal Trade Commission Act ("FTC Act") ((15 U.S.C. § 45(a)),
which proscribes unfair methods of competition and deceptive or misleading
practices. Referred to in the vernacular as "Little FTC Acts," these statutes take
many forms, but they have in common a core set of standards forbidding "unfair"
or "deceptive" practices, as well as provisions for governmental and private
enforcement of the acts. California's Little FTC Acts are codified in California
Business & Professions Code sections 17200 through 17208 ("Unfair
Competition Law" or "UCL") and sections 17500 through 17535 ("False
Advertising Act" or "FAA"), as well as California Civil Code sections 1750 et seq.
("Consumers Legal Remedies Act"). (Because California is the forum of choice
for nearly half the countries' class action litigation, and for all "quasi-class" action
litigation, this outline emphasizes California law, although federal law and the law
of other states are also included). Because of language parallels, the UCL and
the FAA frequently are discussed together, and they are analyzed similarly in
case law. (See Bank of the West v. Superior Court, 2 Cal. 4th 1254, 1273
(1992)).
This outline provides an overview of considerations relevant to the defense of
actions brought under the Little FTC Acts and sets forth a comprehensive listing
of potential defense doctrines (see section VIII, below).
1.
Unfair Competition Law
The UCL (formerly Cal. Civ. Code § 3369), prohibits "any unlawful, unfair
or fraudulent business act or practice and unfair, deceptive, untrue or
misleading advertising. . . ." This outline uses the term "Unfair
Competition Law" (or "UCL") to describe this legislation, adopting the
California Supreme Court's most recent terminology, although the courts
have not been consistent in their descriptions of the Law. Compare Stop
Youth Addiction v. Lucky Stores, 17 Cal. 4th 553 (1998) ("Unfair
Competition Law"); Manufacturers Life Ins. Co. v. Superior Court, 10 Cal.
4th 257 (1995) ("Unfair Competition Act"); Bank of the West v. Superior
Court, 2 Cal. 4th 1254, 1260 (1992) ("Unfair Business Practices Act"); and
Farmers Ins. Exch. v. Superior Court of Los Angeles County, 2 Cal. 4th
377, 400 (1992) ("Unfair Practices Act").
The UCL actually is different from the Unfair Business Practices Act,
codified at Cal. Bus. & Prof. Code sections 17000-17101 (not addressed
in this outline), which concerns only competitive practices such as antitrust
violations, consumer protection issues and unfair competition as defined
by common law. It also is different from the Consumers Legal Remedies
Act, codified at Cal. Civ. Code §§ 1750-84 (described in section I.A.3.,
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below), which proscribes particular deceptive practices and permits class
actions for violations.
a. Unlawful
Forbidden unlawful acts include anything that properly can be
called a business practice or act and also is "forbidden by law."
(Farmers Ins. Exch. v. Superior Court of Los Angeles County,
2 Cal. 4th 377, 400 (1992)). A violation of virtually any California
law will suffice as a predicate for violation of the UCL, and a
violation of federal law also may suffice. (See Andrews v. Trans
Union Corp., 7 F. Supp. 2d 1056 (C.D. Cal. 1998) (denies
defendant's motion for partial summary judgment; if plaintiff proves
a violation of Fair Credit Reporting Act, he would also prove a UCL
claim).
California
Podolsky v. First Healthcare Corporation, 50 Cal. App. 4th
632, 647 (1996) (nursing home's admissions policy
"unlawful" because in violation of federal law); Diaz v.
Kay-Dix Ranch, 9 Cal. App. 3d 588, 593 (1970)) (although
Congress has exclusive power to regulate immigration, court
still weighs claim under the UCL, although it denies relief on
unrelated equitable grounds).
Federal
Upper Deck Authenticated v. CPG Direct, 971 F. Supp.
1337, 1345 n.8 (S.D. Cal. 1997); ("[a]ctions for unfair
competition are necessarily premised on violations of other
substantive laws," citing Farmers Ins. Exch. v. Superior
Court, 2 Cal. 4th at 383 (grants defendant's motion for
summary judgment on all aspects of Upper Deck's unfair
competition claim that are or may be grounded in allegations
of trademark infringement under the Lanham Act,
misappropriation of the right of publicity, interference with
contractual relations, violations of the California dilution
statute, unjust enrichment, constructive trust, and accounting
as these claims relate to the indicia of Mickey Mantle and
Joe Montana; denies summary judgment on plaintiff's claim
under Cal. Civ. Code § 1739.7)); Schwartz v. Upper Deck
Co., 967 F. Supp. 405 (S.D. Cal. 1997) (denies motion to
dismiss or stay the proceedings; unlawful business practices
under the UCL can be violations of civil, criminal, state,
federal, municipal or court-made law; predicate law need not
be a California statute or provide for civil enforcement;
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therefore allegations of RICO violations can serve as
predicate acts for a violation of the UCL).
b. Unfair
"Unfair" practices have received no clear case law definition. See
Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone
Co., 20 Cal. 4th 163 (1999) (quotes both S&H and Motors,
described below, and criticizes lack of definition). Before Cel-Tech,
courts tended to apply a balancing test that likely leads to the same
result as the test in FTC v. Sperry & Hutchinson Co., 405 U.S. 233,
244-45 (1972) ("(1) whether the practice, without necessarily having
been previously considered unlawful, offends public policy as it has
been established by statutes, the common law, or otherwise-whether, in other words, it is within at least the penumbra of some
common law, statutory, or other established concept of unfairness;
(2) whether it is immoral, unethical, oppressive, or unscrupulous;
(3) whether it causes substantial injury to consumers (or
competitors or other businessmen").
Thus, the California Court of Appeal has held that a business act or
practice is "unfair" if "it offends an established public policy or . . . is
immoral, unethical, oppressive, unscrupulous, or substantially
injurious to consumers." (Saunders v. Superior Court (Los
Angeles), 27 Cal. App. 4th 832, 839 (1994) (unfair practices by
court reporters); People v. Casa Blanca Convalescent Homes, Inc.,
159 Cal. App. 3d 509, 530 (1984); People v. James, 122 Cal. App.
3rd 25 (1981) (unfair practice by towing company); Bondanza v.
Peninsula Hosp. and Med. Ctr., 23 Cal. 3d 260 (1979) (practice
may be both unlawful and unfair under UCL) (relying on FTC v.
Sperry & Hutchinson Co., supra, 405 U.S. at 244).
Under another test, a court evaluating a claim of unfairness must
weigh the impact on the victim "against the reasons, justifications
and motives of the alleged wrongdoer. In brief, the court must
weigh the utility of the defendant's conduct against the gravity of the
harm to the alleged victim -- a weighing process quite similar to the
one enjoined on us by the law of nuisance." (Motors, Inc. v. Times
Mirror Co., 102 Cal. App. 3d 735, 740 (1980); see Podolsky v. First
Healthcare Corp., 50 Cal. App. 4th 632, 647 (1996) (quotes Motors
test; notes UCL's "unfairness" prong is "intentionally broad, thus
allowing courts maximum discretion to prohibit new schemes to
defraud"; also endorses S&H standards); State Farm Ins. Co. v.
Superior Court, 45 Cal. App. 4th 1093, 1104 (1996); Samura v.
Kaiser Found. Health Plan, Inc., 17 Cal. App. 4th 1284, 1299
(1993) cert. denied, 114 S. Ct. 1835 (1994). (UCL's prohibition of
"unfair" business conduct "does not give the courts a general
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license to review the fairness of contracts but rather has been used
to enjoin deceptive or sharp practices.")
Also, "[b]y statutory definition, any illegal business practice is also
unfair." Webster v. Omnitrition Int'l, Inc., 1996 U.S. App. LEXIS
3873, at *28 (9th Cir. Mar. 4, 1996) (because the defendant's
"endless chain" scheme violated Penal Code § 327, it was
actionable under FAA and UCL).
California
Cel-Tech Communications, Inc. v. Los Angeles Cellular
Telephone Co., 20 Cal. 4th 163, 187 (1999) (in context of
antitrust case, Court criticizes definitions cited above, says
courts cannot "simply impose their own notions of the day as
to what is fair or unfair," but declines to formulate new
definitions for all purposes; for antitrust cases, adopts new
test: "when a plaintiff who claims to have suffered an injury
from a direct competitor's 'unfair' act or practice invokes
section 17200, the word 'unfair' in that section means
conduct that threatens an incipient violation of an antitrust
law, or violates the policy or spirit of one 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."); Shvarts v. Budget Group, 81 Cal. App.
4th 1153 (2000) (applies old unfairness test under ________
despite citing Cel-Tech elsewhere in opinion); Schnall v.
Hertz Corp., 78 Cal. App. 4th 1144, 1166-67 (2000) (CelTech definition applies even in consumer cases so that "any
claims of unfairness under the UCL should be defined in
connection with those legislatively declared policies"); State
Farm Ins. Co. v. Superior Court, 45 Cal. App. 4th 1093
(1996); Demonet Indus. v. Transamerica Ins. Co., 6 Cal.
App. 4th 31, 338, 342 (1991) ("The Supreme Court in this
state has consistently and repeatedly given the broadest
possible definition to this term ["unfair competition"]
[describes Barquis, McKale, Committee on Children's
Television, Bank of the West, etc.]; concludes that, although
complaint was poorly drafted, trial court should have given
plaintiff leave to amend to better state unfair competition
allegations); People v. Casa Blanca Convalescent Homes,
Inc., 159 Cal. App. 3d 509, 530 (1984) (adopts FTC's
three-part test quoted in Sperry & Hutchinson rather than the
FTC's then relatively new 1980 unfairness standard);
Hernandez v. Atlantic Fin. Co. of Los Angeles, 105 Cal. App.
3d 65, 86-89 (1980) (although the Rees-Levering Act does
not restrict seller-assisted car loans for full purchase price of
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a car per se, lender's failure to comply with that Act could be
enjoined under the UCL as an unfair practice); Motors, Inc.
v. Times Mirror Co., 102 Cal. App. 3d 735, 740 (1980)
(although the Unfair Business Practices Act did not prohibit
charging local retailers more for advertising space than
national accounts, nonetheless, practice could be deemed
"unfair" under UCL); Payne v. United California Bank,
23 Cal. App. 3d 850, 856 (1972) (UCL's predecessor statute,
Civil Code § 3369, prohibited only "specific practices that are
deceptive and unfair on their face").
Federal
Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 979, 994
(9th Cir. 2001) (relies on Cel-Tech, concludes UCL claim
may be pursued by milk producers against cheese-makers
because a plaintiff may bring an unfair competition claim
under California law unless some other provision bars the
action by clearly permitting the conduct); Standard Fire Ins.
Co. and Aetna Cas. & Sur. Co., Inc. v. Peoples Church of
Fresno, 985 F.2d 446 (9th Cir. 1993) ("unfair competition"
has a "broad meaning" and "this provision is not limited to
anti-competitive business practices but also protects the
public from unlawful, deceptive or unfair practices"); Orkin
Exterminating Co. v. FTC, 849 F.2d 1354, 1364 (11th Cir.
1988) (for FTC Act violation, (1) consumer injury must be
substantial; (2) it must not be outweighed by any
countervailing benefits to consumers or competition; and
(3) injury must be one that consumers could not reasonably
have avoided); American Fin. Servs. Ass'n v. FTC, 767 F.2d
957, 981 (D.C. Cir. 1985), cert. denied, 475 U.S. 1011
(1986) ("unfairness" under FTC Act may be found even if
seller does nothing wrong but only "takes advantage of an
existing obstacle which prevents free consumer choice from
effectuating a self-correcting market"); Okura & Co., Inc. v.
Careau Group, 783 F. Supp. 482, 505 (C.D. Cal. 1991)
(rejects counterclaim for statutory fines and injunctive relief
on ground that the defendants had not acted either
improperly or unfairly in their financial dealings with the
plaintiff, and therefore had not engaged in any unfair
business practices); Heastie v. Community Bank of Greater
Peoria, 727 F. Supp. 1133, 1138-39 (N.D. Ill. 1989) (practice
that complies with FTC's Holder in Due Course Rule still
violates Illinois' Consumer Fraud Act because it is unfair);
Meta-Film Assocs., Inc. v. MCA, Inc., 586 F. Supp. 1346
(C.D. Cal. 1984) (complaint alleging failure to provide plaintiff
with screen credit for portions of a script states claim under
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UCL; absent a claim for restitution, remedy for UCL claim is
limited to injunctive relief).
Other States
Daddona v. Liberty Mobile Home Sales, Inc., 209 Conn. 243,
253-54, 550 A.2d 1061, 1066 (1988) (Sperry test); Laughlin
v. Evanston Hosp., 133 Ill. 2d 374, 550 N.E.2d 986-994
(1990) (Sperry test); N.J. Gendron Lumber Co. v. Great N.
Homes, Inc., 8 Mass. App. 411, 418, 395 N.E.2d 457, 46263 (1979) (Sperry test).
c. Fraudulent
"Fraudulent" business acts or practices are those that are likely to
deceive members of the public. Actual deception, reasonable
reliance, or damages caused by the challenged practice are not
necessary elements. (Committee on Children's Television, Inc. v.
General Foods Corp., 35 Cal. 3d 197, 211 (1983) (test is effect on
the intended audience (id. at 214), there, children); Chern v. Bank
of America, 15 Cal. 3d 866, 875-76 (1976) (in contrast to common
law fraud, it is not necessary to establish actual deception,
reasonable reliance, scienter or damage)).
Pleading or proof of injury to consumers, competitors, or the public
also is unnecessary. (People v. Cappuccio, Inc., 204 Cal. App. 3d
750, 760 (1988) (affirming conviction)). Moreover, challenged
practices apparently need not involve a statement that is untruthful
as to the direct recipient of the statement (see American Philatelic
Society v. Claibourne, 3 Cal. 2d 689, 696-99 (1935) (truth was
known to direct recipients of statements but unknown to victims
further removed); People v. Dollar Rent-A-Car Sys., Inc., 211 Cal.
App. 3d 119, 131 (1989) (form contract's "complex language,
minuscule print size and format, combined with defendants'
knowledge that its own trained agents gave erroneous
explanations" are sufficient to prove "fraudulent" conduct)). The
California Court of Appeal has recently concluded: "The 'fraud'
prong of Bus. & Prof. Code § 17200 is unlike common law fraud or
deception. A violation can be shown even if no one was actually
deceived, relied upon the fraudulent practice, or sustained any
damage. Instead, it is only necessary to show that members of the
public are likely to be deceived." (Podolsky v. First Healthcare
Corporation, 50 Cal. App. 4th 632, 647-648 (1996), citing State
Farm v. Superior Court, 45 Cal. App. 4th 1093 (1996), and
Committee on Children's Television v. General Foods Corp.,
35 Cal. 3d 197 (1983); Payne v. United California Bank, 23 Cal.
App. 3d 850, 856 (1972) (UCL does not apply to conduct that, on its
face, is not likely to deceive or mislead the public)). Thus this form
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of fraudulent activity is governed by the "tendency or capacity to
deceive” standard used by both federal and state courts in the
interpretation of section 5 of the FTC Act. The section is measured
under a "reasonable consumer" standard and not by whether the
"lease sophisticated consumer" would be misled by the challenged
representation. Lavie v. Procter & Gamble Co., 105 Cal. App. 4th
496 (2003) (rejects amicus curiae attorney general's argument that
"the sophisticated consumer" standard should be applied to
evaluate deceptiveness of claim that non-prescription drug was
gentle to the stomach); see Quelimane Co. v. Stuart Title Guaranty
Co., 19 Cal. 4th 26, 55 (1998).
d. Business Act or Practice
Before 1992, the portion of the UCL that prohibited "unlawful, unfair
or fraudulent" business conduct applied only to conduct that could
be characterized as a "business practice." As a result, "a single
transaction" did not violate the UCL. Rather, a "pattern of conduct,"
"ongoing conduct," a "pattern of behavior" or a "course of conduct"
was required. (See State v. Texaco, Inc., 46 Cal. 3d 1147, 1169-70
(1988) (merger is outside scope of UCL because it does not
constitute a business practice)). The legislature amended the UCL
in 1992, however, to include a business act as well as a practice.
(Cal. Bus. & Prof. Code § 17200). The "act or practice" language of
the statute now tracks comparable language in section 5 of the FTC
Act. Accordingly, it is no longer necessary to establish that the
conduct at issue involves a "practice." Nor is it necessary to show
that a practice alleged to violate UCL involves advertising. (Allied
Grape Growers v. Bronco Wine Co., 203 Cal. App. 3d 432, 450-52
(1988)).
A "business" is "synonymous with 'calling, occupation, or trade
engaged in for the purpose of making a livelihood or gain.'" (Burks
v. Poppy Constr. Co., 57 Cal. 2d 463, 468 (1962). Compare the
definition of "business" in California's Unruh Civil Rights Act, Civil
Code section 51, which includes: "Everything about which one can
be employed." The activities of nonprofit organizations are included
within the term "business."
California
Bondanza v. Peninsula Hosp. & Med. Ctr., 23 Cal. 3d 260,
269 (1979) (collection practices of nonprofit hospital
considered a "business"); Pines v. Tomson, 160 Cal. App.
3d 370, 386 (1984) (publication of "Christian Yellow Pages"
by nonprofit religious group considered "business"); Athens
Lodge No. 70 v. Wilson, 117 Cal. App. 2d 322, 325 (1953)
(fraternal organization is "business").
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Other States
Mother & Unborn Baby Care, Inc. v. State, 749 S.W.2d 533,
537-538 (Tex. App. 1988), cert. denied, 490 U.S. 1090
(1989) (Texas Uniform Deceptive Trade Practices Act
covered anti-abortion counseling service even though it did
not charge for its work).
e. Deceptive Advertising
The Unfair Competition Law also prohibits "unfair, deceptive, untrue
or misleading advertising" (§ 17200). Advertising is "unfair,
deceptive, untrue or misleading" if "members of the public are likely
to be deceived."
Statements made in connection with sales of goods or services are
"advertising," even though they may not fit traditional definitions of
"advertising."
Such statements may include communications made directly to the
affected customer. (Chern v. Bank of America, 15 Cal. 3d 870, 876
(1976) (misquotation of interest rates over telephone to potential
borrower); People v. Superior Court (Jayhill), 9 Cal. 3d 283, 287
(1973) (deceptive pitch by door-to-door salesmen); Feather River
Trailer Sales, Inc. v. Sillas, 96 Cal. App. 3d 234, 248 (1979) (car
salesmen's statement of low purchase price and failure to disclose
lack of authority)).
Proof of a violation of the deceptive advertising portion of the
statute does not require a showing of a business practice.
California
Committee on Children's Television v. General Foods Corp.,
35 Cal. 3d 197, 211 (1983) ("advertising" includes, among
other acts and practices, oral statements made in connection
with sales; not necessary to prove actual deception,
reasonable reliance, scienter or damages) (compare Cal.
Bus. & Prof. Code § 17500, which requires scienter); Chern
v. Bank of America, 15 Cal. 3d 866, 875-76 (1976); People
v. Forest E. Olson, Inc., 137 Cal. App. 3d 137, 139-41 (1982)
(violation of FAA only if defendant knows or should know in
the exercise of reasonable care that advertising is false or
misleading)); Show Management v. Hearst Publ'g Co., Inc.,
196 Cal. App. 2d 606, 614 (1961) (exposition producer
falsely advertised civic nature of a purely private show; false
advertising itself, without disparaging the product or
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enterprise of another, does not give rise to a private cause of
action.)
f. False Advertising Act Violation
Violations of California's False Advertising Act (Cal. Bus. & Prof.
Code § 17500-08, discussed below, also fall within the Unfair
Competition Act and are subject to the Act's remedies. (Cal. Bus. &
Prof. Code § 17200).
2.
False Advertising Act
The False Advertising Act prohibits statements "concerning . . . real or
personal property or services . . . concerning any circumstance or matter
of fact connected with the proposed performance or disposition thereof,
which is untrue or misleading, and which is known, or which by the
exercise of reasonable care should be known, to be untrue or
misleading. . . ." (Cal. Bus. & Prof. Code § 17500). Unlike the Unfair
Competition Law, the False Advertising Act requires a degree of scienter.
A defendant violates this Act only if he knew or should have known that
the advertising was untrue or misleading. (Id.)
It is not necessary under the FAA to establish actual deception,
reasonable reliance, or damage. "It is necessary only to show that
members of the public are likely to be deceived." (Committee on
Children's Television v. General Foods, 35 Cal. 3d 197, 211 (1983); see
People v. Dollar Rent-A-Car Sys., Inc., 211 Cal. App. 3d 119, 129 (1989).)
Some federal courts have been loath to accept these liberal pleading
standards. (See Bullet Golf, Inc. v. United States Golf Ass'n, 1995 U.S.
Dist. LEXIS 6189, at *3 (C.D. Cal. Mar. 20, 1995) (denies plaintiff
summary judgment on FAA claim because plaintiff failed to (1) allege or
provide any evidence that the public was deceived by the defendant's
press statement, or (2) allege injury to the public or its competitors).
3.
Consumers Legal Remedies Act
The Consumers Legal Remedies Act ("CLRA") prohibits a host of
specifically identified practices, including the following ten that frequently
find their way into consumer class action or UCL claims:
(a)
another;
passing off goods or services as those of
(b)
misrepresenting the source, sponsorship,
approval, or certification of goods or services;
(c)
misrepresenting the affiliation, connection, or
association with, or certification by, another;
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(d)
representing that goods or services have
sponsorship, approval, characteristics, ingredients, uses,
benefits, or quantities which they do not have or that a person
has a sponsorship, approval, status, affiliation, or connection
which he or she does not have;
(e)
representing that goods are original or new if
they have deteriorated unreasonably or are altered,
reconditioned, reclaimed, used, or secondhand;
(f)
representing that goods or services are of a
particular standard, quality, or grade, or that goods are of a
particular style or model, if they are of another;
(g)
disparaging goods or services of another by
false or misleading representations of fact;
(h)
advertising goods or services with intent not to
sell them as advertised;
(i)
representing that a transaction confers or
involves rights, remedies, or obligations which it does not
have or involve, or which are prohibited by law; and
(j)
contract.
inserting an unconscionable provision in the
The CLRA permits class actions for damages, punitive damages and/or
injunctive relief.
B. Practical Reach of the Statutes
The only apparent limitation upon the practical reach of the UCL is the
imagination of man (and woman). The sampling of representative cases listed
below shows the breadth (as well as some of the highs and lows) of the statutes'
applicability.
Advertising
California
People v. Schmitt, 155 Cal. App. 2d 87, 102 (1957) (describing
"Oscilooclast" as cure for cancer); "Private AG's New Cause: Toy
Oven That Doesn't Cook Fast Enough," Recorder (Apr. 18, 1995)
(advertising toy ovens with shorter cookie baking times than actual
results when pre-heating and cool-down times were included).
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Antitrust
California
B.W.I. Custom Kitchen v. Owens-Illinois, Inc., 191 Cal. App. 3d
1341 (1987) (reverses denial of class certification on claims by
indirect purchaser of glass containers for price-fixing); People v.
Nat'l Ass'n of Realtors, 120 Cal. App. 3d 459, 473-76 (1981)
(violations of Cartwright Act).
Federal
Bell Atlantic Bus. Sys. Servs., Inc. v. Hitachi Am. Ltd., 1995 U.S.
Dist. LEXIS 15531 at 28 (March 10, 1995) (denies summary
judgment on UCL claim where MSJ on Sherman Act was denied);
Sunbelt Television, Inc. v. Jones Intercable, Inc., 795 F. Supp. 333,
338 (C.D. Cal. 1992) ("since plaintiffs have adequately pled a
violation of the Sherman Act, they have clearly stated a cause of
action under California's Unfair Competition law").
Financial Institution Practices
California
Perdue v. Crocker Nat'l Bank, 38 Cal. 3d 913, 927-28 (1985) ($6.00
service charge for non-sufficient funds checks when actual cost of
processing was alleged to be $.30); Fletcher v. Security Pac. Nat'l
Bank, 23 Cal. 3d 442 (1979); Chern v. Bank of America, 15 Cal. 3d
866 (1976) (computation of interest on 360-day year); Garrett v.
Coast & S. Fed. Sav. & Loan Ass'n, 9 Cal. 3d 731, 734-35 (1973)
(late charges for untimely installment payments on notes secured
by deeds of trust; requires causal connection between breaches
and actual damages); Badie v. Bank of America, 67 Cal. App. 4th
779 (1998) (arbitration clause in billing stuffer is unenforceable
because customer did not make unambiguous waiver of jury trial
right); California Grocers Ass'n v. Bank of America, 22 Cal. App. 4th
205, 215-17 (1994) (returned check fees of $3.00 set in
non-oligopolistic banking market do not violate UCL even though
twice bank's costs); Beasley v. Wells Fargo Bank, 235 Cal. App. 3d
1383, 1400 (1991) (affirming $5.2 million judgment for excessive
late fees and over-limit fees); Shadoan v. World Sav. & Loan Ass'n,
219 Cal. App. 3d 97, 106 (1990) (rejecting challenge to loan
agreement's prepayment penalty clause and clause permitting the
lender to demand full payment of the loan principal).
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Form Contracts
California
People v. McKale, 25 Cal. 3d 626, 634-35 (1979) (unlawful or
unenforceable terms in form contracts); Bondanza v. Peninsula
Hosp. & Med. Ctr., 23 Cal. 3d 260, 269 (1979) (contract terms that
make debtor pay collection costs); Allied Grape Growers v. Bronco
Wine Co., 203 Cal. App. 3d 432, 450-51 (1988) (systematic breach
of form contract affecting many producers).
Franchise
California
California Serv. Station and Automotive Repair Ass'n v. Union Oil
Co. of California, 232 Cal. App. 3d 44, 53-55 (1991) (challenging
franchise transfer policy as violation of California Franchise
Relations Act).
Federal
Aurigemma v. Arco Petroleum Prods. Co., 734 F. Supp. 1025,
1029-1031 (D. Conn. 1990).
Other States
Forrest LeBlanc v. Belt Ctr., Inc., 509 So. 2d 134, 137 (La. Ct. App.
1987).
Inadequate Staffing of Nursing Homes
California
People v. Casa Blanca Convalescent Homes, Inc., 159 Cal. App.
3d 509, 530 (1984).
Insurance
Federal
Chabner v. United of Omaha Life Ins. Co., 225 F.3d 1042 (9th Cir.
2000) (insurance company violates state law by issuing nonstandard insurance policy to plaintiff with an arbitrarily high mortality
rating).
Other States
Elder v. Coronet Ins. Co., 201 Ill. App. 3d 733, 558 N.E.2d 1312 (Ill.
App. 1990) (misusing polygraph tests to deny insurance claim).
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Labor
California
Hudgins v. Neiman Marcus Group, Inc., 34 Cal. App. 4th 1109,
1126 (1995) (business practice that violates California Labor Code
§§ 221 and 400-410 also violates UCL); People v. Los Angeles
Palm, Inc., 121 Cal. App. 3d 25, 32-33 (1981) (crediting tips against
minimum wage in violation of Labor Code would violate UCL).
Lanham Act Claims
Federal
Cleary v. News Corp., 30 F.3d 1255 (1994) (actions pursuant to
UCL are "substantially congruent" to claims made under the
Lanham Act); Chronicle Publ'g Co. v. Chronicle Publications, Inc.,
733 F. Supp. 1371 (N.D. Cal. 1989) (claim that defendant unfairly
competed in violation of UCL is virtually identical to unfair
competition claims under the Lanham Act); Plasticolor Molded
Prods. v. Ford Motor Co., 713 F. Supp. 1329 (C.D. Cal. 1989)
(notes that analysis of an unfair competition claim tracks analysis of
the Lanham Act claim).
Legal Services
California
People v. Lynam, 253 Cal. App. 2d 963-64 (1967) (false statements
regarding provisions of trust law).
Miscellaneous Charges and Fees
California
Bondanza v. Peninsula Hosp. & Med. Ctr., 23 Cal. 3d 260, 269
(1979) (33% surcharge on delinquent account sent to collection
agency); Medical Copier Cases II and III (San Francisco Superior
Court Nos. JCC 3045 and JCC 3020) (challenges hospital
photocopy charges for patient medical records as violation of Cal.
Evid. Code § 1158).
Other States
Wilder v. Squires, 315 S.E.2d 63 (N.C. App. 1984) (challenge to
refusal to refund customer down payments).
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Pyramid Sales Schemes
California
Monroe Bounds v. Figurettes, Inc., 135 Cal. App. 3d 1, 17-20
(1982) ("pyramid" marketing plan for sales of lingerie violates Penal
Code § 327 and FAA because it lacks safeguards that preclude
inventory loading, make product sales a precondition for receiving
performance bonus, eliminate headhunting fee, and require a
substantial percentage of products to be sold to consumers at
retail); People v. Bestline Prods., Inc., 61 Cal. App. 3d 879, 910914 (1976).
Religious Discrimination
California
Pines v. Tomson, 160 Cal. App. 3d 370, 381 (1984).
Stolen Property
California
Naftzger v. American Numismatic Soc'y, 42 Cal. App. 4th 421, 433,
n. 7 (1996) (suggests that a UCL claim might lie against one who
withholds or sells stolen property for "committing an act of unfair
competition").
Trademark Infringement
Federal
United Parcel Serv., Inc. v. Package Am., Inc., 1996 U.S. Dist.
LEXIS 8148 (N.D. Cal. 1996) (plaintiffs likely to prevail on Lanham
Act claim were likely to prevail on UCL claim, as well, since claims
are "substantially congruent"); Visa Int'l Serv. Ass'n v. Bankcard
Holders of Am., 211 U.S.P.Q. [BNA] 28 (N.D. Cal. 1981) (injunction
against trademark infringement and unfair competition where
defendant appropriated "Visa" and "Bands Design" names;
irreparable injury test of injunction is satisfied by defendant's
misuse of plaintiff's symbol); Kelly Blue Book v. Car-Smarts, Inc.,
802 F. Supp. 27 (C.D. Cal. 1992) (grants plaintiff's request for
injunction against defendant's use of the term "blue book" or other
similar term in advertising; Lanham Act and California law of unfair
competition are "substantially congruent"; Lanham Act and Ninth
Circuit hold that a plaintiff's disclaimer of an exclusive right does not
estop plaintiff from asserting trademark infringement rights; test in
California is likelihood of confusion).
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Unconscionable Terms
California
People v. McKale, 25 Cal. 3d 626, 634-5 (1979) (unfair and
deceptive practice to draft adhesion contract containing provisions
that are unlawful or unenforceable even if drafting party did not
intend to enforce them); Payne v. United California Bank, 23 Cal.
App. 3d 850, 856 (1972) (enforcement of agreement that appears
legal could not be unfair business practice even if defenses to
enforcement exist).
Venue Practices
California
Barquis v. Merchants Collection Ass'n of Oakland, Inc., 7 Cal. 3d
94, 124-25 (1972) (practice of bringing collection actions in distant
forums violates UCL). Yu v. Signet Bank/Virginia, 103 Cal. App.
4th 298 (2002) (reverses dismissal of UCL and abuse of process
claims by consumers in class action against bank for its long-arm
program of pursuing collection actions in Virginia against California
credit card holders; concludes that principles of due process
prevent assertion of personal jurisdiction over California consumers
in Virginia.
C. Statutory Enforcement
1.
Governmental Enforcement
The California Attorney General, district attorneys, city attorneys for cities
having a population of more than 750,000, and full-time city prosecutors in
smaller communities may bring actions under the Unfair Competition Law.
(Cal. Bus. & Prof. Code § 17204). Public prosecutors may seek civil fines,
injunctions, and restitution. Cal. Bus. & Prof. Code §§ 17203, 17204, and
17206).
2.
Private Enforcement
a. Unfair Competition Law
"[A]ny person acting for the interests of itself, its members or the
general public" may bring an equitable action under the UCL. (Cal.
Bus. & Prof. Code § 17204). "Person" includes a corporation. The
plaintiff need not be a competitor of the defendant and need not
suffer damage. (See Committee on Children's Television v.
General Foods Corp., 35 Cal. 3d 197, 209 (1983); Consumers
Union of U.S., Inc. v. Fisher Dev., Inc., 208 Cal. App. 3d 1433,
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1437-44 (1989)). A plaintiff whose UCL claim is predicated on a
violation of another statute may have standing under the UCL even
if the plaintiff does not have standing under the other statute. (See
Midpeninsula Citizens for Fair Hous. v. Westwood Investors,
221 Cal. App. 3d 1377, 1392-3 (1990)). The UCL may not be used,
however, to "'plead around' absolute barriers to relief by relabeling
the nature of the action as one brought under the unfair competition
statute." (Rubin v. Green, 4 Cal. 4th 1187, 1201 (1993) (UCL is
intended to permit private parties to enforce statutory prohibitions,
but only "where to do so would not interfere with legislative
objectives and limitations otherwise prescribed."); Manufacturers
Life Ins. Co. v. Superior Court, 10 Cal. 4th 257, 277-81 (1995)
(rejects UCL claim where Unfair Insurance Practices Act did not
provide private action)).
Private litigants may bring class actions under the UCL but do not
necessarily need to do so to obtain relief for the class. (See Kraus
v. Trinity Management Services, Inc., 23 Cal. 4th 116 (2000);
Fletcher v. Security Pac. Nat'l Bank, 23 Cal. 3d 442, 453 (1979);
Dean Witter Reynolds, Inc. v. Superior Court (Alameda), 211 Cal.
App. 3d 758, 772-73 (1989)).
b. Consumers Legal Remedies Act
Under the Consumers Legal Remedies Act, consumers may
recover actual damages, minimum damages of $1,000 in a class
action, punitive damages, restitution of property, injunctive relief,
and any other relief the court deems proper.
Before filing suit, a consumer must give the prospective defendant
thirty days' notice to afford the defendant an opportunity to cure the
alleged violation (Cal. Civ. Code § 1782(a)). If the company within
thirty days after receipt of such a notice, corrects, repairs, replaces,
or otherwise remedies the alleged violation, or agrees to take such
action within a reasonable time, the consumer may not sue for
damages (§ 1782(b)). Similarly, a prospective defendant may
defeat an action for damages by showing that it has identified all
consumers situated similarly to the prospective plaintiff or made a
reasonable effort to identify them; notified such consumers that,
upon their request, an appropriate correction, repair, replacement,
or other remedy is available; corrected, repaired, replaced, or
otherwise remedied the violations in response to all such requests
or agreed to do so within a reasonable time; and ceased from
engaging, or committed within a reasonable time to cease to
engage, in the challenged methods, act or practices.
(§ 1782(c)(1)-(4)). Attempts by defendant to take the necessary
curative steps in order to comply with section 1782 are inadmissible
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as evidence pursuant to Cal. Evid. Code section 1152, but they
may be introduced by the defendant to show good faith or to show
compliance with the provisions of section 1782.
c. False Advertising Act
Citizens may sue as private attorneys general under the False
Advertising Act.
D. Remedies Under The Unfair Competition Act
1.
Monetary Penalties
a. Civil Penalties Under The UCL.
If sought by a government prosecutor, the imposition of a civil
penalty is mandatory (see People v. Nat'l Ass'n of Realtors,
155 Cal. App. 3d 578, 585 (1984)), and the maximum civil penalty
is $2,500 for each violation of the UCL. (Cal. Bus. & Prof. Code
§ 17206(a)). Courts have held that a separate violation occurs for
each victim of unfair competition (see, e.g., People v. Superior
Court (Jayhill), 9 Cal. 3d 283, 289 (1973)), and, as a result, civil
penalties may be aggregated where there is more than one victim.
The UCL provides for additional penalties if the victims are senior
citizens or disabled. (Cal. Bus. & Prof. Code § 17206.1). In
addition, remedies under the Unfair Competition Law are
cumulative, so a civil penalty may be imposed even though the
defendant has been assessed a fine or damages for the same
conduct under another statute. (Cal. Bus. & Prof. Code § 17205;
see People v. Toomey, 157 Cal. App. 3d 1, 22 (1984)). In
determining the amount of the civil penalty, the courts consider "the
relevant circumstances [, including] the nature and seriousness of
misconduct, the number of violations, the persistence of the
misconduct, the length of time over which the misconduct occurred,
the willfulness of the defendant's misconduct, and the defendant's
assets, liabilities and net worth." (People v. Superior Court
(Solano), 35 Cal. App. 3d 710 (1973) (penalty provisions of the
Business and Professions Code were similar enough to exemplary
damages to permit discovery of the defendant's financial condition
in appropriate cases [although not this one]).
California
People v. Morse, 21 Cal. App. 4th 259, 272 (1993) (upholds
$400,000 in civil penalties where 4 million victims received
solicitations and defendant received more than $1.8 million
in fees from those for whom he prepared homestead
declarations, despite absence of net profit or financial
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condition evidence; affirms restitution award based on
number of solicitations mailed rather than those who read or
responded); People v. Parkmerced Co., 198 Cal. App. 3d
683 (1988) ($221,700 in civil penalties and $40,000 in
attorneys' fees as well as restitution to all tenants and to
tenants' organization for new tenant fee and fee charged to
tenants who moved within complex; no abuse of discretion
where civil penalty was $50/tenant, defendants did not claim
award was disproportionate to their wealth or ability to pay,
and defendants continued illegal charge until trial despite
awareness that District Attorney was investigating their
practice); People v. Custom Craft Carpets, Inc., 159 Cal.
App. 3d 676, 680-81 (1984) (affirms injunctive relief and
liability but reverses trial court's failure to impose mandatory
civil penalties and order restitution; trial court on remand
notes more than 20,000 deceptive television commercials
had been broadcast, of which 6,000 were blatantly
deceptive; television commercials were responsible for
approximately 90% of defendants' customer leads, which
netted more than 40,000 customers by early 1978;
defendants' sales grew from $2,578,974 during FY 1976 to
more than $4 million during FY 1980; during this period,
defendants generated more than $16 million in sales from
more than $2 million in advertising; declarations regarding
poor financial state with negative net worth in excess of
$1 million were unavailing because not believed; more than
3,000 customers in L.A. County alone had illegal liens
placed on their homes, with 18 homes sold at foreclosure
sales based on defendants' illegal and void liens; $750,000
civil penalty imposed amounted to no more than $125 for
each of the 6,000 broadcasts of the deceptive television
commercials; awards $256,645 as partial restitution, based
upon finding that 3,001 L.A. County customers had paid
between $35-$45 in lien fees and reconveyance fees of
$32.50 and $50 between 1975-1984 because of defendants'
acts; restitution calculation does not include lost equity in
homes, foreclosure-related fees, or fees for contracts
recorded outside of L.A. County; restitution and civil
penalties described in In re Taite, 76 BR 764 (C.D. Cal
1987); Sammons & Sons v. Ladd-Fab, Inc., 138 Cal. App. 3d
306 (1982) (upholds summary judgment for defendant for
UCL claim for allegedly duplicating and selling plaintiffs'
product line and catalog); People v. Superior Court (Olson),
96 Cal. App. 3d 181, 197-98 (1979), cert. denied, 446 U.S.
935 (1980) (measure based upon circulation of newspaper
could result in penalty in excess of $2.5 billion for each
edition of the newspaper; "[t]o so interpret the statute would
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render it violative of the due process prohibition against
'oppressive' or 'unreasonable' statutory penalties."); People
v. Cimarusti, 81 Cal. App. 3d 314 (1978) (trial court
exceeded its jurisdiction when it ordered Attorney General to
stipulate to penalties set by the court without hearing in case
involving allegations of deceptive advertising under FAA
related to a "going out of business sale"); People v.
Columbia Research Corp., 71 Cal. App. 3d 607, cert. denied,
434 U.S. 904 (1977) (upholds issuance of preliminary
injunction against company allegedly engaged in fraudulent
business practices; finds sufficient evidence of unfair
business practices, such as misleading suggestion that
persons had won a prize and misrepresenting market price
of goods, to support preliminary injunction; but injunction
was impermissibly vague); People v. Hill, 66 Cal. App. 3d
320 (1977) (upholds injunction against person who misused
the term "accountant" in business title; use of term alleged to
be deceptive and misleading in violation of FAA, and harm of
continued use is enough to support issuance of injunction);
People v. Sacramento Valley Ambulance Ass'n, 1994 WL
160104 (Cal. Superior Court Jan. 7, 1994) (unpublished)
($120,000 in civil penalties and $40,000 in costs and
attorneys fees as well as injunctive relief awarded in Final
Judgment in response to allegations of horizontal price-fixing
and customer and territory allocation); People v. Steelcase,
Inc., 1992 WL 286586 (Cal. Superior Court Feb. 2, 1993)
(unpublished) ($200,000 in civil penalties and $100,000 in
legal costs as well as injunctive relief assigned in Final
Judgment Pursuant to Stipulation in response to allegations
of anti-competitive conduct including vertical and horizontal
price-fixing); People v. Sanyo Electric, Inc., 1982 WL 11211
(Cal. Superior Court Aug. 30, 1982) (unpublished) ($15,000
to be paid to San Diego and Los Angeles Counties as costs
for the investigation and prosecution of this matter, and
$10,000 in civil penalties pursuant to § 17206, as well as
injunctive relief, assigned in Final Judgment Pursuant to
Stipulation in response to complaint alleging resale price
maintenance and other related anti-competitive conduct).
Federal
Brown v. Allstate Ins. Co., 1998 U.S. Dist. LEXIS 11759
(S.D. Cal. July 31, 1998) (dismisses plaintiff's causes of
action under UCL and FAA with leave to amend; private
individuals cannot seek damages for unfair business
practices; compensatory damages not recoverable under
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UCL; private remedies are limited to equitable relief; civil
penalties are recoverable only by specified public officers).
b. Criminal Penalties Under The UCL.
There are no criminal penalties for violations of the Unfair
Competition Law, but a violation of the False Advertising Act is a
misdemeanor punishable by up to six months' imprisonment or a
fine of $2,500 or both. (Cal. Bus. & Prof. Code § 17500).
Alternatively, public prosecutors may seek a civil penalty of $2,500
for each violation of the law. (Cal. Bus. & Prof. Code § 17536(a)).
Each publication or solicitation mailed may be considered a
violation for purposes of assessing civil penalties. (See People v.
Morse, 21 Cal. App. 4th 259, 272-74 (1993); People v. Superior
Court (Olson), 96 Cal. App. 3d 181, 198 (1979), cert. denied, Olson
v. Superior Court, Orange County, 446 U.S. 935 (1980)). Damages
are not available under the law, although private parties may obtain
injunctive relief and restitution. (Cal. Bus. & Prof. Code § 17535);
Chern v. Bank of America, 15 Cal. 3d 866 (1976)).
2.
Injunction and Restitution
Prosecutors or private parties may sue to enjoin violations of the Unfair
Competition Law and to obtain restitution. (Cal. Bus. & Prof. Code
§ 17203); Podolsky v. First Healthcare Corp., 50 Cal. App. 4th 632, 647
(1996); Hernandez v. Stabach, 145 Cal. App. 3d 309 (1983) (upholds
preliminary injunction preventing defendant landlord from filing unlawful
detainer actions as use of court's equity power and of injunctive power
under UCL); California Ass'n of Dispensing Opticians v. Pearle Vision Ctr.,
143 Cal. App. 3d 419 (1983) (upholds injunction for violating UCL and
FAA because claim to provide "total eye care" was misleading; injunction
did not violate the First Amendment or Commerce Clause); People v. Hill,
66 Cal. App. 3d 320 (1977) (upholds injunction against person who
misused the term “accountant” in business title; use of term alleged to be
deceptive and misleading in violation of FAA, harm of continued use is
enough to support issuance of injunction); People v. Columbia Research
Corp., 71 Cal. App. 3d 607, cert. denied, 434 U.S. 904 (1977) (upholds
preliminary injunction against company allegedly engaged in fraudulent
business practices; sufficient evidence of unfair business practices, such
as misleading suggestion that persons had won a prize and
misrepresenting market price of goods, to support preliminary injunction;
injunction was not impermissibly vague.) Courts are not required to use
either of these remedies in the event of a violation and will do so only to
the extent appropriate under the circumstances. Posting of a bond may
be required.
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a. Injunction.
Some courts have held that a plaintiff seeking injunctive relief under
the UCL need not satisfy the traditional prerequisites to injunctive
relief. Posting of a bond may be required, however. (Federal
Automotive Servs. v. Lane Buick Co., 204 Cal. App. 2d 689 (1962)
(§ 17081 [posting of bond by plaintiff not required] does not apply to
FAA); People v. Mobile Magic Sales, Inc., 96 Cal. App. 3d 1 (1979)
(upholds issuance of preliminary injunction forcing mobile home
retailer to conform business practices to UCL; retailer had entered
into arrangements with mobile home parks whereby prospective
tenants were coerced into buying a particular mobile home)).
Federal
Kelly Blue Book v. Car-Smarts, Inc., 802 F. Supp. 27
(C.D. Cal. 1992) (grants injunction against defendant's use
of the term "blue book" or other similar term in advertising;
remedies under UCL include injunctive relief).
b. Restitution.
Restitution of money taken from victims of a UCL violation is an
equitable remedy the courts frequently employ in UCL cases.
(Lewis v. Hankins, 214 Cal. App. 3d 195 (1989) (affirms judgment
for plaintiff; defendant's property subject to lien for fraudulent and
unlawful business practices and other fraudulently conveyed
parcels must be sold at execution so that net proceeds of sale
could be credited to defendant's obligations)). A court may order
restitution without proof of actual deception, reliance or injury if it
"determines that such a remedy is necessary to prevent the use or
employment of the unfair practice. . . ." (Committee on Children's
Television, Inc. v. General Foods Corp., 35 Cal. 3d 197 (1983),
quoting Fletcher v. Security Pac. Nat'l Bank, 23 Cal. 3d 442
(1979)). Under certain circumstances, private parties may obtain
restitution for absent third parties under the UCL without class
action procedures. (Kraus v. Trinity Management Services, Inc., 23
Cal. 4th 116 (2000); Bronco Wine Co. v. Frank A. Logoluso Farms,
214 Cal. App. 3d 699, 262 (1989)).
Federal
National Van Lines, Inc. v. Dean, 237 F.3d 688, 692, 694
(9th Cir. 1956) (reverses trial court's judgment and, applying
California law, concludes that defendant had engaged in,
inter alia, unfair trade practices; whether an accounting
proceeding should be ordered preparatory to allowance of
damages in an unfair competition claim is "largely a matter of
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discretion"); Pharmacare v. Caremark, 965 F. Supp. 1411
(D. Haw 1996) (denies motion to dismiss unfair business
practice claim but grants some of defendant's motions to
dismiss other claims; plaintiff has standing to sue; because
plaintiff limited its prayer for relief to restitution, defendant's
challenges to a request for an injunction are irrelevant);
Andrews v. Trans Union Corp., 7 F. Supp. 2d 1056
(C.D. Cal. 1998) (denies motion for partial summary
judgment; remedies under § 17203 include restitution and
disgorgement of profits; defendants mischaracterized
plaintiff's claim as a claim solely for damages).
c. Compensatory and Punitive Damages Not Available.
Compensatory and punitive damages are not available under the
Unfair Competition Law. (Bank of the West v. Superior Court,
2 Cal. 4th 1254, 1272 (1992)).
E. Remedies Under The False Advertising Act.
Lentz v. Woolley, 1989 U.S. Dist. LEXIS 12651 (C.D. Cal. June 14,
1989) (civil penalties: plaintiffs are not entitled to compensatory or
punitive damages under FAA; criminal penalties: FAA provides for
imprisonment or a monetary fine as remedies for its violation).
II. INTERNAL INVESTIGATIONS
A. Advisability
Companies sometimes learn of allegations of wrongdoing when employee or
ex-employee "whistle-blowers" bring claims to their attention through internal
mechanisms or, if the companies are especially unfortunate, by announcing their
allegations to the media. Other times, a company may receive a letter (and
perhaps an enclosed complaint) from a prosecutor or governmental agency or
from a potential plaintiff's retained counsel. At any of those points, the company
should immediately consult counsel. Furthermore, if a governmental
investigation or significant lawsuit is a real possibility, the company should
seriously consider involving outside counsel experienced in responding to
governmental investigations and consumer class actions.
Management or counsel frequently will recommend an internal investigation into
allegations of wrongdoing. The purpose of such an investigation is to:
(1) explore the nature and extent of any problem; (2) allow management to root
out problematic conduct; and (3) provide the company an opportunity to cure
whatever violations may have existed. The importance of the participation of
counsel in the structure and the conduct of internal investigations cannot be
overstated. An investigation that uncovers or confirms substantial wrongdoing
but is not covered by the attorney-client privilege or the attorney work product
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doctrine can easily provide evidence for the prosecution or for private plaintiffs,
instead of serving the salutary purpose for which it is designed.
B. Preserving the Attorney-Client Privilege and Attorney Work Product
Doctrine
The steps necessary to best protect an internal investigation under the
attorney-client privilege and the attorney work product doctrine are beyond the
scope of this outline, but obtaining advice on this subject is essential if you are
not already familiar with the legal measures governing privilege and waiver
issues. Allegations of serious wrongdoing almost inevitably prompt the creation
of self-serving internal memoranda, frequently sprinkled liberally with third and
fourth-hand hearsay and other unreliable and/or inaccurate information, which
then can become further fodder for prosecutors or private plaintiffs. To prevent
these problems, counsel must act quickly to debrief key personnel and establish
a procedure for funneling information to those conducting the investigation under
counsel's auspices.
III. GOVERNMENTAL ENFORCEMENT
A. Possibility of Multifaceted Attack
Attacks from the government may come from many directions. The offices of the
attorney general, district attorneys, city attorneys, and governmental agencies all
may assert interests in investigating and/or prosecuting wrongdoing that may
violate the UCL. While different levels of government sometimes may work at
odds with one another (see "Lungren Role In Computer Lawsuit Criticized," Los
Angeles Times (Sept. 28, 1995) p. A-27), more commonly the representatives of
the Attorney General will work together with at least one county district attorney
so that they may divide responsibility for an investigation (usually relying upon
the DA's personnel to handle tasks such as execution of search warrants) and
share in the costs of investigation they expect to recover. Staff members of
governmental agencies with regulatory authority over the company at issue (e.g.,
the Department of Insurance, the Department of Corporations) may also assist in
these efforts, bringing additional regulatory enforcement mechanisms into the
picture.
B. Government's Limited Resources to Pursue Case to Trial
A company confronted with a governmental investigation or prosecution can find
the process quite intimidating, especially because government prosecutors
quickly will refer the uninitiated to the UCL's statutory civil penalty provisions and
will point out the statute's imposition of a penalty on a $2,500 per violation basis
(or $5,000, if the unlawful or unfair act involves false advertising). This approach
could theoretically lead to an astronomical result if the violation involves
hundreds of thousands of customers or years of practice.
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While the government arsenal may seem overwhelming, it is important to bear in
mind that government enforcement of the UCL would collapse if present
circumstances changed, and the government could not count on nearly all of its
cases settling. If the government were required to divert its resources from
investigating scores of cases and negotiating settlements with potential
defendants and instead handle discovery issues, prepare for trial and present
evidence at sometimes lengthy court trials for many of its cases, the prosecution
of new violators would grind to a halt. Thus, the government is under significant
internal pressure to settle the cases it brings.
C. Adverse Publicity Can Create a Two-Front War
If a defendant chooses to "fight rather than switch," however, the company must
be prepared for what likely will be substantial adverse publicity directed at the
company's consuming public. Not surprisingly, government prosecutors speak
very differently about a defendant's practices when describing the results of a
successful settlement process than they do when explaining to their public the
violations that they are using public funds to bring to trial.
IV. PRIVATE ENFORCEMENT
A. Private Actions
The UCL permits private actions by "any person acting for the interests of itself,
its members or the general public." (Cal. Bus. & Prof. Code § 17204). The
private plaintiff need not himself be aggrieved by the alleged violation, so long as
he alleges that he is suing on behalf of the general public.
B. Attorneys' Fees
The Unfair Competition Law does not provide for payment of attorneys' fees.
(Cobarrubias v. Allstate Ins. Co., 1998 U.S. Dist. LEXIS 10955 (C.D. Cal. July 10,
1998) (grants defendant's motion to strike; attorneys fees not recoverable on
claim for violation of UCL, citing Chern v. Bank of America, 15 Cal. 3d 866, 875
(1976)). Plaintiff's counsel may seek attorney's fees under a "common fund"
approach (where the attorneys' efforts have created a fund of money that
benefits a class of victims of a particular practice, and the attorney claims a
portion of that fund to cover his fees and costs for bringing the suit), or the
attorney may seek to recover attorneys' fees under California Code of Civil
Procedure section 1021.5, which permits an award of fees:
in any action which has resulted in the enforcement of an important right
affecting the public interest if (a) a significant benefit, whether pecuniary or
nonpecuniary, has been conferred on the general public or a large class of
persons, (b) the necessity and financial burden of private enforcement, or
of enforcement by one public entity against another public entity, are such
as to make the award appropriate, and (c) such fees should not in the
interest of justice be paid out of the recovery, if any.
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(Cal. Civ. Proc. Code § 1021.5; see Pachmayer Gun Works, Inc. v. Olin
Mathieson Chem. Corp., 502 F.2d 802, 809-12 (9th Cir. 1974) (applies California
law and affirms trial court's refusal to award attorney's fees to plaintiffs alleging,
inter alia, unfair competition)).
C. Consumer Attorney Associations
Through seminars and other similar forums, those who specialize in bringing
private claims under the "Little FTC Acts" often share information regarding legal
developments and business trends that may be favorable to plaintiffs, just as
many of the most successful members of the personal injury bar share their
theories and strategies with their fellow personal injury lawyers. As a result,
certain attractive new types of claims mushroom across the country after
developing a year or so in a particular forum.
V. PUBLICITY ISSUES
As soon as practicable after learning of a problem that could lead to adverse
publicity, the company and its counsel should determine whether the company will
respond to press inquiries, or perhaps even initiate its own publicity, to report its
position. If the company determines to eschew the "no comment during the
pendency of litigation" approach and, instead, to respond to allegations of
wrongdoing, the company will want to identify the best available spokesperson for
this task from among its executives, inside and outside public relations personnel,
and (perhaps) its inside or outside counsel. It is crucial that counsel be involved
immediately in determining the parameters for statements that will be made on the
company's behalf, so that no one unintentionally risks claims of waiver of the
attorney client privilege by referring to privileged investigations in the process of
responding to charges of wrongdoing.
VI. INSURANCE COVERAGE
While insurance companies have a duty to defend against claims which create a
potential for indemnity, there is no general duty to defend in case of liability brought
under section 17200. (See Standard Fire Ins. Co. and Aetna Cas. & Sur. Co., Inc. v.
Peoples Church of Fresno, 985 F.2d 446, 451 (9th Cir. 1993) (since claims of
negligent misrepresentation were not covered by an insurance clause's "unfair
competition" term, the district court committed error by finding a duty to defend).
The California Supreme Court has ruled that "unfair competition," as the term is
used in standard-form Commercial General Liability policies protecting "advertising
injury," among other types of wrongs, does not refer to UCL claims brought under
Cal. Bus. & Prof. Code section UCL because damages are not recoverable under
the UCL. (Bank of the West v. Superior Court, 2 Cal. 4th 1254 (1992). See also
Tigera Group v. Commerce and Indus. Ins. Co., 753 F. Supp. 858, 860 (N.D. Cal.
1991) (where insurer contracted to defend policyholder from claims alleging "unfair
competition," the broad meaning of the term from the UCL context should not be
adopted for the purposes of interpreting the clause in the insurance agreement;
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"[a]bsent the element of competition, there can not be 'unfair' competition"; grants
summary judgment).
California
A-Mark Financial Corp. v. Cigna Property and Cas. Cos., 34 Cal. App. 4th
1179, 1182 (1995) (Bank of the West holding applies to claims under Idaho's
UCL equivalent and Commodity Exchange Act, even though both contain
damage remedies); McLaughlin v. National Union Fire Ins. Co., 23 Cal. App.
4th 1132, 1152 (1994) (no duty to defend "where the only potential for liability
turns on resolution of a legal question" whether advertising injury
endorsement insured against UCL violations); Chatton v. National Union Fire
Ins. Co., 10 Cal. App. 4th 846, 865 (1992) (claims for fraud, negligent
misrepresentation, breach of fiduciary duty and negligence violating UCL are
not covered under advertising liability provisions); Ohio Cas. Ins. Co. v.
Hubbard, 162 Cal. App. 3d 939, 943-48 (1984) (affirms trial court's
determination that the insurer need not indemnify its insured in a lawsuit
under the UCL for fraudulent overcharge of rent).
Nonetheless, the company should review its insurance policies to determine whether
they might provide coverage for UCL claims and should evaluate, as well, whether
coverage might exist under a fidelity bond.
Federal
Alliance Ins. Co. v. Colella, 995 F.2d 944, 946 (9th Cir. 1993) (rejects attempt
to read insurance policy covering "unfair competition" expansively so as to
include all practices that violate the UCL [following the lead of the California
Supreme Court in Bank of the West v. Superior Court of Contra Cost
County]); Standard Fire Ins. Co. and Aetna Cas. & Sur. Co., Inc. v. Peoples
Church of Fresno, 985 F.2d 446, 448-51 (9th Cir. 1993) ("[A]dvertising injury"
insurance policy covering "unfair competition" refers to the common law tort of
passing off one's goods as those of another, and negligent misrepresentation
is not covered as it lacks a competitive injury); Bergen Brunswig Corp. v.
Safety Mut. Cas. Corp., 1993 U.S. App. LEXIS 2205, at *1-5 (9th Cir. 1993)
(A insurance policy providing coverage for "damages" caused by "unfair
competition" does not encompass claims brought under the UCL, as the UCL
provides only for restitution and not for damages); Chabner v. United of
Omaha Life Ins. Co., 994 F. Supp. 1185 (N.D. Cal. 1998), aff'd, 225 F.3d
1042 (9th Cir. 2000) (grants plaintiff's motion for summary judgment;
discrimination in rates must be based on sound actuarial principles or "actual
and reasonably anticipated experience"; defendant insurance company has
the burden of proof; UCL provides a private right of action for a violation of
§ 10144 of the Insurance Code although the Insurance Code does not);
American States Ins. Co. v. Canyon Creek, 786 F. Supp. 821, 825-830
(N.D. Cal. 1991) (insurance company must defend and indemnify the
defendant in an unfair competition case pending against it, as the "advertising
injury" insurance policy in question encompasses "unfair competition" claims
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brought under the UCL); Tigera Group, Inc. v. Commerce and Indus. Ins. Co.,
753 F. Supp. 858, 859-61 (N.D. Cal. 1991) (insurance policy covering "unfair
competition" does not obligate defendant insurer to defend or indemnify its
insured in any claim that extends beyond the common law definition of "unfair
competition"--the misappropriation of a competitor's commercial advantage);
Nationwide Mut. Ins. Co. v Dynasty Solar, Inc., 753 F. Supp. 853, 855-58
(N.D Cal. 1990) (insurance policy covering "unfair competition" requires the
insurance company to defend and indemnify the insured in lawsuits for
common law "unfair competition," but not in suits falling under the broader
statutory notion of unfair competition contained in UCL); Aetna Cas. & Sur.
Co. v. Trans World Assurance Co., 745 F. Supp. 1524, 1528-29 (N.D. Cal.
1990) (refuses to extend insurance policy covering "advertising injury" to
instances of "unfair competition" as defined in UCL [here, a suit for RICO
violations, fraud and breach of contract] because California law does not
apply to the underlying suit venued in Ohio); Aetna Cas. & Sur. Co. v.
Watercloud Bed Co., 1988 U.S. Dist. LEXIS 17572 (C.D. Cal. Nov. 17, 1988)
(if patent infringement claims also involve advertising activities, claims can be
construed as unfair competition claims within the coverage of the insurance
contracts).
VII. CLASS ACTIONS
A. Prerequisites
California courts apply to class claims under the UCL the requirements of
California Code of Civil Procedure section 382 and, frequently, the federal class
action standards set forth in Federal Rule of Civil Procedure section 23. Federal
Rule 23 requires satisfaction of several elements: (1) numerosity;
(2) commonality; (3) typicality; and (4) adequacy of representation. (Compare
the similar requirements under the Consumers Legal Remedies Act (Cal. Civ.
Code § 1781)).
1.
Numerosity. The class is so numerous that joinder of all
members is impractical. (Fed. R. Civ. P. § 23(a)(1)).
2.
Commonality. There must be questions of law or fact
common to the class. (Fed. R. Civ. P. § 23(a)(2)).
3.
Typicality. The claims or defenses of the representative
parties must be typical of the claims or defenses of the class.
(Fed. R. Civ. P. § 23(a)(3)).
4.
Adequacy. Fair and adequate representation of the interests
of all class members is required. (Fed. R. Civ. P. § 23(a)(4)).
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B. Additional Requirements
The courts also require a showing that class treatment is appropriate for one of
the following reasons:
1.
Prosecution of separate actions would create a risk of:
(a)
inconsistent decisions; or
(b)
decisions with respect to individuals that would
adversely affect the interests of others (Fed. R. Civ. P.
§ 23(b)(1)(A) and (B)); or
2.
Classwide injunctive or declaratory relief is appropriate,
because the opposing party has acted on grounds generally
applicable to the class. (Fed. R. Civ. P. § 23(b)(2)). (Note,
however, that actions certified under Rule 23(b)(2) sometimes
also include damage claims); or
3.
Common questions predominate over individual questions,
and a class action is superior to other methods for fair and
efficient adjudication. Relevant factors include:
(a)
individual class members' interest in controlling the
litigation;
(b)
extent and nature of any litigation concerning the
controversy already pending;
(c)
desirability of concentrating the claims in the particular
forum; and
(d)
difficulties of management of a class action
(Fed. R. Civ. P. § 23(b)(3)).
In all Rule 23(b)(3) class actions, class members must receive notice and
an opportunity to request exclusion. (Fed. R. Civ. P. § 23(c)(2));
Schwarzschild v. Tse, 69 F.3d 293, 296-97 (1995) (notice in a class action
is not mandatory under Fed. R. Civ. Proc. 23(c)(2) for cases in which
summary judgment already has been granted on defendant's motion;
when defendants obtain summary judgment before the class has been
certified or before notice has been sent, they effectively waive their right to
have notice circulated to the class under Rule 23(c)(2)).
California
San Jose v. Superior Court, 12 Cal. 447, 454-64 (1974); Cooper v.
American Sav. & Loan Ass'n, 55 Cal. App. 3d 274, 285 (1976).
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4.
In a class action, the named plaintiffs ordinarily must
establish a transactional nexus with the defendants. Because
UCL claims do not require an injured plaintiff, plaintiffs and
defendants debate whether absence of injury renders a
named plaintiff inadequate or atypical.
California
Dean Witter Reynolds, Inc. v. Superior Court, 211 Cal. App. 3d 758,
772-75 (1989); Phillips v. Crocker-Citizen Nat'l Bank, 38 Cal. App.
3d 901, 910 (1974) ("question of standing to sue is one of the right
to relief and goes to the existence of a cause of action against the
defendant"); Payne v. United California Bank, 23 Cal. App. 3d 850,
860 (1972) (dismisses complaint as to bank with whom plaintiff had
no relationship).
Federal
La Mar v. H. & B. Novelty & Loan Co., 489 F.2d 461, 464-66
(9th Cir. 1973).
5.
Superiority of class method. Under Rule 23(b)(3), plaintiff
must establish that the class action would be a "superior"
method for adjudicating the controversy.
California
Caro v. Procter & Gamble Co., 18 Cal. App. 4th 644 (1993); Dean
Witter Reynolds v. Superior Court, 211 Cal. App. 3d 758, 772-73
(1989).
6.
Plaintiffs also must prove the existence of an ascertainable
class. See Tenants Ass'n v. Beverly Southers, 222 Cal. App.
3d 1293, 1304 (1990).
VIII. DEFENSES
A. Fraud and Class Action Defenses Are Unavailing
The two primary reasons for the popularity with prosecutors and consumer
attorneys of claims under the Unfair Competition Law are: (1) the unavailability
to defendants of the traditional "no reliance" defense to fraud claims (see
section 52, below); and (2) plaintiffs' ability to prosecute claims on behalf of an
enormous "class" of "victims," without the necessity of satisfying traditional
criteria for maintenance of a class action (e.g., numerosity and typicality of
claims, adequacy of representation, predominance of class issues over individual
issues (Fed. R. Civ. Proc. § 23(a)-(c)). (See Prata v. Superior Court, 91 Cal.
App. 4th 1128 (2001) (grants writ of mandate directing trial court to vacate its
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summary judgment for defendant; plaintiff is a proper representative of other
consumers in a false advertisement of credit account scheme because plaintiff
does not need individual matters of proof to show liability under the UCL); First
Alliance Mortgage Co. v. First Alliance Mortgage Co., 2001 U.S. Dist. LEXIS
19931 (C.D. Cal. 2001) (reverses Bankruptcy Court's order sustaining debtors'
objections to the class claimants' proofs of claim; UCL claimants need not be
certified as a class in order to pursue claims because UCL actions have different
requirements from class actions)).
B. One Hundred Six Defense Arguments
Nonetheless, as with the equally broad federal Racketeer and Corrupt
Organizations Act ("RICO"), defendants have whittled away at the UCL's
potentially broad application through decades of appellate litigation. The outline
lists below a host of potential defense arguments that counsel in these cases
should consider. Some of these doctrines already have received authoritative
judicial endorsement, others have received mixed results, and still others thus far
have been rejected -- although usually not by courts at the highest levels. Even
the third category deserves some thought, however, because a better factual
context, more receptive judges or justices, or an intervening statutory
development can turn a losing defense into a winning one. Also, experience has
shown that trial courts in California, and federal courts at trial and intermediate
appellate levels, are more responsive to defense arguments than the California
Court of Appeal and the California Supreme Court, who appear to believe that
answers to the statutes' problems must come only from the legislature.
1.
Abstention
Principles of federalism may require abstention (which usually gives rise to
a stay of the action rather than dismissal) because of deference to a
federal agency's enforcement power. Courts apply abstention to accord
“great deference to the interpretation given a statute by the officers or
agency charged with its administration.” (See Udall v. Tallman, 380 U.S.
1, 16 (1965) (not UCL case)).
California
People ex rel. Dep't of Transp. v. Naegele Outdoor Adver. Co. of
California, Inc., 38 Cal. 3d 509, 523 (1985), cert. denied, 475 U.S.
1045 (1986) (abstention where underlying violation arose under
federal Highway Beautification Act); Drennan v. Security Pac. Nat'l
Bank, 28 Cal. 3d 764, 770, cert. denied, 454 U.S. 833 (1981)
(abstention where lender referred in loan agreement to use of the
"Rule of 78's" without further explanation, because Federal Reserve
Board standards permitted such references); Crusader Ins. Co. v.
Scottsdale Ins. Co., 54 Cal. App. 4th 121, 138 (1997) (abstains
from deciding claim that surplus lines brokers are violating
Insurance Code § 1763 because agency should first evaluate the
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claim); Cong. of Cal. Seniors v. Catholic Healthcare W., 87 Cal.
App. 4th 491 (2001) (affirms dismissal of plaintiff union's UCL
claims against defendant hospital because Medicare cost reporting
and reimbursement policies are preempted by federal law;
abstention of Medi-Cal claims where Medicare claims are
preempted by federal law); Desert Healthcare Dist. v. PacifiCare,
FHP, Inc., 94 Cal. App. 4th 781 (2001) (affirms dismissal of plaintiff
hospital owner's claims against defendant health care service
provider; abstention where a UCL action would drag a court of
equity into an area of complex economic policy in the health care
finance industry); Diaz v. Kay-Dix Ranch, 9 Cal. App. 3d 588, 593
(1970) (abstention where alleged underlying violation arose under
federal immigration laws).
Federal
Mullins Coal Co. v. Director, Office of Workers' Compensation
Programs, United States Dep't of Labor, 484 U.S. 135, 159 (1987)
(defers to Department of Labor's interpretation of labor laws); FDIC
v. Philadelphia Gear Corp., 476 U.S. 426, 438 (1986) (defers to
FDIC's interpretation of regulations regarding definition of
"deposit"); Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 567-68
(1980) (abstention where lender's disclosure complied with federal
Truth In Lending Act under Federal Reserve Board's interpretation
of Regulation Z); Bone v. Hibernia Bank, 493 F.2d 135, 138-40
(9th Cir. 1974) (abstention where lender referred to Rule of 78's
without further explanation in reliance on Federal Reserve Board
regulations).
2.
Adequate Remedy at Law
Because a request for an injunction invokes the court's equitable powers,
a plaintiff must establish that it has no adequate remedy at law before the
court will issue an injunction. (Prudential Home Mortgage Co. v. Superior
Court, 66 Cal. App. 4th 1236, 1249-50 (1998)).
California
Prudential Home Mortgage Co. v. Superior Court, 66 Cal. App. 4th
1236, 1249-50 (1998) (existence of adequate remedy at law
precludes UCL claim; plaintiff has adequate legal remedy for
alleged failure of mortgage company to make timely reconveyance
of deeds of trust following home refinancing because legislature
established $300 statutory penalty for violations).
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3.
Administrative Law Doctrines
The doctrines of primary jurisdiction and exhaustion of administrative
remedies occasionally are implicated by UCL cases, so that a court will
determine to defer the judicial process until after an administrative agency
has acted. Although the two doctrines sometimes are confused,
exhaustion applies only where the agency actually has power to remedy
the alleged wrong, and the doctrine requires a stay or dismissal of the
judicial proceeding until the administrative agency has resolved the claim
that is properly cognizable before it. Primary jurisdiction applies where the
agency has special expertise and authority over the subject at issue, so
that the court should defer to the agency's procedures.
a. Exhaustion of Administrative Remedies
California
Abelleria v. District Court of Appeal, 17 Cal. 2d 280, 293
(1941) (doctrine of exhaustion of administrative remedies is
a "jurisdiction prerequisite to the courts") (not UCL case);
Karlin v. Zalta, 154 Cal. App. 3d 953 (1984) (plaintiff's failure
to exhaust her "remedies [under the Insurance Code]
forecloses her resort to the judicial process") (not UCL case);
County of Los Angeles v. Farmers Ins. Exch., 132 Cal. App.
3d 77 (1982) (failure to exhaust remedies before Insurance
Commissioner) (not UCL case).
b. Primary Jurisdiction
Under the doctrine of primary jurisdiction, a court may temporarily
abstain from issuing a judgment where it faces issues that have
been placed "within the special competence" of an administrative
body. (Farmers Ins. Exch. v. Super. Ct., 2 Cal. 4th 377, 390-91
(1992)). However, a court cannot employ the doctrine of primary
jurisdiction to justify a complete dismissal of the issues before it;
rather, such issues should only be stayed "pending the
administrative body's resolution of the issues within its jurisdiction."
(Id. at 401).
California
Quielimane Co. v. Stewart Title Guaranty Co., 19 Cal. 4th 26
(1998) (does not address primary jurisdiction doctrine, but
allows antitrust claim against title companies for a
conspiracy to refuse to issue policies on properties acquired
through tax deeds; rejects defense argument that UCL claim
seeks to usurp the power of the legislature); Farmers Ins.
Exch. v. Superior Court of Los Angeles County, 2 Cal. 4th
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377, 401 (1992) (reverses trial court and orders stay of
proceedings pending resolution of issue whether Farmers
violated "Good Driver Discount" provisions of the insurance
pricing initiative by systematically referring drivers who
qualified for the discount to a subsidiary that charged higher
rates); Greenlining Institute v. Public Utilities Commission,
103 Cal. App. 4th 1324, 1330-1331 (2002) (denies petition
for writ of review of PUC decision that it lacked jurisdiction to
adjudicate claims for UCL violation); Cundiff v. Bell Atlantic
Corp., 101 Cal. App. 4th 1395, 1411, 1413 (2002) (reverses
order of dismissal upon demurrer to claims for UCL
violations arising from imposition of charges for allegedly
obsolete or non-existent telephones over a fifteen-year
period; concludes that Public Utilities Commission does not
have explicit jurisdiction or primary jurisdiction over the case;
Bristol Hotels & Resorts v. Nat'l Council on Compensation
Ins., Inc., 2002 Cal. App. LEXIS 2947 (Mar. 13, 2002) (Note:
this opinion has not been certified for publication or ordered
published) (insurance carriers' alleged failure to file with the
Bureau of Insurance the endorsements for policies sold to
plaintiffs constitutes unlawful conduct appropriate for judicial
resolution, in contravention of defendant's suggestion that
judicial enforcement of these provisions would improperly
usurp BOI's regulatory authority); AICCO, Inc. v. Ins. Co. of
N. Am., 90 Cal. App. 4th 579 (2001) (suit alleging unfair
trade practice against defendant insurer could not be
completely dismissed on primary jurisdiction grounds; nor
was the doctrine of primary jurisdiction applicable where
there were no pending administrative proceedings which
would justify further delay); Walker v. Allstate Indemnity Co.,
77 Cal. App. 4th 750 (2000) (upholds dismissal of UCL class
action claim against auto insurers alleging premiums
exceeding rates allowable under Proposition 103 because
Commissioner of Insurance had approved the rates); Wise v.
Pacific Gas & Electric Co., 77 Cal. App. 4th 287, 299-300
(1999) (applies primary jurisdiction doctrine to state claim
that defendant “obtained an excessive and unreasonable
tariff by defrauding the Public Utility Commission” until the
Commission had reviewed the allegations); Crusader
Insurance Co. v. Scottsdale Insurance Co., 54 Cal. App. 4th
121, 138-39 (1997) (applies primary jurisdiction doctrine to
claim that surplus lines brokers violated Insurance Code
§1763); Samura v. Kaiser Found. Health Plan, Inc., 17 Cal.
App. 4th 1284 (1993) (UCL claim challenging third-party
liability provision in HMO's member service agreements
barred because Department of Corporations had been given
exclusive power to enforce violations of the Knox-Keene
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Act); Cellular Plus, Inc. v. Superior Court, 14 Cal. App. 4th
1224 (1993) (Public Utilities Commission did not have
primary jurisdiction over antitrust price fixing claims [not UCL
claims] against cellular telephone providers because claim
did not require interpretation and application of regulations
and statutes within the province and expertise of the PUC,
but instead plaintiff claimed that practice violated Cartwright
Act, which courts and not PUC are experienced in
interpreting); Hewlett v. Squaw Valley Ski Corp., 54 Cal.
App. 4th 499 (1997) (where the California Department of
Forestry has no "'pervasive and self-contained system of
administrative procedure'" to deal with issues in case, and
since legal interpretation of the Forest Practice Act is not
part of CDF's domain, primary jurisdiction principles do not
bar claim under UCL).
Federal
Chabner v. United of Omaha Life Ins. Co., 225 F.3d 1042
(9th Cir. 2000) (refuses to vacate summary judgment and
refer the matter to the Insurance Commissioner because it
would not serve the dual policies of primary jurisdiction;
decides itself whether premium was based on sound
actuarial principals or actual and reasonably anticipated
experience).
Other States
Moy v. Schreiber Deed Sec. Co., 572 A.2d 758, 761 (Pa.
Super. 1990) (no prosecution of state law claim under
Pennsylvania's "Little FTC Act" until consumer pursued
administrative complaint with state department of insurance).
c. Deference to Administrative Interpretation
Because an administrative agency's interpretation of its governing
statute is entitled to “great weight” unless it is clearly erroneous or
unauthorized (Hewlett v. Squaw Valley Ski Corp., 54 Cal. App. 4th
499, 530 (1997); Lusardi Construction Co. v. California
Occupational Safety and Health Appeals Board, 1 Cal. App. 4th
639, 645 (1991)), a defendant may argue that the trial court must
defer to the administrative agency's construction of the statute in a
way that authorizes defendant's conduct.
California
Fenning v. Glenfed, Inc., 40 Cal. App. 4th 1285, 1295 (1995)
(no preemption under federal banking laws, relying on
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opinion letters issued by federal reserve board); People v.
Duz-More Diagnostic Laboratory, Inc., 68 Cal. App. 4th 654
(1998) (practice not unfair because agency's MediCal
manuals and regulations are complex and subject to varying
interpretations); Hewlett v. Squaw Valley Ski Corp., 54 Cal.
App. 4th 499, 526-27 (1997) (absence of uniform
interpretation of applicable law by the California Department
of Forestry did not bar finding of UCL violation); Hudgins v.
Neiman Marcus Group, Inc., 34 Cal. App. 4th 1109, 1125-26
(1995) (court declines to defer to private opinion letter from
California Labor Commissioner obtained while litigation was
pending because it concludes that opinion was wrong and
was not the product of an adversarial process); Drennan v.
Security Pac. Nat'l Bank, 28 Cal. 3d 764, 770 (1981) (loan
agreement disclosure of practice of following the “Rule of
78's” is adequate since Federal Reserve Board's Regulation
Z, promulgated under the Truth in Lending Act, authorizes
such disclosure).
4.
Alternative Source
Where the consumer could have avoided the alleged unfair practice by
taking his business elsewhere or focusing upon other products or services
offered by the same defendant without the offending aspect, a defendant
may use the availability of the alternative source to attack plaintiff's claim.
California
Schnall v. Hertz Corp., 78 Cal. App. 4th 1144, 1161 n.9 (2000)
("refueling" option is not unconscionable as customers have a
"'meaningful choice,' because the rental agreement adequately
informs renters that if they reject the fuel purchase option and
return the rented car with a full tank they will pay no fuel service
charge."); Shvarts v. Budget Group, 81 Cal. App. 4th 1153 (2000)
(rejects UCL claim because "[e]ach of the three payment options is
clearly printed, in boldface, in the rental agreement provided to
[customers] at the time of rental"); Shadoan v. World Sav. & Loan,
219 Cal. App. 3d 97 (1990) (UCL claim barred because defendant
offered other products or services that did not contain the
challenged fee payment penalty on home loan); Dean Witter
Reynolds, Inc. v. Superior Court, 211 Cal. App. 3d 758 (1989)
(unconscionability claim based upon $50 close-out fee for Individual
Retirement Account was precluded because customer had
"reasonably available alternative source of supply"); California
Grocers Ass'n v. Bank of America, 22 Cal. App. 4th 205, 216 (1994)
("absent a showing of oligopoly and consequent lack of free
competition, we cannot discount the significance of the fact that the
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three-dollar fee is at the low end of fees charged by other
institutions.").
Other States
Tudor v. Jewel Food Stores, Inc., 681 N.E.2d 6 (Ill. App. 1997)
(accidental overcharges not unfair where store receipt would
enable customer to check accuracy and store offers money-back
guarantee if scanned price is different from shelf price).
5.
Amendment or Repeal of Underlying Law
Amendment or repeal of the underlying law whose violation forms the
predicate for a section 17200 unlawfulness claim may create a defense to
the section 17200 claim. California courts have not yet addressed this
argument in the context of a section 17200 prosecution.
California
Younger v. Superior Court, 21 Cal. 3d 102 (1978) (action wholly
dependent on statute abates if statute is repealed without savings
clause before judgment becomes final); Governing Bd. v. Mann,
18 Cal. 3d 819, 829 (1977) ("[A] cause of action or remedy
dependent on a statute falls with a repeal of the statute."); Int'l
Ass'n of Cleaning and Dye House Workers v. Landowitz, 20 Cal. 2d
418 (1942) (affirms denial of injunction where repeal of statute
enabling municipal "code of competition" regulating laundry prices
and providing for injunctive relief terminates cause of action.
Further, UCL's predecessor statute lacks a statutory definition of
"unfair competition" and furnishes no independent basis for an
injunction against violation of the penal ordinance at issue);
Chapman v. Farr, 132 Cal. App. 3d 1021, 1023-24 (1982) (unless
plaintiff obtains final judgment before effective date of amendment
or modification, most recent version of statute will govern cause of
action); Orden v. Cranshaw Mortgage & Inv. Co., 109 Cal. App. 3d
141, 145-146 (1980) (same).
Federal
Solomon v. North Am. Life & Cas. Ins. Co., 1998 U.S. App. LEXIS
14907 (9th Cir. June 4, 1998), modified, 98 Cal. Daily Op. Serv.
6278 (9th Cir. Cal. Aug. 11, 1998) (affirms summary judgment for
defendant; UCL operates prospectively absent express retroactivity
provision, so that prior to August, 1992, a party was required to
prove ongoing unfair business practices in order to state a valid
claim).
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6.
Anti-SLAPP Motion to Strike
A weapon of increasing popularity among defendants in recent years has
been an Anti-SLAPP motion at the outset of the case. An Anti-SLAPP
motion argues that plaintiff's claim should be dismissed because it is a
"Strategic Lawsuit Against Public Participation" designed to chill
defendant's exercise of constitutional rights of free speech or petition.
Although the motions infrequently succeed, they are sometimes
successful, and they sometimes provide defendant with an opportunity to
eliminate plaintiff's lawsuit without reaching it's merits. A plaintiff
responding to an Anti-SLAPP motion must demonstrate that the complaint
is both legally sufficient and supported by a sufficient prima facie showing
of fact to sustain a favorable judgment if the evidence submitted by the
plaintiff is credited. See Yu v. Signet Bank/Virginia, 103 Cal. App. 4th 298,
315-318 (2002).
California
Yu v. Signet Bank/Virginia, 103 Cal. App. 4th 298 (2002) (affirms
order denying motion to strike plaintiffs' claims under the AntiSLAPP statute; rejects "intent to chill proof requirement" for AntiSLAPP motion, finding holding that SLAPP claim may arise where
defendant's act underlying the plaintiff's claim itself was an act in
furtherance of the right of petition for free speech).
7.
Arbitration
a. Federal Preemption Under Federal Arbitration Act
Federal preemption principles may preclude state or federal court
prosecution of UCL claims if the transaction at issue involves
"interstate commerce" (which is broadly defined in the cases), and
the persons on whose behalf the suit is brought signed written
agreements to arbitrate. So long as the claim is governed by the
Federal Arbitration Act (9 U.S.C. §§ 1, et seq.), the claim should be
subject to arbitration regardless of conflicting state law doctrines
that may be hostile to arbitration.
Federal
Allied-Bruce Terminix v. Dobson, 115 U.S. 834, 63 U.S.L.W.
4079 (1995) (reads Federal Arbitration Act definition of
"contract evidencing transaction involving commerce"
broadly, to prevent prosecution of various state law claims in
Alabama court); Arriaga v. Cross Country Bank, 163 F.
Supp. 2d 1189 (S.D. Cal. 2001) (grants defendant's motion
to compel arbitration of all claims; California legislature's
demonstrated intent to preclude arbitration of claims for
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public injunctive relief under UCL does not remove the
arbitration agreement from the coverage of the FAA, which
requires the agreement to be enforced; "this Court feels
bound by United States Supreme Court precedent stating
that only Congress may determine when statutory remedies
are not subject to arbitration agreements under the FAA");
Coonley v. Rotan Mosle, Inc., 630 F. Supp. 404, 406 (W.D.
Tex. 1985) (arbitration clause barred prosecution of Texas
"Little FTC Act" claim).
State
Discover Bank v. Superior Court, 105 Cal. App. 4th 326
(2003) (FAA preempts state court from applying state
substantive law to strike class action waiver from arbitration
clause in credit card holder agreement); Blue Cross of
California v. Superior Court, 67 Cal. App. 4th 42 (1998)
(where arbitration agreement governed by FAA is silent
regarding classwide arbitration, section four of FAA does not
bar state courts from ordering classwide arbitration where
permitted by California law)
b. State Arbitration Law
Although many states have found "Little FTC Act" claims to be
arbitrable, California decisions are mixed.
California
Cruz v. Pacific Care, 91 Ca. 4th 1179 (2001), review
granted, 34 P. 3d 288 (2001) (Cal. Supreme Court is
reviewing whether federal law preempts California's
exemption of claims from injunctive relief under the
Consumer Legal Remedies Act or the UCL from arbitration);
Broughton v. Cigna Healthplans, 21 Cal. 4th 1066, 1079-80
(1999) (action for injunctive relief under CLRA is not subject
to arbitration, although other claims for damages are
arbitrable; the CLRA "plaintiff in this case is functioning as a
private attorney general, enjoining future deceptive practices
on behalf of the general public. We hold that under such
circumstances arbitration is not a suitable forum, and the
Legislature did not intend the type of injunctive of relief to be
arbitrated" because " the evident purpose of the injunctive
relief provision of the CLRA is not to resolve a private
dispute but to remedy a public wrong"); Zakarian v. Dekov,
2002 Cal. App. LEXIS 4093, at *9, 21 (May 8, 2002)
(reverses trial court's denial of compelled arbitration with
respect to a defendant-engineer even though he was not a
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party to the arbitration contract because his conduct was
significantly entangled with the primary defendant-doctor's
acts to come within the joinder clause of the agreement);
Szetela v. Discover Bank, 2002 Cal. App. LEXIS 4007, at
*14-15 (Apr. 22, 2002) (vacates trial court's order mandating
forced arbitration with respect to UCL claim because the
contract provision was "not only substantively
unconscionable, it violate[d] public policy by granting
Discover a 'get out of jail free' card while compromising
important consumer rights; Groom v. Health Net, 82 Cal.
App. 4th 1189, 1199 (2000) ("The same [Broughton]
reasoning applies to [the UCL] cause of action [so that
plaintiff's] claims for injunctive relief must therefore be
severed from this portion of the arbitrable [UCL] claims");
Coast Plaza Doctors Hosp. v. Blue Cross of Calif., 83 Cal.
App. 4th 677 (2000) (reverses trial court's order denying
defendant's motion to compel arbitration for private causes
of action and non-injunctive remedies and stays injunctive
claim relief pending outcome of arbitration proceedings;
plaintiff hospital's claim for public injunctive relief against
defendant insurance corporation is not arbitrable because
plaintiff is acting in the capacity of a private attorney general
and injunctive relief benefits the public at large; arbitration is
enforceable for plaintiff's private causes of action and noninjunctive remedies); Berman v. Health Net, 80 Cal. App. 4th
1359, 1372 (2000) (affirms denial of petition to compel
arbitration; plaintiff's non-arbitrable claim for injunctive relief
pursuant to the UCL does not nullify defendant health care
provider's waiver of arbitration, where defendant engaged in
extensive discovery and never sought to sever the UCL
injunction claim from the arbitrable claims); Berman v. Health
Net, 80 Cal. App. 4th 1359 (2000) (denies motion to compel
arbitration because defendants waived their rights to
arbitration by engaging in substantial discovery and thereby
prejudicing plaintiffs; rejects defendants' argument that
conducting discovery concerning an apparently nonarbitrable
UCL claim for injunctive relief cannot lead to waiver of
arbitration because defendant did not sever the
nonarbitrable claims from the arbitrable ones, pursuant to
the California Supreme Court's guidance in Broughton, or
even indicate that their discovery was directed towards the
nonarbitrable claim); Patterson v. ITT Consumer Fin. Corp.,
14 Cal. App. 4th 1659, 1664-7 (1993) (UCL and other claims
not subject to arbitration because court interprets arbitration
agreement as suggesting to customer that arbitration would
take place in a distant forum and, for that reason and others,
arbitration clause is unconscionable).
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Federal
Fairchild v. Nat'l Home Ins. Co., 2001 U.S. App. LEXIS
19487 (9th Cir. 2001) (unpublished opinion) (reverses district
court's order denying defendant's motion to compel
arbitration for UCL claim; UCL claim falls within the scope of
the arbitration provision in the Builder Proposal and
Agreement (BPA) because the language of the BPA is
sufficiently broad to allow for such a claim and the factual
allegations in plaintiff builder's UCL claim are integrally
related to defendant insurance company's compliance with
warranty documents in the BPA); Gray v. Conseco Fin. Inc.,
2000 U.S. Dist. LEXIS 14821 (C.D. Cal. 2000) (grants
motion to compel arbitration for all claims except for the
equitable portion of the UCL claim; adopts the reasoning of
California cases Broughton v. Cigna Healthplans and Coast
Plaza Doctors Hosp. v. Blue Cross of Calif., concluding that
UCL claims seeking equitable relief are not arbitrable);
Arriaga v. Cross Country Bank, 163 F. Supp. 2d 1189 (S.D.
Cal. 2001) (grants motion to compel arbitration of all claims;
claim for disgorgement of funds under the UCL is not
immune from arbitration; because disgorgement is limited in
time and scope, it dies not require judicial supervision and is
essentially the same as awarding money damages; thus, the
California state legislature did not intend to preclude
arbitration for the disgorgement of funds claim available
under the UCL because there is no "inherent conflict"
between this remedy and arbitration); Meyers v. Unizest
Home Loan, Inc., (N.D. Cal. 1993 W. L. 307747) (enforcing
arbitration of UCL private attorney general claims); Coonley
v. Rotan Mosle, Inc., 630 F. Supp. 404 (W.D. Tex. 1985)
(Texas "Little FTC Act" claim subject to arbitration).
Other States
Flower World of Am., Inc. v. Wenzel, 594 P.2d 1015, 122
Ariz. 319 (App. 1978) (Arizona Little FTC Act claim
arbitrable); J & K Cement Constr., Inc. v. Montalbano
Builders, 119 Ill. App. 3d 524 (1983) (Illinois Little FTC Act
claim arbitrable); Greenleaf Eng'g & Constr. v. Teradyne, 15
Mass. App. 571 (1983) (Massachusetts Little FTC Act claim
arbitrable); Rodgers Builders, Inc. v. McQueen, 331 S.E.2d
726, 733 (N.C. App. 1985) (claim under North Carolina Little
FTC Act arbitrable).
c. Class Claims
Even class claims may be arbitrable.
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California
Keating v. Superior Court of Alameda County, 31 Cal. 3d
584, 608-14 (1982) (class claims are properly subject to
arbitration if they fall within the written arbitration clause and
satisfy class action requirements).
8.
Breach of Contract
The applicability of the UCL to simple claims for breach of contract is
uncertain.
Federal
In re Ingle Co., 1997 U.S. App. LEXIS 423, 1997-1 Trade TAX.
(CCH) ¶ 71,782 (9th Cir. Jan. 7, 1997) ("[P]laintiff cites no case
applying section 1720 to a simple breach of contract, and we have
found none."); Agroindustrias Vezel v. H.P. Schmid, Inc., 1991 U.S.
Dist. LEXIS 18783, at *205 (N.D. Cal. 1991) (dismisses a UCL
claim sua sponte, as it derives from a breach of contract claim itself
dismissed).
9.
Business Judgment Rule
When a plaintiff uses the UCL to challenge corporate activity protected by
the established "business judgment rule" defense, the court will likely
dismiss the claim on the theory that the challenged activity is not unlawful.
California
Lee v. Interinsurance Exchange, 50 Cal. App. 4th 694, 713-14
(1996) (bars claim that board's unlawful uncomposition violates
UCL; court concludes: "Obviously, actions which are reasonable
exercises of business judgment, are not forbidden by law, and fall
within the discretion of the directors of a business under the
business judgment rule cannot constitute unlawful business
practices.").
10.
Business Justification / "Everybody Does It"
Business justification and industry practice may provide defenses to UCL
claims under limited circumstances. The defendant bears the burden of
proving the elements of the defense. Where a plaintiff singles out one
defendant to challenge an industry-wide practice, a court may exercise its
discretion to deny injunctive relief where the issue is better left to the
legislative process. See section VIII.B.53, below.
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California
Chern v. Bank of America, 15 Cal. 3d 866, 876 (1976) (industry
practice is no defense to UCL claim); South Bay Chevrolet v.
General Motors Acceptance Corp., 72 Cal. App. 4th 1380 (1999)
(court considers widespread nature of challenged practice and level
of consumer understanding; no UCL violation); Sure Safe Indus. v.
McGrath Rentcorp, 2001 Cal. App. LEXIS 2689, at *19 (Nov. 26,
2001) (defendants' decision not to purchase plaintiff's product can
be justified where plaintiff's rival offers better pricing or a superior
product); People v. Cappuccio, Inc., 204 Cal. App. 3d 750, 763
(1988) (same); People v. Casa Blanca Convalescent Homes, Inc.,
159 Cal. App. 3d 509, 527 (1984) (same); Motors, Inc. v. Times
Mirror Co., 102 Cal. App. 3d 735, 740 (1980) (defendant may prove
reasons, justifications and motives for business practice to show it
is not unfair); Hobby Indus. Ass'n of Am., Inc. v. Younger, 101 Cal.
App. 3d 358, 372 (1980).
11.
Class Certification
The diversity of facts and issues in UCL cases sometimes presents
significant obstacles to certification, which in turn may suggest due
process concerns even to non-class maintenance of the claim. (See
section VIII.B.12.d., below.)
California
Mass. Mut. Life Ins. Co. v. Superior Court, 2002 Cal. App. LEXIS
4029 (April 29, 2002) (affirms district court's order certifying as a
plaintiffs' class 33,000 purchasers of life insurance who alleged that
Mass Mutual failed to disclose its intention to reduce its
discretionary dividend rate; "given the evidence of nondisclosure by
the plaintiffs, the fact ... that prospective purchasers received
differing representations from Mass Mutual's agents is wholly
irrelevant to determination of the company's responsibility under the
UCL," and the claim is "plainly suitable" for treatment as a class
action); Wershba v. Apple Computer, Inc., 91 Cal. App. 4th 224,
244 (2001) (trial court did not abuse its "broad discretion" in
certifying a nationwide class and approving a class settlement with
defendant computer manufacturer because the certification and
settlement were equitable under a balancing of the parties'
interests); Norwest Mortgage v. Superior Court of San Diego,
72 Cal. App. 4th 214 (1999) (UCL could not be the basis of a suit
by a class of non-California residents who purchased their
insurance outside of California where the defendant was a
California insurer with its principal place of business in Iowa; where
"injuries are suffered by non-California residents, caused by
conduct occurring outside of California borders, involving
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defendants whose headquarters and principal places of business
are outside of California," the UCL does not apply; also notes due
process objections to extending jurisdiction over non-California
residents as there were no substantive contacts with California);
Dean Witter Reynolds v. Superior Court (Alameda), 211 Cal. App.
3d 758, 772-73 (1989) (denies class certification because class
mechanism does not present superior method for adjudicating UCL
claims as individual can prosecute claims for restitution on behalf of
general public; "[t]he possibility that absent persons will pursue
separate remedies may pose a threat to the defendant, but
defendant here opposes class certification and presumably will not
be heard to complain later if it suffers adverse consequences as a
result").
Federal
Rosales v. Citibank, Fed. Savings Bank, 133 F. Supp. 2d 1177
(N.D. Cal. 2001) (denies motion to strike representative UCL claim;
private litigant may bring UCL claim on behalf of the public without
seeking class certification and, in fact, class actions are not
necessarily a superior method for litigating UCL claims; here,
although the facts regarding the specific circumstances of improper
withdrawals will differ, the predominant and common issue is the
legality of defendant's refusal to credit the accounts); O'Connor v.
Boeing N. Am., Inc., 197 F.R.D. 404 (C.D. Cal. 2000) (decertifies
class as it failed to fulfill the Rule 23(b)(3) superiority requirement
as plaintiffs could receive full extent of relief sought in a
representative action under UCL; plaintiffs' argument that federal
law precluded a UCL representative action had no merit, and
plaintiffs could pursue such an action in federal court); Lazar v.
Trans Union LLC, 195 F.R.D. 665 (C.D. Cal. 2000) (grants motion
to dismiss UCL claim to the extent that it seeks restitutionary relief
on behalf of the general public, as plaintiff's claim, based upon the
credit agency's mis-merging of his credit file with that of a felon with
thousands of dollars worth of tax liens, was not sufficiently similar to
fellow consumers as to allow him to bring an uncertified class
action on their behalf); Sandlin v. Shapiro & Fishman, 1997 U.S.
Dist. LEXIS 4062 (M.D. Fla. 1997) (denies plaintiffs' motion to
reconsider a prior denial of class certification; plaintiffs do not meet
the requirements of Rule 23 under the Federal Rules of Civil
Procedure regarding numerosity, typicality and adequacy of
representation).
12.
Commercial Relationship
The application of the UCL to commercial relationships among
competitors is a separate, complex issue beyond the scope of the Outline.
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Many of the principles discussed here do not apply in that
competitor/competitor context. (See California Wholesale Elec. Co. v.
Micro Switch, Honeywell, Inc., 1983-1 Trade Cas. (CCH) ¶ 65,253
(C.D. Cal. 1983) (no violation of UCL occurred (1) because the acts
complained of had not been shown to have taken place; (2) because the
acts complained of are not unfair competition; and (3) because UCL is
inapplicable to acts which do not involve consumer deception and which
occur in the course of a commercial relationship between manufacturer
and distributor; acts complained of included breach of contract, unlawful
tying, imposing exclusive dealing arrangement, and conspiring to
monopolize, but the court finds no violations of the applicable statutes).
Federal
Irwin v. Mascot, 2001 U.S. Dist. LEXIS 3285 (N.D. Cal. 2001) (in
previous opinion, court had entered summary judgment in class
action against defendant debt collectors; grants plaintiffs' motion to
modify the class definition in part, finding it retains the power to
modify the class even after entry of summary judgment).
13.
Constitutional Defenses
The absence of clear standards defining unlawful conduct, the potential
applicability of the UCL's proscriptions to protected speech, and the UCL's
potential for double prosecutions all suggest that the statutes are ripe for
constitutional challenge. Nonetheless, courts thus far have rejected
almost all constitutional attacks at the initial pleading levels. Also, it
appears that the strong due process argument that might support reversal
of a significant restitution award in a repetitive UCL action has yet to find
the necessary intrepid defendant willing to suffer such an award in order to
create the best record for an appeal.
a. Case or Controversy
Article III of the United States Constitution limits the powers of
federal courts to circumstances where an actual case or
controversy exists. If a private plaintiff is permitted to sue on behalf
of others for whom he claims injury when he has suffered no injury
himself, he may not present a justiciable case or controversy
sufficient to satisfy Article III requirements. To avail itself of the
protection of this requirement, a defendant in a state without such a
constitutional requirement may consider the possibility of removing
the action to federal court (although remand may follow precisely
because federal law imposes a limitation that state law does not).
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Federal
Littledove v. JBC & Assocs. Inc., 2000 U.S. Dist. LEXIS
18490 (E.D. Cal. 2000) (rejects motion to dismiss;
defendant's settlement offer, which provided for all remedies
sought to which plaintiffs were entitled, did not negate
plaintiffs' cognizable interest or personal stake in the matter,
and thus did not moot plaintiff's claims); Stationary Eng'rs
Local 39 Health and Welfare Trust Fund v. Philip Morris,
Inc., 1998 U.S. Dist. LEXIS 8302 (N.D. Cal. 1998)
(dismisses UCL claim and all other claims except for
plaintiffs' negligent breach of special duty claim; association
does not have standing to bring claim on behalf of its
members under the UCL in federal court; UCL claim based
on defendant's alleged misrepresentations fails because the
plaintiffs did not demonstrate a causal link between
defendant's actions and plaintiffs' injuries); Pharmacare v.
Caremark, 965 F. Supp. 1411 (D. Haw 1996) (denies motion
to dismiss UCL claim but grants motions to dismiss some
other claims; plaintiff has standing to sue; because plaintiff
limits its prayer for relief to restitution, defendant's
challenges to a request for an injunction are irrelevant).
b. Commerce Clause
Courts in California have most often rejected Commerce Clause
attacks on the UCL.
California
Unit Process Co. v. Raychem Corp., 2002 Cal. App. LEXIS
1283, at *13, 15, 18-19, 34-37 (Feb. 5, 2002) (reverses
dismissal on demurrer in vertical distributorship antitrust
litigation; non California resident may allege a UCL claim
against a California defendant without offending the
Commerce Clause where the alleged UCL violations
emanate from the distributorship contracts, and the
agreements had a California choice of law provision, even
though the challenged conduct occurred in another state);
People v. Western Airlines, Inc., 155 Cal. App. 3d 597, 60001 (1984), cert. denied, 469 U.S. 1132 (1985) (rejects
Commerce Clause attack despite extensive federal
regulation of airline fare advertising); California Ass'n of
Dispensing Opticians v. Pearle Vision Ctr., 143 Cal. App. 3d
419 (1983) (upholds injunction for violating the UCL and the
FAA because claim to provide "total eye care" is misleading;
injunction was properly issued, does not violate the First
Amendment or Commerce Clause.); Payne, et. al. v. Aztar
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Corp., et al., San Diego Superior Court No. 698592 (trial
court sustains Commerce Clause challenge to application of
UCL and FAA to advertising to California of video poker
machines in Nevada; plaintiffs did not appeal).
Federal
Edgar v. Mite Corp., 457 U.S. 624, 642-43 (1982) ([T]he
Commerce Clause . . . precludes the application of a state
statute to commerce that takes place wholly outside of the
State's borders, whether or not the commerce has effects
within the States.") (note: 1992 statutory amendments
eliminated the "within this state" language); Shearson
Lehman Bros. Inc. v. Greenberg, 1995 U.S. App. LEXIS
17313, at *5 (9th Cir. July 3, 1995) (claim for injunctive relief
violates the Commerce Clause because it seeks to use a
state statute to impose a nationwide injunction against
defendant until it changes its business practices);
Automotive Prods. PLC v. Tilton Eng'g, Inc., 1993 U.S. Dist.
LEXIS 20813, 33 U.S.P.Q. 2d 1065 (Sept. 16, 1993) (denies
accounting pursuant to UCL because statute only provides
relief "where the defendant has performed or is proposing to
perform 'an act of unfair competition within this state'"; only
act defendant is alleged to have committed "within the state"
is termination of distributorship, which was part of larger
scheme to injure plaintiff; notes court has yet to find a case
in which the UCL has been applied against business practice
occurring "wholly, or even primarily, outside of the state's
borders. Although the Court can only surmise about the
reasons that the legislature limited the reach of § 17203 to
acts which occur within the state, the desire to avoid
violating the Commerce Clause was probably the paramount
concern").
c. Double Jeopardy
The courts have found no violation of the Double Jeopardy Clause
when a defendant is subject to dual prosecutions for federal
criminal penalties and civil monetary penalties.
California
Setliff Brothers Service v. Bureau of Automotive Repair, 53
Cal. App. 4th 1491, 1494-95 (1997) (District Attorney's UCL
action does not prevent subsequent agency proceeding for
license verification based upon same underlying facts);
People v. Damon, 51 Cal. App. 4th 958, 971 (1996)
(previous administrative determination does not create res
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judicata bar to later action by district attorney alleging UCL
violations); People v. Forrest E. Olson, Inc., 137 Cal. App. 3d
137, 140 (1982) (no Double Jeopardy argument in civil
government enforcement action under FAA).
Federal
U.S. v. Traylor, 978 F.2d 1131 (9th Cir. 1992) (Double
Jeopardy clause does not bar prosecution of "boiler room"
telemarketing operator under federal mail fraud statute after
he paid civil monetary penalties because "successive
prosecutions by separate sovereigns for crimes arising out of
the same acts are not barred by the Double Jeopardy
Clause.").
d. Due Process Attacks
(1) Procedural Due Process
To protect defendants from the risk of one-way intervention,
where a defendant could face a collateral estoppel effect
from an unfavorable ruling but plaintiffs could avoid such
effect because a class has not yet been certified, courts
sometimes require class issues to be resolved before any
merits rulings. This doctrine does not solve the problems
that confront a defendant in a quasi-class action under the
UCL, however.
Home Sav. & Loan Ass'n v. Superior Court of Los
Angeles ("Home II"), 54 Cal. App. 3d 208, 211-13
(1976) (court may not hear plaintiffs' summary
judgment motion until after class is certified and those
who wish to opt out have done so); Home Sav. &
Loan Ass'n v. Superior Court of Los Angeles ("Home
I"), 42 Cal. App. 3d 1006, 1010-11 (1975) (reverses
order permitting trial of the individual class
representative's case before class case).
Although a defendant has a constitutional right to notice and
hearing before a court issues a temporary restraining order
that would deprive the defendant of property (Skinner v.
Superior Court of Santa Clara County, 69 Cal. App. 3d 183,
188 (1977)), the courts have rejected due process
arguments where defendants have received hearings.
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California
Kraus v. Trinity Management Services, Inc., 23 Cal.
4th 116, 138 (2000) (non-class representative action
does not violate requirement of procedural due
process because, although private attorney general
suits create a serious risk of multiple recovery against
a defendant, Trinity Management was not at risk of
repetitive litigation under the facts of the case; by the
time the case reached the California Supreme Court,
the statute of limitation had run on any claims the
absent "represented parties" might have asserted on
their own behalves); Wilner v. Sunset Life Insurance
Co., 78 Cal. App. 4th 952, 970 (2000) ("to be sure, if
this matter ultimately does not proceed as a class
action, the possibility that non-parties may pursue
their own remedies poses a risk to [defendant]");
People v. Thomas Shelton Powers, M.D., Inc., 2 Cal.
App. 4th 330, 343-44 (1992) (due process does not
prevent disgorgement of profits to state where no
victim of the unlawful practice may be determined;
"[n]or can we agree that our construction of the
statute in any way deprives defendants of property
without notice. The property having been gained
wrongfully, the defendant has no valid ownership
interest in it.") (overruled sub silentio in Kraus, supra);
Clothesrigger, Inc. v. GTE Corp., 191 Cal. App. 3d
605, 612 (1987) (remands for further findings, after
trial court's refusal to certify nationwide class, whether
application of California law to non-resident plaintiffs
would be constitutional under Phillips Petroleum
[described below], in light of California's choice of law
rules).
Federal
Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 810
(1985) (if interests of non-resident absent class
members are adequately represented in litigation,
they may be bound by settlement or judgment) (not
UCL case).
(2) Substantive Due Process
The courts have rejected many challenges to the UCL on the
grounds of vagueness or uncertainty.
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California
People v. Superior Court (Caswell), 46 Cal. 3d 381,
389 (1988) (due process of law requires that
legislation provide a reasonable degree of certainty;
to withstand a vagueness challenge, “a statute must
be sufficiently definite to provide adequate notice of
the conduct prescribed"; [a] statute which either
forbids or requires the doing of an act in terms so
vague that men of common intelligence must
necessary guess at its meaning and differ as to its
application, violates the first essential of due
process.”); Notrica v. State Comp. Ins. Fund, 70 Cal.
App. 4th 911, 945 (1999) (rejects defendant's
"constitutionally vague as applied" argument due to
the scope and breadth of the language in UCL,
articulating the test as "whether the public is likely to
be deceived"; defendant intended to mask its change
in reserve guideline to maximum probable potential
cost and it succeeded as evidenced by plaintiff's
statement that "it would not have continued its
relationship with [defendant] had it been aware of the
change"); Hewlett v. Squaw Valley Ski Corp., 54 Cal.
App. 4th 499, 529 (1997) (due process vagueness
standard is designed to avoid penalizing conduct
where a statute fails to give adequate notice of what
is forbidden; statute prohibiting timber cutting without
proper permit was not vague or uncertain); People v.
Morse, 21 Cal. App. 4th 259 (1993) (rejects
vagueness challenge to civil prosecution of lawyer for
violation of Cal. Bus. & Prof. Code § 17537.6
regarding operation of "homestead filing services");
People v. Thomas Shelton Powers, M.D., Inc., 2 Cal.
App. 4th 330, 343 (1992) ("disgorgement to the state"
does not render UCL unconstitutionally vague,
because state is not required to put defendant on
notice as to person to whom restitution might later be
required; statute will not be declared void as being
indefinite if it contains "a reasonably adequate
disclosure of the legislative intent regarding an evil to
be combated in language giving fair notice of the
practices to be avoided." (quoting People v. Hellner,
43 Cal. 2d 715, 720 (1954)); People v. H&H
Properties, 154 Cal. App. 3d 894 (1984) (Los Angeles
County Rent Control Ordinance did not operate as an
unconstitutional impairment of H&H Properties' vested
right to proceed with its condominium project, so civil
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penalties were allowable under UCL); People v.
Columbia Research Corp., 71 Cal. App. 3d 607, 613,
cert. denied, 434 U.S. 904 (1977) (facial attack on
constitutionality of FAA fails where defendant actually
knows practices plaintiff is seeking to enjoin); People
v. Kelley, 70 Cal. App. 3d 418, 421 (1977) (reverses
trial court's decision based on Bus. and Prof. Code,
§§ 1723 and 17535 to enjoin appellants from
engaging in the practice of dentistry without a license
because the "preliminary injunction is constitutionally
overbroad in that it explicitly prohibits appellants from
engaging in a statutorily authorized and
constitutionally protected activity..."); People v.
Witzerman, 29 Cal. App. 3d 169, 179 (1972) (word
"misleading" is not unconstitutionally vague); People
v. National Research Co. of California, 201 Cal. App.
2d 765, 772 (1962) (rejects challenge to Cal. Civ.
Code § 3369 [predecessor to UCL], stating statute
"designed to protect the public good must be upheld
unless its nullity clearly, positively and unmistakably
appears.").
Federal
Association of Nat'l Advertisers, Inc. v. Lungren, 44 F.
3d 726 (9th Cir 1994) (statute prohibiting certain
claims in “green” advertising was not
unconstitutionally vague).
Outside the context of the UCL, California courts have held
that a statute must provide sufficient notice of the conduct
that it forbids.
California
Walker v. Superior Court, 47 Cal. 3d 112, 143 (1988);
People v. Superior Court (Caswell), 46 Cal. 3d 381,
389 (1988) ("[to defeat a vagueness attack], a statute
must be sufficiently definite to provide adequate
notice of the conduct proscribed; [a] statute which
either forbids or requires the doing of an act in terms
so vague that men of common intelligence must
necessarily guess at its meaning and differ as to its
application, violates the first essential of due
process."); People v. Sangani, 22 Cal. App. 4th 1120,
1143 (1994).
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Federal
Association of Nat'l Advertisers, Inc. v. Lungren,
44 F.3d 726 (9th Cir. 1994) (statute prohibiting certain
claims regarding "green" advertising is not vague).
Constitutional safeguards may require that the court
undertake a proportionality analysis before imposition of civil
penalties, so that it does not impose civil penalties that
exceed those imposed in other purported cases based upon
more compelling facts. See People v. Nat'l Ass'n of
Realtors, 155 Cal. App. 3d 578 (1984); see also Solem v.
Helm, 463 U.S. 277, 290-92 (1983).
e. Equal Protection Clause
Equal protection challenges have been rare, and they have been
unsuccessful.
California
People v. Warnes, 10 Cal. App. 4th Supp. 35, 39 (1992)
(Equal Protection Clause "requires a court to grant a hearing
on defendant's ability to pay restitution," but "it does not
require a trial judge to make a finding of ability to pay before
ordering restitution.").
f. Excessive Fines Clause
The excessive fines clause may prevent application of UCL
provisions to permit an award of restitution to a governmental
plaintiff where a private plaintiff already has received restitution.
(See Browning Ferris Indus. of Vermont, Inc. v. Kelco Disposal,
Inc., 492 U.S. 257, 262 (1989) (excessive fines clause is
inapplicable to punitive damage award unless government is
recipient of at least a portion of the award); Hale v. Morgan, 22 Cal
3d 388, 401 (1978) (statute (not UCL) that on its face authorizes
“per day” or “per violation” penalty without setting forth limits on a
prosecutor's discretion is confined by the due process clauses of
the federal and state constitutions. Notes that “[u]niformly, we have
looked with disfavor on ever-mounting penalties and have now
really construed the statutes which either require or permit them.”)).
The burden is likely on defendant to prove that its inability to pay is
limited.
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California
City and County of San Francisco v. Sainez, 77 Cal. 4th
1302 (2000) (applies Hale “proportionality” analysis and
upholds a civil penalty of $767,000, which was $1,000/day
for 767 days, against a landlord for housing code violations;
notes that “civil penalty” under §17206 is a “fine” for
purposes of analysis under the “excessive fines” clause of
the Eighth Amendment); People v. Morse, 21 Cal. App. 4th
259 (1993) (court refuses to consider whether civil penalty
and restitution exceed defendant's ability to pay because
defendant did not raise that issue at trial).
Federal
Lopez v. World Savings & Loan Association, 2003 Cal. App.
LEXIS 96 (January 23, 2003) (affirms trial court's decision
that 12 CFR § 560.2 expressly preempts the use of the UCL
to preclude imposition of a $10 fax fee for the transmission
of a payoff demand statement by fax or a $60 fee for
provision of the stateemnt. National Union, United Mine
Workers of America v. Bagwell, 512 U.S. 821, 114 S. Ct.
2552 (1994) (discusses distinction between civil and criminal
contempt and describes due process protections that must
be afforded even in civil contempt cases if the proceeding
takes on characteristics of a criminal proceeding); U.S. v.
Halper, 490 U.S. 435 (1989) (constitutional safeguard
applicable to criminal cases apply equally to civil penalty
cases if government seeks monetary award so unrelated to
government's damages and expenses that it constitutes
punishment; U.S. v. Certain Real Property and Premises,
954 F. 2d 29 (2d Cir 1992) (double jeopardy and excessive
fines clauses apply to civil and monetary sanctions classified
as punitive under Halper test); U.S. v. Ramiro, 986 F.3d 333
(9th Cir. 1993) (award of restitution as part of plea bargain
under 18 U.S.C. § 3663(a)(3) requires a hearing on
defendant's ability to pay).
g. Federal Preemption
Preemption occurs "when a detailed federal enforcement
mechanism for the breach of an obligation created by federal law
exists." (Boyle v. MTV Networks, Inc., 766 F. Supp. 809, 815-16
(N.D. Cal. 1991)). Courts undertaking preemption analysis reach
varying conclusions, generally after careful analysis both of the
statutory scheme and the legislative history of the statutes that
defendants assert have preemptive effect.
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California
Finding Preemption
Bright v. Washington Mut. Bank, 2002 Cal. App. LEXIS 3250
(Mar. 25, 2002) (affirms trial court's decision that 12 C.F.R.
§ 560.2 expressly preempts the use of UCL to enforce a
state law regulating the maximum amount of required hazard
insurance on a home loan, since the federal statute explicitly
preempts state laws regulating "terms of credit"; this
interpretation is supported by the administrative history of
the regulation as well as the promulgating agency's own
interpretation of the regulation); Washington Mutual Bank v.
Super. Ct., 95 Cal. App. 4th 606, 610 (2002) (vacates trial
court's order overruling defendant's demurrers and directs
trial court to sustain because the federal Home Owners'
Loan Act preempts a UCL claim regarding lender's practice
of charging pre-closing interest on home loans); People v.
Pac. Bell, 89 Cal. App. 4th 844, review granted, 112 Cal.
Rptr. 2d 259 (2001) (affirms dismissal of representative
action against utility company where the matter was
concurrently pending before the Public Utility Commission;
subject matter jurisdiction over the suit was preempted by
the pending regulatory proceeding); Olszewski v.
Scrippshealth, 88 Cal. App. 4th 1268, review granted, 111
Cal. Rptr. 2d 687 (2001) (defendant health care provider
could not file a lien on plaintiff's claim against a third party
tortfeaser for reimbursement of expenses because
defendant's statutory lien claim was "balance billing" – a
practice prohibited by the federal Medicaid law; however,
defendant's actions fell within a safe harbor provision which
protects communications in a judicial proceeding); Cong.
of Cal. Seniors v. Catholic Healthcare West, 87 Cal. App. 4th
491 (2001) (affirming the trial court's dismissal of union
plaintiffs' UCL claim against defendant hospital based on the
congressional intent implicit in the very structure of the
federal Medicaid scheme that a hospital's cost reporting and
reimbursement practices should be governed exclusively by
federal law); Eckert v. Bay Area Cellular Tel. Co., 85 Cal.
App. 4th 1369 (2001) (not published) (affirms the trial court's
dismissal on demurrer of plaintiffs' claim against defendant
cellular phone company for lack of subject matter
jurisdiction; jurisdiction preempted by the regulatory authority
of the California Public Utilities Commission because the
relief sought would interfere with the agency's ongoing
development of unsettled regulatory policy); Ball v. GTE
Mobilnet of California, 81 Cal. App. 4th 529, 543 (2000)
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(reverses dismissal of UCL claim on federal preemption
grounds; although plaintiffs cannot invoke state law
regarding charges for non-communication time on cellular
phones after the federal law took effect, they may invoke
UCL to complain that such non-disclosed charges
constituted unfair business practices, and seek injunctive
relief in a new action); Washington Mutual Bank, F.A. v.
Superior Court, 75 Cal. App. 4th 773 (1993) (real estate
settlement procedures act (“RESPA”), which prescribes
disclosures for residential real estate transactions, does not
preempt UCL claim seeking additional disclosures); People
v. Highland, 14 Cal. App. 4th 1692, 1703-12 (1993)
(Homeowner's Loan Act does not preempt government
action challenging slum conditions in buildings where
defendants had made loans); Fleet v. CBS, Inc., 1196 Cal.
App. LEXIS 1119 (1996) (affirms that federal copyright law
preempts state claims for § 3344 right of publicity violation
and UCL when exploitation occurred in the use of plaintiff's
likeness in a motion picture); American Int'l Group, Inc. v.
Superior Court of Los Angeles County, 234 Cal. App. 3d 749
(1991) (civil RICO cause of action is precluded by operation
of the McCarran-Ferguson Act and the state laws of
California regulating the business of insurance); Siegel v.
American Savings & Loan, 210 Cal. App. 3d 953, 960-61
(1989) (rejects preemption argument and allows claim
against federal savings and loan for allegedly improper
reconveyance fees); California ARCO Distrib., Inc. v. Atlantic
Richfield Co., 158 Cal. App. 3d 349, 363 (1984) (Petroleum
Marketing Practices Act preempts UCL claim); People v.
Rath Packing Co., 85 Cal. App. 3d 308 (1978) (affirms denial
of injunction under § 17500 where prior federal adjudication
bars enforcement of state labeling laws preempted by
federal labeling standards; state laws and procedures may
be used to exercise the state's concurrent jurisdiction only
where they are consistent with federal labeling standards).
Finding No Preemption
McCall v. PacifiCare of California, Inc., 25 Cal. 4th 412
(2001) (claims that do not seek medical services
reimbursement or payment under the Medicare Act, but
rather refer incidentally to denial of benefits under the Act,
are not preempted; such claims are collateral to Medicare
claims and may be pursued in state court); Mangini v. R.J.
Reynolds Tobacco Co., 7 Cal. 4th 1057, 1073-74 (1992)
(federal law does not preempt state UCL claim alleging that
use of "Joe Camel" logo on t-shirts and other items violated
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Federal Cigarette Labeling and Advertising Act because it
did not include required health warning); Gibson v. World
Savings and Loan Association, 103 Cal. App. 4th 1291,
1306-07 (2002) (reverses trial court judgment for
defendants; concludes claim for restitution for UCL violation
based upon charges imposed for forced order insurance is
not preempted by 12 C.F.R. § 560.2; rejects OTS' arguments
for preemption); Consumer Justice Center v. Olympian Labs,
Inc., 99 Cal. App. 4th 1056, 1060-62 (2002) (reverses
demurrer by makers and distributors of over-the-counter
dietary supplements to false advertising complaint;
concludes federal law does not expressly preempt false
advertising claims regarding dietary supplements; finds no
implied preemption despite FTC power to obtain an
injunctive relief; notes: "The obvious conclusion to be drawn
from the absence of a private cause of action [in the FTC
Act] is that congress did not intend the Federal Trade
Commission to "occupy the field" of redressing false
advertising claims."; finds no conflict preemption because
compliance with both federal and state law is not
"impossible."; rejects implied preemption under the Federal
Food, Drug and Cosmetic Act because act implies nonpreemption; Black v. Financial Freedom Senior Funding
Corp., 92 Cal. App. 4th 917 (2001) (reverses summary
judgment; Parity Act, Truth in Lending Act and the
Depository Institutions Deregulation and Monetary Control
Act do not preempt homeowner's claims, including alleged
violation of UCL; laws prohibiting false advertising and unfair
business practices are included within the state's police
power, and accordingly subject to a "heightened
presumption against preemption"; such state powers are not
to be preempted unless that was "the clear and manifest
purpose of Congress"); Perdue v. Crocker Nat'l Bank,
38 Cal. 3d 913, 941 (1985) (federal law does not preempt
state law regulating service charges); Drouet v. Super. Ct. of
S.F. County, Cal. App. 4th 1237, review granted, 24 P.3d
491 (Cal. 2001) (tenant may bring a claim for retaliatory
eviction under the UCL even when evicted under the Ellis
Act, which expressly permits a landlord to evict tenants when
removing rental units from the market); People v. Servantes,
86 Cal. App. 4th 1081 (2001) ( local towing laws violated by
defendant towing service were not preempted by the Federal
Aviation Administration Authorization Act, which expressly
prohibits local regulation of motor carriers who transport
property; the local towing laws fell within a statutory
exception to the Act insofar as they were directly related to
safety concerns and not just economic interests); Fenning v.
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Glenfed Inc., 40 Cal. App. 4th 1285 (1995) (Home Owners'
Loan Act of 1933 ("HOLA") does not preempt UCL or FAA
claim arising from advertising and sales practices with
respect to uninsured investments); Sepulveda v. Highland
Fed. Sav. & Loan, 14 Cal. App. 4th 1692, 1708 (1993)
(reverses order sustaining demurrer because HOLA does
not include federal preemption of class claims under UCL for
recoupment of rent collected without the expenditure of
sums necessary to ensure compliance with habitability laws);
Solorzano v. Superior Court, 10 Cal. App. 4th 1135, 1148-49
(1992) (federal statute regulating Medicare-qualified health
maintenance organizations does not preempt UCL claim for
unfair and misleading advertising practices in soliciting
subscribers for plan); American Int'l Group, Inc. v. Superior
Court of Los Angeles County, 234 Cal. App. 3d 749 (1991)
(civil RICO cause of action is precluded by operation of the
McCarran-Ferguson Act and the state laws of California
regulating the business of insurance); Gladstone v. Hillel,
203 Cal. App. 3d 977 (1988) (reverses trial court's decision
to enjoin defendants from using plaintiff's jewelry designs
and molds and reverses trial court's order that defendants
destroy all molds, jewelry sketches, designs and other
representations of plaintiff's work in their possession and not
to use them for any purpose; language of trial court's decree
gives plaintiff an equivalent right to copyright based on
theories of conversion or unfair competition and is therefore
preempted by federal copyright law); People v. Western
Airlines, Inc., 155 Cal. App. 3d 597, 600-601 (1984), cert
denied, 469 U.S. 1132 (1985) (rejects preemption defense to
UCL claim not specifically based on violation of federal law).
Federal
Finding Preemption
Smiley v. Citibank, 517 U.S. 735 (1996) (federal banking
laws preempt state law claims for excessive late charges on
credit cards; affirms summary judgment because, under the
supremacy clause, Delaware law, rather than California law,
controls Bank's imposition of rates on credit card accounts);
Morales v. Trans World Airlines, Inc., 504 U.S. 374 (1992)
(Airline Deregulation Act of 1979 [49 U.S.C. § 1305(a)(1)]
preempts National Association of Attorneys General's
guidelines defining unfair and deceptive advertising to
include, among other practices, printing fare in large type
with restrictions in small type); Manufacturers Life Ins. Co. v.
Taylor, 481 U.S. 58, 65-66 (1987) (Labor Management
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Relations Act preempts UCL claim); Myers v. Merrill Lynch,
249 F. 3d 1087, 1088 (9th Cir. 2001) (affirms dismissal of
broad-gauge attack on the widespread practice by defendant
investment banking firms of discouraging potential
purchasers of stock in public offerings from flipping shares in
order to turn a quick profit, because the claim is preempted
by federal regulation of securities transactions); Kodadek v.
MTV Networks, Inc., 1998 U.S. App. LEXIS 21175 (9th Cir.
Aug. 31, 1998) (affirms summary judgment on grounds that
plaintiff's UCL claim is preempted by the federal Copyright
Act because: (1) the rights that plaintiff asserts under state
law are equivalent to those protected by the Copyright Act
and (2) the work involved falls within the subject matter of
the Copyright Act as set forth in 17 U.S.C. §§ 102 and 103);
Trans World Airlines, Inc. v. Mattox, 897 F.2d 773 (5th Cir.
1990) (federal law [49 U.S.C. § 1305(a)(1)] preempts state
law provisions proscribing deceptive advertising); Del
Madera Properties v. Rhodes and Gardner, Inc., 820 F.2d
973, 977 (9th Cir. 1987) (Federal Copyright Act preempts
misappropriation claim); Rath Packing Co. v. M.H. Becker,
530 F.2d 1295 (9th Cir. 1975) (California Administrative
Code is preempted by federal law in context of meat packing
regulations); Bertram v. Terayon Communications Systems,
Inc., 2001 U.S. Dist. LEXIS 6215 (C.D. Cal. 2001) (plaintiffs
brought UCL claim on behalf of the general public; court
grants defendant's motion to dismiss, Securities Litigation
Uniform Standards Act of 1998 preempts plaintiffs' state law
claims); Rogers v. Nationscredit Financial Services, 233 B.R.
98, 109-110 (N.D. Cal. 1999) (finds preemption of UCL claim
challenging practice of entering into post-petition
“reaffirmation agreements” that did not comply with the
Bankruptcy Code); Rice v. Fox Broadcasting Co., 148 F.
Supp. 2d 1029 (C.D. Cal. 2001) (grants defendant television
producer's motion for summary judgment to the extent that
plaintiff seeks to remedy under the UCL alleged
misappropriation of his protected expression because
plaintiff's UCL claim is preempted by the Copyright Act);
Twohey v. Lincoln Nat'l Life Ins., 2000 U.S. Dist. LEXIS
10096, at *11 - *15 (N.D. Cal. July 11, 2000) (grants
defendant's motion to dismiss; plaintiff's attempt to seek
redress under UCL for defendant's alleged mishandling of
her husband's disability insurance payments is preempted by
the Employee Retirement Income Security Act); Silvaco Data
Sys., Inc. v. Technology Modeling Assoc., Inc., 896 F. Supp.
973, 975-78 (N.D. Cal. 1995) (grants stay in a false
advertising suit against a computer software competitor
given that a substantially similar and more encompassing
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claim is already pending in state court, and that state courts
have concurrent jurisdiction over claims brought under the
Lanham Act); Pantazis v. Fior d'Italia, Inc., 1994 U.S. Dist.
LEXIS 13622 (N.D. Cal. 1994) (court states in dicta that a
UCL claim arising from an allegedly wrongful termination is
preempted by the National Labor Relations Act and § 301 of
the Labor Management Relations Act); Determined Prod.,
Inc. v. Koster, 1992 U.S. Dist. LEXIS 20030, at *14 (N.D.
Cal. 1992) (Copyright Act preempts UCL claim based on the
misappropriation of copyrighted material (toy dinosaurs));
Xerox Corp. v. Apple Computer, Inc., 734 F. Supp. 1542,
1550 (N.D. Cal. 1990) (Copyright Act preempts UCL claims
for unfair competition through use of copyrighted materials);
Xerox v. Corp. v. Apple Computer, Inc., 734 F. Supp. 1542,
1551-53 (N.D. Cal. 1990) (federal copyright law preempts
UCL claim as plaintiff's rights under state law are no greater
than those under the federal statute); Bloom v. Universal
City Studios, Inc., 734 F. Supp. 1553, 1555 (C.D. Cal. 1990)
(§ 301(a) of the Labor Management Relations Act preempts
UCL claim as the conduct underlying the state unfair
business practices claim coincides with that involved in the
§ 301(a) claim); Bull Publ'g Co., v. Sandoz Nutrition Co.,
1989 U.S. Dist. LEXIS 16622, at *19 (N.D. Cal. July 7, 1989)
(plaintiff's claim under § 17203 is "preempted by the 1976
Federal Copyright Act. . . . In the Ninth Circuit, unfair
competition claims asserted under state law are preempted
by the Federal Copyright Act if the right being asserted is
duplicative of the rights protected by § 106 of the Federal
Act."); Holcomb v. Bingham Toyota, Inc., 1987 U.S. Dist.
LEXIS 15151 (E.D. Cal. 1987) (National Labor Relations Act
preempts UCL claim); Nutley v. Varian Assoc., Inc.,
625 F. Supp. 104, 108 (N.D. Cal. 1985) (NLRA preempts
UCL claim); Motown Record Corp. v. George A. Hormel &
Co., 657 F. Supp. 1236 (C.D. Cal. 1987) (reaffirms Xerox
Corp. v. Apple Computer, Inc., 734 F. Supp 1542 (N.D. Cal.
1990), that Copyright Act preempts UCL claims for unfair
competition through use of copyrighted materials); Provience
v. Valley Clerks Trust Fund, 509 F. Supp. 388, 392
(E.D. Cal. 1981) (ERISA preempts UCL claim).
Finding No Preemption
Aiello v. First Alliance Mortgage Co., 2002 U.S. Dist. LEXIS
844 (C.D. Cal. 2002) (denies motion to dismiss UCL claim;
Truth in Lending Act (TILA) does not preempt state laws
because TILA specifically allows for state law to supplement
its enforcement scheme and does not conflict with UCL);
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Davis v. American Bldg. Maintenance Co., 2001 U.S. Dist.
LEXIS 9474 (N.D. Cal. 2001) (remands to state court;
defendant management company removed case under
§ 301 of the Labor Management Relations Act [29 U.S.C.
§ 185 et seq.]; plaintiff's state law claims did not require
interpretation of the collective bargaining agreement and
were therefore not preempted by federal law; case
remanded to state court); Hendricks v. Dynergy Power
Mktg., Inc., 160 F. Supp. 2d 1155 (S.D. Cal. 2001) (remands
case to state court; Federal Power Act does not preempt
UCL claim of anticompetitive conduct, as "plaintiffs can state
a violation under § 17200 in two ways, independent of the
[FPA]: either by alleging a violation of the Cartwright Act ...,
or by alleging that the anti-competitive activity was unfair or
deceptive even if not unlawful"; consequently, artful pleading
doctrine is inapplicable); Hill Physicians Med. Group, Inc. v.
Pacificare of California, 2001 U.S. Dist. LEXIS 6051
(N.D. Cal. 2001) (UCL claim could not be brought under
ERISA's [29 U.S.C. § 1001 et seq.] civil enforcement
provision, and does not relate to an ERISA plan sufficiently
to justify preemption; remands case to state court); Braco v.
MCI Worldcom Communications, Inc., 138 F. Supp. 2d 1260
(C.D. Cal. 2001) (plaintiff's unfair competition claim against
defendant long-distance company is not preempted by the
Federal Communications Act [47 U.S.C. § 414] because
there is no Congressional intent for complete preemption);
Total TV v. Palmer Communications, Inc., 69 F.3d 298, 304
(9th Cir. 1995) (UCL is not preempted by federal Cable Acts
because they are consistent and because Congress did not
intend to fully occupy the field of cable television regulation;
"a hypothetical conflict is not a sufficient basis for
preemption"); Summit Mach. Tool Mfg. Corp. v. Victor CNC
Sys., Inc., 7 F.3d 1434 (9th Cir. 1993) (unfair competition
laws which seek to prevent reverse palming off are not
preempted by federal law); Interactive Network, Inc. v. NTN
Communications, Inc., 875 F. Supp. 1398, 1409-10
(N.D. Cal. 1995) (denies summary judgment on UCL claim
despite preemption of underlying copyright claims because
plaintiff recast claims in terms of consumer confusion
created by misleading press releases); Boyle v. MTV
Networks, Inc., 766 F. Supp. 809, 815-16 (N.D. Cal. 1991)
(Federal Communications Act does not preempt UCL claim
for unlawful lottery because claims for unfair business
practices based on illegal gambling do not fall within FCA
§§ 207 and 202 as plaintiff is not seeking to recover
damages for discrimination; also notes that case fails
Metropolitan Life preemption test because language in
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statute and legislative history do not support proposition that
Congress has manifested intent to make such causes of
action removable to federal court).
h. First Amendment
United States Supreme Court precedent establishes that First
Amendment limitations apply "to all claims, of whatever label,
whose gravamen is the alleged injurious falsehood of a statement"
(Blatty v. New York Times Co., 42 Cal. 3d 1033, 1044-45 (1986),
cert. denied, 485 U.S. 934 (1988)), so that a plaintiff may not
circumvent constitutional protections by recasting his libel claim as
a claim for false advertising or unfair competition. Constitutional
protections for commercial speech, however, have not precluded
injunctive relief under the UCL, although the courts do require that
injunctions be tailored so as to impose no restraint on protected
commercial speech beyond what is reasonably necessary to
prevent a violation of law.
California
Kasky v. Nike, Inc., 2002 Cal. LEXIS 2591 (2002) (reverses
lower courts' decisions; concludes that when Nike, to
increase its sales and profits, makes public statements
defending its labor practices and working conditions, those
statements are commercial speech for purposes of the free
speech protections of both the federal and state constitution
and may be regulated to prevent consumer deception; that
such speech relates to an issue of significant public interest
or controversy does not inherently garner it protection as
political speech); Shekhter v. Fin. Indem. Co., 89 Cal. App.
4th 141 (2001) (reverses trial court's denial of defendant
insurance company's special motion to strike plaintiffs' UCL
claim under Cal. Code of Civ. Proc. § 425.16 where
(1) defendant demonstrates that the acts underlying
plaintiff's claim were made in furtherance of defendant's
constitutional rights of petition or free speech; and
(2) plaintiff fails to demonstrate that he will "probably" prevail
on the claim); DuPont Merck Pharm. Co. v. Superior Court,
78 Cal. App. 4th 562 (2000) (reverses and remands trial
court's decision to dismiss plaintiff's FAA claim based upon
defendant's defense under Cal. Code of Civ. Proc. § 425.6
(Anti-SLAPP); whether statements made during advertising,
marketing or public relations activities were true should be
considered in the second part of the Anti-SLAPP analysis,
whether there is a probability that plaintiffs will prevail; denial
of motions to dismiss or motions for summary judgment in
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other jurisdictions which have different procedural
requirements than the Cal. Code of Civ. Proc., however, do
not establish that plaintiffs will probably prevail; that the trial
court ruled that plaintiff had a legally sufficient claim is not
enough to prove that plaintiffs will probably prevail; plaintiffs
must also prove the legal sufficiency of their claim); Keimer
v. Buena Vista Books, Inc., 75 Cal. App. 4th 1220 (1999)
(allows claim against "Beardstown Ladies" for inaccurate
securities advice based upon alleged false advertising on
book cover and videotape because First Amendment
protections applicable to contents of book do not extend to
its advertising); People v. Morse, 21 Cal. App. 4th 259
(1993) (rejects overbreadth attack on UCL and FAA claims
alleging misleading professional advertising); Cozad v.
Board of Chiropractic Exam'rs, 153 Cal. App. 2d 249 (1957)
(adoption of rules prohibiting misrepresentations and
proscribing penalties for such misrepresentations is not
preempted by FAA, but the board could not prohibit or
restrict advertising that was not untrue or misleading).
Federal
City of Cincinnati v. Discovery Network, Inc., 507 U.S. 410,
431-32 (1993) (states may regulate or prohibit false or
misleading commercial speech because it is not protected
under the First Amendment); Peel v. Attorney Registration
and Disciplinary Commission of Illinois, 496 U.S. 91, 108
(1990) (state may only ban false or misleading speech, but it
may regulate truthful commercial speech); Blatty v. New
York Times Co., 42 Cal. 3d 1033 (1986), cert. denied,
485 U.S. 934 (1988) (First Amendment bars UCL claim
based upon failure to include author's book on New York
Times' "bestsellers" list); U.S. v. O'Brien, 391 U.S. 367, 382
(1968); Association of Nat'l Advertisers, Inc. v. Grocery Mfrs.
of Am., Inc., 44 F.3d 726 (9th Cir. 1994) (upholds
constitutionality of § 17508.5 under the intermediate scrutiny
standard governing commercial speech); Winter v. G.P.
Putnam's Sons, 938 F.2d 1033, 1037 (9th Cir. 1991) (First
Amendment prevents claims against publisher based upon
alleged failure to investigate accuracy of statements
regarding eating mushrooms in book on mycology); San
Diego Committee v. Governing Board, 790 F. 2d 1471 (9th
Cir 1986) (school board that had allowed advertisements
advocating military careers in school newspaper was not
permitted to prohibit advertisements proposing alternatives
to military service); Grolier, Inc. v. FTC, 699 F. 2d 983, 988,
cert. denied, 464 U.S. 891 (1983) (injunction against false or
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misleading advertising does not violate a company's First
Amendment right to free speech); American Med. Ass'n v.
FTC, 638 F.2d 433, 452 (2d Cir. 1980), aff'd, 455 U.S. 676
(1982) (upholds FTC order prohibiting American Medical
Association from making "statements officially condemning
[doctors'] contract practices"); Standard Oil Co. of California
v. FTC, 577 F.2d 653, 662 (9th Cir. 1978); Beneficial Corp.
v. FTC, 542 F.2d 611, 602 (3d Cir. 1976), cert. denied,
430 U.S. 983 (1977) (FTC ban on phrase "Instant Tax
Refund" without considering context violates First
Amendment's prohibition of prior restraints; "Commission,
like any governmental agency must start from the premise
that any prior restraint is suspect, and that a remedy, even
for deceptive advertising can go no further than is necessary
for the elimination of the deception"); William O'Neil + Co. v.
Validea.com, 2002 U.S. Dist. LEXIS 8392, at *21-23 (C.D.
Cal. Jan. 31, 2002) (dismisses UCL claim where the
defendants published a book describing the plaintiff's
investment strategies because the First Amendment protects
such editorial speech even where there are factual
inaccuracies because a publisher has no duty to investigate
the accuracy of a book it publishes); Isuzu Motors, Ltd. v.
Consumers Union of U.S., Inc., 12 F. Supp. 2d 1035, 104849 (C.D. Cal. 1998) (prior restraint on protected commercial
speech must go no further than is reasonably necessary to
accomplish the remedial objective of preventing the
violation); Oxycal Laboratories, Inc. v. Jeffers, 909 F. Supp.
719, 723-25 (S.D. Cal. 1995) (dismisses Lanham Act claim
against book publisher where author stated inaccurately that
drug contained cancer-causing substance); Sunbelt
Television v. Jones Intercable, Inc., 1991 U.S. Dist. LEXIS
19906, at *3-6, 11-12 (C.D. Cal. Cal. 1991) (denies 12(b)(6)
motion because First Amendment does not immunize media
antitrust defendants from suit [here, under the Sherman Act
and UCL] if anti-competitive motives guided their refusal to
carry plaintiff's television channel); New Kids on the Block v.
New Am. Publ'g, Inc., 745 F. Supp. 1540, 1543-47 (C.D. Cal.
1990) (grants summary judgment to defendant on the
grounds that the First Amendment immunizes their news
gathering and dissemination activities from trademark
infringement, misappropriation, and derivative UCL claims).
Commercial speech does not receive the "same level of protection
as non-commercial speech." (Posadas de Puerto Rico Assoc. v.
Tourism Co., 478 U.S. 328, 340 (1986) (commercial speech “may
be restricted only if the government's interest in doing so is
substantial, the restrictions directly advance the government's
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asserted interest, and the restrictions are no more extensive than
necessary to serve that interest;” not UCL case); Central Hudson
Gas & Electric Co. v. Public Service Commission, 447 U.S. 557,
553 (1980)). If speech "proposes a commercial transaction" (Board
of Trustees of the State University of New York v. Fox, 492 U.S.
469 (1989)), it may be regulated if three criteria are satisfied:
(1) the government has a substantial interest in supporting the
regulation; (2) the regulation directly advances that interest; (3) the
regulation is not more intrusive than necessary to serve that
interest. (Ibanez v. Florida Department of Business & Professional
Regulation, 114 S. Ct. 2084 (1994); Central Hudson Gas & Electric
Corp. v. Public Services Commission, 447 U.S. 557, 566 (1980)).
Speech is fully protected, however, if there are both commercial
and non-commercial aspects to this speech. (Riley v. National
Federation for the Blind, 47 U.S. 781, 795 (1988)).
California
Loska v. Superior Court, 188 Cal. App. 3d 569 (1986)
(upholds ordinance prohibiting ticket-scalping in public
places).
Federal
Destination Ventures, Ltd. v. FCC, 46 F.3d 54 (9th Cir. 1995)
(allows suit under federal statute that bans unsolicited faxes
containing advertisements); Moser v. FTC, 46 F.3d 970
(9th Cir. 1995) (allows suit under federal statute banning
commercial automated telemarketing); Association of Nat'l
Advertisers v. Lungren, 44 F.3d 726 (9th Cir. 1994) (upholds
state restrictions on "green advertising that states consumer
products, for example, ozone friendly," unless the goods
satisfy FTC standards); Joe Conte Toyota, Inc. v. Louisiana
Motor Vehicle Commission, 24 F.3d 754 (5th Cir. 1994)
(upholds Louisiana regulation forbidding use of the word
"invoice" in automobile advertising; evidence supports
conclusion that the word "invoice" is inherently misleading);
U.S. Healthcare v. Blue Cross of Greater Philadelphia,
898 F.2d 914 (3rd Cir.), cert. denied, 111 S. Ct. 58 (1990)
(allows suit challenging advertisements comparing medical
insurance plans); National Commission on Egg Nutrition v.
FTC, 570 F.2d 157 (7th Cir. 1977), cert. denied, 439 U.S.
821 (1978) (upholds restrictions on advertisements
suggesting that eating eggs did not cause heart disease).
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(1) Disclaimer
An injunction requiring a disclaimer is more likely to survive
First Amendment scrutiny than one creating an absolute ban
on particular commercial speech.
Federal
Zauderer v. Office of Disciplinary Council of the
Supreme Court of Ohio, 471 U.S. 626, 651 (1985); In
re R.N.J., 455 U.S. 191, 203 (1982).
(2) Political Conduct
First Amendment protections do prevent application of the
UCL to political conduct.
California
Blank v. Kirwin, 39 Cal. 3d 311, 329 (1985) (UCL
does not apply to conspiracy between private and
public persons to monopolize operation of poker clubs
because constitutional Noerr-Pennington doctrine
exempts attempts to influence government through
political process from application of antitrust laws);
Kasky v. Nike, Inc., 2002 Cal. LEXIS 2591 (2002)
(reverses lower courts' decisions; when Nike, to
increase its sales and profits, makes public
statements defending its labor practices and working
conditions, those statements are commercial speech
for purposes of the free speech protections of both
the federal and state constitution and may be
regulated to prevent consumer deception; that such
speech relates to an issue of significant public interest
or controversy does not inherently garner it protection
as political speech); O'Connor v. Superior Court,
177 Cal. App. 3d 1013, 1019 (1986) (UCL does not
apply to false or misleading statements or advertising
during political campaign); People v. E.W.A.P., Inc.,
106 Cal. App. 3d 315, 323 (1980) (First Amendment
does not limit UCL's civil penalties because fine is not
a criminal penalty); People v. Superior Court (Olson),
96 Cal. App. 3d 181, 195 (1979), cert. denied,
446 U.S. 935 (1980) (monetary fines do not violate
First Amendment even though they are based only on
negligent conduct); Chavez v. Citizens for a Fair Farm
Labor Law, 84 Cal. App. 3d 77, 79-83 (1978) (UCL
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does not apply to statements made during initiative
campaign).
Federal
Professional Real Estate Investors, Inc. v. Columbia
Pictures Industries, Inc., 508 U.S. 49 (1993) (NoerrPennington doctrine does not bar anti-trust claim if
petitioning effort is sham and real intent is
interference with competitor's business relationships);
National Committee of the Reform Party of the United
States v. Democratic National Committee, 168 F. 3d
360, 363 (9th Cir 1999) (dismisses UCL claim for
false and misleading campaign practices involving
fundraising); Suburban Restoration Co. v. ACMAT
Corp., 700 F.2d 98, 101 (2d Cir. 1983) (NoerrPennington doctrine applies to Connecticut's "Little
FTC Act").
(3) Deceptive Advertising
First Amendment protections do not prevent application of
the False Advertising Act to deceptive advertising.
California
People v. Health Lab. of N. Am., Inc., 87 Cal. App. 4th
442 (2001) (affirms order denying defendant's motion
pursuant to the anti-SLAPP statute to strike People's
action for permanent injunction enjoining defendants
from making unsubstantiated advertising claims about
their weight loss product; subdivision (d) of the antiSLAPP statute, which exempts public prosecutors'
enforcement actions from anti-SLAPP motions, is not
unconstitutional); People v. Morse, 21 Cal. App. 4th
259, 266 (1993) (deceptive and misleading
advertisements violative of § 17537.6 [solicitations in
connection with operation of homestead filing service]
not entitled to First Amendment protection; challenge
was made to § 17537.6, not UCL); California Ass'n of
Dispensing Opticians v. Pearle Vision Ctr., 143 Cal.
App. 3d 419 (1983) (upholds injunction for violating
UCL and FAA because claim to provide "total eye
care" was misleading; injunction does not violate the
First Amendment or Commerce Clause).
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Federal
Virgin Enter. Ltd. v. Am. Longevity, 2001 U.S. Dist.
LEXIS 2046, at *24 (S.D.N.Y. Feb. 28, 2001) (denies
motion to dismiss on UCL claim because the alleged
deceptive advertising is not entitled to First
Amendment protection).
(4) Opinion
Federal
Bullet Golf, Inc. v. United States Golf Ass'n, 1995 U.S.
Dist. LEXIS 6189, at *2 (C.D. Cal. Mar. 20, 1995)
(denies summary judgment on UCL claim because
"the United States Golf Association's determination
that the hollow point club did not conform to the rules
of golf is an opinion; and as such, it is a protected
statement under the First Amendment.").
(5) "Of and Concerning"
Federal
Aflex Corp. v. Underwriters Lab. Inc., 1989 U.S. Dist.
LEXIS 6935, at *8 (C.D. Mar. 21, 1989) (dismisses
plaintiff's claim under FAA and UCL because "where
the gravamen of a plaintiff's claim is an allegedly
injurious falsehood, the First Amendment requires
that the statement be 'of and concerning' the plaintiff
to be actionable, and the speech in this action was
not of and concerning the plaintiff").
i. Selective Prosecution
Selective prosecution arguments have fallen on deaf ears, as well.
California
Consumers Union of U.S., Inc. v. Alta-Dena Certified Dairy,
4 Cal. App. 4th 963, 975-76 (1992) ("[A]bsent charges of
invidious discrimination, prosecutors have broad discretion
to choose which defendants to prosecute and in what
order.")
j. Separation of Powers
Thus far, defendants' arguments that prosecutors' injunction
requirements have violated constitutional separation of powers
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requirements by usurping legislative functions have been
unsuccessful.
California
Mergia v. Municipal Court, 15 Cal. 3d 286, 297 (1975) (An
equal protection violation does not arise whenever officials
prosecute one and not another for the same act; instead, the
equal protection guarantee simply prohibits prosecuting
officials from “purposefully and intentionally singling out
individuals for disparate treatment on an individiously
discriminatory basis [citations omitted]...in order to establish
a claim of discriminatory enforcement a defendant must
demonstrate that he has been deliberately singled out for
prosecution on the basis of some invidious criterion”);
Consumers Union of U.S., Inc. v. Alta-Dena Certified Dairy,
4 Cal. App. 4th 963, 975 (1992) (disclosure requirements
regarding unpasteurized milk products do not violate
separation of powers requirements; "The mere fact that in
carrying out this function [of protecting the public from
unscrupulous business practices] as, for example by
mandating the placement of a warning on a consumer
product, a court may incidentally duplicate a legislative
function does not result in a violation of the separation of
powers doctrine.").
14.
Consumer Survey or Expert Testimony
Consumer surveys or expert testimony may show the existence or
nonexistence of deception.
California
South Bay Chevrolet v. General Motors Acceptance Corp., 72 Cal.
App. 4th 1380 (1999) (affirms judgment for defense, noting
absence of evidence as to how other customers understood
defendant's practice); Moore v. California State Bd. of Accountancy,
2 Cal. 4th 999 (1992), cert. denied, 113 S. Ct. 1364 (1993) ("The
survey responses, at the very least, support the inference that
members of the public who believe that licensing is required [for
accountants] would assume that a person who uses the title
'accountant' and the designation 'accounting' to describe the
services being offered as licensed by the state"; 53% of surveyed
group believed advertisements for bookkeeping and accounting
services suggested that advertiser was licensed as "certified public
accountant" or "public accountant," thus justifying inference of
"likelihood of confusion"); Committee on Children's Television, Inc.
v. General Foods Corp., 35 Cal. 3d 197, 214 (1983); People v.
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Mobile Magic Sales, Inc., 96 Cal. App. 3d 1 (1979) (upholds
issuance of preliminary injunction forcing mobile home retailer to
conform business practices to UCL requirements; retailer had
entered into arrangements with mobile home parks whereby
prospective tenants were coerced into buying a particular mobile
home).
Federal
E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1292
(1992) (although absence of evidence of actual confusion does not
defeat claim of likelihood of confusion, proof of actual confusion can
be evidence of likelihood of confusion); Academy of Motion Picture
Arts & Sciences v. Creative House Promotions, 944 F.2d 1446,
1455-1457 (9th Cir. 1991) (reinstates UCL claim where 70% of
white-collar professionals tended to confuse "Star Award" with
"Oscar"); Vidal Sassoon, Inc. v. Bristol-Myers Co., 661 F.2d 272,
276 (2d Cir. 1981) (consumer surveys are "highly probative" of
customers' understanding); Firestone Tire & Rubber Co. v. FTC,
481 F.2d 246 (6th Cir.), cert. denied, 414 U.S. 1112 (1973)
(customer confusion shown in 10% of buying public is sufficient to
justify relief under FTC Act); Haskell v. Time, Inc., 965 F. Supp.
1398, 1407-08 (E.D. Cal. 1997) (rejects declaration of professor of
rhetoric who testified that advertisements were worded in a
misleading manner); Sperry Rand Corp. v. Seawol Distrib.,
140 U.S.P.Q. 532 (1964) (surveys conducted by plaintiff serve as
competent evidence of public confusion generated by defendant's
use of plaintiff's "Remington" trademark in sale of sewing
machines); Upjohn Co. v. American Home Products Corp., 598 F.
Supp. 550, 556 (S.D.N.Y. 1984) (plaintiff "must submit evidence in
the form of market research and consumer surveys that
demonstrates how the advertising is perceived by consumers;" not
UCL case).
15.
Context
Since the courts have made it clear that FTC precedent may be used
against them, defendants may want to avail themselves of arguments
available in cases brought under Section 5 of the FTC Act, where it has
been established that overall impact is more important than any single
word or phrase (Beneficial Corp. v. FTC, 542 F.2d 611, 617 (3d Cir. 1976),
cert. denied, 430 U.S. 983 (1977)) and that "text must yield to context"
(Avis Rent-a-Car Sys. v. Hertz Corp., 782 F.2d 381, 385 (2d Cir. 1986)).
Federal
Freeman v. Time, Inc., 68 F.3d 285, 290 (9th Cir. 1995) (rejects
plaintiff's claim that the statement, '"If you return the grand prize
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winning number we'll officially announce that [you have won],'"
leaves room for the reader to draw an inference that he or she had
the winning number; "[s]uch an inference is unreasonable in the
context of the entire document").
16.
Cy Pres
Where victims of a challenged practice cannot be identified, or where the
expense of distribution to individual victims outweighs its utility, a "fluid
recovery" in the form of cy pres relief to benefit the interests vindicated by
the lawsuit sometimes is awarded. (Cf. Cal. Civ. Code § 384). The
California Supreme Court recently has made clear that such relief only is
allowable in certified class actions. (Kraus v. Trinity Management
Services, Inc., 23 Cal. 4th 116 (2000)).
California
Kraus v. Trinity Management Services, Inc., 23 Cal. 4th 116 (2000);
People v. Levi Strauss, 41 Cal. 3d 460 (1986) (suggests court on
remand consider cy pres relief); People v. Thomas Shelton Powers,
M.D., Inc., 2 Cal. App. 4th 330, 340-341 (1992) (restitution and
disgorgement are proper even if it is impossible to find direct victim
of defendants' unfair business practices, so that defendants could
not retain illegal profits. "It is . . . abundantly clear that as a general
rule a trial court, ruling on an unfair trade practice, has the power to
order disgorgement and/or restitution as a form of relief ancillary to
an injunction"; cites Levi Strauss re fluid recovery; overruled sub
silentio by Kraus, supra); People v. Parkmerced Co., 198 Cal. App.
3d 683, 692 (1988) (Cal. Civ. Proc. Code § 1519.5 [escheat statute]
expressly provides that it does not change authority of court to
order equitable remedies, so § 17203 permits refund of unclaimed
restitution to organization for use in representing tenants' interests).
17.
Contractual Limitation of Damages
The enforceability of contractual limitation of liability clauses against UCL
claims is questionable.
California
Los Angeles Cellular Tel. Co. v. Superior Court of Los Angeles
County, 65 Cal. App. 4th 1013 (1998) (false advertising claim was
not precluded by a contract clause limiting liability because
defendant's conduct constituted a violation of law under UCL, but
negligence claim was preempted because there was no reference
to any statute or law).
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18.
Damages Unavailable
California
Bank of the West v. Superior Court, 2 Cal. 4th 1254 (1992)
("damages are not available under UCL"); Chern v. Bank of
America, 15 Cal. 3d 866, 875 (1976) (FAA does “not authorize
recovery of damages by private individuals"); Dean Witter
Reynolds, Inc. v. Superior Court, 211 Cal. App. 3d 758, 774 (1989)
(plaintiff can only recover equitable remedy of restitution, not
compensatory damages, for UCL claims; "[t]he exclusion of claims
for compensatory damages is . . . consistent with the overarching
legislative concern to provide a streamlined procedure for the
prevention of ongoing or threatened acts of unfair competition. To
permit individual claims for compensatory damages to be pursued
as part of such a procedure would tend to thwart this objective by
requiring the court to deal with a variety of damage issues of a
higher order of complexity."); Industrial Indem. Co. v. Superior
Court, 209 Cal. App. 3d 1093, 1096 (1989) (private litigant may
recover only injunctive relief and not damages under UCL).
Federal
Duncan v. Suttle, 1996 U.S. App. LEXIS 2584, at *22 (9th Cir.
Feb. 21, 1996) (compensatory damages are unavailable under the
UCL); E.W. French & Sons, Inc. v. General Portland, Inc., 889 F.2d
1392, 1401 (9th Cir. 1989) (reverses jury verdict because private
parties may not receive compensatory damages); Little Oil Co. v.
Atlantic Richfield Co., 852 F.2d 441, 445 (9th Cir. 1988) (same);
Kates v. Crocker Nat'l Bank, 776 F.2d 1392, 1396 (9th Cir. 1985)
(no damages under UCL, only restitution); National Van Lines, Inc.
v. Dean, 237 F.3d 688, 692, 694 (9th Cir. 1956) (reverses trial
court's judgment and, applying California law, concludes defendant
has committed, inter alia, unfair trade practices; whether an
accounting proceeding should be ordered preparatory to allowance
of damages in an unfair competition claim is "largely a matter of
discretion"); FAS Techs., Ltd. v. Dainippon Screen Mfg., Co., 2001
U.S. Dist. LEXIS 7503 (N.D. Cal. 2001) (grants motion for summary
judgment with respect to UCL claim because only restitution is
recoverable under UCL and the evidence does not support a
conclusion that defendant profited from its alleged misappropriation
of trade secrets); Kingvision Pay-Per-View, Ltd. v. Chavez, 2000
U.S. Dis. LEXIS 18078 (N.D. Cal. 2000) (denies request for default
judgment for damages on UCL claim because plaintiff failed to
show why damages were legally appropriate, especially where the
Court has already provided damages under federal law); Brown v.
Allstate Ins. Co., 1998 U.S. Dist. LEXIS 11759 (S.D. Cal. July 31,
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1998) (dismisses plaintiff's causes of action under UCL and FAA
with leave to amend; private individuals cannot seek damages for
unfair business practices; private remedies are limited to equitable
relief and civil penalties are recoverable only by specified public
officers); Bell Atlantic Bus. Sys. Serves., Inc. v. Hitachi Am. Ltd.,
1995 U.S. Dist. LEXIS 15531 at 28-29, (N.D. Cal. March 10, 1995)
(damages not available under UCL); MAI Sys. Corp. v. QUIPS,
856 F. Supp. 538, 542 (N.D. Cal. 1994) (claim for monetary relief
limited to restitution under UCL); Prego Ltd. 1981 v. Getty Oil Co.,
1991 U.S. Dist. LEXIS 17671, at *35-36 (E.D. Cal. 1991) (injured
party cannot recover money damages, attorneys' fees or litigation
costs as UCL does not create a private right of action but merely
permits courts to enjoin ongoing wrongful business conduct);
Project Management Sys., Inc. v. WST Corp., 1991 U.S. Dist.
LEXIS 11652 (N.D. Cal 1991), aff'd, 1992 U.S. App. LEXIS 32330
(9th Cir. 1992) (grants defendant's summary judgment motion on
the alleged unfair business practice and breach of contract claims;
showing of an unfair business practice requires a demonstration of
on-going conduct or a pattern of conduct; also, private parties are
limited to injunctive relief under UCL, and civil penalties are only
recoverable by specified public officers); Prudential-Bache Sec.,
Inc. v. Union Bank, 1991 U.S. Dist. LEXIS 6643 (N.D. Cal 1991)
(memorandum opinion) (denies defendant's motions to dismiss
including plaintiff's unfair business practice claim; under UCL
plaintiffs can receive restitution and injunctive relief, but not
compensatory or punitive damages; court refuses to abstain from
exercising its equity power because there were not "exceptional
circumstances"); Prudential-Bache Sec. Inc. v. Union Bank,
1991 U.S. Dist. LEXIS 6643, at *8-14 (N.D. Cal. 1991) (denies
motion to strike plaintiff's unfair competition claim that seeks
damages for conspiracy to convert and conversion of funds, as
UCL specifically provides for restitution); Victor v. Thomas F. White
& Co., 1990 U.S. Dist. LEXIS 19803, at *20-21 (N.D. Cal. 1990)
(follows Little Oil Co. v. Atlantic Richfield Co., 852 F. 2d 41, 445
(9th Cir. 1988), where the "Ninth Circuit, interpreting California law,
concludes that no private cause of action for unfair business
practices exists" under the UCL and the FAA; grants motion to
dismiss with prejudice); Determined Prod., Inc. v. Koster, 1992 U.S.
Dist. LEXIS 20030, at *12 (N.D. Cal. 1992) (noting that recovery
under a UCL claim for misappropriation of plaintiff's copyrighted toy
dinosaurs is limited to restitution and injunctive relief, and that
compensatory damages, punitive damages and attorneys' fees are
unavailable under UCL); C & R Clothiers, Inc. v. Men's Warehouse,
Inc., 1990 U.S. Dist. LEXIS 10424, at *7 (N.D. Cal. 1990) (grants
defendant's motion to strike plaintiff's claims for compensatory
damages, punitive damages and attorney fees under its state law
false advertising claims on the grounds that such damages are not
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available under UCL); Victor v. Thomas F. White & Co., 1990 U.S.
Dist. LEXIS 19803, at *20-21 (N.D. Cal. 1990) (grants defendant's
motion to dismiss the unfair business practices claim with prejudice
on the grounds that no private cause of action exists under UCL);
Burt v. Danforth, 742 F. Supp. 1043, 1053-54 (E.D. Mo. 1990)
(claims for "restoration of all losses, costs and expenses incurred
by McDonnell Douglas" and "remuneration paid to individual board
members" are not restitution but claims for compensatory
damages); Feldman v. Glaze, [1989 Transfer Binder] Fed. Sec. L.
Rep. (CCH) ¶ 94,450"], 1989 U.S. Dist. LEXIS 8364, at *4
(N.D. Cal. Apr. 12, 1989) ("'California law does not recognize the
recovery of damages by individuals for unfair business practices.'")
(quoting Kates v. Crocker Nat'l Bank, 776 F.2d 1396, 1398 (9th Cir.
1985)); Southwest Marine, Inc. v. Triple A Mach. Shop, Inc.,
720 F. Supp. 805, 810 (N.D. Cal. 1989); Feldman v. Glaze, [1989
Transfer Binder] Fed. Sec. L. Rep. (CCH)] ¶ 94,450, 1989 U.S.
Dist. LEXIS 8364, at *5-6 (N.D. Cal. 1989) (dismisses FAA claim
because "California law does not recognize the recovery of
damages by individuals for unfair business practices," and the
plaintiff "seeks neither restitution nor injunctive relief under
§ 17535"); Break-Away Tours, Inc. v. British Caledonian Airways,
704 F. Supp. 178, 182 (S.D. Cal. 1988) (no monetary relief under
UCL despite trademark infringement because no restitution is
warranted and damages are not allowable); Newport Components
v. NEC Home Elec., 671 F. Supp 1525, 1550-51 (C.D. Cal. 1987)
(California Supreme Court's decision in Chern re absence of
damages under FAA must also be true of UCL).
19.
Disgorgement Unavailable
In a pair of decisions issued in June, 2000, the California Supreme Court
extensively addressed various defense arguments regarding the
availability of disgorgement of profits and of fluid recovery funds under the
UCL. In Kraus v. Trinity Management Services, Inc., 23 Cal. 4th 116
(2000), the court makes clear that disgorgement of profits is not an
allowable remedy under the UCL. The court describes the difference
between restitution and disgorgement as follows: "An order that a
defendant disgorge money obtained through an unfair business practice
may include a restitution element, but is not so limited. . . . [S]uch orders
may compel a defendant to surrender all money obtained through an
unfair business practice even though not all is to be restored to the
persons from whom it was obtained or those claiming under those
persons. It has also been used to refer to surrender of all profits earned
as a result of an unfair business practice regardless of whether those
profits represent money taken directly from persons who were victims of
the unfair practice." (Id. at 127). In Cortez v. Purolator Air Filtration
Products Co., 23 Cal. 4th 163, 172 (2000), the Court rejected plaintiff's
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effort to obtain disgorgement of all overtime payments the company had
withheld from certain employees when they "could not be restored directly
to the person to whom they were owed. . .," and held that "[t]he trial court
may not make an order for disgorgement of all benefits defendant may
have received from failing to pay overtime wages. It may only order
restitution to persons from whom money or property has been unfairly or
unlawfully obtained."
Nonetheless, the Court of Appeal in Korea Supply Co. v. Lockheed Martin
Corp., 90 Cal App. 4th 902, review granted, 36 P.3d 1 (Cal. 2001), held
that an individual plaintiff could pursue a claim for disgorgement of profits
based upon the definitional language from the California Supreme Court's
decision in Kraus recited above. The court rejected the defendant's
argument that restitution is limited to a return of money taken from
persons who had an ownership interest in it. (This case was argued
December 4, 2002 and should be decided by March, 2003).
Federal
Watson Lab. v. Rhone-Poulenc Rorer, Inc., 178 F. Supp. 2d 1099,
1120 (C.D. Cal. 2001) (grants defendant's motion seeking a
determination that plaintiff is not entitled to "disgorgement" of profits
as a remedy under the UCL because plaintiff has a range of
standard remedies available for defendant's breach of the supply
agreement which can make plaintiff whole).
20.
De Minimis Violation
Occasionally, a plaintiff's claim is so trivial that the court simply will not
entertain it.
California
Harris v. Time, Inc., 191 Cal. App. 3d 449, 458 (1987) (depublished
in part) (affirms dismissal of claim, citing maxim, "de minims non
curat lax" [the law disregards trifles] (Cal. Civ. Code § 3533)).
Federal
Alchemy II Inc. v. Yes! Entertainment Corp., 844 F. Supp 560
(C.D. Cal. 1997) (demonstrating one model of a talking teddy bear
at a trade show, then shipping a slightly different model, neither
violated the UCL nor harmed anyone).
21.
Deception Not Shown
Lack of deception is not a defense. Plaintiff need not prove actual
deception if members of the public are likely to be deceived. Only in very
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rare circumstances have courts concluded that a challenged disclosure
was not "likely to deceive." See, e.g., Shvarts v. Budget Group, 81 Cal.
App. 4th 1153 (2000).
California courts have not articulated a numerical standard for the
percentage of people who must be deceived before a communication will
be deemed "likely to deceive" consumers. One California case not
surprisingly found 53% to be sufficient (Moore v. California State Bd. of
Accountancy, 2 Cal. 4th 999 (1992) (53% confusion)), while one federal
court found 10% confusion in a non-UCL case to be sufficient (see
Firestone Tire & Rubber Co. v. FTC, 481 F.2d 246, cert. denied, 414 U.S.
1112 (1973)).
California
Chern v. Bank of America, 15 Cal. 3d 866, 873-76 (1976); Shvarts
v. Budget Group, 81 Cal. App. 4th 1153 (2000) (defendant car
rental company's "refueling" option was not "likely to mislead"
because "[e]ach of the three payment options is clearly printed, in
boldface, in the rental agreement provided to [customers] at the
time of rental."); Prata v. Superior Court, 91 Cal. App. 4th 1128,
1144 (2001) (grants writ of mandate directing trial court to vacate its
summary judgment ruling for defendant; representative plaintiff
must show that members of the public are likely to be deceived by
the practice; once an unfair trade practice is established, a class
action can proceed without individual proof of lack of knowledge of
the fraud); Van de Kamp v. Bank of America, 204 Cal. App. 3d 819
(1988) (no UCL violation where none of defendant's practices was
wrongful); Mass. Mut. Life Ins. Co. v. Superior Court, 2002 Cal.
App. LEXIS 4029 (Cal. Ct. App., 4th Dist., 1st Div. April 29, 2002)
(affirms district court's order certifying as a plaintiffs' class 33,000
purchasers of life insurance who alleged that Mass Mutual failed to
disclose its intention to lower its discretionary dividend rate; "given
the evidence of nondisclosure by the plaintiffs, the fact ... that
prospective purchasers received differing representations from
Mass Mutual's agents is wholly irrelevant to determination of the
company's responsibility under the UCL," and the claim is "plainly
suitable" for treatment as a class action).
Federal
National Van Lines, Inc. v. Dean, 237 F.3d 688, 692 (9th Cir. 1956)
(reverses trial court's judgment and, applying California law,
concludes that defendant had committed, inter alia, unfair trade
practices; notes that it is not necessary to prove actual confusion or
deception, as "it is sufficient that there is a likelihood of deception";
states that, if intent to deceive is shown, it raises a presumption that
deception and confusion resulted).
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22.
Dischargeability
Civil penalties and restitution payments under the UCL may be nondischargeable in bankruptcy. (In re Taite, 76 BR 764 (C.D. Cal. 1987)
($750,000 civil penalty on Custom Craft Carpets automatically
non-dischargeable; restitution not automatically non-dischargeable as fine
or penalty for forfeiture but non-dischargeable because incurred through
false pretenses, false representation or fraud)).
23.
Discontinued or Completed Act
Before 1992, there was some uncertainty about whether conduct had to
be ongoing in order to be subject to injunction under the UCL. The
legislature amended the Law to clarify that injunctions may issue against
any person who "has engaged" in a violation of the Act, regardless of
whether the conduct is ongoing. (Cal. Bus. & Prof. Code § 17203).
Where a Little FTC Act defines violations in terms of ongoing acts or
practices, defendants have sometimes been successful in obtaining
dismissals by arguing that the statutory language or equitable principles
bar relief because no violations are ongoing. Until a 1992 statutory
amendment, the potential for success with such an argument in California
was enhanced by a provision of the California Consumers Legal
Remedies Act (Cal. Civ. Code §§ 1750, et seq.), which required 30 days'
notice and an opportunity to cure before a plaintiff could bring a class
claim for damages under the Act.
Effective January 1, 1992, California's UCL was amended to substitute the
word "act" for "acts" and "engages, has engaged or proposes to engage"
for "performing or proposing to perform" so that the statute now arguably
includes within its scope a completed act that was not an ongoing
business practice. Accordingly, the statutory language may now permit an
action for injunctive relief to prevent repetition of an isolated past act, even
where repetition is not threatened. Nonetheless, principles of equity and
jurisprudence may lead courts to decline to grant injunctive relief in such
settings.
California
State v. Texaco, Inc., 46 Cal. 3d 1147, 1169-70 (1988) (risk that
defendant may commit new violations does not alone support
injunction) (UCL amended in 1992 to change this result); People v.
McKale, 25 Cal. 3d 626, 632 (1979) (UCL directed at ongoing
wrongful business conduct; section contemplates a "pattern of
conduct," "on-going conduct," "a pattern of behavior" or "a course of
conduct"); Barquis v. Merchants Collection Ass'n of Oakland, Inc.,
7 Cal. 3d 94, 108, 111, 113 (1972); California Serv. Station and
Automotive Repair Ass'n v. Union Oil Co. of California, 232 Cal.
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App. 3d 44, 47 (1991) (notes "injunctive relief will be denied if at the
time of the order or judgment, there is no reasonable probability
that the past acts complained of will recur (i.e., where the defendant
voluntarily discontinues the wrongful conduct), but upholds
injunction against oil company for franchise law violations despite
its discontinuance of challenged practices) (not UCL case); Mangini
v. Aerojet-General Corp., 230 Cal. App. 3d 1125, 1155-56 (1991)
(doctrine of "continuing nuisance" does not revive UCL claim
against lessee who contaminated property with hazardous wastes
20 years earlier); Mid-Peninsula Citizens For Fair Hous. v.
Westwood Investors, 221 Cal. App. 3d 1377, 1392 (1990) (court
denies plaintiff injunctive relief, notes that defendant's challenged
policy has been withdrawn and there is no indication that it would
be resumed); People v. Toomey, 157 Cal. App. 3d 1, 20 (1984)
(defendant's elimination of sales of challenged coupon books prior
to trial did not bar injunctive relief where he continued to sell similar
coupon books); Bush v. California Conservation Corps, 136 Cal.
App. 3d 194, 204 (1982) (plaintiff must show inadequacy of legal
remedies); People v. Nat'l Ass'n of Realtors, 120 Cal. App. 3d 459,
476 (1981) ("[W]here the injunction is sought solely to prevent
recurrence of proscribed conduct which has, in good faith been
discontinued, there is no equitable reason for an injunction."; notes,
"the court has the power to refuse to enjoin future conduct where it
is satisfied there is no reasonable probability past unlawful acts will
be repeated"); Mallon v. City of Long Beach, 164 Cal. App. 2d 178,
190 (1958) ("If, therefore, at the time of the order of judgment, in
the absence of special circumstances, which are not here involved,
there is no reasonable probability that past acts complained of will
recur, injunctive relief will be denied.").
Federal
C. Pappas Co. v. E. & J. Gallo Winery, 610 F. Supp. 662, 672
(E.D. Cal. 1985), aff'd, 801 F.2d 399 (9th Cir. 1986) (denies
injunctive relief because plaintiff makes no showing that defendant
is involved in continuing activity; two acts are insufficient for
continuing activity); People v. Keating, (MDL 90-834 as RMB)
(9th Cir. 1992) (dismisses claim for restitution because no valid
claim for injunctive relief is stated), rev'd on other grounds,
986 F.2d 346 (9th Cir. 1992) (improper removal); Mathews v.
Government Employees Insurance Co., 23 F.2d 1160 (S.D. Cal.
1998) (denies injunctive relief because defendant had ceased
practice of denying employment based on use of credit reports two
years earlier).
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24.
Enjoining Breach of Contract
Because courts ordinarily will not enjoin a prospective breach of contract
unless the contract at issue involves certain specified types of personal
services, a defendant facing a UCL claim in which plaintiff seeks an
injunction to prevent a breach of contract may argue that the UCL claim is
an attempt to circumvent plaintiff's inability to obtain an injunction under
the contract itself.
California
Barndt v. County of Los Angeles, 211 Cal. App. 3d 397 (1989).
25.
Evidence Regarding Quasi-Class Members
Proof of a UCL violation is not limited to evidence relating to the named
plaintiff but includes, also, evidence involving other members of the public
on whose behalf plaintiff is suing as a private attorney general.
California
Cisneros v. U.D. Registry, Inc., 39 Cal. App. 4th 548, 564 (1995)
(plaintiffs claiming unfair business practice arising from violations of
credit reporting statutes in defendant's gathering of information
regarding residential renters and sale of that information to landlord
and agent subscribers may present evidence of practices involving
members of the public other than themselves; reverses for retrial
because court improperly sustained demurrer to UCL claim so that
scope of evidence introduced at trial was improperly restricted).
Federal
American Booksellers Assn., Inc. v. Barnes & Noble, Inc.,
135 F. Supp. 2d 1031 (N.D. Cal. 2001) (plaintiffs are collaterally
and judicially estopped from using certain arguments about
defendant booksellers' unfair or unlawful conduct because plaintiffs
signed consent decrees in prior litigation approving that conduct).
26.
Equitable Defenses
Defendants may not be able to assert equitable defenses such as laches,
estoppel and unclean hands to an unlawfulness claim where the
underlying statute giving rise to the unlawfulness claim does not permit
such defenses.
California
Cortez v. Purolator Air Filtration Prods. Co., 23 Cal. 4th 163 (2000)
(affirms judgment for plaintiff employee in action for unpaid wages
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brought under UCL; UCL defendants may assert equitable
defenses in order to guide the court in fashioning an equitable
remedy; it is unlikely that equitable defenses could defeat a claim
for unpaid wages because the UCL imposes strict liability for unfair
or unlawful conduct); Hobby Indus. Ass'n of Am., Inc. v. Younger,
101 Cal. App. 3d 358, 371 (1980) (no inference in the language of
the underlying statute "that would support a conclusion that one can
assert defenses such as business considerations, or lack of
deception or fraud").
Federal
Geoffrey, Inc. v. Douglas S. Stratton, 16 U.S.P.Q. 2d 1691,
1990 U.S. Dist. LEXIS 19504, at *17-19 (C.D. Cal. 1990) (rejecting
defendant's assertion that the passage of time itself, absent
inexcusable delay and proof that defendant changed its position as
a result of this inaction, created an estoppel by laches; defendant's
false and misleading representation amounted to trademark
infringement and a violation of UCL, justifying injunctive relief).
27.
Estoppel
A defendant might assert an estoppel argument if it has undertaken the
actions challenged in the lawsuit in reliance on approval of those actions
by the government, a private attorney general or counsel for a private
attorney general. Although it appears that the courts have yet to address
the latter arguments in published decisions, some defendants have
argued that principles of estoppel prevent a private attorney general or
counsel for a private attorney general from challenging conduct that one or
the other had expressly or impliedly approved in the course of a
settlement of a previous lawsuit involving the same or similar conduct.
California
Hewlett v. Squaw Valley Ski Corp., 54 Cal. App. 4th 499, 530
(1997) (after discussion, court rejects estoppel defense based upon
arguments that defendant relied on California Department of
Forestry's withdrawal of the timber harvest plan when defendant cut
down trees on its property; court concludes defendant acted
unilaterally and not in reliance on Department's actions).
28.
Extra-Territorial Reach
Questions regarding the extra-territorial reach of the UCL can raise
complex choice of law issues that are beyond the scope of this Outline. In
general, the UCL provides that "[a]ny person who engages, has engaged,
or proposes to engage in unfair competition may be enjoined in any court
of competent jurisdiction" (Bus. & Prof. Code § 17203), and this arguably
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authorizes extraterritorial relief as well, so long as plaintiff can establish
that the court has personal jurisdiction over the defendant. Whether such
extension raises due process issues is another question, which the
California Supreme Court and one Court of Appeal recently have resolved
in defendants' favor.
In Washington Mutual Bank v. Superior Court, 24 Cal. 4th 906 (2001), the
California Supreme Court described the burdens that a proponent of
certification must bear in a multi-state class action in a California Superior
Court. The court observed that "[c]lass actions are provided only as a
means to enforce substantive law. Altering the substantive law to
accommodate procedure would be to confuse the means with the ends –
to sacrifice the goal for the going." (Id. at 918 (citing City of San Jose v.
Superior Court, 12 Cal. 3d 447, 462 (1974))). The court stated that the
trial court must undertake a choice of law analysis (id. at 914-15), either by
evaluating the enforceability of a choice of law clause under the test set
forth in Nedlloyd Lines B.V. v. Superior Court, 3 Cal. 4th 459 (1992), or, in
the absence of a choice of law clause, by conducting an analysis of
competing governmental interests. (Id.) Then, if the laws of multiple
states are applicable, the proponent of certification must show through a
thorough analysis of applicable state laws that any variations in state law
do not "swamp" the common issues in the case. Further, the proponent of
certification must show that application of multiple states' laws will not
render the case unmanageable for fairness and efficiency. Courts
weighing certification issues must consider: (1) the potential recovery of
each individual claimant; and (2) whether the proposed class suit is the
only way to address wrongdoing and prevent unjust advantage. (Id. at
926).
California
Washington Mutual Bank v. Superior Court, 24 Cal. 4th 906, 921
(2001) ("[I]n the absence of an effective choice-of-law agreement to
the contrary, California law may be used on a classwide basis so
long as its application is not arbitrary or unfair with respect to nonresident class members” and "so long as the interests of other
states are not found to outweigh California's interest in having its
law applied"; "when an enforceable choice-of-law agreement is
involved, the burden rests upon the party seeking nationwide class
certification to identify any variations of applicable state law and to
meaningfully demonstrate how a trial on the class causes of action
cay be conducted fairly and efficiently in light of those variations.");
America Online, Inc. v. Super. Ct. of Alameda County, 90 Cal. App.
4th 1 (2001) (affirms trial court's denial of defendant internet
provider's motion to stay or dismiss for inconvenient forum where
contractual forum selection clause was unenforceable on public
policy grounds related to plaintiffs' claims under the Consumers
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Legal Remedies Act); Norwest Mortgage v. Superior Court of San
Diego, 72 Cal. App. 4th 214, 226 (1999) (UCL can not be basis for
suit by class of non-California residents who purchased insurance
outside California where defendant was California insurer with
principal place of business in Iowa; where "injuries are suffered by
non-California residents, caused by conduct occurring outside of
California borders, involving defendants whose headquarters and
principal places of business are outside of California," the UCL
does not apply; also noted due process constraints on extending
jurisdiction over non-California residents with no substantive
contacts with California); People v. National Research Co. of
California, 201 Cal. App. 2d 765, 771 (1962) (interprets earlier
version of statute); Wershba v. Apple Computer, Inc., 91 Cal. App.
4th 224, 242 (2001) (affirms trial court's application of California law
under the UCL where out of state class members were deceived by
defendant computer manufacturer's representations "disseminated
from" the state of California).
Federal
Automotive Prods. PLC v. Tilton Eng'g, Inc., 1993 U.S. Dist. LEXIS
20813, 33 U.S.P.Q. 2d 1065 (Sept. 16, 1993) (denies accounting
pursuant to UCL because statute only provides relief "where the
defendant has performed or is proposing to perform 'an act of unfair
competition within this state'"; only act defendant is alleged to have
committed "within the state" is termination of distributorship, which
was part of larger scheme to injure plaintiff; notes court has yet to
find a case in which the UCL has been applied against business
practice occurring "wholly, or even primarily, outside of the state's
borders”; notes that although the Court can only surmise about the
reasons that the legislature limited the reach of UCL to acts which
occur "within the state," the "desire to avoid violating the Commerce
Clause was probably the paramount concern. . . As the Supreme
Court has held, 'the Commerce Clause . . . precludes the
application of a state statute to commerce that takes place wholly
outside of the State's borders, whether or not the commerce has
effects within the State.' Edgar v. Mite Corp., 457 U.S. 624,
642-43, 73 L. Ed. 2d 269, 102 S. Ct. 2629 (1982) "). (Note that the
1992 amendment eliminates the "within this state" language from
§ 17203).
Other States
Brown v. Market Dev., Inc., 41 Oh. Misc. 57, 322 N.E.2d 367, 37273 (1974) (same); Kugler v. Haitian Tours, Inc., 120 N.J. Super.
260, 293 A.2d 706, 711 (1972) (extra-territorial effect applied to
protect non-resident victims in action against resident defendant).
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29.
Failure To Describe Claim With Reasonable Particularity
Although the California Supreme Court established relatively lenient
pleading standards in Committee on Children's Television, Inc. v. General
Foods Corp., 35 Cal. 3d 197, 213-14 (1983), a plaintiff alleging unfair
business practices under the UCL still must state with reasonable
particularity the facts supporting the statutory elements of the violation.
California
Committee on Children's Television, Inc. v. General Foods Corp.,
35 Cal. 3d 197, 212-13 (1983) ("plaintiff need not plead the exact
language of every deceptive statement; it is sufficient for plaintiff to
describe a scheme to mislead customers, and allege that each
misrepresentation to each customer conforms to that scheme");
People v. Superior Court (Jayhill), 9 Cal. 3d 283, 287-88 (1973)
(plaintiffs do not have to provide names of customers unlawfully
solicited; sufficient to allege defendants "with intent to induce
members of the public to enter into contracts" "have, in violation of
Business and Professions Code § 17500, engaged in a scheme to
mislead customers by a series of misrepresentations"; plaintiffs
should attach to the complaint either a script or an exemplar
representation of the "sales dialogue"); Saunders v. Superior Court,
27 Cal. App. 4th 832, 841-42 (1994) (affirms ruling that allegations
regarding restraint of trade, misrepresentation of court reporters'
experience and financial interest in litigation fail to support UCL
claim because "allegations are too vague and conclusionary to
support a claim for restraint of trade," "too vague and uncertain to
state a cause of action," and there are "no allegations payment of a
CRA reporter's fee or the amount of the fee is related to the
success of the deposition from the insurer's standpoint or to the
ultimate outcome of the action in which the deposition was taken,"
so as to constitute a violation of Cal. Civ. Proc. Code § 2025(k));
Khoury v. Maly's of California, Inc., 14 Cal. App. 4th 612, 619
(1993) (affirms demurrer to UCL and other claims arising from
beauty supply distributor's refusal to continue to supply retailer;
"plaintiff alleging unfair business practices under [the UCL and
Business and Professions Code §§ 17000, et seq.] must state with
reasonable particularity the facts supporting the statutory elements
of the violation; demurrer properly sustained because complaint
identifies "no particular section of the statutory scheme which was
violated and fails to describe with any reasonable particularity" the
facts supporting the violation; complaint refers to an "effect" of
"misleading" appellant's customers, but facts do not involve
deceptive advertising. . ., nor do the facts explain the manner of
misleading appellant's customers. . . The complaint does not
describe the manner in which respondent's practice is 'unlawful'");
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People v. Custom Craft Carpets, Inc., 159 Cal. App. 3d 676, 684
(1984) (plaintiff may allege acts generally and does not have to
itemize them); Nelsen v. Bd. of Health of the State of California, 70
Cal. App. 2d 202, 207 (1945) (plaintiff sought to enjoin the State
Department of Health, the City Attorney of Los Angeles, and others
from prosecuting him for a violation of § 26271 of the Health and
Safety Code (which forbids the advertising of any drug or device as
having an effect upon approximately 48 specified diseases);
upholds demurrer because plaintiff was unable to substantiate the
curative or therapeutic value of his product in the named diseases;
"in order to escape from the severe provisions of section 26271,
through action of the board or judgment of the court, plaintiff must
inevitably place in issue and prove the truth of his representations
to the public.").
Federal
Miron v. Herbalife International, Inc., 2001 U.S. App. LEXIS 10923,
at *8-9 (9th Cir. 2001) (affirms the dismissal of UCL claim made by
distributors of nutritional aids who alleged in a conclusionary
manner that a pyramid scheme existed, but did not assert how the
corporation's reassignment of the distributor's own distributors was
deceptive or misleading); Solomon v. North Am. Life & Cas. Ins.
Co., 1998 U.S. App. LEXIS 14907 (9th Cir. June 4, 1998) modified,
98 Cal. Daily Op. Serv. 6278 (9th Cir. Cal. Aug. 11, 1998) (affirms
summary judgment for defendant; denies motion to amend
complaint to add a new cause of action for unfair business
practices under UCL two weeks before the discovery deadline
when plaintiff failed to allege the required element of ongoing
conduct, and motion to amend would cause undue delay and
prejudice); Cobarrubias v. Allstate Ins. Co., 1998 U.S. Dist. LEXIS
10955 (C.D. Cal. July 10, 1998) (grants defendant's motion to
strike; plaintiff's claim for injunctive relief for violation of UCL fails
because it does not set forth the conduct to be enjoined with
reasonable particularity); Harris v. Duty Free Shoppers Ltd.,
1988 U.S. Dist. LEXIS 11406, at *23 (N.D. Cal. Feb. 24, 1998)
(denies defendants' motion to dismiss for failure to clarify which
acts violated UCL because "an interrogatory from defendants will
serve that purpose"); Levine v. Diamonthuset, Inc., 722 F. Supp.
579, 590 (N.D. Cal. 1989) (because the plaintiffs "pile[d] up
unnecessary and perhaps inapplicable claims...and lump[ed] all the
defendants together and fail[ed] to state which practices or
conduct...misled the plaintiffs," the court dismissed the case with
leave to amend), rev'd on other grounds, 950 F.2d 1478 (9th Cir.
1991).
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30.
Failure To Read Contract
Customers' failure to read a deceptive contract does not provide a
defense.
California
People v. Dollar Rent-A-Car Sys., Inc., 211 Cal. App. 3d 119
(1989); Caro v. Procter & Gamble Co., 18 Cal. App. 4th 644 (1993).
31.
Filed Rate Doctrine
California courts consistently had been hostile to UCL claims that seek to
challenge pricing that a governmental regulatory body with authority over
the defendant industry has approved.
California
Day v. AT&T Corp., 63 Cal. App. 4th 325, 340 (1998) (denies
monetary relief in two cases challenging sales of prepaid long
distance telephone cards without disclosure that call time would be
rounded up to the next whole minute; concludes monetary relief will
constitute rebate as to rates approved by public communications
commission; allows claim for injunctive relief for deception).
Out-Of-State Cases
Marcus v. AT&T, 138 F. 3d 46 (2d Cir 1998) (refuses to entertain
Little FTC Act claim challenging government-approved rates);
Alicke v. MCI Communications, Inc., 111 F. 3d 909 (D.C. Cir 1997).
32.
Filing With California Attorney General
Parties complaining of violations of the UCL must serve notice of their
proceeding, along with a copy of their brief, or petition and brief, on the
attorney general, directed to the attention of the Consumer Law section,
and on the district attorney of the county in which the lower court action or
proceeding was originally filed. (Cal. Bus. & Prof. Code § 17209). The
consequences of a failure to make the required filing are unclear. On one
occasion, the California Court of Appeal decertified a portion of a
published decision upon the government's request. (ABC Int'l Traders,
Inc. v. Matsushita Elec. Corp., 38 Cal. App. 4th 398 (1996) (portion of
opinion depublished), vacated because review granted on other grounds,
14 Cal. 4th 1247 (1997) (Supreme Court opinion does not address
§ 17209 issue)). On another occasion, the Court of Appeal rejected a
defendant's argument, supported by the California District Attorney's
Association, that § 17209 establishes a jurisdictional requirement. The
court concluded, instead, that the statutory language was directory rather
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than mandatory. (Californians for Population Stabilization v. HewlettPackard Co., 58 Cal. App. 4th 273, 283-285 (1997) ("if the Attorney
General and/or the local district attorney are not served with the opening
briefs within three days of their being filed, and if time for serving the brief
has not been extended for good cause shown no judgment or relief may
be granted by the court.")).
33.
Flawed Injunction
Defense arguments that injunctions are is overreaching, in the sense that
they require an inordinate amount of trial court supervision, generally are
not favored.
California
Notrica v. State Comp. Ins. Fund, 70 Cal. App. 4th 911, 944-45
(1999) (rejects defendant's contention that the imposition of a threepart injunction is "overreaching, unnecessary, and unworkable;" the
first part, ordering defendant to delete a misleading guideline from
its claims manuals and cease training personnel to effect that
guideline, would not result in micromanagement by the court of
defendant's practices; the second part, which enjoined defendant
from denying all of its insureds access to worker's compensation
claims files pursuant to Labor Code § 3762, is not unnecessary
because it actually "assures that [defendant] will afford appropriate
access to those of its insured in existence before the effective date
of the Labor Code section;" the third part, which enjoined defendant
from refusing to communicate directly with an insured's authorized
representative, was not irrational and would not haul defendant into
court every time an adjuster fails to promptly return a phone call or
forgets to respond to a letter and defendant is free to move for
modification). People v. First Federal Credit Corp., 104 Cal. App.
4th 721, 732-33 (2002)
34.
Financial Condition
Although defendants sometimes argue otherwise, it appears that
public prosecutors are not required to present evidence of a
defendant's financial condition before seeking imposition of civil
penalties. People v. First Federal Credit Corp., 104 Cal. App. 4th
721, 728-731 (2002) ("[E]vidence of a defendant's financial
condition, although relevant, is not essential for determining the
penalty.").
California
People v. First Federal Credit Corp., 104 Cal. App. 4th 721, 728731 (2002).
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35.
Fluid Recovery
In June of 2000, the California Supreme Court resolved a question that
had divided this state's lower courts for years: whether the UCL
authorizes a trial court to order a defendant to create a fund for restitution
of money owed to victims of a challenged practice when no class has
been certified and those victims cannot be located and identified. The
court in Kraus v. Trinity Management Services, Inc., 24 Cal. 4th 116
(2000) held that the UCL did not authorize the creation of the fluid
recovery fund in cases that were brought as a representative action only
and not as a class action. In the wake of Kraus, one defendant convinced
a superior court judge that even a class action seeking creation of a fluid
fund under the UCL was impermissible, but the Court of Appeal rejected
that view and affirmed that class actions may be brought under the UCL
for the creation of a fluid recovery fund for restitution payments. Corbett v.
Superior Court (Alameda), 101 Cal. App. 4th 649, 672-73 (2002).
California
Kraus v. Trinity Management Services, Inc., 23 Cal. 4th 116, 138
(2000) (fluid recovery may not be awarded in favor of non-parties
cannot be bound by settlement or judgment in a "representative"
action unless the suit is brought as a certified class action); Corbett
v. Superior Court (Alameda), 101 Cal. App. 4th 649 (2002) (issues
writ of mandate to reverse order granting motion to strike portion of
complaint seeking disgorgement of unlawful profits into fluid
recovery fund in UCL class action; UCL claims and class actions
are not mutually exclusive under Kraus v. Trinity Management
Services, Inc., 23 Cal. 4th 116 (2000).
36.
Full Disclosure
Making full disclosure after an initial misleading misrepresentation does
not cure the offense.
California
Chern v. Bank of America, 15 Cal. 3d 866, 876 (1976).
37.
Harm to Defendant
In Kraus v. Trinity Management Services, Inc., 23 Cal. 4th 116, 138
(2000), the California Supreme Court held that a court may "decline to
entertain the [UCL] action as a representative suit" if the defendant can
demonstrate either "a potential for harm or show that the action is not own
brought by a competent plaintiff for the benefit of injured persons." (Id. at
138.) The Court did not explain what showing of "potential for harm"
would be required, but it may be instructive that the Court's discussion
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arose in response to arguments by defendant that the absence of class
certification requirements in representative lawsuits under the UCL
created a potential for abusive and/or repetitive litigation.
38.
Future Criminal Conduct
California's UCL specifically provides for injunctive relief to enforce a
penalty, forfeiture or penal law. (See Cal. Bus. & Prof. Code § 17202
("[s]pecific or preventive relief may be granted to enforce a penalty,
forfeiture, or penal law in a case of unfair competition")).
California
People v. E.W.A.P., Inc., 106 Cal. App. 3d 315, 323-24 (1980)
(reverses dismissal of action to enjoin commercial distributor of
obscene material in violation of Penal Code § 311.2 because
criminal conduct was part of "business practice").
39.
Good Faith
Good faith likely will not provide a defense to a UCL claim, although the
defendant's good faith may affect the analysis of whether conduct is
"unfair," depending on what definition of unfairness is used. (See Section
VIII.B.73)
California
Kapsimallis v. Allstate Insurance Co., 104 Cal. App. 4th 667, 67576 (2002) (reverses motion for judgment on the pleadings for
defendant on claims of breach of contract, bad faith and violation of
UCL based upon establishment of uniform date of loss for
earthquake victims as basis for determination whether subsequent
suits had been commenced within one year of loss; rejects
defendant's argument that because two federal district courts had
reached the same conclusion regarding "inception of the loss" for
the earthquake at issue as had the trial courts below, it could not be
liable for bad faith or for a UCL violation for making "an incorrect,
but good faith, coverage decision).
40.
In Pari Delicto Defense
The availability of an "in pari delicto" defense is uncertain, but it should be
limited to situations where plaintiff's responsibility for the violation he
seeks to redress was quite significant and defendant can show that
imposition of a judicial bar to plaintiff's claim would not harm the public by
interfering with prosecution of laws designed for its protection. (See
Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299, 310-311
(1985) ("[P]rivate action for damages [for federal securities law
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violations] . . . may be barred on the grounds of the plaintiff's own
culpability only where (1) as a direct result of its own actions, the plaintiff
bears at least substantially equal responsibility for the violation he seeks
to redress and (2) preclusion of suit would not significantly interfere with
the enforcement of the securities laws and protection of the investing
public."); Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S.
134, 140 (1968) (in pari delicto defense does not apply to antitrust claims),
overruled on other grounds, Copperweld Corp. v. Independence Tube
Corp., 467 U.S. 752 (1984)). Even satisfaction of the Bateman Eichler
standard may not be sufficient where the plaintiff is suing on behalf of the
general public.
41.
Injunction Against Ancillary Wrong
The courts will not enjoin a wrong that is ancillary to the UCL violation.
Federal
Feldman v. Glaze, [1989 Transfer Binder] Fed. Sec. L. Rep. (CCH),
¶ 94,450 (N.D. Cal. 1989) (dismisses FAA claim in securities case
where injunction sought to prevent dissipation of issuer's assets
rather than to prevent specific unfair trade practice).
42.
Insurance Agents
In California, there is a settled rule against holding insurance agents
individually liable when acting within the scope of their agency.
Federal
Loe v. State Farm Insurance Companies, 2000 U.S. App. LEXIS
25633 (9th Cir. 2000) (agrees that insurance agent was a "sham"
defendant for diversity purposes; plaintiff fails to allege a cause of
action under UCL because of the settled rule in California against
holding insurance agents individually liable).
43.
Joint and Several Liability
Few cases have addressed the application of joint and several liability
principles to unfair competition law claims. The sparse law on the subject
has arisen in cases brought by public prosecutors, where courts have held
that parties may be held jointly and severally liable for UCL and FAA
violations. People v. First Federal Credit Corp., 104 Cal. App. 4th 721,
734 (2002) (upholds joint and several liability for civil penalties).
California
People v. Witzerman, 29 Cal. 3d 169, 180-181 (1972) (upholds joint
and several liability for violation of FAA where defendants
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cooperated with each other in advertising and sale of certain
contracts); People v. First Federal Credit Corp., 104 Cal. App. 4th
721, 734 (2002) (upholds joint and several liability for civil
penalties); People v. Dollar Rent-A-Car Sys., Inc., 211 Cal. App. 3d
119, 122 (1989) (upholds joint and several liability for violations of
UCL and FAA).
44.
Judicial Communications
The law provides a safe harbor for communications made in a judicial
proceeding that are aimed at achieving the objects of the litigation. (Cal.
Civ. Code § 47(b); Frank Pisano &Assocs. v. Taggart, 29 Cal. App. 3d 1,
25 (1972)).
California
Olszewski v. Scrippshealth, 88 Cal. App. 4th 1268 (2001), review
granted, 111 Cal. Rptr. 2d 687 (2001) (plaintiff's claim that
defendant health care provider improperly filed a lien was properly
dismissed on demurrer without leave to amend because filed lien is
a "communication" in a judicial proceeding that falls within the safe
harbor provision of Cal. Civ. Code § 47(b)(2)).
45.
Jury Demands
Because even the restitution allowable under the UCL is a form of
equitable relief, these cases must be tried to the Court. On occasion, a
court will submit a UCL question to a jury that is impaneled to consider
other claims in a case. The jury's decision on such a question should only
be advisory to the court. Some appellate decisions refer to UCL claims
having been tried to a jury (along with other claims) without discussing the
role the jury's verdict played in the Court's decision on the UCL claims.
Federal
But see Hunting World, Inc. v. Reboans, Inc., 33 U.S.P.Q. 2d 1780,
1994 U.S. Dist. LEXIS 19961, at *9-10 (N.D. Cal. 1994) (jury
question arises because knowledge is an element of § 17500
claim).
California
People v. First Federal Credit Corp., 104 Cal. App. 4th 721, 732-33
(2002) (dismisses concerns that juror passion or prejudice may
affect civil penalty award because no right to jury trial exists in UCL
cases; concludes: "Runaway jury verdicts cannot occur when there
is no jury to inflame"); People v. Toomey, 157 Cal. App. 3d 1, 17-18
(1984) (no right to jury trial in unfair competition law cases).
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46.
Justification
Defendant has the burden of proof to show justification as a defense to an
unfairness claim.
California
Motors, Inc. v. Times Mirror Co., 102 Cal. App. 3d 735, 740 (1980)
(complaint must allege facts showing that challenged practice is
unfair but need not rebut defendant's justifications in advance).
47.
Lack of Intent
Absence of intent to defraud is not a defense to a section 17200 claim,
although lack of knowledge of falseness may be a defense to a section
17500 claim.
California
Khan v. Medical Bd. of California, 12 Cal. App. 4th 1834, 1845
(1993) (mistake of fact does not establish defense to misdemeanor
prosecution for violation of FAA because the statute "falls within the
category of offenses known as public welfare offenses which do not
require criminal intent"); People v. Cappuccio, Inc., 204 Cal. App.
3d 750, 756 (1988); Feather River Trailer Sales, Inc. v. Sillas,
96 Cal. App. 3d 234, 247 (1979); People v. Wahl, 39 Cal. App. 2d
Supp. 771, 773 (1940).
Federal
Hunting World, Inc. v. Reboans, Inc., 33 U.S.P.Q. 2d 1780,
1994 U.S. Dist. LEXIS 19961, at *9-10 (N.D. Cal. 1994) (jury
question arises because knowledge is an element of FAA claim.
Admission by defendant of unintentional and unknowing violation of
Lanham Act does not admit liability under UCL because standard of
liability is whether defendant knew or reasonably should have
known that a practice was unlawful); Warner-Lambert Co. v. FTC,
562 F.2d 749, 763 n.70 (D.C. Cir. 1977), cert. denied, 435 U.S. 950
(1978) (lack of fraudulent intent is not defense to deceptive practice
under FTC Act); Beneficial Corp. v. FTC, 542 F.2d 611, 617 (3d Cir.
1976), cert. denied, 430 U.S. 983 (1977) (same).
48.
Legislative History
Where the legislative history resolves an ambiguity in the UCL in a
defendant's favor, it may ask the court to interpret the statute based upon
that history.
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California
Commodore Home Sys. v. Superior Court, 32 Cal. 3d 211, 218 n.9
(1982) (grants unopposed request for judicial notice); Sebago, Inc.
v. City of Alameda, 211 Cal. App. 3d 1372, 1380 (1989) (appellate
courts can take judicial notice of and rely upon letters, committee
statements and other documents comprising the legislative history
of a statute); Palmer v. Agee, 87 Cal. App. 3d 377, 384 (1978)
(court considers statements of legislative committees as expressing
legislative intent of statute).
49.
Manageability
Where a plaintiff attempts to use the private attorney general provisions of
the UCL to circumvent a denial of class certification, manageability issues
may arise that prevent the trial court from adjudicating the claim. Although
this issue has been litigated a number of times at the trial court level since
the decision of the California Supreme Court in Kraus v. Trinity
Management Services, Inc., 23 Cal. 4th 116 (2000) that application of the
UCL in that case did not violate constitutional due process principles, the
Courts of Appeal have not addressed the issue. Earlier, one Court of
Appeal opinion appeared to find manageability concerns sufficient to
warrant dismissal of non-party claims. See South Bay Chevrolet v.
General Motors Acceptance Corp., 72 Cal. App. 4th 861, 891 (1999).
California
Wilner v. Sunset Life Ins. Co., 78 Cal. App. 4th 952, 966 (2000)
(acknowledges manageability problems described in Bronco Wine;
certifies restitution claims by purchasers of Universal Life Insurance
policies; concludes that manageability problems may be addressed
by "motion to strike the [restitution] paragraph of the [complaint]
should [plaintiff] fail to establish the propriety of a class action
following such a hearing on that question."); South Bay Chevrolet v.
General Motors Acceptance Corp., 72 Cal. App. 4th 861, 891
(1999) (affirms judgment for defendant; states that dismissal of
claims of "nonparty plaintiffs" could be appropriate where "it would
be necessary to hold mini-trials into the sophistication of each
dealership's practice of checking GMAC's billing statements for
accuracy, and the oral, written and implied terms of each loan
contract of each dealership.").
50.
Mandatory Injunctions
The requirement of disclaimers or other similar disclosures is not
forbidden by equity's standards disfavoring mandatory injunctions.
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California
Consumers Union of U.S., Inc. v. Alta-Dena Certified Dairy, 4 Cal.
App. 4th 963, 972-74 (1992) (injunction required warning on all
advertisements because "injunction against future violations might
have some deterrent effect, [but] it is only a partial remedy since it
does not correct the consequences of past conduct. . . . An order
which commands a party only to go and sin no more simply allows
every violator a free bite at the apple."
51.
No Bond
Preliminary injunctions under California's Unfair Competition Law require
satisfaction of the bond requirement set forth in California Code of Civil
Procedure section 529, which requires an undertaking or a cash deposit
before issuance of a preliminary injunction. See Continental Baking Co.
Katz, 68 Cal. 2d 512, 526-29 (1968); Abba Rubber Co. v. Seaquist, 235
Cal. App. 3d 1, 10 (1991). The bond must be sufficient to cover any
damages that the defendant may suffer while the injunction is in place if a
permanent injunction is ultimately denied. The court will not require a
bond if the plaintiff is indigent (see Cal. Civ. Proc. Code § 995.240) or is a
government agency (Cal. Civ. Proc. Code § 995.220).
52.
No Causation
Causation arguments are difficult in UCL cases because of the absence of
an injury requirement, but a defendant sometimes may bring causation
deficiencies to the court's attention through the back door because of the
absence of connection between restitution that is sought and wrongdoing
that is alleged.
Federal
Stationary Eng'rs Local 39 Health and Welfare Trust Fund v. Philip
Morris, Inc., 1998 U.S. Dist. LEXIS 8302 (N.D. Cal. 1998) (UCL
claim based on defendant's alleged misrepresentations fails
because the plaintiffs did not demonstrate a causal link between
defendant's actions and plaintiffs' injuries.)
53.
No Competitive or Consumer Injury
UCL claims may lie without a showing of injury to competition. In addition,
plaintiff need not show proof of actual injury to the consuming public.
Even consumer injury is very broadly defined.
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California
Barquis v. Merchants Collection Ass'n of Oakland, Inc., 7 Cal. 3d
94, 111 (1972) (injury to competitor not required because main
purpose of statute is consumer protection; notes "We conclude that
in a society which enlists a variety of psychological and advertising
stimulants to induce the consumption of goods, consumers rather
than competitors need the greatest protection from sharp business
practices [citations omitted]. Given the terms of [the predecessor to
the UCL], the purpose of the enactment and the controlling
precedent, we reject defendant's suggested limitation of [the UCL's
predecessor] to anticompetitive business practices"); Morrow,
Scuria, Golenor & Salisbury v. Am. Int'l Group, Inc., 2002 Cal. App.
LEXIS 2810 (March 13, 2002) (unpublished opinion) (affirms order
sustaining demurrers, without leave to amend; rejects plaintiff law
firm's "tortured attempt to cast respondents as competitors" for
purposes of UCL claim, where firm argued that it was a competitor
to AIG's staff counsel and that AIG's removal of the firm from its
panel of eligible legal counsel constituted 'anti-competitive' action);
People v. Cappuccio, Inc., 204 Cal. App. 3d 750, 758-59 (1988);
People v. E.W.A.P., Inc., 106 Cal. App. 3d 315, 319 (1980)
(pleading of "anticompetitive or harmful" acts not necessary);
People v. K. Sakai Co., 56 Cal. App. 3d 531, 535-37 (1976)
(authorized prosecution of grocery store owner for selling canned
whale meat despite absence of even consumer injury because
purpose of underlying statute was to preserve environment for
benefit of all people by eliminating sales of whale meat); Plotkin v.
Tanner's Vacuums, 53 Cal. App. 3d 454, 460 (1975) (plaintiffs must
allege anticompetitive effect or consumer injury). Show
Management v. Hearst Publ'g Co., Inc., 196 Cal. App. 2d 606, 614
(1961) (exposition producer falsely advertised civic nature of purely
private show; false advertising itself, without disparaging the
product or enterprise of another, does not give rise to a private
cause of action.).
Federal
Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1146-47
(9th Cir. 1997); Saks & Co. v. Hill, 843 F. Supp. 620, 622, 623
(S.D. Cal. 1993) (for claim by Saks Fifth Avenue to enjoin "Saks
Thrift Avenue" [a used clothing store] from using that name, court
rules that "[f]or claims of trademark infringement under federal law
and unfair competition under California law, the ultimate test is
whether the similarity between two marks is likely to deceive or
confuse the public"; Saks Fifth Avenue need not provide evidence
of deception to demonstrate likelihood of deception; “the law does
not require a plaintiff to provide evidence of actual confusion in
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order to prove likelihood of confusion. Here, plaintiff did not produce
substantial evidence of actual confusion."); Geophysical Sys. Corp.
v. Raytheon Co., Inc., 1993 U.S. App. LEXIS 3559, at *17-20
(9th Cir. 1993) (grants defendant's JNOV motion as the plaintiff
failed to establish that it had suffered a competitive injury (an "unfair
injury" under the statute) beyond the risk of loss that accompanies
any contract to buy goods); Nationwide Mut. Ins. Co. v. Dynasty
Solar, Inc., 753 F. Supp. 853 (N.D. Cal. 1990) (grants partial
summary judgment for plaintiffs; UCL is interpreted broadly and
"not confined to anticompetitive business").
54.
No Intent to Injure or Violate the Law
Intent is not an element of a UCL claim because the statutes are strict
liability statutes.
California
People v. Cappuccio, Inc., 204 Cal. App. 3d 750, 760-61 (1988)
(Cal. Bus. & Prof. Code § 17500).
55.
No Knowledge of Falsity
Knowledge of falsity is not an element of a UCL claim, but scienter is
required for an FAA violation.
56.
No Likelihood of Confusion
The Ninth Circuit has developed a multi-factor analysis for determining the
likelihood of confusion between trademarks or service marks. (BreakAway Tours, Inc. v. British Caledonian Airways, 704 F. Supp. 178, 181
(S.D. Cal. 1988) ("These factors are: strength of the mark; proximity of the
goods; similarity of the marks; evidence of actual confusion; marketing
channels used; good faith and intent; and the type of goods and degree of
care likely to be exercised by the purchaser." (Id.) The strength of a mark
is evaluated by "first categorizing it as 1) generic, and inherently weak
mark, 2) descriptive, 3) suggestive or 4) arbitrary, an inherently strong
mark (EA Eng'g, Science, & Tech., Inc. v. Environmental Audit, Inc.,
703 F. Supp. 853, 855 (C.D. Cal. 1989)). Two tests are frequently applied
to determine the strength of the mark. The "'imagination' test focuses on
the amount of imagination required for a consumer to associate the mark
with the services it identifies. The 'need' test asks to what extent a mark is
actually needed by competitors to identify their services." (Id. at 856.)
Federal
Karl Storz Endoscopy America, Inc., v. Surgical Techs., Inc., 285
F.3d 848 (9th Cir. 2001) (reversing district court's grant of summary
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judgment for defendant, as defendant's rebuilt endoscopes may
have created a likelihood of confusion among surgeons who use
the devices and, where the endoscopes had been completely
rebuilt, may have been functional equivalent of a "sale"; plaintiff
thus raised triable issues of material fact with respect to Lanham
claim and, consequently, UCL claim); Academy of Motion Picture
Arts & Sciences v. Creative House Promotions, 944 F.2d 1446
(9th Cir. 1991) (trademark-related unfair competition cases based
upon UCL are "'substantially congruent'" to the Lanham Act, and
both turn upon the likelihood of confusion) (quoting International
Order of Job's Daughters v. Lindeburg & Co., 633 F.2d 912, 916
(9th Cir. 1952)); EA Eng'g, Science, & Tech., Inc. v. Environmental
Audit, Inc., 703 F. Supp. 853, 855 (C.D. Cal. 1989) ("Plaintiff's
[UCL] claims . . . turn on the likelihood of confusion."); Yamaha
Corp. of Am. v. ABC Int'l Traders, Corp., 703 F. Supp. 1398
(C.D. Cal. 1988) (grants defendant's motion for summary judgment
because plaintiff fails to demonstrate that sales of Yamaha
products by defendant created confusion in the minds of
consumers as to the source or sponsorship of the products);
Americana Trading Inc. v. Russ Berrie & Co., 1988 U.S. Dist.
LEXIS 15580, at *7 (N.D. June 27, 1988) (grants summary
judgment in favor of the defendant because the plaintiff's "palming
off" claim under UCL requires a showing of likelihood of customer
confusion as to the source of the product).
57.
No Likelihood of Deception
Courts sometimes reject a claim pleaded under the UCL because a
plaintiff has not shown that members of the public are likely to be
deceived, without analyzing whether the challenged practice might have
been otherwise unlawful or unfair.
California
Bristol Hotels & Resorts v. Nat'l Council on Compensation Ins., Inc.,
2002 Cal. App. LEXIS 2947 (Mar. 13, 2002) (unpublished opinion)
(plaintiffs adequately pled a fraudulent business practice under the
UCL by alleging that defendant insurance carriers' marketed
policies by representing that they would reduce an employer's
insurance costs by linking the amount of premium charged with the
insured's own losses, and subsequently charging residual market
loads, thereby forcing plaintiff insureds to bear losses from residual
markets in other states); Shvarts v. Budget Group, Inc., 81 Cal.
App. 4th 1153, 1157-1160 (2000) (affirms dismissal of renter's
claim that car rental company acted unfairly and fraudulently under
UCL by applying refueling charges for rental cars returned without
full gas tanks because the plaintiff had a meaningful choice about
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whether or not to fill the tank before returning and was unlikely to
be deceived; the rate was disclosed in the rental agreement and
the agreement stated clearly that if the renter returned the car with
a full tank of gas, the refueling charges would not apply); Schnall v.
Hertz Corp., 78 Cal. App. 4th 1144, 1160-1161(2000) (rejects unfair
business practices claim based on the amount of the refueling
charge applied by rental-car company because the legislature
specifically authorized the allegedly unfair practice by passing Civil
Code § 1936(m)(2), but allows a claim under fraud prong of UCL,
because the per-gallon rate was not disclosed in the rental
agreement); Tippett v. Terrich, 37 Cal. App. 4th 1517, 1536-1537
(1995) (test case to establish right of construction worker on public
works project to recover prevailing wages from employer does not
state claim under the UCL because: "'[T]o state a claim under the
[UCL] one need not plead and prove the elements of a tort.
Instead, one need only show that "members of the public are likely
to be deceived,"' quoting Bank of the West, 2 Cal. 4th at 1267.
"Plaintiff made no such showing." Court also states that additional
obstacles to UCL claim include issues whether employee can show
injury to competitors or the general public and that the UCL does
not give rise to a claim for damages); State Bd. of Funeral Dirs. &
Embalmers v. Mortuary in Westminster Mem'l Park, 271 Cal. App.
2d 638, 76 Cal. Rptr. 832 (1969) (upholds conclusion that
advertisements are not in violation of the FAA because they are not
likely to deceive the public); Show Management v. Hearst Publ'g
Co., Inc., 196 Cal. App. 2d 606, 614 (1961) (exposition producer
falsely advertised civic nature of a purely private show; false
advertising itself, without disparaging the product or enterprise of
another, does not give rise to a private cause of action).
Federal
Freeman v. Time, Inc., 68 F.3d 285 (9th Cir. 1995) (adopts
"reasonable person" standard for determining whether consumers
were likely to be deceived under the UCL/FAA, harmonizes it with
Bank of the West's "members of the public are likely to be
deceived" language; notes that California courts look to
interpretations of similar provisions in federal law under the FTC
Act, and since 1982 the FTC has interpreted "deception" in § 5 of
the FTCA to require a showing of "potential deception of consumers
acting reasonably in the circumstances," and not just any
consumers); Toho Co., Ltd. v. Sears Roebuck & Co., 645 F.2d 788
(9th Cir. 1981) (because Sears' advertising of "Bagzilla" was not
likely to confuse the public, there was no claim for "passing off" its
product as the copyrighted "Godzilla"); Whitaker v. Tandy Corp.,
1997 U.S. Dist. LEXIS 1708, at *8-9 (N.D. Cal. 1997) (sustains
motion for judgment on the pleadings granted on UCL and FAA
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claims as defendant's advertisement of fee "as little as $1" was not
deceptive); Creager v. Russ Togs, Inc., 218 U.S.P.Q. (BNA) 582
(C.D. Cal. 1982) (denies motion for preliminary injunction, because
plaintiff did not show a fair chance of success of proving likelihood
of confusion; plaintiff's mark was a weak mark to which no
secondary meaning had attached, so no serious question was
raised concerning likelihood of confusion, which is an element of a
UCL claim).
58.
No Power to Declare Economic Policy
In California, it is well-established that "[t]he appellate courts have 'neither
the power nor the duty to determine the wisdom of any economic policy;
that function rests solely with the legislature.'" Wolfe v. State Farm Fire &
Cas. Ins. Co., 46 Cal. App. 4th 554, 562 (1996) (quoting Max Factor & Co.
v. Kunsman, 5 Cal. 2d 446, 454 (1936) (UCL action based on insurers'
refusal to issue new homeowners' policies in the wake of the Northridge
earthquake; insurers' conduct "ha[d] violated no laws." (Id. at 567); "a
judicial resolution of [the] complaint would involve courts in micro
economic managing." (Id. at 567.) The court in Wolfe found it dispositive
that the legislature had the power to regulate the challenged conduct and
had recently passed legislation on the subject. (Id. at 568 ("we decline the
invitation to undo what the Legislature has done")). The court in Wolfe
reviewed prior decisions in which California courts declined to interfere
with economic policy and considered three factors in determining whether
the UCL claim could be maintained. First, whether a specific statutory
provision prohibited the challenged conduct. (Id. at 567.) Second,
whether a judicial resolution of the complaint would involve the courts in
micro economic managing. (Id.) Third, it observed, "it is enough that the
Legislature had tried and will try again to address the problems." (Id. at
568.).
California
California Grocers Ass'n v. Bank of America, 22 Cal. App. 4th 205,
218 (1994) (trial court abused discretion by issuing injunction under
UCL prohibiting banks from charging $3.00 service fee for certain
check deposits; court recognizes that case "implicates a question of
economic policy -- while the service fees charged by banks are too
high and should be regulated, it is primarily a legislative and not a
judicial function to determine economic policy."
59.
No Previous Finding Of Unfairness
Courts ordinarily have rejected arguments that governmental or private
plaintiffs could not sue defendants whose practices had not previously
been adjudged "unfair" or whose practices complied with legal
requirements.
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California
Saunders v. Superior Court (Los Angeles), 27 Cal. App. 4th 832,
840-41 (1994) (“[P]roviding a discount to the party who notices the
deposition while increasing the cost to the parties requesting copies
of the deposition appears, on its face, to violate the mandate of
impartiality required for reporters"; "In the present case, the
unfairness is even more obvious than in [Motors, Inc. v. Times
Mirror Co., supra]. There, at least, plaintiff could have taken its
advertising business to another newspaper. The non-deposing
parties, however, are bound by their adversary's choice of reporter
and cannot obtain a copy of the deposition from any other
source."); Allied Grape Growers v. Bronco Wine Co., 203 Cal. App.
3d 432, 451 (1988) ("nothing in the section requires that there be a
reported case in advance of an unfair practice holding the practice
to be unfair."); People v. James, 122 Cal. App. 3d 25, 35-36 (1981)
("unfair" practice claim lies against liquor store owner and owner of
car towing service where store owner posted warning signs that
were difficult to see and failed to advise customers of the lot's
parking restrictions, and cars were then towed with a "kickback" to
the liquor store owner); People v. Los Angeles Palm, Inc., 121 Cal.
App. 3d 25, 33 (1981).
Federal
Orion Pictures Distrib. Corp. v. Snufy Enter., 829 F.2d 946, 949
(9th Cir. 1987) (normal blind bidding practice that does not violate
state antitrust law does not support UCL unfairness claim).
60.
No Private Right of Action
Defendants have obtained some dismissals of UCL claims where plaintiffs
attempted to use the UCL to circumvent the absence of a private right of
action in an Insurance Code provision whose violation gave rise to the
alleged UCL cause of action. Outside the insurance field, however, the
California Supreme Court has held that any unlawful act may be the
predicate for a UCL claim. Stop Youth Addiction v. Lucky Stores, 17 Cal.
4th 553 (1998) (permits private action for violation of Penal Code § 308,
which forbids sales of tobacco to minors, even though underlying statute
limits enforcement to public prosecutors); Committee on Children's
Television v. General Foods Corp., 35 Cal. 3d 197, 210-11 (1985)
(declines to decide whether California's Sherman Food & Drug Act creates
private right of action because that "question is immaterial since any
unlawful business practice . . . may be redressed by a private action
charging unfair competition in violation of California Business and
Professions Code §§ 17200 and 17203.").
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California
Korea Supply Co. v. Lockheed Martin Corp., 90 Cal App. 4th 902
(2001), (federal law, Foreign Corrupt Practices Act, used as basis
of UCL claim without discussion) review granted on other grounds,
36 P.3d 1 (Cal. 2001); Manufacturers Life Ins. Co. v. Superior
Court, 10 Cal. 4th 257, 277-81 (1995) (UCL claim stated for acts for
which Unfair Insurance Practices Act ("UIPA") provides a right of
action, but not for claims for which UIPA provides no private right of
action); Rubin v. Green, 4 Cal. 4th 1187 (1993) (plaintiff cannot use
UCL to assert SLAPP (Strategic Lawsuit Against Public Policy)
claim barred by California Civil Code § 47(b) as privileged); Maler v.
Superior Court, 220 Cal. App. 3d 1592, 1598 (1990) (plaintiffs
"cannot circumvent [that] ban [against private actions under
Insurance Code § 790.03] by bootstrapping an alleged violation of
§ 790.03 onto Business & Professions Code § 17200"); Safeco Ins.
Co. v. Superior Court of Los Angeles, 216 Cal. App. 3d 1491, 1494
(1990) (UCL "provides no toehold for scaling the barrier of MoradiShalal. . . . To permit plaintiff to maintain this action would render
Moradi-Shalal meaningless."); Industrial Indem. Co. v. Superior
Court of Santa Cruz County, 209 Cal. App. 3d 1093, 1097-98
(1989) (issues mandamus directing trial court to grant defendant's
motion for summary judgment where plaintiff sued insurer of
homeowners' association for UCL violations arising from insurer's
violations of California Insurance Code § 790.03, when the
California Supreme Court had held in Moradi-Shalal that third-party
claimants could not maintain a direct action against insurers);
Patterson v. ITT Consumer Fin. Corp. (San Francisco Sup. Court
No. 936818) (1993) (unpublished order), writ denied, (demurrer
sustained to claim alleged under UCL for violation of provisions of
California Fin. Code that did not themselves give rise to a private
right of action).
Federal
Chabner v. United of Omaha Life Ins. Co., 225 F.3d 1042 (9th Cir.
2000) (affirms summary judgment against insurance company;
plaintiff has a private right of action under UCL and may use
Insurance Code § 10144 to define the contours of the claim);
Hangarter v. Paul Revere Life Ins. Co., 2001 U.S. Dist. LEXIS
17975 (N.D. Cal. 2001) (grants plaintiff insured's motion to amend
complaint to add UCL claim; UCL allows a private right of action as
long as the relevant statute does not prohibit one; a cause of action
for violations of §790.09 of the UIPA may be asserted under UCL
since §790.09 expressly provides that an administrative action does
not immunize a defendant from either civil or criminal liability);
Andrews v. Trans Union Corp., 7 F. Supp. 2d 1056 (C.D. Cal. 1998)
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(denies motion for partial summary judgment; § 17204 allows suits
by private individuals on behalf of general public); Chabner v.
United of Omaha Life Ins. Co., 994 F. Supp. 1185 (N.D. Cal. 1998),
affirmed, 225 F.3d 1042 (9th Cir. 2000) (grants plaintiff's motion for
summary judgment; UCL provides private right of action for a
violation of § 10144 of the Insurance Code although Insurance
Code does not); Bureerong v. UVWAS, 922 F. Supp. 1450, 1477
(C.D. Cal. 1996) (although no private right of action exists to
enforce the registration provisions of the Garment Manufacturing
Act, plaintiffs states claim for UCL violations because of allegations
of violations of federal and state labor laws); Summit Tech., Inc. v.
High-Line Med. Instruments Co., Inc., 922 F. Supp. 299 (C.D. Cal.
1996) (dismisses UCL claims for violations of Lanham Act and
Copyright Act because Lanham Act and Copyright Act claims had
failed; dismisses allegation for false and misleading advertising
because it "is identical to the false and misleading advertising claim
[under the Federal Drug, and Cosmetics Act] dismissed above as
an attempt to state a private cause of action under the federal
FDCA"; dismisses federal FDCA claim because statute provides no
private right of action; notes: "[T]o the extent that the 'unfair'
conduct constitutes violation of the California Food, Drug, and
Cosmetic Act or Cal. Bus. & Prof. Code § 2234, the unfair
competition claim must be dismissed as an attempt to assert a
private right of action where none exists."); Sipes v. Equitable Life
Ins., 1996 U.S. Dist. LEXIS 12325, at *31-32 (N.D. Cal. 1996)
(grants summary judgment against plaintiff where plaintiff sought to
use same facts from dismissed claim under § 790.03(a) of the
Insurance Code for claim under UCL; plaintiff may not bring
otherwise barred claim by "re-labeling it as a claim under the UCA")
(citations omitted); Kentucky Cent. Life Ins. Co. v. Leduc,
814 F. Supp. 832 (N.D. Cal. 1992), rev'd, 23 F.3d 254 (9th Cir.
1994) (denies defendant's motion to dismiss; private parties had
right of action under UCL because Insurance Code §§ 781 and
790.03(a) provide private cause of action).
61.
No Receipt Of Benefits
Although the courts have not yet addressed such arguments in published
opinions, a defendant who is sued for a UCL violation but who did not
personally receive any financial benefit from the challenged practice might
be able to argue that he has not received any "ill-gotten gains" that he
should be forced to restore to plaintiffs.
California
Bank of the West v. Superior Court, 2 Cal. 4th 1254, 1266 (1992)
(["I]f there has been no showing of a defendant's actual receipt of
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any monies, there is, by definition, nothing to 'disgorge.'"); Fletcher
v. Security Pac. Nat'l Bank, 23 Cal. 3d 442, 450-51 (1979)
(restitution does not require proof that money received was "in fact
obtained as a direct result of the unlawful business practice.")
Federal
Baugh v. CBS, Inc., 828 F. Supp. 745, 757-58 (1993) (restitution is
claimed for restoration of something that defendant took).
62.
No Reliance
Absence of reliance does not defeat a UCL claim.
California
Mass. Mut. Life Ins. Co. v. Superior Court, 2002 Cal. App. LEXIS
4029 (April 29, 2002) (affirms order certifying as a plaintiff class
33,000 purchasers of life insurance who alleged that Mass Mutual
failed to disclose its intention to lower its discretionary dividend
rate; "given the evidence of nondisclosure by the plaintiffs, the fact
... that prospective purchasers received differing representations
from Mass Mutual's agents is wholly irrelevant to determination of
the company's responsibility under the UCL," and the claim is
"plainly suitable" for treatment as a class action); Fletcher v.
Security Pac. Nat'l Bank, 23 Cal. 3d 442, 452-53 n.5 (1979) (UCL
claim based upon defendant's practice of quoting misleading loan
interest rate allowable despite plaintiff's awareness and
understanding of the practice).
63.
No Threat of Future Violations
California
Lee v. Gates, 141 Cal. App. 3d 989, 993 (1983) ("An injunction is
no longer necessary to prevent in the future that which in good faith
has been discontinued, in the absence of any evidence that the
acts are likely to be repeated."); People v. Nat'l Ass'n of Realtors,
120 Cal. App. 3d 459, 476 (1981) ("Where the injunction is sought
solely to prevent recurrence of proscribed conduct which has, in
good faith, been discontinued, there is no equitable reason for an
injunction."); Mallon v. City of Long Beach, 164 Cal. App. 2d 178,
187, 189-90 (1958) (no need for permanent injunction where
defendant filed amended answer stating, "'we will not do it again
and we need no further court order to prevent us from doing it in the
future'" ; notes defendant's "good-faith" intent to voluntarily
abandon its prior conduct voluntarily; "this 'change of
circumstances' resulting in the City's present attitude, . . .
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completely warranted the exercise of the trial court's discretion in
denying injunctive relief.").
Federal
John Paul Mitchell Sys. v. Eslami, Nos. 95-55820, 95-55856,
1997 U.S. App. LEXIS 5974 (9th Cir. 1997) (affirms denial of
injunctive relief under UCL for fraudulent business practices;
reasons that defendant's reselling of plaintiffs' hair products in
violation of contract did not "deceive the general public," and that
an injunction could not protect against acts "which have long since
ceased"—particularly given that plaintiff retained the capacity to
prevent such future conduct by refusing to sell products to
defendant); Beneficial Corp. v. FTC, 542 F.2d 611, 617 (3d Cir.
1976), cert. denied, 430 U.S. 983 (1977) (though defendant had
abandoned the practice of false advertising, court upholds cease
and desist order because later advertising by defendant had
tendency to deceive or mislead).
64.
No Satisfaction of Traditional Equitable Requirements for
Injunction
California
AICCO, Inc. v. Ins. Co. of N. Am., 90 Cal. App. 4th 579 (2001)
(former "parent corporation" of a defendant insurer was not immune
from suit simply because it sold the insurance company prior to
trial; and, on remand, injunctive relief against the former parent
company might still be proper); Woods v. Superior Court of
Monterey County, 102 Cal. App. 3d 608, 1061 (1980) (UCL "could
certainly not give petitioners a stronger right to injunctive relief than
has been given by Health and Safety Code § 1541. In light of that
fact, full discussion of petitioners' contention is unnecessary.");
Larez v. Oberti, 23 Cal. App. 3d 217 (1972) (affirms denial of
plaintiff farm workers' § 3369 request for injunction against
defendant farmer's employment of illegal aliens (1) in deference to
more orderly and effective government enforcement of immigration
law and (2) because impracticability in drafting, supervising and
enforcing the injunction would spawn multiple lawsuits).
Federal
Visa Int'l Serv. Ass'n v. Bankcard Holders of Am., 211 U.S.P.Q. 28
(N.D. Cal. 1981) ("In the unfair competition case, injury to the
plaintiff is not merely an incident to the defendant's act; therefore it
is important that the defendant be enjoined as expeditiously as
possible if injury to the plaintiff is imminent.")
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65.
Non-Residents
Non-residents cannot always enforce claims under the UCL even in courts
in California. Where choice of law rules dictate application of another
state's substantive law, an out of state plaintiff may not be able to invoke
the UCL's provisions.
Federal
Nicholson v. Marine Corp. W. Fed. Credit Union, 953 F. Supp.
1012, 1015 (N.D. Ill. 1997) (conflict of laws exists because
"California Code lets a plaintiff file suit as a 'private attorney
general' acting on behalf of the general public." [citation omitted].
However, Illinois does not let plaintiffs bring lawsuits in this
manner." Court applies "most significant relationship" analysis from
Restatement (second) of Conflicts to conclude that Illinois law
governs because any injury to plaintiff occurred in Illinois, where he
lived, where his car was repossessed, and where he received
"notice of sale" at issue).
66.
Not Competent Plaintiff
The California Supreme Court has stated that a court may "decline to
entertain the [UCL] action as a representative suit" if the defendant can
demonstrate either "a potential for harm or show that the action is not one
brought by a competent plaintiff for the benefit of injured persons." (Kraus
v. Trinity Management Services, Inc., 23 Cal. 4th 116, 138 (2000)).
67.
Not Commerce
Karl Storz Endoscopy America, Inc., v. Surgical Techs., Inc., 285 F.3d 848
(9th Cir. 2001) (reverses summary judgment for defendant, as defendant's
rebuilt endoscopes may have created a likelihood of confusion among
surgeons who use the devices and, where the endoscopes had been
completely rebuilt, may have been functional equivalent of a 'sale'; plaintiff
thus raised triable issues of material fact with respect to Lanham claim
and, consequently, UCL claim); International Evangelical Church of the
Soldiers of the Cross of Christ v. Church of the Soldiers of the Cross of
Christ of the State of California, 54 F.3d 587 (9th Cir. 1995) (discusses
dismissal of plaintiff's claim that defendant's use of plaintiff's name,
insignia, mark and uniforms violated the Lanham Act and unfair
competition law on the grounds that no commerce was involved).
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68.
Not a "Person"
California
Trinkle v. Cal. State Lottery, 71 Cal. App. 4th 1198 (1995)
(California State Lottery as a public entity is not a "person" for the
purposes of the UCL, and as such, is not subject to UCL penalties);
Community Hosp., 50 Cal. App. 4th 199 (1996); Notrica v. State
Comp. Ins. Fund, 70 Cal. App. 4th 911, 940-41 (1999) (upholds
injunction because even though defendant, State Compensation
Insurance Fund ("Fund") is a "public entity," it is a "person" within
the meaning of UCL because in advising the Legislature that
Insurance Code § 11873 would exempt the Fund from the
California Tort Claims Act, defendant made it apparent that it
sought to cast itself as a private enterprise rather than a public
entity.); People v. Hacker Emporium, Inc., 15 Cal. App. 3d 474
(1971) (corporation charged with a § 17536 false advertising
violation is a "person" within the meaning of that statute).
69.
Not "Primary Business"
Where the activity that was the focus of plaintiff's UCL claim was not part
of defendant's primary business but was merely ancillary to that business,
a court dismissed UCL claims in reliance on language in Barquis v.
Merchants Collection Ass'n of Oakland, Inc., 7 Cal. 3d 94, 113 (1972)
(demurrer overruled where plaintiffs allege pattern or practice relating to
defendants' “primary business”).
California
Starbuck v. Kaiser Found. Health Plan, Inc., 275 Cal. 444 (1991)
(Alameda County Superior Court No. 644867-1) (photocopying not
part of hospital's primary business) (depublished); Truta v. Avis
Rent A Car Sys., 192 Cal. App. 3d 802, 807, 816 (1987) (car rental
company not in the "business" of selling insurance despite its
requests that customers buy "collision damage waivers," because
Avis was not "insurer" under authority of California Department of
Insurance); People v. E.W.A.P., Inc., 106 Cal. App. 3d 315, 320-21
(1980) (particular criminal conduct, the distribution of obscene
materials, subject to prosecution under UCL because it involves
business practice); Payne v. United California Bank, 23 Cal. App.
3d 850, 856 (1972) ("sections 17535 and [UCL's predecessor]
restrict the drastic remedy to specific types of business practices
that are unlawful and unfair per se.") (emphasis in original).
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70.
Not a "Practice"
Cases defining the level of repetition necessary to constitute a "practice"
may be of little avail in light of the UCL's 1992 amendment to include an
isolated "act" within the list of proscribed conduct. Even before this
change, judicial decisions construed the term "pattern" broadly, so as to
include conduct that did not meet traditional "pattern," "custom" or "habit"
definitions. (Cal. Evid. Code § 1105 permits showing of "habit or custom
to prove conduct.")
California
State v. Texaco, Inc., 46 Cal. 3d 1147, 1169-70 (1988) (one-time
merger between two oil companies is not "practice"; requirement
"envisions something more than a single transaction." It
contemplates a "pattern of conduct, ongoing conduct, a pattern of
behavior or a course of conduct.") (reversed by 1992 amendment to
UCL); United Farm Workers of Am. v. Dutra Farms, 83 Cal. App.
4th 1146, 1163, cert. denied, 2000 Cal. LEXIS 9816 (2000) (single
act by an agricultural employer of giving money to an anti-union
organization to influence decisions about collective bargaining falls
under the UCL, and a pattern of behavior or incidents is not
necessary to create liability); Klein v. Earth Elements, Inc., 59 Cal.
App. 4th 965, 968-970 (1997) (single act can create liability under
the UCA; but affirms judgment that a pet food distributor who
unwittingly caused contaminated pet food to be distributed into the
stream of commerce did not violate the UCL because the
unintentional distribution of a defective product is beyond the scope
and policy of the "unlawful" prong of UCL); Podolsky v. First
Healthcare Corp., 50 Cal. App. 4th 632, 653 (1996) (UCL can
"presumably" be invoked "based on a single instance of unfair
conduct"); People v. Dollar Rent-A-Car Sys., Inc., 211 Cal. App. 3d
119, 131 (1989) ("sporadic statements made by lower level
employees" that conflict with language of company's standard
contract constitute "business practice"); Allied Grape Growers v.
Bronco Wine Co., 203 Cal. App. 3d 432, 452-53 (1988) (single act
of downgrading grapes in violation of contract affecting many of
plaintiff cooperative's 1,000 members constitutes "practice");
People v. Casa Blanca Convalescent Homes, Inc., 159 Cal. App.
3d 509, 527 (1984) (finds practice in nothing more than a pattern of
behavior pursued in the course of a business).
Federal
Project Management Sys., Inc. v. WST Corp., 1992 U.S. App.
LEXIS 32330 at *4 (9th Cir. 1992) (affirms summary judgment for
defendant as the termination of a software dealership agreement
constitutes a sale transaction rather than the pattern of ongoing
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conduct needed to bring a claim under the UCL); Independent
Hous. Servs. of San Francisco, et al. v. Fillmore Assoc., 1991 U.S.
Dist. LEXIS 14960, at *34-35 (N.D. Cal. 1991) (denies defendant's
(B) motion to dismiss as the construction of a law-rent housing
project constitutes a multitude of individual acts which themselves
can compromise a pattern of unlawful business practice); Pena v.
McArthur, 889 F. Supp. 403 (E.D. Cal. 1994) (grants motion to
dismiss (1) because private UCL plaintiff did not pray for either
injunctive or restitutionary relief and (2) because complaint fails to
allege sufficient ongoing conduct to state a cause of action. (UCL's
1992 "isolated act" amendment clearly casts doubt on the second
holding.)); Project Management Sys., Inc. v. WST Corp., 1991 U.S.
Dist. LEXIS 11652 at *13-15 (N.D. Cal. 1991), aff'd, 1992 U.S. App.
LEXIS 32330 (9th Cir. 1992) (grants summary judgment to
defendant on grounds that the conduct at issue constitutes but one
transaction, failing to establish the pattern of conduct needed to
violate UCL; plaintiff also failed to prove that defendant's conduct
was unfair, fraudulent or unlawful); Heerema Marine Contractors v.
Santa Fe Int'l Corp., 582 F. Supp 445 (C.D. Cal. 1984) (series of
wrongful lawsuits could constitute unfair competition, but single
lawsuit could not, so claim based on a single lawsuit does not state
a cause of action [UCL's 1992 "isolated act" amendment clearly
casts doubt on this holding]; grants defendant's motion for summary
judgment with respect to the remaining unfair competition theory
that defendant had threatened plaintiff's potential customers with
infringement suits; no evidence suggests that such threats were
made.)
Federal
Project Management Sys., Inc. v. WST Corp., 1991 U.S. Dist.
LEXIS 11652 (N.D. Cal 1991), aff'd, 1992 U.S. App. LEXIS 32330
(9th Cir.1992) (grants defendant's summary judgment motion on
the alleged unfair business practice and breach of contract claims;
a showing of an unfair business practice requires a demonstration
of on-going conduct or a pattern of conduct; private parties are
limited to injunctive relief under the UCL, and civil penalties are only
recoverable by specified public officers).
71.
Not "Palming Off"
"Passing off" need not be shown to prove the unfair business practice of
misappropriation when the defendant admits to violating the Copyright Act.
California
A & M Records, Inc. v. Heilman, 75 Cal. App. 3d 554, (1977), cert.
denied and appeal dismissed, 436 U.S. 952 (1978) (affirms
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summary judgment for plaintiff and rejects defendant's contention
that there can be no summary judgment on the issue of liability for
unfair competition in a music pirating case because it had not been
established that defendant "palmed off" his copies as plaintiff's,
when defendant admitted that he duplicated performances owned
by plaintiff in order to resell them for profit.)
72.
Not "Unfair" Where Contract or Law Requires
It is sometimes possible to defeat a UCL claim if the challenged conduct is
required by law or contract.
California
Californians for Population Stabilization v. Hewlett-Packard Co.,
58 Cal. App. 4th 273, 293 (1997) (contract terms required by
immigration law cannot be "unfair").
Federal
Eichman v. Photomat Corp., 880 F. 2d 149, 168 (9th Cir. 1989)
(action permitted by contract and not expressly forbidden by law or
public policy is not "unfair"); Informix Software, Inc. v. Oracle Corp.,
1996 U.S. Dist. LEXIS 8430 (N.D. Cal. May 30, 1996) (dismisses
plaintiff's claim for unfair competition with leave to amend;
"asserting rights enforceable by statute [exclusive licensee] is not
actionable as unfair competition".)
73.
Not Unfair
California
Aguilar v. Atlantic Richfield Co., 25 Cal. 4th 826 (2001) (affirms
grant of summary judgment to defendant; although conspiracy is
not an element of a UCL cause of action as an abstract matter, it is
a necessary component of such a cause of action as a matter of
fact in this case, since the UCL claim was derivative of an alleged
violation of the Cartwright Act); Cel-Tech Communications, Inc. v.
Los Angeles Cellular Telephone Co., 20 Cal. 4th 163, 187 (1999)
(in context of antitrust case, Court criticizes earlier unfairness
definitions but declines to formulate new definitions for all purposes;
for antitrust cases, adopts new test: "when a plaintiff who claims to
have suffered an injury from a direct competitor's 'unfair' act or
practice invokes § 17200, the word 'unfair' in that section means
conduct that threatens an incipient violation of an antitrust law, or
violates the policy or spirit of one 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."); Smith v.
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State Farm Mut. Automobile Ins. Co., 93 Cal. App. 4th 700 (2001)
(affirms in part and reverses judgment in; it is not unlawful or unfair
business practice to refuse to recognize any waiver of uninsured
motorist coverage that did not apply to all of the insured's vehicles
when insured issued single multiple vehicle policies; however,
when insurers issued separate policies for each of an insured's
multiple vehicles, it is unfair to refuse to permit any waiver that did
not include all of the insured's vehicles); Bristol Hotels & Resorts v.
Nat'l Council on Compensation Ins., Inc., 2002 Cal. App. LEXIS
2947 (Mar. 13, 2002) (not published) (worker's compensation
insurance carriers' alleged imposition on plaintiffs of residual market
load (RML) charges incurred in other states is insufficient to
constitute "unfairness" under the UCL despite a purported
legislatively declared policy that California employers should not
have to pay RML's, because "the test is not whether a practice
violates the policy or spirit of any statute, but whether it violates the
policy or spirit of an antitrust statute"; thus, even if one of the
policies underlying the pertinent portion of the Insurance Code is to
prevent the imposition of RML's on California employers, the test is
not met because those sections are not antitrust laws); Desert
Healthcare Dist. v. PacifiCare, FHP, Inc., 94 Cal. App. 4th 781
(2001) (affirms dismissal of plaintiff hospital owner's suit against
defendant health care service provider; capitation agreements are
not unfair because they are standard in the industry and are
specifically approved of by the Knox-Keene Act); Chavez v.
Whirlpool Corp., 93 Cal. App. 4th 363 (2001) (affirms dismissal of
plaintiff consumer's antitrust and unfair competition claims against
defendant appliance manufacturer and appliance retailer; conduct
alleged to be unfair because it unreasonably restrains competition
and harms consumers is not unfair if the conduct is deemed
reasonable and condoned under antitrust law; resale price
maintenance agreements are not unfair because they are
permissible under the Colgate doctrine); Community Assisting
Recovery, Inc. v. Aegis Sec. Ins. Co., 92 Cal. App. 4th 886 (2001)
(affirms dismissal of plaintiff corporation's claims against defendant
insurer; defendant's practice of using the "replacement cost less
depreciation" valuation rather than the "actual cash value" method
of assessing property is not an unfair practice because the
Legislature provides more than one measure to adjust claims under
Cal. Ins. Code § 2071); Sure Safe Indus. v. McGrath Rentcorp,
2001 Cal. App. LEXIS 2689, at *19 (Nov. 26, 2001) (affirms denial
of UCL injunctive relief and restitution where the defendants
"almost immediately" disavowed a letter threatening a boycott);
Shvarts v. Budget Group, Inc., 81 Cal. App. 4th 1153, 1157-1160
(2000) (affirms dismissal of plaintiff car-renter's claim that car-rental
company acted unfairly and fraudulently under UCL by applying
refueling charges for rental cars returned without full gas tanks
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because the plaintiff had a meaningful choice about whether or not
to fill the tank before returning and was unlikely to be deceived: the
rate was disclosed in the rental agreement and the agreement
stated clearly that if the renter returned the car with a full tank of
gas, the refueling charges would not apply); Schnall v. Hertz Corp.,
78 Cal. App. 4th 1144, 1160-1161(2000) (rejects unfair business
practices claim based on the amount of the refueling charge
applied by rental-car company because the legislature specifically
authorized the allegedly unfair practice by passing Civil Code
§ 1936(m)(2), but allows a claim under the fraud prong of the UCL,
because the per-gallon rate was not disclosed in the rental
agreement); Notrica v. State Comp. Ins. Fund, 70 Cal. App. 4th
911, 944 (1999) (injunction warranted based on substantial
evidence of defendant's "unfair" practices, which included failure to
disclose certain internal policies in order to induce plaintiff to enter
into the insurance agreement, denying insureds access to claim
files relevant to employer's premium, refusing to communicate with
an insured's authorized representative, and refusing to allow such
representative to conduct an appropriate claim file review); Olson v.
Breeze, Inc., 48 Cal. App. 4th 608 (1996) (rejects unfair competition
claim against standard form release required on renters of ski
equipment based upon plaintiff's argument that release was not
sufficiently clear to be enforceable in all circumstances); Redding v.
St. Francis Med. Ctr., 208 Cal. App. 3d 98, 104, 108 (1989) (affirms
denial of a preliminary injunction which would have barred
defendant hospital from entering an exclusive contract for running
its cardiovascular program; distinguishes between intentional
actions by a hospital directed at excluding particular physicians
which usually are unfair, and normal hospital business practices
that result in the exclusion of practitioners which are generally
subject to a balancing of equities often tipping in favor of the
defendant-hospital); Sammons & Sons v. Ladd-Fab, Inc., 138 Cal.
App. 3d 306 (1982) (upholds summary judgment for defendant on
claim under UCL for allegedly duplicating and selling plaintiff's
product line of storage components).
Federal
Watson Lab. v. Rhone-Poulenc Rorer, Inc., 178 F. Supp. 2d 1099,
1117 – 19 (C.D. Cal. 2001) (sustains summary judgment motion on
claim for "unfair" conduct; cites with approval the Cel-Tech
requirement which requires showing that defendant's conduct
threatened an incipient violation of an antitrust law where the
parties are ostensible competitors; concludes that where a supplier
merges with a rival firm of the plaintiff, the supplier is deemed a
competitor of the plaintiff; plaintiff's ouster from the market did not
cause a reduction in supply or result in the establishing of arbitrary
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prices and thus concludes that the Cel-Tech consumer harm test
was not met); Frogface v. Network Solutions, Inc., 2002 U.S. Dist.
LEXIS 2594 (N.D. Cal. 2002) (grants summary judgment for
defendant; plaintiff corporation did not produce any evidence to
support its allegation that defendant domain name registry
committed an unfair act when attempting to register a new domain
name; plaintiff produced no evidence showing that defendant
routinely failed to delete domain names from its registry in a timely
fashion); Aiello v. First Alliance Mortgage Co., 2002 U.S. Dist.
LEXIS 844 (C.D. Cal. 2002) (denies motion to dismiss UCL claim; a
practice can be unfair even if the Legislature has not specifically
enumerated it as prohibited; a claim that is not successful under
Truth in Lending Act (TILA) may still be successful under the UCL);
Jackson v. Roe, 273 F.3d 1192 (9th Cir. 2001) (affirming district
court's grant of summary judgment for defendant on UCL claim as
accounting firm's audit, while possibly not proper, did not rise to the
level of "immoral, unethical, oppressive, unscrupulous or
substantially injurious conduct") (case did not give details regarding
the accounting firm's audit); Abbott v. Chemical Trust, 2001 U.S.
Dist. LEXIS 6214 (D. Kan. 2001) (grants summary judgment with
respect to UCL claim; bank's actions were not unfair because bank
acted within the contours of the agreement and fulfilled its
obligations thereunder); Beltran v. Allstate Ins. Co., 2001 U.S. Dist.
LEXIS 9614 (S.D. Cal. 2001) (plaintiff failed to produce any
evidence of unfair business practices; grants summary judgment in
favor of defendant insurance company).
California
Federal
Ballard v. Equifax Check Serv., 158 F. Supp. 2d 1163 (E.D. Cal.
2001) (violation of Fair Debt Collection Practices Act constitutes
"unfair competition" under the UCL, as "virtually any law -- federal,
state or local -- can serve as a predicate for a [UCL] claim, unless
the defendant is privileged, immunized by another statute, or the
predicate statute expressly bars its enforcement under the [UCL]");
Home Sav. of Am., F.A., v. U.S. Home Sav. & Loan Assoc., No. 840560 K(m), slip op. (S.D. Cal. 1984) (grants application for a
Temporary Restraining Order; use of the mark appears to
constitute trademark infringement and unfair competition under
FAA); Davis v. Gulf Oil Corp., 572 F. Supp. 1393 (C.D. Cal. 1983)
(grants motion for summary judgment on UCL claim predicated on
unlawful acts because acts were not unlawful; also grants
defendant's motion for summary judgment on unfair competition
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claim predicated on fraud because parole evidence rule precludes
evidence of the alleged fraud; Orange Micro, Inc. v. Pacific Blue
Micro, 223 U.S.P.Q. (BNA) 4 (C.D. Cal. 1983) (grants preliminary
injunction on trademark and copyright claims, which constitute the
unlawful acts needed for a UCL claim); Cher v. Forum Int'l, Ltd., 7
Media L. Rep. 2593 (C.D. Cal. 1982) (publishers' acts constitutes
unfair competition under UCL and FAA; publishers misappropriated
Cher's name and likeness by using them for subscription
advertisements, by publishing an interview given to another
magazine, and by advertising the publication of this interview;
publishers also misrepresented the interview by giving the false
impression that Cher had given exclusive interviews to the
publishers, a violation of the Lanham Act); Rolex Watch U.S.A., Inc.
v. Thalheimer Co., Inc., 217 U.S.P.Q. [BNA] 964 (N.D. Cal. 1982)
(imitation of trade dress and advertising of copied trade dress were
acts in violation of FAA); Rolex Watch U.S.A., Inc. v Borgerson,
Civil Action No. 81-1040 (Gx), slip. op. (C.D. Cal. 1981) (consented
to injunction and damages in settlement of UCL claim for trademark
infringement and unfair competition where defendant watchmaker
copied the trademarks and trade dress of Rolex).
74.
Not Unlawful
California courts consistently have held that claims for “unlawful” acts
under the UCL fail if the underlying statute either is not violated or
provides a defense that is applicable to the claim. This means that plaintiff
cannot state a claim for a UCL violation based upon an unlawful act if the
underlying statute does not apply to the defendant because the defendant
is not within the category of businesses to which the statute was directed
(Hobby Industrial Association of America, Inc. v. Younger, 101 Cal. App.
3d 358, 369-72 (1980)), and that amendment of the underlying statute will
also provide a defense, Janis v. California State Lottery Commission, 68
Cal. App. 4th 824 (1998).
Even where compliance with the law may preclude a UCL claim for an
"unlawful" practice, it may not preclude a claim under the "unfairness"
prong of the UCL, however. See Cel-Tech Communications, Inc. v. Los
Angeles Cellular Telephone Co., 20 Cal. 4th 163 (1999) (conduct that
does not violate antitrust laws because of proof of intent to injure
competitors is missing cannot nonetheless be held unfair); Motors, Inc. v.
Times Mirror Co., 102 Cal. App. 3d 735, 741 (1980); see Simeon
Management Corp. v. FTC, 579 F.2d 1137, 1144 (9th Cir. 1978) (same
outcome under FTC Act); Spiegel, Inc. v. FTC, 540 F.2d 287, 294-95 (7th
Cir. 1976) (same result).
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California
Coast Plaza Doctor's Hospital v. UHP Healthcare, 2002 Cal. App.
LEXIS 5312 (Dec. 23, 2002) (reverses dismissal of hospital's suit
against insurer because hospital was assigned patients' rights to
payment under the Knox-Keene Act and because pattern of
withholding payment could constitute UCL violation); Whiteside v.
Tenet Healthcare Corp., 101 Cal. App. 4th 693, 706 (2002) (affirms
summary judgment for defendants on plaintiffs UCL claim
challenging defendants' practice of accepting reimbursement for the
balance of charges arising from the hospitalization of a patient with
"preferred provider" provisions in his primary health insurance
contract; concludes that plaintiff may not use the UCL to resurrect
failed breach of contract claim by arguing that contract language
was misleading where language of contract was "clear and
reasonable." Desert Healthcare Dist. v. PacifiCare, FHP, Inc., 94
Cal. App. 4th 781 (2001) (affirms dismissal of plaintiff hospital
owner's suit against defendant health care service provider;
capitation agreement between defendant healthcare service
provider and a physician association is not unlawful because these
agreements are standard in the industry and specifically approved
of by the Knox-Keene Act); Chavez v. Whirlpool Corp., 93 Cal. App.
4th 363 (2001) (affirms dismissal of plaintiff consumer's antitrust
and unfair competition claims against defendants appliance
manufacturer and appliance retailer; conduct that is permissible
under the Colgate doctrine is not unlawful; complaint does not
allege a valid Cartwright Act violation to establish an unlawful act);
Community Assisting Recovery, Inc. v. Aegis Sec. Ins. Co., 92 Cal.
App. 4th 886 (2001) (affirms dismissal of plaintiff corporation's
claims against defendant insurer; defendant's practice of using the
"replacement cost less depreciation" valuation rather than the
"actual cash value" method of assessing property is not unlawful;
plaintiff's complaint does not state an unlawful business practice
because it fails to take into account the safeguard of the appraisal
process provided by the Legislature in Cal. Ins. Code § 2071);
California Med. Ass'n v. Healthcare of California, Inc., 94 Cal. App.
4th 151 (2001) (affirming trial court's order sustaining without leave
to amend defendant's demurrer to plaintiff's derivative UCL claim
since the plaintiff's did not allege facts sufficient to establish a
violation of §1371 or any other provision in the Knox-Keene
statutory scheme; specifically, nothing in the relevant statute
imposed an obligation on defendant insurers to pay physicians
directly if intermediaries failed to do so after defendants' had
already paid intermediaries for physicians' services); Lagatree v.
Luce, Forward, Hamilton & Scripps, 74 Cal. App. 4th 1105 (1999)
(affirms judgment for defendant; UCL claim fails where underlying
wrongful termination claim for refusal to sign a pre-dispute
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arbitration agreement fails because (1) the rights at issue are
subject to waiver by agreement and (2) factors weigh against
recognition of a public policy claim); Manibog v. MediaOne of Los
Angeles, Inc., 81 Cal. App. 4th 1366 (Cal. Ct. App., 2d Dist., 3d Div.
2000) (reverses; MediaOne's late charge violates the delinquency
fee limit set by Government Code § 53088.7, thus allowing
plaintiff's UCL claim to continue, also); Crawford v. Farmers Group,
Inc., 160 Cal. App. 3d 1164, 1171 (1984) (UCL claim dismissed
because allegedly unlawful conduct did not fall within Unruh Retail
Installment Sales Law's definition of “retail installment sales”);
People v. Duz-More Diagnostic Laboratory, Inc., 68 Cal. App. 4th
654 (1998) (UCL claim for unlawfulness based upon alleged
criminal violations of nursing home statutes requires proof of intent
because violation of underlying statute requires proof of intent);
Janis v. California State Lottery Commission, 68 Cal. App. 4th 824
(1998) (claim against California State Lottery Commission and
other defendants for recovery of money lost during unlawful Keno
gambling fails because the California Supreme Court had not yet
declared the game illegal at the time of the alleged losses);
Morrison v. Viacom, Inc., 1998 Cal. App. LEXIS 756 (Sept. 1, 1998)
(affirms judgment for defendant in antitrust action because of
plaintiff's failure to allege violations of §§ 16720 and 16727 dealing
with illegal tying, upon which plaintiff's UCL claim necessarily
depended); Lockheed Info. Mgmt. Serv. Co. v. City of Inglewood,
17 Cal. 4th 170 (1998) (reverses preliminary injunction under UCL
where defendant municipality's competitive bid to provide limited
parking ticket processing did not violate Cal. Veh. Code
§ 40200.5(a)); People v. Servantes, 86 Cal. App. 4th 1081 (2001)
(affirms trial court decision that defendant's violation of hundreds of
state and local towing laws is unfair business practice; rejects
defendant's attempt to make a defense under California's unfair
competition law by claiming that the underlying violation of state
and local regulations governing towing law was preempted by
federal law); Souza v. Lauppe, 59 Cal. App. 4th 865 (1997) (affirms
trial court; agricultural exception to California nuisance statute
requires summary judgment in favor of defendants); Californians for
Population Stabilization v. Hewlett-Packard Co., 58 Cal. App. 4th
273, 293 (1997) (no unfair business practice where contract is legal
under Indian Law and unenforceable, but not illegal, under
California law; notes "that section 17200 'does not give the courts a
general license to review the fairness of contracts but rather has
been used to enjoin deceptive or sharp practices'" (quoting Samura
v. Kaiser Found. Health Plan, Inc., 17 Cal. App. 4th 1284, 1299 n.6
(1993)); California State Elec. Ass'n v. Zeos Int'l Ltd., 41 Cal. App.
4th 1270 (1996) (denies injunctive relief under UCL to trade
association performing warranty service on consumer electronic
products for failure to comply with Civil Code § 1793.2(a)(1)(A)
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requiring provision of warranty service facilities in California,
because Zeos' sales occur in Minnesota, not California, "and hence
are not subject to section 1793.2, subdivision (a)(1)"); Biljac Assoc.
v. First Interstate Bank of Oregon, 218 Cal. App. 3d 1410, 1422-24
(1990) (affirms summary judgment for defendants on unfair
competition claim because allegations in this case clearly require
showing of conspiracy, and insufficient evidence was presented to
draw a reasonable inference of conspiracy among bank
defendants, while trade association defendants present undisputed
evidence that they did not have or set interest rates); Korens v. R.
W. Zukin Corp., 212 Cal. App. 3d 1054, 1059 (1989) (refuses to
require landlords to pay interest on security deposits under UCL
because, although legislature had extensively related security
deposits, legislature had not required interest to be paid on them;
the court "declines the invitation to do that which the Legislature
has left undone"); Van de Kamp v. Bank of America, 204 Cal. App.
3d 819, 855 (1988) (practices of self-pooling and self-depositing,
use of fail float and use of disbursing float for trust funds are not
unlawful, unfair or fraudulent where no statutory violations and no
breach of fiduciary duty); Richmond v. Dart Indus., Inc., 196 Cal.
App. 3d 869, 871-79 (1987) (affirms trial court's refusal to rule on
UCL claim for misrepresenting availability of water and sewer
service after a jury verdict against the plaintiff class of landpurchasers on their Subdivided Lands Act claim); Sammons &
Sons v. Ladd-Fab, Inc., 138 Cal. App. 2d 306 (1982) (upholds
summary judgment for defendant for claim under UCL for allegedly
duplicating and selling plaintiff's product line of storage components
because duplicating plaintiff's unpatented and uncopyrighted
product line does not state a claim for unfair competition); Hobby
Indus. Ass'n of Am., Inc. v. Younger, 101 Cal. App. 3d 358, 369-72
(1980) (no unlawfulness claim against wholesalers and retailers for
selling non-functional slack-filled packages when underlying statute
explicitly exempts wholesalers and retailers from its provisions);
College of Psychological and Soc. Studies v. Board of Behavioral
Science Exam'rs, 41 Cal. App. 3d 367 (1974) (defendant Board
cannot take action against unaccredited College for granting
Ph.D.'s to persons who are licensed and have Master's degrees
from accredited schools, and such conduct does not constitute
false advertising; “[t]he legislature is free to deal with unaccredited
schools, but the administrative board may not enlarge on legislative
efforts in that area. . . . Nothing grants the board power to enlarge
the provisions of the chapter.”).
Federal
Kentmaster Mfg. Co. v. Jarvis Prods. Corp., 146 F.3d 691 (9th Cir.
1998), amended, 164 F.3d 1243 (9th Cir. 1999) (upholds summary
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judgment for defendant in action for antitrust violations and unfair
competition when UCL claim necessarily depended on the
underlying, insufficiently pled allegations of predatory pricing); Loe
v. State Farm Ins. Co., 1997 U.S. App LEXIS 25308, 124 F.3d 212
(9th Cir 1997) (unpublished opinion) (affirms trial court's dismissal
of plaintiff's claim; "[plaintiff's] fraud claim cannot rest on the UCL
because UCL was enacted after Cal. Ins. Code § 790.03");
Frogface v. Network Solutions, Inc., 2002 U.S. Dist. LEXIS 2594
(N.D. Cal. 2002) (grants summary judgment for defendant;
defendant domain name registry's purported violation of ICAAN
cannot be unlawful under the UCL because there is no authority for
the proposition that ICAAN policies have the force of law); Abbott v.
Chemical Trust, 2001 U.S. Dist. LEXIS 6214 (D. Kan. 2001) (grants
summary judgment with respect to UCL claim; bank's actions were
not unlawful or fraudulent; plaintiff failed to prove underlying tort,
fraud and negligence, breach of fiduciary duty, constructive trust,
breach of contract, and deceptive trade claims); Watson Lab. v.
Rhone-Poulenc Rorer, Inc., 178 F. Supp. 2d 1099, 1120 (C.D. Cal.
2001) (denies summary judgment regarding a UCL "unlawful"
business practice claim because defendant's breach of a supply
contract could constitute the requisite unlawfulness; concludes that
plaintiff did not establish the requisite consumer harm to maintain a
UCL "fraudulent" business practice claim); American Booksellers
Assn., Inc. v. Barnes & Noble, Inc., 135 F. Supp. 2d 1031
(N.D. Cal. 2001) (denies defendant booksellers' motion for
summary judgment on plaintiffs' UCL claim because plaintiffs' claim
for injunctive relief under the Robinson-Patman Act survived
summary judgment, and therefore plaintiffs' UCL claim survived as
well; plaintiffs could not make the argument that certain conduct
was unlawful, however, because plaintiffs signed a consent decree
in prior litigation approving that conduct); Benton v. Allstate Ins.
Co., 2001 U.S. Dist. LEXIS 9448 (C.D. Cal. Mar. 1, 2001) (affirms
summary judgment for defendant on plaintiff's UCL claim because
plaintiff failed to raise triable issues of fact regarding his claims of
common law bad faith and violation of Cal. Ins. Code
§§ 790.03(h)(3),(5), and (6), which his UCL claim depended upon);
Aquino v. Credit Control Servs., 4 F. Supp. 2d 927 (N.D. Cal 1998)
(grants motions to dismiss; messenger service that only delivers
debt notices is not a debt collector and could not have engaged in
unfair debt collection practices); Raines v. Switch Mfg., 1997 U.S.
Dist. LEXIS 13621 (N.D. Cal. 1997) (grants plaintiff's motion to
dismiss all defendant's counterclaims including the unfair
competition counterclaim; UCL claim fails because the defendant
did not allege any facts that the plaintiff acted in bad faith in
misusing patents or in bringing the suit); Summit Tech., Inc. v.
High-Line Med. Instruments Co., Inc., 922 F. Supp. 299 (C.D. Cal.
1996) (dismisses UCL claims for violations of Lanham Act and
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Copyright Act because Lanham Act and Copyright Act claims had
failed); Summit Tech., Inc. v. High-Line Med. Instruments Co., Inc.,
922 F. Supp. 299 (C.D. Cal. 1996) (dismisses UCL claims for
violations of Lanham Act and Copyright Act because Lanham Act
and Copyright Act claims had failed); Bell Atlantic Bus. Sys. Servs.,
Inc. v. Hitachi Data Sys. Corp., 1995 U.S. Dist. LEXIS 15471, at
*103 (N.D. Cal. 1995) (grants interlocutory judgment on UCL claim
after a jury found a failure to prove the underlying monopolization
claim); Independent Cellular Tel., Inc. v. Daniels & Assoc.,
863 F. Supp. 1109, 1118 (N.D. Cal. 1994) (dismisses UCL claim
because defendants were not subject to licensing requirement at
issue); California Travel Parks Ass'n v. California, 1994 U.S. Dist.
LEXIS 7899, at *12 (N.D. Cal. 1994) (grants summary judgment
motion, without more than a cursory discussion; plaintiff did not
allege the violation of any law or any facts indicative of an unlawful
or unfair business practice; plaintiff accused state of unfair
competition for allowing the United States to permit free camping
on a spot of land, severely damaging plaintiff's business); Metro
Publ'g, Ltd. v. San Jose Mercury News, 861 F. Supp. 870, 881
(N.D. Cal. 1994) (dismisses UCL claim because of dismissal of
trademark infringement and dilution claims on which it was based);
Baugh v. CBS, Inc., 828 F. Supp. 745, 757 (N.D. Cal. 1993) (no
claim for unlawful act based on trespass where no trespass
occurred); McDonald's Corp. v. Arche Technologies, Inc.,
17 U.S.P.Q. 2d 1557, 1990 U.S. Dist. LEXIS 18545, at *11
(N.D. Cal. 1990); Peterson v. Wells Fargo Bank, Nat'l Ass'n,
556 F. Supp. 1100 (N.D. Cal. 1981) (FAA claim fails because
communication was not misleading; court analyzes TILA, Unruh
Act, and common law duty not to discriminate arbitrarily and grants
defendant's motion for summary judgment of UCL claim, predicated
on violations of other federal and California laws; no violations of
§ 17500, because form of notice of change in interest rates was not
misleading).
75.
Parallel Statutory Scheme
The existence of a parallel statutory scheme that forbids the same conduct
is irrelevant.
California
People v. Bestline Prods., Inc., 61 Cal. App. 3d 879, 910-11 (1976).
(While some states "exempt" conduct that "is subject to and
complies with the rules and regulations of, any statutes
administered by the [F]ederal [T]rade [C]ommission," California has
no such provision.). But cf. Woods v. Superior Court of Monterey
County, 102 Cal. App. 3d 608, 1061 n. 4 (1980) (UCL "could
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certainly not give petitioners a stronger right to injunctive relief than
has been given by Health and Safety Code § 1541").
Other States
Ariz. Rev. Stat. Ann. § 44-1523; Ark. Stat. Ann. § 70-913(a); Colo.
Rev. Stat. § 6-1-106(1)(a); Del. Code Ann. title XI, § 2513(b); La.
Rev. Stat. Ann. § 51:1406(4); Mo. Ann. Stat. § 407.020(1); N.H.
Rev. Stat. Ann. § 358-A:3; People v. Green Acres Trust, 127 Ariz.
160, 166, 618 P.2d 1086, 1092 (Ariz. App. 1980) ("The fact that our
Consumer Fraud Act may, in some instances, be cumulative with
respect to other penal and remedial provisions available to public
prosecuting authorities does not make it inapplicable."); State v.
Rhoades, 275 S.C. 104, 107, 267 S.E.2d 539, 541 (1980) (party
claiming exemption from state Unfair Trade Practices Act must
show only that general activity is regulated by another "regulatory
body or officer"); Murphy v. McNamara, 36 Conn. Supp. 183, 187,
416 A.2d 170, 174 (1979) (FTC's concurrent jurisdiction does not
bar state action. "It is obvious that the legislature intended to make
[the Connecticut U.D.A.P. Statute] at least co-extensive with its
federal counterpart."); Gour v. Daray Motor Co., 373 S.2d 571,
576-77 (La. Ct. App. 1979) (voluntary settlement with FTC where
defendant agreed to cease misrepresenting source of engine parts
did not bar action under state statute because challenged conduct
did not "comply" with FTC Act), cert. granted, 376 S.2d 1270, cert.
dismissed, 377 S.2d 1033 (1979).
76.
Parol Evidence Rule
California
Wang v. Massey Chevrolet, 2002 Cal. App. LEXIS 3273, at *23
(filed Mar. 21, 2002) (reverses summary judgment; parol evidence
rule does not preclude a UCL claim where the alleged deceit
pertains to oral statements made prior to the execution of an auto
lease; reasons that "permitting a parol evidence bar . . . would be
tantamount to construing the written contract as constituting
essentially a waiver of the protections of the act, which is contrary
to public policy").
77.
Preemptive Strike
When an enforcement action is imminent, a defendant may benefit by
making the first move by filing a suit to block enforcement of an underlying
law or regulation. Such an approach may permit the plaintiff to chose the
forum, which can be significant where judges in a particular venue may be
more hostile to defendant's (now plaintiff's) position or where a federal
forum is available, so that the defendant turned plaintiff may avail itself of
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the federal court's standing requirements to prevent prosecution of
restitution claims by a non-injured quasi-class representative, or of other
favorable aspects of federal decisions.
Federal
Morales v. Trans World Airlines, Inc., 504 U.S. 374, 380-81 (1992)
(Airline Regulation Act of 1979 preempted guidelines adopted by
National Association of Attorneys General regarding unfair and
deceptive advertising; "When enforcement actions are imminent -and at least when repetitive penalties attach to continuing or
repeated violations and the moving party lacks the realistic option
of violating the law once and raising its federal defense -- there is
no adequate remedy at law. . . . Like the plaintiff in Ex Parte
Young, respondents were faced with a Hobson's choice:
continually violate the Texas law and expose themselves to
potentially huge liability; or violate the law once as a test case and
suffer the injury of obeying the law during the pendency of the
proceedings and any further review.")
Pursuit of preemptive strike suits against private plaintiffs may be more
difficult.
California
Rubin v. Green, 4 Cal. 4th 1187, 1201-02 (1995) (Cal. Civ. Proc.
Code § 47(b)'s protection of statements made in the context of a
judicial proceeding precludes claims under UCL to restrain SLAPP
("Strategic Lawsuit Against Public Participation") suits; relies on
Maler and Safeco decisions, described above, that barred claims
were not "resurrected" by casting claim as one for relief under
UCL).
78.
Prior Case Pending
The California Code of Civil Procedure provides as one of the statutory
grounds for a demurrer the existence of another case in the state courts
involving the same parties and same alleged wrong. (Cal. Civ. Proc. Code
§ 430.10). Some judges believe that this principle supports dismissal of
duplicative UCL representative claims (both on behalf of the "general
public") under a "first to file" rule. Retired San Francisco Judge William
Cahill so ruled in a series of bank customer privacy cases before him in
the late 1990s. Other judges look to the specific named plaintiff and find
an absence of identity of parties.
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79.
Public Entity Immunity
The UCL does not apply to governmental entities, even when they are
performing non-governmental acts.
California
LeVine v. Weis, 90 Cal. App. 4th 201 (Cal. Ct. App., 2d Dist., 6th
Div. 2001) (reaffirms Trinkle and Community Memorial Hospital's
holdings with respect to public entity immunity under the Unfair
Practices Act, no such immunity under the False Claims Act);
California Med. Ass'n v. Regents of University of California, 79 Cal.
App. 4th 542, 551 (2000); Janis v. State Lottery Commission, 68
Cal. App. 4th 824, 831 (1998); Trinkle v. Cal. State Lottery, 71 Cal.
App. 4th 1198, 1202-04 (1995); Community Memorial Hospital v.
County of Ventura, 50 Cal. App. 4th 199, 209-11 (1996).
80.
Puffing
Standard advertising claims that customers could not reasonably perceive
as factual claims may not be actionable, although California state courts
have not addressed puffing defenses under the UCL. Two United States
District Court decisions construing California law have sustained puffing
defenses, however.
California
Dixon Mobile Homes, Inc. v. Walters, 48 Cal. App. 3d 964, 972-73
(1975) (applies California law because of California's strongly
pro-consumer interests in extending protection of Rees-Levering
Act [automobile financing] to its residents).
Federal
FTC v. Colgate-Palmolive Co., 38 U.S. 374 (1965) (puffing is "sales
talk" that no one could reasonably rely upon); Southland Sod Farms
v. Stover Seed Co., 108 F.3d 1134, 1145 (9th Cir. 1997)
(exaggerated and boasting advertising claim, upon which no
reasonable buyer would rely, was non-actionable puffery; but, a
"specific and measurable advertisement claim of product superiority
based on product testing" was not); Cook, Perkiss & Liehe, Inc. v.
Northern California Collection Service, Inc., 911 F.2d 242 (9th Cir.
1990) (dismisses claim because claim by debt collection service
that its services were comparable to hiring an attorney but less
costly were simply general assertion of superiority); Atari Corp. v. 3
DO Co., 31 U.S.P.Q. 2d 1636, 1994 WL 723601 (N.D. Cal. 1994)
(slogan, "The most advanced home gaming system in the
universe," was merely a general assertion of superiority, not a
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representation about objective, quantifiable attributes, and therefore
not actionable under the UCL or the FAA or the Lanham Act);
Haskell v. Time, Inc., 857 F. Supp. 1392 (E.D. Cal. 1994) (grants
motion to dismiss on bulk of claims against Publisher's
Clearinghouse for sweepstakes solicitations because no
reasonable person would believe the solicitations to be true; applies
"reasonable consumer" rather than "least sophisticated consumer"
standard; permits suit to proceed with respect to one alleged
statement); Nikkal Industries, Ltd. v. Salton, Inc., 735 F. Supp. 1127
(S.D.N.Y. 1990) (claim that defendant's product is "better" than
competitor's is puffing).
Other States
Autohaus, Inc. v. Aguilar, 794 S.W.2d 459, 462-64 (Tex. App. 1990)
(claims that Mercedes-Benz is best-engineered car in the world and
is unlikely to have mechanical difficulties are permissible "puffing").
81.
Punitive Damages Standards Inapplicable
It appears that statutory and constitutional provisions may not be
applicable to imposition of civil penalties. See People v. First Federal
Credit Corp., 104 Cal. App. 4th 721-731-32 (2002) (rejects argument that
decision of California Supreme Court in Adams v. Murakami, 54 Cal. 3d
105, 108-09 (1991) requiring a plaintiff introduce evidence of a defendant's
financial condition before imposition of punitive damages should be
extended to civil penalties under UCL or FAA).
California
People v. First Federal Credit Corp., 104 Cal. App. 4th 721-731-32
(2002) (citing Rich v. Schwab, 64 Cal. App. 4th 803, 816-17 (1998),
concludes that fundamental differences between punitive damages
and civil penalties, including the limitation of civil penalties to public
law enforcement officials and the mandatory nature of civil
penalties, militate against importing the requirement of proof of
defendant's financial condition from punitive damages cases).
82.
Punitive Damages Unavailable
California
People v. Superior Court (Jayhill), 9 Cal. 3d 283, 287 (1973)
(Attorney General may not recover punitive damages; in absence of
statute, exemplary damages are allowed only to the person
immediately injured); People v. Superior Court (Solano), 35 Cal.
App. 3d 710 (1973) (penalty provisions of the Business and
Professions Code were similar enough to exemplary damages to
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permit discovery of the defendant's financial conditions in
appropriate cases (although not this one)).
Federal
American Computech, Inc. v. National Med. Care, Inc., 1992 U.S.
App. LEXIS 6460, at *27-29 (9th Cir. 1992) (reverses award of
punitive damages for failure to properly instruct the jury [note: there
is no jury trial right in UCL cases] that such damages are not
recoverable under a UCL claim); Czechowski v. Tandy Corp.,
731 F. Supp 406, 409-410 (N.D. Cal. 1990) (no punitive damages);
Southwest Marine, Inc. v. Triple A Mach. Shop, Inc., 720 F. Supp.
805, 810 (N.D. Cal. 1989) (no punitive damages); Ferrari S.p.A.
Esercizio Fabbriche Automobili E. Corse v. McBurnie Coachcraft,
Inc., 1988 U.S. Dist. LEXIS 16314, at *15 (S.D. Cal. Sept. 6, 1988)
(plaintiff is not entitled to punitive or treble damages under UCL);
Hartley v. Stamford Towers Ltd. Partnership, 1994 U.S. App. LEXIS
23543, at *19 (9th Cir. Aug. 26, 1994) (depublished opinion)
(because the plaintiff received notice as a class member, chose not
to opt out of the class and accepted the settlement payment, she is
enjoined from arbitrating claims against the defendant).
83.
Rate Setting
Litigation under the UCL should not become a substitute for decisions
properly left to the state legislature.
California
California Grocers Ass'n v. Bank of America, 22 Cal. App. 4th 205,
218 (1994) (abuse of discretion in court's issuance of injunction in
UCL quasi-class action limiting certain return check fees to $1.73
(Bank's costs plus 15% profit mark-up; "Judicial review of one
service fee charged by one bank is an entirely inappropriately
method of overseeing bank service fees. . . . 'Legislative
Committees and administrative officer charged with regulating an
industry have better sources of gathering information and
assessing its value than do courts in isolated cases.' . . . 'It is
primarily a legislative and not a judicial function to determine
economic policy.'") (citations omitted); Beasley v. Wells Fargo
Bank, 235 Cal. App. 3d 1383, 1391 (1991) (trial judge awarded
damages for overcharges on bank credit card fees but declined to
grant injunctive relief because court was not "' . . . well suited to
regulating retail bank pricing via injunction on an ongoing basis.'"
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84.
Ratification or Waiver
Waiver of rights or ratification of defendant's conduct by individual
members of the public on whose behalf the government or a private
attorney general is suing may not bar "quasi-class" claims.
California
Fletcher v. Security Pac. Nat'l Bank, 23 Cal. 3d 442, 452-454
(1979) (knowledge of and consent to interest charges by some
customers did not preclude order requiring refund of interest
overcharges to all borrowers).
85.
Regulatory Approval
Regulatory approval may not provide a defense to a UCL claim.
California
Chern v. Bank of America, 15 Cal. 3d 866, 876 (1975) (compliance
with federal Truth-in-Lending Act did not provide defense to FAA
claim that bank used bait-and-switch tactic in advertising 9% rate
but calculating interest at 9 1/4%); AICCO, Inc. v. Ins. Co. of
N. Am., 90 Cal. App. 4th 579 (2001) (prior regulatory approval by
the Insurance Department of insurance company's transfer of
policies without policyholder consent does not preclude a court
from deciding the legal consequences of defendant's actions);
People v. Casa Blanca Convalescent Homes, Inc., 159 Cal. App.
3d 509 (1984) (agency's approval and renewal of nursing home's
license does not bar District Attorney from UCL claim to enforce
compliance with state administrative regulations); Coast & Southern
Fed. S & L Ass'n v. Transcoast S & L Ass'n, 16 Cal. App. 3d 205,
209-210 (1971) (California Savings and Loan Commissioner's
approval of name change does not bar unfair competition claim for
deceptively similar name) (not UCL case).
86.
Reliance on Advice of Counsel
Reliance on advice of counsel likely is not a defense to an Unfair
Competition Law claim since intent is not a requirement. In a civil penalty
context, the Court of Appeal has rejected a defense based upon reliance
on advice from counsel. See People v. Nat'l Ass'n of Realtors, 155 Cal.
App. 3d 578, 585 (1984).
California
People v. Nat'l Ass'n of Realtors, 155 Cal. App. 3d 578, 585 (1984)
(rejects defense to civil penalties of reliance on advice of counsel).
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87.
Removal
Actions may be removed to federal court where they are "founded on a
claim or right arising under the Constitution, treaties or laws of the United
States." (28 U.S.C. § 1441(b)). Although removal is not technically a
defense, the ability to remove a case to federal court may make all the
difference in the world in a company's ability to present what defenses it
does have to a somewhat receptive audience – because the practical
reality is that federal courts are far more receptive to business challenges
to UCL lawsuits. Removal has been denied where the state is plaintiff and
where the unlawfulness alleged in a UCL claim arises from violation of
federal law, but it should be available where plaintiffs are private parties
and (1) complete diversity exists; or (2) a valid federal preemption claim is
asserted. Note that plaintiff must have sustained actual injury to maintain
a UCL claim in federal court, however. See section VIII.B.89 (Standing),
below.
a. Federal Question
Federal
Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64 (1987)
(inclusion of a federal claim as a defense provides a ground for
removal where "Congress . . . so completely preempt[s] a particular
area, that any civil complaint raising this select group of claims is
necessarily federal in character") (not UCL case); Merrell Dow
Pharm., Inc. v. Thomson, 474 U.S. 804, 814 (1986) (allegation that
federal act has been violated, or that act itself does not provide
private federal right of action, does not render complaint
removable) (not UCL case); Patenaude v. The Equitable Life
Assurance Society of the United States, 2002 U.S.App. LEXIS
9124, *6 (9th Cir. 2002) (affirms order dismissing action and
denying remand on the ground that Securities Litigation Uniform
Standards Act completely preempts UCL action over alleged
misrepresentations in connection with the purchase of variable
annuities); People v. Keating, 986 F.2d 346 (9th Cir. 1993) (rejects
removal of UCL and other claims by California Attorney General
against accountants for Lincoln Savings & Loan Association despite
participation of Resolution Trust Corporation as successor to
Lincoln after its failure); People v. General Motors Corp., 431 F.2d
732 (9th Cir. 1970) (reverses district court's denial of motion to
remand an FAA claim to California state court); Kenneth Rothschild
Trust v. Morgan Stanley Dean Witter, 2002 U.S. Dist. LEXIS 6439
(C.D. Cal. 2002) (grants motion to dismiss and denies motion to
remand; trust's UCL claims arising in connection with the purchase
of sale of a "covered security" are completed preempted under
Securities Litigation Uniform Standards Act; Bertram v. Terayon
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Communications Systems, Inc., 2001 U.S. Dist. LEXIS 6215 (C.D.
Cal. 2001) (grants motion to dismiss and denies plaintiff's motion to
remand on the ground that a representative UCL action related to
NASDAQ-listed stock is a "covered class action" under Securities
Litigation Uniform Standards Act); Fardella v. Downey Savings &
Loan Ass'n, 2001 U.S. Dist. LEXIS 6037 (N.D. Cal. 2001) (UCL
claim against savings and loan association is not dependent on
federal claims; therefore, court does not have jurisdiction; remands
case to state court); Kagan v. Carwell Corp., 2001 U.S. Dist. LEXIS
4544 (C.D. Cal. 2001) (court lacks jurisdiction because federal law
does not provide plaintiff a private right of action, and the only other
basis for jurisdiction proffered by defendant car manufacturer was a
defense of federal preemption, which does not establish removal
jurisdiction); Roskind v. Morgan Stanley Dean Witter & Co.,
2001 U.S. Dist. LEXIS 4528 (N.D. Cal. 2001) (state law, not NASD
rules, will determine if defendant securities dealer engaged in unfair
practices; remands case to state court based on lack of federal
question jurisdiction); Schwartz v. Visa Int'l Corp., 2001 U.S. Dist.
LEXIS 105 (N.D. Cal. 2001) (grants plaintiff's motion for remand to
state court; since a UCL action to redress an unlawful business
practice borrows violations of other laws and plaintiff has not raised
any independent federal claims, there is no basis for federal
jurisdiction); Castro v. Providian Nat'l Bank, 2000 U.S. Dist. LEXIS
19062 (N.D. Cal. Jan. 2, 2001) (grants plaintiffs' motion for remand
to state court; defendants argued that plaintiffs' discussion of the
Truth in Lending Act (TILA) and Regulation Z in summary
adjudication reply brief raised a federal claim; arguable presence of
TILA as a basis for liability in a UCL claim is not grounds for federal
jurisdiction where the TILA claim is not a necessary element for
liability under the UCL because the UCL claim is supported by
violations of state law as well); Tall Club of Silicon Valley v. Am.
Airlines, 2000 U.S. Dist. LEXIS 11302, at *6 (N.D. Cal. June 19,
2000) (remands case to state court ; removability is determined
from the face of the complaint, not by issues that may be raised in
the answer); Abada v. Charles Schwab & co., 127 F. Supp. 2d
1101 (S.D. Cal. 2000) (vacates dismissal and denies remand under
Securities Litigation Uniform Standards Act, published at 68 F.
Supp. 2d. 1160, and remands to state court on the ground that the
misrepresentations alleged involved the "relationship between
Schwab and its customers" regarding its technical abilities, rather
than the value of any particular security); Toxic Injuries Corp. v.
Safety-Kleen Corp., 57 F. Supp. 2d 947, 955 (C.D. Cal. 1999)
(remands to state court because the UCL is a state cause of action,
and cites with approval the proposition established in Mangini that
the state legislature cannot expand the standing of a plaintiff in
federal court); Salcido v. Pacific Weathershield, Inc., 1997 U.S.
Dist. LEXIS 18191 (N.D. Cal. 1997) (grants plaintiffs' motion to
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remand the case to California Superior Court; "third-party
defendants cannot remove [to federal court] pursuant to § 1441(a)
because a third-party defendant is not a 'defendant' under
§ 1441(a)"); Rawson v. Tosco Ref. Co., 1996 U.S. Dist. LEXIS
1006 (N.D. Cal. 1996) (remands case to California Superior Court
for lack of federal jurisdiction; UCL creates a cause of action solely
based on California law, and, alone, it is not a federal issue);
Mangini v. R.J. Reynolds Tobacco Co., 793 F. Supp. 925, 927-28,
930 (N.D. Cal. 1992) (remands under Merrell Dow, because
complaint does not "arise under" federal law where Federal
Cigarette Labeling and Advertising Act does not create private
federal right of action; plaintiff had claimed that tobacco company's
"Joe Camel" advertisements violated the Act because its
promotional t-shirts and other similar items failed to include health
warnings; defendant contended that plaintiffs' claim necessarily
arose under federal law); People v. Steelcase, Inc., 792 F. Supp.
84, 86-87 (C.D. Cal. 1992) (no removal where Eleventh
Amendment bars federal courts from exercising original jurisdiction
because states have sovereign immunity against suits in federal
court); Boyle v. MTV Networks, Inc., 766 F. Supp. 809, 814-18
(N.D. Cal. 1991) (federal preemption argument does not justify
removal to federal court unless claim has been "artfully pleaded"
and argument is for "complete preemption"; also, plaintiff would
lack Article III standing); Titan Sports, Inc. v. 3-G Prod.,
19 U.S.P.Q. 1867, 1991 U.S. Dist. LEXIS 15945, at *11 (C.D. Cal.
1991) (refuses jurisdiction over state law claims pendent to federal
copyright and trademark claims); People (New York) v. Trans World
Airlines, Inc., 728 F. Supp. 162 (S.D.N.Y. 1989) (grants plaintiff's
motion to remand and denies defendants' motion to stay or transfer
the proceedings; grants in part and denies in part plaintiff's motions
to dismiss defendants' federal action against plaintiff; application of
state regulations of deceptive advertising to the airline industry is
not preempted by FAA regulations under the Supremacy Clause;
claims of violations of the Interstate Commerce Clause and First
Amendment also dismissed; court does not dismiss claim that the
state regulation violated the Commerce Clause because it
sufficiently alleged that the regulations interfere with interstate and
foreign commerce); Contemporary Servs. Corp. v. Universal City
Studios, Inc., 655 F. Supp. 885, 895 (C.D. Cal. 1987) (remands
UCL claim to state court; "[w]hile citizens can sue on behalf of the
general public for injunctive relief [citations omitted], the Court is
unaware of California authority authorizing them to seek restitution
of the general public. A California court would be the best qualified
to decide this on first impression. In addition, the test under
California law for what constitutes 'unfair competition' involves
complex analysis of what business practices are 'unlawful' under
California law. This is not a well-settled proposition."); People v.
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Beltz Travel Serv., Inc., 379 F. Supp. 948 (N.D. Cal 1974) (grants
plaintiff's motion to remand case to state court; derivative right
under California Unfair Competition Law [Cal. Civ. Code § 3369] to
sue in state court on behalf of persons who suffered an injury does
not confer on plaintiffs the right to sue in federal court).
b. Diversity
Kenneth Rothschild Trust v. Morgan Stanley Dean Witter, 2002 U.S.
Dist. LEXIS 6439 (C.D. Cal. 2002) (denies remand of UCL claim under
Securities Litigation Uniform Standards Act, but finds amount-incontroversy requirement not satisfied for diversity jurisdiction because
defendant cannot "aggregate" separate alleged claims of class
members); Myers v. Merrill Lynch & Co., 249 F.3d 1087 (9th Cir. 2001)
(affirms District Court ruling, 1999 WL 696082 (N.D. Cal. 1999), that
amount-in-controversy for purposes of diversity jurisdiction in a UCL
claim that was not a "class action" could be measured by potential cost
to defendant); Surber v. Reliance Nat'l Indem. Co., 110 F. Supp. 2d
1227, 1230-33 (N.D. Cal. 2000) (remands case to state court because
diversity jurisdiction is not satisfied; rejects plaintiff's statement of
damages for aggregation where there was no personal injury or
wrongful death and there was no support in the record for the asserted
amount; plaintiff's attorney fees are not aggregated where defendant
fails to provide any factual basis; punitive damages are excluded if
there is no evidence supporting them; rejects administrative costs
associated with defendant's compliance with a UCL court order
because otherwise all UCL claims would become a federal matter
where there is diversity); Gibson v. Chrysler Corp., 1998 U.S. Dist.
LEXIS 11343 (N.D. Cal. July 20, 1998) (remands action to state court
because diversity jurisdiction not satisfied; can only aggregate
individual class member damages claims when "two or more plaintiffs
unite to enforce a single title or right in which they have a common and
undivided interest"); Daniels v. Philip Morris Companies, 1998 U.S.
Dist. LEXIS 13950 (S.D. Cal. Aug. 7, 1998) (grants remand;
defendants are precluded from aggregating plaintiffs' requests for
attorney's fees to satisfy the amount in controversy requirement;
restitution is designed to punish a defendant for past unlawful conduct,
and is not designed as a prospective remedy to satisfy the amount in
controversy requirement; punitive damages not allowed under UCL so
cannot satisfy amount in controversy).
88.
Repetitive Litigation: Res Judicata and Collateral Estoppel
Repetitive litigation often arises under the UCL, where different plaintiffs
sue the same defendants for the same wrongs (or essentially the same
wrongs) in multiple suits (sometimes in multiple forums). Defendants
should consider asserting the doctrines of res judicata and collateral
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estoppel to bar such relitigation. These two doctrines are frequently
confused, even in judicial decisions.
Res judicata bars relitigation of claims that were asserted, or that could
have been asserted, in prior litigation against the party seeking the
protection of the doctrine, or a party in privity with him. Collateral estoppel
bars a party from challenging an adverse finding if that finding has been
actually litigated in a matter where the party resisting application of
collateral estoppel had an opportunity and incentive to litigate the issue,
and the issue was finally determined against that party. (In some
jurisdictions, pendency of an appeal will prevent application of collateral
estoppel).
Although some commentators have argued that res judicata principles
should not apply to bar re-litigation of claims for restitution on behalf of the
general public when private lawsuits follow the resolution of government
claims (see Stern, "California's Unfair Business Practices Statutes:
Settling the 'Nonclass Class' Action and Fighting the 'Two Front War,'"
12 CEB Civ. Litigation Rep. 95 (May, 1990); Fellmeth, "Unfair Competition
Law Enforcement by Agencies, Prosecutors and Private Litigants: Who's
On First?" 15 Cal. Reg. L. Rep. 1 (1995)), defendants have sometimes
successfully obtained dismissals of class actions filed by private parties
seeking relief after the government obtained injunctive relief, civil penalties
and restitution in settlement of a predecessor lawsuit.
California
Kraus v. Trinity Management Services, Inc., 23 Cal. 4th 116, 138-9
(2000) ("If the possibility of future suits exists, it may be appropriate
for the court to condition payment of restitution to beneficiaries of a
representative UCL action on execution of acknowledgment that
the payment is in full settlement of claims against the defendant,
thereby avoiding any potential for repetitive suits on behalf of the
same persons or dual liability to them."); People v. Pacific Land
Research Co., 20 Cal. 3d 10, 17 (1977) ("[W]e do not agree that
consumer protection actions brought by the People, seeking
injunctive relief, civil penalties and restitution, are the equivalent of
class actions brought by private parties, requiring the same
safeguards to protect a defendant from multiple suits and other
harmful consequences. An action filed by the People seeking
injunctive relief and civil penalties is fundamentally a law
enforcement action designed to protect the public and not to benefit
private parties. The purpose of injunctive relief is to prevent
continued violations of law and to prevent violators from dissipating
funds illegally obtained."); Braco v. Superior Court, 2002 Cal. App.
LEXIS 3477 (Mar. 28, 2002) (not published) (rejecting defendant's
contention that allowing plaintiff's representative action on behalf of
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the general public would bar future actions by those actually
harmed by the conduct; since the present suit is not a "class action
on behalf of employees or competitors or customers in which notice
and the opportunity to opt out would have to be provided;...the
judgment in this case will have no res judicata or collateral estoppel
effect"); Payne v. Nat'l Collections Sys., Inc., 91 Cal. App. 4th 1037
(2001) (certified for partial publication) (reverses order sustaining
demurrer where there was a prior judgment entered in a
representative action brought by the district attorney and Attorney
General against an airline and respondent collection agency;
traditional res judicata principles do not apply to the unfair
competition law judgment secured by the prosecutors under the
circumstances because an action brought by the prosecutor is
fundamentally different from a class action filed by a private party;
prosecutor or other governmental official who files the action is
ordinarily not a member of the class; his role as a protector of the
public may be inconsistent with the welfare of the class so that he
could not adequately protect their interests; an unlawful competition
law action commenced by a prosecutor is brought fundamentally for
the benefit of the public as a law enforcement action); Rothschild v.
Tyco Int'l, Inc., 83 Cal. App. 4th 488 (2000) (reversed trial court's
dismissal; pendency of suit under the False Claims Act does not
preclude a subsequent action for alleged violations of the UCL);
Wilner v. Sunset Life Insurance Co., 78 Cal. App. 4th 952, 970
(2000) ("to be sure, if this matter ultimately does not proceed as a
class action, the possibility that non-parties may pursue their own
remedies poses a risk to [defendant]"); American Int'l Indus. v.
Superior Court, 70 Cal. App. 4th 406 (1999), dec'n on reh'g,
1999 Cal. App. LEXIS 303 (June 16, 1999), depublished by
California Supreme Court in response to request form Milberg,
Weiss (bars an FAA false advertising claim on the ground that the
claim could have been raised in previous litigation); Caro v. Procter
& Gamble Co., 18 Cal. App. 4th 644, 660 (1993) (upholds refusal to
certify class action on grounds, among others, that policies of
disgorgement or deterrence had been "vindicated in other
proceedings," including federal and state proceedings, each of
which included consent decrees); Committee to Defend Reprod.
Rights v. A Free Pregnancy Ctr., 229 Cal. App. 3d 633, 641 (1991)
(existence of parallel civil enforcement action by government does
not preclude UCL claim brought on behalf of general public, and
private litigant does not need permission of District Attorney or
Attorney General to file suit); Bronco Wine v. Frank A. Logoluso
Farms, 214 Cal. App. 3d 699, 708 (1989) ("The doctrines of res
judicata and collateral estoppel serve two public policies. The first
is preventing a party who already has had a fair trial on an issue
from again drawing it into controversy. The second is to protect
parties from being twice vexed for the same cause. [Citations
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omitted] Preventing relitigation of the same issue also fosters the
important public policy of judicial economy."); Lewis v. Hankins,
214 Cal. App. 3d 195, 198-99 (1989) (affirms judgment in favor of
plaintiff in claim for fraudulent and unlawful business practices after
rejecting defendant's argument that payments made under the
decree to non-parties will not have res judicata effect with respect
to their individual claims for failure to raise the issue at the trial
level); Dean Witter Reynolds v. Superior Court, 211 Cal. App. 3d
758, 773-774 (1989) (individual victims of unfair business practice
are not barred by prior judgment from bringing their own suits "to
protect their interests"; absent persons generally are not bound by
a judgment unless they were in privity with a party and the
adjudication of their rights comports with due process. The
possibility that such persons would pursue their own remedies may
pose some threat to the defendant; here, however, defendant
opposes class certification and will "presumably not be heard to
complain later if it suffers adverse consequences as a result.");
Gates v. Superior Court, 178 Cal. App. 3d 301, 306-08 (1986)
(taxpayers suing Los Angeles City Police Officers for accounting of
funds allegedly spent to finance illegal undercover investigations,
after earlier taxpayer action had resulted in stipulated consent
decree and judgment, were barred from suit because "[j]udgments
in representative taxpayer actions are binding on all other
taxpayers even though the named taxpayer plaintiff in the second
suit was not the same taxpayer who brought the original case.
Where the plaintiff in the prior action commenced the action, as a
citizen and taxpayer on behalf of himself and others similarly
situated, to determine a matter of general public interest, and where
a different plaintiff in the succeeding action commenced that action
as a citizen and taxpayer to determine the same matter of public
interest, there is identity of parties within the requirement under the
doctrine of res judicata."); People v. Rath Packing Co., 85 Cal. App.
3d 308 (1978) (affirms denial of injunction under FAA where prior
federal adjudication bars enforcement of state labeling laws
preempted by federal labeling standards; state laws and
procedures may be used to exercise the state's concurrent
jurisdiction only where they are consistent with federal labeling
standards); Home Sav. & Loan Ass'n v. Superior Court, 42 Cal.
App. 3d 1006, 1011 (1974) ("[I]f defendant prevails in the first cause
of action involving merely individual members of the class, no other
members of the class need be bound by the outcome, for they were
not parties to the lawsuit and received no notification about it.");
Smith v. City of Los Angeles, 190 Cal. App. 2d 112, 128 (1961)
(taxpayer suit for injunction against transfer of part of city park to
Los Angeles Dodgers was barred by res judicata as a result of
previous actions by different taxpayers confirming validity of
challenged ordinance and contract); Alexandra v. Lucky Stores, Inc.
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(Alameda County S. Ct. No. 727750-4 (1994)) (sustains demurrer
on res judicata grounds where government already had obtained
injunction, civil penalties and restitution, and Stipulation for Entry of
Permanent Injunction stating: "It would be impractical and virtually
impossible to identify members of the public who may have
unknowingly purchased or received [the products] or to make
restitution to them; and . . . the California Attorney General's Office
and the Alameda County District Attorney's Office believe that the
civil penalties and cy pres restitution provided for in the Stipulated
Final Judgment and Permanent Injunction are appropriate and
adequate to achieve realization of the plaintiff's dual policies of
(1) deterrence of the wrongful conduct alleged in the Complaint,
and (2) disgorgement of gains from any past such wrongful
conduct"; no appeal filed); Gray v. Safeway (Alameda County S. Ct.
No. H-171057-9 (1994)) (sustains demurrer on res judicata grounds
where government already had obtained injunction, civil penalties
and restitution, and Stipulation for Entry of Permanent Injunction
contained some of same language as Lucky judgment at issue in
Alexandra; appeal dismissed after settlement just before scheduled
hearing; attorney general filed amicus brief supporting dismissal on
standing rather than res judicata grounds).
Federal
International Evangelical Church of the Soldiers of the Cross of
Christ v. Church of the Soldiers of the Cross of Christ of the State
of California, 54 F.3d 587 (9th Cir. 1995) (judgment for defendant
reversed and remanded; right to seek damages for fraud and unjust
enrichment is primary right different from the primary right to
enforce a trust and as such, is not barred by res judicata since the
same wrongful act may invade many different primary rights);
Alaska Sport Fishing Ass'n v. Exxon Corp., 34 F.3d 769, 773
(9th Cir. 1994) (consent decree among Alaska, U.S. Government
and Exxon settling the litigation over Valdez oil spill bars
subsequent suit by individual sport fishers and Sport Fishing
Association, which were privies of the governments because the
governments acted "as representatives for all their citizens in a suit
to recover damages for injury to a sovereign interest. . . . Thus, the
sport fishers here, as members of the general public, were 'parties'
to the federal suit within the meaning of res judicata."); Hartley v.
Stamford Towers Ltd. Partnership, 1994 U.S. App. LEXIS 23543, at
*19 (9th Cir. Aug. 26, 1994) (depublished opinion) (because the
plaintiff was noticed as a class member, chose not to opt out of the
class and accepted the settlement payment, she was enjoined from
arbitrating claims against the defendant); U.S. v. ITT Rayonier, Inc.,
627 F.2d 996, 1003 (9th Cir. 1980) (the relationship between [The
Washington Department of Ecology] and the EPA is "'sufficient'
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under the circumstances to preclude relitigation of the issue already
resolved in state court"; court notes, "[I]n some contexts, the
relationship between governmental authorities as private enforcers
of ordinances and private parties suing for enforcement as private
attorneys general is close enough to preclude relitigation.");
Southwest Airlines Co. v. Texas Int'l Airlines, 546 F.2d 84, 101
(5th Cir.), cert. denied, 434 U.S. 832 (1977) (upholds injunction
against state court suit by several airlines who, "assum[ing] the role
of private attorneys-general," sought to compel Southwest to move
its operations pursuant to a phase-out provision of the ordinance
controlling creation of the airport, even though airlines were not
parties to the first suit; allowing continual relitigation of Southwest's
right to remain at an old airport would create uncertainty for other
businesses and government operations involved. It would also
waste judicial resources and time and subject Southwest and
others to "the harassment and expense of still later lawsuits, as well
as the possibility of numerous conflicting judgments." Court warns:
"If courts could second-guess another court each time a new
litigant, dissatisfied with the previous judgment, filed a new
complaint, the respect the previous parties would have towards the
courts would inevitably decrease."); Ferrari S.p.A. Esercizio
Fabbriche Automobili E. Corse v. McBurnie Coachcraft, Inc.,
1988 U.S. Dist. LEXIS 16314, at *15 (S.D. Cal. Sept. 6, 1988)
(plaintiff is not entitled to punitive or treble damages under the
UCL).
89.
Restitution for Absent Parties
California Supreme Court Justice Baxter wrote in Bronco Wine Co. v.
Frank A. Logoluso Farms 214 Cal. App. 3d 699, 717 (1989), while he was
on the Court of Appeal, that "rendering a judgment for or against a
nonparty to a lawsuit raises serious fundamental due process
considerations.” Nonetheless, the California Supreme Court later held
that an order for restitution to absent parties does not violate due process
principles in a case where there was no likelihood of repetitive litigation.
In Kraus v. Trinity Management Services, Inc., 23 Cal. 4th 116, 138
(2000), the Court held that a non-class representative action did not
violate requirements of procedural due process because defendant Trinity
Management was not at risk of repetitive litigation under the facts of that
case, which had already gone to trial. By the time the case reached the
California Supreme Court, the statute of limitation had run on any claims
the absent "represented parties" might have asserted on their own
behalves. Other courts have focused upon policies of disgorgement and
endorsed restitution awards premised upon charges paid by absent "quasi
class" members. (See Dean Witter Reynolds, Inc. v. Superior Court,
211 Cal. App. 3d 758, 773 (1989)).
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California
Kraus v. Trinity Management Services, Inc., 23 Cal. 4th 116, 138
(2000) (although private attorney general suits without class
certification create a serious risk of multiple recovery against a
defendant, defendant Trinity Management was not at risk of
repetitive litigation under the facts of that case, and restitution to
absent parties was allowable); Day v. AT&T Corp., 63 Cal. App. 4th
325 (1998) (UCL allows restitution for sums spent by victims of
violators but not cy pres fund; cites Oxford English Dictionary for
requirement of "restore"); Bronco Wine Co. v. Frank A. Logoluso
Farms, 214 Cal. App. 3d 699, 717 (1989) ("Due process is denied
because the nonjoined party has not been given notice of the
proceedings or an opportunity to be heard....Notice and a chance to
be heard are essential components to the trial court's jurisdiction
and for due process. Without jurisdiction over the parties, an in
personam judgment is invalid"; "serious fundamental due process
considerations" arise from restitution awarded to absent "victims"
where evidence shows they did not want restitution) (citation
omitted); Dean Witter Reynolds, Inc. v. Superior Court, 211 Cal.
App. 3d 758, 773 (1989) (court is "empowered to grant equitable
relief, including restitution in favor of absent parties, without
certifying a class action.")
Federal
Lazar v. Trans Union LLC, 195 F.R.D. 665 (C.D. Cal. 2000) (grants
defendant's motion to dismiss UCL claim to the extent that it sought
restitutionary relief on behalf of the general public, as plaintiff's
claim, based upon the credit agency's mis-merging of his credit file
with that of a felon with thousands of dollars worth of tax liens, is
not sufficiently similar to fellow consumers as to allow him to bring
an uncertified class action on their behalf).
90.
Restitution Measure
In a class action under the UCL, a court may award restitution of sums
improperly charged to class members by comparing charges actually
assessed to permissible charges.
California
Hitz v. First Interstate Bank, 38 Cal. App. 4th 274, 277, 280 (1995)
(modifies $13,971,830 judgment in class action challenging
assessment of late or over-limit fees against credit card customers
to reduce judgment by $9,076,304 because defendant is entitled to
retention of net revenue or benefit from finance charges imposed
on delinquent and over-limit balances because the credit card
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agreement provides for such interest; "It is wrong to compel
[defendant], in effect, to finance delinquent and over-limit balances
at rates that are lower than are charged on non-delinquent and
within-limit portions of accounts and to non defaulting cardholders.
This would be inconsistent with [defendant's entitlement to actual
damages 'fairly measured by the period of time the money was
wrongfully withheld. . . .'"] (citation omitted)).
Federal
Rosales v. Citibank, Fed. Savings Bank, 133 F. Supp. 2d 1177
(N.D. Cal. 2001) (denies Citibank's motion to strike plaintiff's claim
for restitution; restitution is given if the offending party has obtained
something it was not entitled to keep; requiring Citibank to restore
to plaintiff the amount of money improperly withdrawn from his
account is within the type of restitutionary remedies available under
the UCL)
91.
Restitution Without Injunction
California
ABC Int'l Traders, Inc. v. Matsushita Elec. Corp., 14 Cal. 4th 1247
(1997) (reinstates claim for restitution and disgorgement brought
without claim for injunctive relief; rejects argument that injunction is
prerequisite to restitution); Fletcher v. Security Pac. Nat'l Bank,
23 Cal. 3d 442, 452-54 (1979) (FAA permits restitution only as a
form of ancillary relief in injunction action; allows claim for
restitution of interest overcharges resulting from bank computing
"annual" interest on 360-day basis where no claim for injunctive
relief is alleged; but issue is not addressed); People v. Superior
Court (Jayhill), 9 Cal. 3d 283, 286-87 (1973) (FAA permits
restitution only as a form of ancillary relief in injunction action);
People v. Thomas Shelton Powers, M.D., Inc., 2 Cal. App. 4th 330,
339-341 (1992) (trial court ruling on unfair trade practice claim has
authority to order restitution and/or disgorgement only as a form of
relief ancillary to an injunction).
Federal
People v. Keating, (MDL 90-834 RMB July 8, 1991) (dismisses
State's claim for restitution against accountant when no viable claim
for injunctive relief existed), rev'd on other grounds, 986 F.2d 346
(9th Cir. 1992) (lack of federal jurisdiction); In re Thortec Sec. Litig.,
1989 U.S. Dist. LEXIS 6003, at *14 (N.D. Cal. Jan. 26, 1989)
(dismisses claim because plaintiff did not seek injunctive relief, and
"[a]bsent an action for injunction, there can be no cause of action
under § 17500, restitutionary or otherwise."); Commins v. Johnson
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& Higgins, Inc., 1988 U.S. Dist. LEXIS 15574, at *19 (N.D. Cal.
Sept. 29, 1988) (restitution is only available under UCL where there
is also a claim for injunctive relief); Lindemuth Co. v. Shannon Fin.
Corp., 637 F. Supp. 991, 994-95 (N.D. Cal. 1986) ("[T]here is no
authority for the proposition that [restitution] can be granted in the
absence of a suit for injunctive relief."); Pynchon v. Bursell, No.
CIVIL S-82-615 LKK, slip. op. (E.D. Cal. 1984) (before a court can
find that a claim has been stated for restitution under § 17204, it
must first find that a complaint states a claim for injunctive relief;
since no injunctive relief was sought or pleaded, restitution claim is
dismissed).
92.
Securities Transactions
Although most courts have held that securities law violations are not
covered by sections 17200 or 17500, the California Court of Appeal held
in Roskind v. Morgan Stanley Dean Witter, 80 Cal. App. 4th 345 (2000),
that the UCL could be the basis for a suit challenging failure to follow best
execution rules of the National Association of Securities Dealers.
California
Roskind v. Morgan Stanley Dean Witter, 80 Cal. App. 4th 345
(2000) (rejects defense argument that UCL does not apply to
securities claims; rejects preemption and commerce clause
challenges to application of UCL to charges of violation of NASD
"best execution" rules and prohibitions against "trading ahead" of
customers).
Before Roskind, numerous California trial courts had held that the UCL did
not apply to securities transactions and/or is preempted by the federal
securities laws.
California
Copperstone v. TCSI Corp., No. 775199-1 (Alameda County S. Ct.
Apr. 2, 1997) (“as a matter of law [,] California Business &
Professions Code §§ 17200 and 17500 do not apply to securities
transactions"); Howard Gunty Profit Sharing v. Quantum Corp., No.
CV760370 (Santa Clara County S. Ct. Feb. 28, 1997) (UCL claims
dismissed on the ground that alleged misconduct related to
securities transactions "does not constitute a violation of these
statutes"); Ferrari v. Read-Rite Corp., No. CV762735 (Santa Clara
County S. Ct., May 20, 1997) (same); Goldberg v. Storm Tech.,
Inc., No. CV764797 (Santa Clara County S. Ct., Aug. 25, 1997)
(UCL is "not applicable to securities claims").
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Federal
Shearson Lehman Bros. Inc. v. Greenberg, 1995 U.S. Dist. App.
LEXIS 17313, at *5 (9th Cir. July 3, 1995) (unpublished decision;
UCL is inapplicable to securities transactions; "it seems likely that
[§] 17200 is preempted by federal securities laws"; note that the
court does not use the district court's strong language, set forth
below, regarding preemption); Spinner Corp. v. Princeville Dev.
Corp., 849 F.2d 388, 391-93 (9th Cir. 1988) (Hawaii's FTC act does
not apply to securities claims); Smith v. Cooper/T. Smith Corp.,
846 F.2d 325 (5th Cir. 1988) (same result under Louisiana UTPA);
Stephenson v. Paine Webber Jackson & Curtis, Inc., 839 F.2d
1095, 1101 (5th Cir. 1988) (Louisiana UTPA is inapplicable to
securities fraud cases); Takiguchi v. Podorean, [1987 Transfer
Binder] Fed. Sec. L. Rep. (CCH) ¶ 93,319, at 96,625 (Haw. Cir. Ct.
1987) (same result under Hawaii's FTC act); Lindner v. Durham
Hosiery Mills, Inc., 761 F.2d 162, 166-67 (4th Cir. 1985) (North
Carolina's "Baby FTC Act" does not apply "to securities
transactions which [are] already subject to pervasive and intricate
regulation"); Swenson v. Engelstad, 626 F.2d 421, 428-29 (5th Cir.
1980) (Texas UDTP Act does not apply to securities violations).
(caution: decisions based upon provisions of the UCL in states
other than California may have little relevance to analysis of this
issue under California law, as other states' UCL provisions do not
include "unlawful" conduct); Kainos Lab., Inc. v Beacon
Diagnostics, Inc., No. C-97-4618 MHP (N.D. Cal. Sep. 14, 1998)
(dismisses UCL and FAA claims as inapplicable to securities
transactions, notes that "the Ninth Circuit affirmed a district court's
dismissal of a § 17200 claim on similar grounds") (cites Shearson
Lehman Bros., Inc. v. Greenberg); Perera v. Chiron Corp., 1996 WL
251936, at *5-6 (N.D. Cal., May 8, 1996) ("§ 17200 is inapplicable
to securities transactions"); Roach v. Woltmann, 879 F. Supp. 1039
(C.D. Cal. 1994) (dismisses securities-related claims (including
UCL claim) for failure to exhaust administrative remedies);
Shearson Lehman Bros., Inc. v. Greenberg, [1993 Transfer Binder]
Fed. Sec. L. Rep. (CCH), ¶ 97,409 (C.D. Cal. 1993)
("section 17200 is not applicable to securities transactions [and is]
completely preempted by the federal securities laws"), aff'd,
60 F.3d 834 (9th Cir. 1995) (table disposition, text available at 1995
WL 392028); Joyner v. Triple Check Fin. Serv., 782 F. Supp. 364
(W.D. Tenn. 1991) (Tennessee Consumer Protection Act "does not
apply to transactions involving the purchase and sale of
securities"); Levine v. Diamanthuset, Inc., 722 F. Supp. 579, 590
(N.D. Cal. 1989), rev'd on other grounds, 950 F.2d 1478 (9th Cir.
1991) (in securities fraud case, UCL "offers no remedies that
plaintiffs cannot achieve using other causes of action"); Mercer v.
Jaffe, Snider, Raitt & Heuer, P.C., 713 F. Supp. 1019 (W.D. Mich.
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1989) (dismisses Michigan Consumer Protection Act claim thereby
joining the "'overwhelming' majority of decisions declining to apply
general state consumer protection statutes to the securities field");
Nichols v. Merrill Lynch, Pierce, Fenner & Smith, 706 F. Supp.
1309, 1325 (M.D. Tenn. 1989) (Tennessee CPA inapplicable in
light of "the great weight of authority finding such statutes 'are
generally held not to apply to securities'" [citation omitted]);
Feldman v. Glaze, [1989 Transfer Binder] Fed. Sec. L. Rep. (CCH),
¶ 94,450 (N.D. Cal. 1989) ("[I]t is not clear that this
section [§ 17535] is applicable in the securities context."); Morris v.
Gilbert, 649 F. Supp. 1491 (E.D.N.Y. 1986) (dismisses New York
consumer protection statute claim; "it is questionable that New
York's legislature intended to give securities investors and added
measure of protection beyond that provided by the securities
acts. . . ."); Singer v. Dean Witter Reynolds, Inc., 614 F. Supp.
1141, 1145 (D. Mass. 1985) (same result under Massachusetts
act); In re Cantanella Sec. Litig., 583 F. Supp. 1388 (E.D. Pa. 1984)
("securities fraud is not actionable" under New Jersey Consumer
Fraud Act); Lickhalter v. System Dev. Corp., [1984 Transfer Binder]
Fed. Sec. L. Rep. (CCH) ¶ 91,459 (C.D. Cal. 1984) (dismisses
unfair competition claim under UCL and FAA for failure to state a
claim because facts alleged in complaint did not give rise to cause
of action under either section, but did not indicate what those facts
were or why they were insufficient; RICO claim was sufficiently
alleged); Lickhalter v. System Dev. Corp., [1984 Transfer Binder]
Fed. Sec. L. Rep. (CCH) ¶ 91,459, at 98,301 (C.D. Cal. 1984)
(dismisses unfair competition and false advertising claims on
grounds that UCL does not apply to securities transactions); Taylor
v. Bear Stearns & Co., 572 F. Supp. 667 (N.D. Ga. 1983) (Georgia
Fair Business Practices Act does not apply to securities
transactions); Russell v. Dean Witter Reynolds, Inc., 200 Conn.
172, 510 A.2d 972 (1986) (Connecticut UTPA "does not apply to
deceptive practices in the purchase and sale of securities"); Cabot
Corp. v. Baddour, 394 Mass. 720, 477 N.E.2d 399, 400-02 (1985)
(Massachusetts' "Little FTC Act" does not apply to federal securities
violations.); Skinner v. E.F. Hutton, 333 S.E.2d 236 (N.C. 1985)
("securities transactions are beyond the scope" of North Carolina's
little FTC act); State v. Rhoades, 275 S.C. 104, 267 S.E.2d 539
(1980) (securities transactions were regulated by SEC and state
securities laws and therefore exempt from South Carolina UTP);
State v. Piedmont Funding Corp., 119 R.I. 695, 382 A.2d 819
(1978) (securities transactions regulated by federal and state
securities laws and agencies are exempt from Rhode Island
Deceptive Trade Practices Act).
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Other States
Swenson v. Engelstad, 626 F.2d 421 (5th Cir. 1980) (affirms, inter
alia, the trial court's ruling that the Texas Deceptive Trade Practices
Act does not protect consumers who purchase stock certificates).
93.
Seller's Good Faith
California courts have not decided whether a seller's good faith provides a
defense to a deceptive practice claim, although federal courts have
concluded it does not.
California
Mid-Peninsula Citizens For Fair Hous. v. Westwood Investors,
221 Cal. App. 3d 1377, 1392 (1990) (injunctive relief meaningless
where rental policy limiting occupancy to one person per bedroom
had been voluntarily withdrawn and nothing in record indicated that
defendant had intention to reinstate it); Phipps v. Saddleback Valley
Sch. Dist., 204 Cal. App. 3d 1110, 1118-19 (1988) (school district
did not voluntarily and in good faith discontinue practice of
prohibiting HIV positive children from school because it had
changed its policies only when mandated by a preliminary
injunction); People v. Toomey, 157 Cal. App. 3d 1, 19-20 (1984)
(defendant did not act in good faith when ceasing the sale of casino
coupon books, which it finds to be an unfair business practice,
while continuing to sell other forms of coupons using many of the
same deceptive marketing techniques found objectionable).
Federal
Orkin Exterminating Co. v. FTC, 849 F.2d 1354, 1368 (11th Cir.
1988) (rejects defense of good-faith reliance on advice of counsel);
Chrysler Corp. v. FTC, 561 F.2d 357, 363-64 (D.C. Cir. 1977) (no
good-faith defense to violation, but good-faith limits appropriate
scope of order); National Van Lines, Inc. v. Dean, 237 F.3d 688,
692 (9th Cir. 1956) (reverses trial court's judgment and concludes,
applying California law, defendant has committed, inter alia, unfair
trade practices; notes that it is not necessary to prove actual
confusion or deception, as "it is sufficient that there is a likelihood of
deception"; states that, if intent to deceive is shown, it raises a
presumption that deception and confusion resulted).
94.
Standing
Defendants will have difficulty with standing arguments under the UCL
because actions may be prosecuted: (1) by the Attorney General; (2) by
any District Attorney; (3) by any County Counsel authorized by agreement
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with the District Attorney in actions involving a violation of a County
Ordnance; (4) by any City Attorney of the City, or City and County, having
a population in access of 750,000; (5) with the consent of the District
Attorney, by any City Prosecutor in any city having a full-time City
Prosecutor; (6) with the consent of the District Attorney, by a City Attorney
in any City and County in the name of the People in the State of California
or (7) by any person acting for the interests of itself, its members or the
general public (Cal. Bus. & Prof. Code § 17204).
Standing to enforce violations of § 17500 lies with: (1) the Attorney
General; (2) any District Attorney; (3) any County Counsel; (4) any City
Attorney; (5) any City Prosecutor; or (6) any person acting for the interest
of itself, its members or the general public. (Cal. Bus. & Prof. Code
§ 17535).
California state courts uniformly have rejected standing arguments, even
where the named plaintiff himself alleged no injury whatsoever. In federal
court, however, federal law governs determination of standing issues, and
normal standing principles do apply.
California
Stop Youth Addiction v. Lucky Stores, 17 Cal. 4th 553 (1998) (any
person or entity has standing under the UCL to obtain equitable
relief from UCL violations); People v. McKale, 25 Cal. 3d 626, 63233, 638 (1979)) (existence of statutory enforcement scheme
investing authority in different agency does not prevent government
claim under UCL for violation of the Mobile Home Parks Act, which
vests sole authority for bringing enforcement actions in the
Commission for Housing and Community Development); Coast
Plaza Doctor's Hospital v. UHP Healthcare, 2002 Cal. App. LEXIS
5312 (Dec. 23, 2002) (hospital has standing under UCL to
challenge violations of Knox-Keene Act by insurer); California
Medical Association v. Aetna U.S. Healthcare of California, Inc., 94
Cal. App. 4th 151, 169 (2001) (hospital has standing under UCL to
challenge violations of Knox-Keene Act by insurer); Braco v.
Superior Court, 2002 Cal. App. LEXIS 3477 (Mar. 28, 2002) (not
published) (reverses trial court; concludes plaintiff has standing to
bring a UCL claim against a bar for alleged violation of the SmokeFree Workplace Act, as any person may maintain a UCL action
even if he or she has suffered no personal injury; contention that
suit was brought for an improper purpose immaterial at this stage,
where the only issue is the sufficiency of the complaint);
Christensen v. Superior Court (Los Angeles), 230 Cal. App. 3d 798,
830 (1990) (all plaintiffs have standing to sue for disgorgement of
profits and compensation obtained as a result of provision of
mortuary services); Rent Control Bd. v. Bluvshtein, 230 Cal. App.
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3d 308, 318 (1991) (Municipal Rent Control Board is "a governing
agency; it is none of the things included in the [§ 17204] definition
of person. Therefore, it has no standing to bring an action for
injunction pursuant to the Unfair Practices Act. . . ."); Tenants Ass'n
v. Beverly Southers, 222 Cal. App. 3d 1293, 1304 (1990) (reverses
trial court; in an action grounded in, inter alia, UCL claims, an
unincorporated association of residents in a mobile home park
owned and managed by defendants has standing to sue in a
representative capacity, except for personalized injuries such as
emotional distress); Mid-Peninsula Citizens for Fair Hous. v.
Westwood Investors, 221 Cal. App. 3d 1377 (1990); Yancy v.
American Sav. and Loan Ass'n, 215 Cal. App. 3d 1076, 262 Cal.
Rptr. 792, 797-8 (1989) (denies appeal from orders made pursuant
to voluntary settlement of class action because appellant, neither a
class member nor an intervenor, is not aggrieved [within the
meaning of Code of Civil Procedure § 902] by the orders and
therefore lacks standing to challenge them. The trial court had
already established that the class representatives provided
adequate representation and that the settlement itself was fair prior
to appellant's attempt to become involved in the case); Industrial
Indem. Co. v. Superior Court, 209 Cal. App. 3d 1093, 657 (1989)
(plaintiff cannot recover restitution unless he is member of class for
whose benefit statute was enacted); Consumers Union of U.S., Inc.
v. Fisher Dev., Inc., 208 Cal. App. 3d 1433, 1437 (1989) (relief
under the UCL is not limited to "aggrieved" persons, even though
only "aggrieved" persons could sue under the express terms of the
statute allegedly violated, the Unruh Civil Rights Act; but treble
damage remedy and attorneys' fees available under Unruh Act
would not be available to non-aggrieved plaintiffs); Pines v.
Tomson, 160 Cal. App. 3d 370, 380-81 (1984) (Jewish
businessman with no direct dealings with defendants could sue
based on defendants' publication of a Christian Yellow Pages);
People v. James, 122 Cal. App. 3d 25, 40 (1981) (government has
standing to sue even where actual victims lack standing);
Hernandez v. Atlantic Fin. Co. of Los Angeles, 105 Cal. App. 3d 65,
86-89, 70-71 (1980) (daughter of car buyer could sue under the
UCL on behalf of members of the public even though she did not
purchase a car and did not borrow money from defendants; action
is "fundamentally a law enforcement action designed to protect the
public and not to benefit private parties."); Stoiber v. Honeychuck,
101 Cal. App. 3d 903, 926-28 (1980) (tenant may not sue landlord
for unsafe and unsanitary buildings because she had moved out of
his premises and did not allege her suit was brought on behalf of
the general public); United Farm Workers of Am. v. Superior Court,
47 Cal. App. 3d 334 (1975) (plaintiff cannot recover restitution
unless he is member of class for whose benefit statute was
enacted).
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Federal
Vermont Agency of Natural Resources v. United States, 529 U.S.
765, 120 S. Ct. 1858 (2000) (United States' "injury in fact suffices to
confer standing on respondent. . . ."); John Paul Mitchell Sys. v.
Eslami, Nos. 95-55820, 95-55856, 1997 U.S. App. LEXIS 5974
(9th Cir. 1997) (affirms denial of injunctive relief under UCL for
fraudulent business practices; reasons that defendant's reselling of
plaintiffs' hair products in violation of contract did not "deceive the
general public," and that an injunction could not protect against acts
"which have long since ceased"—particularly given that plaintiff
retained the capacity to prevent such future conduct by refusing to
sell products to defendant); McCarthy v. Recordex Serv., Inc., 80
F.3d 842 (3d Cir. 1996), cert. denied, 519 U.S. 825 (1996) (affirms
in part and reverses in part; indirect purchasers lack standing to
bring an antitrust action and an associated action for unfair
competition for alleged conspiracy by defendants to charge
excessive fees for photocopies of medical records requested by
patients); Hartley v. Stamford Towers Ltd. Partnership, 1994 U.S.
App. LEXIS 23543, at *19 (9th Cir. Aug. 26, 1994) (depublished
opinion) (because the plaintiff received notice as a class member,
chose not to opt out of the class and accepted the settlement
payment, she is enjoined from arbitrating claims against the
defendant); Mortera v. N. Am. Mortgage Co., 172 F. Supp. 2d 1240
(N.D. Cal. 2001) (remands to state court case brought by plaintiff as
a private attorney general under the UCL, as the plaintiff had not
alleged injury in fact sufficient to meet the standing requirements of
Article III in her case to enjoin defendant mortgage company from
charging California veterans who participated in the VA Home Loan
Guaranty Program certain fees; plaintiff nether sought, nor was
entitled to under the UCL, any portion of the recovery); Hamelin v.
Allstate Ins. Co., 2002 U.S. Dist. LEXIS 5093 (C.D. Cal. 2002)
(dismisses plaintiff's UCL claim without prejudice; plaintiff insured
does not have standing to bring a UCL claim against defendant
insurance company in federal court because there is no evidence
that the insured faces any particular and concrete possibility of
future injury, the policies have been paid to their limits, and the
insured is not a current policyholder; plaintiff would have standing
to pursue the UCL claim in Superior Court, on behalf of others,
because the California Supreme Court has recognized that the UCL
has lax standing requirements, lower than those in Article III); In re
Terazonsin Hydrochloride Antitrust Litigation, 160 F. Supp. 2d
1365, 1371-72, 1379 (S. D. Fla. 2001) (grants in part and denies in
part defendants' motion to dismiss; class of indirect purchasers may
not bring a UCL claim where the plaintiffs must "rely on unidentified
persons within those states to state a claim for relief"; however,
dismissal is without prejudice; UCL provides the California indirect
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plaintiff-purchasers a remedy "because [the statute] explicitly
provides that 'the court may make such orders or judgments . . . as
may be necessary to restore to any person in interest any money . .
. which may have been acquired by . . . unfair competition'";
recognizes that UCL proscribes unilateral monopolization of a
prescription drug market); Virgin Enter. Ltd. v. Am. Longevity, 2001
U.S. Dist. LEXIS 2046, at *24 (S.D.N.Y. Feb. 28, 2001) (denies
motion to dismiss because plaintiff's alleged Lanham Act violation
could constitute injury in fact); FAS Techs., Ltd. v. Dainippon
Screen Mfg., Co., 2001 U.S. Dist. LEXIS 7503 (N.D. Cal.2001)
(grants defendant equipment manufacturer's motion for summary
judgment with respect to UCL claim because the undisputed
evidence demonstrated that plaintiff has not suffered any injury with
respect to defendant's alleged misappropriation of trade secrets
and therefore it lacks standing to bring a UCL claim); Sony Pictures
Entm't, Inc. v. Fireworks Entm't Group, Inc., 156 F. Supp. 2d 1148
(C.D. Cal. 2001) (dismisses without leave to amend defendant
Fireworks' UCL counterclaim; defendants do not have standing
because they neither alleged in their counterclaims nor explained in
their papers how they suffered a distinct and palpable injury as a
result of plaintiff's unfair business practices); Toxic Injuries Corp. v.
Safety-Kleen Corp., 57 F. Supp. 2d 947, 949 (C.D. Cal. 1999)
(denies plaintiff's standing in federal court under § 17203 because
the plaintiff had not suffered any injuries in fact); Stationary Eng'rs
Local 39 Health and Welfare Trust Fund v. Philip Morris, Inc.,
1998 U.S. Dist. LEXIS 8302 (N.D. Cal. 1998) (dismisses plaintiffs'
UCL claim and all other claims except for plaintiffs' negligent breach
of special duty claim; association does not have standing to bring a
claim on behalf of its members under the UCL in federal court;
plaintiffs would involve individual members of the association, and
therefore it fails the test; plaintiffs' UCL claim based on defendant's
alleged misrepresentations fails because the plaintiffs did not
demonstrate a causal link between defendant's actions and
plaintiffs' injuries); Pharmacare v. Caremark, 965 F. Supp. 1411 (D.
Haw 1996) (denies defendant's motion to dismiss unfair business
practice claim but grants some of defendant's motions to dismiss
other claims; plaintiff has standing to sue; because plaintiff limited
its prayer for relief to restitution, defendant's challenges to a
request for an injunction are irrelevant); As You Sow v. SherwinWilliams Co., 1993 U.S. Dist. LEXIS 18310 (N.D. Cal. 1993)
(remands to state court because plaintiff lacks standing under
Article III to sue in federal court; plaintiff did not allege that it
suffered an injury in fact; reaffirms the holding in Boyle v. MTV
Networks, Inc., 766 F. Supp. 809 (N.D. Cal. 1991), which remanded
because plaintiff lacked standing to sue in federal court because
she did not suffer an injury); Boyle v. MTV Networks, Inc.,
766 F. Supp. 809, 817-18 (N.D. Cal. 1991) (remands because,
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among other grounds, plaintiff lacks standing to sue in federal court
because she sues only on behalf of general public and has not
herself suffered an injury from defendants' actions); In Re Papst
Licensing, 2000 U.S. Dist. LEXIS 18316 (E.D. La. 2000) (grants
plaintiff patent licensor's motion to dismiss defendant
manufacturer's UCL counterclaim; defendant failed to assert the
factual allegations necessary to support the distinct and palpable
injury required for standing because defendant's counterclaim
contains no allegation of royalties actually paid by defendant which
might form the basis for restitution); Burt v. Danforth, 742 F. Supp.
1043, 1053 (E.D. Mo. 1990) (plaintiff cannot recover "restitution" on
derivative-type claims for breach of fiduciary duty because, among
other things, "plaintiff is not a member of the class for whose benefit
the statute was entered"); Ferrari S.p.A. Esercizio Fabbriche
Automobili E. Corse v. McBurnie Coachcraft, Inc., 1988 U.S. Dist.
LEXIS 16314, at *15 (S.D. Cal. Sept. 6, 1988) (plaintiff is not
entitled to punitive or treble damages under UCL); People v. Beltz
Travel Serv., Inc., 379 F. Supp. 948, 950 (N.D. Cal. 1974) (federal
law governs analysis of standing issue after removal).
95.
Statutes of Limitation
The statute of limitation under section 17200 is "four years after the cause
of action accrued" (Cal. Bus. & Prof. Code § 17208) and has been held
(by federal courts) to begin to run when the events at issue occur (not
upon later discovery). (See Stutz Motor Car of Am., Inc. v. Reebok Int'l,
Ltd., 909 F. Supp 1358, 1363 (C.D. Cal. 1995) ("statute begins to run
when the cause of action accrues, irrespective of whether plaintiff knew of
its accrual").
Under § 17536, for the Attorney General seeking civil penalties, the
statute of limitation is three years from the date a public prosecutor
discovers "the facts constituting grounds for commencing such an action."
(Cal. Civ. Proc. Code § 338(h)). California Code of Civil Procedure
§ 340(2), however, provides for a one-year statute of limitation for "[a]n
action upon a statute for a forfeiture or penalty to the people of this state."
These provisions do not cover suits brought by private parties or by public
officials for injunctive relief. Presumably, such claims are covered under
the catch-all provision of California Code of Civil Procedure § 343, which
provides a four-year statute of limitation for actions not otherwise
specified, although if they are construed as fraud claims, they should be
subject to the three-year limitation of California Code of Civil Procedure
§ 338(d).
The UCL statute of limitation can be used to revive a claim that might
otherwise be time-barred under a shorter statute of limitation governing an
underlying statute.
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California
Cortez v. Purolator Air Filtration Prods. Co., 23 Cal. 4th 163 (2000)
(affirms judgment for plaintiff employee in action for unpaid wages
brought under the UCL; shorter periods of limitation applicable to
contractual or statutory wage claims do not govern a UCL action
based on failure to pay wages); Cortez v. Purolator Air Filtration
Products Co., 23 Cal. 4th 163 (2000); Wyatt v. Union Mortgage Co.,
24 Cal. 3d 773, 786 (1979) (proof of civil conspiracy tolls statute of
limitations "until the 'last overt act' pursuant to the conspiracy has
been completed [citation omitted]. Here the 'last overt act' was
appellant's collection a few weeks before trial of final payment on
the 1970 loan.”); Glue-Fold v. Slautterback, 82 Cal. App. 4th 1018,
1021, 1030-1031 (2000) (affirms summary judgment in favor of
defendant envelope corporation because plaintiff failed to produce
sufficient evidence to satisfy the "discovery" rule and thereby toll
the running of the four-year statute of limitation under UCL, when
the plaintiff did not show reasonable diligence in investigating the
moment at which the defendant misappropriated trade secrets).
Federal
Breed v. Hughes Aircraft Co., 2002 U.S. App. Lexis 7084 (Fed. Cir.
Apr. 5, 2002) (unpublished opinion) (alleged promises made to
plaintiff that he would "get a big contract" do not bar defendant from
asserting statute of limitations defense to UCL and
misappropriation of trade secret claims because such promises
were not conditioned on plaintiff refraining from litigation and could
not reasonably cause detrimental reliance; further, misappropriation
is not a continuing tort, but accrues when parties' confidential
relationship is first violated, so plaintiff's assertion that his UCL
claim is not time barred because defendant's misappropriations
were continuing acts was rejected); Solomon v. North Am. Life and
Cas. Ins. Co., 1998 U.S. App. LEXIS 14907 (9th Cir. June 4, 1998)
(modified, 98 Cal. Daily Op. Serv. 6278 (9th Cir. Cal. Aug. 11,
1998)) (fraud claim in insurance action barred by three-year statute
of limitations under Cal. Civ. Proc. Code § 338(d), and claim for
breach of fiduciary duty was governed by a general four-year
statute of limitations pursuant to Cal. Civ. Proc. Code § 343);
Eichman v. Fotomat Corp., 880 F.2d 149, 159 (9th Cir. 1989);
MediMatch, Inc., v. Lucent Techs, Inc., 120 F. Supp. 2d 842 (N.D.
Cal. 2000) (grants defendant's motion to dismiss UCL claim; one
plaintiff's claims were barred by the statute of limitations, as tolling
commenced when the cause of action accrued (i.e. when the party
entered into the sale and lease agreement), irrespective of whether
plaintiff knew of its accrual; also, the plaintiffs had contracted into a
valid, express choice-of-law provision, thus California law was not
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applicable); Suh v. Yang, 1997 U.S. Dist. LEXIS 20073 (N.D. Cal.
Nov. 6, 1997) (denies defendant's motion for counter summary
judgment based on statute of limitations; each separate infringing
display of defendant's name on products constitutes different cause
of action, therefore action not barred by four year statute of
limitations); Stutz Motor Car of Am., Inc. v. Reebok Int'l, Ltd., 909 F.
Supp 1358, 1363 (C.D. Cal. 1995) ("statute begins to run when the
cause of action accrues, irrespective of whether plaintiff knew of its
accrual"; refuses to apply discovery rule); Intermedics, Inc. v.
Ventritex, Inc., 822 F. Supp (N.D. Cal. 1993) (grants defendant's
motion for summary judgment; unfair competition charge based on
misappropriation of trade secrets begins to run upon discovery of
facts that support an unfair competition claim); Levine v.
Diamanthuset, Inc., 722 F. Supp. 579 (N.D. Cal. 1989), rev'd on
other grounds, 950 F.2d 1978 (9th Cir. 1991) (four-year statute of
limitation of UCL applies to claim against lawyer, rather than
one-year statute of limitation directly governing such claims).
96.
Statutory Interpretation
"[I]t is fundamental that a statute should not be interpreted in a manner
that would lead to absurd results." (Central Pathology Serv. Med. Clinic,
Inc. v. Superior Court, 3 Cal. 4th 181, 191 (1992); see also Freedom
Newspaper, Inc. v. Orange County Employees Retirement Sys. Bd. of
Dirs., 6 Cal. 4th 821, 827-28 (1993) ("We will not give a stature an absurd
interpretation")). The UCL must be read in pari materia with the Unfair
Business Practices Act. (See Morehart v. County of Santa Barbara, 7 Cal.
4th 725, 752 (1994); Pesce v. Department of Alcoholic Beverage Control,
51 Cal. 2d 310, 312-13 (1958).).
97.
Subsequent Disclosure
The courts have been hostile to defendants' arguments that full disclosure
of all necessary facts was made after an initial misleading representation.
The FTC has taken the same position.
California
Chern v. Bank of America, 15 Cal. 3d 866, 876 (1976) (subsequent
disclosure does not cure violation when initial misrepresentation is
misleading).
Federal
Resort Car Rental System, Inc. v. FTC, 518 F.2d 962, 964 (9th
Cir.), cert. denied, 423 U.S. 827 (1975) ("FTC Act is violated if it
induces the first contact rule deception, even if the buyer later
becomes fully informed before entering the contract.").
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98.
Summary Judgment
Determinations of "unfairness" or "deceptiveness" may be either questions
of law or questions of fact.
California
Aguilar v. Atlantic Richfield Co., 25 Cal. 4th 826 (2001) (affirms
appellate court's grant of summary judgment to defendant against
claimed violations of the Cartwright Act and the UCL; Court clarifies
the law courts must apply specifically when ruling on motions for
summary judgment in antitrust actions for unlawful conspiracy; to
overcome a defendant's motion for summary judgment a plaintiff
must show evidence of conspiracy by a preponderance of the
evidence – ambiguous evidence or inferences showing or implying
conduct that is as consistent with permissible competition by
independent actors as with unlawful conspiracy by collusion is
insufficient to meet this burden; accordingly, a plaintiff must present
evidence that tends to exclude, although it need not actually
exclude, the possibility that the alleged conspirators acted
independently rather than collusively); Motors, Inc. v. Times Mirror
Co., 102 Cal. App. 3d 735, 740 (1980) (summary judgment should
be readily available for UCL claims; if the "utility of the conduct
clearly justifies the practice, no more than a simple motion for
summary judgment would be called for"); Payne v. United California
Bank, 23 Cal. App. 3d 850, 856 (1972) ("[W]hat constitutes 'unfair
competition' or 'unfair or fraudulent business practice' under any
given set of circumstances is a question of fact, the essential test
being whether the public is likely to be deceived."); People v.
Lynam, 253 Cal. App. 2d 959, 965 (1967) (whether advertisements
are false or misleading is question of law appropriately subject to
summary judgment).
Federal
Starter Corp. v. Eurostar, 1993 U.S. Dist. LEXIS 19955, at *5-6
(C.D. Cal. 1993), 28 U.S.P.Q. 2d (BNA) 1844 (summary judgment
may be appropriate in confusion of trademark case alleging unfair
competition and trademark infringement where plaintiff has not
raised genuine issue of fact; unfair competition claim dismissed).
99.
Tolling of Statute of Limitations
Although the pendency of an uncertified class action tolls the
statute of limitations of both claims asserted in the suit until class
certification is denied or the case is dismissed, it does not appear
that this tolling doctrine applies to cases filed solely as
representative actions under the UCL.
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California
The decision of the California Supreme Court in Kraus v. Trinity
Management Services, Inc., 23 Cal. 4th 116 (2000) supports this
view. In Kraus, the Court rejected a due process challenge despite
recognizing that private Attorney General lawsuits posed a serious
risk of repetitive litigation because, under the procedural
circumstances in Kraus, Trinity Management had no risk of
repetitive litigation because, by the time the case reached the
California Supreme Court, the statute of limitations already had run
on claims that could have been asserted by absent parties to the
representative action.
100.
Truth As Defense
Truth is a defense to claims of fraudulent misrepresentation when no
material facts are concealed.
California
Lee v. Interinsurance Exch. of the Auto. Club of S. California,
50 Cal. App. 4th 694 (1996) (dismisses plaintiff's claim that
defendant insurance company fraudulently induced subscribers to
execute a Subscriber's Agreement on the grounds that all material
representations in the Agreement were true and no material facts
were concealed); Williams v. State Farm Fire and Cas., 216 Cal.
App. 3d 1540 (1990) (affirms judgment for defendant insurance
company because defendant did not misrepresent its policies
regarding earthquake coverage and plaintiff's stipulated facts
establish that his characterization of the events is inaccurate).
Federal
National Van Lines, Inc. v. Dean, 237 F.3d 688, 692 (9th Cir. 1956)
(reverses judgment; applies California law to conclude defendant
committed, inter alia, unfair trade practices; notes that it is not
necessary to prove actual confusion or deception, as "it is sufficient
that there is a likelihood of deception"; states that, if intent to
deceive is shown, it raises a presumption that deception and
confusion resulted); Cairns v. Franklin Mint Co., 107 F. Supp. 2d
1212 (C.D. Cal. 2000) (grants summary judgment to defendant on
plaintiff's false advertising claims under 15 U.S.C. § 1125(a) and
UCL because the uncontroverted evidence demonstrated that
defendant's statement that 100% of the purchase price of
commemorative items depicting Princess Diana would be donated
to her favorite charities was "literally true"); Alchemy II Inc. v. Yes!
Entertainment Corp., 844 F. Supp. 560 (C.D. Cal. 1997)
(demonstrating one model of a talking teddy bear at a trade show,
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then shipping a slightly different model, neither violates the UCL nor
harmed anyone).
But truth is not a defense to a UCL deception claim if the statement is
likely to mislead.
California
Day v. AT&T Corp., 63 Cal. App. 4th 325, 332 (1998) ("[UCL] may
be invoked where the advertising complained of is not actually
false, but thought likely to mislead or deceive, or is in fact false. By
their breadth, the statutes encompass not only those
advertisements which have deceived or misled because they are
untrue, but also those which may be accurate on some level, but
will nonetheless tend to mislead or deceive."); College of
Psychological and Soc. Studies v. Board of Behavioral Science
Exam'rs, 41 Cal. App. 3d 367 (1974) (Board cannot take action
against unaccredited college for granting Ph.D.'s to persons who
are licensed and have Master's degrees from accredited schools,
and such conduct does not constitute false advertising; "[t]he
legislature is free to deal with unaccredited schools, but the
administrative board may not enlarge the provisions of the
chapter."); People v. Lynam, 253 Cal. App. 2d 959, 966 (1967);
People v. Wahl, 39 Cal. App. 2d Supp. 771, 773 (1940). But see
Cozad v. Board of Chiropractic Exam'rs, 153 Cal. App. 2d 249
(1957) (Board's adoption of rules prohibiting misrepresentations
and proscribing penalties for such misrepresentations was not
preempted by FAA, but the Board could not prohibit or restrict
advertising that was not untrue or misleading).
Federal
Visa Int'l Serv. Ass'n v. Bankcard Holders of Am., 211 U.S.P.Q.
(BNA) 28 (N.D. Cal. 1981) ('"Irrespective of its truth or falsity, any
statement which is deceptive or merely misleading without intent to
deceive, violates [FAA]. The essence of the 'unfair competition'
prohibited, lies in the simulation and imitation of goods of a rival or
competitor with the purpose of deceiving an unwary public into
buying imitations under the impression that it is purchasing goods
of such competitor," citing Audio Fidelity v. High Fidelity
Recordings, 283 F.2d 551, 555 (9th Cir. 1960)); Kalwaytys v. FTC,
237 F.2d 654, 656 (7th Cir. 1956) (truth is not defense if statement
is likely to mislead).
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101.
Unclean Hands
Unclean hands defenses do not apply to prevent the government from
enjoining unlawful and fraudulent business practices. Applicability of
unclean hands defenses to individual claims is uncertain.
California
People v. James, 122 Cal. App. 3d 25, 40 (1981) (government does
not stand in the shoes of the victim class).
Federal
Denbicare, Inc. v. Toys "R" Us, Inc., 1988 U.S. Dist. LEXIS 15948,
at *8 (N.D. Cal. Jan. 13, 1988) (although the defendant accused the
plaintiff of "unclean hands," the court awarded a preliminary
injunction in favor of the plaintiff because "even considering the
possibility that plaintiff has not acted in utmost good faith, the
balance of hardships still favors the plaintiff").
102.
"Unfair" Act Not Actionable If Not Unlawful
Although some courts had barred UCL claims where a challenged act did
not violate a statute that governed the conduct at issue, the California
Supreme Court has held in an antitrust context that an act that is not
unlawful may nonetheless give rise to liability if it is unfair. In Cel-Tech
Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th
163, 187 (1999), the Court said that while courts cannot "simply impose
their own notions of the day as to what is fair or unfair," conduct is
actionable under the unfairness prong if it "threatens an incipient violation
of an antitrust law, or violates the policy or spirit of one 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."). Earlier
decisions had upheld defenses on the "not unlawful" basis.
California
Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone
Co., 20 Cal. 4th 163, 187 (1999) (in context of antitrust case, Court
criticizes earlier unfairness definitions but declines to formulate new
definitions for all purposes; for antitrust cases, adopts new test:
"when a plaintiff who claims to have suffered an injury from a direct
competitor's 'unfair' act or practice invokes UCL, the word 'unfair' in
that section means conduct that threatens an incipient violation of
an antitrust law, or violates the policy or spirit of one 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.");
Blank v. Kirwan, 39 Cal. 3d 311, 322-23, 329 (1985) (unsuccessful
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applicant for license to operate hostess club sued a number of
defendants for conspiring to monopolize the operation of hostess
club; plaintiff failed to state UCL claim because, among other
defects, "defendants' efforts, as we have concluded, cannot violate
the Cartwright Act (Cal. Bus. & Prof. Code § 16700, et. seq.)");
AICCO, Inc. v. Ins. Co. of N. Am., 90 Cal. App. 4th 579 (2001)
(reverses the trial court's dismissal of plaintiffs' complaint because
defendant insurance company was alleged to have transferred
liabilities to another insurance company without the consent of its
policyholders in violation of Cal. Civ. Code § 1457; accordingly,
plaintiffs allegations were clearly sufficient to state a cause of action
for unlawful, deceptive or misleading activity under the UCL);
People v. Servantes, 86 Cal. App. 4th 1081 (2001) (violation of
hundreds of state and local towing laws is unfair business practice;
UCL prohibits not only unlawful business practices but also unfair
business practices, which can be determined by measuring the
gravity of the harm to the victim against the utility of the defendant's
conduct); Van Ness v. Blue Cross of Cal., 87 Cal. App. 4th 364
(2001) (affirms trial court's grant of summary judgment against
plaintiff insured who claimed that policy documents misrepresented
the benefits offered by defendant health insurer; states that
plaintiff's UCL claim must necessarily fail because, contrary to
plaintiffs assertions, the language of the policy and promotional
brochure were not deceptive, but clear and unambiguous);
Shadoan v. World Sav. & Loan Ass'n, 219 Cal. App. 3d 97, 106
(1990) (lender's prepayment penalty clause and unilateral call
clause were not an unfair business practice under the UCL
because the plaintiff failed to prove the provisions were
unconscionable); Hobby Indus. Ass'n of Am., Inc. v. Younger,
101 Cal. App. 3d 358, 359-70 (1980) ("although the Supreme Court
has construed the orbit of the unfair competition statutes
expansively, it cannot be said that this embrace in purview also
encompasses business practices which the Legislature has
expressly declared to be lawful in other legislature.") (Fair
Packaging and Labeling Act (Cal. Bus. & Prof. Code §§ 12601, et
seq.), which prohibits packaging containing nonfunctional slack fill,
exempts wholesale and retail distributors from liability.)
103.
Unlawful Usurpation of Legislative Power
A number of courts have held that the judiciary should not usurp the power
of the legislature and the governor to make economic policy by using UCL
actions to regulate otherwise lawful conduct.
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California
Harris v. Capital Growth Investors XIV, 52 Cal. 3d 1142, 1168
(1991) ("In the absence of clear legislative direction, we are
unwilling to engage in complex economic regulation under the
guise of judicial decision making.") (not UCL case); Bristol Hotels &
Resorts v. Nat'l Council on Compensation Ins., Inc., 2002 Cal. App.
LEXIS 2947 (Mar. 13, 2002) (not published) (overturns demurrer on
the alternative grounds that the decision involved complex
economic regulation to which the court's should abstain in
deference to the legislature; since the trial court did not sustain the
demurrer on that basis the appellate court could only do so if it
determined that the trial court abused its discretion, which it did not
because determining whether defendant violated a statute
pertaining to worker's compensation did not involve issues of
complex economic regulation); California Med. Ass'n v. Healthcare
of California, Inc., 94 Cal. App. 4th 151 (2001) (affirms trial court's
dismissal of plaintiff's derivative UCL claim since the Knox-Keene
statutory scheme contemplated certain risk shifting arrangements
similar to the defendant's contractual shifting of risk to
intermediaries, which the plaintiffs' alleged to be unlawful; "Where,
as here, the Legislature has permitted certain conduct, 'courts may
not override that determination' by declaring such conduct to be
actionable under...section 17200") (quoting Cel-Tech
Communications, Inc. v. Los Angeles Cellular Telephone Co., 20
Cal. 4th 163, 182 (1999)); Swanson v. St. John's Reg'l Med. Ctr.,
97 Cal. App. 4th 245, 252 (2002) (affirms demurrer because the
plaintiff may not use UCL to assault the Hospital Lien Act's statutory
safe harbor); Wolfe v. State Farm Fire & Cas. Ins. Co., 46 Cal. App.
4th 554 (1996); California Grocers Ass'n, Inc. v. Bank of America,
22 Cal. App. 4th 205 (1994); Samura v. Kaiser Found. Health Plan,
Inc., 17 Cal. App. 4th 1284 (1993), cert. denied, 511 U.S. 1084
(1994) (refuses to interfere with health care contracts pursuant to
UCL because "the courts cannot assume general regulatory powers
over health maintenance organizations through guise of enforcing
Business Professions Code § 17200"); Korens v. R. W. Zukin
Corp., 212 Cal. App. 3d 1054 (1989).
104.
Venue
In government actions for civil penalties under the UCL and FAA, venue
lies in "the county in which the cause, or some part thereof, arose." (Cal.
Civ. Proc. Code § 393(1)(a)). Venue for private suits, however, lies in
"any court of competent jurisdiction." (Cal. Bus. & Prof. Code § 17203).
Venue statues in the Code of Civil Procedure may limit plaintiffs'
seemingly broad venue options, however.
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California
America Online, Inc. v. Super. Ct. of Alameda County, 90 Cal. App.
4th 1 (2001) (affirms denial of defendant internet provider's motion
to stay or dismiss for inconvenient forum where contractual forum
selection clause was unenforceable on public policy grounds
related to plaintiffs' claims under the Consumers Legal Remedies
Act); Gallin v. Superior Court, 230 Cal. App. 3d 541, 545 (1991)
(Cal. Civ. Proc. Code § 395(a), which establishes proper venue
over defendants as the county of their residence, supersedes
plaintiff's venue rights under the California Consumers Legal
Remedies Act, Cal. Civ. Code §§ 1750-84).
Other States
Perovich v. Humphrey, 1997 U.S. Dist. LEXIS 16949 (1997 N.D. Ill)
(memorandum opinion) (dismisses plaintiffs' claim under UCL and
for class certification, but denies the motion to dismiss plaintiffs'
claim of Bankruptcy Code violation; Illinois law applies rather than
California law under the choice of law rules in Illinois despite the
fact that the alleged wrongful conduct was initiated in California,
because the injury occurred in Illinois, the relationship between the
parties is in Illinois, and the majority of the parties reside in Illinois.
Therefore, there is no UCL issue).
Federal
Diamond-Chase Co. v. Stretch Devices, Inc., 16 U.S.P.Q. 2d 1568,
1990 U.S. Dist. LEXIS 19432, at *2-11 (C.D. Cal. 1990) (grants
motion to transfer the case to the District Court for the District of
New Jersey in order to consolidate it with prior patent infringement
case brought there by the defendant.)
105.
Vicarious Liability
California
People v. Dollar Rent A Car Systems, Inc., 211 Cal. App. 3d 119
(1989) (upholds liability of majority shareholder/CEO who approved
practices at issue); People v. Toomey, 157 Cal. App. 3d 1 (1985)
(upholds liability of president and chief operating officer because of
position in the corporation); People v. Regan, 95 Cal. App. 3d
Supp. 1 (1979) (employer was not strictly liable for § FAA violations
by his employee, that knowledge by employer of employee's illegal
activities was not inferable, and that there was insufficient evidence
to support conviction of employer for employee's violation of
§ FAA).
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106.
Waiver
Where plaintiff fails to describe its claims before the trial court, the court of
appeal may find waiver.
California
Californians for Population Stabilization v. Hewlett-Packard Co.,
58 Cal. App. 4th 273, 291-92 (1997) (plaintiff's claim of "unfair"
practices, including that company resorted to punitive litigation
against employees who quit, that the allegedly unlawful contract
provisions and litigation practices enabled defendant to offer
California clients something other California suppliers of temporary
compute personnel could not, and that deputation agreement
specifying 30% add-on attorneys' fees provision only operated in
favor of defendant were waived because of plaintiff's failure to bring
these deficiencies to the attention of the court.)
IX. ATTORNEYS FEES
Although the UCL does not provide for an award of attorneys fees to a
prevailing party, plaintiffs pleading claims as "private attorneys general"
under often seek, and receive, attorneys fees under California Code of
Civil Procedure section 1021.5, for lawsuits brought in the "public
interest."
California
Hewlett v. Squaw Valley Ski Corp., 54 Cal. App. 4th 499 (1997) (upholds both
penalties and attorneys fees; states that "[d]ue to the burdens imposed on
public agencies, adequate government enforcement of the laws is not always
possible, making private action imperative"); Committee to Defend Reprod.
Rights v. A Free Pregnancy Ctr., 229 Cal. App. 3d 633, 643-44 (1991) ("The
trial court, in considering fee awards to private litigants on the facts and
record applicable to each particular case, must carefully walk the line
between unreasonably transmuting section 1021.5 into an unwanted
cornucopia of attorney fees for those intervene in, or initiate litigation against,
private parties under the guise of benefiting the public interest while actually
performing duplicative, unnecessary, and valueless services, and providing
appropriate compensation under that statute in cases where the co litigating
private party does render necessary, significant services of value and benefit
to the public"); Willis v. Superior Court of Los Angeles County, 112 Cal. App.
3d 277 (1980) (compels discovery by lawyer-plaintiff of his clients, the final
disposition of their cases, and the amount of fees awarded, on the grounds
that such information was marginally private and directly relevant to unfair
competition action).
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Federal
Pachmayer Gun Works, Inc. v. Olin Mathieson Chem. Corp., 502 F.2d 802,
809-12 (9th Cir. 1974) (applies California law and affirms trial court's refusal
to award attorney's fees to plaintiffs alleging, inter alia, unfair competition).
X. RECOVERY OF COSTS
In California, a defendant may be entitled to costs where he has made a
modest settlement offer which is refused by a plaintiff who subsequently
fails to establish liability at trial. (Cal. Civ. Proc. Code § 998).
California
People v. Fremont Gen. Corp., 89 Cal. App. 4th 1260 (2001) (affirms trial
court's award of costs to a parent company defendant where plaintiffs
rejected parent company's pre-trial $2 million offer under Cal. Civ. Proc. Code
§ 998 and subsequently failed to establish the parent company's liability
under the UCL).
XI. SETTLEMENT
A. Class Actions.
Settlement of class actions under the UCL follows normal class action
procedures, and California courts look to federal rules and procedures for
guidance. For Rule 23(b)(3) class actions, where customers must be given
notice and an opportunity to request exclusion from the class before the
judgment has binding effect, the court must approve the form of notice and
preliminarily approve the fairness of the settlement. For Rule 23(b)(2) class
actions, where the primary form of relief granted by the settlement is injunctive,
notice to absent class members is not required.
1.
Fairness Hearing
Where a fairness hearing is required, the court determines whether the
proposed settlement is fair, reasonable, and adequate.
2.
Fiduciary Duty
Named class representatives owe a fiduciary duty to class members and
must provide adequate representation.
California
Kagan v. Gibralter Sav. & Loan Ass'n, 35 Cal. 3d 582, 593 (1984)
(separate settlement with named plaintiffs is prohibited under
Consumers Legal Remedies Act); La Sala v. American Sav. & Loan
Ass'n, 5 Cal. 3d 864, 871 (1971) (class representatives "surrender
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any right to compromise the group action in return for an individual
gain").
3.
Adequate Representative
Rule 23(a)(4) representativeness requirement means that the named
plaintiff must have been harmed by the same practice of the same
defendant as the absent parties he or she seeks to represent.
California
Trotsky v. Los Angeles Fed. Sav. & Loan Ass'n, 48 Cal. App. 3d
134, 146 (1975).
Federal
La Mar v. H. & B. Novelty & Loan Co., 489 F.2d 461, 464 (9th Cir.
1973).
B. Quasi-Class Actions Under the UCL
Settlement of quasi-class actions under the UCL does not require court approval.
The res judicata effect of the settlement of a quasi-class claim is uncertain,
however. Consider that inclusion of a harmed plaintiff may increase the
likelihood of res judicata effect. Some courts have applied res judicata or res
judicata-type principles to bar repetitive litigation, while others have rejected such
arguments.
California
People v. Henderson, 255 Cal. App. 3d 1129, 1151 (1990); Frazier v. City
of Richmond, 184 Cal. App. 3d 1491, 1503 (1986) (notice and opt-out
procedures are not required to satisfy due process); Gates v. Superior
Court of Los Angeles County, 178 Cal. App. 3d 301, 307 (1986)
(settlement of taxpayers' suit against government is res judicata of claims
by other taxpayers); People v. Hy-Lond Enters., Inc., 93 Cal. App. 3d 734,
752-53 (1979) (district attorney lacks authority to "surrender the powers of
the Attorney General and his fellow district attorneys to commence, when
appropriate, actions in other counties under [ the UCL]"; the DA cannot
commit that an administrative agency will not separately enforce its
regulations); Rynsburger v. Dairymen's Fertilizer Coop., Inc., 266 Cal.
App. 2d 269, 278 (1968) ("Where statutory authority to sue has been given
specifically to a public entity by statute, a judgment rendered therein is res
judicata as to all members of the class represented. [Citation omitted.]
Therefore, citizens and residents to the extent they are in privity with or
represented by the city or state, are bound by judgments" against the
government); City of Chino v. Superior Court, 255 Cal. App. 2d 747, 755
(1967) (res judicata applies where authority to sue is given to a public
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entity by statute "even though the public entity in a particular instance
could not have maintained the action as a representative of a class").
Federal
Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 812 (1985) (Court leaves
open the question whether notice and an opportunity to request exclusion
are constitutionally required before the settlement could bind absent
parties); Hansberry v. Lee, 311 U.S. 32, 42-43 (5th Cir. 1940); Southwest
Airlines Co. v. Texas Int'l Airlines, 546 F.2d 84 (5th Cir. 1977), cert.
denied, 434 U.S. 832 (1977) ("On the facts of this case, however, res
judicata applies because Dallas, as a government, represented in
Southwest I the only legal interests the airlines possess regarding the
enforcement of the 1968 ordinance against Southwest." In other words,
the relationship between the city as public enforcer of the ordinance and
the airlines as private enforcers is close enough to preclude relitigation).
District Attorneys and the Attorney General's office have developed an
internal understanding to prevent the multiple filings to which they might
otherwise be entitled, because fear of such multiplicity deters settlement.
Participation of the Attorney General's office is the best assurance against
a violation of this non-binding understanding. Note that the effect of the
understanding may lead to internecine warfare among various
prosecutorial levels.
Settlement with public law enforcement officials may not preclude private
suit.
California
People v. Pacific Land Research Co., 20 Cal. 3d 10, 17-18 (1977) (actions
by public prosecutors are not the equivalent of private class actions; "an
action by the People lacks the fundamental attributes of a consumer class
action filed by a private party. The Attorney General or other
governmental official who files the action is ordinarily not a member of the
class. His role as a protector of the public may be inconsistent with the
welfare of the class so that he could not adequately protect their interests
[citation omitted] and the claims and defenses are not typical of the
class."); People v. Superior Court (Good), 17 Cal. 3d 732, 736-37 (1976)
(Supreme Court allows intervention by individual suing on behalf of
investor class where district attorney had brought civil complaint under
predecessor to UCL seeking injunction, penalties, and restitution to
investors in oil drilling scheme).
Federal
Kamm v. California City Dev. Co., 509 F.2d 205, 208 (9th Cir. 1975)
(settlement with California AG that included restitution to lot owners bars
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2003 Gail E. Lees
Gibson, Dunn & Crutcher
All Rights Reserved
glees@gibsondunn.com
class action by lot owners who signed release and accepted restitution,
but case by those who did not sign release could proceed).
The attorney general's office rejects the res judicata argument, even
though it supports the rights of defendants to avoid repetitive litigation. In
an amicus brief filed with the California Court of Appeal in 1995, the
attorney general's office argued that the court should use standing
principles rather than res judicata principles to prevent repetitive litigation.
(Brief of Amicus Curiae California Attorney General in Gray v. Safeway,
(App. No. A 067323) (Alameda County S. Ct. No. H 171057-09) (Aug. 19,
1993) (case settled before appellate hearing).
C. Private Letter Agreement
Ordinarily, government prosecutors will require a stipulated judgment and
permanent injunction and will not agree to confidentiality, although they will
discuss publicity issues. Occasionally, where the case is not significant, a district
attorney may agree to a private letter agreement that is not made public because
it does not require court approval.
D. Adding True Class Claims
Occasionally, where the desire for res judicata protection outweighs the
defendant's concern that notice of a class action may provoke a response from
unnamed "quasi-class" members that will increase the amount defendant must
pay in settlement, a defendant may want to work with plaintiff's counsel to bring a
class representative and class counsel into the action.
California
Aetna Fin. Co. v. Consumers Union (San Francisco S. Ct. No. 926772)
(cross-complaint under UCL sought injunction and restitution on quasiclass basis; defendant requested res judicata protection; and parties
brought in class counsel, who intervened in the action and obtained court
approval after notice to class members).
10608448_3.DOC
155
2003 Gail E. Lees
Gibson, Dunn & Crutcher
All Rights Reserved
glees@gibsondunn.com