Unfair
Competition Law (UCL)
We
have added a new category of case decisions related to California Business
and Profession Code Sections 17000 et seq. (Unfair Trade Practices) as
an increasing number of plaintiffs are including causes of action for violation
of the Unfair Competition Law in their claims against manufacturers for
defective products, employers for discrimination, and insurers in coverage
actions. The Act defines unfair competition as any unlawful, unfair, or
fraudulent business act or practice or any unfair, deceptive, untrue or
misleading advertising. Both injunctive relief and monetary damages
are available for violation of the Act.
California’s Unfair Competition Law is amended by the passage of proposition 64.
With the passage of Proposition 64, significant portions of Business and Professions Code Section 17200 et seq. were amended. Three major changes were made: (1) individuals who seek private enforcement of unfair business competition laws must demonstrate that they were actually injured by, and suffered financial/property loss because of, unfair business practices; (2) private representative claims must now comply with procedural requirements applicable to class action lawsuits; and (3) only the California Attorney General or local government prosecutors can now sue on behalf of the general public to enforce unfair business competition laws. The issue of retroactivity likely will be decided in the near future as it is expected defendants in a number of pending cases will be filing motions to dismiss based on the new requirement that the private individual demonstrate actual injury.
Restitution
is the only monetary remedy authorized for violation of the UCL.
In
Korea Supply Company vs. Lockheed Martin Corporation (2003) 29 Cal.4th
1134, 131 Cal.Rptr.2d 29, plaintiff sued defendants asserting claims under
the UCL and for interference with prospective economic advantage.
For violation of the UCL plaintiff sought a disgorgement of profits earned
by the defendants. The California Supreme Court upheld the trial
court’s sustaining of the demurrer to the cause of action for violation
of the UCL, holding that the UCL authorized a court to order a defendant
to disgorge profits only to the extent that the damages constituted restitution
to the plaintiff.
While
a defendant may not enforce a written arbitration agreement to compel arbitration
of a claim for injunctive relief under the UCL, that portion of the claim
which seeks monetary damages is subject to arbitration under the agreement.
In
Cruz v. PacificCare Health Systems (2003) 30 Cal.4th 303, 133 Cal.Rptr.2d
58, plaintiff filed a class action against PacificCare for violation of
the UCL. PacificCare sought to compel contractual arbitration. The
California Supreme Court after reviewing several United States Supreme
Court cases concluded that claims under the UCL for injunctive relief were
inarbitrable but that claims for restitution under the UCL, whether brought
by an individual or in a class proceeding, would be subject to contractual
arbitration.
A
private plaintiff filing a representative action under the UCL alleging
that provisions of the defendant’s contract with its customers constitutes
unlawful business practices is subject to the forum selection clause of
the contract as though the plaintiff were a customer himself.
In
Net 2 Phone, Inc. vs. Superior Court (2003) 109 Cal.App.4th 583,
135 Cal.Rptr.2d 149 a consumer protection group sued a New Jersey internet
telephone service in California contending that the billing practice of
the defendant rendered its advertisement and promotional materials false
and misleading. The billing practice was disclosed in the defendant’s
contract with its customers which also contained forum selection clauses
providing that any disputes would be governed by New Jersey Law.
Defendant sought to dismiss the action pursuant to the forum selection
clause. Plaintiff argued that it was not a party to the contract
and therefore not bound by it.
The
trial court determined that since the plaintiff was acting as a private
attorney general, it could pursue the action in California but the action
would be governed by New Jersey law. The Court of Appeals granted
the petition for writ of mandate filed by defendant and ordered that the
entire case be dismissed as the plaintiff would not have standing to file
a representative action under New Jersey law.
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