X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Dial-surf the radio these days and your odds of tuning in Shania Twain are only slightly better than hearing a talk show host rant about 17200. Say again? Little more than a decade ago, California’s unfair competition law, spelled out in Business and Professions Code � 17200, was a field seldom plowed. Aside from a few earnest deputy attorneys general and the occasional private lawyer for whom 17200 was an add-on claim, few cared much about it. In those days, 200 cases filled the entire realm of UCL law. Now, 200 cases are just one year’s output. Section 17200 is red hot. Other articles in this special report discuss where 17200 has been. This article will attempt to predict where it is headed, measured by the perspective of the five groups that make up its constituencies: courts, the Legislature, law enforcement, plaintiffs bar and defense bar. The Courts The California Supreme Court has six UCL cases on its plate. By summer, the U.S. Supreme Court will also weigh in. Here’s a look at the key issues, along with some courageous � perhaps even foolhardy � predictions. � What is “restitution“? In Korea Supply Co. v. Lockheed Martin Corporation, No. S100136, the plaintiff was an arms broker hired to help sell a missile system to the Republic of Korea. But the contract allegedly was won by a competitor as a result of bribes and sex offered to Korean officials. The broker sued. Can the plaintiff recover the profits earned by its principal’s competitor? (Opinion below at 90 Cal.App.4th 902 (2001).) Oral arguments were heard on Dec. 4, 2002, so expect a decision by March 2003. Prediction: Lockheed wins. Maybe things will be different with Justice Carlos Moreno, but the California Supreme Court heretofore has had a habit of ducking the hard policy choices posed by the UCL cases it has accepted for review. � Are UCL claims arbitrable? In Cruz v. PacifiCare Health Systems, No. S101003, the court of appeal exempted UCL claims from arbitration. (Opinion below at 91 Cal.App.4th 1179 (2001).) Oral arguments took place on Feb. 3 so a decision is expected by May 2003. Prediction: Toss a coin. But watch Green Tree Financial Corp. v. Bazzle because the U.S. Supreme Court may decide if a state can exempt consumer cases from federal arbitration. � Does UCL trump the Food and Drug Administration? Dowhal v. SmithKline Beecham, S109306, raises the issue of whether 17200 can be used to force a manufacturer of nicotine patches to issue warnings about hazards posed to fetuses where the FDA approved the package label without this warning. (Opinion below at 100 Cal.App.4th 8 (2002).) Prediction: If Dowhal is affirmed, can we abolish the FDA? � Can wage-and-hour class actions proceed? In Sav-On Drug Stores Inc. v. Superior Court, No. S000965, the court of appeal held that overtime claims could not be brought as a class because individual fact questions predominate. If wage-and-hour cases cannot be brought as class actions, think 17200. (Opinion below at 97Cal.App.4th 1070 (2002).) Prediction: Anybody’s guess. � Does the First Amendment limit UCL claims? In Kasky v. Nike Inc., 27 Cal.4th 939 (2002) the California Supreme Court held that Nike Inc. could be sued over public statements defending itself against charges that its overseas operations exploited foreign workers. A decision by the U.S. Supreme Court, expected by June, may result in a defining case concerning commercial free speech. Prediction: Speech wins. � Are law enforcement actions exempt from California Public Utilities Commission jurisdiction? People ex rel. Orloff v. Superior Court ( Pacific Bell), No. S099131, addresses whether UCL law enforcement actions against public utilities are subject to the same rule as private suits, i.e., “exclusive jurisdiction” in the Public Utilities Commission. (Opinion below at 89 Cal.App.4th 844 (2001).) Prediction: Close call, but the edge goes to law enforcement. � Does Cel-Tech‘s”safe harbor” operate retrospectively? In Olszewski v. ScrippsHealth, No. S098409, the appellate court extended the “safe harbor” of Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal.4th 163 (2000), to actions that are lawful when taken, even if a later court declares the statute invalid. (Opinion below at 88 Cal.App.4th 1268 (2001).) Prediction: Six-to-five says the defense wins. The Legislature Section 17200 is a hot potato because of the press attention over “sue-and-settle” cases. These are cases in which a lawyer identifies a generic type of violation within an industry that is often technical in nature and that requires government reporting. The lawyer will sue under the UCL, typically in the name of a make-believe corporation carrying a name that has the ring of a charity. Sometimes hundreds of defendants get “misjoined” in a single suit to cut down on filing fees. Targets have included nail salons, convenience stores, restaurants, real estate brokers, mortgage brokers and auto repair shops. Most recently, entire blocks of small businesses have found themselves being sued due to the misfortune of occupying an older building that is not in exacting compliance with federal access standards for the disabled. Legislative hearings are being held and two 17200 reform bills have been introduced. AB 69, by Assemblyman Lou Correa, D-Santa Ana, is still a placeholder. Another bill, AB 102, introduced by Assemblyman Robert Pacheco, R-City of Industry, would limit “representative” actions to affected plaintiffs. They would have to make a pre-filing demand, and the defendants would then have 90 days to correct. A “representative action” would also require court approval. Prediction: Any legislation bearing even a whiff of reform will be killed in the Senate should it pass the Assembly. You can take that to the bank. Law Enforcement Attorney General Bill Lockyer might be excused for feeling ambushed. The trial lawyers have his pockets full to bursting, yet at the same time his friends have directed these “sue and settle” lawsuits largely at small urban business owners, many of whom are minorities and immigrants — core Democrats. The state Justice Department’s Web site is filled with statements about the “defense of minorities” but Lockyer’s notion of the American Dream apparently doesn’t extend to freedom from abusive UCL cases. The California District Attorneys Association, meanwhile, is concerned. The group has come out in favor of legislation curbing private UCL suits. Prediction: The attorney general believes the problem lies with a few isolated lawyers. Playing Captain Renault, Mr. Lockyer says he’s shocked, shocked! and is demanding a State Bar investigation. He has issued subpoenas and will probably sue a few “usual suspects.” Meanwhile, deputies will study the problem. Expect press releases. Plaintiffs Bar The leadership of the Consumer Attorneys of California is in a quandary over the “sue and settle” cases. Some want to offer a compromise on 17200 reform that offers up for sacrifice the “sue and settle” purveyors in the hopes of blaming the problem on a few miscreant lawyers. Others fear that is impossible without adversely affecting their own brand of UCL suits. Prediction: The hardliners will prevail. The Defense Bar Over the next year, the defense bar will hope to build on past success when it comes to developing 17200 defenses. As previously noted, the California Supreme Court may have something to say about “disgorgement” by March when it decides Korea Supply. A second promising defense is pre-emption. Last year, the Ninth Circuit showed some receptiveness. Bank of America v. City & County of San Francisco, 309 F.3d 551 (local ordinances seeking to cap the amount charged for nondepositors’ use of ATM machines pre-empted) and Nathan Kimmel Inc. v. DowElanco Inc., 275 F.3d 1199 (UCL claims predicated on the theory that the defendant defrauded the EPA are pre-empted). So did many California appellate courts. Lopez v. World Saving & Loan Assn., 03 C.D.O.S. 750, (UCL challenge to S&L’s practice of charging $10 fax fee for payoff demand statement is pre-empted) and Gentry v. eBay, Inc., 99 Cal.App.4th 816 (UCL claim against Internet auction provider by persons who bought forged autographed sports items is pre-empted). A third evolving defense is “manageability” and, in particular, whether a UCL case can be maintained as a “representative action” if it could not qualify for class action treatment due to the predominance of individual issues. Rosenbluth Int’l. v. Superior Court, 101 Cal.App.4th 1073 (UCL claim by unaffected plaintiff on behalf of Fortune 1000 commercial clients cannot proceed because any member of “general public” would be better off suing individually). In conclusion, handicapping legislation and predicting future case decisions is about as reliable as picking stocks or Super Bowl winners. Still, the author provides this prognostication as a public service and a way for readers to keep score at home. For many, the satisfaction in proving this author wrong will be its own bonanza. William L. Stern is a partner at Severson & Werson in San Francisco. He focuses his practice on commercial litigation, including defense of consumer class actions and unfair business claims. His revised practice guide on 17200, “Business & Professions Code � 17200 Practice,” will be published by The Rutter Group in May.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.