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The California Supreme Court ruled Monday in two separate cases that the state’s unfair competition law can’t be used to force businesses to disgorge ill-gotten gain into a fund to benefit all potential victims. Such broad-based relief is available only through the filing of a class action, the court said, holding that the unfair competition law — California Business & Professions Code �17200 — only requires that restitution be made to each identifiable individual that suffered financial loss. “Plaintiffs have directed us to nothing, and we have found nothing in the legislative history of [the unfair competition law] to suggest that the Legislature intended to authorize fluid recovery in representative UCL actions when it made the power to order restitution statutory,” Justice Marvin Baxter wrote for the court in Kraus v. Trinity Management Services Inc., 00 C.D.O.S. 4369. He was joined by Chief Justice Ronald George and Justices Stanley Mosk, Ming Chin and Janice Rogers Brown. Justice Joyce Kennard issued a separate concurring opinion, and Justice Kathryn Mickle Werdegar wrote a separate concurring and dissenting opinion. The justices reached a similar conclusion in a companion case, Cortez v. Purolator Air Filtration Products Co., 00 C.D.O.S. 4382. Both Kraus and Cortez involved attempts by alleged victims of wrongdoing to have businesses disgorge unfairly gained profit into funds that could be used to repay and benefit all potential victims, known or unknown. Kraus was brought by San Francisco tenants who said a landlord’s security and administrative fees were unfair, while Cortez involved claims of unpaid overtime. But the defendants had argued that such broad relief was available only through the filing of a class action. The court agreed. “Absent class certification the defendant in such an action remains subject to countless future lawsuits based on the same conduct and raising the same issues even if the defendant has prevailed in the UCL action,” Baxter wrote in Kraus. In both cases, though, the court ruled that direct restitution could be made through the unfair competition law to people “from whom money or property has been unfairly or unlawfully obtained.” In her partial dissent in Kraus, Werdegar called the majority’s reasoning “fallacious” and said that it “flies in the face” of the court’s own previous pronouncements. “With its decision, the majority today permits the landlord defendants in this case to retain nearly half a million dollars in illegal gains from unfair competition, while significantly diminishing consumers’ equitable and statutory protections against unfair business practices,” she wrote. The cases had attracted several groups as amicus curiae, seven siding with the defendants in Kraus and four with the plaintiffs. Representatives of two of the groups on opposing sides were upbeat about the ruling. “The court here was making a distinction between a 17200 [action] and a class action,” said Sharon Arkin, a partner at Newport Beach’s Robinson, Calcagnie & Robinson, whose brief on behalf of the Consumer Attorneys of California backed the plaintiffs. “People had been using 17200s the same way [as class actions] and [the justices] are saying you can’t really do this.” Lisa Perrochet, a partner at Encino’s Horvitz & Levy, which authored a defense-side amicus brief for the Truck Insurance Exchange, sounded a similar note. “The majority did say that if you are going to bring one of these representative actions, the remedy you can get is cash in pocket back to the person from whom the cash is taken,” she said. “By saying that you have to have identifiable people to get the money, the Supreme Court may have put the brakes on these loosey-goosey kind of cases.”

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