Source: https://www.uclpractitioner.com/ucl_competitor_actions/
Timestamp: 2019-04-23 06:15:39+00:00

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Posts categorized "UCL - competitor actions"
New UCL Prop. 64 standing opinion: Two Jinn, Inc. v. Government Payment Service, Inc.
In Two Jinn, Inc. v. Government Payment Service, Inc., ___ Cal.App.4th ___ (Feb. 2, 2015), the Court of Appeal (First Appellate District, Division Four) addressed Prop. 64 standing in the context of a UCL competitor action, and affirmed the trial court's grant of summary judgment in the defendant's favor.
The plaintiff (Aladdin Bail Bonds) advanced a couple of standing arguments, each of which the Court rejected.
Aladdin contends that GPS's allegedly unfair business practices caused it economic injury when customers who would otherwise have used Aladdin's services used GPS's services instead. We disagree because the summary judgment evidence shows that any diversion of customers from Aladdin to GPS did not result from the fact that GPS does not have a bail bond license, or that it does not comply with other regulations governing the activities of licensed bail bond agents.
This part of the opinion stands in contrast to Glen Oaks Estates Homeowners Assn. v. Re/Max Premier Properties, Inc., 203 Cal.App.4th 913 (2012) (discussed in this blog post), which held that investigative costs are sufficient "injury in fact" to confer standing under Kwikset.
The opinion then goes on to hold that, even if the plaintiff did have standing, the defendant's conduct was neither "unlawful" nor "unfair" within the meaning of the UCL. Slip op. at 15-24.
The dockets were both updated Monday morning to show that the cases have been relisted and redistributed for conference on Friday, January 17, 2013 2014. Whirlpool Corp. v. Glaser, No. 13-431 (U.S.); Sears, Roebuck & Co. v. Butler, No. 13-430 (U.S.).
For more details on these cases, including links to the lower court opinions and some of the briefs, see this blog post.
In other news, the Court granted cert. in a case I've been following because the underlying action includes a UCL claim. POM Wonderful LLC v. The Coca Cola Co., No. 12-761 (U.S.). Before cert. was granted last Friday, the matter had been relisted once, and the Solicitor General was invited to file an amicus curiae brief, which it did in late November.
Whether the court of appeals erred in holding that a private party cannot bring a Lanham Act claim challenging a product label regulated under the Food, Drug, and Cosmetic Act.
Petitioner also brought claims under various California laws. Those claims are not at issue in this Court. See pet. 1. The district court granted summary judgment to respondent on those claims, No. 08-CV-6237, 2013 WL 543361 (C.D. Cal. Feb. 13, 2013), and petitioner's appeal is pending, No. 13-5570 (9th Cir).
Amicus Curiae Brief of United States at 5 n.2. In the cited decision, the district court held that the UCL claim was preempted by federal law.
SCOTUSblog's case page for this matter has links to more of the briefs.
In Law Offices of Mathew Higbee v. Expungement Assistance Services, ___ Cal.App.4th ___ (Mar. 14, 2013), the Court of Appeal (Fourth Appellate District, Division Three) held that Prop. 64 did not eliminate UCL actions brought against a competitor whose unlawful business practices were stealing away the plaintiff's customers, market share and profits.
To me, the issues raised in this case should have been no-brainers. Nothing in Prop. 64 suggested an intention by voters to elimimate UCL competitor actions, and after the Supreme Court's holdings in Clayworth and Kwikset, there should have been no doubt that a competitor who loses customers, market share and profits (that is, suffers monetary "injury in fact") because of the unfair competition of a competing business can bring a UCL action and seek injunctive relief.
Nevertheless, the defendant in Higbee argued that the plaintiff business competitor lacked Prop. 64 standing because it could allege no "direct" business dealings with the defendant. Slip op. at 2. The opinion approaches this argument as though it had some conceivable merit. It does not, as the opinion correctly concludes.
Higbee argues the allegation that EAS violated section 6125 et seq. (pertaining to the requirement of an active law license), section 6400 et seq. (pertaining to the registration and bonding of, and permissible activities of, legal document assistants), and Penal Code section 4852.2 (pertaining to the requirement of a law license for the handling of certain criminal matters), constituted an allegation of an unlawful business practice within the meaning of the UCL. He says he is entitled to base a UCL lawsuit on those statutes, citing Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553 (superseded in part by Prop. 64, as recognized in Californians for Disability Rights v. Mervyn’s, LLC, supra, 39 Cal.4th at p. 227).
Slip op. at 9-10 (footnotes omitted).
As a preliminary matter, the Court agreed that the UCL "borrows" violations of other laws and makes them independently actionable, and found "no reason why the alleged violations of statutes concerning the unauthorized practice of law cannot serve as a predicate for Higbee's UCL action." Id. at 9-12.
Next, the Court considered, and rejected, the defendant's argument that the plaintiff lacked post-Prop. 64 standing because it had not suffered the right type of injury. Id. at 12-20.
The operative complaint alleged that "as a result of EAS’s unauthorized practice of law, advertisement of illegal services, and representation that it could perform the same legal services as [plaintiff] did, he had been forced, in order to compete, to lower his prices and to expend more money on advertising, he had lost clients and revenue, and the value of his law firm had diminished." Id. at 13. The defendant argued that "a loss of market share is not the type of economic injury that qualifies as an injury in fact for the purposes of standing under the UCL. Id.
The Court of Appeal disagreed, citing, among other cases, Clayworth, Kwikset, Saunders v. Superior Court, 27 Cal.App.4th 832 (1994), Allergan, Inc. v. Athena Cosmetics, Inc., 640 F.3d 1377 (Fed. Cir. 2011) (discussed in this blog post), Pom Wonderful LLC v. Coca-Cola Co., 679 F.3d 1170 (9th Cir. 2012) (discussed here), and VP Racing Fuels, Inc. v. General Petroleum Corp., 673 F.Supp.2d 1073 (E.D. Cal. 2009). In Saunders, Allergan, and VP Racing, "the alleged injury was based on reduced market share." Slip op. at 16.
As we have observed, the original purpose of the unfair competition laws was to protect against “wrongful conduct in commercial enterprises which resulted in business loss to another, ordinarily by the use of unfair means in drawing away customers from a competitor.” (People ex rel. Mosk v. National Research Co. of Cal., supra, 201 Cal.App.2d at p. 770.) Although the UCL was ultimately expanded to provide equitable relief to consumers in addition to business competitors (ibid.), this does not mean that the UCL no longer protects business competitors (Kwikset Corp. v. Superior Court, supra, 51 Cal.4th at p. 320).
In the matter before us, we hold that Higbee, having alleged that he had been forced to pay increased advertising costs and to reduce his prices for services in order to compete, and that he had lost business and the value of his law practice had diminished, succeeded in alleging at least an identifiable trifle of injury as necessary for standing under the UCL.
Slip op. at 19-20 (emphasis added).
Finally, the Court reached the defendant's core argument that the plaintiff "cannot demonstrate standing to bring a UCL claim because he never engaged in any business dealings with EAS." Id. at 21. The defendant relied wholly on Clayworth, where the Supreme Court stated: "While the voters clearly intended to restrict UCL standing, they just as plainly preserved standing for those who had had business dealings with a defendant and had lost money or property as a result of the defendant’s unfair business practices." Id. (quoting Clayworth v. Pfizer, Inc., 49 Cal.4th 758, 788 (2010)).
The language of the UCL does not leave the court hamstrung, unable to even consider an action seeking injunctive relief just because the defendant engages in its purportedly unlawful activity via the Internet and has not had any direct business dealings with the plaintiff.
EAS’s citations to cases pertaining to the requirement to allege reliance in order to show causation in cases based on fraud (see, e.g., In re Tobacco II Cases (2009) 46 Cal.4th 298; Pfizer Inc. v. Superior Court (2010) 182 Cal.App.4th 622) do not convince us otherwise.
Id.; see also Medrazo v. Honda of North Hollywood, 205 Cal.App.4th 1 (2012) (discussing Supreme Court's Tobacco II footnote, which states that "there are doubtless many types of unfair business practices in which the concept of reliance, as discussed here, has no application") (see this blog post for more on Medrazo).
In the last sentence of the opinion, the Court of Appeal directed the clerk to forward a copy of the opinion to the Attorney General, presumably so that her office can take appropriate action against the defendant, perhaps including an action for civil penalties under the UCL. Slip op. at 25.
Congratulations to Mat Higbee, who represented himself in this case.
Bob Egelko of the San Francisco Chronicle had this article in yesterday's paper on the Court of Appeal's opinion last week in Law Offices of Mathew Higbee v. Expungement Assistance Services, ___ Cal.App.4th ___ (Mar. 14, 2013).
A state appeals court has reinstated a lawyer's suit against a company offering cut-rate legal services, ruling that - despite a voter-approved law limiting unfair-competition suits - a business that's being undercut by a rival's practices can still seek redress in court.
Ninth Circuit addresses UCL standing: Pom Wonderful LLC v. The Coca-Cola Co.
To have standing to bring a claim under the UCL, a private plaintiff must show that it “has suffered injury in fact and has lost money or property as a result of” unfair competition; to have standing under the FAL, a private plaintiff must make the same showing of injury and loss as a result of an FAL violation. Cal. Bus. & Prof’l Code §§ 17204, 17535. The district court interpreted the “lost money or property” language to require a plaintiff to show that it is entitled to restitution from the defendant—even if the plaintiff seeks only injunctive relief. That was error. The California Supreme Court has now made clear that standing under section 17204 (the UCL standing provision) does not depend on eligibility for restitution. See Kwikset Corp. v. Superior Ct., 246 P.3d 877, 895 (Cal. 2011); Clayworth v. Pfizer, Inc., 233 P.3d 1066, 1088 (Cal. 2010). We are inclined to interpret the materially identical language in section 17535 (the FAL standing provision) the same way. Nevertheless, because these cases came down after the district court entered judgment in this case, we will vacate the judgment as to Pom’s state law claims and remand to the district court to rule on standing in light of Kwikset and Clayworth.
This was a UCL competitor and Lanham Act case brought by Pom Wonderful against Coca-Cola over the labeling of the latter's "Pomegranate Blueberry" juice, which "contains about 99.4% apple and grape juices, 0.3% pomegranate juice, 0.2% blueberry juice, and 0.1% raspberry juice." Id. at 5248. In the first part of its analysis, the Ninth Circuit held that the federal Food, Drug and Cosmetic Act did not bar the Lanham Act claim. Id. at 5252-58.
New UCL competitor decision: Allergan, Inc. v. Athena Cosmetics,Inc.
The U.S. Court of Appeals for the Federal Circuit has handed down an opinion in a UCL competitor action. Allergan, Inc. v. Athena Cosmetics, Inc., ___ F.3d ___ (Fed. Cir. May 24, 2011). The case was commenced in the Central District of California, but the Federal Circuit had jurisdiction over the appeal because the case included patent claims. Slip op. at 7.
Here, Allergan has plainly alleged an economic injury that was the result of an unfair business practice. The unfair competition that Allergan alleges involves the defendants’ manufacture, marketing and/or sale of hair and eyelash growth products without a prescription, federal or state approval, and proper labeling in violation of federal and California laws. Allergan’s First Am. Compl. 9-14. As a result of these acts, Allergan alleges that it has “lost sales, revenue, market share, and asset value.” Id. at 14. Allergan’s complaint sufficiently alleges an injury that was caused by the defendants’ unfair business practices. Under Kwikset, this satisfies the requirements of section 17204, and therefore Allergan has standing to pursue its claim for relief under the UCL. See Kwikset, 246 P.3d at 894-95; Clayworth, 233 P.3d at 1087.
Id. at 11 (emphasis added). The district court had erroneously applied earlier Court of Appeal opinions, such as Citizens of Humanity, holding that only a restitutionary loss could create Prop. 64 standing. See id. at 6. UCL competitor actions are alive and well.
Proposition 64 did not add a “business dealings requirement” to standing under section 17204. The only amendment Proposition 64 made to section 17204 re-quired that a private person bringing an action pursuant to the UCL must have “suffered injury in fact and . . . lost money or property as a result of such unfair competition.” Cal. Prop. 64 § 3. Reading this amendment to encompass a business dealings requirement would contradict the plain language of the statute and improperly elevate one purpose of Proposition 64 over the language of the statute. See City of Chicago v. Envtl. Def. Fund, 511 U.S. 328, 337 (1994) (“[I]t is the statute, and not the [voter’s findings], which is the authoritative expression of the law . . . .”).
The defendants also argued that Kwikset approved of the business dealings requirement. Oral Arg. at 30:00-31:00, available at http://www.cafc.uscourts.gov/oral-argument-recordings/2010-1394/all. The crux of defendants’ argument is the introduction of Kwikset, which states that the purpose of Proposition 64 was to “eliminate standing for those who have not engaged in any business dealings with would-be defendants . . . .” 246 P.3d at 881. This argument disregards the focus of Kwikset, which held that the only requirements to establish standing under section 17204 are that (1) the plaintiff suffered an injury in fact from the loss of money or property; and (2) that this injury was caused by the defendant’s unfair business practice. Id. at 885.
Moreover, the defendants’ argument ignores that there are “innumerable ways” to show economic injury from unfair competition and that the Kwikset court did not “supply an exhaustive list of ways in which unfair competition may cause economic harm.” Id. at 886. While a direct business dealing is certainly one way in which a plaintiff could be harmed, the California courts have also recognized claims under the UCL where a direct business dealing was lacking. See, e.g., Overstock.com, Inc. v. Gradient Analytics, Inc., 151 Cal. App. 4th 688, 716 (Cal. Ct. App. 2007) (finding standing under section 17204 where plaintiff had plead that defendant’s unfair business practices—intentional dissemination of false negative reports—had “result[ed] in diminution in value of [plaintiff’s] assets and decline in its market capitalization and other vested interests”). Thus, standing under section 17204 is not restricted by a direct business dealings requirement. The only standing requirements under 17204 are those in the language of the statute and, as explained in I.B., Allergan has satisfied those requirements.
Slip op. at 12-13 (emphasis added).
It is unlawful for any person engaged in business within this State to sell any article or product at less than the cost thereof to such vendor, or to give away any article or product, for the purpose of injuring competitors or destroying competition.
Slip op. at 16. However, "section 17043 does not require an anticompetitive impact. '[A]n injurious effect is not an essential element of the violation. The violation is complete when sales below cost are made with the requisite intent and not within any of the exceptions.' (People v. Pay Less Drug Store (1944) 25 Cal.2d 108, 113–114 [153 P.2d 9].)" Id.
The main point of contention was over the defendant's asserted "recoupment defense," i.e., whether "'objectively reasonable probability of recouping' losses 'through later monopoly pricing' must be established by the plaintiff in a section 17043 action." Id. at 11. The Court of Appeal answered that question in the negative. Id. at 11-20.
The rest of the opinion focuses on several claims of instructional error and other issues.
New UCL competitor decision: Silvaco Data Systems v. Intel Corp.
Silvaco Data Systems v. Intel Corp., ___ Cal.App.4th ___ (Apr. 29, 2010) is a case for misappropriation of trade secrets in which the plaintiff also brought a UCL claim. See pp. 37-41 for the Sixth District's discussion of standing (which, strangely, makes no mention of Tobacco II, a case undoubtedly relevant to the discussion).
In Drum v. San Fernando Valley Bar Association, ___ Cal.App.4th ___ (Feb. 24, 2010), the Court of Appeal (Second Appellate District, Division Five) upheld a judgment entered after the defendant's demurrer to the plaintiff's UCL claim was sustained without leave to amend.
A voluntary bar association’s unilateral refusal to sell its membership list to any particular buyer, even if the association’s reason was to protect some of its members from price competition, is not an “unlawful, unfair or fraudulent business act or practice” under the UCL (§ 17200).
Id. at 5. The Court of Appeal also observed that plaintiff "did not allege that he lost or expended or was denied any money or property as the result of the Association’s refusal to sell him its membership mailing list," and therefore lacked Prop. 64 standing to bring the action. Id. at 4.
Recent Ninth Circuit UCL competitor decision: Sybersound Records, Inc. v. UAV Corp.
In Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137 (9th Cir. 2008), the Ninth Circuit construed the UCL in the context of a competitor action. The plaintiff, a producer of karaoke records, alleged that the defendant, a competing karaoke producer, falsely represented to its customers (who are "distributors and retailers that resell these records to the public") that all songs on their records are 100% licensed for copyright purposes. This conduct, the plaintiff alleged, gave the defendant a competitive advantage, and the plaintiff lost money as a result. Id. at 1141, 1152 & n.7. The district court dismissed the plaintiff's UCL claim, and the Ninth Circuit affirmed.
California’s statutory unfair competition laws broadly prohibit unlawful, unfair, and fraudulent business acts. Korea Supply Co., 63 P.3d at 943. Unlawful acts are “anything that can properly be called a business practice and that at the same time is forbidden by law . . . be it civil, criminal, federal, state, or municipal, statutory, regulatory, or court-made,” where court-made law is, “for example a violation of a prior court order.” Nat’l Rural Telecomm. Coop. v. DIRECTV, Inc., 319 F. Supp. 2d 1059, 1074 & n.22 (C.D. Cal. 2003) (quoting Smith v. State Farm Mut. Auto. Ins. Co., 113 Cal. Rptr. 2d 399, 414 (Ct. App. 2001); Saunders v. Superior Court, 33 Cal. Rptr. 2d 438, 441 (Ct. App. 1994)) (internal quotations omitted). Unfair acts among competitors means “conduct that threatens an incipient violation of an antitrust law, or violates the spirit or policy 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.” Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co., 973 P.2d 527, 544 (Cal. 1999). Finally, fraudulent acts are ones where members of the public are likely to be deceived. Nat’l Rural Telecomm. Coop., 319 F. Supp. 2d at 1077-78.
We first address the claims based on contracts and misrepresentations to which Sybersound was not a party, namely the misrepresentations to the Customers and copyright holders about payment of royalties and licenses, which sound in contract law. Under the sweeping standing provisions of California’s UCL, “[s]ection 17200 does not require that a plaintiff prove that he or she was directly injured by the unfair practice or that the predicate law provides for a private right of action.” Gregory v. Albertson’s Inc., 128 Cal. Rptr. 2d 389, 392 (Ct. App. 2002). “[A] breach of contract may form the predicate for a section 17200 claim, provided it also constitutes conduct that is unlawful, or unfair, or fraudulent.” Nat’l Rural Telecomm. Coop., 319 F. Supp. 2d at 1074 (internal quotation and citation omitted). Sybersound, however, has not pled that the breaches of contract are independently unlawful, unfair, or fraudulent, merely that the Corporation Defendants do not pay royalties or acquire licenses from other co-owners, in breach of their contracts with licensors and the Customers.
Because the unfair competition claim is based upon the misrepresentations that occurred in separate business relationships among karaoke records producers, licensors, and the Customers, the court would be placed in the awkward situation of enforcing private contracts among sophisticated parties who are not all parties to this lawsuit. See Gregory, 128 Cal. Rptr. 2d at 396 (dismissing a UCL claim and noting that the specific remedy sought under the UCL would “cause the court to assume the roles of real estate broker or property manager . . . [and] require the court to make competitive business judgments.” (internal quotation omitted)).
In this case, forcing “Defendants to fully license their products” and enforcing sales and royalties contracts through this litigation may “leave victims worse off than they would be if they filed individual actions against [defendants].” Rosenbluth Int’l, Inc. v. Superior Court, 124 Cal. Rptr. 2d 844, 847 (Ct. App. 2002) (dismissing a UCL claim that was based on a contract where the public in general was not harmed by the defendant’s unlawful practices, but where the victims of the unlawful actions were sophisticated corporations that negotiated their individual contracts with defendants). Courts are institutionally ill-suited to enforce and superintend private contracts among business entities where the concerned entities themselves are not parties to the suit.
Sybersound’s allegations that [the defendants] falsely told the Customers that Sybersound’s karaoke recordings infringed on copyrights also fail to state a claim. Since Sybersound cannot state a claim under the Lanham Act or the Copyright Act and has not pled any other unlawful acts under which this claim would fall, it cannot meet the unlawful conduct prong of the UCL. Moreover, Sybersound has also not pled an act that would be an incipient violation of antitrust law, as required under Cel-Tech for claims against competitors. Finally, Sybersound has not pled that these misrepresentations are likely to deceive members of the general public.
Accordingly, we conclude that the UCL claim was also properly dismissed by the district court.
Id. This opinion's approach to the UCL is much more conservative than that of another Ninth Circuit panel in a case handed down just two months later. Williams v. Gerber Products Co., 523 F.3d 934 (9th Cir. 2008) (discussed in this blog post).
On May 14, 2008, the Recorder reported on a new UCL competitor action filed by Craigslist against eBay. Zusha Elinson, "Craigslist Fires Back at eBay," The Recorder (May 14, 2008) (subscription). The complaint, filed in San Francisco Superior Court on May 13, 2008, is very detailed and quite interesting. It separately alleges violations of the "unlawful" and "unfair" prongs, and asserts violations of certain common-law rules (as well as various statutes) as the basis for the "unlawful" prong claim. Complaint at pp. 15-19. It correctly alleges the post-Cel-Tech formulation of the "unfair" prong (which governs competitor actions). Id. at 16-17.
On May 19, 2008, the Daily Journal reported that "Craigslist and eBay Vie for Edge in Venue" (subscription). The Daily Journal article reports that by the time Craiglist filed suit in San Francisco Superior Court (on May 13), eBay had already sued Craigslist in Delaware Chancery Court (on April 30). "'It's a corporate blood war,' said Fred Lambert, a professor at UC Hastings College of the Law who is an expert on corporations and securities law."
"SF Weekly penalty could rise to $15.6 million"
Judge Marla Miller of San Francisco Superior Court said she believes she's required under state law to increase the damages and issue an injunction in light of the jury's March 5 verdict that the SF Weekly, part of a national chain of alternative newspapers, cut its advertising rates below its costs to undermine the locally owned Guardian.
The jury awarded $6.3 million to the Guardian for its losses. Miller, in what she described as a tentative decision, said Friday she would triple the portion of those damages that equals one year of losses, bringing the total to $15.6 million, and prohibit the Weekly from selling below-cost ads in order to hurt the Guardian.
My prior post on this interesting Unfair Practices Act (and UCL) case is here. Business & Professions Code section 17082 requires trebling of any damages award in a UPA case ("any plaintiff in any such action shall be entitled to recover three times the amount of the actual damages, if any, sustained by the plaintiff"). It is unclear why the trebling would be limited to "one year of losses," however.
UPDATE: On May 20, 2008, the Daily Journal reported that "Judge Increases Jury Award for S.F. Newspaper" (subscription). According to the article, Judge Miller trebled the damages to $15.6 million and "issued a 10-year injunction forbidding SF Weekly, the Guardian's competitor and the defendant in the unfair competition case, from selling display advertisements below cost."
The Recorder also posted a copy of the jury verdict. It is unclear from the article whether a UCL claim was also pleaded, but my guess would be yes. That claim would be decided by the judge, not the jury. The jury's finding that the defendant violated the UPA probably compels the judge to also find a violation of the UCL's "unlawful" prong. It is doubtful, however, that any monetary relief that the UCL might afford would exceed the damages that the jury already awarded. If the judgment is appealed, the case is sure to be an interesting one to follow.
The San Francisco Chronicle also reports that "Bay Guardian wins suit with SF Weekly." In that article, a lawyer for SF Weekly is quoted as saying that an appeal is planned.
UPDATE: In an article in which I am quoted, Competition Law 360 reports that "$15.6M Awarded In San Francisco Newspaper Clash" (March 6, 2008) (subscription).
UCL decision from last May: Overstock.com, Inc. v. Gradient Analytics, Inc.
Somehow I missed the Court of Appeal's opinion in Overstock.com, Inc. v. Gradient Analytics, Inc., 151 Cal.App.4th 688 (2007), which the First Appellate District, Division Four handed down on May 30, 2007.
Overstock.com was decided in the context of an anti-SLAPP motion and contains several noteworthy rulings relating to the UCL. First, the Court of Appeal determined that conduct "likely to deceive a reasonable consumer" was actionable under the UCL even if the reasonable consumer is someone other than the plaintiff — in this case, potential investors in the plaintiff's stock. Overstock.com, 151 Cal.App.4th at 714.
"The UCL contains no language supporting an exclusion for securities, and under the plain language of the UCL, we cannot create such an exclusion." .... Indeed the sweeping language of the UCL is intended " ' to permit tribunals to enjoin on-going wrongful business conduct in whatever context such activity might occur.' "
The Court also noted that "the California UCL contains no directive to interpret our consumer protection statute consistently with the FTC Act." Id. at 715. This holding tends to undermine Camacho v. Automobile Club of Southern California, 142 Cal.App.4th 1394, 1403 (2006), in which the Court of Appeal relied on the FTC Act in adopting a third formulation of the UCL's "unfair" prong.
Finally, the Court of Appeal held that the plaintiff satisified the Prop. 64 "injury in fact" requirement by alleging that the defendant's unfair, unlawful and fraudulent conduct "result[ed] in diminution in value of its assets and decline in its market capitalization and other vested interests. This meets the statutory requirement of 'injury in fact' resulting from defendants' misconduct." Overstock.com, 151 Cal.App.4th at 716. This holding is directly contrary to at least one federal decision, Walker v. USAA Casualty Ins. Co., 474 F.Supp.2d 1168 (E.D. Cal. 2007), in which the court held that to qualify as "injury in fact," the monetary loss must also be recoverable as "restitution" under the UCL. As I have explained before, that holding seemed to me contrary to the plain language of Prop. 64, and Overstock.com confirms this.
I've had limited time to read or analyze these decisions. Time permitting, I will post more about them later on.
New UCL competitor action: Stevenson Real Est. Servs. v. CB Richard Ellis Real Est. Servs.
In Stevenson Real Estate Servs., Inc. v. CB Richard Ellis Real Estate Servs., Inc., ___ Cal.App.4th ___ (Apr. 26, 2006), the complaint attempted to plead a cause of action for intentional interference with prospective economic advantage, using an alleged UCL violation as the "independently wrongful act" required to plead that cause of action under Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134 (2003). Slip op. at 3-4. To count as an "independently wrongful act," the conduct must be "proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.” Id. at 5 (citing Korea Supply, 29 Cal.4th at 1159). The Court of Appeal (Second Appellate District, Division Eight) held that the trial court properly granted judgment on the pleadings because the complaint did not adequately allege a violation of the UCL's "unfair" prong as interpreted in Cel-Tech Communications, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal.4th 163, 187 (1999), which governs competitor actions. Slip op. at 10-11. The opinion seems to assume that the "fraudulent" prong does not apply to competitor actions. See id. at 11 n.4. Nor was the "unlawful" prong mentioned — presumably because if the plaintiff could have alleged some other violation of law, it would not have needed to rely on the UCL to state a claim for intentional interference with prospective economic advantage.
RLH Industries, Inc. v. SBC Communications, Inc., ___ Cal.App.4th ___ (Nov. 3, 2005) (Fourth Appellate District, Division Three) is another recent UCL opinion in an action between competitors. Like Eddins v. Sumner Redstone, ___ Cal.App.4th ___ (Nov. 22, 2005), discussed in the post immediately below, it involved a Cartwright Act claim and construed Chavez v. Whirlpool Corp., 93 Cal.App.4th 363 (2001). The Court of Appeal applied the Cel-Tech formulation of "unfair," holding that "nothing suggests [the defendant's challenged] policy 'threatens an incipient violation' of the Cartwright Act, violates its policy or spirit, or otherwise threatens competition. .... Even if some unfair competition causes of action can survive independently of an actual antitrust violation, this one does not." Slip op. at 8-9 (citing Chavez, 93 Cal.App.4th at 375). The Court of Appeal affirmed the trial court's order granting summary judgment to one of the two defendants.
As for the other defendant, summary judgment should not have been granted. The Court of Appeal rejected that defendant's argument that the United States Constitution's dormant commerce clause bars UCL and antitrust claims against an out-of-state defendant for out-of-state anticompetitive conduct that impacts Californians. Slip op. at 14-16.
In Eddins v. Sumner Redstone, ___ Cal.App.4th ___ (Nov. 22, 2005), the Court of Appeal (Second Appellate District, Division Eight) construed the UCL's "unlawful" prong in the context of an action between business competitors. The Court determined that the trial court properly granted summary adjudication of the plaintiffs' Cartwright Act claim, but erred in also granting summary adjudication of the UCL claim. The trial court relied on Chavez v. Whirlpool Corp., 93 Cal.App.4th 363, 375 (2001), which held that conduct is not "unfair" within the meaning of the UCL if it is "deemed reasonable and condoned under the antitrust laws." Citing Cel-Tech, the Court of Appeal found that Chavez only applies to a UCL "unlawful" prong claim predicated on the Cartwright Act, but not to a UCL "unfair" prong claim. I've always thought that this aspect of Chavez was inconsistent with Cel-Tech, so it's nice to see another panel decline to follow it.
Last Thursday, the Court of Appeal (Second Appellate District, Division Two) handed down People's Choice Wireless, Inc. v. Verizon Wireless, ___ Cal.App.4th ___ (July 28, 2005), and held that the trial court properly sustained the defendant's demurrer to the plaintiff's UCL claim. Because it was an action between competitors, the Court applied the post-Cel-Tech formulation of "unfair." This case probably represents the most detailed exposition of the post-Cel-Tech formulation in a competitor action since Cel-Tech itself was decided.

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