Court Opinion

ID: 5650414
Source: CourtListenerOpinion
Date Created: 2022-01-11 22:31:36.071777+00
Date Added: 2024-06-11T08:38:33.458033
License: Public Domain

BAXTER, J., Concurring.
Although I have serious reservations as to the ultimate viability of this lawsuit, I concur in the judgment and the reasoning underlying the conclusion that plaintiff has standing to prosecute this lawsuit. My concerns regarding this possible misuse of the Unfair Competition *579Law (Bus. & Prof. Code, § 17200 et seq.)1 (UCL), most of which are identified in the majority opinion, cannot be resolved in the procedural posture in which this case reaches us. On the narrow issue before us, whether the complaint states a cause of action under the UCL, I agree with the majority. It does.
The UCL authorizes “any person,” which includes corporate entities, to bring an action on that person’s own behalf or in the interests of the public, to seek both redress for a past act or acts of unfair competition and an injunction against future unfair competition. (§§ 17201, 17203.) An unlawful act in the business context is, by definition, an action of unfair competition. (§ 17200.) Penal Code section 308 makes the knowing sale of tobacco products to minors unlawful. The complaint alleged that Lucky Stores, Inc., sold tobacco products to minors.
The Legislature has declared that “[ujnless otherwise expressly provided,” UCL remedies are cumulative to remedies and penalties available “under all other laws of this state.” (§ 17205.) Nothing in the later enacted Stop Tobacco Access to Kids Enforcement Act (§ 22950 et seq.; (STAKE Act)) suggests, let alone “expressly provide[s],” a legislative intent to limit the scope or availability of the UCL insofar as the unlawful sale of tobacco products is concerned. There is neither an express nor an implied pro tanto repeal of the UCL in the STAKE Act or in Penal Code section 308. The STAKE Act and Penal Code section 308 reflect legislative awareness of the grave health risks posed by use of tobacco products. Through them the Legislature has created means by which governmental officers attempt to prevent use of, and consequent addiction to, tobacco by persons under the age of 18, and penalize those who sell tobacco products to them. The UCL serves a completely different purpose. It provides remedies for and protection against unlawful business practices because those practices constitute unfair competition.
Merchants who violate the law by selling tobacco products to minors obtain an unfair competitive advantage over their law-abiding counterparts who do not share in the profits from such illegal sales. Use of the UCL to restrain such unlawful activity is therefore appropriate notwithstanding the existence of sanctions available under the criminal law. Compelled disgorgement of profits earned by unlawful sales deters future violations of the law and levels the playing field on which the business activity occurs. (Fletcher v. Security Pacific National Bank (1979) 23 Cal.3d 442, 451 [153 Cal.Rptr. 28, 591 P.2d 51] [construing identical language in section 17535 applicable *580to false and misleading advertising].) Injunctions against future violations do the same. This is true regardless of whether the unfair business activity involves violation of a criminal law. Because the UCL authorizes “any person acting for the interests of itself, its members or the general public” (§ 17204), to prosecute actions for relief under the UCL, and it cannot be determined at the demurrer stage of this litigation what, if any, relief plaintiff should receive, I concur in the majority opinion.
I write separately, however, to emphasize that in subsequent stages of this litigation the defendant may again raise the issues we do not reach today and the trial court may conclude that this plaintiff should not be awarded the relief sought—damages or restitution and injunctive relief.
A demurrer reaches only objections to the sufficiency of a complaint which appear on the face of the complaint or are based on matter of which the court must take judicial notice. (Code Civ. Proc., § 430.30.) As the majority notes, the prayer for relief in a complaint is not subject to demurrer. If the allegations of the complaint suggest that the plaintiff is entitled to any relief, a demurrer asserting that the complaint fails to state a cause of action must be overruled even if the complaint seeks a type of relief to which the plaintiff is not entitled. (Colvig v. RKO General, Inc. (1965) 232 Cal.App.2d 56, 66 [42 Cal.Rptr. 473]; see also Franchise Tax Board v. Firestone Tire & Rubber Co. (1978) 87 Cal.App.3d 878, 885 [151 Cal.Rptr. 460].) Since the complaint alleges unlawful sales of tobacco products to minors, plaintiff may be entitled to injunctive relief. Since injunctive relief is an equitable remedy, however, whether to grant that relief lies in the sound discretion of the trial court. If, as claimed, plaintiff or its counsel has engaged in improper or unlawful conduct in gathering evidence, such as its alleged statutorily unauthorized use of underage decoys,2 or has initiated the action for reasons other than redressing unfair business practices, or has engaged in extortionate conduct in initiating and/or prosecuting the action, the trial court may well determine that equitable relief should be denied. (Allen v. Los Angeles County District Council of Carpenters (1959) 51 Cal.2d 805, 811-812 [337 P.2d 457]; Garamendi v. Mission Ins. Co. (1993) 15 Cal.App.4th 1277, 1289 [19 Cal.Rptr.2d 190].)
*581The trial court may also determine that the prosecution of this suit, which is not supported by the Attorney General or by local prosecutors, may interfere with the ability of those officers to enforce remedies available to governmental agencies. Defendants who find themselves exposed to repetitive suits and overlapping remedial orders under private UCL judgments and governmental actions to enforce the STAKE Act and/or Penal Code section 308 may well be less willing to enter into consent decrees with the governmental agencies.
Of equal concern, however, is the monetary relief sought by plaintiff. It is unclear from the complaint whether plaintiff seeks restitution, a remedy provided for by the UCL, or damages, a remedy not authorized by that law. “[Djamages are not available under section 17203. [Citations.] The only nonpunitive monetary relief available under the Unfair Business Practices Act is the disgorgement of money that has been wrongfully obtained or, in the language of the statute, an order ‘restor[ing] . . . money . . . which may have been acquired by means of . . . unfair competition.’ (§ 17203; cf. §§ 17206, 17207 [penalties].)” (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1266 [10 Cal.Rptr.2d 538, 833 P.2d 545].)
To the extent that plaintiff seeks a monetary remedy, it is in the prayer for $10 billion to be paid to the State of California. “Restore” and “restitution” have a well understood meaning. “Restore” means “return” and “restitution” is the act of returning the thing which is restored. Section 17203 authorizes the court to make orders as “necessary to restore to any person in interest any money or property” gained through unfair business competition. If we are faithful to language, of section 17203 and the purpose of the UCL, therefore, the restitution authorized by the UCL is a return of the profit earned from an unfair business practice to the person who was the victim of that unlawful practice. That person might be a business competitor or a consumer. It is far from clear that the sum sought by plaintiff reflects an estimate of the profits Lucky Stores, Inc., and other defendants who were also named, but are no longer parties made from unlawful sales of tobacco products to minors. The allegations of the complaint suggest that plaintiff actually seeks damages.
The complaint alleges that the sale of cigarettes to minors, or to adults who became addicted as minors as a result of such sales, costs the State of California more than one dollar in health care costs for each dollar defendant obtained through the sales. On that basis it also alleges that these health care costs have cost the state an amount exceeding 90 percent of defendant’s gross profits from cigarette sales. The prayer that the defendant pay $10 billion “restitution” to the State of California therefore appears to be a claim *582for costs incurred as a result of the need to provide remedial health care for tobacco-related illness, a form of compensatory damages, not restitution or disgorgement of profits to a victim of the unlawful sales of cigarettes. If so, that remedy is not available under the UCL.
If plaintiff seeks restitution, I question whether plaintiff is entitled to any monetary relief. Stop Youth Addiction, Inc., does not claim to be a victim of the alleged unlawful business activities of the named defendants. If it seeks restitution, therefore, it must do so on behalf of business competitors who are not before the court or minor purchasers of tobacco if they are deemed victims of the unlawful sales. However, the action was not brought on behalf of business competitors of the named defendants or minors who have purchased tobacco products and does not seek return of any money to them. An attempt by a single litigant to compel payment to the state of restitution owed to third parties who have not authorized the action raises substantial due process issues implicating the rights of both the defendant and the absent parties.3
Those issues arise notwithstanding plaintiff’s effort to have the sums recovered paid to the State of California. Each business competitor of the more than 400 defendants, originally named in the complaint would have an individual right to seek restitution under the UCL. Arguably, the minor purchasers are victims4 who also may sue to compel disgorgement to them of the money unlawfully obtained by defendant. Since plaintiff has not sued on their behalf in a class action, none have notice and the opportunity to opt *583out of the litigation, and none is bound by the outcome of the lawsuit. The action has no res judicata or collateral estoppel effect5 on UCL actions by those persons authorized by section 17203. Thus, regardless of whether plaintiff is successful in this action and Lucky Stores, Inc., is required to disgorge the profits made on unlawful sales to minors, it is subject to suit and potentially to pay restitution for the same sales to any business competitor harmed by the unfair business practices of defendants and, possibly to the individual purchasers as well.
A similar, but less egregious, attempt to obtain restitution on behalf of absent parties in a UCL action was rejected in Bronco Wine Co. v. Frank A. Logoluso Farms (1989) 214 Cal.App.3d 699 [262 Cal.Rptr. 899]. There the court was concerned with ensuring due process to the absent parties even though the restitution was to be paid to those parties. I said then, and continue to believe, that “[t]he procedure utilized with regard to the nonpart[ies] raises serious fundamental due process considerations.” (Id. at p. 717.) Rendering a judgment for or against a nonparty to a lawsuit may constitute denial of due process under the United States and California Constitutions. (Lambert v. California (1957) 355 U.S. 225, 228 [78 S.Ct. 240, 242-243, 2 L.Ed.2d 228]; Twining v. New Jersey (1908) 211 U.S. 78, 110-111 [29 S.Ct. 14, 24-25, 53 L.Ed. 97].) Due process is denied because the nonjoined party has not been given notice of the proceedings or an opportunity to be heard. (Ibid.) 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. (Environmental Coalition of Orange County, Inc. v. Local Agency Formation Com. (1980) 110 Cal.App.3d 164, 173 [167 Cal.Rptr. 735].)
“For over 50 years California has recognized that a judgment may not be entered either for or against one who is not a party to an action or proceeding. [Citations.]” (Bronco Wine Co. v. Frank A. Logoluso Farms, supra, 214 Cal.App.3d at p. 717.)
The rights of prospective UCL plaintiffs here cannot be foreclosed by the action of Stop Youth Addiction, Inc., which might agree to settle the claim for less than its worth, may not competently prosecute the lawsuit, and which seeks payment to the state of sums actually due to the prospective *584plaintiffs. Thus defendants are subject to suit seeking restitution of the same profits by competitors and, possibly, the minor purchasers of tobacco products.
While Bronco Wine Co. v. Frank A. Logoluso Farms, supra, 214 Cal.App.3d 699, addressed only the due process rights of the absent parties, its recognition that those parties are not bound by the judgment makes the potential for denial of the rights of the defendants in an action such as this clear. It cannot have been the intent of the Legislature which enacted the UCL when it authorized “any person” to prosecute a UCL action that private parties be permitted to seek the restitution relief for which it provides on behalf of third parties who have not authorized the action, who have no notice of the action, and who may themselves bring individual actions.6
Therefore, while I concur in the judgment, I do so reluctantly because I do not believe that actions of this kind were contemplated by the Legislature and fear that if permitted they may compromise the due process rights of persons with a legitimate interest in restraining unfair competition in the business arena.

Unless otherwise specified, all statutory references are to the Business and Professions Code.

A person under 18 years of age who purchases tobacco products violates Penal Code section 308, subdivision (b). Thus a person who makes unauthorized use of minor decoys in a private “sting” operation may violate that law as a conspirator or aider and abettor of the purchase, and may violate Penal Code section 272 by contributing to the delinquency of the minor. The STAKE Act authorizes the State Department of Health Services and local law enforcement agencies, pursuant to department guidelines and subject to strict statutory conditions, to carry out random, on-site sting operations using 14- and 15-year-old decoys whose participation then is not a violation of Penal Code section 308. (§ 22952, subds. (c) and (d).) No similar statutory authority permits private persons to engage minors in the purchase of tobacco products for purposes of establishing unfair competition.

I recognize that actions on behalf of absent parties seeking restitution or disgorgement to a state or local governmental entity on their behalf have been sanctioned by the Court of Appeal. (See People v. Thomas Shelton Powers, M.D., Inc. (1992) 2 Cal.App.4th 330 [3 Cal.Rptr.2d 34]; People ex rel. Smith v. Parkmerced Co. (1988) 198 Cal.App.3d 683 [244 Cal.Rptr. 22]; Dean Witter Reynolds, Inc. v. Superior Court (1989) 211 Cal.App.3d 758, 773 [259 Cal.Rptr. 789]; Caro v. Procter & Gamble Co. (1993) 18 Cal.App.4th 644, 661 [22 Cal.Rptr.2d 419].) Those cases and the authorities on which they relied, State of California v. Levi Strauss & Co. (1986) 41 Cal.3d 460 [224 Cal.Rptr. 605, 715 P.2d 564] and Fletcher v. Security Pacific National Bank, supra, 23 Cal.3d 442, 450, are distinguishable. In some the recovery was by a governmental agent and was to be held for distribution to victims of the unfair business practice. Fletcher was brought as a class action. We stated there that the court might order restitution to the class or, if the class action was precluded, relief ancillary to an injunction. (23 Cal.3d at pp. 453-454.) We did not discuss the due process implications of an order for disgorgement of profits for which absent parties, who had no notice, retained a right to sue. Here, no provision is made for locating and reimbursing the victims, and the State of California opposes the prosecution of this lawsuit. It has not offered to act as a surrogate for the victims. Thus none of the protections available to absent parties and to defendants in a class action are available here.

Consumers have been recognized as “victims” of unfair business practices such as deceptive conduct (Podolsky v. First Healthcare Corp. (1996) 50 Cal.App.4th 632 [58 Cal.Rptr.2d 89]) and illegally excessive pricing (People v. Thomas Shelton Powers, M.D., Inc., supra, 2 Cal.App.4th 330).

“[A] party will be collaterally estopped from relitigating an issue only if (1) the issue decided in a prior adjudication is identical with that presented in the action in question; and (2) there was a final judgment on the merits; and (3) the party against whom the plea is asserted was a party or in privity with a party to the prior adjudication. [Citation.] This requirement of identity of parties or privity is a requirement of due process of law.” (Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865, 874 [151 Cal.Rptr. 285, 587 P.2d 1098], original italics; Bernhard v. Bank of America (1942) 19 Cal.2d 807, 812-813 [122 P.2d 892].)

An action like that brought here by Stop Youth Addiction, Inc., is distinguishable from a UCL action brought by a governmental entity seeking disgorgement of profits to that entity when consumer victims cannot be identified and are unlikely to sue, but provision is made for a pro rata payment to those who are identified and for use of the balance of the recovery for the benefit of similar consumers. (See, e.g., People v. Thomas Shelton Powers, M.D., Inc., supra, 2 Cal.App.4th 330.)