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Unfair Business Practices

Portrait of William Campbell

An Overview of What “Unfair Business Practices” Means

Portrait of William Campbell

From the desk of William Campbell

It has become customary when filing a lawsuit, save a few exceptions, to assert a cause of action for violating California Business & Professions Code §17200.  California Business & Professions Code §17200 prohibits any “unlawful, unfair or fraudulent business act or practice” and any “unfair, deceptive, untrue or misleading advertising.” California Business & Professions Code §17200 “is not confined to anticompetitive business practice but is equally directed toward ‘the right of the public to protection from fraud and deceit.’” (Stoiber v. Honeychuck, (1980) 101 Cal.App.3d 903, 927).  “[A]ny unlawful, unfair or fraudulent business act or practice is deemed to be unfair competition.” (Podosky v. First Healthcare Corp., (1996) 50 Cal.App.4th 632, 647).  As one can see, there are three main theories of liability in a California Business & Professions Code §17200.  The basis of these theories center on conduct that is unlawful, unfair, or fraudulent.

What is Unlawful?

“The ‘unlawful’ practices prohibited by section 17200 are any practices forbidden by law, be it civil or criminal, federal, state, or municipal, statutory, regulatory, or court-made. (Watson Labs., Inc. v. Rhone-Poulenc Rorer, Inc., (C.D. Cal 2001) 178 F.Supp.2d 1099, 1120; People v. McKale, (1979) 25 Cal.3d 626).  Watson makes it very clear that the scope of what is unlawful covers almost anything made illegal by statute, case law or a regulatory body.

What is Unfair?

This prong of California Business & Professions Code §17200 is undefined.  In fact, “the California Supreme Court has not yet developed or approved a definition regarding what is unfair in the context of a UCL suit …” (People ex rel. Bill Lockyer v. Fremont Life Ins. Co., (2002) 104 Cal.App.4th 5085, 515).  What the Court has said is “courts may not apply purely subjective notions of fairness” when determining whether conduct is unfair.  (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., (1999) 20 Cal.4th 163, 184).  The lack of definition of the term Unfair is by design.  “The unfair prong is intentionally broad, thus allowing courts maximum discretion to prohibit new schemes to defraud.” (State Farm Fire & Casualty Co. v. Superior Court, (1996) 45 Cal.App.4th 1093, 1103).  Ultimately, “an ‘unfair’ business practice occurs when that practice ‘offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.’” (Davis v. Ford Motor Credit Co. LLC, (2009) 179 Cal.App.4th 581, 595).

What is Fraudulent?

The Fraud prong of California Business & Professions Code §17200 is interesting because “the fraud prong of section 17200 ‘bears little resemblance to common law fraud or deception.’ Under section 17200, ‘[t]he test is whether the public is likely to be deceived. What this means is that a section 17200 violation, unlike common law fraud, can be shown even if no one was actually deceived, relied upon the fraudulent practice, or sustained any damage.” (People ex rel. Bill Lockyer v. Fremont Life Ins. Co., (2002) 104 Cal.App.4th 5085, 516-517).    Ultimately, fraud under California Business & Professions Code §17200 can exist where no facts are in place to allege a separate cause of action for fraud.

Who can assert a claim for violation of California Business & Professions Code §17200?

Anyone can bring a lawsuit alleging violations of California Business & Professions Code §17200.  In fact, anyone “acting for the interest of itself, its members or the general public” has standing to bring a claim. (Pines v. Tomson, (1984) 160 Cal.App.3d 370, 374).

What Are the Damages?

“[O]nly two remedies are available to redress violations of the UCL: injunctive relief and restitution.”  (Feitelberg v. Credit Suisse First Boston, LLC, (2005) 134 Cal.App.4th 997, 1012).  “The object of restitution is to restore the status quo by returning to the plaintiff funds in which he or she has an ownership interest.” (Korea Supply Co. v. Lockheed Martin Corp., (2003) 29 Cal.4th 1134, 1149).  “[R]estitution means the return of money to those persons from whom it was taken or who had an ownership interest in it.” (Madrid v. Perot Systems Corp., (2005) 130 Cal.App.4th 440, 455).  Restitution necessarily requires that “money or property have been lost by a plaintiff, on the one hand, and that it have been acquired by a defendant, on the other.” (Kwikset Corp. V. Superior Court, (2011) 51 Cal.4th 310, 336).  Injunctive relief is a court order to stop the conduct of which the Plaintiff is complaining.  Injunctive relief is “intended to permit courts to enjoin ongoing wrongful business conduct in whatever context such activity might occur” but “it will be denied if, at the time the order of judgment, there is no reasonable probability that the past acts complained of will recur.” (California Serv. Station etc. Assn. v. Union Oil Co., (1991) 232 Cal.App.3d 44, 56-57).

Keep in mind that usually when a plaintiff alleges violations of California Business & Professions Code §17200, they also ask for punitive damages per California Civil Code §3294.  According to California Civil Code §3294 “where is it proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.”   These facts can dramatically increase the financial exposure in a lawsuit of this kind.

What Are My Defenses?

First, elimination of any element required to prove Unfair Business Practices entitles the Defendant to a verdict in their favor.  Indeed, the first step in evaluating and defending against claims like this is to determine if elimination of any of the required elements is possible.  If even one element can be, then the fight is over.  In addition to this defense, is the assertion of an affirmative defense.

Statute of Limitations

Under California Business & Professions Code §17208, “Any action to enforce any cause of action pursuant to this chapter shall be commenced within four years after the cause of action accrued.”  What this means is that the Plaintiff cannot sit on their hands and expect to assert an Unfair Business Practices claim if the Plaintiff has known about the violation for more than four years.

The Bottom Line

Obviously, the law in this area is complicated.  If you are being sued, you need to get in front of the lawsuit as fast as you can.  You will need a lawyer and a law firm that understands the law and a track record of success.  Here at Fitzgerald & Campbell, APLC we understand the law, and we know how to fight cases in and out of Court.  We can provide you with the defense you deserve and help you GET YOUR LIFE BACK!

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