The Unfair Competition Law, codified as Business & Professions Code Section 17200, provides for injunctive and other relief for any business practice that is “unfair,” “unlawful” or “fraudulent.”
- What is Unfair? An unfair business practice is one that has the tendency to deceive the public. Courts have struggled to come up with some sort of formula for defining “unfair” business practices. Several years ago, some clarification was given stating that the unfairness prong of the UCL does not give a general license for courts to review the fairness of contracts; the statute is directed at enjoining particularly deceptive or sharp business practices. Beyond that, there is not a great deal of guidance.
- What is Unlawful? An “unlawful” practice is more easily defined—anything that violates any statute, regulation or rule. That statute, regulation or rule might be an obscure federal regulation or even local city ordinance. Even if there is not a private cause of action for a violation of the underlying law, a UCL plaintiff can nonetheless bring such a claim under this provision of the statute.
- What is Fraudulent? The important thing to understand is that common law fraud is not required. Common law fraud requires a misrepresentation of fact, actual and reasonable reliance and resulting damages. Not so under this statute. This nebulous standard for fraudulent conduct is far lower than the common law standard.
The statute uses the disjunctive which means that the business practice may satisfy any one of the three prongs in order to state claim. The statute is intentionally broad to give the courts maximum discretion to control whatever new schemes may be contrived, even though they are not yet forbidden by law
No Damages. Another interesting feature is that a plaintiff cannot obtain money damages. There are only two remedies—an injunction to stop the business practice and restitution. In most cases, the only restitution allowed is for the return of money paid to the defendant by the plaintiff. In essence the defendant is stating that the plaintiff overcharged or obtained some other benefit from the defendant and has to be compelled to pay that back.
Attorney Fees and Class Actions. What makes a case potentially risky for a defendant business is the attorney fees that can be sought. Under the current system, a plaintiff’s lawyer can petition the court based not only on hours expended but the supposed public benefit that has been achieved as a result of the lawsuit.
This risk of having to pay attorney fees, coupled with the prospect of having to pay a class action settlement (aggregating even a small amount of money obtained from thousands if not millions of transactions), can result in a multi-million dollar liability arising from what may appear to be a silly theory. From the company’s perspective, a unfair competition claim that a billing practice was unfair because it overcharged customers a few cents, seems absurd. From the class action plaintiff lawyers’ perspective, it is a potential gold mine that will yield fees in the thousands or even millions of dollars. The actual CA statute resides below:
BUSINESS AND PROFESSIONS CODE SECTION 17200-17210
17200. As used in this chapter, unfair competition shall mean and
include any unlawful, unfair or fraudulent business act or practice
and unfair, deceptive, untrue or misleading advertising and any act
prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of
Division 7 of the Business and Professions Code.
17201. As used in this chapter, the term person shall mean and
include natural persons, corporations, firms, partnerships, joint
stock companies, associations and other organizations of persons.
17201.5. As used in this chapter:
(a) “Board within the Department of Consumer Affairs” includes any
commission, bureau, division, or other similarly constituted agency
within the Department of Consumer Affairs.
(b) “Local consumer affairs agency” means and includes any city or
county body which primarily provides consumer protection services.
17202. Notwithstanding Section 3369 of the Civil Code, specific or
preventive relief may be granted to enforce a penalty, forfeiture, or
penal law in a case of unfair competition.
17203. Injunctive Relief–Court Orders
Any person who engages, has engaged, or proposes to engage in
unfair competition may be enjoined in any court of competent
jurisdiction. The court may make such orders or judgments, including
the appointment of a receiver, as may be necessary to prevent the use
or employment by any person of any practice which constitutes unfair
competition, as defined in this chapter, or as may be necessary to
restore to any person in interest any money or property, real or
personal, which may have been acquired by means of such unfair
competition. Any person may pursue representative claims or relief on
behalf of others only if the claimant meets the standing
requirements of Section 17204 and complies with Section 382 of the
Code of Civil Procedure, but these limitations do not apply to claims
brought under this chapter by the Attorney General, or any district
attorney, county counsel, city attorney, or city prosecutor in this
17204. Actions for Injunctions by Attorney General, District
Attorney, County Counsel, and City Attorneys
Actions for relief pursuant to this chapter shall be prosecuted
exclusively in a court of competent jurisdiction by the Attorney
General or a district attorney or by a county counsel authorized by
agreement with the district attorney in actions involving violation
of a county ordinance, or by a city attorney of a city having a
population in excess of 750,000, or by a city attorney in a city and
county or, with the consent of the district attorney, by a city
prosecutor in a city having a full-time city prosecutor in the name
of the people of the State of California upon their own complaint or
upon the complaint of a board, officer, person, corporation, or
association, or by a person who has suffered injury in fact and has
lost money or property as a result of the unfair competition.