James R. Wheaton, Esq.
California's Unfair Competition Law,(1) found in Business and Professions Code Section 17200 et seq.,(2) has long enjoyed a reputation among prosecutors, business competitors and civil rights and consumer protection advocates as a strong tool against those who pollute our economic streams through sharp practices.(3) It is now appearing with increasing frequency in cases brought by public and private environmental prosecutors against those who pollute our air, water, ground and products.(4)
Principally, Section 17200 empowers any person or organization to become an environmental enforcer, bringing an action to enforce any environmental law, against any business in California. Doctrines of standing, causation, and injury all vanish under Section 17200, leaving lawyers schooled in those doctrines from the world of business competition, toxic and other torts, and federal environmental citizen suits, in unfamiliar territory. While remedies for damages or penalties are not available to private enforcers, monetary relief in the form of restitution and disgorgement of profits more than make up the difference. To practitioners new to the field, the relaxation of those doctrinal prerequisites in other areas is either a godsend or an atrocity, depending on whether one traffics in complaints or answers.
It therefore behooves every environmental attorney, whether bringing or defending citizen enforcement cases, to be intimately schooled in the unique powers of, defenses against, and coming issues involving, Section 17200. While a single article can never aspire to be a complete education in any legal topic,(5) this article will attempt to provide the practitioner new to Section 17200 with a basic grounding in the statute and its interpretive case law, as well as highlight for the experienced 17200 practitioner the current controversies. In addition, as this article was written the Supreme Court issued two opinions that rejected attacks on the core of Section 17200's remedies. While those cases did not resolve all the issues remaining, particularly for environmental cases, the basic doctrines of Section 17200 still stand, and it behooves every environmental practitioner to be familiar with this growing area of the law.
17200 Standing: "A General Warrant to Do Good"
A Section 17200 action may be brought by anyone. Standing to enforce 17200--and through its derivative powers discussed infra any other environmental law--is universal. Actions may be brought by public prosecutors, "or by any person acting for the interests of itself, its members or the general public."(6)
Critically, the person bringing suit need neither be harmed nor suffer any injury to him, her or itself from the challenged conduct. There is no transactional nexus required between the specific practice complained of and the plaintiff. The plaintiff need not even be affected by the act complained of.(7) This is an enormous exception to the usual rule that suits may only be brought by the "real party in interest."(8)
One of the most interesting features of the law is that the plaintiff can "borrow" another statute to allege a violation of Section 17200.(9) That is, a violation of any other law can be alleged to a violation of Section 17200 and be enforced using Section 17200's remedies. This is true, even where the "borrowed" or derivative statute does not confer standing on that plaintiff, or the plaintiff otherwise has no authority to enforce the derivative law.(10) It is this feature that grants private environmental enforcers universal standing to enforce, essentially, every provision of the Fish and Game, Health and Safety, Public Resources and Water Codes.(11)
Some observers felt (perhaps hoped?) that universal standing was in doubt, or might be limited by the Supreme Court, but this was put to rest by the Court in Stop Youth Addiction.(12) The Court reaffirmed sweeping standing for plaintiffs to enforce any "borrowed" violations, even from the Penal Code,(13) and held that standing to sue under 17200 does not depend on whether or the not the plaintiff:
Thus it is common for a nonprofit corporation to sue to enforce some substantive provision of environmental law, although its principal place of business is in a different part of the state, it has no members affected by the violation, and the nonprofit has no direct connection to the business, the complained of practice or its effects. Nor does the presence of a public prosecutor, enforcing either the underlying statute or Section 17200 itself, necessarily oust the private party. Parallel actions are allowed and quite common.(16) Even ongoing administrative actions by a responsible regulatory agency regarding a practice does not automatically bar a private party 17200 lawsuit regarding that practice.(17)
Thus the statutory language allowing actions to be brought "by any person acting for the interests of itself, its members or the general public" effectively deputizes the world to find and bring environmental violators to the bar of justice.
What 17200 Prohibits: Anything That Can Be Defined as "Wrong"
Section 17200 prohibits "any unlawful, unfair or fraudulent business act or practice. . ."(18) There is an old saw that describes different international jurisprudential models that can be paraphrased thus: "In America everything is permitted except that which is prohibited; in France everything is prohibited except that which is permitted; in the Soviet Union everything was prohibited including that which was permitted; and, in the new Russia everything is permitted including that which is prohibited." Under 17200, to many defendants, it feels a lot like the old Soviet Union.
In many ways, they are right. Let's parse Section 17200, with a few preliminary observations.
First, the three prongs are disjunctive. Section 17200 can be enforced against any unlawful or unfair or fraudulent business act or practice. For example, an otherwise lawful and non-fraudulent practice may nevertheless be "unfair."(19)
Second, no actual injury--to the plaintiff, to the public or to competition generally--need be pleaded or proved.(20)
Third, Section 17200 "imposes strict liability. It is not necessary to show that the defendant intended to injure anyone,"(21) and this applies as well in the environmental context.(22)
Fourth, under the statute a "practice" is simply the company's general conduct, and an "act" can be a single act, or even wholly past acts.(23)
With these basic principles in mind, we can examine each prong.
Unlawful Acts
The "unlawful" prong is the most important for environmental enforcers, and includes any violation of any other law.(24) Most critical to readers here, there is no question but that Section 17200 can be used to enforce local, state and federal environmental statutes.(25)
Borrowed violations are not limited to state statutes. They can also be federal statutes and regulations;(26) administrative regulations and interpretations;(27) local ordinances and acts;(28) and, court interpretations and decisions.(29)
In environmental matters, one of the most common uses of Section 17200 actions has been in conjunction with enforcement actions under Proposition 65.(30) Because Section 17200 alleges a separate and discreet violation from the derivative or "borrowed" statute,(31) the Section 17200 claim adds considerable force to the overall complaint in that it both expands the potential statute of limitation to four years,(32) and provides for additional remedies the "borrowed" statute may lack. For both public and private prosecutors Section 17200 adds both additional injunctive relief and forms of monetary relief, and public prosecutors pick up additional penalties.(33)
Unfair Acts
What defines an "unfair" act is not fixed, but it is "sweeping." "The Legislature intended this 'sweeping language' [in Section 17200] to 'include anything that can properly be called a business practice and that at the same time is forbidden by law.' In drafting the Act, the Legislature deliberately traded the attributes of tort law for speed and administrative simplicity. As a result, to state a claim under the Act one need not plead and prove the elements of a tort."(34)
What has been decided is that "unfairness" is not limited to that which is also "unlawful." An act which is otherwise lawful can still be unfair.(35) In a recent decision the Supreme Court did provide one safe harbor, however. If the conduct complained of has been specifically sanctioned by the Legislature as lawful, it cannot be actionably "unfair" under Section 17200.(36)
Critically, environmental enforcers are not limited to alleging a direct violation of a specific statute, regulation or court order. The acts complained of may simply be "unfair" in that they provide an unfair advantage over "green" competitors, allow the company to shed externalities onto innocent neighbors, impose costs onto government, or mislead consumers about the environmental or health effects of products. Any one of these could form the basis for an "unfairness" claim under Section 17200.(37)
In the environmental context, the court in Hewlett (arguably in dicta) noted that violations of the conditions in a zoning permit, even if not unlawful, were comfortably within Section 17200's proscription against "unfair" acts.(38)
Fraudulent Acts
Use of the "fraudulent" prong will not be common in environmental enforcement cases, and so needs only brief treatment here.(39) Suffice it to say here that the standard for "fraudulent acts" under Section 17200 is not the same as common law fraud.(40) Common law fraud claims have the well-known elements of: misrepresentation; knowledge of same by the defendant; intent by the defendant to defraud or induce reliance by the plaintiff; justifiable reliance by the plaintiff; and, resulting damage.(41) Under Section 17200 not a single one of those elements is required.
Rather, the section prohibits any practice, if "members of the public are likely to be deceived."(42) There is no requirement to show that any intent to deceive, nor that member of the public was actually deceived, reasonably relied or was actually damaged. Ibid. And, the activity need not be in connection with any advertising or communication; it reaches to any "business practice."(43)
A closely related concept is found in the prohibition in section 17500 against "unfair, deceptive, untrue or misleading advertising." Because section 17500 is limited to situations in which there is an intent to dispose of real or personal property, or perform services, in the environmental context it would be limited to consumer cases involving health or environmental claims. For a more in depth examination of the statute and its interpretive law, the reader is directed to Stern.(44)
Remedies
The remedies for violations of Section 17200 are not complete, but they are powerful. They include injunctive relief, both prohibitory and mandatory, and can be extremely broad. The purpose of injunctive relief is not only to protect competitors, but to protect the public at large.(45) It can even include corrective advertising.(46)
It is worth noting that an injunction is not a prerequisite to restitutionary relief, confirming that the Act can reach purely past acts, even if an injunction equitably cannot.(47)
The most controversial--and powerful--part of relief is monetary. While penalties and damages remain beyond the reach of any private enforcer,(48) they can sue for and recover monetary relief in the form of restitution and disgorgement of ill-gotten gains. Notably, restitution is available, even in absence of reliance or actual damages.(49)
Even more notable, disgorgement of ill-gotten gains remains a currently available, and its use was ringingly reaffirmed by the Supreme Court in the Kraus and Cortez decisions.(50) Therefore, while disgorgement remains available even where moneys cannot be "restored" to any identified "victims;"(51) however, if there are identified or identifiable victims, disgorgement is also available, but must occur through a class action.(52)
Effectively then, at present the scope of relief is limited only by the plaintiff's imagination and the tenacity of the defense.
Two further points on remedies. First, injunctive and monetary relief are expressly cumulative to each other, and to any other remedies available under any other statute or claim. Section 17205. Second, plaintiffs may be entitled to attorneys fees for enforcing Section 17200, assuming they otherwise meet the standards as a private attorney general under CCP 1021.5.(53)
Defenses
It is tempting to advise a client sued under Section 17200 to heed the advice of the Wicked Witch of the West in The Wizard of Oz: "Surrender Dorothy." While sound, the situation is not quite so bleak. One of the leading practitioners in the field for the defense bar, Gail Lees of Gibson, Dunn and Crutcher, has prepared an extensive paper on the topic, "The Defense of Governmental and Private Class and 'Quasi-Class' Actions Under the 'Little FTC' Acts." While it covers much more than just Section 17200, it does provide a detailed road map to defense counsel faced with a complaint, and to plaintiffs' counsel in evaluating a case.
The paper presents "Seventy Six Defense Arguments" which, like Robert Preston's "Seventy-Six Trombones" provide many different sounds, not all of them pleasing to the ear. The paper candidly notes that while "[s]ome of these doctrines already have received authoritative judicial endorsement, others have received mixed results, and still others thus far have been rejected. . ."(54) Even more candidly, the paper advises defense counsel on the virtue of trying these arguments only in trial courts, which "are more responsive to defense arguments that the California Court of Appeal and the California Supreme Court, who respectively have stated that answers to the statutes' [']problems['] must come from the legislature."(55) Plaintiffs' counsel should therefore take note that winning defense trial arguments can be corrected above.
An exhaustive treatment, even a review, of all seventy-six defenses would exhaust the reader and break the publishers' printing budget. In the interest of brevity, the author points the reader to the paper and, again, to Stern(56) for a detailed outline and discussion of possible defenses.
In the environmental context, the most important defenses for both sides to be aware of are: abstention and its related doctrine of primary jurisdiction;(57) First Amendment defenses in cases challenging conduct related to securing government approvals or advertising;(58) in "unlawful" cases, importing various defenses and limitations into the derivative Section 17200 cases along with the substantive violation;(59) various defenses to the relief, such as mootness to defeat injunctive relief;(60) and, affirmative defenses such as statute of limitations(61) and misconduct by the prosecuting party.(62)
In addition, severe limitations on monetary remedies have been repeatedly by defendants but have been rejected by both intermediate appellate courts, and most recently by the California Supreme Court in Kraus and Cortez, as discussed in detail in section III(C), infra.
Be aware that in "unlawful" cases lack of deception, business justification and industry custom are not defenses.(63) Similarly, in "unfair" cases, business justification and compliance with the law may be no defense.(64)
At bottom, there are no "magic shield" defenses to Section 17200 cases, and defendants and their counsel searching for them are on a fool's errand. While "Surrender Dorothy" may be too strong, cost-conscious defendants should be wary of invitations for excursions on unwinnable crusades.
III. Advanced and Cutting Edge Issues
While the issues outlined above are relatively settled, there continue to be substantial controversies and uncertainties that both plaintiff and defense counsel should bear in mind. Some of these were before the California Supreme Court, and its decisions did not entirely decide all of them, particularly in the environmental enforcer context. To coherently examine them, a set of citizen environmental enforcement hypotheticals will be useful illustrations.
A. Joint public-private enforcement
Private prosecution of section 17200 with public prosecution of the underlying statute for the same conduct
If a public prosecutor is prosecuting an action under a citizen enforcement statute, and that statute bars a simultaneous private prosecution,(65) does that also bar citizen prosecution under 17200?
While there is no appellate decision, nearly all trial courts that have visited the question have held that it does not. The reasoning is the same as that in SYA:(66) the presence or absence of authority to prosecute under the underlying statute is irrelevant in determining standing to sue derivatively under Section 17200.(67)
That said, however, many trial courts will, when requested by the public prosecutor exercise their inherent authority to manage litigation before them, and stay the private action if it in any way is interfering with the public prosecutor. Trial courts have been just as quick to deny that request when made by defendants, and the reasoning is simple. If the prosecutor does not object to--or even welcomes--the private prosecutor as a positive assist, there is no reason for the court, much less the defendant, to determine otherwise.
Private prosecution
of Section 17200 simultaneous with public prosecution of Section 17200 for the
same conduct
In the example above, if the prosecutor is also prosecuting the Section 17200 violation, does that oust the private plaintiff? The answer is, again, (almost) always in the negative. The reasoning here is not only the SYA line of cases, but is buttressed by the use of the disjunctive "or" in section 17204 which lists the parties that can enforce Section 17200.(68) The use of "or" does not automatically mean that each is exclusive,(69) and appellate courts have expressly or impliedly allowed simultaneous (i.e. joint) prosecutions under 17200. A single example stands out in the environmental field. In Hewlett,(70) both trial and appellate courts agreed that a Section 17200 action for violations of the Forest Practices Act could be simultaneously maintained by the District Attorney and a private party. Indeed, both courts held that they could impose penalties and award attorney fees to the private party under CCP 1021.5 for materially assisting the prosecution. Again, the courts place heavy reliance on representations from the public prosecutor that the private enforcement is necessary or materially assists in successfully prosecuting the matter.(71)
B. Res Judicata and Collateral Estoppel
What is the effect on a second Section 17200 claim after a previous action brought under 17200 has already been resolved by judgment or settlement?
The answer here turns on several additional factors: whether the first or second party is a public prosecutor; whether the settlement was ever approved by a court or is simply a private settlement and dismissal; whether there are other claims in the second not based on Section 17200 , and what remedies those other claims permit.
Therefore, in analyzing these issues, one must distinguish the types of cases brought under 17200, by the type of plaintiff, which determines the interest, the injury claimed, and the remedies. Distinguish the following examples:
the competitor suing for business injury;(72)
the consumer, supplier (or representative of same) suing for consumers' monetary loss;(73)
the public or private prosecutor suing to enforce some other law, often with injunctive relief as the principal goal.(74)
The usual and accepted remedy for handling the subsequent action(75), from a due process point of view of the defendant, is to offset the prior monetary relief in any subsequent action. Thus for example, in People v. National Ass'n of Realtors,(76) the 17200 penalty or award is first offset by any prior penalty or award obtained against the same defendant for violating the underlying statute.
To avoid this result, defendants have recently been raising concerns about the due process rights of their alleged victims.(77) Of course, whether a defendant is the right party to raise the due process rights of its victims is interesting, and courts ought to be at least suspicious, particularly where the proposed response is to cut-off or exclude some "class" of victims from any relief.(78) Conversely, defense counsel should be chary of how these issues are raised. For instance, successfully arguing that the victims' due process rights must be protected could result in courts agreeing to protect the absent individuals, but in so doing finding that Section 17200 has no preclusive effect on subsequent plaintiffs. This could lead to an endless roundelay of cases with no finality, a result the defendant (and probably defense bar) surely does not want.
It is worth noting that there have been several legislative attempts to resolve the res judicata or finality problem. Most recently the California Law Revision Commission proposed extensive changes in Section 17200 to address "non-class" class actions, restitutionary claims and preclusion, essentially using notice and hearing procedures borrowed from true class actions.(79) All bills proposing changes have failed passage.(80)
Indeed, the Supreme Court has pointed out that every legislative effort to narrow or restrict Section 17200's application has failed, while only those amendments which broaden its application have become law.(81)
The Supreme Court has also made clear--at some length--that neither it nor any other court should grant narrowing constructions when the Legislature has declined to do so, not even as a matter of "policy."(82)
Remedies
While injunctive relief and restitution (including disgorgement) are clearly established as available remedies under Section 17200 by decisions of the California Supreme and lower courts,(83) a renewed effort to limit monetary relief, indeed the ability to secure disgorgement at all, were currently put before the Supreme Court. Like every other effort to hobble or eviscerate Section 17200, it failed.
The recent decisions in Kraus and Cortez bear some close attention, although ultimately they probably have no effect on most environmental citizen enforcement cases.
Both cases arose in the consumer context, and dealt primarily with issues of due process for "absent class" members. However, business interests sought, but failed, to use the cases to severely limit remedies available in all Section 17200 cases.
In Kraus tenants challenged various policies regarding security deposits and liquidated damages clauses. The trial court ordered, and the appellate court affirmed, restitution and disgorgement by the landlord of all unlawfully collected funds, with unclaimed money to a "fluid recovery fund" to advance tenants' rights. In Cortez, a former employee sued for failure to pay overtime wages. The trial court found for plaintiff on her individual claims, but not on behalf of 175 other employees, holding that since injunctive relief was no longer available, no restitutionary relief was available. The appellate court reversed and remanded to determine the total amount of restitution to all 175 employees.
The key issues for environmental actions presented by the cases was whether a Section 17200 claim can provide broad forms of monetary relief, or is limited to restitution to identified individuals. Put simply, in an environmental case--say a case of avoided costs through illegal dumping, or profit from illegal harvesting of trees--in which the wrongdoer profits but there is no "person" to whom any money can be "restored," is a court under Section 17200 powerless to order the wrongdoer to disgorge the ill-gotten gain?
The importance of the cases when they were argued was the attempt by petitioners to get an unequivocal "yes" that would forever bar all "disgorgement" remedies under Section. That is, they sought to have the Court rule that Section 17200's monetary remedies are limited to restitution to identified victims only. Perhaps the most important result of the two decisions is that the Court did not adopt that interpretation. While the Court did not expressly reject it, it did reaffirm the importance and availability of disgorgement, separate and apart from restitutionary relief. It also cited with approval, and without overruling, prior appellate cases that endorsed disgorgement that was unconnected to restitution.
Thus the opinions point strongly in favor of the continued availability of all of the environmental enforcers' remedies. The Court hewed closely the facts in each case, and clearly decided only two questions: (1) whether monetary relief under section 17203 is limited to restitution to individuals before the court, and (2) where restitution is ordered, can the trial court use "fluid recovery" mechanisms where some members of the group are not identified or do not claim relief, without the use of a class action. Kraus, 23 Cal. 4th at 121.
The answer to the former is unquestionably no. The Court reaffirmed that "disgorgement", separate from "restitution," is available under section 17203. "An order that a defendant disgorge money obtained through an unfair business practice may include a restitutionary element, but it is not so limited. . .[S]uch orders may encompass broader restitutionary relief, including disgorgement of all money so obtained, even when it may not be possible to restore all of that money to direct victims of the practice." Kraus, 23 Cal. 4th at 127 (emphasis added). This is a profound holding for environmental cases where the harm is to the environment or public as a whole, and not to identified individuals.
The only limit the Court
placed on monetary relief came in answering the second question: in a representative
Section 17200 action seeking relief for absent individuals, relief can include
restitution to absent members, but not "fluid recovery" unless the case is certified
as a class action.(84)
The effect of the decisions in environmental cases therefore turns on whether the harm alleged is to identifiable individuals for whom money can be restored, or the harm is more inchoate. In the former, the cases limit one form of relief under specific circumstances; in the latter, the relief available under Section 17200 appears to be unaffected.
Therefore the debate for environmental enforcers continues, with the issue being whether the monetary relief, whether or not it includes the "restitution" for identified or identifiable victims that is expressly permitted by the statute, can also include monetary relief in which no "monetary victims" are present or can be located. Put another way, if a practice is determined to be unlawful, unfair or fraudulent, but the victims are either so scattered or are effectively the public at large, as is often the case in environmental matters, is the court prohibited from disgorging the monetary benefit from that practice, both to prevent the defendant from retaining the ill-gotten gains, and to present come deterrent effect on others?
The Supreme Court rejected the broad prohibition, and reaffirmed the availability of disgorgement that goes beyond and is unconnected to restitution. Moreover, nearly every other case has held the court is so empowered, using the "detergent" or "cleansing" theory of Section 17200.(85) While the effort to limit Section 17200 to restitution only i probably not dead, it has been taken off life support.
Of course, the debate about the availability of monetary relief that is not directly tied to securing restitution to identified "victims" is particularly pertinent to environmental cases. In most if not all environmental enforcement cases there is no identifiable monetary "victim" to whom restitution could be made.
Therefore, as with res judicata, determining what relief is appropriate may eventually depend on what type of action is being brought and by whom: competitor, consumer, or private attorney general or prosecutor. Thus, permitting disgorgement in addition to or in lieu of "restitution" may be more compelling in the latter two examples, than in the first two. Moreover, any discussion of "restor[ing] to any person in interest any money or property" is simply irrelevant in the latter two. A limitation to "restitution" only may strip the statute of any effective remedy for past conduct, even conduct with immense impacts today on the environment.
Coming changes: legislation
While several bills are circulating to amend 17200 in various ways to defendants' liking, no observers of the legislative scene are willing to predict that anything that will narrow Section 17200 or its remedies is likely to pass either legislative house. Indeed, the only recent action by the Legislature expressly removed Section 17200 issues from the agenda for the Law Revision Commission.(86)
Regardless of how the recent Supreme Court remedy decisions are interpreted in future citizen environmental enforcement cases, Section 17200 will remain a potent weapon in any citizen environmental enforcer's arsenal. Universal standing, derivative power to enforce any law, enhanced statutes of limitations, broad remedies: all point to continued and increased use of Section 17200 in environmental matters.
Endnotes.
1. The nomenclature of "Section 17200" is confusing. See William Stern, "Unfair Business Practices and False Advertising: Bus. & Prof. Code 17200" (The Rutter Group, 1999) at 27. The Supreme Court, noting this confusion, ibid, adopted the locution of" Unfair Competition Law" for sections 17200-17209. While they are supreme, this article will use "Section 17200" to collectively refer to sections 17200-17209.
2. All unreferenced statutory citations are to the Business and Professions Code.
3. See, e.g., Consumers Union v. Fisher Development (1989) 208 Cal.App.3d 1433; Committee on Children's Television v. General Foods (1983) 35 Cal.3d 197; People v. McKale (1979) 25 Cal.3d 626; "Unfair Competition statute: California's sleeping giant awakens," Thomas A. Papageorge, 4 Whittier L.Rev. 561 (1982); "Role of California's attorney general and district attorneys in protecting the consumer," 4 U.C. Davis L.Rev. 35 (1971).
4. While many environmental prosecutors and private environmental enforcers have long included Section 17200 claims in their complaints, the recent explosive growth in use of Section 17200 in environmental cases can in some respects be traced to a seminal reported case that brought it to widespread attention, Hewlett v. Squaw Valley Ski Corp. (1997) 54 Cal.App.4th 499.
5. Those wishing a more detailed presentation will surely secure a copy of Mr. Stern's expansive outline published by the Rutter group, cited in note 1, supra. This publication, although written from a defense perspective, is comprehensive and well organized, and is the bible of 17200 law.
6. 17204 (emphasis added).
7. Stop Youth Addiction v. Lucky Stores, 17 Cal.4th 553, 561-567 (1998) [hereafter "SYA"].
8. Cf. Code of Civil Procedure 367.
9. Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal.4th 163, 180 (1999).
10. Committee on Children's Television (1983) 35 Cal.3d 197, 210-211; Consumers Union v. Fisher Development (1989) 208 Cal.App.3d 1433.
11. The same is true for public prosecutors. People v. McKale (1979) 25 Cal.3d 626.
12. 17 Cal.4th 553 (1998) (hereafter "SYA").
13. SYA, 17 Cal.4th at 560-567.
14. In regard to what parties can sue and be sued, note that while nonprofits can be sued as a "business" under 17200, Isuzu Motors, Ltd. v. Consumers Union (C.D. Cal. 1998) 12 F.Supp.2d 1035, 1048, neither government agencies nor political campaigns can. Janis v. California State Lottery Commission (1998) 68 Cal.App.4th 824 [state agency]; Community Memorial Hospital v. County of Ventura (1996) 50 Cal.App.4th 199, 209-211 [county]; O'Conner v. Superior Court (1986) 177 Cal.App.3d 1013, 1019 [candidates]; Chavez v. Citizens for a Fair Farm Labor Law (1978) 84 Cal.App.3d 77 [initiative campaign].
15. Although equitable doctrines of "unclean hands" and "in pari delicto" may limit the scope of equitable relief such as an injunction.
16. See, e.g., Hewlett, supra; Committee to Defend Reproductive Rights v. A Free Pregnancy Center (1991) 229 Cal.App.3d 633, 641. However, the Attorney General's office understandably takes the view that its action takes precedence over a private party's, and therefore it can and does move to stay or otherwise abate private actions that it feels interfere with the People's action, and that resolution of the People's action acts to resolve the private party action as well. No private party in this author's knowledge has successfully challenged either proposition.
17. See, Setliff Bros. Service v. Bureau of Automotive Repair (1997) 53 Cal.App.4th 1491. That said, a defendant sued for discharges who is also in front of a regional water board over those discharges or a cleanup order will routinely seek to stop the private party's Section 17200 action using doctrines such as primary jurisdiction or abstention. Plaintiffs just as routinely fight and defeat such motions. See section II(G), infra, and Stern, supra, n. 1 at 127-130 for cases applying and rejecting the doctrines.
18. "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." Section 17200.
19. Committee on Children's Television, supra, 35 Cal.3d 197, 210; and see Stern supra n. 1 at 28 and cases cited therein.
20. People v. Cappuccio (1988) 204 Cal.App.3d 750.
21. State Farm, etc. v. Superior Court (Allegro) (1996) 45 Cal.App.4th 1093, 1102.
22. See Hewlett v. Squaw Valley, supra, 54 Cal.App.4th at 520.
23. People v. Casa Blanca Homes, Inc. (1984) 150 Cal.App.3d 509, 527 ["practice" may be "nothing more than a pattern of behavior pursued in the course of a business"]; Allied Grape Growers v. Bronco Wine Co. (1988) 203 Cal.App.3d 432, 453 ["practice" may be found with even a single "victim"]; Klein v. Earth Elements, Inc. (1997) 59 Cal.App.4th 965, 969 n.3 ["The plain meaning of the amendment, as enacted [to change the plural "acts" to the singular "act"] is that the [section] now covers a single act of misconduct."].
But note that an injunction generally will not lie against wholly past acts, that are not expected to be repeated. Cf. Midpeninsula Citizens for Fair Housing v. Westwood Investors (1990) 221 Cal.App.3d 1377, 1393 [no injunction where alleged policy discontinued] with California Service Station Assn. v. Union Oil Co. (1991) 232 Cal.App.3d 44, 57.
However, mootness is "not a defense to liability", Stern, supra n. 1 at 164, and relief in the nature of restitution and disgorgement may still lie. See, e.g., Hewlett, supra [17200 action allowed to challenge past conduct of unlawfully logging trees].
24. SYA, 17 Cal.4th at 566.
25. Southwest Marine v. Triple A Machine Shop (N.D.Cal. 1989) 720 F.Supp. 805; Communities for a Better Environment (N.D.Cal.1997) 996 F.Supp. 934 [federal Clean Water Act]; Hewlett, supra, 54 Cal.App.4th at 520-525 [Forest Practices Act, Pub. Res. Code 4511, and local ordinances]; People v. Sakai Co. (1976) 56 Cal.App.3d 531 [Endangered Species Act, Pen. Code 6530]; People v. Cappuccio (1988) 204 Cal.App.3d 750, 759 [Fish and Game Code 8011, 12512].
26. Committee on Children's Television, supra; Diaz v. Kay-Dix Ranch (1970) 9 CA3d 588, 591 [federal statutes and regulations]; Communities for a Better Environment (N.D.Cal.1997) 996 F.Supp. 934 [federal Clean Water Act permit as implemented by state agency ].
27. People v. McKale (1979) 25 Cal.3d 626, 632; Hewlett, supra, 54 Cal.App.4th at 526 [California Department of Forestry interpretations regarding timber harvesting].
28. Hewlett, supra, 54 Cal.App.4th at 532 [local zoning ordinance and county-issued conditional use permit].
29. Hewlett, supra, 54 Cal.App.4th at 533-535 [plaintiff can pursue action under 17200 in lieu of contempt for violations of prior court orders].
30. Health & Safety Code 25249.5 et seq. See, e.g., People v. Superior Court (American Standard) (1996) 14 Cal.4th 294, 299 n. 3 [Attorney General's complaint alleged Proposition 65 violation in first cause of action, and Section 17200 violation for violating Proposition 65 in second].
31. "Unless otherwise expressly provided, the remedies or penalties provided by this chapter are cumulative to each other and to the remedies or penalties available under all other laws of this state." Section 17205.
32. Section 17208.
33. The breadth of the relief is remarkable. See section 17203 (injunctive relief) and 17206 (penalties to public prosecutors). See also subsection F, "Remedies" infra.
34. Bank of the West (1992) 2 Cal.4th 1254, 1266-1267.
35. Cel-Tech Communications v. L.A. Cellular Phone Co., supra , 20 Cal.4th at 180 (1999). The Supreme Court illustrated the point clearly in its unanimous opinion in Mangini v. R.J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, in which it held that a marketing campaign for cigarettes, allegedly directed to minors, was certainly subject to an unfairness claim, even if no specific law against it could be found.
36. Cel-Tech Communications v. L.A. Cellular Phone Co., supra , 20 Cal.4th at 180 (1999); see also, Lazar v. Hertz Corp. (1999) 69 Cal.App.4th 1494 [practice expressly authorized by legislature as lawful cannot be unfair under Section 17200]. The Cel-Tech opinion also enunciated a new set of limiting tests for unfairness, borrowing from similar provisions under the FTC. But those tests are expressly limited to cases brought by competitors; the Court made plain that it was not deciding the issue in other contexts. 20 Cal.4th at 187, n.12.
37. The uncertainty of the standard in the non-competitor plaintiff case, stemming from the reserved question by the Supreme Court in Cel-Tech, see the prior note, might make it advisable for a non-competitor plaintiff to plead with greater particularity than was the case before Cel-Tech. For a more detailed discussion, see Stern, supra n. 1, at 222-223.
38. 54 Cal.App.4th at 533, n.22.
39. That said, there are two types of environmental cases where it might come into play. First is an environmental case involving "greenwashing:" false or misleading claims about the environmental or health benefits of a product or company. Second might be a case about the land use or contamination at a site in which neighboring residents could raise claims that arise from the contamination of their own property. Because the "fraud" claim under Section 17200 is far easier than common law fraud, see accompanying text, neighbors may find a powerful tool to disgorge profits, secure restitution or force cleanup.
40. Committee for Children's Television, supra, 35 Cal.3d at 211.
41. See Civil Code 1709.
42. Committee for Children's Television, supra, 35 Cal.3d at 211.
43. Allied Grape Growers v. Bronco Wines (1988) 203 Cal.App.3d 432; American Philatelic Soc'y v. Claiborne (1935) 3 Cal.2d 689, 696-699.
44. Supra n.1, at 71-103. Of interest to some environmental enforcers--and compliance counsel for manufacturers or retailers--are California's "green marketing" rules, found in section 17580.5. The section restricts claims using "recyclable," "ozone-friendly," "biodegradable," "recycled content," and other terms, incorporating FTC guidelines. Its predecessor statute was upheld against a First Amendment challenge. Association of National Advertisers v. Lungren (9th Cir. 1994) 44 F.3d 726.
45. See, e.g, People ex rel. Mosk v. National Research (1962) 201 Cal.App.2d 765, 771-772; Barquis v. Merchants Collection Ass'n (1972) 7 Cal.3d 94, 111.
46. See, Consumer Union v. Alta-Dena Certified Dairy (1992) 4 Cal.4th 963 [dairy forced by court to make affirmative statements about wholesome of unpasteurized milk to undo effects of prior false statements].
47. ABC International Traders v. Matsushita Electric Co. (1997) 14 Cal.4th 1247. The issue was also raised and effectively reaffirmed in Cortez v. Purolator Air Filtration Products, Inc., discussed in section III(C), infra.
48. Section 17206 limits penalties only to actions brought in the name of the People by prosecutors. Cel-Tech, supra, 20 Cal.4th at 179 and Bank of the West v. Superior Court (1992) 2 Cal.4th 1254 (and many other cases) hold that Section 17200 does not permit recovery of "damages."
49. Fletcher v. Security Nat'l Bank (1979) 23 Cal.3d 442, 449-450.
50. Kraus v. Trinity Management Services (2000) 23 Cal.4th 116; Cortez v. Purolator Air Filtration Products (2000) 23 Cal.4th 163.
51. People Thomas Shelton Powers (1992) 2 Cal.App.4th 330. The continued availability of disgorgement, and the constitutional problems with restitution to absent and non-noticed class members, was raised in a recent case, see, e.g., Day v. ATT (1998) 63 Cal.App.4th 325, 337-340. The Supreme Court dismissed the due process problems in Cortez, as discussed in detail in section III(C), infra.
52. The continued availability of disgorgement was reaffirmed by the Court. See 23 Cal. App.4th at 127: "An order that a defendant disgorge money obtained through an unfair business practice may include a restitutionary element, but is not so limited. As in this case, such orders may compel a defendant to surrender all money obtained through an unfair business practice even though not all is to be restored to the persons from whom it was obtained or those claiming under those persons. It has also been used to refer to surrender of all profits earned as a result of an unfair business practice regardless of whether those profits represent money taken directly from persons who were victims of the unfair practice."
The only limitation that decision placed on disgorgement was that, in a "representative UCL action" that was not brought as a class action, which can use the device of a "fluid recovery fund". The Court only held that Section 17200's remedies "do not authorize orders for disgorgement into a fluid recovery fund." 23 Cal.App.4th at 137.
Thus disgorgement remains fully available in cases in which there are no identified or identifiable victims, and in those cases it is also available as long as it is brought as a class action to establish a fluid recovery fund.
53. Hewlett, supra, 54 Cal.App.4th at 545-546.
54. Ibid at 1.
55. Ibid.
56. Supra, n. 1 at Chap. 5, pp. 105-182.
57. See Stern, pp. 127-130 for cases both applying and rejecting each).
58. See ibid pp. 107-114, 124. See also, Dupont-Merck v. Superior Court (Newman) (No. G024013, 4th DCA February 14, 2000) 2000 Cal. App. LEXIS 118; Kasky v. Nike, Inc. (2000) 79 Cal.App.4th 165 (No. A086142, 1st DCA, March 20, 2000), petition for hearing granted.
59. See ibid pp. 134-138.
60. See ibid pp. 164-166 discussing cases accepting and rejecting mootness.
61. See ibid pp. 178-180.
62. See ibid pp. 180-182.
63. Ibid at p. 146 and cases cited therein.
64. Ibid at p. 149, 152.
65. E.g., Proposition 65's Health & Safety Code 25249.7.
66. Supra; Comm. on Children's Television, supra, 35 Cal.3d at 210-211, and Consumers Union v. Fisher Development, supra, 208 Cal.App.3d 1433.
67. There is an interesting wrinkle in this, however. At least in San Francisco Superior Court, most trial judges arrive at a different result where the private party has failed to provide the 60-day notice required under Proposition 65. In that case, the trial court routinely denies the private party power to prosecute the conduct as a Proposition 65 violation through Section 17200.
68. "Actions for any relief pursuant to this chapter shall be prosecuted. . .by the Attorney General or any district attorney or by any county counsel authorized by agreement with the district attorney. . .or any city attorney [that meets certain criteria]. . .or by any person acting for the interests of itself, its members or the general public.
69. A simple, non-legal example that certain Deputies Attorney General have used: where the doctor tells you to call if your ill child is hot or lethargic, that does not mean you should refrain if the child is hot and lethargic.
70. Supra, 54 Cal.App.4th at 545-546.
71. See also, Consumers Union v. Alta-Dena, 4 CA4th 963 (1992) and Committee to Defend Reproductive Rights v. A Free Pregnancy Center, 229 CA3d 633 (1991), both of which involved 17200 actions jointly and cooperatively prosecuted by a District Attorney and private party.
The courts' look at the cooperative nature of the joint public-private prosecution therefore makes it imperative that the private prosecutor cooperate with the public prosecutor, including not only in litigation, but also in pre-litigation investigation and sharing of information, and in settlement and negotiation strategy.
72. E.g., Cel-Tech, supra.
73. E.g. California v. Levi Strauss (1986) 41 Cal.3d 460; Allied Grape Growers v. Bronco Wines (1988) 203 Cal.App.3d 432; People v. Parkmerced (1988) 198 Cal.App.3d 683).
74. E.g. Hewlett, supra; Consumers Union v. Fisher Development, supra; Consumers Union v. Alta-Dena, supra.
75. In all examples, assume that the second action is for the same conduct. A second action for conduct that is different from, or occurring after the prior settlement, raises few if any issues.
76. (1981) 120 Cal.App.3d 459, 475, fn.1.
77. See, e.g., American International Industries, Inc. v. Superior Court (1999) 72 Cal.App.4th 1376 (2d DCA, No. B121824) 99 D.A.R. 1931 (2/26/99) rehearing granted March, 1999, depublished (June 1999).
The Supreme Court may have put the issue to rest by sidestepping it, at least as the issue was framed by the petitioners. The Court simply held that, where there identified victims whose due process rights might arguably be affected, the appropriate means to deal with monetary relief that might fully disgorge the defendants' ill-gotten gains is to use a class action and a fluid recovery fund. Kraus v. Trinity Management (2000) 23 Cal.4th at 137.
78. This is not to say that defendants do not have very legitimate concerns about multiple, overlapping payments or penalties for a single course of conduct.
79. These proposals were largely based on a report prepared for the Commission by Prof. Fellmeth, California's Unfair Competition Act: Conundrums and Confusions (Jan. 1995), published in Recommendation on Unfair Competition Litigation (Nov. 1996) 26 Law. Rev. Com. Rep. (1996).
80. For examples of bills embodying the Fellmeth-Law Revision Commission recommendations, see SB 593 (Morrow, 1999-2000 Session), AB 2511 (Morrow, 1997-1998 Session), AB 1295 (Caldera, 1997-1998 Session). None made it out of their first committee.
81. SYA, supra, 17 Cal.4th at 570-571, & fn. 9.
82. Ibid at 567-578.
The only appellate opinion to address the res judicata issue squarely was depublished. American International Industries v. Superior Court, (2d DCA, No. B121824) 99 D.A.R. 1931 (2/26/99) rehearing granted March, 1999, depublished (June 1999). The court found a prior action under Proposition 65 and Section 17200 barred claims in a subsequent action "on behalf of the public," but not individual claims by consumers for relief sounding in damages. In addition to the lack of precedential support for its holdings the case is, in any case, highly fact-bound.
The previous Proposition 65 action against manufacturers of hair dye was settled by a court decree. The court found it preclusive on a subsequent action because: the settlement was approved by and entered in a court order; the language of first release was expansive; the Attorney General, although not a party or signatory in the first or second action, both "participated" in and "approved" the prior settlement as warranting "no further action" and "in the public interest," thereby establishing some sort of "privity" with the public at large; and, the first settlement provided for some restitutionary relief to consumers in the form of "coupons."
Notably, the court did not bar causes of action based on other claims that were not and could not have been litigated in the first action, thereby permitting individual Consumer Legal Remedies Act, fraudulent concealment and products liability claims in which individual damages were sought.
While the basis for depublication is unknowable, on rehearing the Court of Appeal was alerted to United States and California Supreme Court cases neither briefed nor discussed in its opinion. E.g., Richards v. Jefferson County (1996) 517 U.S. 793; General Telephone Co. v. E.E.O.C. (1980) 446 U.S. 318, 332-333; People v. Pacific Land Research Co. (1977) 20 C3d 10, 16, 18-19; Dean Witter Reynolds v. Superior Court (1989) 211 CA3d 758, 773-774.
83. California v. Levi Strauss (1986) 41 Cal.3d 460 [court can order disgorgement, and use cy pres "fluid recovery" with residue to different source than victims, even where cannot effect complete restitution to victims or victims cannot be found]; Fletcher v. Security Pacific Nat'l Bank (1979) 23 Cal.3d 442, 449 [court armed with both general and specific statutory "cleansing power to order restitution to effectuate complete justice"]; People v. Superior Court (Jayhill) (1973) 9 Cal.3d 283, 286 [court can use full range of inherent powers to effect complete relief]; People v. Parkmerced (1988) 198 Cal.App. 3d 683 [same]; People Thomas Shelton Powers (1992) 2 Cal.App.4th 330 [can order disgorgement, even without any victims or any identifiable person suffering detriment].
Cf. Day v. ATT (1998) 63 Cal.App.4th 325 337-340 [FCC "filed rate doctrine" prohibits changes in rates or preferential rates to anyone, and therefore limits power of court to order restitutionary relief to long distance phone card users regardless of "unfair" or "fraudulent" practice; broad dicta suggests Section 17200 limited to restitution only and not disgorgement]; Bronco Wine, supra, [dissent by then-Appellate, now Supreme Court Justice Baxter, suggesting same dicta: Section 17200 permits restitution only to identified persons who lost money to defendant, but ill-gotten gains secured from unidentifiable individuals beyond reach of statute].
84. The Court held: (1) restitution to non-parties under a representative 17200 action is permissible, (2) it does not require certification of a class, (3) but the specific remedy of disgorgement into a fluid recovery fund requires a class action. Cortez, 23 Cal. 4th at 168. The court also held a defendant should be ordered to bear all the costs "to identify, locate and repay to each [person] the full amount of funds improperly acquired." Kraus, 23 Cal. 4th at 138. In large consumer cases these costs could be enormous, not to mention seriously harming the corporate image from advertising the corporation's transgressions.
While a complete discussion of the decisions is beyond the scope of this article, it must be noted that the Court rejected the most important argument advanced by the business community: that due process prohibits a representative plaintiff from recovering any form of monetary relief other than restitution for parties before the court, absent the procedures of class actions. Kraus, 23 Cal.4th at 126, 138. The Court also held that Section 17200's four year statute of limitations--and not any shorter period in the "borrowed" statute--governs the action. Cortez, 23 Cal. 4th at 179. Both are substantial victories for plaintiffs.
85. See preceding note, and Stern, supra n. 1 at 260-262, 289-298, and cases cited therein.
86. ACR 17 (Wayne, 1999-2000 Session).