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The following is the text of an article published in the January, 10, 2000, issue of California Law Business
"Do y'all have gravity out there?" was the Atlanta lawyer's pained reaction to our nutshell description of the workings of California's Unfair Competition Law.
We do indeed have gravity out here. And a lot of it has a cosmic locus in Section 17200 of the California Business and Professions Code, the state's Unfair Competition Law (UCL). Lawyers are being pulled from every point of the plaintiffs' half of the compass to this formerly uninspiring rule for fair play between businesses.
At the same time, business people are seeing their time and money sucked from every corner of the country into a tornado vortex that swirls to a point on the "any unlawful, unfair, or fraudulent business act" phrase anchoring the UCL's expanding universe of applications.
This is a law on the verge of making California a national laughingstock. Call it Gonzo Law . . . "straight face" law.
How can you describe a statute that lets a lawyer in private practice, without a client and without tangible evidence of harm, sue a defendant for being "unfair" and know the allegation will rocket past summary judgment motions. It's the kind of a law which, as one Southern California lawyer told me, lets you proceed with any claim as long as you can state it with a straight face.
It didn't start that way. Enacted to give state and local prosecutors a tool like the Federal Trade Commission Act, the law was long ago amended to let "any person" bring a UCL action independent of the attorney general or district attorneys. Court rulings built from this scaffold have given us what the California Law Revision Commission has called "probably the broadest such statute in the country." Our general counsel Fred Hiestand sees it as the "omnibus statute . . . a bounty hunter-type regulatory mechanism of enormous elasticity."
The silly cases - the play oven that baked too slowly, the squirt gun that shot short - these trigger a "what else can you expect from lawyers?" reaction among the general public. But they don't convey the depth of the problem.
An investigation by the California Law Revision Commission does:
"The Unfair Competition Law provides unusually broad, and perhaps unique, standing for private parties . . . Those suing on behalf of the general public can range from plaintiffs having a narrow dispute with a defendant in a business context, who tack on the representative claim for discovery and settlement advantages, to plaintiffs serving a true private attorney general function...The Unfair Competition Law does not provide any mechanism to distinguish between these types of plaintiffs. There is a potential for abuse where a claim on behalf of the general public is added to a complaint for tactical advantage."
We are not dealing with conjecture.
"The survey of cases and practitioners involved in Unfair Competition Law litigation indicates that the statute's dilemma is no longer theoretical, it is currently functioning in a number of cases to frustrate the just and expeditious resolution of disputes," wrote University of San Diego Law School Professor Robert C. Fellmeth in his study for the Law Revision Commission.
As Commission assistant executive director Stan Ulrich told the Wall Street Journal recently, "Although I can't prove it, I believe there's a huge underground economy in 17200 claims."
Then we have the plaintiff's attorneys with this agenda item on their annual Hawaii seminar: "How Business and Professions Code Section 17200 Can be a 'Value Added' Component of Your Litigation."
The law has been used to accuse the maker of Pokemon trading cards of corrupting the nation's youth by promoting gambling. It was used in a suit against Wal-Mart for offering a "Ladies Day" discount on an oil change. In the latter it was revealed that the plaintiff had gone to Wal-Mart, rather than his normal automotive service, in order to be denied the discount, and deliberately did not ask for one (The store actually gave discounts to anyone requesting.) - all this occurring only after the man was introduced to his counsel.
Attempts are in play to use the UCL to circumvent the shorter statute of limitations that would otherwise apply to an alleged offense. Working from the other direction, an attempt is being made to use damage provisions in the underlying offense to evade the UCL's remedy limits of restitution and injunction.
The Law Revision Commission's study produced the observation that "The limitations on the type of recovery available under the unfair competition law probably act only as a minor restraint on litigation."
The UCL is also a little short in the res judicata department, a fact not lost on parties in a recent Central Valley case in which the plaintiff demanded discovery access to the defendant auto dealer's customer list. While motion trading on this issue was going on, the plaintiff's lawyer made the following offer: ". . . my client hereby consents to settlement of the above matter for the total amount of $100,000, to include all attorney's fees and costs, and on condition that the previous court-order discovery be provided."
The game of turning an already-solved problem into attorney fees is exemplified by the UCL suit against a pet food company which reacted to its accidental sale of contaminated pet food with a $3.7 million recall and information campaign that reimbursed both customers and distributors. This company fought back, eventually winning an appellate decision that declared the firm's "intentionally over-inclusive" recall and other conduct to be "exemplary" and that there was "absolutely nothing deceptive or sharp about the company's behavior."
It is absolutely astounding that the UCL permits a case like this to even be argued, let alone survive to the appellate level.
Yet the Legislature has repeatedly sided with plaintiffs' lawyers and over the past three years blocked bi-partisan UCL amendments to end abuses like these.
The Economist magazine, in an arms length overview of the American civil justice system early in the past decade, observed that:
"Ideally, societies want lawyers to strike the right balance between being businessmen and being professionals. Wherever that 'right' balance is, lawyers have too often failed to find it on their own - especially where great wads of cash are there to be made."
Experience with the Unfair Competition Law has certainly borne that out.
John H. Sullivan is president of the Civil Justice Association of California in Sacramento, a non-profit association representing businesses, professionals, and local governments.
