Unfair Competition Law

• Publication year: 2016
• Author: By Jessica Riggin and Sarah London

Unfair Competition Law

By Jessica Riggin and Sarah London

The Year in Review

In 2016, courts addressed key threshold questions about who can recover what under California's Unfair Competition Law (UCL). For instance, what if an advertised sale lured you into a clothing store to purchase items, only to have you arrive at the checkout counter to find that the items were not on sale? Would you have a viable UCL claim if, due to embarrassment, you chose to buy some of the selected items at full price? What if you visited the emergency room as a "self-pay" patient and later received a hospital bill you considered to be unreasonably high? Could you pursue a UCL claim even if the hospital offered a financial assistance program? Can you obtain an injunction preventing the enforcement of a non-compete clause for contracts beyond your own—without class certification and without any intent of contracting with the offending company in the future? Courts in 2016 answered each of these questions in the affirmative, pointing to an overall trend toward increasing access to the courts for those alleging unfair business practices.

Standing

Veera v. Banana Republic, LLC (2016) 6 Cal.App.5th 907

Standing has presented a potential hurdle in UCL cases since the passage of Proposition 64 in 2004 to amend the UCL's standing requirements for private actions for relief. Proposition 64 limited UCL claims to any "person who has suffered injury in fact and has lost money or property as a result of unfair com-petition."¹ In Veera, the appellants alleged that they were lured into a Banana Republic store by signs advertising "40 percent off," but that after selecting items for purchase, they were informed at the checkout counter that their items did not qualify for the sale.² Embarrassed and having spent significant time shopping, the appellants bought some, but not all, of the items. Banana Republic argued that the appellants lacked standing, as they were notified that the items failed to qualify for the sale prior to purchase. The Court of Appeal, however, held that there was a triable question regarding whether the appellants' reliance on the allegedly deceptive advertising resulted in the economic loss, finding that the unfair practice or misrepresentation need not be the only cause of the harm. Further, the court noted that, had the consumers been able to resist the influence of the deceptive advertising, they would have lacked standing because there would be no economic injury.³ As the court observed, if an alleged "bait and switch" scheme is successful, the legislative purpose underlying Proposition 64 suggests that consumers should have standing.

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Moran v. Prime Healthcare Mgmt., Inc. (2016) 3 Cal.App.5th 1131

In Moran, a "self-pay" patient challenged the rates he was charged for emergency room treatment on three separate occasions after signing a preprinted conditions-of-admission agreement and receiving medical treatment. Although the Court of Appeal rejected the appellant's "unlawful" theory under the California Legal Remedies Act ("CLRA"),⁴ it found he had stated a claim under the UCL to the extent he alleged that the financial liability provision of defendants' contract was unconscionable. By alleging that the respondents charged rates in gross excess of the cost of care for the purpose of increasing the hospital's profits at the expense of vulnerable patients, the appellant met his burden of alleging that the price exceeded the cost or fair value. The respondents also contested standing, arguing that the contract allowed the appellant to avoid paying the full cost of his care by reducing or eliminating his bill through hospital financial assistance or its charity care policy. The court rejected this argument, concluding that the application process constituted a "tangible burden."

Takeaways

Veera and Moran suggest a trend toward a more liberal view of what constitutes an "economic injury" sufficient to establish standing under the UCL. In both cases, the appellants allege that they were charged unreasonable rates, yet they could have taken modest steps to avoid paying those rates: the shoppers could have simply walked out of the store without purchasing any items, and the patient could have filed an application for financial assistance. Nevertheless, both courts found that the public policy goals underlying the UCL were best served by allowing the claims to go forward. The opinions reflect a trend in favor of allowing plaintiffs their day in court to challenge allegedly unfair business practices when avoidance of the economic harm caused by the practice would have caused the plaintiff burden, inconvenience, or embarrassment.

Remedies

Robinson v. U-Haul Co. of California (2016) 4 Cal.App.5th 304

Appellant U-Haul Company of California ("U-Haul") sued respondent Leigh Robinson, a former U-Haul independent dealer, after Robinson terminated his dealer contract with U-Haul and began renting Budget trucks from his storage unit facility in violation of the non-compete clause in U-Haul's standard dealer contract. At the outset of the action, the trial court denied U-Haul's request for a preliminary injunction that would have prevented Robinson from offering the products of U-Haul's competitors while a Yellow Pages ad (purchased at U-Haul's expense) was still promoting Robinson's business as a U-Haul dealership. Robinson then filed a separate action alleging malicious prosecution and unfair competition in violation of the UCL. The trial court found in Robinson's favor, issuing a permanent injunction preventing U-Haul from enforcing "against any former or current dealers the non-competition covenant in its dealer contracts" and awarding the plaintiff more than $800,000 in fees.⁵

The Court of Appeal upheld the trial court's decision. Significantly, the court determined that a permanent injunction may be appropriate, even when a party has voluntarily submitted to the terms of a non-compete provision. The court observed: (1) U-Haul knew the non-compete provision was unlawful at the time it was...