california-160550_960_720California’s Unfair Competition Law

The Legislature enacted California’s Unfair Competition Law (the “UCL”) to deter unfair business practices and protect consumers from exploitations in the marketplace. Allen v. Hyland’s Inc. (C.D. Cal. 2014) 300 F.R.D. 643, 667. Under the UCL “unfair competition” means “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act.” Bus. & Prof. Code, §§ 17200; 17500. The Legislature initially imposed no standing requirements for private litigants to bring suit and, “[a]s a result, a private individual or entity with no relationship to the alleged wrongful practice could use the statute to force a business to repay substantial sums arguably acquired through a UCL violation.” In re Tobacco II Cases (2009) 46 Cal.4th 298, 329 (dissenting opinion).

In November 2004, California voters passed Proposition 64, a ballot proposition designed to prevent “shakedown suits” brought under the UCL. In re Tobacco II Cases, 46 Cal.4th at 316. Lawmakers aimed Proposition 64 at “unscrupulous lawyers” who exploited the UCL’s generous standing requirement to extort money from small businesses by bringing frivolous lawsuits. Id.[1]  

Proposition 64 required that for private litigants to bring an action under the UCL the litigant must suffer an actual economic injury as a result of the unfair business practice at issue. Bus. & Prof. Code, § 17204. Critically, under Proposition 64, local public prosecutors can still bring UCL lawsuits without meeting the more stringent standing requirements applicable to private litigants. Bus. & Prof. Code, § 17204. Thus, while Proposition 64 limited private litigants’ standing to sue under the UCL, government prosecutors’ standing was in no way affected by this law. Californians For Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 232.

The Aftermath of Proposition 64

Ever since the Legislature amended the UCL pursuant to Proposition 64, California courts have been faced with the issue of interpreting the “as a result of” language under the UCL. The California Supreme Court has opined the “as a result of” language requires that a putative plaintiff actually relies on the conduct at issue in order to have standing to sue under the UCL. In re Tobacco II Cases (2009) 46 Cal.4th 298, 326. The actual reliance need not be the only cause of the plaintiff’s harm; so long as the reliance is a substantial factor in actually influencing the plaintiff’s decision, standing will lie. Id., at 326-27.

In 2016 the Court of Appeal for the Second District recognized that the “as a result of” language required “reliance on a statement for its truth and accuracy.” Goonewardene v. ADP, LLC (2016) 5 Cal.App.5th 154, 185 (citing Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 327).

Veera v. Banana Republic, LLC

The California Supreme Court will have another opportunity to further define “as a result of” under the UCL in a case which appellant Banana Republic recently filed for review. In Veera v. Banana Republic, LLC the plaintiffs alleged that they were “lured” into a
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