By James Bourbeau
Copyright © 2004 by University of the McGeorge School of Law
JD, McGeorge School of Law, University of the Pacific
to be conferred May 2005
B.A., Fine Art, California State University, Sacramento, 2002
Proposition 64, Limits on Private Enforcement of Unfair Business Competition Laws hereinafter “the Proposition” or “Proposition 64] would amend the Unfair Competition Law, Business and Professions Code, sections 17200, et. seq. [hereinafter section 17200]. Proposition 64 specifically amends sections 17203, 17204, 17206, 17535, and 17536. California Secretary of the State, California Official Voter Information Guide, Limits on private Enforcement of Unfair Business Competition Laws, Proposition 64 (2004).
California’s Unfair Competition Law [hereinafter UCL] prohibits unlawful or fraudulent business acts, and is meant to protect the public from deceptive advertising, and violations of environmental, health and safety laws. See Bus. & Prof. Code §§ 17200 et. seq.. Currently, a claim under section 17200 may be brought by the Attorney General, local prosecutors, or a person acting in the interest of itself, its members, or the public. Id. at § 17204. Actual injury to the consuming public or to business competitors is not a required element of proof of a violation of section 17200, at least where the conduct is alleged to be “unlawful.” See Bus. & Prof. Code § 17204; People v. Cappuccio, Inc., 204 Cal. App. 3d 750 (1988).
Proposition 64 would amend section 17200 in four ways. First, it would limit the individual’s right to sue under the California Unfair Business Competition Law to claims that the individual was actually injured by, and suffered financial and/or property loss because of an unfair business practice; Second, it would require private representative claims to comply with procedural requirements applicable to class action lawsuits; Third, it would authorize only the California Attorney General or local government prosecutors to sue on behalf of general public to enforce unfair business competition laws; Finally, Proposition 64 would limit the use of monetary penalties recovered by Attorney General or local government prosecutors to enforcement of consumer protection laws.
The stated goal of Proposition 64 is to limit so-called “shakedown lawsuits” against businesses under section 17200. According to the Proponent, these are suits under section 17200 that are brought by unscrupulous attorneys against businesses in order to coerce them into settlement. Because section 17200 does not require that a party sustain an injury in fact, unethical attorneys for shell consumer organizations have needed only to search for code violations by businesses, then send the business an intent to sue letter informing them that, because they are in violation of a state code, they may be liable pursuant to section 17200.
The Proponents believe that section 17200 should be amended to comport with standing requirements that require injury in-fact, and that this amendment will serve to hinder those who would bring abusive lawsuits. Opponents assert that section 17200 should remain as is, allowing persons and groups to sue businesses who are in violation of laws enacted to protect the public without meeting the standing requirement of an injury in fact or going through the complex and expensive procedure to certify a class action, thus giving consumer, health and environmental advocacy groups an additional tool to help protect the public welfare by discouraging unfair business practice.
The Proponents of the Proposition claim that law suits that abuse the relevant portions of section 17200 are a burden on business and the overall economy of the state, and are unethical. Yes on 64, Get The Facts on Proposition 64 http://www.stopshakedownlawsuits.com/facts_general.html (accessed Sept. 2, 2004). Opponents claim that the Proposition will have the effect of gutting California’s historic Unfair Competition Law, would impose rigid standing requirements that would effectively prohibit all public lawsuits filed under the statute by individuals and organizations, and create blanket immunity for unlawful, unfair, or fraudulent business conduct which will imperil California’s environment and create imminent public health hazards. See Consumer Attorneys of California, http://caoc.com/p64wherecaocstands.htm (accessed Sept. 1, 2004).
What is certain is that Proposition 64 will limit access by some persons and organizations wishing to file claims pursuant to section 17200, who cannot show an injury in fact, and do not wish to or cannot meet the requirements for a class action. However, government prosecutors and attorneys may still bring a section 17200 suit on behalf of the people, and private persons and organizations may still file section 17200 claims if they meet the heightened standing requirements. California Secretary of the State, California Official Voter Information Guide, Limits on private Enforcement of Unfair Business Competition Laws, Proposition 64 (2004). Proposition 64 may achieve its stated purpose of inhibiting abuses like those recently highlighted in the media and discussed in section II. A., in which unscrupulous attorneys preyed upon small businesses to gain settlements at the threat of a section 17200 suit.
Both sides of the issue champion the claim of fiscal savings to the state, while claiming that a victory by their Opponent will cost the state. The costs and savings to the state run from an increased workload for government prosecutors and courts, to extra funds earmarked to pay for enforcement of consumer protection laws, if the initiative is approved by voters. The actual fiscal effects are not easy to predict, as it is unknown how many 17200 suits will be filed under the amended filing requirements.
Finally, in the present economic environment faced by the state, it may make good public policy to protect businesses from a law that can be easily abused to their detriment. This is an especially important consideration if there are other, adequate, means of addressing the legitimately unfair business practices without allowing victimization by those who would abuse the legal system. On the other hand, there already exists a system of state and federal laws and rules meant to ensure the ethical practice of law and inhibit abusive or frivolous lawsuit (E.g. Bus.& Prof. Code § 6068(e) and Fed. R. Civ. P. 11). If courts and the California State Bar are willing to closely monitor such unethical activity, then section 17200 could be utilized as the tool for consumer and environmental protection that it was intended to be.
A. Background and Existing Law
Section 17200 prohibits any person from engaging in any unlawful or fraudulent business act, and is enforceable by the Attorney General, local public prosecutors, “or by any person acting for the interests of itself, its members, or the general public.” Bus. & Prof. Code § 17204 (emphasis added). Examples of this type of lawsuit include cases involving deceptive or misleading advertising or violations of state law intended to protect the public well-being, such as health and safety requirements. California Secretary of the State, California Official Voter Information Guide, Limits on private Enforcement of Unfair Business Competition Laws, Proposition 64 (2004). Currently, a person initiating a lawsuit under the UCL is not required to show that he/she suffered injury or lost money or property, nor are the Attorney General or local public prosecutors required to demonstrate an injury or the loss of money or property of a claimant, before they can bring an unfair competition lawsuit. Bus. & Prof. Code § 17204. Additionally, persons initiating unfair competition lawsuits do not have to meet the requirements for class action lawsuits. Id. Requirements for a class action lawsuit include (1) certification by the court of a group of individuals as a class of persons with a common interest that can be fairly and adequately protected by the representative party (2) demonstration that there is a benefit to the parties of the lawsuit and the court from having a single case, and (3) notification of all potential members of the class. See Code Civ. Proc. § 382; Fed. R. Civ. P. 23. Violators of the unfair competition law may be required to pay civil penalties up to $2,500 per violation. Bus. & Prof Code § 17206. If the section 17200 claim is brought by the Attorney General or other public prosecutor, state and local governments may use the revenue from such civil penalties for general purposes. Id.
There have been highly publicized cases of abuse of section 17200, as well as speculation that there exists an “underground economy” of settlements to shell consumer groups and unscrupulous attorneys. Civil Justice Association of California, Did You Know..? http://www.cjac.org/news/didyouknow01102000.html (accessed on Oct. 1, 2004). In a typical case of abuse of section 17200, a lawyer, law firm, or separate organization represented by counsel claims that a business is violating any number of state laws from false or misleading advertising to environmental regulations. Proponents assert that these violations have, in many cases, been arguably superficial (E.g. travel agents who neglect to post their license number on advertising). Yes on 64, Get The Facts on Proposition 64 http://www.stopshakedownlawsuits.com/facts_general.html (accessed Sept. 2, 2004). An attorney would probably then seek to effect a settlement with the violator by sending a threatening intent to sue letter. The typical settlement amount is $2,500.00—the amount of penalty award pursuant to section 17200. In many cases the business owner is advised that defending a section 17200 suit in court will cost more than the settlement, and the business owner subsequently settles for the amount in the letter. The primary problem in such a case is that section 17200 currently allows for a suit to be brought without an actual plaintiff who can make a colorable showing of injury or loss. The unscrupulous organization or attorney can merely look for a business with violations and basically then seek to extort settlements from them by the threat of expensive court proceedings.
On its face, Proposition 64 aims to quell these abuses. The issue remains, however, whether the Proposition goes too far and suppresses the ability to protect the public from abuses of businesses that gain advantages in the marketplace by unfair and illegal business practices, and whether there are other sufficient means of regulating ethical violations without amending section 17200.
B. Proposed Changes
There are five proposed changes to section 17200 included in the language of Proposition 64. The Injunctive Relief section of the UCL states in pertinent part that “[a]ny person who engages, has engaged in, or proposes to engage in unfair competition may be enjoined” from doing so. Bus. & Prof. Code § 17203. The Proposition amends this section with the following language:
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 Code of Civil Procedure Section 382, 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 state.
California Secretary of the State, California Official Voter Information Guide, Text of Proposed Laws, Proposition 64 (2004).
Section 17204, regarding the standing requirement, would then be amended as follows: “or by any person acting for the interests of itself, its members or the general public who has suffered injury in fact and has lost money or property as a result of such unfair competition. Id. Therefore, the effect is to limit the persons who may bring a section 17200 claim to those who have an injury or loss, a class action, or a California Attorney General, district attorney, county counsel, city attorney, or city prosecutor.
The next drafting change concerns the penalty awards in a section 17200 judgment when the claim is brought by a government entity. Currently, if the case is brought by the Attorney General, one-half of the penalty is paid to the treasurer of the county in which the judgment was entered, and one-half is paid to the state general fund. Bus. & Prof. Code § 17206. If brought by a district attorney or county counsel, the entire penalty shall be paid to the county treasurer. Id. If brought by a city attorney or city prosecutor, one-half of the penalty shall be awarded to the county treasurer and one-half to the city treasurer. Id. Proposition 64 will add the following language immediately after the section mentioning penalty awards: “The aforementioned funds shall be for the exclusive use by the Attorney General, the district attorney, the county counsel and the city attorney for the enforcement of consumer protection laws. California Secretary of the State, California Official Voter Information Guide, Text of Proposed Laws, Proposition 64 (2004). The only exception to this section states in section 17206(e) that one-half of the penalty award in a violation of Health and Safety Code, section 17980 or Article 3 of Chapter 10 of Division 10 may be “paid for the purpose of restoring, maintaining, or enhancing the premises” subject to the action, while the other half will be paid to the appropriate treasury for the purpose of enforcement of consumer protection laws. California Secretary of the State, California Official Voter Information Guide, Text of Proposed Laws, Proposition 64 (2004).
Finally, and similar to the preceding sections, Bus. & Prof. Code, sections 17535 and 17536 would be amended by Proposition 64 to require that: (1) the plaintiff have “suffered injury in fact and has lost money or property as a result of a violation of this chapter,” or the action must be brought by the Attorney General, district attorney, county counsel, city attorney, or city prosecutor; and (2) the award in such a case is paid for the use of “enforcement of consumer protection laws.” California Secretary of the State, California Official Voter Information Guide, Text of Proposed Laws, Proposition 64 (2004).
C. The Effects of Proposition 64
1. Financial Effects
According the California Legislative Analyst’s office, Proposition 64 would have an unknown fiscal impact on state support for local trial courts, depending on whether adoption of the initiative increases or decreases the overall level of court workload dedicated to unfair competition cases, and whether adoption would cause a decrease in section 17200 lawsuits, thus bringing a positive change to the business climate or conversely costing the state due to the ill effects of unchecked violations of consumer, health, and safety laws. California Secretary of the State, California Official Voter Information Guide, Limits on Private Enforcement of Unfair Business Competition Laws, Proposition 64 (2004).
If the level of court workload significantly decreases because of the proposed restrictions on unfair competition lawsuits, there could be state savings. Alternatively, this measure could increase court workload, and therefore state costs, to the extent there is an increase in class action lawsuits and their related requirements. The number of cases that would be affected by this measure and the corresponding state costs or savings for support of local trial courts is unknown.
As mentioned supra, Proposition 64 requires that section 17200 civil penalty revenue be diverted from general state purposes to the Attorney General for enforcement of consumer protection laws, or from general local purposes to local public prosecutors for enforcement of consumer protection laws. Id. To the extent that this diverted revenue is replaced by state or local general fund monies, there would be a cost to the general funds of state or local government. Id. However, there is no provision in the measure requiring the replacement of diverted revenues. Id.
Proposition 64 may result in other less direct, unknown fiscal effects on the state and localities, such as increased workload and costs to the Attorney General and local public prosecutors to the extent that they pursue certain unfair competition cases that other persons are precluded from bringing under this measure. Id. The Attorney General has indicated that Proposition 64 would stress his department’s resources. Lockyer Criticizes Prop. 64’s Limits On Lawsuits, Kevin Yamamura, Bee Capitol Bureau, http://www.sacbee.com/content/politics/story/10935508p-11852901c.html (accessed Oct. 1, 2004). Finally, future lawsuits that would have been brought under current law by a person on behalf of others involving, for example, violations of health and safety requirements, might not be brought by the Attorney General or a public prosecutor. In this case, violations of health and safety requirements may not be corrected, potentially causing state or municipal governments to incur increased costs in health-related programs. See id.
2. Effects on Ethical Practice
There has been a record of abuse by some lawyers of section 17200. In one of the most publicized examples of the fallout from questionable section 17200 lawsuits, the State Bar banned the attorneys in the Trevor Law Group, a Beverly Hills law firm, from practicing law by placing them on inactive status for their allegedly egregious and excessive enforcement of section 17200 against numerous auto repair shops. Elliot G. Disner and Noah E. Jussim, So Unfair and Foul, 26-NOV L.A. Law 42 (Nov. 2003). The State Bar took this action pending the resolution of further disciplinary actions against the Trevor Law Group attorneys, including disbarment. Id. Faced with this prospect, the attorneys decided to voluntarily resign from the bar. Id. The attorneys also faced a lawsuit by California Attorney General Bill Lockyer, which ironically included a claim that the Trevor Group violated section 17200 as a result of the firm’s unfair business practices. Id.
If Proposition 64 can accomplish what it claims, there may be a positive effect on business in California, by prohibiting this sort of abuse. However, the type of abuse mentioned above can be controlled if courts are, for example, willing to impose Rule 11 sanctions, and the bar is vigilant in policing the member body for ethical violations.
3. Effects on Consumer, Health and Environmental Litigation
The actual effect on public interest organizations’ and the public’s ability to bring
about change and reform through the use of section 17200 is difficult to assess, primarily
because other California citizen suit laws are available to enforce public safety
and consumer protection. (E.g. California Coastal Act, Pub. Res. Code § 30000, et seq.; California Environmental
Quality Act, Pub. Res. Code § 21000, et seq.; Integrated Waste Management Act, Pub. Res. Code § 40050, et seq.; Lewis Presley Air Quality Management Act, Hlth. & S. Code § 40400, et seq.; Noise Control Act of 1973, Hlth. & S. Code § 46000; Porter-Cologne Water Quality
Control Act, Water Code § 13000, et. seq.; Safe Drinking Water and Toxic Enforcement Act (“Proposition 65”), Hlth. & S, Code
§ 25249.5, et seq.). The amount that these other laws would be utilized in lieu of section 17200, if
those wishing to file suit under section 17200 were required to showing of injury
in-fact, is an unknown. The fact remains, however, that some consumer, health and
environmental groups have used the liberal standing requirements of section 17200
to bring consumer, health, and environmental protection suits against those businesses
who have attempted to profit from unfair business practices at the expense of the
public welfare. No on 64, Endangered Species: More cases, brought under California's Unfair Business Competition
Law, that Prop 64 threatens to make extinct http://www.electionwatchdog.
org/fs/fs000017.php (accessed Oct. 12, 2004). Therefore, it is reasonable to say that Proposition 64 would effectively inhibit some of this activity in the public interest.
There appear to be no significant drafting issues, as the Proposition simply amends the current language of section 17200 succinctly and in five very specific sections. The effect of the amendments are unambiguous and the writing should withstand scrutiny for legislative drafting concerns.
A. Federal Constitution
Proposition 64 does not appear to raise any federal constitutional issues.
B. State Constitution
Proposition 64 not only places limitations on who may bring a section 17200 action, but also designates who may receive an award in a successful claim. This may raise the issue of whether it violates the single subject requirement.
California Constitution Article II, section 8(d) states that “an initiative measure embracing more than one subject may not be submitted to the electors or have any effect.” Cal. Const. art. II, § 8(d). An initiative measure does not violate the single-subject requirement if, despite its varied collateral effects, all of its parts are reasonably germane to each other, and to the general purpose or object of the initiative. Senate v. Jones, 21 Cal. 4th 1142, 1157 (1999). Accordingly, initiative measures that fairly disclose a reasonable and commonsense relationship among their various components in furtherance of a common purpose do not violate the rule. Id. In Jones, the California Supreme Court held that Proposition 24 (“Let the Voters Decide Act of 2000”) embraced at least two separate and unrelated subjects: transfer of the power of reapportionment from the Legislature to the Supreme Court, and the compensation of state legislators and officers. Id. at 1160. Therefore, the provisions of Proposition 24 were not reasonably germane to a common theme or purpose and thus did not satisfy the single-subject requirement of the California Constitution. Id.
Although, Proposition 64 contains a single subject rule issue that might be seen as analogous to that in Senate v. Jones, the amendments to section 17200 in Proposition 64 do not appear to violate the single subject rule. The Proposition purports by its title to limit enforcement of section 17200 by private parties. However, the Proposition addresses, not only a limitation on eligible parties, but on available remedy, requiring that civil penalty revenues received by state and local governments from the violation of unfair competition law be used only by the Attorney General and local public prosecutors for the enforcement of consumer protection laws. California Secretary of the State, California Official Voter Information Guide, Limits on Private Enforcement of Unfair Business Competition Laws, Proposition 64 (2004).
Therefore, section 17206 not only limits who may bring a section 17200 claim, but
affects the remedy at law in such cases. However, here the five amended sections appear
to be “reasonably germane to each other, and to the general purpose or object of the
initiative,” thus passing constitutional muster. See Jones, 21 Cal. 4th at 1157. Even though it is true that the other four amendments focus
on who may bring a 17200 claim, there is a cohesive theme connecting section 17206
to the purpose and object of Proposition 64 as a whole. This purpose is to limit “[f]rivolous
(section 17200) lawsuits as a means of generating attorney’s fees without a corresponding
public benefit.” Yes on 64, Get The Facts on Proposition 64 http://www.stopshakedownlawsuits.com/facts
_general.html (accessed Sept. 2, 2004). It is a reasonable determination that the remedy serves the general purpose by removing the private profit incentive of non-public attorneys and simultaneously benefiting the public by directing the awards to enforce unfair business practices.
Additionally, California courts have held that the single subject rule has been construed broadly, and should not be interpreted in an unduly narrow or restrictive fashion that would preclude the use of the initiative process to accomplish comprehensive, broad-based reform in a particular area of public concern. See id. at 1157. Therefore, it is likely that Proposition 64 would be upheld if it were challenged pursuant to the single subject requirement.
The main public policy claim made by the Proponents of Proposition 64 is that unscrupulous lawyers have abused section 17200 to compel settlements out of businesses, under the guise of protecting consumer and general public safety.
The Proponents of Proposition 64 claim that
[t]here’s a loophole in California law that allows private lawyers to file frivolous lawsuits against small businesses even though they have no client or evidence that anyone was damaged or misled. Shakedown lawyers “appoint” themselves to act like the Attorney General and file lawsuits on behalf of the people of the State of California, demanding thousands of dollars from small businesses that can’t afford to fight in court.
California Secretary of the State, California Official Voter Information Guide, Limits on Private Enforcement of Unfair Business Competition Laws, Proposition 64 (2004).
John Sullivan, President of the corporate-backed Civil Justice Association of California and a Proposition 64 Proponents, said public interest groups could still use other federal and state laws to bring suits. He added that Proposition 64 allows public prosecutors to sue businesses for violations of state law.
“Proposition 64 does not change the power of the attorney general or the district attorneys,” Sullivan said. “We’re not knocking out cases that any responsible public prosecutor would want to pursue. We’re knocking out the shakedown lawsuits.” Lockyer Criticizes Prop. 64’s Limits On Lawsuits, Kevin Yamamura, Bee Capitol Bureau http://www.sacbee.com/content/politics/story/10935508p-11852901c.html (accessed Oct. 1, 2004).
The Proponents of the Proposition further state that most of the time, the lawyers or their front groups keep all the money, that no other state allows this, and finally, that Proposition 64 would permit, under different laws, the suits cited by its Opponents, thus allowing the public sufficient avenues of redress for violations of section 17200 and consumer, health, and environmental claims generally. Id.
Governor Schwarzenegger has announced his support of the Proposition: “Proposition 64 will stop the legal practice of shakedown lawsuits, in which private lawyers file suits without any client or any evidence of harm. This turns lawyers into bounty hunters, stalking innocent small businesses that create jobs and opportunity in California. By working together with an agenda of recovery and reform, California is on the rebound.” Governor Schwarzenegger’s California Recovery Team, Press Release http://www.cjac.org/bp17200/GovPR_Yes64_No70.pdf (accessed Sept. 22, 2004).
There are conflicting claims over whether section 17200 is actually a necessary legal tool for plaintiffs. The Proponents claim that the public can be protected by numerous other accessible laws (infra), and some of the claims of section 17200 utility by the Opponents conflict with the outcomes in the examples they cite. The following illustration is indicative of the conflicting claims. The Opponents to Proposition 64 claim that “most environmental cases, brought by environmental organizations, could never be brought…. These include … Squaw Valley Ski Corporation violat[ing] the Forest Practice Act when it cut trees for a new ski run. The trial court determined that the cutting of trees constituted an ‘unlawful business practice’ which was upheld on appeal.” Yes on 64, Get The Facts on Proposition 64 http://www.stopshakedownlawsuits.com/pdf/environment_memo.pdf (accessed Sept. 2, 2004). (quoting James C. Sturdevant, President, Consumer Attorneys of California, Forum magazine, May 2004) (accessed Sept. 2, 2004). However, in Hewlett v. Squaw Valley Ski Corp., 54 Cal. App. 4th 499 (1997), the Placer County District Attorney filed an unfair competition suit against Squaw Valley, and Hewlett and the Sierra Club joined the public prosecutor as co-plaintiffs. Clearly, Proposition 64 would not have prevented this case and its parties from going forward; the Sierra Club was enforcing a court order it had obtained unrelated to the UCL, and the UCL claims were brought by a public prosecutor. Id.
Opponents also claim that Proposition 64 will imperil the California environment. Proponents assert that there are numerous statutes that provide environmental protection for California citizens (E.g. Clean Air Act, 42 U.S.C. § 7401 et. seq.; Toxic Substances Control Act, 15 U.S.C. § 2601, et. seq.; California Coastal Act, Pub. Res. Code § 30000, et seq.; California Environmental Quality Act, Pub. Res. Code § 21000, et seq.; Integrated Waste Management Act, Pub. Res. Code § 40050, et seq.; Lewis Presley Air Quality Management Act, Hlth. & S. Code § 40400, et seq.; Noise Control Act of 1973, Hlth. & S. Code § 46000; Porter-Cologne Water Quality Control Act, Water Code § 13000, et. seq.; Safe Drinking Water and Toxic Enforcement Act (“Proposition 65”), Hlth. & S, Code § 25249.5, et seq.).
Opponents to Proposition 64 claim that approval of the initiative will
have the effect of gutting California’s historic Unfair Competition Law…The initiative would impose rigid standing requirements that would effectively prohibit all public lawsuits filed under the statute by individuals and organizations. It would create blanket immunity for unlawful, unfair, or fraudulent business conduct which will imperil California’s environment and create imminent public health hazards for millions of Californians.
Consumer Attorneys of California, Where Consumer Attorneys of California Stands and Why http://caoc.com/p64-wherecaocstands.htm (accessed Sept. 1, 2004).
Chris Chaffee, a spokesman for Opponent coalition member Consumer Attorneys of California, stated that section 17200 is “the only method to combat unfair consumer practices unless there is an injury in fact,” and that “certification requirements of class action lawsuits are complex, time consuming, and expensive for consumer and non-profit consumer groups.” Interview with Chris Chaffee, Consumer Attorneys Of California, (Oct. 1, 2004) (notes on file with the McGeorge School of Law, University of the Pacific, Capital Center for Government Law and Policy). When asked about the Proponent’s claims of lawsuit abuse, Mr. Chaffee responded that the bulk of abuse of section 17200 was by one law firm and they were appropriately held responsible (referring to the Trevor Law Group). Id. Section 17200 is “not about jobs or businesses, but about holding corporations responsible.” Id. Mr. Chaffee went on to note that “California is not on the fringe,” as “sixteen other states have consumer driven lawsuit statutes.” Id. Also, there have been compromise attempts by lawmakers to fashion a statute that is less likely to be easily abused, without taking the teeth out of section 17200 (E.g. Senate Bill 185). Id. Senate Bill 185, as last amended, would require a proposed settlement in an unfair competition action (section 17200) brought or planned to be brought by a private person on behalf of the general public “to be approved by a court,” would require a private person filing an unfair competition action on behalf of the general public to “show injury-in-fact to obtain restitution,” unless the plaintiff is a tax-exempt nonprofit corporation or the action is brought or sponsored by specified labor organizations or by a nonprofit organization funded by designated legal entities, and would require unfair competition actions brought by a private person on behalf of the general public to “submit a copy of the complaint and proposed settlement filings to the Attorney General.” Cal. Sen. 185, 2003-2004 Reg. Sess.(Aug.26, 2004). Currently, Senate Bill 185 is active and has been re-referred to the Judiciary Committee. The aforementioned changes to section 17200 appear to be a fair compromise, serving to restrict the abusive use of the Unfair Competition Law, and yet allowing public interest suits to go forward under more court scrutiny. The bill will not go into effect if Proposition 64 is passed.
State Attorney General Bill Lockyer has stated his opposition to Proposition 64, saying it would strip public interest groups of the right to sue businesses for practices such as water pollution and personal privacy abuses, and would be “a major step backward for consumer and environmental protections.” Lockyer Criticizes Prop. 64’s Limits On Lawsuits, Kevin Yamamura, Bee Capitol Bureau http://www.sacbee.com/content/politics/story/10935508p-11852901c.html (accessed Oct. 1, 2004). Lockyer further stated: “There are lots of examples, not just in theory but in actuality, of lawsuits that might not have occurred without this (existing law).” Id. “Lockyer said his office has too few resources to pursue all of the worthy environmental and consumer cases that public interest groups now bring to light. All the state and local prosecutors are having their budgets cut, so it becomes less and less likely that we’d be able to pick up the cases now taken up by public health groups and others.” Id.
Opponents point to the large amount of corporate financial backing for Proposition
“Blue Cross of California. Donation: $250,000…Bank of America. Donation: $100,000…Microsoft. Donation: $100,000…Kaiser Foundation Health Plan. Donation: $100,000…State Farm. Donation: $100,000.” California Secretary of the State, California Official Voter Information Guide, Limits on private Enforcement of Unfair Business Competition Laws, Proposition 64 (2004). “At least 31 companies and 6 industry groups that have been successfully taken to court for pollution and other harmful practices, or face current suits under the Unfair Business Competition Law, have contributed over $4.2 million to Prop 64.” ElectionWatchdog.org, Unfair Business Competition Law Cases Against Initiative Donors http://www.electionwatchdog.org/fs/fs000015.php (accessed Oct. 14, 2002).
The Opponents cite instances where consumer groups used section 17200 to protect consumers and the general public. When the supermarket Safeway changed the date on old meat and resold it, consumer groups stopped the practice by bringing a case under California’s Unfair Business Competition Law. No on 64 http://www.electionwatchdog.org/ (accessed Sept. 2, 2004). Community groups sued oil companies for polluting California drinking water supplies under the law and forced oil companies to pay for the cleanup of the water before anyone got hurt. Id. Car dealers have been held legally accountable under the Act for bait-and-switch schemes. Id.
One of the strongest claims by Opponents is that, before obtaining any injunctive or restitutionary relief under the UCL for a claim such as false advertising, the plaintiff would need to show an injury in fact. Consumer Attorneys of California, Where Consumer Attorneys of California Stands and Why http://caoc.com/p64-wherecaocstands.htm (accessed Sept. 1, 2004). In some unfair competition claims, such a showing is difficult to make. Even though the defendant may be violating section 17200, the injury to the public is hard to identify through a single party, and may not be ripe for suit. In this way, section 17200 protects the public from potential harm.
As another example, Proposition 64 could stop public interest enforcement of the California Financial Information Privacy Act (Fin. Code §§ 4050 et. seq.). The Opposition claims that, under Proposition 64, if an individual’s privacy was violated, you could not go to court unless you could show a financial loss resulting from the privacy intrusion. Consumer Federation of California, http://www.consumerfedofca.org/bin/view.fpl/550731/action_id/23.html. (accessed Sept. 2, 2004). “It wouldn’t matter that a bank, credit card company or insurer broke the law and made a big profit by selling your confidential data to an outside business without your permission.” Id.
On November 2, 2004, California voters will be asked to weigh the harms, and decide whether a California law that has enabled some unethical and unscrupulous lawyers to prey on businesses should be amended to tighten standing requirements, or whether section 17200 should remain as it is, allowing persons and groups to sue businesses who are in violation of laws enacted to protect the public without meeting the standing requirement of an injury in fact, thus giving consumer groups and the public an additional tool to keep businesses from unfair business practices.
It is reasonable to say that the proposed amendments would mean one less avenue for redress and accountability under California law, but then only in the context of a non-party group or attorney wishing to bring a suit under section 17200. There would remain access by parties with injury in-fact, and by the public through government prosecutors to section 17200 and other laws that protect the environment, public health, and privacy.
It may be that a compromise initiative or statute could effectively protect businesses from abusive lawsuits, without “gutting” section 17200 of its usefulness as a protective and preventative tool for consumer and environmental groups.
Public policy arguments on both sides warrant voters’ attention. If Proposition 64 is enacted then businesses will acquire a protection from unscrupulous lawyers. However, California consumers will have one less avenue of redress and compensation for the unfair and illegal business practices of some businesses.
Because of the fiscal considerations discussed in section II.C.1., the potential costs and benefits to the state’s economy are not easy to predict. Yet, there is a compelling argument to be made that in order to increase economic well-being, businesses should be protected from a law that can be abused to their detriment. This holds especially true where there might be adequate means of addressing legitimately unfair business practices without allowing businesses to be victimized by those who would abuse the legal system. However, it is reasonably certain that in the attempt to protect businesses, the ability of consumer, health, and environmental advocacy groups to monitor and remedy unfair business practice will be diminished, and an effective compromise could be legislated.