Academic journal article Stanford Journal of Law, Business & Finance

California Proposition 64 Requires That Pending Actions Based on the Unfair Competition or False Advertising Laws Be Dismissed

Academic journal article Stanford Journal of Law, Business & Finance

California Proposition 64 Requires That Pending Actions Based on the Unfair Competition or False Advertising Laws Be Dismissed

Article excerpt

Introduction

On November 2, 2004, by a vote of 59%, California voters passed Proposition 64, titled "Limits of Private Enforcement Of Unfair Competition Laws." This proposition curtails the expansive standing formerly allowed plaintiffs asserting unfair competition law ("UCL") and false advertising claims under sections 17200 and 17500 of the California Business and Professions Code. As specified in Article Ð, Section 10a of the California Constitution, these amendments went into effect the day after the election, on November 3, 2004.

Prior to the passage of Proposition 64, sections 17204 and 17353 permitted suits "by any person acting for the interests of itself, its members or the general public." Under this language, California courts permitted private, representative UCL and false advertising actions without requiring plaintiffs to establish injury-infact and without requiring plaintiffs to follow class action procedures. see, e.g., Kraus v. Trinity Management Services, Inc., 23 Cal. 4th 116, 137-138 (2000). California courts also allowed private plaintiffs to sue to redress violations of law, such as health and safety laws, even though authority to enforce those laws was vested exclusively in some government agency, and even when those underlying laws granted no private right of action. See, e.g., Stop Youth Addiction, Inc. v. Lucky Stores, Inc., 17 Cal.4th 553, 567-68 (1998). Such permissiveness led to abuse by some attorneys who manufactured plaintiffs to bring such suits. The plaintiff in Stop Youth Addiction, for example, was a for-profit corporation whose sole shareholder was the mother of the plaintiff's attorney. Id. at 585.

Proposition 64 dramatically limits the standing formerly allowed under sections 17204 and 17353 by requiring that private suits only be brought by "any person who has suffered injury in fact and has lost money or property as a result of such unfair competition." Under the amended Sections 17203 and 17353, private individuals may pursue representative claims or relief on behalf of others only if they meet the new standing requirements of Sections 17204 and 17353, and only if they also comply with the class action requirements of Section 382 of the California Code of Civil Procedure. Id. These amendments bring UCL and false advertising claims back into line with the requirement that "every action must be prosecuted in the name of the real party in interest." Cal. Code Civ. P. § 367; see also Powers v. Ashton, 45 Cal. App. 3d 783, 787 (1975) (holding that under Rule 367 only the person possessing the right sued upon by reason of a substantive law can be deemed the "real party in interest"); Bank of Orient v. Superior Court, 67 Cal. App. 3d 588, 594 (1977) ("This rule is designed to protect a defendant from a multiplicity of suits and from further annoyance and vexation, and to fix and determine the real liability which is alleged in the complaint.")

Proposition 64 clearly applies to all future UCL and false advertising claims filed under California law. It is not obvious, however, what affect Proposition 64 has on the hundreds (or thousands) of UCL and false advertising claims currently pending in trial and appellate courts. Proposition 64 contains no express provision regarding the retroactive application of its provisions. The plaintiffs' bar points to the established rule in California that a statute "may be applied retroactively only if it contains express language of retroactivity or if other sources provide a clear and unavoidable implication that the Legislature intended retroactive application." McClung v. Employment Development Department, 2004 WL 2472297, *5 (CaL); see also Myers v. Philip Morris Co., Inc., 28 Cal.4th 828, 839-40 (2002); Evangelatos v. Superior Court, 44 Cal.3d 1188, 1193-94 (1988). The plaintiffs' bar argues under this standard that the intent of the electorate is not sufficiently clear, and that Proposition 64 should not apply to pending actions. …

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