Unfair Competition Law (UCL)

The Unfair Competition Law (UCL) prohibits “unfair competition,” which means and includes “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising....” Zhang v. Super. Ct. (2013) 57 Cal.4th 364, 370; Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1143; Bus. & Prof. Code, § 17200, et seq.

Its purpose is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services. Veera v. Banana Republic (2016) 6 Cal.App.5th 907, 914.

To state a cause of action under Business and Professions Code section 17200, et seq., plaintiff must show:

1. a business practice;
2. that is unfair, unlawful, or fraudulent; and
3. authorized remedy

Bus. & Prof. Code § 17200; Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 676.

“A plaintiff alleging unfair business practice under these statutes must state with reasonable particularity the facts supporting the statutory elements of the violation.” Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal.App.4th 612, 619.

To support this cause of action, plaintiff must allege a statutory section that has been violated and describe with particularity any supporting violation. Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal.App.4th 612, 619. In prohibiting “unlawful” business practices, “the UCL ‘borrows’ rules set out in other laws and makes violations of those rules independently actionable.” Zhang v. Super. Ct. (2013) 57 Cal.4th 364, 370; accord Rose v. Bank of America, N.A. (2013) 57 Cal.4th 390, 396; Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 610. “Plaintiff can borrow virtually any law or regulation — federal or state, statutory or common law — to serve as the predicate ‘wrong’ for a UCL violation; and proving violation of the borrowed law establishes a per se violation of the UCL....” Wiseman & Reese, Cal Prac. Guide, Civ. Proc. Before Trial Claims & Defenses (The Rutter Group 2017) ¶ 14:57; see also Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 950. The “‘unlawful’ conduct includes any business practice or act forbidden by local, state or federal statutes or by regulations or case law.” Wiseman & Reese, supra, at ¶ 14:59; Munson v. Del Taco, Inc., (2009) 46 Cal.4th 661, 676.

“The term ‘fraudulent’ as used in section 17200 ‘does not refer to the common law tort of fraud but only requires a showing members of the public “‘are likely to be deceived.’”’.... Unless the challenged conduct ‘“targets a particular disadvantaged or vulnerable group, it is judged by the effect it would have on a reasonable consumer.”’” Puentes v. Wells Fargo Home Mortg., Inc. (2008) 160 Cal.App.4th 638, 645 (citations omitted).

While common law fraud must be pleaded with specificity, a fraudulent business practice under the UCL is different. “The fraudulent business practice prong of the UCL has been understood to be distinct from common law fraud. ‘A [common law] fraudulent deception must be actually false, known to be false by the perpetrator and reasonably relied upon by a victim who incurs damages. None of these elements are required to state a claim for injunctive relief’ under the UCL.” In Re Tobacco II Cases, (2009) 46 Cal. 4th 298, 312.

Note, a claim under the UCL (and the FAL) cannot be “[g]eneralized, vague, and unspecified assertions constitute ‘mere puffery’ upon which a reasonable consumer could not rely, and hence are not actionable.” Oestreicher v. Alienware Corp. (N.D. Cal. 2008) 544 F.Supp.2d 964, 973. “Where there is reasonable doubt as to whether a particular statement is an expression of opinion or an affirmation of a fact, the determination rests with the trier of facts.” Pacesetter Homes, Inc. v. Brodkin (1970) 5 Cal.App.3d 206, 212.

False Adverting Law (FAL)

The elements of a claim for false advertising under the False Adverting Law (FAL) are:

1. defendant intended to dispose of real or personal property or perform services; and
2. defendant publicly disseminated advertising containing an untrue or misleading statement;
3. defendant knew, or should have known, it was untrue or misleading; and
4. it concerned the real or personal property or services or their disposition or performance; or
5. defendant publicly disseminated advertising with the intent not to sell the property or services at the price stated or as advertised.

Bus. & Prof. Code, § 17500; Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 210; Hambrick v. Healthcare Partners Medical Group, Inc. (2015) 238 Cal.App.4th 124, 154; Nat’l Council Against Health Fraud, Inc. v. King Bio Pharms., Inc. (2003) 107 Cal. App. 4th 1336, 1342.

Private plaintiffs are authorized to bring civil actions to enjoin and seek restitution from false advertisers under California Business and Professions Code section 17535. Since this is a statutory claim, the pleadings must state with reasonable particularity the facts supporting the statutory elements of the violation. Khoury v. Maly’s of California, Inc. (1993) 14 Cal. App. 4th 612, 619.

Plaintiffs must show that “members of the public are likely to be deceived,” which is the standard for false advertising under Bus. & Prof. Code Section 17500. They also must show that the allegedly false statements are not “likely to deceive” “a reasonable consumer. See Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 951; Chapman v. Skype, Inc. (2013) 220 Cal.App.4th 217, 226 (“reasonable consumer” standard); Bardin v. Daimlerchrysler Corp. (2006) 136 Cal.App.4th 1255, 1275 (“likely to deceive” standard).

There is no requirement that the misleading statement be widely published: “The [public dissemination] requirement is satisfied by statements made in face-to-face meetings or over the telephone.” Wiseman & Reese, Cal. Prac. Guide: Civ. Proc. Before Trial Claims & Defenses (The Rutter Group 2017) ¶ 14:132; see also People v. Dollar Rent-A-Car Systems, Inc. (1989) 211 Cal.App.3d 119, 128.)

“In deciding whether an advertisement is untrue or misleading in violation of the [False Advertising Law], most courts have adopted the ‘likely to deceive’ test applicable under the UCL.” Wiseman & Reese, supra, at ¶ 14:140.

Standing

“‘[P]rivate standing is limited to any “person who has suffered injury in fact and has lost money or property” as a result of unfair competition’” or false advertising. Kwikset Corp. v. Super. Ct. (2011) 51 Cal.4th 310, 320-321; Bus. & Prof. Code, §§ 17204, 17535. “‘The phrase “as a result of” in its plain and ordinary sense means “caused by” and requires a showing of a causal connection or reliance on the alleged misrepresentation.’.... However, a ‘plaintiff is not required to allege that [the challenged] misrepresentations were the sole or even the decisive cause of the injury-producing conduct.’” Kwikset Corp. v. Super. Ct. (2011) 51 Cal.4th 310, 320-321.

Thus, in order to establish standing under the UCL and the FAL, a private party must:

1. “establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and
2. show that that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.”

Kwikset Corp. v. Super. Ct. (2011) 51 Cal.4th 310, 322; Bus. & Prof. Code, §§ 17204, 17535. “[T]his standing requirement applies only to the named plaintiffs in a class action․” Morgan v. AT&T Wireless Services, Inc. (2009) 177 Cal.App.4th 1235, 1257 (citation omitted).

“[T]he quantum of lost money or property necessary to show standing is only so much as would suffice to establish injury in fact [which] is not a substantial or insurmountable hurdle.” Kwikset Corp. v. Super. Ct. (2011) 51 Cal.4th 310, 324 (citation omitted).

Restitution and Damages

Neither actual nor compensatory damages may be awarded in an action for false advertising. Bank of the West v. Super. Ct. (Industrial Indem. Co.) (1992) 2 Cal.4th 1254, 1266 (“damages are not available under section 17203”); Chern v. Bank of America (1976) 15 Cal.3d 866, 875 (§§ 17500 and 17535 “do not authorize recovery of damages”). Punitive damages are not available. People v. Super. Ct. (Jayhill Corp.) (1973) 9 Cal.3d 283, 287.

The only monetary relief that may be awarded on a UCL or FAL cause of action is restitution--i.e., ordering defendant to “restore” money or property (real or personal) “which may have been acquired by means of [the] unfair competition.” Bus. & Prof. Code, § 17203 (brackets added). “The word ‘restitution’ means the return of money or other property obtained through an improper means to the person from whom the property was taken.” Clark v. Super. Ct. Nat‘l Western Life Ins. Co. (2010) 50 Cal.4th 605, 614. “Restore” as used in section 17203 “suggests that section 17203 operates only to return to a person those measurable amounts which are wrongfully taken by means of an unfair business practice.” Day v. AT & T Corp. (1998) 63 Cal.App.4th 325, 338-339.