Ruling on enforcement of the UCL is a victory for Californians

Ruling on enforcement of the UCL is a victory for Californians

On June 25, the California Supreme Court issued a unanimous opinion by Justice Goodwin Liu in Abbott Labs v. Superior Court of Orange County, 2020 DJDAR 6272, allowing a district attorney to seek recovery for violations of California's Unfair Competition law that occur beyond the borders of their county.

The Orange County district attorney had sued pharmaceutical companies, alleging they intentionally delayed the sale of a generic version of a popular pharmaceutical drug to maximize profits at the expense of California consumers, and seeking statewide relief. The defendants moved to strike all references to "California" in the complaint, arguing that the district attorney's authority was limited to the borders of Orange County and so could not support recovery on behalf of all Californians. Thus, the issue was: Does a district attorney have the authority to recover restitution and civil penalties under the Unfair Competition Law (Bus. & Prof. Code Section 17200 et seq.) for violations occurring outside the country?

The trial court denied the motion to strike, which the Court of Appeal reversed. And then the Supreme Court reversed the Court of Appeal, holding that the trial court did not err in denying the motion to strike because the Unfair Competition Law did not preclude the district attorney from seeking recovery for violations that occur outside Orange County.

The Unfair Competition Law contains sweeping language to prevent an unlawful, unfair or fraudulent business act or practice, with the goal of protecting both consumers and businesses by promoting a fair market for goods and services. A district attorney is expressly authorized to maintain a civil action for either injunctive relief or civil penalties for acts of unfair competition.

The Supreme Court acknowledged that the California Constitution grants the attorney general powers as the "chief law officer of the state." But these powers do not "constrain the Legislature's prerogative to structure UCL enforcement so that a district attorney has authority to seek civil penalties and restitutions for violations outside of his or her county." Furthermore, the public enforcement authority that the UCL grants to district attorneys does not hinder the attorney general's supervisory authority over district attorneys or the attorney general's ability to intervene or take control of a civil enforcement action.

Justice Leondra Kruger wrote the concurrence, joined by Chief Justice Tani Cantil-Sakauye and Justice Carol Corrigan, to call attention to "a gap in the statutory enforcement scheme that the legislature may wish to fill." Justice Kruger specifically highlighted the need to require district attorneys to notify the attorney general of an inter-county UCL case, thus allowing the attorney general to exercise the statutory authority to take over the case.

Amicus briefs highlighted a divide among state and local prosecutors. On the one hand, the California attorney general and the California District Attorneys Association supported the defendant in their briefs, arguing that local district attorneys do not have the authority to seek penalties for harms occurring outside of their jurisdiction. On the other hand, a coalition of city attorneys, city counsels and the League of Cities filed amicus briefs in support of the Orange County district attorney, arguing that local prosecutors may exercise statewide jurisdiction. The amicus brief by Consumer Attorneys of California agreed noting the constitutional and statutory authorities that authorize and obligate the attorney general to advise district attorneys in UCL actions and even to take over the litigation entirely.

If district attorneys were barred from seeking statewide relief in UCL actions, two harmful public policy consequences would result.

First, California injuries would be adjudicated under federal law in distant states because suits previously brought by cities and counties in state courts would be relegated to faraway federal multi-district litigations. Thus, the ability of cities and counties to protect statewide interests by prosecuting violations of law is critical to the redress in California courts of California injuries.

Second, if cities and counties were barred from representing statewide interests, then meritorious cases that are beyond the resources of the attorney general's office would never be brought. Allowing cities and counties to seek statewide relief maximizes the resources to pursue meritorious cases. Otherwise, California would be limited to only those suits that the attorney general has the resources to pursue. As the court noted, "Indeed the limited enforcement resources of the Attorney General have been a significant factor in the Legislature's repeated expansion of public enforcement authority under the UCL."

As history shows, local public entities have repeatedly achieved groundbreaking results in furtherance of the public good. For example, 10 California cities and counties partnered with private attorneys to represent the state of California in a suit against paint manufacturers for lead toxins that permeated the walls of millions of homes, resulting in a $1.15 billion abatement fund. Tobacco cases brought on behalf of Californians resulted in compensation to the state for health care costs related to smoking and an agreement by tobacco companies to refrain from marketing cigarettes to kids. Cities also sued Monsanto for promoting its once-popular line of polychlorinated biphenyls, recovering tens of millions of dollars that were used to clean up bays, rivers and storm water systems polluted with the chemicals.

In short, victory for the pharmaceutical companies would have limited the ability of the public to enforce the laws enacted to protect them. Accordingly, this California Supreme Court decision was a much needed win for Californians. 