Sacramento Report
by Francisco Silva
Voters overwhelmingly passed Proposition 64 in our recent election. This was perhaps one of the most notable and significant initiatives approved by the voters. The proposition closes loopholes in the unfair competition law (Bus. & Prof. Code §17200) that had led to abusive and frivolous lawsuits against small and big businesses alike.
The backers of this proposition—a coalition of major corporations, associations (including the California Apartment Association’s Political Action Committee) and mom-and-pop businesses—expect that its passage will significantly reduce or eliminate shakedown lawsuits and demonstrate to the nation that California is ready to create a more friendly business environment.
Under the new amendments
that became effective immediately after the election, an attorney
seeking to obtain a remedy on behalf of the public under the unfair
competition law (UCL) must show that the plaintiff has standing
to sue and that the case can be brought on behalf of the public,
pursuant to traditional class action procedure. Some of the practical
effects of the new law are described below.
Proposition Accomplishes “Finality”
Under the prior law, a plaintiff was allowed to sue on behalf of the public without having to show through traditional class action procedure that he or she would or could actually represent the public. Because the lawsuit was not a certified class action, there was no assurance that a defendant who adjudicated and resolved a prior lawsuit could not be sued again regarding the same issue by another party claiming to also represent the public. Proposition 64 provides for class action procedures, meaning that the members of a certified class action, whether they participated in the lawsuit or not, will be bound by a prior judgment or settlement.
Proposition
Requires Plaintiff Be Affected
Under prior law, attorneys were able to prosecute cases without
the need to show that the plaintiff had, in fact, suffered some
type of damage or injury. Accordingly, defendants were faced with
sham lawsuits by persons who had not even interacted with defendants.
For instance, a plaintiff was allowed to sue Visa and MasterCard
for alleged misleading disclosures, even though he or she had never
used or owned a Visa or MasterCard credit card. The proposition
requires that a plaintiff, suing under the UCL, has been affected
by the business practice at issue in the litigation.
Proposition
Lessens the Problem of Burdensome Discovery
Under prior law, UCL suits were often brought on little more than
a hunch or theory. However, because the lawsuit could easily be
brought on behalf of the public, the scope of discovery was generally
very broad. Attorneys, therefore, used the UCL to conduct broad
discovery in order to determine whether they had a case or to litigate
the defendant into settlement. The proposition does not change
the civil discovery rules directly. However, the scope of discovery
is governed by the scope of the claims at stake, which will now
be limited in scope because of the standing and class-action-certification
requirements.
Proposition Does Not Inhibit Law Enforcement Actions
The proposition amends the UCL only with respect to actions that
are brought by private parties. The amendments do not affect actions
brought by district attorneys, the attorney general, county counsel
and/or city attorneys.
The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of SFAA or the San Francisco Apartment Magazine. Francisco Silva is the vice president and counsel of legislative affairs for CAA. Copyright © 2005 by the San Francisco Apartment Magazine. All rights reserved.