Recent Legal Developments

Amendment to Unfair Business Practices Claim Allowed to Satisfy Standing Requirements

In 2004, California voters passed Proposition 64 which amended Business & Professions Code section 17200, et seq., to state that anyone bringing an action for unfair business practices must be one “who has suffered injury in fact and has lost money or property as a result of unfair competition.” (Bus. & Pro. 17204) Prior to the amendment, the statute had authorized suits by any person “acting for the interests of itself, its members or the general public.” The original language had led to a plethora of frivolous lawsuits designed primarily for the recovery of attorney’s fees rather than for the benefit of the public.

In Californians for Disability Rights v. Mervyn's, LLC (2006) 39 Cal.4th 223, the California Supreme Court held that the amendment applied to lawsuits pending at the time the proposition went into effect. The court noted that the amendment did not change the legal consequences of past conduct by imposing new or different liabilities based upon such conduct, thus making it impermissibly retroactive. Instead, the statute simply established rules for the conduct of pending litigation without reference to liability for prior conduct. Because plaintiff had no standing to sue under the amended statute, the action had to be dismissed.

In Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, plaintiffs faced exactly the same situation as in Californians For Disability Rights. The California Supreme Court in Branick, however, ruled that plaintiffs must be given the opportunity to amend their complaint in order to add as a plaintiff an individual who had suffered some injury or damage to property. Defendant argued that by allowing such amendments plaintiffs would benefit from their impermissible actions by substituting new plaintiffs and having the new allegations relate back to the filing of the initial complaint. The court disagreed, holding that barring such amendments would in no way support the policy objectives underlying Proposition 64 of precluding frivolous actions. A plaintiff with actual injuries should be allowed to bring an action. The court noted, however, that simply because the proposition did not bar amendments to pleadings did not mean that the amendments would be allowed in every case. The trial court would have to review each request on a case by case basis, applying the standards set forth in Code of Civil Procedure section 473.

See also, Consumer Advocacy Group, Inc. v. Kintetsu Enterprises of America  (2007) 150 Cal.App.4th 953.

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