We are pleased to bring you this inaugural edition of17200Law@manatt, the new electronic publication of the Unfair Competition Law Practice Group of Manatt, Phelps & Phillips, LLP. We intend to publish this newsletter from time to time to provide you with useful information on significant legal developments regarding California’s Unfair Competition Law, Business and Professions Code §17200 et seq. ("Section 17200" or the "UCL"), the foremost consumer protection law in California.
The UCL is an extraordinarily broad law that has become a weapon of choice in litigation against numerous California businesses. No segment of California commerce has avoided its reach. That is because the unique text and jurisprudence of the UCL have made UCL claims so broad and amorphous as to invite various UCL claims, no matter how isolated or attenuated the alleged offending business act or practice may be. UCL claims may be brought by plaintiffs who have suffered no injury, have no connection whatever to the businesses they sue, and who have done nothing other than read about what businesses may be doing to others that allegedly is unfair, illegal or fraudulent. As legal commentators and some Supreme Court Justices have noted, the lure of broad injunctive relief, restitution and attorneys’ fees to prevailing plaintiffs has proven irresistible to a legion of resourceful plaintiffs and their counsel. From the business perspective, defending UCL claims is the judicial equivalent of chasing butterflies. Better yet, consider the commentary of one non-California lawyer who, after learning about the UCL, asked: "Do y’all have gravity out there?" John H. Sullivan, Call It Gonzo Law -- The Unfair Competition Statute covers any claim, if it’s presented with a straight face, Los Angeles Daily Journal, California Law Business (January 10, 2000).
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In an appellate victory for California businesses confronting a spate of lawsuits brought under California’s Unfair Competition Law (Bus. & Prof. Code § 17200 et seq., the "UCL"), the California Court of Appeal has held that the proper methodology for determining whether advertising or other statements rise to the level of unfair competition under the "fraudulent" prong of the UCL is a "reasonable consumer" standard, rather than the more lenient "least sophisticated consumer" test. In Lavie v. Proctor & Gamble Co., 2003 WL133415, __ Cal.App.4th __ (No. A093393, Jan. 17, 2003) the Court rejected arguments advanced by California’s Attorney General, who had appeared as amicus in support of the plaintiff, that the plaintiff-friendly "least sophisticated consumer" test should be used. The result is a major victory for California businesses and other entities that are frequent defendants in UCL actions, and reflects a growing trend by California’s appellate courts to place greater limitations on the UCL’s generous boundaries.
Plaintiff Lavie claimed his pre-existing ulcer was aggravated by Aleve(TM), a Proctor & Gamble ("P&G") product. He sued P&G under both the UCL and California’s False Advertising Act (Bus. & Prof. Code §17500), in addition to asserting claims for common law fraud, negligent misrepresentation, and violation of the Consumers Legal Remedies Act (Civil Code §1750 et seq. ). The suit alleged P&G’s claims that "Aleve is gentler to the stomach lining than aspirin" were false and/or likely to mislead members of the public, because they supposedly carried an "implicit and false message" that Aleve(TM) was gentle to the stomach and would not cause stomach upset. Lavie sought restitution under the UCL to California consumers of all gross sales receipts by P&G on Aleve(TM) sales, potentially $140 million. Following a 13-day bench trial, the trial court found for P&G on all counts. Lavie appealed the judgment on the UCL and false advertising claims only.
The Court of Appeal certified for publication only a portion of its opinion. Published is the section in which the Court rejected the Attorney General’s amicus assertion that the "least sophisticated consumer" standard applies in actions alleging fraudulent conduct in violation of the UCL, and thus that the trial court erred in applying the "reasonable consumer" test.
In supporting his argument that the "least sophisticated consumer" standard should apply, the Attorney General noted that the primary purpose of the UCL has always been to prohibit advertising that has the capacity or tendency to mislead consumers, including unwary or unsophisticated consumers. However, the Court noted, existing UCL case law had never applied a "least sophisticated consumer" standard absent evidence that the advertisements at issue were specifically targeted at especially vulnerable persons. Instead, the Lavie Court followed several existing federal decisions interpreting and applying the UCL, which had recognized that the UCL inherently contemplated a "reasonable person" or "reasonable consumer" standard. The Court also noted that the "reasonable person" standard was the usual standard applied to claims of deception under similar laws in other jurisdictions, including the Federal Trade Commission Act (15 U.S.C. §45(a)(1) ("the FTC Act")).
Accordingly, the Court concluded that, unless advertisements target a particularly disadvantaged or vulnerable group, they must be judged by the effect they would have on a reasonable consumer rather than the least sophisticated listener. The Lavie Court cautioned, however, that the standard is tempered at the other end of the spectrum as well, noting that "whether an advertisement or business practice violates the UCL is not measured by the perception of the most sophisticated, wary, or expert consumer, but by the likely effect on the normally credulous consumer." Thus, per the Lavie Court, a "reasonable consumer" need not be "exceptionally acute and sophisticated," nor need she be "wary or suspicious of advertising claims."
Only those portions of the opinion dealing with the Attorney General’s arguments over the appropriate methodology of determining likelihood of deception were certified for publication. In the unpublished sections of the opinion, the Court upheld as supported by substantial evidence the trial court’s finding that Lavie had failed to show the commercials were likely to deceive members of the public, and that they were neither deceptive nor misleading under either the UCL or the False Advertising Law. On that basis, the Lavie Court affirmed the judgment.
The Lavie decision is welcome news for California businesses, which are frequently haled into court by UCL plaintiffs with no injury, standing or even connection to the defendant, but who complain on behalf of an unspecified "public" that the defendant has done something unfair, fraudulent or illegal. The UCL permits that form of wide-open standing, because of its dominant purpose to protect consumers from practices that cause harm or deception. The Lavie decision, however, imposes some legal discipline on future UCL claims, by requiring that "reasonable" consumers be wronged, and not merely anyone who wishes to complain.
Attorney ContactsBarry Landsberg, 310.312.4259Andrew Struve, 310.312.4259
Craig J. de Recat
Eliot G. Disner
Chad S. Hummel
Matthew P. Kanny
Terri D. Keville
Barry S. Landsberg
John F. Libby
Joanna S. McCallum
Brad W. Seiling
Andrew H. Struve
Christopher L. Wanger
Jack S. Yeh
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