New UCL decision: Alch v. Superior Court
On Tuesday, the Court of Appeal decided Alch v. Superior Court, ___ Cal.App.4th ___ (Sept. 14, 2004), involving over twenty putative class actions all alleging that television studios, television production companies, and talent agencies systematically discriminate against television writers older than age 40. The Court of Appeal reinstated the plaintiffs’ FEHA age discrimination claims, Unruh Act claims, and UCL claims. The decision got a lot of press as an employment case (see these articles, for example), but not as a UCL case. Its UCL components are interesting and significant.

The UCL claim was based on alleged employment practices (age discrimination) that FEHA makes unlawful. The trial court held that to state a UCL claim, the plaintiffs were required to allege “potential competitive harm or likely consumer deception.” Slip op. at 70. The appellate court disagreed, pointing out that “[a] practice is enjoinable as unlawful ‘totally apart from its inherent “fairness.”’” Id. (quoting Barquis v. Merchants Collection Assn., 7 Cal.3d 94, 112 (1972)). “Moreover, the court of appeal has expressly held that age discrimination in violation of FEHA is an unlawful employment practice that may be enjoined under the UCL, whose remedies are cumulative.” Id. at 71 (citing Herr v. Nestlé U.S.A., Inc., 109 Cal.App.4th 779, 789 (2003)).

The Court of Appeal also rejected the argument that under Cel-Tech Communications, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal.4th 163 (1999), “all claims of unfairness under the UCL should be defined in connection with a legislatively declared policy.” Slip op. at 73 (citation omitted). After pointing out that Cel-Tech specifically limited that part of its holding to actions between business competitors, the court held that even if the Cel-Tech formulation of “unfair” applied, it was satisfied because “there is plainly a legislatively declared policy against age discrimination.” Id. “[N]othing in [the Cel-Tech formulation], in the context of an age discrimination claim, requires a showing of potential competitive harm or consumer deception.” Id. at 73-74.

Next, the Court of Appeal determined that “an order compelling the employers to reimburse the class for wages lost as a result of [their ageist hiring practices]” was not an available UCL remedy. Id. at 74-80. The fact that such relief would not be “restitutionary” was key to this holding. Because the plaintiffs were never hired (albeit for discriminatory reasons), they never acquired an ownership interest in any wages or salary. “The classwide backpay remedy suggested by the [plaintiffs] must be distinguished from the restitutionary backpay to employees authorized by the Supreme Court” in Cortez v. Purolator Air Filtration Products Co., 23 Cal.4th 163, 168 (2000). Cortez involved unpaid wages that “became property to which the employees were entitled,” so an order requiring those wages to be paid would be a “restitutionary” order. See Slip op. at 78 n.77.

Conceding that their prayed-for remedy was not “restitutionary,” plaintiffs pointed out that the UCL specifically authorizes “such orders … as may be necessary to prevent” unfair business practices. Id. at 74 (quoting Bus. & Prof. Code §17203). The Court of Appeal disagreed that this language was broad enough to authorize the backpay remedy they sought. “‘[A] court cannot, under the equitable powers of section 17203, order whatever form of monetary relief it believes might deter unfair practices.’ Accordingly, [plaintiffs’] claim that a trial court may award whatever ‘ancillary monetary relief’ it deems necessary to effectuate an injunction is incorrect. Moreover, the relevant precedents counsel against expanding the monetary relief available under the UCL to include classwide backpay in the absence of any indication that the Legislature intended to provide such a remedy.” Id. at 75-76 (quoting Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134, 1148 (2003)).

The plaintiffs also pointed out that in Kraus v. Trinity Management Services, Inc., 23 Cal.4th 116, 129 (2000), the Supreme Court observed that nonrestitutionary disgorgement of profits might be an available remedy in a certified UCL class action. The Court of Appeal considered Kraus irrelevant for the simple reason that the plaintiffs did not seek such a remedy:

[Plaintiffs] do not seek disgorgement of unlawfully obtained profits into a fluid recovery fund; they seek an award of classwide backpay into a fluid recovery fund. Backpay to compensate persons discriminatorily refused employment is a very different remedy from the disgorgement of ill-gotten gains obtained from an illegal practice. It may well be that in a proper case a court may order disgorgement of profits into a fluid recovery fund in a UCL class action; at least one case has so held. (See Corbett v. Superior Court (2002) 101 Cal.App.4th 649, 655 ....) Fluid recovery in class actions, however, is merely a method of paying out damages after they have been awarded. The question is not whether the trial court could order fluid recovery of a damages award; it is whether the trial court has authority to award non-restitutionary backpay under the UCL in the first instance. It does not. As the Supreme Court stated in Korea Supply, the “nonrestitutionary disgorgement remedy sought by plaintiff closely resembles a claim for damages, something that is not permitted under the UCL.” (Korea Supply, supra, 29 Cal.4th at pp. 1150-1151.) So it is with the backpay remedy sought by [plaintiffs in this case].

Slip op. at 79-80 & n.79 (footnote incorporated into text). This holding still leaves open the possibility that Kraus will be construed to permit non-restitutionary disgorgement of profits in a certified UCL class action. No court (including Corbett) has definitively resolved that issue, but the weight of authority supporting a disgorgement-of-profits remedy is now heavier by one case.

In sum, the Court of Appeal concluded that the plaintiffs could not recover any form of monetary relief under the UCL. Accordingly, “the trial court correctly sustained the employers’ demurrers to the [plaintiffs'] UCL class claims, since the only remedy available to the [plaintiffs] is injunctive relief, which is obtainable to the same extent through the [plaintiffs'] representative actions." Id. at 80. (Although the court cited no authority for this final holding, Frieman v. San Rafael Rock Quarry, Inc., 116 Cal.App.4th 29 (2004) provides some support for it.)
- posted by Kim Kralowec @ 1:00 AM