The UCL Practitioner
Friday, July 09, 2004
Some thoughts on California v. Dynegy, Inc.
From a pure UCL standpoint, the most interesting part of the Ninth Circuit's decision in California v. Dynegy, Inc. is the following language in footnote 6:
According to California, the state unfair competition [law]'s disjunctive phrasing permits relief for practices that are either "unfair, unlawful, or fraudulent." See Cal. Bus. & Prof. Code § 17200. With respect to unlawfulness, California urges that the companies improperly converted property to which the ISO had the exclusive right of possession and control. Yet this claim is based entirely on alleged tariff obligations .... The federal tariff wholly governs the lawfulness of the companies' conduct. Similarly, with respect to the "unfair" and "fraudulent" terms, the claims depend entirely upon the federal tariff. Cf. Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163, 182 (Cal. 1999) ("Courts may not simply impose their own notions of the day as to what is fair or unfair.").
(Slip op. at 8846 n.6 (hyperlink added).) This footnote reads like a last-minute afterthought. Attorneys well-versed in UCL practice know that Cel-Tech's key holding is that conduct can be "unfair" or "fraudulent" regardless of whether it is also "unlawful." Notwithstanding the quoted language from Cel-Tech, separate and workable definitions of "unfair" and "fraudulent" have developed in the caselaw. I haven't seen the state's complaint, so maybe in this particular case the "unfair" and "fraudulent" prong claims really were pleaded as coextensive with the "unlawful" prong claim. But if not, those claims deserved a more thorough (and independent) analysis.

Another interesting thing about Dynegy is its conclusion that the UCL claim was removable because the "unlawful" prong hinged on a federal-law violation. (Slip op. at 8846-47 & n.7.) Up until now, most federal courts have held that UCL claims are not normally removable, even if predicated on federal law, because at bottom they remain state-law claims. In this case, the predicate federal law was subject to exclusive federal jurisdiction—which must be the distinguishing factor. It will be interesting to see how this aspect of Dynegy plays out.
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