The UCL Practitioner
Monday, August 22, 2005
More on California v. Altus Finance, S.A.
As promised, here are some more thoughts on California v. Altus Finance, S.A., ___ Cal.4th ___ (Aug. 15, 2005).

The case involved the scope of the Attorney General's power to obtain UCL remedies against an insolvent insurance company whose assets were under control of the Insurance Commissioner. In 1999, the AG intervened in a qui tam action against the insolvent insurer, which was later removed to federal court. The Ninth Circuit asked the California Supreme Court to decide whether the AG's suit could proceed concurrently with another action (also removed to federal court) that the Insurance Commissioner was pursuing. (Slip op. at 1-5.) The Supreme Court separately addressed each UCL remedy that the AG sought (restitution, civil penalties, and injunctive relief).

The opinion (authored by Justice Moreno) mentions Prop. 64 several times, but does not breathe a word about retroactivity, which is logical, since Prop. 64 did not really change anything for public prosecutors. A few things are interesting about the opinion from the perspective of private UCL litigation.

First, the Court quotes the post-Prop. 64 language about "injury in fact" even though there was no reason to mention it given that the AG's suit was based, of course, on the public prosecutor provisions:
"Through the UCL a plaintiff may obtain restitution and/or injunctive relief against unfair or unlawful practices in order to protect the public and restore to the parties in interest money or property taken by means of unfair competition." (Kraus v. Trinity Management Services, Inc. (2000) 23 Cal.4th 116, 126 (Kraus); see Bus. & Prof. Code, § 17204.) A UCL action may be prosecuted by the Attorney General, by certain specified local law enforcement officials, "or by any person who has suffered injury in fact and has lost money or property as a result of such unfair competition.” (Ibid.)
(Slip op. at 19-20; see also id. at 25-26 (also quoting Prop. 64).) The quotation from Kraus suggests that the Court believes that the underlying definition of "restitution" is unchanged, and that Prop. 64 only affected who can file the suit.

Next, the Court held:
Business and Professions Code section 17205 provides: "Unless otherwise expressly provided, the remedies or penalties provided by [the UCL] are cumulative to each other and to the remedies or penalties available under all other laws of this state." Therefore, the fact that there are alternative remedies under a specific statute does not preclude a UCL remedy, unless the statute itself provides that the remedy is to be exclusive. (See Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 573 (Stop Youth Addiction).) We conclude that Insurance Code section 1037, subdivision (f) is such an express limit on the authority of the Attorney General to seek a restitutionary remedy under the UCL.
(Slip op. at 20.) Such express limits are relatively rare; most published cases involve less clear-cut situations. As the Court observed: "We have left open the question whether Business and Professions Code section 17205 precludes the Legislature from impliedly repealing a UCL remedy if the two are 'clearly repugnant and so inconsistent that the two cannot have concurrent operation.' (Stop Youth Addiction, supra, 17 Cal.4th at p. 574.) Because we decide the limit on UCL remedies is express in the present case, we need not decide that question." (Slip op. at 20 n.6.)

The Court also addressed disgorgement of profits as a form of UCL remedy. It reiterated the possibility that, in a certified class action, such a remedy is available:
The Attorney General refers in his complaint to “restitution/disgorgement” remedies. As we explained, “[a]n order that a defendant disgorge money obtained through an unfair business practice may include a restitutionary element, but is not so limited . . . . [S]uch orders may compel a defendant to surrender all money obtained through an unfair business practice of all unlawfully obtained profits even though not all is to be restored to the person from whom it was obtained or those claiming under those persons.” (Kraus, supra, 23 Cal.4th at p. 127.) In this case, although the Attorney General refers to a disgorgement remedy, we understand his claim as essentially one for restitution, i.e., to return the money to the insurer’s creditors. Moreover, outside the class action context, a disgorgement remedy in the sense described above is not authorized. (Id. at p. 137.)
(Slip op. at 7 (emphasis added).) As I've pointed out before, we still await a published appellate opinion squarely holding that in a certified UCL class action, the available remedies include disgorgement of profits. Meanwhile, the courts keep dropping very strong hints (such as this one) in favor of such a remedy. Now that most private UCL cases must be pursued as class actions, we will probably see a lot more litigation over this issue.

Finally, the Court had this to say about injunctive relief under the UCL:
As we have recognized, injunctive relief may fall into two categories: injunctions intended “to remedy a public wrong” (Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066, 1080) and injunctions primarily intended to resolve “a conflict between the parties and rectify[] individual wrongs” (id., at p. 1080, fn. 5). Injunctions sought under the UCL may fall into either category. (See Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303, 315.)
(Slip op. at 27.) This is interesting. I'm still cogitating about its implications (if any) for private UCL plaintiffs.
Regarding the comments about injunctions, the explicit affirmation that injunctions are available to remedy public wrongs is intersting with respect to a problem I perceive in the Prop. 64 amendment.

If an individual obtains an injunction that is intended to prevent a "public" harm, then the relief is, essentially, class-wide, but there would appear to be no need to certify a class. Attorney's fees would be available for obtaining a public benefit. This arrangment troubles me, and I'm not done contemplating it. But if this weren't the case, then we would have the odd situation in which a plaintiff could obtain an injunction for the public good, but no one other than the plaintiff could enforce the injunction. What would be the point of identifying the target benficiaries of the injunction?

There are some fundamental problems with the logic of the Prop. 64 amendment. The initiative process in California is going to generate a lot of very misguided laws, the consequences of which won't be known until the damage is done.
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