Unfair Competition: Standing to Sue

By on June 11, 2014 - Comments off

Law Offices of Mathew Higbee v. Expungement Assistance Services (2013) 214 Cal.App.4th 544, 153 Cal.Rptr.3d 865

An attorney filed an action against an online legal services provider under California’s Unfair Competition Law (Bus. & Prof.Code, § 17200 et seq.) (the “UCL”), contending that the defendant was engaging in the unauthorized practice of law. The plaintiff alleged that the defendant was undercutting competition by using unlicensed persons to perform legal work, thereby saving on attorney fees, and by employing unbounded and unregistered legal document assistants, thereby saving on the cost of posting statutorily mandated bonds and registration fees. The plaintiff further alleged that as a result of the defendant’s actions he had lost revenue and market share, and had sustained increased advertising costs as well as a loss in the value of his firm.

The trial court sustained the defendant’s demurrer without leave to amend, finding that the plaintiff’s claims were insufficient to establish that he had suffered actual injury as a result of the defendant’s conduct, and holding that because of the Proposition 64 standing amendments one may not sue a competitor for obtaining market share that the plaintiff might possibly obtain for itself.  However, the court of appeal reversed, holding that the plaintiff had alleged injury in fact, and that the lack of direct business dealings between the competitors did not preclude the action:

Higbee alleged that, due to EAS’s unlawful competition, he had lost business, the value of his law firm had diminished, and he had been required to expend money in the form of increased advertising costs. Unlike the plaintiff in Drum v. San Fernando Valley Bar Assn., supra, 182 Cal.App.4th 247, 106 Cal.Rptr.3d 46, who sought to acquire a new share of whatever mediation business might be available in the marketplace, Higbee alleged that EAS’s unlawful business practices had taken customers away from him.

As we have observed, the original purpose of the unfair competition laws was to protect against “wrongful conduct in commercial enterprises which resulted in business loss to another, ordinarily by the use of unfair means in drawing away customers from a competitor.” … Although the UCL was ultimately expanded to provide equitable relief to consumers in addition to business competitors, this does not mean that the UCL no longer protects business competitors.

As the Supreme Court stated in Kwikset Corp. v. Superior Court, supra, 51 Cal.4th 310, 120 Cal.Rptr.3d 741, 246 P.3d 877, the purpose of the UCL “ ‘is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.’ … Put another way, the UCL “governs ‘anti-competitive business practices’ as well as injuries to consumers, and has as a major purpose ‘the preservation of fair business competition.’ … “There are innumerable ways in which economic injury from unfair competition may be shown. A plaintiff may (1) surrender in a transaction more, or acquire in a transaction less, than he or she otherwise would have; (2) have a present or future property interest diminished; (3) be deprived of money or property to which he or she has a cognizable claim; or (4) be required to enter into a transaction, costing money or property, that would otherwise have been unnecessary. ” … The foregoing list is not exhaustive and the notion of “lost money” under the UCL is not limited.  Moreover, “the quantum of lost money or property necessary to show standing is only so much as would suffice to establish injury in fact” and “it suffices … to ‘ “allege some specific, ‘identifiable trifle’ of injury.”

If Higbee had engaged in business dealings with EAS, the alleged causation likely would have been plain. But that does not mean that it is impossible to allege facts sufficient to support causation in the absence of direct business dealings. Here, as we have discussed, Higbee alleges that he suffered losses in revenue and asset value and was required to pay increased advertising costs specifically because of the unlawful business practices of EAS. Mindful of the procedural posture of this case, we are unwilling to say that this allegation of causation is insufficient to withstand a demurrer.

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