Class Action

New UCL "unfair" prong decision: In re Red Light Photo Enforcement Cases

By Kimberly A. Kralowec

In In re Red Light Photo Enforcement Cases, 13 Cal.App.4th 1314 (Jun. 13, 2008), the Court of Appeal (Fourth Appellate District, Division One) appeared to assume without deciding that a UCL claim may be predicated on an attempt to enforce a contract between the defendant and a third party with provisions that are void as contrary to public policy:

Plaintiffs contend the court erred by finding for ACS, because the contingency fee contracts between it and the municipalities were void as against public policy and thus were predicates for UCL claims.

Business and Professions Code section 17200 does not proscribe specific practices, but broadly prohibits "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising." 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.' [Citations.] By proscribing 'any unlawful' business practice, 'section 17200 "borrows" violations of other laws and treats them as unlawful practices' that the unfair competition law makes independently actionable." (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.) " 'Because Business and Professions Code section 17200 is written in the disjunctive, it establishes three varieties of unfair competition ? acts or practices which are unlawful, or unfair, or fraudulent. "In other words, a practice is prohibited as 'unfair' or 'deceptive' even if not 'unlawful' and vice versa." ' " (Ibid.)

"It is well established that our courts, like those of other states, may, in appropriate circumstances, void contracts on the basis of public policy. Of course '[t]he determination of public policy of states resides, first, with the people as expressed in their Constitution and, second, with the representatives of the people ? the state Legislature.' [Citation.] . . . ' "[U]nless it is entirely plain that a contract is violative of sound public policy, a court will never so declare. 'The power of the courts to declare a contract void for being in contravention of sound public policy is a very delicate and undefined power, and . . . should be exercised only in cases free from doubt.' " ' " (City of Santa Barbara v. Superior Court (2007) 41 Cal.4th 747, 777, fn. 53, italics added.) "[A] contract should be construed to be valid and enforceable rather than void as against public policy." (Underground Constr. Co. v. Pacific Indemnity Co. (1975) 49 Cal.App.3d 62, 67; Civ. Code, §§ 1643, 3541.)

Slip op. at 22-23 (footnote omitted) (emphasis in original). Neither of the two cases cited in that last paragraph were UCL cases. The opinion goes on to discuss contract law principles and does not mention the UCL again. I suppose the predicate for the UCL claim is the idea that conduct sufficiently contrary to public policy so as to render a contract void is also "unfair" conduct within the meaning of the UCL. The trial court had earlier found no statutory violation, which would seem to have eliminated any "unlawful" prong claim. Id. at 6-7 n.3. The Court of Appeal ended up affirming the judgment in the defendant's favor.

Full post as published by The UCL Practitioner on July 17, 2008 (boomark / email).