Class Action

"Limiting Legal Scope": the economic abstention doctrine

By Kimberly A. Kralowec

On February 7, 2008, the Daily Journal ran a Focus article called "Limiting Legal Scope" (subscription). The article addresses, from a defense-oriented perspective, the economic abstention doctrine that has developed in the UCL case law. According to the article,

The [UCL] frequently has met its match when claims of unlawfulness depend on borrowed laws that an executive agency has been assigned to enforce. Courts have abstained or declined equitable jurisdiction in unfair-competition cases that ask them to assume administrative-agency functions, to make ad hoc determinations of economic policy or to regulate defendants with rulings, injunctions and other equitable remedies that might conflict with an agency's adjudication of the same subject.

That summary of the law reflects a defendant-centric interpretation of the decisions. The thing to keep in mind is that the key factor is not whether an agency already regulates the area, but whether the area involves questions of complex economic policy that the legislative (or executive) branch is better equipped to deal with. The fact that agency regulations may also govern the particular subject matter of the case does not mean that the UCL claim fails. Rather, under Cel-Tech and the economic abstention decisions, the UCL claim fails only if (a) the regulation expressly permits the challenged conduct, or (b) the regulated area raises complex questions of economic policy that should be left to regulative bodies.

The article also does not cite the cases in which courts have declined to apply the "economic abstention doctrine," of which there are many. See, e.g., McKell v. Washington Mutual, Inc., 142 Cal.App.4th 1457, 1473-74 (2006) ("While we appreciate the wisdom of abstention in matters calling for a legislative determination of economic policy, we do not believe abstention is required in the instant case.").

Here are a few of my prior blog posts on the subject:

• New UCL economic abstention decision: Shamsian v. Dept. of Conservation

• New UCL/CLRA decision: McKell v. Washington Mutual

• "UCL Suits to Target Illegal Hiring"

• New UCL economic abstention decision: Alvarado v. Selma Convalescent Hosp.

Thanks to the blog reader who emailed me a copy of the article.

Full post as published by The UCL Practitioner on February 14, 2008 (boomark / email).