Home -> Law Blog Directory -> International Law Blogs -> The FCPA Blog

International Law

: The FCPA Blog

California Here We Come

We've said before (here and here) that there's no private right of action under the FCPA. Which means offenses can be prosecuted only by the U.S. Department of Justice or the Securities and Exchange Commission. The DOJ's Lay Person's Guide to the FCPA notes, however, that "[c]onduct that violates the antibribery provisions of the FCPA may also give rise to a private cause of action for treble damages under the Racketeer Influenced and Corrupt Organizations Act (RICO), or to actions under other federal or state laws." It's easy to skip over the DOJ's reference to "state laws." But it could be important.

The UCL. California, for example, has an Unfair Competition Law. See Bus. & Prof. Code, § 17200 et seq. It prohibits unfair competition, including unlawful, unfair, and fraudulent business acts, and it protects both consumers and competitors. Relevant to this discussion, the UCL "borrows" violations from other laws by making them independently actionable as unfair competitive practices.

And the FCPA. The California UCL was the basis for the suit in Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134. The plaintiff, a Korean company acting as a sales agent of Loral Corporation, alleged that Lockheed Martin submitted competing bids to sell military equipment to the Republic of Korea that were tainted by bribery and sexual favors. So in its compliant, the plaintiff "borrowed" a cause of action from the Foreign Corrupt Practices Act. The FCPA prohibits, among other things, the bribing of a foreign government official for the purpose of influencing any act or decision in his official capacity and in violation of a lawful duty, or for the purpose of inducing him to use his official influence to obtain or retain business. See 15 U.S.C. 78dd-2(a)(1)(A), (B).

Lockheed Martin argued in defense that the FCPA "impliedly bars a private action for unfair competition predicated on its violation, because the federal statute does not expressly provide for private enforcement." But the California court said the "UCL may be predicated on a violation of a statute for which there is no private right of action, unless the predicate statute or the UCL expressly provides otherwise. . . . There is no language in the UCL barring 15 United States Code section 78dd-2 as a predicate for an unfair competition action." The court explained that "[s]tate law does not conflict with federal law merely because there is an absence of a private right of action in the federal law. . . . A state law conflicts with federal law when compliance with both is impossible. . . . Congress did not intend to occupy the field of unfair business practices." If that reasoning works for California, it may work for other states as well.

Limited but useful remedies. California's UCL doesn't get much attention as an FCPA-related cause of action. That's probably because the remedies available under it exclude compensatory damages. As the court explained in Korea Supply Co. v. Lockheed Martin Corp., "Suits asserting statutory UCL claims are equitable actions. . . . For that reason, compensatory damages are not available in such suits. . . . Instead, successful private UCL plaintiffs are generally limited to injunctive relief and restitution." But the UCL can still be a potent weapon. Companies can enjoin competitors that obtain contracts or bid for new work using corrupt means.

Other state laws? So, the DOJ's advice to check state laws for private causes of action based on violations of the FCPA turns out to be prudent after all. If our readers have had any experiences with private rights of action for FCPA offenses under state laws, we'd like to hear their stories. You can leave anonymous comments by clicking here. Or you can email comments to us here.

Full post as published by The FCPA Blog on March 04, 2008 (boomark / email).