Issue link: https://read.dmtmag.com/i/705606
w w w. v w m m e d i a . c o m J u l y - A u g 2 016 | V I N E YA R D & W I N E RY M A N A G E M E N T 1 1 1 SCOPE OF CALIFORNIA'S UCL Codified in Sections 17200 and 17500 of the California Business & Professions Code, California's UCL is essentially a consumer protection law, providing govern- ment entities and private citizens the ability to bring lawsuits against businesses for practices that are alleged to harm consumers. It's one of the broadest, if not the broadest, consumer protection laws in the country — and it includes expan- sive definitions, creating potential liability for a wide range of business conduct. The UCL prohibits four types of wrongful conduct by businesses: unlawful business acts or practices; unfair business acts or practices; fraudulent business acts or practic- es; and unfair, deceptive, untrue or misleading advertising. Under the UCL, an "unlawful" business act or practice is one that violates any law, be it federal, state, local, statutory or court-made. The UCL borrows violations of other laws and treats them as unlawful practices that are independently dard of proof in UCL actions is preponderance of the evidence. The preponderance of the evidence standard is relatively low and is met if the plaintiff (whether the govern- ment or a private litigant) shows that it's more likely than not that the defendant engaged in a business act or practice that violates the UCL. Successful government UCL enforcement actions have a num- ber of potential remedies, includ- ing injunctions, requiring cessation of the violative practice or act, and restitution or reimbursement for vic- tims' losses due to violative conduct. Additionally, the government can seek civil monetary penalties and investigation costs. The maxi- mum allowable civil monetary pen- alty under the UCL is $2,500 per violation. This may not sound like much, but calculation of the num- ber of violations can increase the fine exponentially. For example, in many counties, each day on which a violation of the county code is in existence is considered a separate and distinct violation for penalty purposes. The ability to obtain civil mon- etary penalties, especially in such large amounts, provides a power- ful incentive for law enforcement a g e n c i e s t o b r i n g U C L c a s e s , because any penalty paid goes directly to the agency that investi- gated and prosecuted the action. UCL cases provide an alternate way to fill the agency's coffers at a time when budget cuts and lack of fund- ing plague many law enforcement agencies. HOW TO AVOID BECOMING A TARGET Because UCL liability is so broad in scope and can apply to such a wide range of conduct (includ- ing minor county code violations), these investigations and cases may be difficult to avoid. However, there are actions a business owner can take in an attempt to avoid a UCL investigation or government enforcement action. Know and comply with state and local ordinances, including county permitting, building and zoning actionable. For example, "unlaw- ful" UCL cases have been brought based on county code violations, zoning ordinances, building and housing code violations, and envi- ronmental statutes, such as the California Fish & Game Code. "Unfair" under the UCL is inten- tionally broad to allow law enforce- ment agencies maximum discretion to take action against new schemes to defraud consumers that may not yet violate any law. The California courts have disagreed on one defi- nition of "unfair" and have held a wide variety of practices to be "unfair" under the UCL. Examples include a car rental company con- cealing a refueling service charge, even though charging such a fee itself was legal; an insurance com- pany's use of a polygraph test to deny insurance; and intentionally placing unenforceable terms in con- sumer contracts. A business act or practice is "fraudulent" under the UCL if members of the public are likely to be deceived by that act or prac- tice. "Fraudulent" under the UCL is broader than common law fraud because UCL liability doesn't require intent, reliance, damages or even actual deception — rather, the mere likelihood of deception is sufficient. GOVERNMENT ENFORCEMENT UCL government enforcement actions can be brought by a number of law enforcement officials, includ- ing the California Attorney General, county district attorneys, county counsel and city attorneys. Given this broad and potentially overlap- ping number of law enforcement officials who can investigate and prosecute UCL actions, there's an unfair competition database allow- ing for coordination between agen- cies. In addition to civil discovery methods that may apply to private UCL actions, law enforcement officials can use administrative subpoenas and other investigative techniques — such as wiretap sur- veillance — in UCL investigations and actions. For both government enforce- ment and private actions, the stan- + California counties are increasingly using Califor- nia's Unfair Competition Law (UCL) to bring govern- ment enforcement actions against local businesses for myriad reasons. + UCL cases can often result in large fines and costs — as well as reputational damage from negative publicity. + Knowing and complying with state and local ordi- nances, as well as educat- ing employees, is the best way to avoid UCL cases. + Engage counsel to act on your behalf if hit with a UCL lawsuit. AT A GLANCE