The BP Blast!: A California Employment Law Blog

California Supreme Court Applies Proposition 64 To Pending Cases, Clarifying Who Has Standing to Sue Under California's Unfair Competition Law

On July 24, 2006, the California Supreme Court issued two opinions involving what standing is required for private litigants attempting to pursue claims under California's Unfair Competition Law (the "UCL"): Californians for Disability Rights v. Mervyn's, No. S131798 and Branick v. Downey Savings and Loan Association, No. S132433 (July 24, 2006).

In November 2004, California voters approved Proposition 64, legislation attempting to stop abuse of the UCL by restricting standing under the Act. Before Proposition 64, a private litigant could file suit under the UCL on behalf of "the general public" regardless of whether or not he or she had suffered any actual injury or damage by the defendant. Proposition 64 stated that a private litigant can only file suit under the UCL when he or she has suffered actual harm.

The question before the California Supreme Court was whether the “standing” requirement of Proposition 64 would be applied to UCL cases filed before Proposition 64 was passed. The California Supreme Court ruled in Californians for Disability Rights v. Mervyn's that Proposition 64 applies to pending cases, but that a plaintiff who lacks any actual harm and therefore standing under the UCL can attempt to amend his or her lawsuit to add a plaintiff who has standing.

The California Supreme Court acknowledged that generally statutes operate prospectively, absent a clear indication that the voters intended otherwise. The Court observed California voters had not indicated that Proposition 64 was to operate retroactively. The Court nonetheless concluded that Proposition 64 did apply to cases pending at the time it took effect, reasoning that a statute is only applied retroactively when the application of the statute would impose new or different liabilities based upon past conduct. The Court found Proposition 64 "left entirely unchanged the substantive rules governing business and competitive conduct. Nothing a business might lawfully do before Proposition 64 is unlawful now, and nothing earlier forbidden is now permitted." Thus the Court found applying Proposition 64 to cases pending at the time it was passed would not constitute the retroactive application of a statute.

The California Supreme Court in Downey also added that plaintiffs could amend their complaint to substitute in someone who had actually suffered actual injury. Such substitution is to be allowed provided that the new plaintiff does not "state facts which give rise to a wholly distinct and different legal obligation against the defendant." Furthermore, the Court held that if the new plaintiff's claim rests on the same general set of facts and injury as the original plaintiff's claim, the new plaintiff's claim will typically "relate back" to the filing of the original complaint. Therefore, the new plaintiff would be able to seek damages for the four-year period statute of limitations period preceding the filing of the original complaint – not just four years from the date s/he was substituted into the case.

In past years it has been commonplace for plaintiff's attorneys to include a UCL claim when asserting the violation of certain statutes, usually alleged violations of California’s Labor Code. The California Supreme Court's decisions will curtail the abuse of the UCL by union leaders and other “puppet plaintiffs,” absent their ability to locate a current or former employee who feels he or she has suffered actual harm. While the Court’s decision is certainly a victory for California’s employers, it is still no substitute for careful examination and adherence to California’s complex employment laws.