It is not often that civil defendants find themselves wishing that an individual plaintiff’s lawsuit had been filed as a class action. But an individual plaintiff who files suit using California’s unfair competition law, California Business and Professions Code section 17200 et seq., can make defendants long for the certainty and finality a class action can provide.

Within the past year, there have been a number of decisions arising from the plaintiffs’ bar’s increasingly prevalent use of California’s unfair competition law (UCL), as UCL claims are viewed as a way to bring a representative action without the burdens of obtaining class certification. A few of these recent decisions have imposed limits on UCL claims, and UCL claims generally meet with disfavor in the federal courts. But these claims present troubling constitutional questions, and warrant closer review by the courts.

Virtually Any Business Practice Can Result In A UCL Claim

California’s UCL began as a law businesses could use against competitors to recover for traditional unfair competition tactics. Over time, however, the malleable statute expanded beyond its business-competitor roots to encompass actions by customers and members of the public, and also became a catch-all cause of action, suitable for inclusion in almost any type of lawsuit — from a breach of contract to a products liability action. In fact, under current authority, any unlawful, fraudulent, or just plain "unfair" practice can give rise to a UCL claim.

As a result of this broadly worded definition of actionable conduct, any business practice not expressly authorized by law carries the risk of being deemed unfair — and thus actionable — if later challenged with a UCL cause of action. See, e.g., Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163, 184, 187 (1999) (UCL cannot condemn an action that the Legislature otherwise permits, but absent such a "safe harbor," an act may be "unfair" under section 17200 if, for example, it threatens an incipient violation of an antitrust law, or "the policy or spirit" of an antitrust law, or "otherwise significantly threatens or harms competition").

This broad a definition of actionable UCL practices, California Supreme Court Justice Joyce Kennard has warned, "provide[s] no certainty to businesses seeking to know what conduct the unfair competition law prohibits." Cel-Tech Communications, Inc., 20 Cal. 4th at 206 & 207 (Kennard, J., concurring and dissenting). Justice Marvin Baxter also has warned that the law "no longer gives fair warning of conduct that may be deemed unlawful." Id. at 207 (Baxter, J., concurring and dissenting). (Endnote # 1)

Despite this sizeable vagueness problem, however, the UCL’s definition of actionable conduct is not the most substantial problem for business defendants. Instead, perhaps the largest problem is that UCL claims can be brought by anyone — even someone never injured by the allegedly unfair business practice, and can be brought on behalf of others — even the general public — without complying with class certification procedures.

California’s UCL Allows Representative Actions Without Injury Or Class Certification

Unlike the roughly analogous Federal Trade Commission Act, violations of which only the Federal Trade Commission may prosecute, any private party may bring a UCL claim. In fact, in state court, a UCL plaintiff does not even need to satisfy traditional notions of standing — he or she is not required to have personally suffered injury from the practice giving rise to the suit. A UCL claim may be brought by anyone, whether a competitor, a customer, or an interloping member of the general public who is neither a customer nor a competitor, but instead a mere figurehead selected by a plaintiffs’ attorney. E.g., Reese v. Wal-Mart Stores, Inc., 73 Cal. App. 4th 1225 (1999) (plaintiff was groomed for role in litigation by attorney). Equally troubling, however, is that UCL plaintiffs can file suit and recover on behalf of others, or the public, without satisfying the requirements for class certification, and without incurring the time and expense of identifying and notifying all potential class members. The fact that a plaintiff can bring a non-class representative UCL claim and avoid the expense of obtaining certification and the trouble of notifying the potential class members provides plaintiffs with a very powerful litigation tool.

As a result of these features, UCL claims have become increasingly popular in California both as the centerpiece of stand-alone UCL lawsuits, and as a "value added" claim appended to more traditional tort, contract, and statutory causes of action. E.g., Cortez v. Purolator Air Filtration Products, 23 Cal. 4th 163 (2000) (while noting potential constitutional concerns with non-class representative UCL actions, court noted that UCL actions are beneficial for "mak[ing] it economically feasible to sue when individual claims would be too small to justify the expense of litigation"). In fact, the claims have become so popular, they have turned up in cases filed in jurisdictions quite far from California’s borders. E.g., In re Papst Licensing, 2000 WL 1673054 (E.D. Utah Nov. 6, 2000).

In contrast to the significant advantages UCL claims carry for plaintiffs, there are only two material limitations. First, California’s courts have held that UCL claims are equitable in nature, and thus do not result in a jury trial. Second, because of their equitable nature, UCL claims do not carry the legal remedy of damages, whether compensatory or punitive.

Nevertheless, the equitable characterization and the resulting unavailability of punitive damages seldom are a disincentive, since, as noted above, a single plaintiff can seek restitution of the defendant's profits resulting from the "unfair" business practice on behalf of absent persons or the entire general public.

By Allowing Non-Class Representative Actions, The UCL May Violate Due Process

Because the UCL allows plaintiffs to bring non-class representative actions, perhaps the most significant issue now remaining for the courts is whether the UCL adequately satisfies due process concerns. After all, when an allegedly unfair business practice is challenged using a class action lawsuit that is certified, when the litigation is over, all notified class members that did not opt out are bound by the judgment and cannot file their own suit. But because a plaintiff can bring a representative UCL claim without following class action requirements, any resulting judgment is not binding on absent beneficiaries of the action, since they were neither named nor given notice. Accordingly, the defendant remains in jeopardy of having to defend a second, and a third, non-class representative UCL claim arising from the same business practice.

Within the past year, the California Supreme Court flirted with this lurking constitutional question. In Kraus v. Trinity Management Services, Inc., 96 Cal. 4th 485 (2000), the court did impose some limits on UCL claims, but unfortunately pulled back and left the due process constitutional issue for another day.

In Kraus, five tenants brought a UCL action against their landlord on behalf of all current and former tenants, alleging that the landlord had collected improper security deposits and imposed improper liquidated damages for lease breaches. The plaintiff tenants did not file the suit as a class action, but instead brought non-class representative UCL claims.

In their suit, the plaintiffs sought to force the defendants to disgorge every improper fee collected from every current or past tenant into a "fluid recovery" fund. They proposed to distribute the money from the fluid recovery fund to any current or former tenant who could be found, with any remaining funds distributed to groups working for the advancement of tenants’ rights in San Francisco.

The California Supreme Court began its analysis by explaining that due to the equitable nature of UCL claims, a monetary award can be recovered in an action only through equitable remedies, like restitution. In the proper case, the court explained, an order could issue compelling a defendant to return money obtained through an unfair business practice to persons with an ownership interest in those funds.

In Kraus, however, the proposed fluid recovery would have done more than return wrongfully collected fees to the tenants who paid them, but would also have required the defendants to disgorge additional money to groups advancing tenants’ rights. Accordingly, the proposed fluid recovery fund did not fall within the scope of the restitution remedy allowed under the UCL.

Despite this reasonable limitation on UCL claims, the balance of the Krause opinion is a little more troubling. Although the court disapproved the use of the fluid recovery remedy, it approved of plaintiff’s use of a non-class representative action to obtain restitution for the tenants and former tenants. Accordingly, the court directed the defendants to identify, locate and repay each improperly charged former tenant using "all reasonable means." In the end, the costs the defendants will incur in providing this class action-like notice could exceed the costs of disgorging the improperly collected tenant fees into a fluid recovery fund.

The defendants in Kraus did challenge the constitutionality of any non-class representative UCL claim, whether for restitution or disgorgement into a fluid recovery fund. At least a class action, the defendants argued, would have res judicata effect against future litigation by members of the class who had notice of the action. By contrast, representative UCL actions do not bar subsequent actions over the same business practices by persons who were not named in the original suit — theoretically, the defendants would remain vulnerable to every other tenant and former tenant and could be forced to make restitution to the same people again and again — surely a due process violation. In Kraus, however, the California Supreme Court elected not to consider the due process issue, concluding that, as a practical matter, the statutory period on any UCL claims except plaintiffs' had run, thus rendering the prospect of a duplicative subsequent suit remote.

To further alleviate the due process concerns in its award of restitution to all present and former — though unnamed — tenants, the Krause court also indicated that the defendants could introduce evidence of any prior repayments they already had made, so that no tenant would receive restitution twice. The court also suggested that in the future, California courts could condition payment of restitution to absent beneficiaries of a representative UCL claim on execution of the absent beneficiaries’ release of all claims. Despite these attempts by the California Supreme Court to shield defendants from these particularly egregious consequences that could flow from the UCL’s allowance of non-class representative claims, at the most basic level the question remains unanswered: Is it fair to hold a business liable to an absent, unnamed plaintiff, but leave it vulnerable to the burden of defending a subsequent lawsuit for the same conduct when it is later brought by that same plaintiff?

Kraus is not the first California case to dismiss the due process problem with non-class representative UCL claims, however. California has a long history of dismissing or sidestepping due process concerns with the UCL. In one of the earliest cases to consider the non-class representative UCL claims, Fletcher v. Security Pacific National Bank, 23 Cal. 3d 442, 450 (1979), the California Supreme Court decided that held that it was up to each trial court as to whether it would require a formal class action for any given representative UCL claim. (Endnote # 2)

Moreover, where non-class representative UCL claims were allowed, the plaintiff need not be concerned with class certification hurdles, like whether individualized issues of proof would predominate. For example, the court in Fletcher concluded that once a UCL plaintiff established that a fraud-like unfair trade practice had occurred, a class action could proceed and restitution could be awarded without any individualized proof of fraud, even if a traditional fraud class action would require such individualized proof. Not only was the California Supreme Court untroubled by this result, it praised non-class representative UCL claims as being superior to class actions, because they "eliminate[d] the potentially significant expense of pretrial certification and notice."

Bronco Wine Co. v. Frank A. Logoluso Farms, 214 Cal. App. 3d 699 (1989), was a rare case in which a California court did express concern that non-class representative UCL claims might violate due process. In Bronco Wine, the plaintiff grape grower brought a non-class representative UCL claim on behalf of over 100 non-party growers over the prices a processor charged for the 1982 grape harvest. These absent beneficiaries of the plaintiff’s UCL action included one grower who testified he had no issue with the amount the defendant had paid him, and others who signed releases in the processor’s favor. The trial court ultimately awarded almost $500,000 as restitution to 27 of the non-party growers.

The defendant, however, argued that the non-class representative UCL claim should have been dismissed or, in the alternative, plaintiff should have been compelled to use the California class action procedure, Code of Civil Procedure section 382. Though the California Supreme Court did conclude that the award violated due process, the due process violation, said the court, was that the non-party growers who were awarded restitution had not received notice of the action or had not had an opportunity to be heard.

The court’s consideration of the defendant’s due process rights was less searching. Though it did not find the defendant’s due process rights to have been violated, the court did question the "utility" of a procedure that purports to allow an award of restitution to non-parties, yet does not bind those absent beneficiaries of the UCL claim to the judgment. In fact, the only real due process concern the court raised about defendants was whether allowing the representative action made the case unfair, since it was so "much more complex and difficult" than one prosecuted only on behalf of an individual plaintiff. In the end, however, the court declined to address whether this additional complexity reached procedural due process levels.

Recent Federal Decisions Have Disallowed Non-Class Representative UCL Claims, Or Question Their Constitutionality

In contrast to California’s courts, the federal courts have been somewhat more reluctant to allow non-class representative UCL claims and more suspicious of the constitutionality of such claims. Within the past year, several federal courts have refused to allow non-class representative UCL claims, on several different grounds.

In Lazar v. Trans Union LLC, 195 F.R.D. 665 (C.D. Cal. 2000), the plaintiff sued because his credit report contained errors, despite his repeated requests that the defendant correct them. The plaintiff’s non-class representative UCL claim sought restitution, for himself and "the general public," of all profits the defendant received from its allegedly unfair business practice of refusing or neglecting to correct errors in consumers’ credit files. Though the defendant did not assert a due process challenge, it did succeed in defeating the non-class representative UCL claim by convincing the court to hold plaintiff to traditional class requirements.

In Lazar, the defendant objected that in asserting the representative UCL claim, plaintiff was improperly attempting to recover on behalf of an uncertified class, and that no class could be certified because individual issues so predominated. The district court acknowledged Kraus, which did allow a non-class representative UCL claim, but applied a traditional class action requirement to distinguish its facts. Kraus, said the court, allowed the non-class representative claim because the plaintiff and absent persons’ claims were all "very similar" in position — each tenant and former tenant was charged the same improper $100 fee, and there were no individualized issues of proof. By contrast, in Lazar, the court said, the amounts each individual lost would be very fact intensive, and thus it refused to allow plaintiff to proceed on behalf of the general public.

In another federal case from earlier this year, In re Papst Licensing, 2000 WL 1673054 (E.D. La. Nov. 6, 2000), the district court considered a computer hard drive manufacturer’s UCL claims arising from the defendant’s patent application and patent royalty enforcement practices. Though the manufacturer had not paid any patent royalties to the defendant, it requested restitution on behalf of other manufacturers who had. Though in Kraus, the California Supreme Court had permitted the plaintiff to pursue a non-class representative UCL claim for restitution, the court concluded that allowing such claims in federal court would violate the constitutionally mandated requirement of standing.

Unlike in state court, the Papst Licensing court explained, in federal courts, standing is a threshold jurisdictional requirement mandated by article IIII of the United States Constitution. This standing requirement meant that even if the UCL did not require the plaintiff to be injured, federal law did. Accordingly, any plaintiff bringing a representative UCL claim would be required to show "a distinct and palpable injury" to itself and establish that it was pursuing only its own rights, and would be prohibited from seeking redress for an injury "shared in substantially equal measure by all or a large class of citizens." Since the plaintiff manufacturer in Papst Licensing had not actually paid patent royalties to the defendant, it could not satisfy the standing requirement, and its UCL claim accordingly was dismissed. But see O’Connor v. Boeing North American, Inc., 2000 WL 1682973 (C.D. Cal. Oct. 10, 2000) (rejecting standing challenge where UCL claim was brought by residents who sued the owners and operators of a nearby nuclear testing facility for their own property damage and environmental claims).

Finally, one federal district court has rejected a non-class representative UCL claim arising from securities transactions, on the ground that such a claim violated the commerce clause of the United States Constitution. The short opinion of Shearson Lehman Brothers Inc. v. Greenberg, 1993 WL 144856 (C.D. Cal. Mar. 15, 1993), does not provide many contextual facts, but in it, the court concluded that a UCL claim brought on behalf of the general public arising from securities transactions violated the commerce clause, because the UCL purported to directly regulate interstate commerce, and impermissibly placed an undue burden on it. The court also concluded that plaintiff’s UCL claims arising from securities transactions were preempted by federal securities laws. Though the court in Shearson Lehman Brothers selected a reason different from those in both Lazar and Papst Licensing, each of these cases appear to reflect the deeper concerns the federal courts have with the lax procedural safeguards and sweeping nature of non-class representative UCL claims.


Given the right case, perhaps one day the California Supreme Court — or a federal court faced with these increasingly popular UCL claims — will carefully scrutinize the constitutional problems inherent in a law that allows representative actions but does not bind absent beneficiaries of the action. With that scrutiny, the courts may yet declare non-class representative UCL claims violative of due process, or even some other constitutional provision. Until then, defendants throughout the country have reason for concern any time a plaintiff asserts a claim under California’s UCL.


1.    Despite Justices Kennard and Baxter’s hints that the UCL may be unconstitutionally vague, at least one intermediate California appellate court had rejected that argument. In the unpublished decision of McFetters v. Amplicon, Inc., 98 Cal. Rptr. 2d 63 (2000), the court concluded that, under the circumstances of that case, there was little danger that the defendant was not on notice that its conduct could violate California law. In McFetters, however, the defendant allegedly tricked customers into signing leases — clearly an "unfair" business practice if true. Future UCL claim defendants might wish to consider a vagueness challenge, particularly if the UCL claim is premised on conduct that is only questionably unfair

2.    Nevertheless, it does not appear that courts often use their discretion to require class certification. See, e.g., Dean Witter Reynolds, Inc. v. Superior Court, 211 Cal. App. 3d 758 (1989) (holding that the trial court abused its discretion by requiring class action treatment of a representative UCL claim).