Friday, March 15, 2013
Court of Appeal Revives Attorney’s Suit Against Online Competitor
Panel Says Direct Dealings Between Parties Not Required to Sue Under UCL
By KENNETH OFGANG, Staff Writer
An attorney who claims that an online provider of services similar to his is competing unfairly by using unlicensed attorneys and unregistered document assistants stated a claim under the Unfair Competition Law, the Fourth District Court of Appeal ruled yesterday.
Div. Three reinstated Santa Ana lawyer Mathew Higbee’s suit against Expungement Assistance Services. ESA has the domain name clearmyrecord.com, among others, while Higbee offers criminal defense services, including efforts to expunge convictions, at recordgone.com.
Higbee alleges that EAS, a Delaware corporation with its principal place of business in Kentucky, is a not a law firm, is not authorized to practice law in any state, but offers legal advice and legal services. By offering such advice and services in California, he maintains, the defendant is violating state laws that require attorneys to be licensed and require non-lawyers who prepare legal documents to either do so under the supervision of a licensed attorney or to register with the county in which they do business and post a bond.
Orange Superior Court Judge Robert J. Moss ruled that Higbee failed to state a cause of action under the UCL, as amended by Proposition 64. Specifically, the judge said, the plaintiff failed to allege that he had lost money or property as a result of a transaction with the defendant.
“Plaintiff only alleges that defendant is getting some business that plaintiff might possibly obtain for itself,” the judge wrote. “ This is insufficient. One may not sue a competitor under [Business and Professions Code Sec.] 17200 because that competitor is obtaining some market share.”
But Justice Eileen Moore, writing for the Court of Appeal, said Proposition 64 does not displace traditional unfair competition law, which protects a business from economic losses that it would otherwise sustain as a result of the illegal acts of its competitors.
Proposition 64 added to the UCL a requirement that the plaintiff have suffered actual economic injury as a result of the unfair or unlawful practice complained of. The intent, Moore explained, was to eliminate “the shakedown lawsuit—the ‘I get rich’ lawsuit brought by a person who has had no business dealings with the proprietor being sued, but who has happened to notice that the hapless proprietor is out of compliance with a particular law. “
But California, she noted, has long recognized causes of action between competitors under the unfair competition laws, which were first codified in 1933. And she rejected the defense contention that the unauthorized-practice-of-law and document-preparation statutes, having been enacted for the benefit of consumers rather than lawyers, cannot form the basis for a UCL claim by a lawyer against a competitor.
Court Reporter Case
She cited Saunders v. Superior Court (1994) 27 Cal.App.4th 832, in which the plaintiff court reporters were allowed to sue other reporters and insurance companies over the practice of “direct contracting” by the defendant reporters with the insurance companies for the exclusive right to report depositions taken by lawyers representing those companies, as well as related practices alleged to violate the Business and Professions Code.
“Just as the alleged violations of those Business and Professions Code sections were held to serve as the underpinnings of the UCL action in Saunders, we see no reason why the alleged violation of statutes concerning the unauthorized practice of law cannot serve as a predicate for Higbee’s UCL action,” Moore wrote.
“Here…Higbee alleges that he suffered losses in revenue and asset value and was required to pay increased advertising costs specifically because of the unlawful business practices of EAS,” she added. “Mindful of the procedural posture of this case, we are unwilling to say that this allegation of causation is insufficient to withstand a demurrer.”
The justice warned, however that the court did not intend “to suggest that we approve of the revival of shakedown lawsuits or that a consumer who has never done business with a company has standing to maintain a UCL action against it. “
The case is Law Offices of Mathew Higbee v. Expungement Assistance Services, 13 S.O.S. 1258.
Copyright 2013, Metropolitan News Company