Metropolitan News-Enterprise


Friday, August 2, 2013


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Supreme Court, in Two Cases, Reinstates Actions Under UCL


By a MetNews Staff Writer


The California Supreme Court yesterday decided two cases involving the Unfair Competition Law, holding, in one, that an action may be stated under the act where the conduct violates the Unfair Insurance Practices Act, just so it also violates some other statute or common law.

In the other case, it announced that a UCL action may sometimes be maintained based on a violation of a federal statute, even though that statute does not authorize private relief.

An action under the UCL may be pegged to any of three bases, one of which is that the conduct is unlawful. Both decisions dealt with that prong.

In the insurance case, Justice Carol Corrigan wrote for the majority in clarifying the effect of the court’s 1988 decision in Moradi-Shalal v. Fireman’s Fund Ins. Companies, 46 Cal 3d 287, which barred private actions for conduct proscribed by Insurance Code section 790.03(h).

Corrigan said:

“When the Legislature enacted the UIPA, it contemplated only administrative enforcement by the Insurance Commissioner….Private UIPA actions are absolutely barred; a litigant may not rely on the proscriptions of section 790.03 as the basis for a UCL claim….However, when insurers engage in conduct that violates both the UIPA and obligations imposed by other statutes or the common law, a UCL action may lie. The Legislature did not intend the UIPA to operate as a shield against any civil liability.”

The decision reinstates an action by Yanting Zhang against California Capital Insurance Company which she accuses of false advertising and bad faith. A judgment of dismissal had been entered after San Bernardino Judge Joseph R. Brisco sustained a demurrer without leave to amend.

Concurring Opinion

Justice Kathryn Werdegar, joined by Justice Goodwin Liu, said in a concurring opinion that she disagreed with Corrigan’s pronouncement that an action under the UCL may never be founded on a violation of the UIPA.

“Given Zhang’s conscious decision not to predicate a UCL claim directly on such transgressions, this assertion is unnecessary dictum,” she wrote, adding:

“Moreover, it is wrong: it misreads our own precedent and imposes on the UCL limits never contemplated by the Legislature.”

Werdegar argued that relevant cases, taken “collectively,” establish “that a UCL cause of action will not lie to enforce violation of a particular statute only if the Legislature affirmatively intended to preclude such indirect enforcement.”

She said that “[i]t is not enough that the Legislature in drafting the predicate statute simply failed to ‘provide for the action.’ ”

The case is Zhang v. Superior Court, 2013 S.O.S. 3903.

Gary K. Kwasniewski and Jeanette L. Viau represented Zhang. Peter Abrahams and Mitchell C. Tilner of Horvitz & Levy, joined by Lance D. Orloff and Aaron J. Mortensen of Grant, Genovese & Baratta, were attorneys for the insurance company.

Federal Statute

In the other case decided yesterday, the high court held that a UCL action may be founded on alleged violations of the federal Truth in Savings Act, even though Congress has acted to bar private actions under that statute.

Corrigan, in a 7-0 opinion, stated the issue in these words:

“May a claim of unlawful business practice under California’s unfair competition law be based on violations of a federal statute, after Congress has repealed a provision of that statute authorizing civil actions for damages?”

She responded:

“We hold that it may, when Congress has also made it plain that state laws consistent with the federal statute are not superseded.”

In 1996, Congress repealed 12 U.S.C. § 4310 which authorized private actions under TISA. That action, according to Bank of America—defendant in a class action over alleged nondisclosures—precludes application of the UCL.

Los Angeles Superior Court Judge Jane Johnson agreed with the bank, sustaining a demurrer with leave to amend. The bank stood on its complaint; a judgment of dismissal was entered; Div. Two of this district’s Court of Appeal affirmed.

Explaining the reversal, Corrigan said:

“[C]onsiderations of congressional intent favor plaintiffs. By leaving TISA’s savings clause in place, Congress explicitly approved the enforcement of state laws ‘relating to the disclosure of yields payable or terms for accounts...except to the extent that those laws are inconsistent with the provisions of this subtitle, and then only to the extent of the inconsistency.’ (§ 4312.) The UCL is such a state law.”

The case is Rose v. Bank of America, 2013 S.O.S. 3912.

Henry H. Rossbacher, Jeffrey Alan Goldenberg, James S. Cahill and Talin K. Tenly of The Rossbacher Firm argued for the reversal. Reed Smith attorneys Margaret M. Grignon (a former justice of this district’s Court of Appeal), Scott H. Jacobs and Zareh A. Jaltorossian, represented the bank.

Justice Ming Chin did not participate. Sitting under assignment, in his place, was Third District Court of Appeal Justice Louis Mauro.


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