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Court of Appeal:
UCL Can’t Be Used to Bar Law Firm’s Alleged Shakedowns
Opinion Affirms Dismissal of District Attorneys’ Action Against Potter Handy and Its Lawyers
By a MetNews Staff Writer
Div. One of the First District Court of Appeal has affirmed the dismissal of an action brought by the district attorneys of Los Angeles and San Francisco against the San Diego law firm of Potter Handy, which operates as the Center for Disability Access in filing a deluge of lawsuits for disability discrimination throughout the state in what is alleged to be a shakedown scheme to exact settlements by small businesses.
That firm, according to the district attorneys’ pleading, routinely alleges violations of the federal Americans with Disabilities Act (“ADA”) in the form of barriers to access by the disabled to places of business, some of the violations being nonexistent. Its stable of handicapped plaintiffs make the allegation, necessary for standing, of an intent to return to the establishment if the obstacles are removed when no such intent exists—some of the targeted businesses being hundreds of miles from the plaintiffs’ homes, it is contended.
Potter’s boilerplate complaints also allege violations of California’s Unruh Act which, unlike the ADA, authorizes the award of damages.
The appeals court held Friday, in an opinion by Presiding Justice Alison M. Tucher, suggested dealing with the conduct through misdemeanor prosecutions and State Bar proceedings. Tucher said that San Francisco Superior Court Judge Curtis E.A. Karnow properly sustained a demurrer without leave to amend based on the litigation privilege, set forth in Civil Code §47(b)(2), rendering privileged any utterance made in a “judicial proceeding.”
Suit Under UCL
Potter was sued under the Unfair Competition Law (“UCL”). Business & Professions Code §17200 spells out that “unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice.”
The law firm and its lawyers engage in an “unlawful” practice through their violations of Business & Professions Code §6128, it was alleged. That section provides:
“Every attorney is guilty of a misdemeanor who either: [¶] (a) Is guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party.”
The district attorneys sought injunctive relief, restorations of moneys taken from businesses, and civil penalties of $2,500 for each violation that was proven.
Attorney General’s Contention
The Office of Attorney General argued on appeal:
“This is a civil law enforcement action against attorneys who intentionally lied to falsely manufacture standing in thousands of lawsuits they filed against California small businesses, all so that they could shake down their economically distressed victims for tens of millions of dollars in cash settlements. Respondents, the law firm Potter Handy LLP and 15 of its current and former attorneys, did not challenge the factual sufficiency of the People’s allegations below, nor did they dispute that they could be charged and punished criminally or administratively for their illegal acts in spite of the litigation privilege….The only question on appeal is whether the litigation privilege prevents the People from bringing a civil Unfair Competition Law (‘UCL’) law enforcement action to punish the exact same intentional lawbreaking that all agree could be the basis for a valid criminal prosecution or State Bar disciplinary proceeding.”
It asserted:
“[I]his case alleges Respondents committed thousands of Section 6128(a) violations as part of a systemic, statewide business practice. It would be effectively impossible to bring this case through the criminal system as doing so would require the filing of thousands of separate misdemeanor charges in courts across the state, both to comply with criminal venue rules and ensure local witness availability.”
Proper Remedies
Tucher declared:
“Carving out an exception to the litigation privilege for the People’s UCL claim would not be proper because the Legislature’s prescribed remedies—prosecution directly under section 6128(a) and State Bar disciplinary proceedings—remain viable.”
She explained:
“In the complaint, the conduct alleged to violate the UCL is the filing of ADA/Unruh lawsuits in federal court based on false standing allegations, and the use of those lawsuits to coerce settlements. Both types of conduct constitute communications falling within the broad reach of the privilege and its absolute protection of access to the courts.”
The presiding justice went on to say:
“[T]he conduct alleged in this case relates to the filing and prosecution of antecedent cases, but no tort of malicious prosecution is alleged. The conduct is said to violate a misdemeanor provision of the Business & Professions Code and one or more of the State Bar’s Rules of Professional Conduct, but the case is not proceeding directly under these provisions, and the availability of these alternate remedies is not a reason to exempt the conduct from the reach of the litigation privilege.”
Public Policy
The Office of Attorney General argued that perpetrating deception on the courts is contrary to public policy, Tucher responded:
“We agree and in no way condone the conduct alleged in the People’s complaint. But the People’s contention does not support their claim of error. The Legislature took account of pertinent public policy concerns by making it a crime for an attorney to engage in fraudulent or collusive conduct intended to deceive the court or any party, not by carving out an exception to the litigation privilege for UCL cases aimed at this conduct.”
The case is People v. Potter Handy, 2023 S.O.S. 3691.
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