Chatignygate II
The Commerce Clause and Noncommercial Activity

17200 Retroactivity

One of the reasons for California’s economic woes is its absurd “Unfair Competition Law,” also known as section 17200. I’ve blogged a lot on my own weblog Freespace about the sort of frivolous cases that the courts were hearing under 17200. Fortunately, California voters overwhelming approved Proposition 64 in our last election. This proposition (gasp!) requires that a person must actually have been harmed in order to bring a lawsuit under 17200.

Well, the world’s most frivolous (published) 17200 decision, Benson v. Kwikset, was decided today by the Court of Appeal. Benson sued the Kwikset lock company arguing that it was unfair for them to claim their locks were “made in America,” since the locks contain little screws and pins that are themselves made in Taiwan. He won, and the Court of Appeal affirmed over a beautiful dissent by Justice Sills, which contained the priceless statement

Under the way the majority interprets the statute, the aircraft carrier U.S.S. Ronald Reagan, built by American shipworkers in Newport News, Virginia, could not be said to have been “made in America....” [T]hey would say that if a single television screen (usually referred to as a “monitor”) in the communications section of the ship came from Taiwan, then the ship itself was not made in America because a “part thereof” was “ entirely or substantially made” outside the United States.

Benson v. Kwikset Corp., 15 Cal.Rptr.3d 407, 425-26 (2004). Very soon after the decision the Court granted rehearing sua sponte on an issue regarding (what else) attorney’s fees. While rehearing was pending, Prop. 64 was passed. The big question now is, whether Prop 64 applies to cases that were already in the courts when Prop 64 was passed. There have been three Court of Appeal decisions on that. The First District held on Feb. 5 that Prop. 64 is not retroactive. (I’ll explain why later.) Then the Second District held on Feb. 9 held that it is retroactive. Today, the Fourth District issued its new decision in Kwikset, also holding that it is retroactive, but nevertheless repeating its decision on the merits of the 17200 case, and eliciting another delightful opinion from Justice Sills (who I think is quickly becoming California’s Scalia). It starts:

Sills, P. J., Concurring and Dissenting.

THE CONCURRING PART

I agree with the majority opinion’s excellent demonstration that Proposition 64 applies to the present case.   

PRELUDE TO THE DISSENTING PART

Alas, though, I cannot sign on to the majority opinion, because it contemplates the possibility of further litigation on the merits.

This case has a history.  At the end of June 2004—more than four months prior to the passage of Proposition 64—my colleagues went out with a (now-vacated) majority opinion upholding a large judgment in favor of the plaintiff... It is tempting to speculate as to whether Proposition 64 would have been considered necessary if, over time, the judiciary had been a bit more circumspect with the unfair competition laws, in cases like this one and others.  Cases like this one are, in my opinion, precisely the sort of abuse that Proposition 64 was crafted to halt (except that in this case the plaintiff is represented by a respectable law firm rather than the infamous Trevor Law Group).  My position is that the unfair competion laws are good laws, but that the judiciary must apply those laws with a certain amount of common sense.  Well, be that as it may, the passage of Proposition 64 by a large margin only confirms that the electorate was indeed fed up with the abuses of the unfair business practices laws, of which plaintiff’s case here is a prime example. 

The majority today has elected to, essentially, republish its prior opinion....  What follows under the heading, “the dissenting part” is my own (republished) dissenting opinion to that republished majority opinion, completed in June 2004.  Readers may find some of its references to “feeding frenzies” and “predatory litigation” to have been given a measure of vindication by the passage of Proposition 64, which, if anything, was clearly intended to prevent the unfair competition laws from becoming a profit center for lawyers.

THE DISSENTING PART

Today’s majority decision only confirms the critics’ worst caricature of California’s unfair competition law (Bus. & Prof. Code, § 17200 et seq.)—that it has degenerated into nothing but a feeding frenzy for attorneys who use the law to shake down California businesses and chase jobs out of California...

The rest is here.

The retroactivity argument goes like this: the First District Court of Appeal held that laws are presumed not to be retroactive unless they clearly say so. Nothing in Prop 64 clearly says so. Nothing in the ballot pamphlet clearly says so, and the language of Prop 64 says it’s intended to prohibit the filing of frivolous lawsuits, and that is sort of prospective-looking language. Fair enough. But the Second District and now the Fourth District say that the presumption against retroactivity does not apply in two cases: 1) where the change in the law is a procedural, rather than a substantive change, and 2) where the change repeals a cause of action that is purely statutory (as opposed to a cause of action that is based on common law). This last argument is particularly interesting. It relies on Government Code section 9606, which says that “Any statute may be repealed at any time, except when vested rights would be impaired. Persons acting under any statute act in contemplation of the power of repeal.” In Callet v. Alicto, 210 Cal. 65 (1930), the Court held that this means that causes of action that are only statutory can be repealed even while the case is proceeding, and the case goes away. Evangelatos v. Superior Court, 44 Cal. 3d 1188 (1988) held that changes to common law causes of action are not presumed to be retroactive, which is consistent with this interpretation.

The retroactivity issue, of course, is now racing toward the state Supreme Court. But however that is decided, I think Justice Sills is right that “even if the judgment in this case is ultimately upheld, this case represents what will hopefully be the last of a breed of lawsuits against businesses where lawyers make big bucks, and clients nothing, for finding some tiny arguable technicality and bringing an unfair competition suit.”

Incidentally, although I strongly disagree with the author’s views of section 17200, I strongly recommend The UCL Practitioner, a fantastic, thorough, and lickety-split weblog on all things related to 17200.

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