California, Litigation

California Cannabis Claims: Unfair Competition

 

Welcome to the final post in our litigation series on California cannabis claims. For our last post, we’ll be touching on California’s Unfair Competition Law.

Introduction

California’s “Unfair Competition Law,” also known as the Unfair Competition Act, Unfair Business Practices Act, or the Unfair Practices Act, is codified at Business & Professions Code § 17200, et seq. As its name suggests, it generally prohibits “any unlawful, unfair or fraudulent business act or practice.” If this seems a little ambiguous or vague, that’s exactly the point – it’s purposefully written in “sweeping language” to prevent “anything that can properly be called a business practice and that at the same time is forbidden by law.”

Statute of Limitations

An Unfair Competition Law (“UCL”) claim must be initiated within four years.

Elements of an Unfair Competition Claim

There are five elements to any UCL claim:

  1. Proper Parties. Any person may sue or be sued under the UCL – that includes corporations, partnerships, associations, or other organizations of people.
  2. Parties may sue only if, as a result of the unfair competition they claim, they have (1) suffered injury in fact, and (2) lost money or property. “Injury in fact” requires an actual, legally protected interest that is invaded in a concrete and particularized way. A plaintiff can also establish “lost money or property” in a number of ways other than straight economic loss, such as acquiring less in a transaction than a plaintiff otherwise would have or having a present or future interest diminished.
  3. Enumerated violation of the UCL. There must be an unlawful, unfair, fraudulent business act or practice:
    • Unlawful: claims based on the “unlawful” prong of the UCL use other laws and assert that violation of those other laws is actionable under the UCL. The plaintiff must allege: (1) the specific violation, (2) that the unlawful conduct is a “business practice” of the defendant, and (3) as a result of this practice, the defendant received ill-gotten gains (like the plaintiff’s money and/or property).
    • Unfair: this is more nebulous, but the California Supreme Court has defined “unfair” as “conduct that threatens an incipient violation of an antitrust law … or otherwise significantly threatens or harms competition.”
    • Fraudulent: this is also somewhat nebulous, but a defendant violates the “fraudulent” prong of the UCL when it engages in conduct by which “members of the public are likely to be deceived” based on an objective, reasonable person standard.
  1. There must be a causal link between the alleged unfair competition and the plaintiff’s injury.
  2. And finally, the plaintiff must have sustained harm as a result of the defendant’s actions.
Remedies

Unlike most other claims, UCL claims do not provide for compensatory or punitive damages. Instead, UCL claims authorize the court to:

  1. Order injunctive relief. The Court can issue an order enjoining (stopping) any business practice that is found to violate the UCL. Sometimes, the Court will seek to enforce this by also appointing a receiver.
  2. Order restitution. The Court can order the defendant to “restore” the money or property that was acquired by the defendant’s violation. The point of restitution is to restore the status quo.
Conclusion

And that’s a wrap on our five-part series! If you’re interested in getting a quick rundown on the other popular California cannabis claims, those links are below. As always, if you have any questions on these or other claims potentially available to you, don’t hesitate to reach out to our Litigation Team.