Opinion
B161523.
11-12-2003
SUE SARKIS, Plaintiff and Appellant, v. CALIFORNIA ASSOCIATION OF LICENSED INVESTIGATORS, INC., Defendant and Respondent.
David A. Cordier for Plaintiff and Appellant. Selman — Breitman, Brad D. Bleichner and Dennis M. Alexander for Defendant and Respondent.
While still a member of defendant California Association of Licensed Investigators (CALI), plaintiff Sue Sarkis, a private investigator, state-licensed for more than 20 years, filed a lawsuit seeking damages against CALI based on causes of action for defamation, wrongful suspension of membership rights, and an injunction against unfair business practices under the Unfair Competition Law (UCL) (Bus. & Prof. Code, § 17200 et seq.). She appeals from the judgment entered after the court granted a nonsuit for CALI and against Sarkis on Sarkis UCL cause of action at the close of Sarkis opening statement. Concluding that Sarkis failed to offer proof of injury, or the likelihood of injury, to the general public, we affirm the judgment.
CALI expelled Sarkis from its membership roughly seven months after she instituted this lawsuit.
Additional statutory references are to the Business and Professions Code, unless otherwise indicated.
Sarkis request for an injunction under the UCL was the only cause of action that survived to trial. Although the other defendants, members of CALIs board of directors, had not yet been formally dismissed by a long-planned stipulation, both parties and the court treated CALI as the sole remaining defendant.
BACKGROUND
At the final status conference, the court ruled that Sarkis would have to prove not only that CALI violated "the Corporations Code as a business practice," but also would have to "demonstrate the unlawful practice causes or is likely to cause injury to the general public."
Sarkis filed a motion for reconsideration. In denying the motion, the court said it had concluded that although any member of the public may sue as private attorney general for violation of the UCL without the plaintiff being harmed, "there has to be some public interest involved." "The law requires `public injury for representative standing. This does not mean that members of the public must have actually relied on some representation of the offending business, or that a member of the public must have actually been damaged. It means only that the conduct is likely to cause injury . . . ." The court said CALI had correctly insisted that Sarkis prove an injury or likelihood of injury to the general public, on whose behalf she purportedly filed the lawsuit.
Prior to giving his opening statement, counsel for Sarkis acknowledged that Sarkis was not a derivative action and that she made no personal claim for damages. Counsel stated the evidence would prove that CALI had routinely violated state law regarding management and care of nonprofit mutual benefit corporations and would show CALI had knowingly and willfully violated the rights of its membership as well as those of certain directors, in violation of the Corporations Code. CALI, he said, also violated some bylaws and its articles of incorporation. Counsel listed numerous alleged omissions, such as failure to notify each member annually of the members right to receive a financial report in conformance with the Corporations Code and refusal to complete financial reports when so asked by members. This failure to provide complete and accurate reports to members had put CALI in serious jeopardy because it owed large sums of money to the state under the escheat laws and was holding funds that should be escheated, in violation of the Code of Civil Procedure. CALI had repeatedly violated its bylaws by accepting dues from individuals who were no longer members. It had listed individuals as licensed investigators who it knew were not licensed, to the detriment of members who relied on information in CALIs directory, in violation of certain sections of the Business and Professions and Corporations Codes. It may have violated certain Penal Code sections. Counsels argument continued in this vein.
At the close of Sarkis statement, CALI made a motion for judgment (Code Civ. Proc., § 631.8) on the grounds that Sarkis had made no showing of injury to anyone and no showing there had been any unlawful practice that would constitute a business practice. From Sarkis many points, the court found two items on which it found "at least an argument of public deception," on which the parties would go to trial.
The first of these two issues was a claim that some of the money CALI held in its workers compensation accounts had been held for a longer time than is permitted by law and, therefore, that money should have been escheated to the state. The second claim was that CALIs membership list, which was available to the public, did not differentiate between licensed and unlicensed investigators (who must be affiliated with a licensed investigator in order to practice).
At the conclusion of the hearing, counsel met to work out a stipulation as to an injunction on those two issues. Instead, counsel returned to the courtroom and Sarkis counsel announced, "Rather than piecemeal this case out and have to go to the Court of Appeal with respect to whether evidence was properly excluded, I would offer to withdraw those allegations from the opening statement . . . without prejudice to renewing at some future date . . . ." CALIs counsel renewed his motion for judgment. The court granted the motion. When it signed the judgment, the court deemed the motion to have been proper as a motion for nonsuit and entered judgment accordingly.
DISCUSSION
Sarkis alleged she was bringing the UCL claim "on behalf of the general public," stating CALIs conduct was "deleterious to the general public" and that she sought to enforce important rights "affecting the public interest. . . ." She did not allege any personal harm.
On appeal, Sarkis seems to claim that acting as a private attorney general — a status the trial court acknowledged — she is entitled to enjoin any unlawful act even if it causes no harm to the public beyond technical illegality. The question of whether a representative UCL plaintiff must show injury to someone was the core of the hearing on CALIs final motion and the basis of the trial courts ruling. Assuming, without deciding, that the UCL applies to CALI and that Sarkis had standing to bring the UCL claim for an injunction, we reach the question of harm.
The term "representative action" refers to "a UCL action that is not certified as a class action in which a private person is the plaintiff and seeks disgorgement and/or restitution on behalf of persons other than or in addition to the plaintiff." (Kraus v. Trinity Managements Services, Inc. (2000) 23 Cal.4th 116, 126, fn. 10.)
The dispositive ground set out by CALI was whether Sarkis opening statement laid out any harm or likelihood of harm to the general public. As noted, the trial courts ruling was based on Sarkis failure to offer any harm, or likelihood of harm, to the general public in her opening statement.
Section 17203 provides: "Any person who engages, has engaged, or proposes to engage in unfair competition may be enjoined in any court of competent jurisdiction. The court may make such orders or judgments, including the appointment of a receiver, as may be necessary to prevent the use or employment by any person of any practice which constitutes unfair competition, as defined in this chapter, or as may be necessary to restore to any person in interest any money or property."
The UCL defines "unfair competition as "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 . . . of Part 3 of Division 7 of the Business and Professions Code[,]" concerning representations made to the public by offerors of certain products or services, such as telephone sellers, travel promoters and environmental representations. (§ 17500 et seq.)
In Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, disapproved on other grounds in Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 175, the Supreme Court considered whether a restitutionary UCL award for advertising injury due to unfair competition was a form of damages covered by the banks comprehensive general liability insurance policy. The court concluded that, although a damages award for wrongful competition might be insurable, an award for a statutory violation, which could only be punitive or restitutionary, was not. (Id. at pp. 1265-1266.)
In the course of its discussion identifying the applicable definition of "unfair competition," the court observed that "[i]n drafting the [UCL], the Legislature deliberately traded the attributes of tort law for speed and administrative simplicity. As a result, to state a claim under the act one need not plead and prove the elements of a tort. Instead, one need only show that `members of the public are likely to be deceived. [Citations.]" (Bank of the West v. Superior Court, supra, 2 Cal.4th at pp. 1266-1267, italics added.)
In Tippett v. Terich (1995) 37 Cal.App.4th 1517, the court held a UCL action was not available to a plaintiff who sought to compel payment of prevailing wages. "The cause of action does not support a claim for damages based on the difference between the wages paid and the prevailing wage." (Id. at p. 1537.) The court quoted the foregoing language from Bank of the West and concluded "[p]laintiff made no such showing. [¶] Plaintiff made no other attempt, in his offer of proof or otherwise, to present evidence establishing his right to relief on the unfair competition causes of action." (Tippett v. Terich, supra, 37 Cal.App.4th at p. 1538.)
In Cortez v. Purolator Air Filtration Products Co., supra, 23 Cal.4th 163, the court held that "orders for payment of wages unlawfully withheld from an employee are . . . a restitutionary remedy authorized by section 17203. . . . The employee is, quite obviously, a `person in interest (§ 17203) to whom that money may be restored." (Id. at pp. 177-178.)
The Supreme Court noted that the Court of Appeal opinion in Cortez had criticized Tippet for failing to provide "any analysis to support the conclusion that unpaid wages may not be recovered in a UCL action." (Cortez v. Purolator Air Filtration Products Co., supra, 23 Cal.4th at p. 171.)
In the course of reaching its holding in Kraus — that "disgorgement into a fluid recovery fund is not a remedy available in . . . representative UCL actions" — the court noted that "[t]hrough the UCL a plaintiff may obtain restitution and/or injunctive relief against unfair or unlawful practices in order to protect the public and restore to the parties in interest money or property taken by means of unfair competition." (Kraus v. Trinity Management Services, Inc., supra, 23 Cal.4th at pp. 121, 126.)
In Rosenbluth Internat., Inc v. Superior Court (2002) 101 Cal.App.4th 1073, our colleagues in Division Five opened their discussion with the statement that "[t]he UCL permits `any person acting for the interests of itself, its members or the general public (§ 17204) to file an action for restitution and/or injunctive relief (§ 17203) against a person or business entity alleged to be engaged in any `unlawful, unfair or fraudulent business act or practice . . . . (§ 17200). As interpreted by our Supreme Court, the UCL allows a private plaintiff who himself has suffered no injury to file a lawsuit under the UCL in order to obtain relief for others. [Citation.] The representative plaintiff need only show that members of the general public are likely to be deceived. . . ." (Rosenbluth Internat., Inc v. Superior Court, supra, 101 Cal.App.4th at pp. 1076-1077, some italics added.) "Where the UCL action is based on a contract, the representative plaintiff may seek to vindicate the rights of individual consumers who are parties to the contract. [Citations.] However, a UCL action based on a contract is not appropriate where the public in general is not harmed by the defendants alleged unlawful practices. [Citation.]" (Id. at p. 1077, italics added.)
While the foregoing cases arose in settings different from that presented here, the message seems clear that a private plaintiff bringing an action under the UCL on behalf of the general public must show that the general public has been harmed or is likely to be harmed. (See Kasky v. Nike (2002) 27 Cal.4th 939, 950.)
In her reply brief on appeal, Sarkis points to several offers of proof she made at the hearing on CALIs motion. The first three offers related to CALI members, whom Sarkis asserted were also members of the general public. The first assertion was that CALI had continuously and repeatedly denied its members full rights of membership, including imposition of discipline of members, in violation of the Corporations Code and CALIs bylaws. This denial related to notice and an opportunity to be heard prior to the effective date of any expulsion, termination, or suspension. The second allegation was that CALI had repeatedly denied members right to inspect various records, such as accounting records and minutes, as required by the Corporations Code. Third, Sarkis offered to prove that CALI had repeatedly and continuously denied certain members of CALIs board of directors access to "various records" that board members had an absolute right to receive under the Corporations Code.
Sarkis also points to two other offers of proof. First, she said CALI had continuously violated Corporations Code provisions relating to providing financial reports to CALI members and that such reports had contained substantial misrepresentations. CALI had failed, she averred, to notify each member annually of the members right to receive financial statements. She invoked certain Corporations Code sections providing criminal sanctions for certain misrepresentations, including making or publishing, generally or privately, "to members or other persons" any materially false report or statement as to the corporations financial condition.
Second, Sarkis offered to show that CALI continuously made substantial misrepresentations regarding the number of members authorized to vote, in violation of the Corporations Code. She stated members of the public were likely to be deceived. She said the Corporations Code provides for criminal sanctions for "various types of misrepresentations," including any publication "intended to give, and having a tendency to give, a membership in such corporation a greater or lesser value than it really possesses."
As noted in footnote 4 below, Sarkis waived the claim that CALI did not differentiate between licensed and unlicensed investigators. At oral argument, Sarkis stated that unlicensed investigators cannot vote. We therefore conclude that the voting issue has been waived.
Sarkis presented no explanation of how any of the foregoing assertions injured or were likely to injure the public. She failed to show this case called for a remedy for unfair competition. Remedies other than the UCL are readily available to CALI members who wish to address corporate management. We find no error in the trial courts grant of a nonsuit.
DISPOSITION
The judgment is affirmed. The parties are to bear their own costs on appeal.
We concur: VOGEL (Miriam A.), J. and MALLANO, J.