Anyone practicing civil litigation in California will need no introduction to the Unfair Trade Practices Act, Business & Professions Code section 17200 et seq. For the uninitiated, the statute is almost unbelievably broad and vague: It prohibits "any unlawful, unfair or fraudulent business act or practice"; it allows plaintiffs who have not been personally damaged to sue; it allows representative actions without normal class action procedures (such as notice or a formal motion to certify); it has a four year statute of limitations; and it allows claims for equitable and injunctive relief, which Calfornia courts hold cannot be sent to arbitration.
Worse, because "representative" actions under section 17200 require no class notice, certification, or fairness hearings, a defendant who settles a 17200 "representative" action -- even for large sums and attorneys' fees -- has no assurance that he/she/it won't be sued again the very next day for the exact same behavior, and have to settle (or fight) again.
(I had to try to explain all this once to the GC of a corporate client in in the midwest, and he was none too happy or understanding. He felt that California plaintiffs had come up with a racket through which they could repeatedly extort money from corporations that had done little or nothing wrong. His assessment was not far from accurate.)
Now, according to California's First District Court of Appeal, failing to include a cause of action under 17200 in many civil actions may actually constitute malpractice, even if the plaintiffs' attorney thought it unwarranted or unjustified. The opinion was filed today in Janik v. Rudy, Exelrod & Zieff.
Here's the Court's introduction:
Plaintiff seeks to impose liability on attorneys who produced a class action recovery of some $90 million, claiming they were negligent because they failed to obtain a still larger recovery. While we may share the attorneys� dismay that their efforts have been rewarded with this lawsuit rather than with the kudos they no doubt expected, and perhaps deserve, we are nonetheless constrained to hold that plaintiff�s claim cannot be rejected out of hand. While it may well be that the attorneys did not breach their duty of care in failing to proceed under an alternative theory that would have produced a greater recovery, we cannot say, as did the trial court, that there simply was no duty for the attorneys to breach.
Plaintiff Stanley Janik brought this purported class action for legal malpractice against defendants Steven Zieff and the law firm of Rudy, Exelrod & Zieff, LLP (collectively the attorneys), alleging that the attorneys mishandled a prior class action against Farmers Insurance Exchange (Farmers). While having secured recovery for a large class of claims representatives who were not paid overtime compensation on the ground that they were administrators to whom the applicable regulations under the Labor Code assertedly did not apply, the attorneys are faulted for not having sought recovery under the Unfair Competition Law, Business and Professions Code section 17200 (UCL). Under the UCL, the statute of limitations would have permitted recovery for overtime wages earned but unpaid during the four-year period preceding the filing of the complaint, rather than for only the three-year period available under the Labor Code. The trial court sustained defendants� demurrer without leave to amend on the ground that the attorneys had no duty to class members with respect to claims that were not specified in the order certifying a class. Although there is little precedent to guide us, we do not believe that the obligations of class counsel can be so narrowly circumscribed. While the scope of the duty of class counsel must be determined with reference to the certification order, we conclude that the attorneys� obligations may extend beyond the claims as certified to related claims arising out of the same facts that class members reasonably would expect to be asserted in conjunction with the certified claims. Accordingly, we must reverse the judgment and require the attorneys to establish that they did not breach the applicable standard of care before they may be exonerated.
The law firm's complaint had alleged only violations of the Labor Code, which has a three year statute of limitations. Had they also alleged a violation of section 17200, the limitations period would have been four years, and the recovery might have been larger. Janik, the plaintiff in the malpractice case, was an unnamed class member in the original suit with no direct relationship with class counsel.
My problem is that the Court's reasoning here applies to almost any civil lawsuit against a "business" in California. As a rule, if you can state a cause of action for anything, you can also state a cause of action under section 17200, as whatever wrongs constitute the first will also constitute the second. By including section 17200 you automatically get a bunch of "freebies," such as: four year statute of limitations, the ability to recover on behalf of other non-parties, and most likely a case that is at least partially impenetrable to a petition for arbitration.
In fact, most California civil lawsuits already include section 17200 claims, but now lawyers may be subject to malpractice claims (even from non-clients) if they file compaints that don't.
Section 17200 was bad enough when it was an occassional tool for clever plaintiffs' attorneys. Now, apparently, it is mandatory.
To my mind, that fact alone is powerful evidence that section 17200 is in desperate need of reform. And fast.
Wednesday, June 30, 2004 at 4:36PM 