Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Cal. App.: Bail agent’s false advertising, UCL claims properly tossed, (Feb 4, 2015)

By Greg Hammond, J.D.

A licensed bail agent failed to state adequate California Unfair Competition Law (UCL) and Lanham Act false advertising claims against an electronic funds transfer processor. In affirming a superior court’s judgment in favor of the processor, the California Court of Appeals in San Francisco determined that the bail agent lacked standing to bring a UCL claim; the processor was not required to obtain a bail bond license; and the bail agent failed to state a Lanham Act false advertising claim, as a matter of law (Two Jinn, Inc. v. Government Payment Service, Inc., February 3, 2015, Ruvolo, I.).

Background. Two Jinn, Inc., doing business as Aladdin Bail Bonds (Aladdin), is a licensed bail agent in California. Government Payment Services, Inc. (GPS) is an electronic funds transfer processor that processes credit or debit card transactions for cardholders who deposit cash bail to a local government entity. Aladdin filed suit against GPS for allegedly engaging in bail agent activities in violation of state licensing and regulatory requirements. Specifically, Aladdin brought four claims against GPS, including three UCL claims and one claim for false advertising under the Lanham Act.

The trial court dismissed Aladdin’s Lanham Act claim and later entered summary judgment in favor of GPS on the UCL claims, finding: (1) Aladdin did not have standing to bring its UCL claims because GPS’ allegedly unfair business practices did not cause Aladdin to suffer an actual economic injury; (2) GPS is not regulated under nor required to obtain a bail bond license under Insurance Code §1800; (3) GPS operates an electronic funds transfer processing system; (4) GPS did not violate the UCL; and (5) Aladdin failed to allege any false statement of fact that GPS supposedly made in violation of the Lanham Act.

Aladdin timely appealed, focusing on the UCL cause of action and conceding that it cannot obtain declaratory relief if the UCL claim fails. The appellate court therefore confined its review of the summary judgment rulings to the first cause of action alleging unlawful business practices in violation of the UCL.

UCL standing. Aladdin argued that it suffered economic injury because customers, as a result of GPS’ allegedly unfair business practices, used GPS’ services instead of Aladdin’s services. The appellate court rejected this argument, however, finding that any diversion of customers from Aladdin to GPS was not caused from GPS’ lack of a bail bond license, or that GPS did not comply with other regulations governing licensed bail bond agents. Rather, GPS submitted evidence demonstrating that it is not a bail bond agent, but is an electronic funds transfer (EFT) service, authorized under Government Code §6159. This statute, according to the court, provides arrested and detained individuals with an alternative method of securing release, without having to use a bail bond agent like Aladdin. Consequently, there was no causal connection between Aladdin’s alleged harm suffered and from the fact that GPS conducts its business without a bail agent license.

In the alternative, Aladdin argued that it had UCL standing because it suffered an economic injury by incurring “significant costs and expenses” to investigate the nature, scope, and extent of GPS’ conduct. The court quickly disposed of this argument, noting that pre-litigation costs did not establish standing to bring a UCL claim, because they were not an economic injury caused by supposedly unlawful business practices. If plaintiffs could establish UCL standing based on expenses incurred in order to bring their claim, then the requirement that plaintiffs show they lost money or property “as a result” of the challenged conduct in order to have standing to sue under the UCL “would be meaningless,” the court concluded.

GPS’ business practices. Aladdin also argued that GPS’ business practices violate the license and regulatory requirements imposed on bail bond agents under Insurance Code §1800, and are not authorized under Government Code §6159. The court disagreed, noting that GPS is not a bail bond agent and is not required to have a bail bond license, because it does not provide services relating to the posting of an undertaking of bail or a bail bond by an insurer. In addition, §6159 expressly authorizes counties to create cash bail programs, to employ service providers like GPS who do not have a bail bond license, and to allow those third-party service providers to charge a fee for their services. Finally, the court concluded that GPS’ business activities did not violate insurance regulations under Title 10 of the California Code of Regulations, because the company was not required to hold a bail agent license. Summary judgment was therefore properly granted in relation to the UCL claims.

Lanham Act. In support of its appeal of the order dismissing its Lanham Act claim, Aladdin argued that it adequately stated a cause of action for false advertising. The court rejected Aladdin’s argument, finding that the company failed to identify any false statement that appeared in GPS’ commercial advertisement or promotion. Aladdin’s theory that GPS’ advertising was nevertheless unlawful because it misled consumers to believe that it was a government agency or affiliate was also without merit, because Aladdin had no commercial interest in any misused mark, name, or device, or in any good or service that was allegedly being misrepresented. The dismissal of the Lanham Act claim was consequently affirmed.

The case numbers are A136984 and A137479.

Attorneys: Robert Warren Hicks (Robert W. Hicks & Associates) for Two Jinn, Inc. Mitchell Bruce Greenberg (Abbey Weitzenberg Warren & Emery) and Scott Alan Miller (Dillon & Gerardi, APC) for Government Payment Service, Inc.

Companies: Two Jinn, Inc.; Government Payment Service, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews