Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—CalCtApp: Direct Business Dealings Not Required to State California Unfair Competition Law Claims , (Mar 18, 2013)

By Jody Coultas, J.D.

A California appellate court overturned a trial court’s dismissal of an attorney’s California Unfair Competition Law (UCL) claim against online legal services provider Expungement Assistance Services (EAS) for the unauthorized practice of law (Law Offices of Mathew Higbee v. Expungement Assistance Services, March 14, 2013, Moore, J.).

EAS allegedly used unlicensed persons to perform legal work, which allowed it to save on attorney fees and offer its services for less than licensed competitors. The law office argued that EAS violated a number of California laws related to the requirement of active law licenses, and in turn violated the UCL. The trial court held that the law office’s allegations of lost revenue, lost market share, diminution in law firm value, and increased advertising costs were insufficient to establish injury in fact for the purposes of UCL standing.

The purpose of the UCL is to protect both consumers and competitors by promoting fair competition, and the law is applied broadly. In 2004, voters enacted Proposition 64 in order to limit private standing under the UCL to any person who has suffered injury in fact and has lost money or property as a result of unfair competition.

EAS argued that the law office could not borrow the unauthorized practice of law statutes and treat them as unlawful business practices under the UCL. There was no reason why the law office could not borrow the statutes under the UCL, according to the court.

The lack of direct dealings between the law office and the EAS did not preclude the law office from having standing to assert the UCL claim, according to the court. EAS alleged that the law office lacked standing because it has no right or interest under the unauthorized practice of law statutes. Standing requires an injury in fact and causation between the injury and the defendant’s unlawful conduct. The injury requirement was met by the law office’s allegations that it lost customers and was forced to lower prices and pay more for advertising to compete because of EAS’s actions. A business competitor who adequately alleges that he or she has suffered injury in fact and lost money or property as a result of the defendant’s unfair competition is not necessarily precluded from maintaining a UCL lawsuit against the defendant just because he or she has not engaged in direct business dealings with the defendant. Neither Prop 64 nor case law required business dealings between the parties in order to show causation. However, the court noted that this opinion did not suggest that a consumer who had never done business with a company had standing to maintain a UCL action against it.

The case is No. G046778.

Attorneys: Mathew K. Higbee (Law Offices of Mathew Higbee) for Law Offices of Mathew Higbee. Jeffrey L. Sikkema (Carothers DiSante & Freudenberger) for Expungement Assistance Services.

Companies: The Law Offices of Mathew Higbee; Expungement Assistance Services

Cases: StateUnfairTradePractices CaliforniaNews