Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: Injunctive relief under California UCL denied absent real, immediate threat of injury, (Jul 19, 2016)

By: Glenn Sulzer, J.D.

Claims for injunctive relief under California’s Unfair Competition Law (UCL) may not be brought in federal court absent a threat of future injury, according to the federal district court in San Francisco. Accordingly, as a plaintiff no longer had an existing business relationship with the defendant, it could not establish a real or immediate threat of harm from continued use of an office service agreement that failed to disclose fees (Circle Click Media, LLC v. Regus Management Group LLC, July 18, 2016, Chen, E.).

Failure to disclose fees. Circle Click Media leased commercial office space from Regus Management Group. The lease arrangement was maintained pursuant to an Office Service Agreement (OSA), which identified the office location, lease terms, initial payment amount, and monthly payment amount. According to Circle Click, however, the actual monthly charge exceeded the monthly amount stated on the OSA because Regus assessed mandatory fees that were not adequately disclosed until after the lease was signed. Based on this allegation, Circle Click brought suit in federal court, alleging violations of California’s UCL and False Advertising Law (FAL). Specifically, Circle Click sought injunctive relief precluding the continued use by Regus of the OSA.

Article III standing. Regus initially maintained that Circle Click lacked standing to pursue claims for injunctive relief because it could not establish a threat of future harm from continued use of the OSA, as it had no plan to continue renting office space from the company. A federal trial court rejected Regus’s motion for summary judgment, ruling the Circle Click did have standing to pursue injunctive relief. However, the court denied Circle Click’s motion for class certification.

In a subsequent proceeding, before a different trial court dealing with the class certification issue, Regus again maintained that Circle Click lacked Article III standing to seek injunctive relief under the UCL. Circle Click did not address the merits of the argument, but averred that the standing issue had previously been decided and that Regus was bringing an improper motion for reconsideration.

Noting that standing is an element of subject matter jurisdiction, the court stated that the issue of standing under Article III may be raised at any time, even after the prior dismissal of a motion to dismiss on standing grounds. The court then concluded that Circle Click lacked standing to seek injunctive relief under the UCL.

The court conceded that the plaintiff might have standing under the UCL to seek injunctive relief in state court. However, UCL statutory standing requirements differed from standing requirements in federal court. Actions in federal court must satisfy Article III standing, which, in the Ninth Circuit, requires the demonstration of a real or immediate threat of irreparable injury. As Circle Click no longer had a contractual relationship with Regus and had no intention of pursuing a future business relationship with Regus, it could not establish the real or immediate threat of future harm posed by the defendant’s continued use of the allegedly defective OSA.

Injunctive relief on behalf of others. In addition, the court ruled that, even if there were Article III standing, Circle Click could not pursue injunctive relief under the UCL or FAL on behalf of other parties without class certification. The UCL authorizes individual parties to pursue representative claims on behalf of others, but only if the claimant meets the applicable requirements for a class action. The availability of a public injunction on FAL claims is conditioned on the same terms as those brought under the UCL. As Circle Click could not establish class status, it was precluded from seeking injunctive relief under the UCL and FAL.

The case is No. 12-cv-04000-EMC.

Attorneys: Ali Ari Aalaei (Ari Law, PC) for Circle Click Media LLC. Daniel Thomas Rockey (Bryan Cave LLP) for Regus Management Group LLC.

Companies: Circle Click Media LLC; Regus Management Group LLC

Cases: StateUnfairTradePractices CaliforniaNews