Class Action

New UCL competitor action applying Clayworth: Finelite, Inc. v. Ledalite Architectural Products

By Kimberly A. Kralowec

Many thanks to the blog reader who forwarded a recent decision by U.S. District Judge Maxine Chesney, Finelite, Inc. v. Ledalite Architectural Products, 2010 WL 3385027 (N.D. Cal. Aug. 26, 2010).  Finelite is competitor action arising from misstatements by one competitor that allegedly stole away sales from the other competitor, impacting that competitor's profits.   The defendant moved to dismiss the UCL claim (which sought injunctive relief only) for lack of standing, arguing that to obtain any form of relief under the UCL, the plaintiff must have suffered a loss that would be compensable as restitution.  Lost profits would be damages, not recoverable under the UCL.  Id. at *1.

Judge Chesney denied the motion, applying the Supreme Court's recent holding in Clayworth v. Pfizer:  

Ledalite also relies on cases that have held a plaintiff cannot seek injunctive relief under § 17200 if the plaintiff does not have standing to seek restitution. See Pom Wonderful LLC v. Welch Foods, Inc., 2009 WL 5184422, *3-5 (C.D.Cal.2009) (holding plaintiff lacked standing to seek injunctive relief where plaintiff failed to allege entitlement to restitution); Walker v. GEICO General Ins. Co., 474 F.Supp.2d 1168, 1172 (E.D.Cal.2007) (holding plaintiff lacked standing to assert ?any UCL claim? because plaintiff could not show ?either prior possession or a vested legal interest in the money or property allegedly lost?). As the California Supreme Court has more recently explained, however, ?the right to seek injunctive relief under section 17200 is not dependent on the right to seek restitution; the two are wholly independent remedies.? See Clayworth v. Pfizer, Inc., 49 Cal.4th 758, 790, 111 Cal.Rptr.3d 666, 233 P.3d 1066 (2010) (rejecting argument that plaintiffs alleging claim under § 17200 ?could not seek injunctive relief unless they could also seek restitution?); see also Fulford v. Logitech, Inc., 2009 WL 1299088, at *1 (N.D.Cal.2009) (noting ?a number of courts, subsequent to the enactment of the UCL standing requirement ..., have found [the] plaintiff has standing under the UCL, irrespective of any such plaintiff's inability to seek restitution from the defendant?); G & C Auto Body, Inc. v. GEICO General Ins. Co., 2007 WL 4350907, at *3-5 (N.D.Cal.2007) (holding, although plaintiffs could not establish entitlement to restitution, plaintiffs had standing to seek injunction based on plaintiffs' ?loss of business caused by [d]efendants' steering of customers away from [p]laintiffs' [businesses]?); White v. Trans Union, LLC, 462 F.Supp.2d 1079, 1083 (C.D.Cal.2006) (holding that although plaintiffs ?would be required to show that [defendant] took money directly from them in order to obtain [restitution], no such burden exists [ ] where [p]laintiffs seek only injunctive relief? under § 17200). Consequently, any inability by Finelite to state a claim for restitution does not constitute a bar to Finelite's seeking injunctive relief.

Id. at *2 (footnotes omitted) (emphasis added).  Finelite confirms that Prop. 64 did not do away with UCL competitor actions for injunctive relief. 

Full post as published by The UCL Practitioner on September 23, 2010 (boomark / email).