As the Pendulum Swings: Is the Standing Requirement for 17200 Claims Too Strict?
Prior to 2004, challenging a 17200 claim based on the plaintiff’s lack of standing was nearly impossible. Now, less than five years later, the Court of Appeal not only embraced the 2004 amendment to section 17204, it gave it teeth.
Section 17204 of the California Business and Professions Code used to allow almost anyone to sue under California's Unfair Competition Law (‘UCL’) (Cal. Bus. & Prof. Code § 17200), so long as the person was acting in the interest of the general public.
In 2004, Proposition 64 passed, and the relevant section of code was amended to include an actual standing requirement for private causes of action under the UCL. Now, only a “person who has suffered injury in fact and has lost money or property as a result of the unfair competition” (§ 17204) has the requisite standing.
At first glance, section 17204’s standing requirement still seems rather broad. However, in Troyk v. Farmers Group, Inc., No. D049983, 2009 WL 597256 (Cal. Ct. App. Mar. 10, 2009), the Court of Appeal suggested otherwise by reversing a summary judgment in favor of the plaintiff because the plaintiff did not sufficiently allege that he met the standing requirement of section 17204.
The plaintiff, Thomas Troyk, filed a class action against the defendant insurance company because his agreement with the defendant required him to pay a five dollar monthly service charge for the payment of his car insurance policy’s one-month term, which was not stated in his policy. Id. at *12, *30. Troyk alleged that the extra monthly charge violated the Insurance Code, which requires that the entire premium be stated in an insurance policy, because the monthly service charge was not included in the premium. The trial court granted Troyk’s motion for summary judgment. On appeal, the court agreed with Troyk’s argument regarding the interpretation of ‘premium’ under the Insurance Code; however, the court reversed the summary judgment motion because Troyk did not specifically address how he suffered an injury “as a result of” the defendant's conduct. Id. at *12-13.
The stated intent behind Proposition 64’s amendment to section 17204 is “to prohibit attorneys from filing lawsuits for unfair competition where they have no client who has been injured in fact under the standing requirements of the United States Constitution.” Id. at *33 (citing Buckland v. Threshold Enterprises, Ltd., 155 Cal. App. 4th 798 (2007)) (emphasis in original). However, as the court notes, only the first element of the three required for federal standing—the injury in fact—is incorporated into the amended code section. Nevertheless, the court breaks down section 17204’s standing requirement into three elements as well. They are (1) injury in fact, (2) lost money or property, and (3) causation.
In Troyk’s case, the court found that parts one and two were satisfied because “Troyk’s alleged payment of money in addition to the premium stated in his insurance policy sufficiently allege[d] lost money.” Troyk, No. D049983, 2009 WL 597256, at *34 (emphasis in original). However, since Troyk did not sufficiently allege causation, i.e., how his lost money was the result of the defendant's conduct, the court reversed the summary judgment motion because Troyk did not satisfy his “burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact regarding his UCL cause of action.” Id. at *35.
The court also notes that the
UCL’s standing requirements appear to be more stringent than the federal standing requirements. Whereas a federal plaintiff’s ‘injury in fact’ may be intangible and need not involve lost money or property, Proposition 64, in effect, added a requirement that a UCL plaintiff’s ‘injury in fact’ specifically involve ‘lost money or property.’ Id. at *34 n. 31.
While the amended text of section 17204 can be parsed so as to treat it as a three-part test, the intent behind Proposition 64 doesn’t necessarily call for it. Frivolous, and unscrupulous 17200 claims were undoubtedly a problem prior to 2004, and section 17204’s pre-2004 standing requirement was ridiculously broad. But, the facts in Troyk are particularly clear with regard to causation. Troyk and the other class members suffered economic injury because they paid a monthly service fee in violation of the Insurance Code.
The analysis in Troyk is sound, but the decision doesn’t strike me as mandated by the language of section 17204 and/or the intent behind Proposition 64. I think section 17204 could reasonably be construed so as to minimize the need for a clear economic injury, and I don’t see why causation can't be inferred in clear cases such as this one.
