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UCL Class Action Defense Cases–Webster v. Allstate: California Appellate Court Affirms Dismissal Of UCL Class Action Complaint Holding Plaintiff Lacked Standing And Conduct Not Violative Of UCL

Class Action Alleging Violations of California’s Unfair Competition Law (UCL) Properly Dismissed because Plaintiff Lacked Standing to Prosecute Class Action Claim California Appellate Court Holds

Plaintiff, the owner and operator of an auto body repair shop, filed a putative class action on behalf of California auto body repair shops against automobile insurers Allstate Insurance and Progressive Casualty Insurance California auto body repair shops for violations of California’s Unfair Competition Law (UCL) and the Cartwright Act, and for unjust enrichment, on the ground that the insurers paid class members “based on rates that were allegedly below their ‘actual repair rate.’” Webster v. Allstate Ins. Co., Case No. B211390 (Cal.App. January 11, 2010) [Slip Opn., at 1-2.] According to the allegations underlying the class action complaint, the insurers “unlawfully and unfairly steer customers away from plaintiff’s business and towards direct repair providers (DRPs) who have a contractual relationship with defendants.” Id., at 2. The class action further alleged that defendants paid class members “‘artificially low’ rates for auto body work,” based on “unlawful and unfair surveys of body shop rates that include rates charged by DRPs who provide volume discounts to defendants.” Id. Defense attorneys moved to dismiss the class action complaint; the trial court granted the motion, holding that plaintiff lacked standing to pursue the class action’s UCL claim for injunctive relief. Id. Plaintiff appealed. The Court of Appeal, in an unpublished opinion, affirmed that plaintiff lacked standing to prosecute the UCL claim and held that “plaintiff failed to allege unlawful or unfair conduct within the meaning of the statute.” Id. It further affirmed the dismissal of the class action’s unjust enrichment and Cartwright Act claims and, accordingly, affirmed.

The Court of Appeal explained that the class action sought “an injunction prohibiting defendants from using negotiated rates in their surveys to determine the prevailing auto body rate in a geographic area, treble damages for violations of the Cartwright Act, attorney fees, interest and costs,” and prayed additionally for “disgorgement of all benefits wrongfully taken from plaintiff and the class in an amount that defendants have been unjustly enriched.” Webster, at 4. Plaintiff conceded, however, that he could recover restitution under the class action’s UCL claim, id. “The purpose of the UCL is to protect consumers and competitors from unfair competition in commercial markets for goods and services.” Id., at 4-5 (citation omitted). Plaintiff is neither a consumer nor a competitor of defendants, but argued “he has standing to pursue a UCL cause of action even though he is not eligible for restitution,” and that defendants “engaged in both unlawful and unfair business practices.” Id., at 5. The appellate court rejected both claims.

The Court of Appeal held that plaintiff lacked standing to pursue the class action’s UCL claim. Webster, at 5 et seq. Relief under California’s UCL is limited to injunctive relief and restitution; accordingly, standing to pursue UCL claims is limited “‘to individuals who suffer losses of money or property that are eligible for restitution.’” Id., at 5 (citation omitted). Because plaintiff concedes, as he must, “that he is not eligible for restitution,” it necessarily follows that he lacks standing to prosecute the UCL claim. Id., at 6 (citation omitted). The appellate court rejected plaintiff’s argument that his claim survived under In re Tobacco II Cases, 46 Cal.4th 298 (Cal. 2009), and Fireside Bank v. Superior Court, 40 Cal.4th 1069 (Cal. 2007), finding the cases inapplicable because plaintiff, as named class representative, lacked standing. See Webster, at 6-7. Accordingly, the appellate court affirmed the dismissal of the class action’s UCL claim, id., at 14.

NOTE: We do not here summarize the Court of Appeal’s analysis and conclusion that the insurers’ conduct was not an unlawful or unfair business practice. See Webster, at 8-11. We also do not discuss the Court’s conclusion that the class action’s unjust enrichment claim was properly dismissed, see id., at 11-12, and that the Cartwright Act claim failed, see id., at 12-14. Interested readers may find the entire opinion below.

Download PDF file of Webster v. Allstate Insurance