THIRD READING  

Bill No: AB 3020

Author: Gloria (D), et al.

Introduced: 2/21/20

Vote: 21

SENATE JUDICIARY COMMITTEE: 7-1, 7/30/20

AYES: Jackson, Durazo, Lena Gonzalez, Monning, Stern, Umberg, Wieckowski

NOES: Melendez

NO VOTE RECORDED: Borgeas

ASSEMBLY FLOOR: 57-17, 6/8/20 - See last page for vote

SUBJECT: Unfair Practices Act

SOURCE: San Diego City Attorney Mara Elliot

DIGEST:

This bill adjusts the distribution of civil penalties recovered by the City Attorney of San Diego in Unfair Competition Law (UCL) actions.

ANALYSIS:

Existing law:

1. Establishes the UCL and defines “unfair competition” to mean and include any unlawful, unfair, or fraudulent business act or practice and unfair, deceptive, untrue, or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code. (Bus. & Prof. Code § 17200 et seq.)
2. Provides that any person who engages, has engaged, or proposes to engage in unfair competition may be enjoined in any court of competent jurisdiction. The court may make such orders or judgments as may be necessary to prevent the use or employment by any person of any practice which constitutes unfair competition or as may be necessary to restore to any person in interest any money or property, which may have been acquired by means of such unfair competition. Any person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of Business and Professions Code Section 17204 and complies with Section 382 of the Code of Civil Procedure, but these limitations do not apply to claims brought under this chapter by the Attorney General, or any district attorney, county counsel, city attorney, or city prosecutor in this state. (Bus. & Prof. Code § 17203.)
3. Requires actions for relief pursuant to the UCL be prosecuted exclusively in a court of competent jurisdiction and only by the following:
   1. The Attorney General;
   2. A district attorney;
   3. A county counsel authorized by agreement with the district attorney in actions involving violation of a county ordinance;
   4. A city attorney of a city having a population in excess of 750,000;
   5. A city attorney in a city and county;
   6. A city prosecutor in a city having a full-time city prosecutor in the name of the people of the State of California upon their own complaint or upon the complaint of a board, officer, person, corporation, or association with the consent of the district attorney; or
   7. A person who has suffered injury in fact and has lost money or property as a result of the unfair competition. (Bus. & Prof. Code § 17204.)
4. Holds any person who engages, has engaged, or proposes to engage in unfair competition liable for a civil penalty not to exceed $2,500 for each violation, which shall be assessed and recovered in a civil action brought in the name of the people of the State of California by the Attorney General, by any district attorney, by any county counsel authorized by agreement with the district attorney in actions involving violation of a county ordinance, by any city attorney of a city having a population in excess of 750,000, by any city attorney of any city and county, or, with the consent of the district attorney, by a city prosecutor in any city having a full-time city prosecutor, in any court of competent jurisdiction. (Bus. & Prof. Code § 17206(a).)
5. Requires the penalties collected pursuant to the UCL to be used for enforcement of consumer protection laws and provides for the distribution of those funds based on the entity bringing the action:
   1. If the action is brought by the Attorney General, one-half of the penalty collected shall be paid to the treasurer of the county in which the judgment was entered, and one-half to the General Fund;
   2. If the action is brought by a district attorney or county counsel, the penalty collected shall be paid to the treasurer of the county in which the judgment was entered;
   3. If the action is brought by a city attorney of a city and county, the entire amount of the penalty collected shall be paid to the treasurer of the city and county in which the judgment was entered; and
   4. If the action is brought by a city attorney or city prosecutor, one-half of the penalty collected shall be paid to the treasurer of the city in which the judgment was entered, and one-half to the treasurer of the county in which the judgment was entered, except as provided. (Bus. & Prof. Code § 17206.)
6. Provides that if the action is brought at the request of a board within the Department of Consumer Affairs or a local consumer affairs agency, the court shall determine the reasonable expenses incurred by the board or local agency in the investigation and prosecution of the action. Before any penalty collected is paid out pursuant to the provisions above, the amount of any reasonable expenses incurred by the board shall be paid to the Treasurer for deposit in the special fund of the board described in Section 205. If the board has no such special fund, the moneys shall be paid to the Treasurer. The amount of any reasonable expenses incurred by a local consumer affairs agency shall be paid to the general fund of the municipality or county that funds the local agency. (Bus. & Prof. Code § 17206(e).)
7. Provides that the proceeds of civil penalties or other monetary awards recovered in any civil action brought jointly in the name of the people of the State of California by the Attorney General, one or more district attorneys, or by one or more city attorneys, or any combination thereof, shall be paid as approved by the court. (Gov. Code § 26506.) A district attorney, city attorney, or any combination thereof, may, in agreement with other district attorneys or city attorneys, act jointly in prosecuting a civil cause of action of benefit to his own county in a court of the other jurisdiction. (Gov. Code § 26507.)

This bill provides that if a UCL action is brought by the City Attorney of San Diego, the penalty collected shall be paid to the treasurer of the City of San Diego.

Background

The UCL, Business and Professions Code Section 17200 et seq., protects consumers against unlawful, unfair, or fraudulent business practices and advertising. The UCL provides for civil penalties to be assessed and recovered from violators in the name of the people of California by various governmental agencies. The UCL specifically details how the proceeds from those actions are to be distributed and used.

Currently, if the action is brought by a city attorney or city prosecutor, one-half of the penalty collected is paid to the city in which the judgment was entered, and one-half to the county in which the judgment was entered. This bill amends that allotment if the action is brought by the City Attorney of San Diego. The penalty collected must instead be paid to the treasurer of the City of San Diego in full.

This bill is sponsored by Mara Elliot, the San Diego City Attorney. There is no known opposition.

Comments

According to the author:

Proposition 64 (2004) limited private lawsuits, under the Unfair Competition Law, against a company only to those where an individual is actually injured by and suffers a financial loss due to an unfair, unlawful, or fraudulent business practice. Otherwise, only public prosecutors may file lawsuits charging unfair business practices. These actions may be brought forward by the Attorney General or district attorney. Additionally, the city attorney of any city with a population in excess of 750,000 may also bring actions under the Unfair Competition Law forward. However, even if an eligible city attorney brings the action forward, using only their own resources and without any assistance from a district attorney, any penalties awarded to the city attorney must be shared equally with the district attorney. The penalties awarded for an action brought by a district attorney are not required to be shared with a city attorney.

AB 3020 requires penalties collected by the San Diego City Attorney from an action under the Unfair Competition Act to be paid to the City of San Diego entirely.

UCL Enforcement

Unfair business practices encompass fraud, misrepresentation, and oppressive or unconscionable acts or practices by businesses, often against consumers. In California, affected individuals and specified governmental agencies are authorized to bring civil actions for unfair competition and to recover civil penalties or injunctive relief pursuant to the UCL.

The UCL identifies specific agencies authorized to bring such actions and to recover civil penalties. This includes the Attorney General and district attorneys. County counsel are also permitted to bring such actions if authorized by the district attorney and only in actions involving a county ordinance violation. City prosecutors in cities having a full-time prosecutor can also bring UCL claims on behalf of the people of California if they have the consent of the district attorney.

City attorneys in cities with populations in excess of 750,000 have expanded authority, as does San Francisco. They may bring UCL actions without seeking consent. Currently, the only city attorneys granted authority to bring actions under the UCL based on population are those in San Jose, San Diego, and Los Angeles.

Distribution of UCL Civil Penalties

The UCL also specifically details how the civil penalties collected pursuant to it are to be distributed. This is currently based primarily on which governmental entity is bringing the action. Relevant here, the law provides that “if the action is brought by a city attorney or city prosecutor, one-half of the penalty collected shall be paid to the treasurer of the city in which the judgment was entered, and one-half to the treasurer of the county in which the judgment was entered.” (Bus. & Prof. Code § 17206.) Therefore, regardless of whether the county was involved, the county is receiving half of the proceeds from these actions. For comparison, if the action is brought by a district attorney or county counsel, the entire penalty collected is received by the county in which the judgment was entered.

This bill amends the above provision by providing that if the action is brought by the City Attorney of San Diego, the entire penalty collected shall be paid to the treasurer of the City of San Diego.

It should be noted that existing law provides that if the UCL action is brought at the request of a board within the Department of Consumer Affairs or a local consumer affairs agency, the board’s reasonable expenses incurred as a result of the investigation and prosecution of the action are to be reimbursed before the penalty collected is otherwise paid out.

Previous Attempt to Amend UCL Penalty Distributions

In 2019, a similar bill passed through the Legislature, AB 1477 (Gloria, 2019). It would have made a similar adjustment to the distribution of penalties. That bill was much broader in that it would have not been limited to San Diego, but have applied to all city attorneys eligible to bring such actions. It also included a one-year delay as to Los Angeles City Attorney claims and also provided that where a county agency “participated in the prelitigation investigation” of the UCL action brought by the city attorney, half of the penalties collected would go to the treasurer of the county in which the judgment was entered.

Governor Newsom vetoed the bill. In his veto message, the Governor stated:

This bill would adjust the distribution of civil penalties recovered by government entities in Unfair Competition Law actions.

This existing division is intended to ensure that both the city and county have resources to enforce consumer protection laws. This measure will revise longstanding practices and reduce the resources allocated to counties, putting in jeopardy important consumer protection services they provide.

I encourage the counties and cities impacted by this bill to work together to reach a resolution on this matter that is in the best interests of the public they serve.

AB 1477 was opposed by various counties. The County of Los Angeles argued the bill “could discourage the Los Angeles City Attorney from involving the County’s Department of Consumer and Business Affairs [(DCBA)] in pre-filing investigations because by excluding them the City Attorney could keep all of the civil penalties recovered.” The county asserted that by “eliminating a vital source of funding for the County's consumer protection efforts by DCBA, the District Attorney, and County Counsel . . . the bill would continue to have an adverse fiscal impact on the County and on the consumer protection work that it does for the over 10 million people living in the County.”

This bill now limits its impact to claims brought by the San Diego City Attorney. There is no known opposition.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 7/31/20)

San Diego City Attorney Mara Elliott (source)

OPPOSITION: (Verified 7/31/20)

None received

ARGUMENTS IN SUPPORT: The San Diego City Attorney Mara Elliot makes the case for why this bill is needed:

This bill protects consumers by ensuring a proper distribution of prosecutorial resources. Under AB 3020, when my Office successfully prosecutes a case under the UCL and obtains civil penalties, it will receive every dollar of those penalties to support work on other UCL cases and investigations. . . .

This puts my Office on equal footing with District Attorneys that are authorized to prosecute unfair business practices. Currently, when the District Attorney brings an action under the UCL, that county receives all of the civil penalties awarded by the court. But when my Office brings such an action, those civil penalties must be split evenly with the County of San Diego, even if the District Attorney was not at all involved with prosecuting the case.

The bill provides the City Attorney of San Diego with all of the proceeds if they bring the action, rather than sharing with San Diego County, which may not have been involved in the litigation at all.

ASSEMBLY FLOOR: 57-17, 6/8/20

AYES: Aguiar-Curry, Bauer-Kahan, Berman, Bloom, Boerner Horvath, Bonta, Burke, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Cooley, Cooper, Daly, Diep, Eggman, Frazier, Friedman, Gabriel, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager, Levine, Limón, Low, Maienschein, McCarty, Medina, Mullin, Nazarian, O'Donnell, Petrie-Norris, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Mark Stone, Ting, Weber, Wicks, Wood, Rendon

NOES: Bigelow, Brough, Chen, Choi, Cunningham, Megan Dahle, Flora, Fong, Gallagher, Kiley, Lackey, Mathis, Mayes, Obernolte, Patterson, Voepel, Waldron

NO VOTE RECORDED: Arambula, Muratsuchi, Quirk, Quirk-Silva, Smith

Prepared by: Christian Kurpiewski / JUD. / (916) 651-4113

7/31/20 17:51:59

**** END ****

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2019-2020 Regular Session

Bill No: AB 3020 (Author:Gloria)

Version: February 21, 2020

Hearing Date: July 30, 2020

Fiscal: No

Urgency: No

Consultant: CK

SUBJECT

Unfair Practices Act

DIGEST

This bill adjusts the distribution of civil penalties recovered by the City Attorney of San Diego in Unfair Competition Law actions.

EXECUTIVE SUMMARY

The Unfair Competition Law (UCL), Business and Professions Code Section 17200 et seq., protects consumers against unlawful, unfair, or fraudulent business practices and advertising. The UCL provides for civil penalties to be assessed and recovered from violators in the name of the people of California by various governmental agencies. The UCL specifically details how the proceeds from those actions are to be distributed and used.

Currently, if the action is brought by a city attorney or city prosecutor, one-half of the penalty collected is paid to the city in which the judgment was entered, and one-half to the county in which the judgment was entered. This bill amends that allotment if the action is brought by the City Attorney of San Diego. The penalty collected must instead be paid to the treasurer of the City of San Diego in full.

This bill is sponsored by Mara Elliot, the San Diego City Attorney. There is no known opposition.

PROPOSED CHANGES TO THE LAW

Existing law:

1. Establishes the UCL and defines “unfair competition” to mean and include any unlawful, unfair, or fraudulent business act or practice and unfair, deceptive, untrue, or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code. (Bus. & Prof. Code § 17200 et seq.)
2. Provides that any person who engages, has engaged, or proposes to engage in unfair competition may be enjoined in any court of competent jurisdiction. The court may make such orders or judgments as may be necessary to prevent the use or employment by any person of any practice which constitutes unfair competition or as may be necessary to restore to any person in interest any money or property, which may have been acquired by means of such unfair competition. Any person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of Business and Professions Code Section 17204 and complies with Section 382 of the Code of Civil Procedure, but these limitations do not apply to claims brought under this chapter by the Attorney General, or any district attorney, county counsel, city attorney, or city prosecutor in this state. (Bus. & Prof. Code § 17203.)
3. Requires actions for relief pursuant to the UCL be prosecuted exclusively in a court of competent jurisdiction and only by the following:
   1. the Attorney General;
   2. a district attorney;
   3. a county counsel authorized by agreement with the district attorney in actions involving violation of a county ordinance;
   4. a city attorney of a city having a population in excess of 750,000;
   5. a city attorney in a city and county;
   6. a city prosecutor in a city having a full-time city prosecutor in the name of the people of the State of California upon their own complaint or upon the complaint of a board, officer, person, corporation, or association with the consent of the district attorney; or
   7. a person who has suffered injury in fact and has lost money or property as a result of the unfair competition. (Bus. & Prof. Code § 17204.)
4. Holds any person who engages, has engaged, or proposes to engage in unfair competition liable for a civil penalty not to exceed $2,500 for each violation, which shall be assessed and recovered in a civil action brought in the name of the people of the State of California by the Attorney General, by any district attorney, by any county counsel authorized by agreement with the district attorney in actions involving violation of a county ordinance, by any city attorney of a city having a population in excess of 750,000, by any city attorney of any city and county, or, with the consent of the district attorney, by a city prosecutor in any city having a full-time city prosecutor, in any court of competent jurisdiction. (Bus. & Prof. Code § 17206(a).)
5. Requires the penalties collected pursuant to the UCL to be used for enforcement of consumer protection laws and provides for the distribution of those funds based on the entity bringing the action:
   1. if the action is brought by the Attorney General, one-half of the penalty collected shall be paid to the treasurer of the county in which the judgment was entered, and one-half to the General Fund;
   2. if the action is brought by a district attorney or county counsel, the penalty collected shall be paid to the treasurer of the county in which the judgment was entered;
   3. if the action is brought by a city attorney of a city and county, the entire amount of the penalty collected shall be paid to the treasurer of the city and county in which the judgment was entered; and
   4. if the action is brought by a city attorney or city prosecutor, one-half of the penalty collected shall be paid to the treasurer of the city in which the judgment was entered, and one-half to the treasurer of the county in which the judgment was entered, except as provided. (Bus. & Prof. Code § 17206.)
6. Provides that if the action is brought at the request of a board within the Department of Consumer Affairs or a local consumer affairs agency, the court shall determine the reasonable expenses incurred by the board or local agency in the investigation and prosecution of the action. Before any penalty collected is paid out pursuant to the provisions above, the amount of any reasonable expenses incurred by the board shall be paid to the Treasurer for deposit in the special fund of the board described in Section 205. If the board has no such special fund, the moneys shall be paid to the Treasurer. The amount of any reasonable expenses incurred by a local consumer affairs agency shall be paid to the general fund of the municipality or county that funds the local agency. (Bus. & Prof. Code § 17206(e).)
7. Provides that the proceeds of civil penalties or other monetary awards recovered in any civil action brought jointly in the name of the people of the State of California by the Attorney General, one or more district attorneys, or by one or more city attorneys, or any combination thereof, shall be paid as approved by the court. (Gov. Code § 26506.) A district attorney, city attorney, or any combination thereof, may, in agreement with other district attorneys or city attorneys, act jointly in prosecuting a civil cause of action of benefit to his own county in a court of the other jurisdiction. (Gov. Code § 26507.)

This bill provides that if a UCL action is brought by the City Attorney of San Diego, the penalty collected shall be paid to the treasurer of the City of San Diego.

COMMENTS

1. UCL enforcement

Unfair business practices encompass fraud, misrepresentation, and oppressive or unconscionable acts or practices by businesses, often against consumers. In California, affected individuals and specified governmental agencies are authorized to bring civil actions for unfair competition and to recover civil penalties or injunctive relief pursuant to the UCL.

The UCL identifies specific agencies authorized to bring such actions and to recover civil penalties. This includes the Attorney General and district attorneys. County counsel are also permitted to bring such actions if authorized by the district attorney and only in actions involving a county ordinance violation. City prosecutors in cities having a full-time prosecutor can also bring UCL claims on behalf of the people of California if they have the consent of the district attorney.

Certain city attorneys have expanded authority. City attorneys of cities with populations in excess of 750,000 and city attorneys of a city and county may bring UCL actions without seeking consent. Currently, the City and County of San Francisco is the only consolidated city-county in California, a status it has held since 1856. Thus, in practice, San Francisco is the only public entity that is affected by the statutory provisions granting authority to a city attorney of a city and county to bring unfair competition actions. Currently, the only city attorneys granted authority to bring actions under the UCL based on population are those in San Jose, San Diego, and Los Angeles.

1. Distribution of UCL civil penalties

The UCL also specifically details how the civil penalties collected pursuant to it are to be distributed. This is currently based primarily on which governmental entity is bringing the action. Relevant here, the law provides that “if the action is brought by a city attorney or city prosecutor, one-half of the penalty collected shall be paid to the treasurer of the city in which the judgment was entered, and one-half to the treasurer of the county in which the judgment was entered.” (Bus. & Prof. Code § 17206.) Therefore, regardless of whether the county was involved, the county is receiving half of the proceeds from these actions. For comparison, if the action is brought by a district attorney or county counsel, the entire penalty collected is received by the county in which the judgment was entered.

This bill amends the above provision by providing that if the action is brought by the City Attorney of San Diego, the entire penalty collected shall be paid to the treasurer of the City of San Diego. The Office of the San Diego City Attorney, the sponsor of the bill, makes the case for why the bill is needed:

This bill protects consumers by ensuring a proper distribution of prosecutorial resources. Under AB 3020, when my Office successfully prosecutes a case under the UCL and obtains civil penalties, it will receive every dollar of those penalties to support work on other UCL cases and investigations. . . .

This puts my Office on equal footing with District Attorneys that are authorized to prosecute unfair business practices. Currently, when the District Attorney brings an action under the UCL, that county receives all of the civil penalties awarded by the court. But when my Office brings such an action, those civil penalties must be split evenly with the County of San Diego, even if the District Attorney was not at all involved with prosecuting the case.

The bill provides the City Attorney of San Diego with all of the proceeds if they bring the action, rather than sharing with San Diego County, which may not have been involved in the litigation at all.

It should be noted that existing law provides that if the UCL action is brought at the request of a board within the Department of Consumer Affairs or a local consumer affairs agency, the board’s reasonable expenses incurred as a result of the investigation and prosecution of the action are to be reimbursed before the penalty collected is otherwise paid out.

1. Previous attempt to amend UCL penalty distributions

In 2019, a similar bill passed through the Legislature, AB 1477 (Gloria, 2019). It would have made a similar adjustment to the distribution of penalties collected in UCL actions. That bill was much broader in that it would have not been limited to San Diego, but have applied to all city attorneys eligible to bring such actions. It also included a one-year delay as to Los Angeles City Attorney claims and also provided that where a county agency “participated in the prelitigation investigation” of the UCL action brought by the city attorney, half of the penalties collected would go to the treasurer of the county in which the judgment was entered.

Governor Newsom vetoed the measure. In his veto message, the Governor stated:

This bill would adjust the distribution of civil penalties recovered by government entities in Unfair Competition Law actions.

This existing division is intended to ensure that both the city and county have resources to enforce consumer protection laws. This measure will revise longstanding practices and reduce the resources allocated to counties, putting in jeopardy important consumer protection services they provide.

I encourage the counties and cities impacted by this bill to work together to reach a resolution on this matter that is in the best interests of the public they serve.

AB 1477 was opposed by the County of Los Angeles along with the County of Santa Clara and the California State Association of Counties. The County of Los Angeles argued the bill “could discourage the Los Angeles City Attorney from involving the County’s Department of Consumer and Business Affairs [(DCBA)] in pre-filing investigations because by excluding them the City Attorney could keep all of the civil penalties recovered.” The county asserted that by “eliminating a vital source of funding for the County's consumer protection efforts by DCBA, the District Attorney, and County Counsel . . . the bill would continue to have an adverse fiscal impact on the County and on the consumer protection work that it does for the over 10 million people living in the County.”

This bill now limits its impact to claims brought by the San Diego City Attorney. There is no known opposition.

1. Stated intent of the bill

According to the author:

Proposition 64 (2004) limited private lawsuits, under the Unfair Competition Law, against a company only to those where an individual is actually injured by and suffers a financial loss due to an unfair, unlawful, or fraudulent business practice. Otherwise, only public prosecutors may file lawsuits charging unfair business practices. These actions may be brought forward by the Attorney General or district attorney. Additionally, the city attorney of any city with a population in excess of 750,000 may also bring actions under the Unfair Competition Law forward. However, even if an eligible city attorney brings the action forward, using only their own resources and without any assistance from a district attorney, any penalties awarded to the city attorney must be shared equally with the district attorney. The penalties awarded for an action brought by a district attorney are not required to be shared with a city attorney.

AB 3020 requires penalties collected by the San Diego City Attorney from an action under the Unfair Competition Act to be paid to the City of San Diego entirely.

SUPPORT

San Diego City Attorney Mara Elliott (sponsor)

OPPOSITION

None known

RELATED LEGISLATION

Pending Legislation: None known.

Prior Legislation:

AB 1477 (Gloria, 2019) See Comment 3.

AB 814 (Bloom, 2017) would have granted certain city attorneys the power to conduct investigations, including the ability to issue pre-litigation subpoenas, when they reasonably believe there has been a violation of the UCL. This bill died on the Senate Floor.

PRIOR VOTES:

Assembly Floor (Ayes 57, Noes 17)

Assembly Judiciary Committee (Ayes 7, Noes 3)

**************

ASSEMBLY THIRD READING

ATR Bill Id:AB 3020

Author:(Gloria)

As Introduced Ver:February 21, 2020

Majority vote

SUMMARY:

Provides that all civil penalties recovered by the City Attorney of San Diego for Unfair Competition Law cases prosecuted solely by the City Attorney are to be deposited into the treasury of the City of San Diego.

Major Provisions

1. Provides that if an Unfair Competition Act civil action is brought by the City Attorney of San Diego, the penalty collected shall be paid to the treasurer of the City of San Diego.
2. Makes various technical and conforming changes.

COMMENTS:

This modest bill seeks to rebalance the apportionment of civil penalties recovered in Unfair Competition Law cases brought by the City Attorney of San Diego. The bill proposes to provide all penalty money recovered in matters solely prosecuted by the City Attorney of San Diego to the City's treasury. California maintains some the most sweeping consumer protection laws of any state. These laws, in addition to guaranteeing certain consumer privacy and safety protections, also strictly prohibit unfair, fraudulent, or anticompetitive business practices and prohibitions against false or misleading advertisements. These practices are, in part, governed by a set of strict prohibitions and sizable penalties collectively referred to as the California Unfair Competition Law. An early form of the law was originally enacted in 1872 as Section 3369 of the Civil Code, which provided for the "availability of civil remedies for business violations in cases of penalty, forfeiture, and criminal violation," and was amended in 1933 to prohibit "any person [from] performing an act of unfair competition," which included unfair or fraudulent business practice, as well as false advertising. However, until 1935, the prohibitions under the unfair competition laws applied only to business competitors, and relief and penalties were not available to consumers. The availability of consumer protection remedies emerged from interpretations by the California Supreme Court in American Philatelic Soc. v. Claibourne (1935) 3 Cal. 2d 689, 698, and the court of appeal in People ex re. Mosk v. National Research Co. (1962) 201 Cal. App. 2d 765, 771, which held that "the rules of unfair competition should protect the public from fraud and deceit," and that "equitable relief authorized by [the Unfair Competition Law] is not circumscribed by any prerequisite showing that the conduct in question be limited to the field of business competitions," respectively. In 1977, the Unfair Competition Law was moved from the Civil Code to the Business and Professions Code, which was "a move not intended to alter it substantively nor to affect the applicability of pre-existing interpretive case law." (Fellmeth, California's Unfair Competition Act: Conundrums and Confusions, Recommendation on Unfair Competition Litigation, 26 Cal. Law Revision Com. Rep., p. 232, Nov. 1996.)

Existing law defines "unfair competition" to mean and include "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by" other statutory provisions prohibiting false advertising, and provides that "any person who engages, has engaged, or proposes to engage in unfair competition" may be enjoined and subject to civil penalties. (Business and Professions Code Section 17200; see also Section 17500 et seq.) Prior to 2004, an action alleging unfair competitive practice could be brought by any private plaintiff on behalf of the public, or by the Attorney General, a district attorney, any county counsel, any city attorney of a city having a population in excess of 750,000, any city attorney of any city and county, or, with the consent of the district attorney, by a city prosecutor in any city having a full-time city prosecutor.

In 2004, a statewide ballot measure played to voter's fears of a growing scourge of frivolous lawsuits in California prompting nearly 60% of voters to approve of Proposition 64, which limited standing for private action under the Unfair Competition Law to those who have "suffered injury in fact and [have] lost money or property as a result of such unfair competition," and required that all civil penalties collected from an action be used for the enforcement of consumer protection laws. In short, this ballot measure prohibited private enforcement of unfair business competition laws on behalf of the public thus limiting enforcement on behalf of the public to the Attorney General and local government prosecutors.

In addition to the Attorney General, the Unfair Competition Law vests enforcement authority in county district attorneys, county counsel, and the city attorney of cities with a population over 750,000. In practice, the division of labor and criminal or civil jurisdiction varies with the district and city, depending on the size and the needs of those cities. However, the existing law provides a one-size-fits-all, statewide method for allocating any civil penalties recovered from Unfair Competition Law civil cases. In accordance with existing law, if the action is brought by the district attorney, all penalties recovered as a result of that action are provided to the county treasurer for the use of consumer protection enforcement. However, if the action is brought by the city attorney, even in cases where the district attorney consents or assistance is not necessary, the penalties are nonetheless required to be split between the city treasury and the county treasury for their respective enforcement of consumer protection laws. The sponsor of this bill, the City Attorney for the City of San Diego, argues that in the case of cities with populations in excess of 750,000 which require no involvement from the district attorney to bring an action and often engage in enforcement activities autonomously, this arrangement is not appropriate. The City Attorney of San Diego argues, convincingly, that the current legal framework discourages city attorneys from taking action for consumer and environmental protection, as the expenditure of city resources often outweighs the potential penalties recouped by the city.

This modest bill seeks to remedy the perceived imbalance in the splitting of civil penalty recovery from Unfair Competition Law cases in San Diego. The bill proposes that if the San Diego City Attorney recovers civil penalties in an Unfair Competition Law action, and the action was solely prosecuted by the City Attorney, then all penalty recovery is to be deposited in the treasury of the City of San Diego and the County of San Diego is not entitled to any portion of the recovery.

As noted above, this bill focuses solely on civil penalty payments awarded to the San Diego City Attorney. The author and sponsor of this bill note that the narrow focus on San Diego is the result of concerns raised by other large counties about a similar bill, AB 1477 (Gloria of 2019), that resulted in the eventual veto of that measure by Governor Newsom. When heard by the Judiciary Committee, that bill would have authorized all City Attorneys recovering civil penalties in Unfair Competition Law cases to recover the full amount of the penalties. Although all city attorneys, presumably, face similar challenges to San Diego, this bill only focuses on San Diego. Should this bill advance, the author may wish to consider if a statewide approach remains the best means to rebalance the awarding of civil penalties in Unfair Competition Law cases. However, the author and sponsor note that, unlike other large counties, officials at both the city and county level in San Diego agree on the merits of this approach for cases handled by the San Diego City Attorney. Furthermore, should other counties and cities reach such agreements related to Unfair Competition Law case proceeds, those counties and cities can sponsor legislation to codify that agreement. Given the issues faced by AB 1477, and the agreement in San Diego, this bill is appropriate to advance despite its very narrow focus.

According to the Author:

The Unfair Competition Law authorizes public prosecutors, like the Attorney General and district attorneys, to file lawsuits charging unfair business practices. Similarly, certain city attorneys of large cities in California, like San Diego, Los Angeles, and San Jose, are able to bring similar suits forward. However, even if those eligible city attorneys receive no counsel, resource, or assistance from their district attorney, any civil penalties awarded to the city attorney must be shared equally with their district attorney. AB 3020 will ensure an equitable distribution of penalties awarded under the Unfair Competition Law in the City of San Diego and empower the City Attorney to prosecute against unscrupulous businesses in the interest of consumers and the environment.

Arguments in Support:

The City Attorney for the City of San Diego is sponsoring this measure. In support of this bill, she writes:

This bill protects consumers by ensuring the proper distribution of prosecutorial resources. Under AB 3020, when my office successfully prosecutes a case under the Unfair Competition Law and obtains civil penalties, it will receive every one of those penalties to support work on other Unfair Competition Law cases and investigations.

Arguments in Opposition:

None on file

FISCAL COMMENTS:

None

VOTES:

ASM JUDICIARY: 7-3-1

YES: Mark Stone, Chau, Chiu, Gonzalez, Holden, Kalra, Reyes

NO: Gallagher, Kiley, Obernolte

ABS, ABST OR NV: Maienschein

UPDATED:

VERSION: February 21, 2020

CONSULTANT: Nicholas Liedtke / JUD. / (916) 319-2334 FN: 0002781

Date of Hearing: May 27, 2020

ASSEMBLY COMMITTEE ON JUDICIARY

Mark Stone, Chair

ABPCA Bill Id:AB 3020

Author:(Gloria) – As Introduced Ver:February 21, 2020

SUBJECT: Unfair Practices Act: ENFORCEMENT: CITY OF SAN DIEGO

KEY ISSUE: SHOULD THE CITY OF SAN DIEGO BE ENTITLED TO ALL CIVIL PENALTY FUNDS RECOVERED AS RESULT OF LAWSUITS FILED TO ENFORCE THE UNFAIR COMPETITION LAW, IF THE LAWSUIT IS PROSECUTED SOLELY BY THE CITY ATTORNEY OF THE CITY OF SAN DIEGO?

SYNOPSIS

This non-controversial bill seeks to permit the City of San Diego to recover all civil penalties awarded in an Unfair Competition Law action brought and prosecuted solely by the City Attorney of San Diego, on behalf of the people of the city, rather than forcing the City of San Diego to remit half of the recovery to the county. This measure is a follow-up to the author’s AB 1477 (Gloria, 2019) which, when heard by this Committee, would have permitted all city attorneys in California to retain the full amount of civil penalties in Unfair Competition Law actions. Given that existing law provides county governments with the ability to recover half of all amounts recovered by city attorneys, even if the county did not participate in the civil action, unsurprisingly, AB 1477 encountered opposition by several counties outside of San Diego and was ultimately vetoed by Governor Newsom. This bill is far more limited when compared to AB 1477 in that it only applies to the City of San Diego. The author notes that this bill reflects a general agreement between city and county officials regarding the allocation of civil penalties recovered in Unfair Competition Law cases in San Diego.

This bill is sponsored by the City Attorney of San Diego, who notes that providing her office with the full amount of civil penalties recovered in Unfair Competition Law cases ensures that the City Attorney is compensated for their work, and can maintain the funds necessary to continue enforcing this critical consumer protection law. As currently in print, this bill has no known opposition.

SUMMARY: Provides that all civil penalties recovered by the City Attorney of San Diego for Unfair Competition Law cases prosecuted solely by the City Attorney are to be deposited into the treasury of the City of San Diego. Specifically, this bill:

1. Provides that if an Unfair Competition Act civil action is brought by the City Attorney of San Diego, the penalty collected shall be paid to the treasurer of the City of San Diego.
2. Makes various technical and conforming changes.

EXISTING LAW:

1. Establishes the Unfair Practices Act and provides that the act is intended to safeguard the public against the creation or perpetuation of monopolies and to foster and encourage competition, by prohibiting unfair, dishonest, deceptive, destructive, fraudulent and discriminatory practices by which fair and honest competition is destroyed or prevented. (Business and Professions Code Section 17000 et seq.)
2. Provides that any person who engages, has engaged, or proposes to engage in unfair competition shall be liable for a civil penalty not to exceed $2,500 for each violation. (Business and Professions Code Section 17206 (a).)
3. Provides that any person who intentionally violates any injunction prohibiting unfair competition issued pursuant to the Unfair Competition Law shall be liable for a civil penalty not to exceed $6,000 for each violation. (Business and Professions Code Section 17207 (a).)
4. Provides that the penalties described in 2) and 3) shall be assessed and recovered in a civil action brought in the name of the people of the State of California by the Attorney General, any district attorney, any county counsel authorized by agreement with the district attorney in actions involving violation of a county ordinance, any city attorney of a city having a population in excess of 750,000, any city attorney of any city and county, or a city prosecutor in any city having a full-time city prosecutor with the consent of the district attorney. (Business and Professions Section 17206 (a).)
5. Provides that if the action described in 4) is brought by a city attorney or city prosecutor, one-half of the penalty collected shall be paid to the treasurer of the city in which the judgment was entered, and one-half to the treasurer of the county in which the judgment was entered. (Business and Professions Code Section 17206 (c).)
6. Provides that if the action described in 4) is brought by a district attorney or county counsel, the penalty collected shall be paid to the treasurer of the county in which the judgment was entered. (Ibid.)
7. Provides that if the action described in 4) is brought by the Attorney General, one-half of the penalty collected shall be paid to the treasurer of the county in which the judgment was entered, and one-half to the General Fund. (Ibid.)
8. Provides that the funds collected pursuant to actions described above shall be for the exclusive use by the Attorney General, the district attorney, the county counsel, and the city attorney for the enforcement of consumer protection laws. (Ibid.)
9. Defines “unfair competition” to mean and include any unlawful, unfair, or fraudulent business practices. (Business and Professions Code Section 17200.)
10. Holds that an Unfair Competition Law action that is brought in the name of the people of the State of California to enforce a statewide legislative scheme is not considered an action brought by a county, city, or county and city. (GameStop, Inc. v. Superior Court (2018) 26 Cal. App. 5th 502, 512.)
11. Holds that a district attorney’s authority to bring an unfair competition action does not extend to seeking civil penalties and restitution for violations alleged to have occurred in other counties. (Abbott Laboratories v. Superior Court (2018) 24 Cal. App. 5th 1.)
12. Provides that, notwithstanding any other provision of law, the proceeds of civil penalties or other monetary awards recovered in any civil action brought jointly in the name of the people of the State of California by the Attorney General, one or more district attorneys, or by one or more city attorneys, or any combination thereof, shall be paid as approved by the court. (Government Code Section 26506.)
13. Provides that a district attorney, city attorney, or any combination thereof, may, in agreement with other district attorneys or city attorneys, act jointly in prosecuting a civil cause of action to benefit their own county in a court of the other jurisdiction. (Government Code Section 26507.)
14. Provides that a district attorney, with the concurrence of the district attorney of another county and the boards of supervisors of both affected counties, may provide to the district attorney of such other county legal or investigative services, or both, pertaining to the prosecution of a civil cause of action in the other county by the district attorney of that county. (Government Code Section 26508.)
15. Provides that under the circumstances described in 13), the county provided with such services shall compensate the county providing the services at a rate which is mutually agreeable to the counties as parties to the agreement. (Government Code Section 26508.)

FISCAL EFFECT: As currently in print this bill is keyed non-fiscal.

COMMENTS: This modest bill seeks to rebalance the apportionment of civil penalties recovered in Unfair Competition Law cases brought by the City Attorney of San Diego. The bill proposes to provide all penalty money recovered in matters solely prosecuted by the City Attorney of San Diego to the City’s treasury. In support of this bill the author states:

The Unfair Competition Law authorizes public prosecutors, like the Attorney General and district attorneys, to file lawsuits charging unfair business practices. Similarly, certain city attorneys of large cities in California, like San Diego, Los Angeles, and San Jose, are able to bring similar suits forward. However, even if those eligible city attorneys receive no counsel, resource, or assistance from their district attorney, any civil penalties awarded to the city attorney must be shared equally with their district attorney. AB 3020 will ensure an equitable distribution of penalties awarded under the Unfair Competition Law in the City of San Diego and empower the City Attorney to prosecute against unscrupulous businesses in the interest of consumers and the environment.

California’s Unfair Competition Law protects businesses and consumers from unfair business practices, but Proposition 64 (2004) limited the ability of non-governmental actors to bring such actions. California maintains some the most sweeping consumer protection laws of any state. These laws, in addition to guaranteeing certain consumer privacy and safety protections, also strictly prohibit unfair, fraudulent, or anticompetitive business practices and prohibitions against false or misleading advertisements. These practices are, in part, governed by a set of strict prohibitions and sizable penalties collectively referred to as the California Unfair Competition Law. An early form of the law was originally enacted in 1872 as Section 3369 of the Civil Code, which provided for the “availability of civil remedies for business violations in cases of penalty, forfeiture, and criminal violation,” and was amended in 1933 to prohibit “any person [from] performing an act of unfair competition,” which included unfair or fraudulent business practice, as well as false advertising. However, until 1935, the prohibitions under the unfair competition laws applied only to business competitors, and relief and penalties were not available to consumers. The availability of consumer protection remedies emerged from interpretations by the California Supreme Court in American Philatelic Soc. v. Claibourne (1935) 3 Cal. 2d 689, 698, and the court of appeal in People ex re. Mosk v. National Research Co. (1962) 201 Cal. App. 2d 765, 771, which held that “the rules of unfair competition should protect the public from fraud and deceit,” and that “equitable relief authorized by [the Unfair Competition Law] is not circumscribed by any prerequisite showing that the conduct in question be limited to the field of business competitions,” respectively. In 1977, the Unfair Competition Law was moved from the Civil Code to the Business and Professions Code, which was “a move not intended to alter it substantively nor to affect the applicability of pre-existing interpretive case law.” (Fellmeth, California’s Unfair Competition Act: Conundrums and Confusions, Recommendation on Unfair Competition Litigation, 26 Cal. Law Revision Com. Rep., p. 232, Nov. 1996.)

Existing law defines “unfair competition” to mean and include “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by” other statutory provisions prohibiting false advertising, and provides that “any person who engages, has engaged, or proposes to engage in unfair competition” may be enjoined and subject to civil penalties. (Section 17200; see also Section 17500 et seq.) Prior to 2004, an action alleging unfair competitive practice could be brought by any private plaintiff on behalf of the public, or by the Attorney General, a district attorney, any county counsel, any city attorney of a city having a population in excess of 750,000, any city attorney of any city and county, or, with the consent of the district attorney, by a city prosecutor in any city having a full-time city prosecutor.

In 2004, a statewide ballot measure played to voter’s fears of a growing scourge of frivolous lawsuits in California prompting nearly 60 percent of voters to approve of Proposition 64, which limited standing for private action under the Unfair Competition Law to those who have “suffered injury in fact and [have] lost money or property as a result of such unfair competition,” and required that all civil penalties collected from an action be used for the enforcement of consumer protection laws. In short, this ballot measure prohibited private enforcement of unfair business competition laws on behalf of the public thus limiting enforcement on behalf of the public to the Attorney General and local government prosecutors.

Some local governments face barriers to pursuing Unfair Competition Law claims. In addition to the Attorney General, the Unfair Competition Law vests enforcement authority in county district attorneys, county counsel, and the city attorney of cities with a population over 750,000. In practice, the division of labor and criminal or civil jurisdiction varies with the district and city, depending on the size and the needs of those cities. However, the existing law provides a one-size-fits-all, statewide method for allocating any civil penalties recovered from Unfair Competition Law civil cases. In accordance with existing law, if the action is brought by the district attorney, all penalties recovered as a result of that action are provided to the county treasurer for the use of consumer protection enforcement. However, if the action is brought by the city attorney, even in cases where the district attorney consents or assistance is not necessary, the penalties are nonetheless required to be split between the city treasury and the county treasury for their respective enforcement of consumer protection laws. The sponsor of this bill, the City Attorney for the City of San Diego, argues that in the case of cities with populations in excess of 750,000 which require no involvement from the district attorney to bring an action and often engage in enforcement activities autonomously, this arrangement is not appropriate. The City Attorney of San Diego argues, convincingly, that the current legal framework discourages city attorneys from taking action for consumer and environmental protection, as the expenditure of city resources often outweighs the potential penalties recouped by the city.

This bill. This modest bill seeks to remedy the perceived imbalance in the splitting of civil penalty recovery from Unfair Competition Law cases in San Diego. The bill proposes that if the San Diego City Attorney recovers civil penalties in an Unfair Competition Law action, and the action was solely prosecuted by the City Attorney, then all penalty recovery is to be deposited in the treasury of the City of San Diego and the County of San Diego is not entitled to any portion of the recovery.

After a prior measure was vetoed by the Governor, this bill seeks to apply a more narrow approach to rebalancing the appropriation of penalties recovered from unfair competition lawsuits. As noted above, this bill focuses solely on civil penalty payments awarded to the San Diego City Attorney. The author and sponsor of this bill note that the narrow focus on San Diego is the result of concerns raised by other large counties about a similar bill, AB 1477 (Gloria, 2019), that resulted in the eventual veto of that measure by Governor Newsom. When heard by this Committee, that bill would have authorized all City Attorneys recovering civil penalties in Unfair Competition Law cases to recover the full amount of the penalties. Although all city attorneys, presumably, face similar challenges to San Diego, this bill only focuses on San Diego. Should this bill advance, the author may wish to consider if a statewide approach remains the best means to rebalance the awarding of civil penalties in Unfair Competition Law cases. However, the author and sponsor note that, unlike other large counties, officials at both the city and county level in San Diego agree on the merits of this approach for cases handled by the San Diego City Attorney. Furthermore, should other counties and cities reach such agreements related to Unfair Competition Law case proceeds, those counties and cities can sponsor legislation to codify that agreement. Given the issues faced by AB 1477, and the agreement in San Diego, this bill is appropriate to advance despite its very narrow focus.

ARGUMENTS IN SUPPORT: The City Attorney for the City of San Diego is sponsoring this measure. In support of the bill, she writes:

This bill protects consumers by ensuring the proper distribution of prosecutorial resources. Under AB 3020, when my office successfully prosecutes a case under the Unfair Competition Law and obtains civil penalties, it will receive every one of those penalties to support work on other Unfair Competition Law cases and investigations.

REGISTERED SUPPORT / OPPOSITION:

Support

Office of the San Diego City Attorney, Mara Elliott (sponsor)

Opposition

None on file

Analysis Prepared by: Nicholas Liedtke / JUD. / (916) 319-2334