California’s Unfair Competition Law (Business and Professions Code sections 17200, et seq.) (“UCL”) explicitly provides one remedy – restitution. In Lee v. Luxottica Retail North America, Inc., the plaintiff, acting on behalf of a putative class of optometrists in California with independent optometry practices, brought suit against a competing chain of optical retailers for unfair competition seeking lost profits and market share. The defendant demurred and the trial court granted the demurrer without leave to amend on the basis that lost profits and market share are not remedies authorized by the UCL. Plaintiff appealed.
The California First Appellate District Court of Appeals affirmed. It held:
. . . the only relief plaintiff requests against his competitors—compensation for lost market share—is not a remedy authorized by the UCL, because it does not constitute restitution, the only form of nonpunitive monetary recovery authorized under the UCL. Simply put, compensation for expected but unearned future income to which the plaintiff has no legal entitlement is not recoverable as restitution under the UCL, regardless of whether it is characterized as lost market share. Lost profits are damages, not restitution, and are unavailable in a private action under the UCL.
The Appellate Court reasoned that, while the scope of conduct covered by the UCL is broad, its remedies are limited in a private action. Remedies in private actions under the UCL are generally limited to injunctive relief and restitution. non-restitutionary disgorgement of profits—that is, profits that are neither money a defendant took from the plaintiff nor funds in which the plaintiff has an ownership interest—is not an authorized remedy under the UCL in an individual action. A court cannot, under the equitable powers of section 17203, award whatever form of monetary relief it believes might deter unfair practices. Thus, compensation for lost business is not recoverable in an action against a business competitor under the UCL.
The Appellate left open the possibility that a competitor could bring a tort or contract action fashioned to obtain lost profits due to unfair competition or business practices, but that action would not be based on the UCL.
If you believe that a competitor is unfairly competing with you or is engaged in unfair business practices that affect your bottom line, contact your business attorney before you issue a cease-and-desist demand and a demand for damages.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
