THE RISING TREND IN UNFAIR BUSINESS PRACTICES LAWSUITS
By Sam K. Abdulaziz

Over the last few years, there have been a number of lawsuits filed against businesses alleging unfair business practices. These lawsuits are not only filed by customers who have a beef, but also are being filed by district attorneys and "public interest" groups, each trying to obtain civil penalties, attorneys' fees and other types of awards for alleged practices which prey on the public.

Some of these unfair business practice lawsuits are legitimate. In every free market society, there are companies that prey upon the elderly or the naïve. However, some of these lawsuits are close to being blackmail. As an example, last year the news was filled with stories regarding a group of lawyers who had filed lawsuits against thousands of nail salons under Proposition 65. Proposition 65 requires notices of harmful substances (I am sure you have seen those signs whenever you have visited gas stations or even restaurants that they use cancer causing chemicals). In that rather infamous case, the allegations were that the law group had formed a corporation to act as the plaintiff (as opposed to finding someone who is actually injured), and thereafter sued thousands of nail salons, mostly owned and operated by recent immigrants to the United States. Each of these defendants were urged to pay what would otherwise be a relatively small sum (around $2,000 to $4,000) to be dismissed from the lawsuit. Multiply that by thousands of defendants and you can see the potential harm to the public for such wrongful lawsuits.

An unfair business practice lawsuit is usually based upon one of three sets of statutes that apply in California. It is very simple for your services to fall within these statutes. Unless you are very careful, there is always the real possibility that your advertising or business practices could subject you to such a lawsuit.

The lawsuit commonly used by both private attorneys and District Attorneys is one utilizing Business and Professions Code section 17200. This section is broad, and merely provides that, "Unfair competition shall mean and include any unlawful, unfair or fraudulent act or practice and unfair, deceptive, untrue or misleading advertising..." A person who violates this section could be liable for a penalty not to exceed $2,500 for each violation. This is typically sought by either attorneys general or district attorneys, and private attorneys. We have seen cases where penalties are sought in the millions of dollars for what otherwise would be rather innocuous business activities. One example is advertising by a service and repair contractor that it will respond to a service call "within an hour of the call." That is being argued by some district attorneys as being an unfair business practice or false advertising.

Another statute applies solely to false or misleading statements in advertising. Under this area of the law, there are numerous subdivisions, including laws restricting how sale prices are advertised, the quantities of items available to be sold, home solicitations (including sales by telephone), as well as fact-based or brand-comparison advertisements. Some of these provisions are restricted as to their applicability, so that they apply where only a single plaintiff is suing a company rather than in a class action lawsuit. Other provisions have no limitation, and a company can find itself being sued on behalf of an entire class of consumers.

The moral of this article is that you should be very careful in the manner in which you conduct your business. Even the honest, well-intentioned business can find itself facing allegations based upon nothing more than an exaggerated advertisement or what others would consider "puffery." When in doubt, consult with an attorney before running an advertisement or flyer for your business. Also, in that the company may be responsible for the representations of its salespeople, you should closely train and supervise your personnel.

Attorney Sam Abdulaziz of Abdulaziz & Grossbart has been practicing construction law for 30 years. He has written a book called "California Construction Law" which is updated annually. He represents numerous construction trade associations and contractors. He appears at Contractors State License Board meetings and has argued a number of cases before the appellate courts, including the California Supreme Court dealing with the "Pay-If-Paid Clause." Abdulaziz & Grossbart provides this information as a service to its friends & clients. The documents are of a general nature and are intended to highlight areas of the subject matter and should not be used as a substitute for specific legal advice. You should seek the aid and advice of a competent attorney and/or accountant instead of relying on the presentation and/or documents. Sam Abdulaziz can be reached at Abdulaziz & Grossbart, P.O. Box 15458, North Hollywood, CA 91615-5458; (818) 760-2000, Facsimile (818) 760-3908; or by E-Mail at info@aglaw.net . On the Internet, visit our Website at www.aglaw.net