The ABA/BNA Lawyers’ Manual on Professional Conduct™ is a trusted resource that helps attorneys understand cases and decisions that directly impacts their work, practice ethically, and...
A lawyer has a cause of action under California's unfair competition law against an online legal service provider that allegedly engages in the unauthorized practice of law by using nonlawyers to perform legal services, the California Court of Appeal, Fourth District, held March 14 (Law Offices of Mathew Higbee v. Expungement Assistance Services, Cal. Ct. App. 4th Dist., No. G046778, 3/14/13).
In an opinion by Justice Eileen C. Moore, the court decided that an unfair competition claim can be premised on alleged violation of UPL statutes and that the complaint in this case adequately asserts actual economic injury from the defendant's alleged unauthorized practice. The lack of direct business dealings between the lawyer and the defendant is not fatal to the unfair competition claim, the court ruled.
The plaintiff is Law Offices of Mathew Higbee. The firm, now known as Higbee & Associates, is based in Santa Ana, Cal. As part of its practice, the firm offers criminal record expungement.
The defendant is Expungement Assistance Services (EAS). According to Higbee's complaint, EAS is a Delaware corporation with its principal place of business in Kentucky, and is not authorized to practice law in California or any other state.
Higbee's complaint asserted that EAS established websites such as clearmyrecord.com that offered customers legal advice and legal services for clearing criminal records. The complaint also alleged that EAS used unlicensed persons to perform legal work and employed unbonded and unregistered legal document assistants. These unlawful practices allegedly cost Higbee market share and diminished the value of the firm.
The trial court sustained EAS's demurrer, holding that the complaint did not allege injury in fact as required to establish a claim under California's unfair competition law.
The appellate court revived the lawsuit, concluding that the allegations were sufficient to state a cause of action.
California's unfair competition law (UCL) prohibits “any unlawful, unfair or fraudulent business act or practice.” Cal. Bus. & Prof. Code §72000.
Higbee alleged that EAS violated California statutes that require an active law license to practice law and to handle certain criminal matters, as well as a state statute that imposes registration and bonding requirements for legal document assistants. EAS's business methods do not comply with these statutes and are “unlawful” practices for purposes of a UCL claim, Higbee argued.
EAS contended, however, that alleged violation of UPL laws cannot support an unfair competition claim because UPL laws are intended to protect the public and the integrity of the judicial process, not to shield lawyers from competition.
The court sided with Higbee, saying “we see no reason why the alleged violation of statutes concerning the unauthorized practice of law cannot serve as a predicate for Higbee's UCL action.” The UCL law “borrows” violations of other laws to define unfair competition, Moore explained.
Section 17204 of the UCL law was amended nearly 10 years ago to provide that no private party has standing to pursue an action under the law unless that person “has suffered injury in fact and has lost money or property as a result of the unfair competition.” The amendment resulted from Proposition 64, a voter initiative intended to prevent attorneys from fleecing businesses by threatening to bring UCL suits on behalf of consumers even though no one had actually been injured.
EAS contended that Higbee lacked standing, arguing that a loss of market share is not the type of economic injury that qualifies as an “injury in fact” for the purpose of standing under the UCL.
Following a detailed look at cases decided after Proposition 64 took effect, the court ruled that Higbee's complaint alleged “at least an identifiable trifle of injury as necessary for standing under the UCL” by asserting that the lawyer was forced to pay increased advertising costs, that he had to reduce his prices for services in order to compete, that he had lost business, and that the value of his law firm had diminished.
The court also decided that the complaint adequately asserted that Higbee's injury was caused by EAS's alleged unauthorized practice, even though EAS did business over the internet and never had any business dealings with Higbee.
This holding is strictly limited to the context of business competitors and does not permit a consumer who has never done business with a company to sue it under the UCL, the court stated.
Mathew K. Higbee, Santa Ana, Cal., represented his firm. Jeffrey L. Sikkema and David G. Hagopian of Carothers DiSante & Freudenberger in Irvine, Cal., represented EAS.
Full text at http://op.bna.com/mopc.nsf/r?Open=kswn-95svfp.
Copyright 2013, the American Bar Association and The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)