Restitution Under the UCL Is Not Damages
Topics: Court Decisions
California Plaintiffs frequently assert a duplicative claim under the Unfair Competition Law (“UCL”), California Business & Professions Code Section 17200 et seq. that relies on a violation of another law to establish liability, usually to make use of the UCL’s longer four-year statute of limitations. In a recent decision, Lee v. Luxottica Retail North America, Inc., 2021 DJDAR 6060, 2021 WL 2451109 (6/21/2021), the First Appellate District, in following a consistent line of cases analyzing the UCL, confirmed that restitution under the UCL is an equitable remedy, which is distinct from damages.
Plaintiff Lee is an optometrist operating an independent (i.e. non-chain) practice. He filed a putative class action against two corporate affiliates operating a chain of optical retail stores, more commonly known as LensCrafters. Plaintiff asserted a single claim under the UCL, alleging that Defendants’ unlawful and unfair business practices violated state laws regulating the practice of optometry and dispensing of optical products, which caused him and putative class members to lose “market share” in lost revenue and sales. The only remedy Plaintiff sought was restitution and disgorgement of sums illegally obtained through violation of the UCL. The trial court sustained Defendants’ demurrer without leave to amend, reasoning that Plaintiff failed to allege recoverable restitution under the UCL. In affirming the trial court’s decision, the Court of Appeal explained that while the scope of unlawful conduct potentially covered under the UCL is broad, its remedies are extremely limited. Injunctive relief is the primary remedy offered by the UCL, and restitution (specifically, the return of money taken from the plaintiff as a result of the unlawful conduct) is the only monetary remedy available to plaintiffs in private actions. Damages are not recoverable. Neither are attorneys’ fees or punitive damages. Relying on the California Supreme Court decision in Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134 (2003), the Lee Court explained that non-restitutionary disgorgement of profits is not available under the UCL. That is, “profits that are neither money the defendant took from the plaintiff nor funds to which the plaintiff has an ownership interest – is not an authorized remedy under the UCL.” Quantifiable sums, such as earned but unpaid wages, may constitute restitution because employees have a vested interest in earned wages. In contrast, anticipated but unearned commissions constitute an expectancy or contingent interest, and would not constitute recoverable restitution under the UCL. In other words, restitution is to “restore” the plaintiff to the status quo by returning funds that the defendant improperly took from the plaintiff, or funds to which the plaintiff had an ownership interest. Thus, Plaintiff’s theory of liability based on lost market share or lost profits did not constitute restitution under the UCL, and the UCL is not intended to be an all-purpose substitute for a contract action or tort action that would allow a plaintiff to bypass having to prove the elements of the underlying tort or contract claim. Accordingly, the Court dismissed Plaintiff’s claims against LensCrafters.
This decision is a positive outcome for California employers that have to defend against UCL claims (usually asserted in putative class actions) and affirms the rule that the only form of monetary remedy available is restitution, which does not equate to damages.