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Update: Four California Courts Rule that Proposition 64 is Retroactive

By Jeffrey L. Fillerup
April 01, 2005

Courts in California have issued contradictory rulings in the past 2 months about whether a reform of the state's Unfair Competition Act, California Business & Professions Code Sections 17200, et seq. (the “UCA”) is retroactive. Section 17200 was changed when California voters passed Proposition 64 in the Nov. 2004 election. Proposition 64 amends the UCA to delete the broad standing rules and to add a requirement that suit may be brought by a private plaintiff (as opposed to a suit brought by a County Attorney or Attorney General) only if the plaintiff has suffered “injury in fact” and has lost money or property as a result of the unfair competition. These reforms will likely reduce the incidence of Section 17200 litigation ' a development that is strongly supported by businesses across the state.

In the first decision, referenced in a “News Brief” in the March 2005 issue of FBLA, the court held that Proposition 64 did not apply to cases that were pending at the time of the election, Californians for Disability Rights v. Mervyn's, LLC, 2005 Cal.App.Lexis 160 (1st App. Dist., Feb. 1, 2005). The Mervyn's court relied on the general rule that “a new statute is presumed to operate prospectively absent an express declaration of retrospectivity or a clear indication that the electorate, or the Legislature, intended otherwise.” After determining that the voters had not voted on nor intended that the Proposition be applied retroactively, the court applied the general rule and held that a prospective application was appropriate.

However, on the heels of Mervyn's, a rapid-fire series of cases rejected that reasoning. On Feb. 9, 2005, in Branick v. Downey Savings and Loan Assoc., 2005 Cal.App.Lexis 201 (2d App. Dist., 2005), the court held that Proposition 64 does apply retroactively and the plaintiff lacked standing to sue “on behalf of the general public.” The Branick court agreed with the general rule enunciated in Mervyn's, but found that the Mervyn's court erred by not applying an exception to the general rule of prospective application. The exception, known as the “repeal principle,” holds that retroactivity applies “when a statutory enactment repeals a statute that provides a purely statutory cause of action.”

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