(Super. Ct. No. 30-2009-00116928) Appeal from a judgment of the Superior Court of Orange County, Robert J. Moss, Judge.
The opinion of the court was delivered by: Moore, J.
CERTIFIED FOR PUBLICATION
California's Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.)*fn1 (UCL) has been crafted to preclude the shakedown lawsuit--the "I get rich" lawsuit brought by a person who has had no business dealings with the proprietor being sued, but who has happened to notice that the hapless proprietor is out of compliance with a particular law. (Californians for Disability Rights v. Mervyn's, LLC (2006) 39 Cal.4th 223, 228-229.) The question before us is whether, in endeavoring to protect "mom and pop" operators from the devastation wreaked by gold-digging plaintiffs, the UCL has been so narrowed as to preclude one business competitor from maintaining a UCL lawsuit against another with whom he or she has had no direct business dealings, where the defendant competitor's unlawful business practices have caused injury and monetary or property loss to the plaintiff competitor.
Bearing in mind that the UCL was originally conceived to protect business competitors (People ex rel. Mosk v. National Research Co. of Cal. (1962) 201 Cal.App.2d 765, 770), and also that the deterrence of unfair competition is an important goal of the UCL (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1147-1148), we conclude that the lack of direct dealings between two business competitors is not necessarily fatal to UCL standing, provided the plaintiff competitor has suffered injury in fact and lost money or property as a result of the defendant competitor's unfair competition. (§ 17204.)
Here, the Law Offices of Mathew Higbee (Higbee) filed a lawsuit against online legal services provider Expungement Assistance Services (EAS) for, inter alia, unfair competition based on the unauthorized practice of law. EAS purportedly undercut the competition by using unlicensed persons to perform legal work, thereby saving on attorney fees, and by employing unbonded and unregistered legal document assistants, thereby saving on the costs of posting statutorily mandated bonds and paying registration fees. The court sustained EAS's demurrer without leave to amend, holding that Higbee's allegations of lost revenue, lost market share, diminution in law firm value, and increased advertising costs were insufficient to establish injury in fact for the purposes of UCL standing. Higbee claims error, arguing that he sufficiently alleged the quantum of injury necessary to establish injury in fact. We hold that Higbee alleged an identifiable trifle of injury sufficient to withstand a demurrer. (See Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 324-325.) We reverse and remand.
Higbee filed a first amended complaint against EAS, asserting causes of action for unfair competition, interference with economic advantage, trade libel, and defamation. EAS filed a motion for judgment on the pleadings with respect to the first cause of action. The court granted the motion, with leave to amend.
The court held that Higbee failed to allege that he had suffered actual injury. In addition, the court stated: "It is not alleged that plaintiff had a transaction with defendant in which it lost money or property or that it was deprived of money or property to which it had a cognizable claim. Plaintiff only alleges that defendant is getting some business that plaintiff might possibly obtain for itself. This is insufficient. One may not sue a competitor under [section] 17200 because that competitor is obtaining some market share." The court gave Higbee an opportunity to file a second amended complaint.
In his second amended complaint, Higbee reasserted the first four causes of action and added a fifth "cause of action" for injunctive relief. EAS then filed a demurrer, challenging the first and fifth causes of action. With respect to the first cause of action, EAS argued that Higbee lacked standing to assert a claim for violation of section 17200. With respect to the fifth cause of action, EAS argued, inter alia, that injunctive relief is a remedy not a cause of action.
The court sustained the demurrer with respect to the first and fifth causes of action, without leave to amend. The parties thereafter informed the court that they had settled the remaining causes of action--the second, third and fourth. They requested a dismissal with prejudice of those causes of action. The court then dismissed the lawsuit and Higbee filed a notice of appeal.
On appeal, Higbee challenges the order sustaining the demurrer only with respect to the first cause of action for unfair competition. He concedes that injunctive relief is a remedy, not a cause of action, and so does not challenge the order with respect to the fifth "cause of action."
(1) Motion to take documentary evidence on appeal and application to file motion under seal--
On November 15, 2012, EAS filed a motion to take documentary evidence on appeal and an application to file that motion under seal. EAS represented that Higbee was arguing on appeal issues that were settled already. However, the settlement agreement was not part of the record on appeal inasmuch as the parties had not provided a copy to the trial court when they notified that court of the settlement. Consequently, EAS contended that the only way for this court to know whether Higbee was arguing about matters that already had been settled was to provide this court with a copy of the settlement agreement.
The settlement agreement contains a confidentiality clause, however. It requires the terms of the settlement agreement, but not the fact of the settlement agreement, to remain confidential. This notwithstanding, the confidentiality clause permits the terms of the settlement agreement to be disclosed "in any action or proceeding where the existence or terms of the [settlement agreement] are at issue . . . ."
EAS requested that the motion to take documentary evidence on appeal, and the copy of the settlement agreement attached thereto, be filed under seal. EAS filed a redacted copy of the motion for public viewing. Higbee did not file any objection, either to the motion itself or to the application to seal the motion.
This court issued an order granting the motion to take documentary evidence on appeal (Cal. Rules of Court, rule 8.252(c)) and granting the application to seal the unredacted motion and attachments thereto. (Cal. Rules of Court, rules 2.550(d)-(e), 8.46(e).)
(2) Scope of issues on appeal--
Paragraph 4.1 of the settlement agreement provides that Higbee releases EAS from all claims arising in connection with the lawsuit "except that [Higbee] does not release EAS from the First Cause of Action . . . of the Second Amended Complaint to the extent that [it relates] to the contention that EAS is engaged in the unauthorized practice of law." So, this appeal concerns only the sustaining of the demurrer without leave to amend as to the first cause of action, to the extent it is based on the unauthorized practice of law.
(1) Second amended complaint--
In his second amended complaint, Higbee alleged his business was a corporation that was engaged in the practice of law in California and offered legal services for record expungements. In conducting his business, Higbee utilized the services of contract attorneys and a Web site hosting provider. Higbee further alleged that EAS was a Delaware corporation with its principal place of business in Kentucky and was neither a law firm nor an entity authorized to practice law in California or any other state. He also alleged that EAS was engaged in the unauthorized practice of law in California, in contravention of Business and Professions Code sections 6125 et seq. and 6400 et seq. and Penal Code section 4852.2, and was conducting business in California without authorization, in violation of Corporations Code section 2105. In addition, Higbee alleged that the conduct of EAS constituted a violation of the UCL.
More specifically, Higbee asserted that EAS maintained a number of different Web sites, such as www.clearmyrecord.com, on which it purported to inform prospective customers about the legal remedies available to them, describe the rights and privileges afforded by those remedies, tell prospective customers what legal documents were necessary to achieve their goals, and represent that its lawyers would prepare or review a customer's court filings and offer legal advice. Higbee alleged that the actions of EAS not only had harmed members of the general public, but also had usurped the opportunities of Higbee, who competes directly with EAS for the same customers, and had resulted in lost revenue.
Higbee sought an injunction restraining EAS from: (1) "operating the websites known as www.clearmyrecord.com, [w]ww.removeit.org, . . . shredmy[record].com or any other website that attempts to offer criminal record clearing services, including expungements, sealing, pardons, clemency, setting asides, vacating criminal records and dismissals;" (2) advising people about legal remedies available to them; and (3) ...