repeated violations allow new UCL claims even after years go by

People v. E*Poly Star, Inc., 205 Cal. App. 4th 1316 (2012)

The district attorneys of Los Angeles, Marin and Fresno Counties sued for injunctive relief and civil penalties against E*Poly Star for unfair competition and false advertising.  E*Poly Star, which supplies  polyethylene and paper products to state and local governments, allegedly misrepresented the length, width, thickness and count of its packaged products.   The trial court dismissed without leave to amend on the ground that the claims were barred by the statutes of limitations (3 years for false advertising, 4 for UCL claims), which began to run no later than August 2, 2006 when the Weights and Measures Office of the Los Angeles County Department of Agricultural Commissioner notified E*Poly Star that its products were found to be short weighted in violation of the law.  The court of appeals reversed.

The DAs argued that the complaint alleged that E*Poly Star had engaged in an ongoing course of illegal conduct that continued through the date of filing, and that E*Poly Star shouldn’t essentially be granted immunity from prosecution forever.  E*Poly Star argued that the continuing violation doctrine should only apply in discrimination cases, and that the causes of action pled all arose out of acts investigated in May/June 2006 and noticed in the August 2006 letter.  Fresno’s DA presented evidence that separate inspections had occurred in subsequent years indicating violations persisted; the DAs were prepared to amend the complaint to plead as much with greater specificity.  E*Poly Star argued that the court shouldn’t allow the amendment, since it was inconsistent for the DAs to argue that there were a number of separate violations when they’d previously argued that there was a continuing violation of the UCL.

On appeal, the People only challenged the dismissal of the UCL claim, not the false advertising claim.

In a case brought by the People, the amount of the civil penality is based initially on the number of violations.  So it’s important to figure out what constitutes a single violation; this in turn depends on the type of violation involved, the number of victims and the repetition of the conduct constituting the violation.  In addition, a UCL claim must be brought within four years of the accrual of the cause of action.  The California Supreme Court hasn’t decided whether a delayed discovery rule applies to UCL claims, and the courts of appeal are divided, but the instant court of appeal had already held that—at least for UCL claims based on deceptive practices where the harm wouldn’t reasonably be discovered until a future date—the period starts to run only when a reasonable person would have discovered the factual basis for the claim.

Turning to the specific facts alleged here, the People alleged that E*Poly Star unlawfully sold mislabeled products within four years of the filing of the complaint to nine different government departments, divisions or units.  “[E]ach set of transactions with a different governmental entity, even if not each individual sale, was a separate and distinct violation of the UCL with its own accrual date.”  Thus, the August 2006 letter, which identified violations of the law only in connection with products delivered to a few L.A. County departments, was “simply irrelevant” to the accrual date of the other UCL claims relating to the 8 other entities identified in the complaint.  Moreover, liberally construing the allegations of the complaint, the DAs pleaded that five other L.A. County departments entered into contracts with E*Poly Star within four years of the filing of the complaint and that E*Poly Star provided mislabeled products to them, too.  At the very least, the trial court should have allowed the DAs to amend the complaint to plead with greater specificity.  The court of appeals also noted that it was not holding that there was only one UCL claim per entity; the DAs could plead and try to prove that multiple separate UCL violations occurred as to each of the entities.

The court of appeals pointed out that the People weren’t seeking penalties for mislabeled sales that occurred more than four years before the filing of the complaint.  As a result, the court didn’t reach the issue of whether the continuous violation doctrine would apply here to allow liability for conduct occurring outside of the statute of limitations if it was sufficiently connected to unlawful conduct within the limitations period.