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.
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