Antitrust and Unfair Competition Law

Competition: Spring 2021, Vol 31, No. 1


By Colleen E. Huschke1


A. California Clarifies Price Gouging Prohibitions

1. Price—Gouging-Penal Code § 396

Effective January 1, 2021, California Penal Code section 396 will now clearly apply in pandemic emergencies and to online and in person sales, in addition to traditional retail sales (both clarifications of existing law). The amended statute now also explicitly covers new sellers into the market and places a limit on the amount the seller may charge (50% above cost). Penal Code section 396 maintains the pricing restraints how much a previous seller of specified goods and services may raise their prices.


A. California Enacts Comprehensive Consumer Privacy Law

1. California Consumer Privacy Act of 2018, Civ. Code, § 1798.100 Et Seq.

In 2018, in response to the worldwide consumer privacy movement represented by the European Union’s General Data Protection Regulation (GDPR)2 and to public demand for additional California privacy protections in the Internet Age, the state legislature passed and Governor Jerry Brown signed AB 375 (Chau), the California Consumer Privacy Act of 2018 (CCPA).3

Effective January 1, 2020, the CCPA provides comprehensive codification of consumer privacy rights and establishes remedies for violations of those rights.

Legislative intent. In its statement of intent, the California legislature described the purpose of the CCPA as "giving consumers an effective way to control their personal information by ensuring the following rights:

  1. The right of Californians to know what personal information is being collected about them.
  2. The right of Californians to know whether their personal information is sold or disclosed and to whom.
  3. The right of Californians to say no to the sale of personal information.
  4. The right of Californians to access their personal information.
  5. The right of Californians to equal service and price, even if they exercise their privacy rights."4

[Page 1]

Definition of personal data. The CCPA defines personal information as information that "identifies, relates to, describes, is capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular consumer or household."5 This includes identifiers such as a "real name, alias, postal address, unique personal identifier, online identifier Internet Protocol address, email address, account name, social security number, driver’s license number, passport number, or other similar identifiers."6

The CCPA provides examples of covered "personal information," including protected classifications under federal or state law, commercial information, biometric information, Internet activity, geolocation data, audio-visual information, professional or employment information, education information, and similar information used to draw a profile about a consumer.7

However, the CCPA specifies that "publicly available information" is not included in this definition, which category includes, among other exceptions, information lawfully available from government records and consumer information that is "deidentified or aggregate consumer information."8 In this regard, the CCPA definition differs from that of the GDPR, as the CCPA extends its definition to include households, while the GDPR classifies applicable personal consumer information as individual only.

Applicability. The CCPA applies to any "business," including any for-profit entity that collects consumers’ personal data, does business in California, and satisfies at least one of the following thresholds: (1) has annual gross revenues in excess of $25 million; (2) possesses the personal information of 50,000 or more consumers, households, or devices; or (3) earns more than half of its annual revenue from selling consumers’ personal information.9

Obligations of businesses. The CCPA provides a number of obligations for businesses that collect the personal information of consumers, including requirements to: (1) implement processes to obtain parental or guardian consent for minors under 13 years and the affirmative consent of minors between 13 and 16 years to data sharing for purposes;10 (2) provide a "Right to Say No to Sale of Personal Information" and provide guidance on methods to opt out of the sale of that information via "reasonably accessible" means, such as links on business websites;11 (3) designate methods for submitting access requests including toll-free telephone numbers;12 (4) update privacy policies with new information, including a description of California residents’ rights;13 and (5) implement procedures to avoid requesting opt-in consent for 12 months after a California resident opts out.14

[Page 2]

Private remedies and public sanctions. Private remedies and public law enforcement sanctions are provided by the CCPA. Where notified businesses fail to cure violations within 30 days, the CCPA authorizes statutory damages in private civil actions for the data breach violations of $100 and $750 per California resident and per incident, or actual damages, whichever is greater, and any other relief a court deems proper, subject to the option of the California Attorney General’s Office to supersede the private actions and prosecute civil law enforcement actions against the violations.15

Where notified businesses fail to cure violations within 30 days, the CCPA authorizes civil penalties recoverable in actions in the name of the People of the State of California by the Attorney General under the Unfair Competition Law of up to $2,500 per violation, and under the CCPA of up to $7,500 per violation for intentional violations.16

B. California Attorney General Issues CCPA Regulations

1. California Consumer Privacy Act Regulations, 20 CCR § 999.300 Et Seq.

Civil Code section 1798.185 requires the Attorney General to adopt regulations addressing ten separate subject areas, including: updating the relevant categories of "personal information;" updating the definition of unique information identifiers; establishing exceptions needed to conform CCPA to federal or state law; establishing procedures for consumers to opt out of sales of personal information; adjusting the monetary thresholds for the CCPA definition of relevant "businesses;" and establishing rules and procedures for the required CCPA notices, financial incentive offerings, obtaining of the consumer’s own information, and verification of consumer requests, among other topics.

On October 11, 2019, the California Attorney General’s Office released its highly anticipated proposed regulations interpreting important aspects of the California Consumer Privacy Act, as required by the Act.17 Designated the "California Consumer Privacy Act Regulations," these new interpretations of the CCPA are codified at 20 CCR § 999.300 et seq. of the California Code of Regulations. On February 10, 2020 and March 11, 2020 certain modifications were proposed and revision made.

[Page 3]

On August 14, 2020, California’s Office of Administrative Law approved the final version of the implementing regulations. Recently, on October 12, 2020 the Department of Justice proposed a third set of modifications with a public comment period open until October 28, 2020. The third set of proposed modifications to the regulations focuses on the Notice of the Right to Opt-Out of Sale of Personal Information;18 Requests to Opt-Out;19 Authorized Agent20 and Notices to Consumers Under 16 Years of Age.21


A. California Consumer Financial Protection Law (CCFPL), Fin. Code § 90000 Et Seq.

On September 25, 2020 Governor Newsom signed AB 1864 enacting the California Consumer Financial Protection Law (CCFPL). The CCFPL shall be effective January 1, 2021. Below is an overview, not an exhaustive analysis, of the new law.

The newly enacted law renames the Department of Business Oversight (DBO), the Department of Financial Protection and Innovation (DFPI).

Legislative Intent. The purpose of the California Consumer Financial Protection Law shall be to promote consumer welfare, fair competition, and wealth creation in this state by doing all of the following:

  1. Promoting nondiscriminatory access to responsible, affordable credit on terms that reasonably reflect consumers’ ability to repay.
  2. Promoting nondiscriminatory access to consumer financial products and services that are understandable and not unfair, deceptive, or abusive.
  3. Protecting consumers from discrimination and unfair, deceptive, and abusive acts and practices in connection with financial practices and services.
  4. Promoting nondiscriminatory consumer-protective innovation in consumer financial products and services.22

Scope. The DFPI is modeled on the federal Consumer Financial Protection Bureau (CFPB) and the CCFPL is based, in part, on the federal Dodd-Frank Act Title X. The DFPI has broad jurisdiction over the financial services industry to protect consumers from "unlawful, unfair, deceptive, or abusive" acts.23 The definition of "unfair" and "deceptive" acts is to be interpreted consistent with Business and Professions Code section 17200 and case law thereunder,24 whereas "abusive" is to be interpreted consistent with Title X of the Dodd-Frank Act.25 While the CCPL defines "covered person" broadly26 there are important exemptions to coverage, including banks.27 The CCFPL contemplates the issuance of rules regarding registration requirements for covered persons.28 The CFCPL also contains a complaint response obligation by covered persons.29

[Page 4]

In addition, the DFPI will establish a Financial Technology Innovation Office to investigate and report on markets for consumer financial products and services, to conduct outreach and educational programs for underserved communities and to implement initiatives to promote innovation.30

Enforcement. The DFPI has broad power to bring administrative actions, or civil actions in state or federal court.31 The DFPI also has extensive investigatory and subpoena powers.32 The CCPL does not limit the power or authority of the Attorney General.33 Similarly, the enforcement authority of the district attorney or city attorney pursuant to Business and Professions Code section 17204 to bring unfair competition actions is not affected by the CCFPL and any remedies from such actions are cumulative of those set forth in the CCFPL.34

Remedies. The CCFPL contains a panoply of remedies, including, but not limited to, rescission, restitution, monetary relief and civil penalties.35 The DFPI may also, "after notice and an opportunity for a hearing, suspend or revoke the license or registration of a covered person or service provider."36

[Page 5]


A. California Supreme Court Holds Statewide Jurisdiction for District Attorneys

A county district attorney (represented by private contingent-fee counsel) brought a UCL action against pharmaceutical manufacturers alleging a conspiracy to prevent generic versions of prescription drugs from reaching the market. On appeal after the trial court denied defendants’ motion to strike, the Fourth Appellate District held that a county district attorney does not have extraterritorial jurisdiction to recover statewide monetary relief under the UCL, a view supported by the California Attorney General and the California District Attorneys Association (CDAA).37

The California Supreme Court reversed.38 The court held: "The People, as real party in interest and represented by the District Attorney, have asked this court to determine whether the District Attorney’s authority to enforce California’s consumer protection laws under the auspices of the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.) is limited to the county’s borders. We hold it is not: The UCL does not preclude a district attorney, in a properly pleaded case, from including allegations of violations occurring outside as well as within the borders of his or her county."39

The court first discussed the UCL, quoting at length from Business and Professions Code sections 17200 (definition of unfair competition), 17203 (trial court can award injunctive relief and issue "any orders . . . which may be necessary" including restitution), 17204 (which agencies can bring law enforcement actions for injunctive relief), 17205 (UCL remedies are cumulative to remedies provided by other statutes), 17206 (which agencies can seek civil penalties and the allocation of such penalties), and 17207 (civil penalty if a defendant violates a UCL injunction) and 17206 (civil penalties for engaging in unfair competition).

While the court noted that the legislative record does not expressly authorize district attorneys to collect extraterritorial civil penalties, "what the record does reveal is a clear trajectory toward greater and overlapping public enforcement at all levels of government."40 The court then went on to detail the various changes to the scope of the enforcement power of law enforcement agencies to bring actions for violations of the UCL. Law enforcement civil penalties were added in 1972.41 In 1974, city attorneys in cities with a population of more than 750,000 were given UCL law enforcement authority.42 Further expansions—in 1991 "to all county counsel" and in 1992 "to all city attorneys with the consent of their respective district attorneys."43 Only 2004’s Proposition 64 is an exception to "this trajectory of expanding UCL enforcement" and that proposition "had no effect on suits brought by the Attorney General, the district attorneys, or other public prosecutors."44

[Page 6]

The California Supreme Court concluded "[i]n sum, the text of the UCL grants broad civil enforcement authority to district attorneys, and this broad grant of authority is consistent with the statute’s purpose and history. We see no indication that in an enforcement action brought by a district attorney, the Legislature intended to limit civil penalties or restitution to the geographic boundaries of the district attorney’s county."45

The court did, however, note the concerns of the amici curiae, the California Attorney General and the CDAA, about the breadth of the district attorney’s enforcement power, but concluded: "Ultimately, the pros and cons of centralization or decentralization in the enforcement of California’s consumer protection laws is a matter of policy for the Legislature to decide."46

Contingent-fee arrangements in public UCL/FAL enforcement actions. The underlying issue in Abbott Laboratories is the concern over the recent phenomenon of private contingent-fee counsel approaching unwary district attorneys or city attorneys, seeking access to public UCL/FAL authority in order to bring actions the private attorneys cannot pursue today under Proposition 64. For example, in 2015 the district attorney for Trinity County (population 13,000) was convinced to hire private contingent-fee counsel—in disregard of AG and CDAA ethical norms—and then claimed sole authority to bring the Volkswagen diesel case for the entire state of California. The California Attorney General’s Office and CDAA have consistently held such contingent-fee compensation to be improper in public enforcement actions under longstanding ethical principles (see discussion below).

California District Attorneys Association and Attorney General policy on prosecutorial neutrality. The ethical norms of CDAA and the Attorney General prohibit the use of outside contingent-fee counsel in three types of public enforcement actions, including cases where ongoing business activity is challenged under statutes such as the UCL and FAL.

This policy is not based on due process concerns but rather on California legal and ethical principles adopted by the Supreme Court in County of Santa Clara v. Superior Court47 and People ex rel. Clancy v. Superior Court.48 Thus, CDAA’s ethical manual provides: "Prosecutorial neutrality is required in those civil law enforcement actions where important constitutional concerns are implicated, ongoing business activity is threatened, or there is a threat of criminal liability. Private contingent fee attorneys may not appropriately represent the People in such cases."49

[Page 7]

In this regard, the California Supreme Court has cited with approval the ABA Standards for Criminal Justice, Prosecution Function: "’It is clear that [case-by-case] fee systems of remuneration for prosecuting attorneys raise serious ethical and perhaps constitutional problems, are totally unacceptable under modern conditions, and should be abolished promptly.’"50

These California ethical standards are distinct from federal due process principles and related issues. For example, the Ninth Circuit held in American Bankers Management Co., Inc. v. Heryford51 that a contingent-fee counsel arrangement in a local prosecutor’s civil case did not violate federal due process requirements. However, the court acknowledged the separate California ethical standards for such matters and refused to merge the two sets of principles: "Similarly, the California Supreme Court’s decisions in People ex rel. Clancy v. Superior Court, 39 Cal. 3d 740 (1985), and County of Santa Clara v. Superior Court, 50 Cal. 4th 35 (2010), were based not on federal due process principles, but on ‘the courts’ general authority "to disqualify counsel when necessary in the furtherance of justice.’"52

B. The California Supreme Court Finds No Right to a Jury Trial in UCL and FAL Actions

The First District created a split among California courts when it held defendants in UCL public enforcement actions have a right to jury trial as to liability.53 Numerous appellate courts over the past forty years had held that UCL actions brought by the People are primarily equitable in nature and should be decided by a trial court, not a jury.54

The First District, however, found that "the ‘gist’ of the statutory causes of action asserted against [defendants] are legal, thereby giving rise to a right to jury trial. However, following the approach taken by the United States Supreme Court in Tull v. United States (1987) 481 U.S. 412 . . . we also conclude the right to jury trial extends only to the issue of liability and that the amount of statutory penalties, as well as whether any equitable relief is appropriate, is properly determined by the trial court."55

The California Supreme Court reversed.56 "For the reasons discussed hereafter, we conclude that the causes of action established by the UCL and FAL at issue here are equitable in nature and are properly tried by the court rather than a jury. As we explain, the legislative history and underlying purpose of the statutory provisions in question demonstrate that these very broadly worded consumer protection statutes were fashioned to permit courts to utilize their traditional flexible equitable authority, tempered by judicial experience and familiarity with the treatment of analogous business practices in this and other jurisdictions, in evaluating whether a challenged business act or practice or advertising should properly be considered impermissible under these statutory provisions."57

[Page 8]

The Court found there was no statutory right to a jury trial on the issue of civil penalties under either the UCL or the FAL explaining "the legislative history and legislative purpose of both statutes convincingly establish that the Legislature intended that such causes of action under these statutes would be tried by the court, exercising the traditional flexible discretion and judicial expertise of a court of equity, and not by a jury, including when civil penalties as well as injunctive relief and restitution are sought."58

Next, the court found that there is no California constitutional right to a jury trial when prosecutors seek both civil penalties and injunctive relief. When a nonseverable cause of action involves both legal and equitable aspects, courts apply the "gist of the action" test for purposes of a California constitutional right to jury trial analysis. "[I]n light of the particular nature of the civil causes of action authorized by the UCL and FAL, we conclude that the gist of a civil action under the UCL and FAL is equitable rather than legal in nature."59 Therefore, there is no right to a jury trial in a UCL/FAL case even when the prosecution seeks civil penalties in addition to traditional equitable relief.60

Lastly, the court found Tull distinguishable. The right to a jury trial under the U.S. Constitution’s Seventh Amendment only applies to federal court actions, not actions in state court. "[T]he right to jury trial in state court proceedings is governed by the provisions and judicial interpretation of each state’s own constitutional jury trial provision."61 Under Tull, federal courts apply a different test than California’s holistic "gist" test.62

C. California Attorney General Obtains $344 Million Judgment Against Johnson & Johnson

The California Attorney General filed suit in 2016 against Johnson & Johnson and its surgical products unit, Ethicon, Inc., alleging unfair competition and false advertising in the sale and promotion of its pelvic mesh product.63 On January 30, 2020, the San Diego Superior Court ordered Johnson & Johnson to pay nearly $344 million in civil penalties finding, after a nine-week bench trial, that it had, in fact, deceptively marketed its pelvic mesh device. The court found: "While J&J’s marketing vividly portrayed the benefits of the company’s products, J&J misstated, downplayed and omitted the risks of its pelvic mesh products. J&J knew the grievous risks and also knew full well why they should have disclosed them."64

[Page 9]

In addition to its extensive, 88-page Statement of Decision, which found both penalties and injunctive relief appropriate, the court included two detailed Appendices; a 12-page Penalty Count Appendix; and 24-page Violation Appendix. A copy of the Statement of Decision with Appendices is located on the Attorney General’s website. Unsurprisingly, Johnson & Johnson filed a notice of appeal on September 17, 2020.


A. California Supreme Court Applies Rule of Reason to Business-to-Business Non-Competes

In 2016, Ixchel entered into Collaboration Agreement with Forward to develop a new drug treatment containing DMF for the treatment of neurological diseases.65 The agreement allowed Forward to terminate the agreement at-will upon 60-day notice.66 At the same time, Forward was also in negotiations with Biogen to settle a patent dispute relating the DMF.67 This settlement required Forward terminate its agreement with Ixchel, which Forward did, resulting in Ixchel losing its ability to develop this treatment with Forward. It was also unable to find another partner.68 Ixchel filed suit in federal court against Biogen alleging, among other things, tortious interference with contractual relations.69 The complaint was dismissed and Ixchel sought review of its tort and UCL claims by the Ninth Circuit.70

In order for the Ninth Circuit to correctly review the district court’s dismissal, the California Supreme Court was asked to address the certified questions: 1) whether Biogen’s interference in Ixchel’s at-will contract with Forward must be independently wrongful; and 2) how Business and Professions Code section 16600 applies to the settlement provision requiring Forward to terminate its agreement with Ixchel.71

The California Supreme Court held: "tortious interference with at-will contracts requires independent wrongfulness and that a rule of reason applies to determine the validity of the settlement provision under Business and Professions Code section 16600."72

[Page 10]

The court first considered whether this business-to-business at-will contract was more closely aligned with interference with the performance of a contract or interference with a prospective economic relationship.73 The court concluded that at-will contracts of the kind at issue here were similar to prospective economic relationships. "Like parties to a prospective economic relationship, parties to at-will contracts have no legal assurance of future economic relations."74 As such, the "plaintiff must allege that the defendant engaged in an independently wrongful act."75

Next, the court considered whether section 16600 applies to the dispute and if so, did it form the basis of the independent wrong required to state a claim. The court quickly dispensed with the first issue. "As an initial matter, we agree with the parties that section 16600 applies to business contract."76 Ixchel argued that the settlement agreement’s requirement that Forward terminate the Collaboration Agreement was per se void as it violated section 16600.77 Section 16600 states "Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." The court acknowledged the broad language of the statute but, reviewing the statutory history, found section 16600 "is best read not to render void per se all contractual restraints on business dealings, but rather subject such restraints to a rule of reason."78

After the Supreme Court issued its opinion, the Ninth Circuit, in an unpublished decision, applied the Supreme Court’s guidance, finding that the district court had correctly held that for Ixchel to have stated a claim for tortious interference with an at-will contract, Biogen would have had to have committed an independently wrongful act.79 The Ninth Circuit affirmed the district court’s ruling that the termination provision in Biogen’s settlement agreement with Forward was not an unreasonable restraint of trade in violation of section 16600.


The Second District reversed a $3.75 million judgment in favor of Flagship Theatres of Palm Desert, LLC (Flagship) in the ongoing litigation between Flagship and Cinemark USA, Inc. and its subsidiary Century Theatres, Inc. (collectively Century).80 The case concerns an antitrust dispute arising from the licensing of motion pictures to movie theatres. Flagship alleged, and a jury agreed, that "Century had engaged in a practice known as ‘circuit dealing’ by entering into licensing agreements with film distributors that covered licenses to play films not just at [a theatre owned by Century], but at multiple other Century-owned theatres as well, and using these agreements to pressure distributors into refusing to license films to [a theatre owned by Flagship]."81

[Page 11]

The court relied heavily on its analysis of federal law, including United States v. Paramount Pictures,82 as well as California law, including Redwood Theatres, Inc. v. Festival Enterprises, Inc.,83 concerning circuit dealing and vertical restraints concluding a review of the case law did not support the argument that "all multi-theatre license agreements under all circumstances are per se illegal under federal (or California) antitrust law."84 Rather, "[b]ased on the forgoing survey of relevant federal and California law and film industry developments, we conclude that the trial court correctly required Flagship to show actual net harm to competition under the rule of reason in order to prevail on its non-monopoly circuit dealing claim."85 The court went on to find that "the connection between the rule of reason and vertical restraints in modern antitrust law—a connection that, since Redwood discussed it, has graduated from a trend to a fundamental tenet—is key to selecting the proper analytical framework for non-monopoly circuit-dealing claims."86 Thus, to prove a non-monopoly circuit-dealing claim not only must there be evidence that there were agreements covering more than one theatre, "but that such agreements caused net harm to competition, as determined by the balancing of anti and procompetitive effects under the rule of reason."87

Given this analytical framework, the court proceeded to evaluate the sufficiency of the evidence presented to support the jury’s findings. The court took issue with the jury instructions concerning the relevant market.88 It ultimately found the evidence to support a finding of competitive harm in the relevant market region, as defined by either party, was insufficient to support the verdict.89


A. No Private Right of Action Under California’s ARL

The Sixth Appellate District has held that there is no private right of action under California’s automatic renewal statutory scheme.90 Citing Lu v. Hawaiian Gardens Casino, Inc.,91 the court observed that a private party can only sue for a violation of a statute if that statute expressly allows it.92

[Page 12]

Plaintiff argued that Business and Professions Code section 17604 contemplated a private right of action because, while the statute makes clear that there shall be no criminal sanctions for violations of the auto renewal law, "all available civil remedies that apply to a violation of this article may be employed."93 The court ruled that "Plaintiff’s interpretation is not unreasonable."94 There must be "clear, understandable, unmistakable" language reflecting a legislative intent to create such a private right.95 "A clear indication means the text cannot be reasonably susceptible of competing interpretations" and the text in this case was found to be susceptible to different interpretation.96

However, the court provided hope to future litigants that a claim could be stated for a violation of Business and Professions Code § 17200 if the plaintiff could meet the standing requirement for private actions by pleading actual harm was caused by the violation.97 In doing so, the court disagreed with federal cases which found the statute’s unconditional gift provision alone had conferred standing.98 Because the plaintiff in Mayron had not alleged financial harm resulting from the violation of law, and had not shown how he would amend the complaint, the court found no abuse of discretion in the lower court’s denial of leave to amend.99


Arbitration after AT&T Mobility, LLC v. Concepcion.100 The U.S. Supreme Court’s decision in AT&T Mobility, LLC v. Concepcion, holding that the Federal Arbitration Act101 preempts conflicting state law, has created a formidable barrier for many UCL or FAL actions challenging the unfair trade practices or employment policies of defendants using contracts with mandatory arbitration clauses.

Since Concepcion, the California Supreme Court has recognized in Iskanian v. CLS Transportation102 and elsewhere the broad preemptive effect of the FAA and has abrogated several California doctrines limiting mandatory arbitration. However, the Court has also demonstrated a commitment to identifying limits to Concepcion. As a result, the relationship between arbitration provisions and contract law principles (such as unconscionability) remains the subject of extensive litigation.

[Page 13]

Following Iskanian and Sanchez, California plaintiffs now often seek to use alternative legal mechanisms, including the Labor Code Private Attorney General Act and unconscionability principles, in an attempt to reach beyond arbitration clauses and bring disputes over consumer contracts and employment practices before courts instead of arbitrators.

Aftermath of Sanchez v. Valencia Holding Co.103 In 2015, the California Supreme Court delivered its widely anticipated opinion in Sanchez v. Valencia Holding Co., upholding the arbitration clause in the industry-standard auto purchase/sale contract but emphasizing that unconscionability principles remain applicable to all California contracts and must be applied to each set of facts on a case-by-case basis. The Court held that Concepcion prohibits the use of unconscionability principles or other state doctrines to prohibit whole categories of arbitration (such as class-action arbitration provisions) or to otherwise interfere with the FAA’s policy promoting arbitration. But while avoiding such categorical prohibitions or interference, California courts must undertake case-by-case factual analysis of any allegations of unconscionability to determine whether unconscionable contract terms are present.

FAA principles and the California Supreme Court today. The California Supreme Court’s commitment to the continuing viability of contract principles such as unconscionability, and its mandate that such cases be reviewed on their specific facts, have permitted some latitude to plaintiffs challenging certain unfair arbitration terms, so long as those contract principles are not applied so as to discriminate against whole categories of arbitration or unduly interfere with the fundamental attributes of arbitration.104

Many commentators see support within the California Supreme Court for carving out exceptions to the broad sweep of Concepcion.105 While Concepcion has certainly changed arbitration doctrine in California, and while challenges to protected aspects of arbitration will often fail, it appears that the California Supreme Court will continue to seek limits on the scope of the FAA and Concepcion. Examples include:

PAGA actions: Iskanian v. CLS Transportation.106 The Supreme Court held that Concepcion impliedly overruled Gentry v. Superior Court,107 and thus mandatory arbitration provisions must be enforced even when they require arbitration of wage-and-hour issues protected by California’s labor laws. However, the Court further ruled that an arbitration agreement requiring the employee to give up the right to bring representative actions under the Labor Code Private Attorney General Act of 2004108 (PAGA) is against public policy and unenforceable.

[Page 14]

By carving out PAGA representative actions from the realm of private arbitration governed by the FAA, the Iskanian opinion has prompted a wave of plaintiffs’ lawsuits and class actions utilizing this exception in employment and wage-and-hour disputes.109

Public injunctive relief: McGill v. Citibank, N.A.110 Analyzing an arbitration provision purporting to bar bank employees from seeking public injunctive relief, the California Supreme Court held that such relief remains available to private plaintiffs under the UCL, FAL and CLRA. The Court ruled: "[I]nsofar as the arbitration provision here purports to waive McGill’s right to request in any forum such public injunctive relief, it is invalid and unenforceable under California law."111

The Court rejected Citibank’s claim that the FAA necessarily preempts California’s public injunctive remedy. By including the FAA’s "saving clause" preserving traditional contracts defenses, Congress intended "’to make arbitration agreements enforceable as other contracts, but not more so.’"112 The Court thus held that "the FAA does not require enforcement of a provision in a predispute arbitration agreement that, in violation of generally applicable California contract law, waives the right to seek in any forum public injunctive relief under the UCL, the CLRA, or the false advertising law."113

The following lists some of the more prominent UCL appellate opinions applying these principles to recent factual situations in the post-Concepcion legal environment:

Arbitration Clauses Enforced:

Sanchez v. Valencia.114 (See discussion, supra.)

Iskanian v. CLS Transportation.115 (See discussion, supra).

Hunter v. Kaiser Foundation Health Plan, Inc.116 Plaintiff brought a class action against Kaiser and its debt collector for violations of California and federal law, including the FDCPA, UCL and the Rosenthal Act, based on the defendants’ debt collection practices.117 The District Court found the contracts’ arbitration clauses enforceable, finding that federal law either preempted California law or, if not preempted, the contract satisfied the requirements of California Health and Safety Code Section 1363.1.118 The court did find, however, certain provisions within the arbitration clause relating to attorney’s fees and cost splitting unconscionable, but determined that these provisions could be severed.119

[Page 15]

Arbitration Clauses Rejected:

McGill v. Citibank, N.A.120 (See discussion, supra).

Blair v. Rent-A-Center, Inc.121 In a class action against a rent-to-own furniture company alleging excessive prices violating the UCL, the CLRA and state anti-usury law, the Ninth Circuit held the contract’s arbitration term invalid and unenforceable since the FAA does not preempt the rule of McGill v. Citibank, N.A.122 that a waiver of the right to seek public injunctive relief is unenforceable. "In sum, the McGill rule is a generally applicable contract defense derived from long-established California public policy. It is a ‘ground[ ] . . . for the revocation of any contract’ and falls within the FAA’s saving clause at the first step of the preemption analysis."123 The plaintiff class thus had the right to a trial on the public injunction claim here.

OTO, LLC v. Koh.124 The First Appellate District held "waiver of the various employee-friendly wage claim provisions of the Labor Code does not make an arbitration agreement unconscionable so long as the resulting arbitration procedure is ‘affordable and accessible,’" as it was here.125 The California Supreme Court reversed this ruling.126 The California Supreme Court found both procedural and substantive unconscionability after conducting a detailed analysis of the terms of the agreement and the circumstances of its execution.

Mejia v. DACM Inc.127 Plaintiff brought a putative class action alleging violations of the CLRA and the UCL, among other statutes, stemming from the failure to provide required financial information relating to the sale of a motorcycle. The Fourth District found that California, not Utah, law applied to the determination of the enforceability of the arbitration clause concluding that plaintiff met his burden to show "California had a materially greater interest than Utah in the determination of the ‘particular issue’ involved: the enforceability of an arbitration provision which bars [him] from seeking in any form public injunctive relief."128 The court found that McGill applied, notwithstanding defendant’s argument that the plaintiff sought a private not public injunction. The defendant claimed the "arbitration provision allows [plaintiff] to pursue his claim for a public injunction in court after arbitration of all arbitrable claims."129 The court found this argument for an implied exception for seeking a public injunction to be without merit and affirmed the lower court’s ruling that the arbitration clause was unenforceable under McGill.130

[Page 16]


National Institute of Family and Life Advocates (NIFLA) v. Becerra.131 In an opinion with potential impact on UCL enforcement of state-required affirmative disclosures to consumers, the Supreme Court examined a state law requiring pro-life pregnancy centers to make disclosures about available reproductive services including abortion. The Court held that even under the Zauderer intermediate scrutiny standard, the disclosures required by California would violate the First Amendment as unduly burdensome compelled speech. Exempting some clinics from the disclosure requirements fit poorly with the law’s objective of providing low-income women with information about state services. As a result, California’s law was "underinclusive" and thus defective under the First Amendment.132

Some observers have suggested that a broad reading of the Supreme Court’s opinion in NIFLA could jeopardize the constitutionality of other state-mandated affirmative disclosures, perhaps including Proposition 65 notices and other forms of required disclosure. But the Ninth Circuit has now identified substantial limits on the scope and applicability of the NIFLA opinion:

Interpipe Contracting, Inc. v. Becerra.133 Here the court distinguished NIFLA, suggesting limits to its applicability: "First, National Institute expressly did not reach the issue of viewpoint discrimination. Second, the law there was underinclusive because exempting some clinics from the information requirement fit poorly with its objective of "providing low-income women with information about state-sponsored services."134

CTIA—The Wireless Association v. Berkeley.135 In CTIA, the Ninth Circuit sustained a district court’s refusal to issue a preliminary injunction against a Berkeley ordinance requiring cell phone retailers to advise prospective purchasers of the dangers of carrying cell phones too close to the body. "But NIFLA plainly contemplates applying Zauderer to ‘purely factual and uncontroversial disclosures about commercial products.’ NIFLA, 138 S. Ct. at 2376 (emphasis added). Berkeley’s ordinance falls squarely within this category . . . Based on the foregoing, we conclude that CTIA has little likelihood of success on its First Amendment claim that the disclosure compelled by the Berkeley ordinance is unconstitutional, and thus the ordinance meets constitutional standards under the intermediate scrutiny of Zauderer."136

[Page 17]

National Association of Wheat Growers v. Becerra.137 Proposition 65 prohibits any person in the course of doing business from knowingly and intentionally exposing anyone to the listed chemicals without a prior "clear and reasonable" warning.138 This prohibition is supposed to take effect 12 months after the chemical has been listed as a chemical known to the state to cause cancer by California’s Office of Environmental Health Hazard Assessment (OEHHA). Two specific warning labels contained in state regulations are deemed per se clear and reasonable. Glyphosate, the chemical at issue, had been classified as "probably carcinogenic" by the International Agency for Research on Cancer and placed on the state’s Proposition 65 list.139

The National Wheat Growers Association sought a permanent injunction enjoining the California Attorney General from enforcing the Proposition 65 warning requirement of California Health and Safety Code Section 25249.6 to glyphosate.140 The National Association of Wheat Growers argued that the warning requirement was a violation of its First Amendment right because it was unjustified compelled speech.141

As an initial matter, the court found the dispute ripe for disposition. "Thus, plaintiffs, who have stated they intend to give no warning based on their constitutional right against compelled speech, face a credible threat of enforcement as a result of exercising such right, regardless of the enactment of the safe harbor for glyphosate."142

Moving to the merits of the analysis, the court had to decide which level of First Amendment scrutiny to apply: intermediate scrutiny articulated in Central Hudson Gas & Electric Corp. v. Public Service Commission143 or the lower standard of Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio.144 The court, citing NIFLA, concluded that if the compelled speech was not purely factual and uncontroversial it would apply the intermediate standard in Central Hudson.145 Plaintiff argued, and the court agreed, that the warning requirement was not purely factual and uncontroversial because various other agencies, such as the EPA and WHO, concluded that there was insufficient evidence that glyphosate was a carcinogen.146 Acknowledging the substantial interest of the state in protecting the public from carcinogens, the court nevertheless granted the permanent injunction against enforcement of the warning label requirement, finding that "misleading statements about glyphosate’s carcinogenicity, and the state’s knowledge of that purported carcinogenicity, do not directly advance that interest."147

[Page 18]

The California Attorney General filed an appeal in September 2020.


A. Robocalling Prohibition Under Parallel Federal and California Statutes Clarified

Unsolicited telemarketing calls, including those using automatic telephone dialing systems ("robocalling"), are regulated under federal law by the Telephone Consumer Protection Act of 1991 (TCPA)148 and the federal "Do-Not-Call" Implementation Act of 2003,149 and under California law by Business and Professions Code sections 17590—17594, entitled "Unsolicited and Unwanted Telephone Solicitations," which harmonizes California law with the federal regulations. The TCPA and California law have now been held to "[forbid] calls using an automated telephone dialing system (ATDS), commonly referred to as a robodialer."150 The federal "Do Not Call" regulation prohibits calls of specified types to numbers registered on the federal "Do Not Call" list maintained by the Federal Trade Commission.

California’s regulations addressing unsolicited telemarketing calls, including the requirements of the state’s "Do Not Call" list, were amended in 2004 to coordinate the California regulatory scheme with the federal "Do-Not-Call" Implementation Act of 2003. California’s Business and Professions Code sections 17590—17594, entitled "Unsolicited and Unwanted Telephone Solicitations," conforms California law to the federal regulations, including the definition of robodialing as addressed in Duguid. The revised state law also adopts all California phone numbers on the federal registry as the California "do not call" list, permitting Californians to take advantage of the free federal registry and its protections, and separately prohibits specified unlawful and deceptive practices by telemarketers.151

The United States Supreme Court has accepted for review the following question arising out of the Duguid case: "Whether the definition of ATDS in the TCPA encompasses any device that can ‘store’ and ‘automatically dial’ telephone numbers, even if the device does not ‘us[e] a random or sequential number generator.’" Resolving the question of what constitutes an ATDS for purposes of the TCPA will have a tremendous impact on both businesses and consumers. Oral argument occurred on December 8, 2020.

[Page 19]



1. Colleen E. Huschke is Deputy District Attorney in the Consumer Protection Unit of the San Diego County District Attorney’s Office.

The views expressed here are those of the author and do not necessarily reflect those of the San Diego District Attorney’s Office.
I am grateful to Thomas Papageorge, Head of the Consumer Unit of the San Diego County District Attorney’s Office, for his guidance and use of his prior update as a foundation for this year’s memorandum.

2. Regulation 2016/679 (Apr. 27, 2016).

3. Cal. Civ. Code § 1798.100 et seq.; Stats. 2018, ch. 55, § 3.

4. Stats. 2018, ch. 55, § 2(i).

5. Cal. Civ. Code § 1798.140(o)(1).

6. Id. § 1798.140(o)(1)(A).

7. Id. § 1798.140(o)(1)(A-K).

8. Id. § 1798.140(o)(2).

9. Id. § 1798.140(c).

10. Id. § 1798.120(d).

11. Id. § 1798.102.

12. Id. § 1798.130(a).

13. Id. § 1798.135(a)(2).

14. Id. § 1798.135(a)(5).

15. Id. § 1798.150.

16. Id. § 1798.155.

17. Id. § 1798.185.

18. Id. § 999.306.

19. Id. § 999.315.

20. Id. § 999.326.

21. Id. § 999.332.

22. Cal. Fin. Code § 9000(b).

23. Id. § 90003(a)(1).

24. Id. § 90009(c)(1).

25. Id. § 90009(c)(3).

26. Id. § 90005(e).

27. Id. § 90002.

28. Id. §§ 90009, 90009.5.

29. Id. § 90008.

30. Id. § 90006(d)(1)-(4).

31. Id. § 90006(b)(1)-(2).

32. Id. § 90011.

33. Id. § 90017.

34. Id. § 90017(e).

35. Id. § 90012(b)(1)-(8).

36. Id. § 90015(f).

37. Abbott Laboratories, Inc. v. Superior Court, 24 Cal. App. 5th 1 (2018).

38. Abbott Laboratories, Inc. v. Superior Court, 9 Cal. 5th 642 (2020).

39. Id. at 648-649.

40. Id. at 657.

41. Id.

42. Id.

43. Id.

44. Id. at 658.

45. Id.

46. Id. at 663.

47. 50 Cal. 4th 35 (2010).

48. 3 Cal. 3d 740 (1985).

49. CDAA, Professionalism (2016), Ch.XI, Part IX (citing County of Santa Clara v. Superior Court, 50 Cal. 4th 35 (2010) (emphasis added)); see also People ex rel. Clancy v. Superior Court, 3 Cal. 3rd 740 (1985).

50. County of Santa Clara, 50 Cal. 4th at 49.

51. 885 F.3d 629 (9th Cir. 2018).

52. Santa Clara, 50 Cal.4th at 48 (quoting Clancy, 50 Cal. 3d at n. 12).

53. Nationwide Biweekly Administration, Inc. v. Superior Court, 24 Cal. App. 5th 438 (2018).

54. See, e.g., People v. First Federal Credit Corp., 104 Cal. App. 4th 721 (2002); People v. Bestline Products, Inc., 61 Cal. App. 3d 879 (1976); People v. Witzerman, 29 Cal. App. 3d 169 (1972); see also People v. Superior Court (Kaufman), 12 Cal. 3d 421, 431, n. 9 (1974).

55. Nationwide Biweekly, 24 Cal. App. 5th at 470-471.

56. Nationwide Biweekly Administration, Inc. v. Superior Court, 9 Cal. 5th 279 (2020).

57. Id. at 292.

58. Id. at 297.

59. Id. at 322.

60. Id. at 327.

61. Id. at 330.

62. Id.

63. People of the State of California v. Johnson & Johnson et al., No. 3702016-00017229-CU-MC-CTL (San Diego Supr. Ct.).

64. Statement of Decision 46, People of the State of California v. Johnson & Johnson et al., No. 3702016-00017229-CU-MC-CTL (San Diego Super. Ct. Jan. 30, 2020).

65. Ixchel Pharma, LLC v. Biogen, Inc. 9 Cal. 5th 1130, 1138 (2020).

66. Id.

67. Id.

68. Id. at 1139.

69. Id. at 1140.

70. Id.

71. Id. at 1137.

72. Id.

73. Id. at 1140-1141.

74. Id. at 1147.

75. Id.

76. Id. at 1150.

77. Id.

78. Id.

79. Ixchel Pharma, LLc v. Biogen, Inc., 821 Fed. Appx. 897 (2020).

80. Flagship Theatres of Palm Desert, LLC v. Century Theatres, Inc., 55 Cal. App. 5th 381 (2020).

81. Id. at 388-89.

82. 334 U.S. 131 (1948).

83. 200 Cal. App. 3d 687 (1988).

84. Flagship Theatres, 55 Cal. App. 5th at 403.

85. Id. at 410.

86. Id.

87. Id. at 413.

88. Id. at 424-15.

89. Id. at 426.

90. Mayron v. Google LLC, 54 Cal. App. 5th 566 (2020).

91. 50 Cal. 4th 592 (2010).

92. Id. at 572.

93. Id. at 571.

94. Id.

95. Id. at 571.

96. Id. at 572.

97. Id. at 574-77.

98. Id. at 572

99. Id. at 576-77.

100. 563 U.S. 333 (2011).

101. 9 U.S.C. § 1 et seq.

102. 59 Cal. 4th 348 (2014).

103. 61 Cal.4th 899 (2015).

104. See, e.g., McGill v. Citibank, N.A., 2 Cal. 5th 945 (2017); Carlson v. Home Team Pest Defense, Inc., 239 Cal. App. 4th 619 (2015).

105. See, e.g., Richard W. Novotny, Gauging the Future of Iskanian and FAA Preemption in California, Los Angeles Lawyer, Mar. 2015, at 10.

106. 59 Cal. 4th 348 (2014).

107. 42 Cal. 4th 443 (2007).

108. Cal. Labor Code §§ 2698 et seq.

109. See, e.g., Williams v. Superior Court, 237 Cal. App. 4th 642 (2015); Franco v. Arakelian Enterprises, Inc., 234 Cal. App. 4th 937 (2015).

110. 2 Cal. 5th 945 (2017).

111. Id. at 961 (emphasis in original).

112. Id. at 962.

113. Id. at 969 (emphasis in original); see also Blair v. Rent-A-Center, Inc., 928 F. 3d 819 (9th Cir. 2019).

114. 61 Cal. 4th 899 (2015).

115. 59 Cal. 4th 348 (2014).

116. 434 F. Supp. 3d 764 (N.D. Cal. 2020).

117. Id. at 767.

118. Id. at 774.

119. Id. at 780.

120. 2 Cal. 5th 945 (2017).

121. 928 F. 3d 819 (9th Cir. 2019).

122. 2 Cal. 5th 945 (2017).

123. Blair, 928 F.3d at 828.

124. 14 Cal. App. 5th 691 (2017).

125. Id. at 710.

126. OTO, LLC v. Koh, 8 Cal. 5th 11 (2019).

127. 54 Cal. App. 5th 691 (2020).

128. Id. at 699-700.

129. Id. at 705 (emphasis added).

130. Id. at 706.

131. 138 S. Ct. 2361 (2018).

132. Id. at 2375.

133. 898 F. 3d 879 (9th Cir. 2018), cert denied 139 S. Ct. 2744 (2019).

134. Id. at 902 n.17.

135. 928 Fed. 3d 832 (9th Cir. 2019).

136. Id. at 848-849.

137. 468 F. Supp.3d 1247 (2020).

138. Id. at 1252.

139. Id.

140. Id. at 1254.

141. Id. at 1256-57.

142. Id. at 1255.

143. 447 U.S. 557 (1980).

144. 471 U.S. 626 (1985).

145. National Association of Wheat Growers, 468 F. Supp. 3d at 1258.

146. Id. at 1264.

147. Id.

148. 47 U.S.C. § 227.

149. 6 C.F.R. § 310.4 et seq.

150. Duguid v. Facebook, Inc., 926 F.3d 1146 (9th Cir. 2019).

151. Cal. Bus. & Prof. Code § 17590.

Forgot Password

Enter the email associated with you account. You will then receive a link in your inbox to reset your password.

Personal Information

Select Section(s)

CLA Membership is $99 and includes one section. Additional sections are $99 each.