July 6, 2020
On June 25, 2020, the California Supreme Court issued its ruling in Abbott Laboratories v. Superior Court of Orange County, answering the question whether local district attorneys may enforce California’s unfair competition law (UCL) outside their county’s borders. The Court answered in the affirmative, allowing district attorneys to seek statewide relief for consumers.
The case originated when several pharmaceutical companies allegedly entered into agreements to delay the market debut of generic versions of Niaspan, a prescription drug used to treat high cholesterol. As a result, people who needed the drug paid substantially higher prices for Niaspan than they would have if the generic version had been available without improper delay. The Orange County District Attorney brought an action against Abbott Labs and several other companies (collectively, Abbott). The District Attorney alleged that Abbott had violated the UCL and sought an injunction, restitution, and civil penalties. Abbott, in turn, filed a motion to strike “claims for restitution and civil penalties to the extent that those are not limited to Orange County.”
The Supreme Court upheld the District Attorney’s ability to pursue statewide relief. The Court held that while the text of the UCL does not explicitly address the geographic scope of a district attorney’s authority to seek civil penalties and restitution, ultimately the best reading of the statute implicitly permits statewide DA actions, for three reasons.
First, the broad language of the UCL contains no geographic limitation, nor does the legislative history raise any concern about the geographic scope of relief sought in an enforcement action by a district attorney.
Second, the UCL allocates one-half of civil penalties in any action by the Attorney General to the county in which the judgment was entered; since the Legislature did not allocate UCL penalties exclusively by the place in which the violations occurred, it seems to have contemplated that one county could bring an action governing recovery in a different county.
Third, the UCL distinguishes between counties “in which the violation occurs” and counties “where the injunction was issued,” indicating that violations and injunctions may occur in different places.
Further, the court observed from the legislative record of the UCL that there is a clear trajectory toward greater and overlapping public enforcement at all levels of government.
In sum, the Court found in the penumbra of the UCL a regime that permits DAs to seek restitution and penalties in other counties in addition to their own.
The pharmaceutical companies contended such a reading would impede the “hierarchical structure of the prosecutorial function within California’s executive branch” — meaning the Attorney General’s authority would be affected. The Court was not persuaded. Instead, the Court opined that “the public enforcement authority that the UCL grants to district attorneys does not constrain the Attorney General’s prerogative to intervene or take control of a civil enforcement action that, in the Attorney General’s view, does not adequately serve the public interest.” Additionally, the Attorney General must be served with all appellate briefs or petitions in a UCL matter, confirming their supervisory role. Thus, allowing the DAs to seek UCL relief statewide does not undermine the Attorney General’s constitutional role as California’s chief law enforcement officer.
The Attorney General and the California District Attorneys Association, both appeared as amici curiae in support of the Defendant. The Attorney General argued that a statewide penalties and restitution regime could create conflicts of interest between statewide victims and local constituencies over penalties, with counties competing to settle first and claim the proceeds. Further, the AG felt the broader availability of statewide relief would “endanger California’s ability to credibly lead the way in matters of national or international prominence.” The AG also wrote that the historical “geographic limitations on district and city attorneys’ UCL authority have formed the basis for decades of interoffice cooperation.” The California District Attorneys Association echoed those concerns. The AG and CDAA worried that the net effect would be to hamper effective statewide enforcement of the UCL rather than enhance it.
The Court addressed the arguments of the amici curiae, but did not share their concerns. First, the court reasoned that restitution is paid to victims, not the county, and thus does not create the same “race to file” incentive. Second, all of the concerns were presented in the abstract, with the Attorney General offering a single example with no apparent negative effects. The court observed that the Legislature considered the concerns of the amici curiae, but reasonably could have believed that an overlapping scheme of decentralized enforcement has potential advantages. The Court also noted that this case and the voices of the amici curiae could “induce the Legislature to consider amending the UCL to add procedures to minimize the risks of conflicting enforcement efforts.”
Ultimately, the case affirmed the decentralization of enforcement authority granted by the Legislature, and held that it is within the district attorney’s authority to seek statewide civil penalties and restitution under the UCL.
It is clear that the decision was a close call. The textual and historical evidence mustered by the Court in support of its interpretation is far from conclusive. On the other hand, the clarity provided by the Court’s decision may well compel the Attorney General and district attorneys (and affected city attorneys) — if not the legislature — to work out a new system of checks and restraints that will at once provide increased enforcement activity and avoid conflicts of interest.