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Consumer Class Action Complaint Against Walgreens

February 6, 2024/in False Advertising /by taulersmith

Tauler Smith LLP recently filed a consumer class action complaint against Walgreens because the retail behemoth is allegedly selling Phenazopyridine Hydrochloride (Phenazo), an unapproved over-the-counter UTI drug, to unsuspecting customers in violation of California’s consumer protection laws. The class action suit, which was filed in federal court in California, alleges that Walgreens uses misleading advertising to deceptively sell Phenazo to treat urinary tract infections even though the drug is unsafe, ineffective, and unlawful to market to consumers.

For more information about the Walgreens UTI drug lawsuit, keep reading this blog.

What Is the FDA Approval Process for Over-the-Counter Drugs?

The U.S. Food and Drug Administration (FDA) regulates the safety and effectiveness of prescription and nonprescription drugs sold in the United States. Before over-the-counter drugs like Phenazo can be sold to consumers, they must be approved by the FDA. This can happen in one of two ways:

The drug goes through the standard FDA approval process, which involves submitting a New Drug Application (NDA).
The drug receives a drug monograph.

A drug monograph is a process that drug manufacturers can utilize to get their products approved for specific therapeutic uses in a particular category. In other words, a drug monograph is a way around the requirement for FDA approval as a finished drug.

New Drug Applications

Under authority granted by the Federal Food, Drug, and Cosmetic Act (FDCA), the FDA typically requires drug manufacturers to submit a New Drug Application (NDA) or an Abbreviated New Drug Application (ANDA) and provide clinical trial data to demonstrate the safety of a new drug before they can market it as a finished drug product.

When the FDA requested data on the safety and efficacy of all OTC urinary antiseptics/analgesics not yet reviewed by the FDA, the request included Phenazopyridine Hydrochloride (Phenazo). In this notice, the FDA stated that Phenazo had not been the subject of an approved NDA, meaning that the UTI drug’s safety was not demonstrated to the satisfaction of the federal regulatory agency.

OTC Drug Monographs

An OTC drug monograph allows drug manufacturers to lawfully market certain over-the-counter drugs based on the safety of a drug’s active ingredients. The monograph process involves a “rule book” that defines specific conditions under which an OTC drug may be considered safe and effective in a given therapeutic category. Under this approach, a manufacturer does not need FDA approval to bring the nonprescription drug to market because only certain ingredients are being marketed as safe for a particular use within a particular therapeutic drug category.

What Is Phenazopyridine?

Phenazopyridine Hydrochloride (Phenazo) is an over-the-counter drug used to treat symptoms of urinary tract infection (UTI), including urinary pain, burning, and discomfort. UTI is a medical condition that disproportionately impacts women, particularly women in underserved communities.

Millions of Americans trust pharmacies to sell them safe, effective, and lawful remedies for their illnesses, including urinary tract infections. For these consumers, pharmacies are the primary point of purchase for over-the-counter drugs, as well as the primary source of information for over-the-counter medications. Reliance on OTC medications is heightened in underprivileged communities where residents are more vulnerable to illness and health concerns due to lack of access to medical care.

Phenazo is marketed and advertised as a drug for urinary tract infections – but the UTI drug has not been approved by the FDA, which means that stores like Walgreens should not be selling it as an over-the-counter treatment.

Walgreens Sued for False Advertising of UTI Drug Phenazo

Argueta v. Walgreens Co. is a high-profile consumer class action lawsuit against the Walgreens Company, which operates the second-largest pharmacy store chain in the United States. The lawsuit, which was filed in the U.S. District Court for the Eastern District of California, accuses the pharmacy of unlawfully selling Phenazopyridine Hydrochloride (Phenazo) over the counter and marketing the misbranded drug as a finished drug product called “Urinary Pain Relief.”

The Walgreens class action alleges that Phenazo has never been approved by the FDA under the NDA/ANDA process, nor has Phenazo ever been brought to market under an established OTC drug monograph. In other words, the drug is allegedly being marketed and sold by Walgreens in violation of California consumer fraud laws.

Walgreens Accused of Violating California’s Unfair Competition Law (UCL)

Walgreens has been accused of violating California’s Unfair Competition Law (UCL) by selling the unapproved OTC drug Phenazo. The UCL is a far-reaching consumer protection statute that applies to many different kinds of unethical business practices, including hidden shipping insurance surcharges, false reference pricing, and deceptive advertising of over-the-counter drug products. The statute explicitly prohibits any “unlawful, unfair or fraudulent business act or practice,” as well as “unfair, deceptive, untrue or misleading advertising.” The basis for the class action lawsuit against Walgreens is that the pharmacy allegedly sells the Phenazo product in a manner that is likely to deceive the public about whether the drug is approved by the FDA and therefore lawful to sell over the counter.

Importantly, the UCL is a strict liability statute. This means that the plaintiff in a UCL claim does not need to show that the defendant intentionally or negligently engaged in fraudulent business practices; all that is needed is a showing that the unfair practice or act occurred. In other words, anyone who purchased an over-the-counter UTI drug product from Walgreens may be entitled to multiple forms of compensation, including restitution, statutory damages, and punitive damages.

Did You Purchase a UTI Drug at Walgreens? Call the California Consumer Protection Lawyers at Tauler Smith LLP

The California consumer protection lawyers at Tauler Smith LLP have filed a class action lawsuit against Walgreens over the sale of Phenazopyridine as an over-the-counter treatment for urinary tract infections. The proposed class of consumers eligible for the lawsuit includes anyone who purchased the Walgreens UTI product in California during the last four (4) years.

Call 310-590-3927 or email us to schedule a free consultation.

Tauler Smith LLP Successfully Defends THC Potency Class Action

January 20, 2024/in Successes /by taulersmith

A California court granted Tauler Smith LLP’s motion to dismiss without leave to amend in a deceptive pricing class action alleging mislabeling of THC potency. The plaintiffs specifically alleged that the cannabinoid content in the defendant’s infused joints did not match what was on label. Tauler Smith’s skilled Los Angeles class action defense attorneys filed a demurrer to the class action based on the discrepancy between the plaintiffs’ purchases and the potency tests that formed the basis of plaintiffs’ claims.

To learn more about Tauler Smith’s latest legal victory, keep reading this blog.

California Consumer Laws on Cannabis Advertising and THC Content

Recreational marijuana is a multi-billion-dollar business in the states where it is legal, which includes California. In fact, it is estimated that California is the largest cannabis market in the world. Although there are no clear federal regulations of cannabis sales, California agencies do regulate marijuana product sales within the state. For example, the California Department of Cannabis Control allows just a 10% margin of error for THC content listed on product packaging and labels. If the THC potency amount listed on the package is not close enough to the THC potency amount of the actual product, then a court may find that the company selling the products engaged in false advertising.

One reason that cannabis product labels may promise higher potency is that consumers are typically willing to pay more for weed with a stronger concentration of THC, which stands for Delta-9-tetrahydrocannabinol. Marijuana with a higher percentage of THC can deliver a more euphoric “high” for users.

Class Action Lawsuit: Ayala v. Central Coast Agriculture

Central Coast Agriculture is a California-based progressive farm that focuses on sustainability. The company is also a licensed cannabis cultivator, and some of its products are sold under the Raw Garden brand name. According to the original complaint against Central Coast Agriculture, the consumer-plaintiffs purchased two products: a Raw Garden Infused Joints three-pack in the “Sunset Cookies” strain, and Raw Garden Infused Joints in the “Caribbean Slurm” strain. The plaintiffs alleged that the marijuana products were mislabeled because the amount of THC contained in the products was substantially lower than the amount stated on the packaging: 25 percent THC potency versus 44 percent THC potency.

The plaintiffs in Ayala et al. v. Central Coast Agriculture, Inc. filed a class action lawsuit under a number of consumer protection statutes, including the California Consumers Legal Remedies Act (CLRA), the California Unfair Competition Law (UCL), and the California False Advertising Law. The case was heard in the Superior Court of California, County of Santa Clara, and the Honorable Theodore C. Zayner ruled on the litigants’ pre-trial motions.

Tauler Smith LLP Wins Defense Demurrer in Class Action Lawsuit

A demurrer is a legal challenge to a specific claim made in court, much like a motion to dismiss in federal court. When determining whether to grant a demurrer, courts will typically assume that all the facts alleged in the pleading are true, no matter how improbable they might be. If the plaintiff’s case is still unlikely to succeed even under these circumstances, then the motion for demurrer may be granted by the court.

The defendant in Ayala v. Central Coast Agriculture was represented by Los Angeles law firm Tauler Smith LLP. Our class action defense attorneys demurred to all causes of action in the case because the plaintiffs failed to allege sufficient facts. Specifically, the defense attorneys objected because the plaintiffs were unable to sufficiently demonstrate that the marijuana products purchased actually contained less THC than the amount listed on the product labels.

California Class Action Defense Lawyers Win THC Potency Case

The Santa Clara Superior Court sustained defense counsel’s demurrers on every cause of action in the case, which represented another huge pre-trial victory for the Tauler Smith LLP law firm. Moreover, the court held that the legal arguments were so overwhelmingly in favor of the defendant that the plaintiffs should have no leave to amend their complaint. In other words, the plaintiffs’ complaint was dismissed entirely.

In its ruling, the court held that the plaintiffs’ class action complaint relied on several faulty assumptions about the products they purchased, as well as the lab results cited in the lawsuit:

Testing was done too late. The court noted that the THC lab tests were conducted roughly two (2) months after the original purchases, which cast serious doubt on how relevant the tests might be in the case. The court further noted that there was nothing in the plaintiffs’ lawsuit about when the joints tested by the WeedWeek researchers were produced or sold. This meant that the plaintiffs had no way of knowing how long the products were on the shelves before being tested.
Not the same products. The court also said that the plaintiffs failed to show that the joints tested by WeedWeek were the same as the products at issue in the lawsuit. There was no evidence that any lab tests were conducted on the particular “Sunset Cookies” strain of marijuana purchased by one of the plaintiffs. (The plaintiffs suggested that a “Fire Walker” THC product tested by researchers was “substantially similar” to the “Sunset Cookies” strain, but the court rejected this argument.) Beyond that, only a single pre-rolled joint of the “Caribbean Slurm” strain was tested, which was an insufficient analog of the particular product purchased by the other plaintiff. Even the WeedWeek article authors characterized their testing as an “imperfect experiment” with conclusions that do not necessarily apply to any individual brand, company, or product.
No information on product labeling. The court stated that there was zero information about the labelling of the products tested by the lab researchers and cited by the plaintiffs. This meant that the plaintiffs failed to prove that the THC amounts listed on the packages they purchased were the same as the THC amounts listed on the packages of the products being tested.
Failed to account for testing variables. The court noted other problems with the laboratory test results referenced by the plaintiff in their lawsuit, including the failure of the testers to account for significant variables. For example, there was no information about the products’ temperature exposure, the potential for testers’ bias, or the possibility of human error.
No injury or harm suffered by plaintiffs. The court found that since the plaintiffs failed to show that the marijuana products purchased actually contained less THC than was listed on the product labels, they could not establish that they sustained any injury or damage as a result of their purchases.

The Santa Clara Superior Court held that there was no clear connection between the lab testing results and the plaintiffs’ actual purchases. The testing results could not be applied to the Raw Garden marijuana joints purchased by the plaintiffs because the tests were conducted on different products at different times by different entities using different methods for different purposes. This was a clear and decisive victory for both the defendant and the Tauler Smith LLP litigation team. The legal win was even more impressive because the consumer protection statutes relied on by the plaintiffs tend to be interpreted broadly by California courts and often in favor of plaintiffs.

You Need to Hire the Right Lawyer for Your Consumer Class Action Defense

When ruling on the demurrer in Ayala et al. v. Central Coast Agriculture, Inc., the court concluded that the lab tests relied on by the plaintiffs were insufficient to draw an inference that the products at issue were inaccurately labeled. This was in stark contrast to the ruling in another false advertising case.

Two other consumers recently sued a different California marijuana company, DreamFields Brands, Inc. That class action complaint, which was filed in Los Angeles Superior Court, alleged similar facts: that the plaintiffs purchased pre-rolled joints containing a lower percentage of THC than declared on the product packaging. Additionally, the class action lawsuit cited the same independent lab tests performed by WeedWeek. The defendant in that lawsuit was represented by a different law firm, and those lawyers were unsuccessful in getting the case dismissed.

The dissimilar results in these cases should make one thing abundantly clear: hiring the right lawyer to represent you in your class action defense could be the difference between winning and losing.

Contact the California Class Action Defense Lawyers at Tauler Smith LLP

Class action lawsuits filed in California courts are notoriously complicated, particularly when they involve consumer protection claims. That’s why it is imperative that defendants in these cases be represented by the experienced California class action defense lawyers at Tauler Smith LLP. Our litigation team has extensive experience representing defendants in false advertising cases, including both private civil actions and class actions.

Call or email us today for a free initial consultation.

Federal Law on Automatic Renewals

August 26, 2023/in False Advertising /by taulersmith

Federal law on automatic renewals has gotten stronger and more far-reaching in recent years. This has come in response to states like California that have started to take the lead when it comes to protecting consumers against deceptive advertising and business fraud. There are several prominent laws at both the California state level and the federal level that govern retail subscription programs and automatic renewal programs, including the FTC Rule on Automatic Renewals. Additionally, both state and federal agencies have begun increasing their enforcement of these laws in recent years. For example, the California Automatic Renewal Task Force (CART) makes sure that businesses comply with California’s Automatic Renewal Law (ARL), while the Consumer Financial Protection Bureau (CFPB) is actively enforcing federal laws regulating negative options and recurring contracts. Before contacting federal or state agencies, consumers who have been billed without consent for an auto-renewal subscription should speak with a qualified consumer protection attorney.

To learn more about the federal law on automatic renewal subscriptions, keep reading this blog.

What Is the Federal Trade Commission Rule on Auto-Renewals?

Companies that do business in California while offering automatic renewal and subscription programs must comply with applicable state and federal laws, including the California Automatic Renewal Law (ARL). In fact, California has served as a model for automatic renewal legislation passed by other states, as well as federal statutes and rules that govern auto-renewals.

Federal law uses slightly different terminology for automatic renewal subscriptions: they are instead referred to as “negative option plans.” Basically, a negative option plan is one that is automatically renewed if the consumer fails to take any kind of affirmative action to cancel or not renew it.

The California false advertising lawyers at Tauler Smith LLP represent plaintiffs in civil litigation both individually and as members of class action lawsuits. We also regularly appear in both state and federal courts, so we are very familiar with the relevant consumer protection laws.

How Is the Federal Automatic Renewal Law Enforced?

The Federal Trade Commission (FTC) enforces federal law on automatic renewals and the Negative Option Rule. Federal guidelines for automatic renewals tend to focus on up-front disclosures from businesses, informed consent from customers, and uncomplicated cancellation procedures.

In addition to the FTC, the Consumer Financial Protection Bureau (CFPB) is also involved in enforcement of federal laws concerning automatic renewal and subscription practices.

Proposed Amendment to FTC Rule on Automatic Renewals

The FTC proposed an amendment to the agency rule on automatic renewals that could have a serious impact on how companies do business in California and other states. When the FTC asked for public input on auto-renewal policies, the response was overwhelming: the federal agency received thousands of comments from consumers who complained that businesses were deceptively renewing subscriptions without consent.

Some pro-business organizations like the U.S. Chamber of Commerce have objected to the FTC’s proposed rules for auto renewal subscription services, which the group says would “impose substantial and burdensome regulations on the business community.” But similar consumer fraud regulations already exist in California: statutes like the Automatic Renewal Law (ARL), the Consumers Legal Remedies Act (CLRA), and the Unfair Competition Law (UCL) all provide strong protections for consumers against companies that do business in the state.

If the FTC rule change is approved and goes into effect, it will certainly affect businesses that offer automatic renewal plans in California and other states. That’s because federal law would allow for the imposition of civil penalties of up to $50,000 for each violation of the law.

Other Federal Laws Regulating Automatic Renewals: ROSCA and TSR

The Federal Trade Commission rule on negative options is the main federal law that governs automatic renewal offers by companies. In addition to the FTC rule, there are a couple of other federal statutes that also apply to automatic renewals:

The Restore Online Shoppers’ Confidence Act (ROSCA)
The Telemarketing Sales Rule (TSR)

Restore Online Shoppers’ Confidence Act (ROSCA)

Under federal law, there are disclosure requirements for auto-renewal terms when a customer signs up for a subscription online. The Restore Online Shoppers’ Confidence Act (ROSCA) requires companies to clearly and conspicuously disclose “all material terms of the transaction” prior to obtaining the customer’s billing information. ROSCA also imposes on businesses a requirement to obtain express informed consent for an auto-renewal plan before getting customers’ billing information.

Unfortunately for consumers, ROSCA has limited application to auto-renewal plans because it only applies to online purchases.

Telemarketing Sales Rule (TSR)

Another important federal law governing automatic renewals is the Telemarketing Sales Rule (TSR). The TSR requires certain disclosures when a telemarketer offers a product or service that includes an automatic renewal subscription, such as the material terms and conditions of the purchase.

State Laws: What Is the California Law on Automatic Renewals of Subscriptions?

California’s Automatic Renewal Law (ARL) goes even further than federal law by explicitly prohibiting companies from auto-renewing subscriptions without first obtaining affirmative consent from the subscriber. That type of consent can only be given when the customer is aware of what exactly they are agreeing to, so this means companies must “clearly and conspicuously” disclose the subscription terms, including the price of the service, length of the subscription, and any recurring charges. Clear and conspicuous disclosure can be achieved by using all-caps, highlighted text, colored text, boldface font, and anything else that might contrast or differentiate an auto-subscription from other terms or conditions.

Canceling Subscriptions Under California’s ARL

The California Auto Renewal Task Force (CART) is a group of district attorneys in Los Angeles County, San Diego County, Santa Barbara County, Santa Clara County, and Santa Cruz County who enforce the ARL against companies that mislead and deceive California consumers with confusing subscription policies that automatically renew without authorization and that can be difficult to cancel afterwards.

Doug Allen, an assistant district attorney with the Santa Cruz County District Attorney’s Office and also a member of CART, says that the ARL is specifically designed “to make it as easy to get out of [an auto-renewal subscription] as it was to get into it.” The ARL stipulates that businesses must provide full disclosure to customers about the terms and conditions of all subscription renewal plans, including automatic renewals. Additionally, the ARL requires businesses to make it easy for customers to cancel a subscription on the backend.

Most Common Violations of the California ARL

Some of the most egregious violations of the California Automatic Renewal Law (ARL) involve companies that intentionally make it tough for a customer to cancel by bouncing the customer around when they call or email. For example, a retailer might inform the customer that they will need to speak to a “supervisor” who is conveniently never available. This is done with the full intention of ensuring that the customer remains enrolled in the subscription program. When a customer tries to cancel on the company’s website, the site needs to be easy to navigate and the cancellation process needs to be simple. The ARL also prohibits businesses from attempting to drag out the cancellation with an online survey; any surveys must be provided after the cancellation is complete.

Contact the California Consumer Protection Lawyers at Tauler Smith LLP

Tauler Smith LLP is a law firm that handles consumer fraud litigation in both state and federal courts across the United States. Our consumer protection lawyers have extensive experience representing plaintiffs in these matters, so we understand the nuances of automatic renewal laws that may apply in your particular case. If you were billed for a monthly subscription contract that was automatically renewed without your consent, we can assist you. Call or email us now to schedule a free initial consultation.

NBC News: Robert Tauler on California’s Automatic Renewal Law

July 27, 2023/in False Advertising /by taulersmith

In a recent on-air report, NBC News spoke to attorney Robert Tauler about California’s Automatic Renewal Law (ARL). The impetus for the story was a lawsuit filed by Los Angeles law firm Tauler Smith LLP on behalf of a consumer who accused a casting company of automatically renewing his subscription to their service without notice or authorization. Many consumers find that it is incredibly difficult to cancel their subscriptions after they sign up for a service or make what they intended to be a one-time purchase online. Worse yet, a lot of companies will even go so far as to change the terms of the subscription and then renew it without informing the customer. The California Automatic Renewal Law, or ARL, makes it illegal for companies to use deceptive subscription methods. Under the ARL, a company that violates automatic subscription laws can be sued for $2,500 for each violation.

Click here to see the NBC Los Angeles report on subscription claims filed under California’s Automatic Renewal Law. To learn more about the ARL claims filed by Tauler Smith LLP, keep reading this blog.

NBC Los Angeles News Airs Report on ARL Claim Against Casting Company

NBC Los Angeles News recently aired a report on a lawsuit filed by Chris O’Brien, a Pasadena resident who is alleging that a casting website charged his credit card for a subscription renewal without permission. O’Brien is being represented by Tauler Smith LLP, a law firm which regularly represents consumers in automatic renewal claims filed in California courts and ARL claims filed in federal courts.

Casting Frontier is a talent agency that helps actors find auditions and casting calls through online searches on the company’s website. In a report on KNBC Channel 4, NBC Los Angeles detailed how Casting Frontier has been accused of charging customers’ credit cards and renewing annual memberships without authorization. In Chris O’Brien’s case, he didn’t realize that the talent agency had raised the cost of his membership until after they automatically renewed his online subscription. He told NBC News that he never received an email or any kind of notice from the casting website before the charges appeared on his credit card. The fee spike was noticeable because the membership cost went from $75 all the way up to $200, or more than double the original fee.

The NBCLA I-Team investigated the troubling allegations being made against Casting Frontier. The KNBC broadcast team later aired the results of the investigation and provided key details about the California Automatic Renewal Law (ARL), including information about how consumers can use the law to get substantial monetary compensation. If O’Brien wins his case against the casting company, he could be awarded $2,500 under the ARL.

How Consumers Can Get Compensated Under the California Automatic Renewal Law

The unfortunate reality is that Casting Frontier is far from the only company that has been accused of violating California’s automatic renewal laws. These days, it is common for people to use their cell phones and computers to quickly subscribe to different products and e-commerce services such as movie streaming platforms, music apps, food deliveries, and even pet supplies. A lot of these subscriptions renew automatically, which opens the door for unethical companies to use deceptive tactics on customers.

California has extremely strong consumer protection laws that explicitly prohibit companies that do business in the state from deceiving customers through fraud or false advertising. One of these consumer protection statutes is the Automatic Renewal Law (ARL), which imposes certain requirements on businesses that automatically renew subscriptions:

The company must clearly and conspicuously disclose any auto-renewal offer terms.
The company must obtain affirmative consent from consumers before charging their credit cards for an automatic renewal.
The company must allow customers to easily cancel their subscriptions.

In fact, the California statute is so strong that it has become the model for all other state automatic renewal laws, as well as federal law on auto-renewing contracts. The California ARL, which is codified in Cal. Bus. & Prof. Code §§ 17600, stipulates that consumers can’t be hit with new charges that they haven’t previously agreed to. This means that companies must inform consumers of exactly how much they will be charged for a subscription, as well as when those charges will be issued. The bottom line is that consumers must be made aware that a subscription will renew and that they are going to get a second charge.

California Auto-Renewal Task Force (CART)

The state of California has a task force dedicated to enforcing California’s Automatic Renewal Law. The California Auto-Renewal Task Force (CART) includes prosecutors from the district attorney’s offices in Los Angeles County, San Diego County, Santa Barbara County, Santa Clara County, and Santa Cruz County. CART has investigated dozens of companies over the years and imposed more than $16 million in fines against violators of both California state laws and federal laws.

Douglas Allen, an active member of CART, observed that many ARL violations are egregious, with companies intentionally making it difficult for customers to cancel subscriptions once they’ve signed up for a service. These companies count on customers allowing a subscription to auto-renew three or four times before they realize what’s happening.

ARL Statutory Damages

If your subscription was automatically renewed without your affirmative consent, you could be eligible to file a lawsuit and receive a minimum of $2,500 in statutory damages.

Consumers need to trust their gut when they think they might be dealing with a deceptive company. According to Los Angeles consumer protection lawyer Robert Tauler, “Anytime a consumer feels wrong about a situation or feels frustrated with a subscription service, that’s reason enough to know that something’s probably off.” Consumers who learn that they were billed for an automatically renewing subscription should speak with a California consumer fraud attorney immediately.

Contact the California Consumer Protection Lawyers at Tauler Smith LLP

The Los Angeles consumer protection lawyers at Tauler Smith LLP represent plaintiffs in cases against companies that violate California’s Automatic Renewal Law (ARL). If you signed up for a monthly or annual subscription that automatically renewed, our experienced attorneys can help you file a civil suit and get restitution of your expenses and financial compensation for any harm or losses you suffered. Call 310-590-3927 or email us.

Tauler Smith Wins Terminating Sanctions Motion

Tauler Smith Wins Motion for Terminating Sanctions

July 21, 2023/in Successes /by taulersmith

In a recent employment law matter filed in Los Angeles, Tauler Smith LLP won a motion for terminating sanctions. Los Angeles litigation attorney Wendy Miele represented a media production company that was being sued by a former contractor who worked as a personal assistant for the company. When the plaintiff refused to respond to discovery requests and failed to comply with multiple court orders, our California civil litigators sought an order granting case-terminating sanctions against the plaintiff. Although courts are typically reluctant to approve motions that effectively end a case, the LA County Superior Court judge granted the motion for terminating sanctions and dismissed the plaintiff’s complaint. This was a major success for attorney Wendy Miele and the rest of the Tauler Smith litigation team.

For additional information about Tauler Smith LLP’s latest legal victory, keep reading.

Los Angeles Employment Lawyers Successfully Represent Company in Misclassification Case

Los Angeles litigator Wendy Miele represented an entertainment production company in an employment law matter. A former personal assistant for the company filed a civil suit in the Los Angeles County Superior Court alleging that she had been misclassified as an independent contractor instead of as an employee. This is an important distinction because California employment law imposes different requirements on employers based on the classification of workers. The worker’s lawsuit alleged that the company violated the California Labor Code, which protects wage earners and regulates their wages, hours, and other conditions of employment. The lawsuit also argued that she was entitled to recovery of attorney’s fees because the alleged misclassification constituted a violation of the unlawful prong of California’s Unfair Competition Law (UCL), which explicitly prohibits any “unlawful, unfair or fraudulent business act or practice.”

Employment cases involving allegations of wage and hour violations are notoriously difficult to win on the defense side, especially at the pre-trial stage. That’s what makes this legal victory particularly noteworthy. In fact, the Tauler Smith LLP legal team has successfully defended three (3) of these cases so far this year. Our experienced California employment defense attorneys have also secured decisive victories for summary judgment in employment law disputes involving qui tam whistleblower claims, allegations of workplace retaliation, and allegations of wrongful termination.

Discovery Misconduct & Terminating Sanctions

The ex-worker in this case was required to produce certain documents in advance of trial, but the court had to intervene because she abused the discovery process by not turning over the requested evidence to opposing counsel. When the plaintiff committed discovery misconduct by continuing to use stall tactics and ultimately failing to provide the necessary discovery evidence in a timely manner as ordered by the court, the California employment attorneys at Tauler Smith LLP took aggressive action by filing a motion for terminating sanctions.

Other types of sanctions that the court could have imposed against the plaintiff for withholding information included issue sanctions, discovery sanctions, evidence sanctions, and contempt sanctions.

Los Angeles Civil Litigation Attorneys Win Motion for Terminating Sanctions

After hearing arguments from both sides, the Los Angeles County Superior Court judge granted the motion. The court found that the plaintiff willfully refused to comply with Los Angeles Superior Court Local Rule 3.25, which deals with the case management conference and the settlement conference. The rule stipulates that counsel must serve and file lists of exhibits to be presented at trial, and that this must be done at least five (5) days prior to a final status conference. Failure to comply with Local Rule 3.25 can prompt the court to impose terminating sanctions, which is what happened in this case.

In this recent California employment law matter, the plaintiff failed to produce documents and did not respond adequately to discovery requests. This chronic pattern of delay is why the judge ultimately granted attorney Wendy Miele’s motion for terminating sanctions against the plaintiff. The end result of the Tauler Smith legal team’s aggressive representation of their client is that the opposing party’s complaint has been dismissed with prejudice. This was another successful outcome for Tauler Smith LLP.

After the ruling, Wendy Miele commented on the “salacious” nature of the case. Miele said, “There was a lot of inflammatory mudslinging of a personal nature by the opposing party against Tauler Smith’s client. We seized on the tactical strategy of terminating sanctions, which a court rarely grants but which were appropriate in this case. It was a very satisfying win for our client.”

Contact Tauler Smith LLP Today for Legal Help with Your California Employment Claim

The litigation attorneys at Tauler Smith LLP represent both plaintiffs and defendants in California employment claims. Call 310-590-3927 or send an email to schedule a free consultation with one of our experienced litigators.

FTC Settlement: Amazon’s Alexa, Ring Security Cameras, and Privacy Laws

June 9, 2023/in False Advertising /by taulersmith

Amazon recently reached a settlement with the Federal Trade Commission (FTC) and the Department of Justice (DOJ), agreeing to pay $31 million in civil penalties for consumer privacy violations associated with the company’s Alexa voice assistant devices and Ring doorbell cameras. The DOJ alleged that Amazon engaged in a number of unreasonable privacy practices, ultimately resulting in an FTC settlement involving Amazon’s Alexa, Ring security cameras, and privacy laws.

The use of home security cameras and other internet-connected devices to spy on and illegally record customers has triggered several high-profile lawsuits, including a recent invasion of privacy claim against Arlo Home Security System in California. In the Amazon case, the tech behemoth was accused of violating federal laws by using Alexa voice devices and Ring doorbell cameras to unlawfully collect voice and video data, including data from children. The FTC and the DOJ said that Amazon illegally stored voice information, geolocation information, and video recordings without user permission. Moreover, the tech giant allegedly failed to delete kids’ Alexa recordings when those removals were requested by parents. The FTC and the DOJ filed complaints against Amazon in federal court, and now those cases have been settled: Amazon agreed to pay $25 million for its Alexa privacy violations that compromised children’s data and another $6 million for Ring privacy violations that exposed users to surveillance, threats, and harassment.

To learn more about the DOJ and FTC settlements reached with Amazon over the company’s Alexa voice service and home security cameras, keep reading this blog.

Federal Trade Commission Accuses Amazon of Invading Privacy of Alexa Users

The Amazon settlement resolved two separate claims filed against the tech company by the FTC:

A claim that Amazon’s Alexa service was being used in violation of federal child privacy laws.
A claim that the Ring doorbell cameras were being used to illegally spy on customers.

The FTC’s Alexa complaint was filed in the United States District Court for the Western District of Washington, and it alleged that Amazon violated both the Federal Trade Commission Act (FTC Act) and the Children’s Online Privacy Protection Act (COPPA) by deceiving parents about how data collected by the Alexa devices would be utilized. Specifically, the FTC alleged that Amazon unlawfully recorded children’s voices and maintained their geolocation data while telling parents that they could delete voice recordings and other data collected by the Alexa app.

What Is Amazon’s Alexa Service?

Amazon’s Alexa is a cloud-based voice assistant service that is used by millions of Americans. Alexa allows consumers to interact with technology designed to make their lives easier. For example, Alexa can be used to check the weather, learn the latest news developments, perform online searches for information, listen to music and audiobooks, play games, order products from Amazon.com, and stream content on smart TVs. Global sales of Alexa devices have topped more than half a billion, with use of the Alexa voice service increasing every year since it reached the market. This includes more than 800,000 children under the age of 13 who have their own Alexa profiles.

Alexa devices are made by both Amazon and third-party manufacturers, meaning that the technology is available on hundreds of millions of devices. Although Amazon’s marketing of its Alexa service and Echo devices claims that they are “designed to protect users’ privacy,” the fact that the Alexa mobile application is connected to the internet means that the data recorded by the device is accessible online and exposes users to scary breaches of their privacy.

Amazon Violations of the FTC Act

Section 5 of the Federal Trade Commission Act (FTC Act) prohibits companies from engaging in “unfair or deceptive acts or practices in or affecting commerce.” Amazon was accused of committing multiple violations of Section 5 of the FTC Act:

Falsely representing that users of the Alexa app could delete their geolocation data upon request.
Falsely representing that Alexa users could delete voice recordings, including voice recordings of their children.
Unfair privacy practices that caused substantial injury to users of the Alexa service.

Amazon Violations of the Children’s Online Privacy Protection Act (COPPA)

The Children’s Online Privacy Protection Act (COPPA) is a federal law that was passed by Congress in 1998, and it was intended to strengthen general privacy laws with specific protections for minors under the age of 13 who use the internet. The impetus for COPPA was a rise in websites that were secretly collecting the personal data of children. The COPPA Rule is codified in Section 1303(b) of COPPA, 15 U.S.C. § 6502(b), and Section 553 of the Administrative Procedure Act, 5 U.S.C. § 553. The COPPA Rule imposes strict requirements on the operators of commercial websites that target children: these websites must notify parents about the information collected. COPPA also requires website operators to give parents the option to delete their kids’ information at any time.

Although Amazon specifically promised Alexa users in a “Children’s Privacy Disclosure” that the company would delete their data upon request, the FTC alleged that Amazon continued to maintain children’s data long after such requests had been made. FTC consumer protection chief Samuel Levine observed that COPPA explicitly forbids companies “from keeping children’s data forever.”

Moreover, even in those instances when Amazon did erase the data, they reportedly retained written transcripts of the children’s recordings in a database that was accessible by employees. Amazon did not disclose to parents that the company was keeping the written transcripts and continuing to access them. FTC Commissioner Alvaro Bedoya said that Amazon deceived parents about its data deletion practices by failing to comply with parental requests to erase children’s voice data collected by Alexa. This was a violation of federal laws meant to protect children against online threats and privacy invasions.

Amazon tried to justify its actions by saying that it kept children’s voice information to improve the company’s voice recognition algorithm, to help the company better respond to voice commands, and to give parents enough time to review the information. According to Amazon, the algorithm is a form of artificial intelligence (AI) that learns and gains capabilities as it acquires more information. Artificial intelligence has become extremely controversial as an increasing number of tech companies have started to introduce AI products and applications into the marketplace. This is one reason that it was so important for the FTC to send a strong message to Amazon and others that using AI and other technologies to invade customer privacy will not be tolerated by the government. The Amazon Alexa settlement will bar the company from using children’s data to train the company’s algorithms.

Amazon Settles FTC Case Alleging Alexa Consumer Privacy Invasions

Samuel Levine, the FTC consumer protection chief, commented on the Amazon Alexa settlement and highlighted “Amazon’s history of misleading parents, keeping children’s recordings indefinitely, and flouting parents’ deletion requests.” All of these actions violated the Child Online Privacy Protection Act (COPPA) and “sacrificed privacy for profits.”

The Alexa settlement with the FTC includes a number of provisions:

Amazon must pay a $25 million civil penalty.
Amazon can no longer use children’s geolocation data or voice information for the purpose of creating or improving company products.
Amazon must delete any inactive Alexa accounts belonging to children.
Amazon must notify all users about the FTC action against the company, as well as the settlement.
Amazon is prohibited from misrepresenting its privacy policies in the future, especially as they pertain to geolocation data, voice recordings, and children’s voice information.
Amazon must create and strictly enforce a privacy program related to geolocation data.

As part of the Amazon Alexa settlement, the company will have to implement privacy safeguards for child users. The company will also have to make significant changes to the way it stores Alexa data: there will be a requirement that Amazon delete certain information right away so that underage children won’t have their information exposed. Amazon has also agreed to delete child accounts that are inactive, as well as voice data and geolocation data from active accounts.

In the wake of the Alexa settlement, FTC Commissioner Alvaro Bedoya warned companies “sprinting to do the same” thing as Amazon that they should think twice, especially if their products will be used by kids. Bedoya, who has two children of his own, said that “nothing is more visceral to a parent than the sound of their child’s voice.”

Department of Justice Files Complaint Against Amazon for Invading Privacy of Ring Home Security Camera Users

The Federal Trade Commission (FTC) doesn’t just protect children’s privacy; the agency is committed to protecting the privacy of all consumers. That’s why the FTC and the Department of Justice (DOJ) brought a second case against Amazon alleging that the tech giant violated federal law by allowing employees and contractors to access Ring doorbell cameras used by customers, with the access leading to illegal surveillance of the customers. Additionally, the FTC said that Ring did not take sufficient actions to stop hackers from accessing customer cameras.

Amazon Subsidiary Company Ring Sells Home Security Cameras

Ring is a subsidiary company of Amazon that primarily sells home security cameras, doorbells, and other accessories that are connected to the internet. Amazon has sold more than one million indoor cameras to customers in the United States and internationally. These cameras are typically used on the exterior entryways of a home, but they can also be used as indoor cameras to monitor private spaces such as bedrooms and bathrooms. It is these indoor cameras that were frequently targeted by Ring employees and hackers looking to spy on customers, with nearly 40% of all Ring devices that were compromised being either Stick Up Cams or Indoor Cams marketed primarily for indoor use.

Amazon bought Ring in 2018 for roughly $1 billion. Although most of the alleged privacy violations happened before Amazon acquired Ring, the parent company is still liable for any violations of federal law. Ring security cameras are marketed by Amazon as affordable cameras that can be attached to houses or, more commonly, to doors so that users can monitor entry into their homes. But while customers believed that they were securing their homes by using Ring cameras, they were actually exposing their homes to nefarious actors – many of whom were employed by Amazon.

DOJ Complaint Against Amazon for Ring Doorbell Cameras

The Justice Department filed its Ring complaint on behalf of the Federal Trade Commission (FTC) in the U.S. District Court for the District of Columbia. The complaint alleged that Amazon violated Section 5 of the FTC Act in connection with the company’s Ring cameras.

Ring Security Cameras Illegally Accessed by Company Employees

According to the DOJ complaint, Ring home security cameras were accessed by company workers who subsequently spied on and harassed customers. In fact, the workers who gained access to the devices were also able to communicate directly with customers and threaten them. There were documented instances of female customers being cursed at in their bedrooms, children being subjected to racist slurs, and a number of Ring customers receiving death threats. These same individuals harassing and terrorizing Ring customers also used the cameras to set off false alarms and to change home security settings.

The Ring home security videos were reportedly available to every employee, and this was true for all customer videos over a period of several years. The complaint filed by the Department of Justice in federal court stated that Ring “gave every employee…full access to every customer video.” Beyond allowing unauthorized access, Ring’s lapses when it came to customer security also meant that company employees were able to download customer videos and then share those videos freely with anyone. The videos could be downloaded, saved, and even transferred by both Ring employees and contractors based out of Ukraine.

Ring Employees Spied on Customers

One Ring employee allegedly accessed and viewed thousands of recordings from Ring security videos being used by female customers. According to the FTC, this employee targeted 81 different women who were using the Ring Stick Up Cams. The employee’s criminal actions included focusing searches on Ring cameras with names suggesting that they had been placed in customer bedrooms or bathrooms. The illegal spying reportedly continued for months before Ring took any action at all to stop it.

Another Ring employee was accused of accessing a camera belonging to a female employee and subsequently spying on her by watching video recordings stored on her account.

These privacy beaches continued for months and, in many cases, years before Ring finally took action to limit what the FTC called “dangerously overbroad access” and impose any kind of technical or procedural restrictions on employees who were trying to access customers’ home security videos. Additionally, the FTC complaint stated that Ring did not obtain consent for human review of video recordings, and that the company “buried information in its Terms of Service and Privacy Policy.” This meant that consumers had no way of knowing that Ring employees had access to their stored videos.

Ring Exposed Consumers to Cyberattacks by Hackers

Ring also had insufficient security measures to protect customer information against hacking, which led to some customer accounts being compromised via credential stuffing and brute force attacks. The FTC alleged that the doorbell company’s failure to fix “bugs in the system” allowed hackers to access customer cameras and, in some cases, to harass and frighten customers. This stemmed from “system vulnerabilities,” which Ring failed to repair despite knowing that the problems existed.

During one cyberattack committed against Ring, more than 55,000 U.S. customers had their Ring accounts compromised. Nearly 1,000 of these customer accounts had their stored videos unlawfully accessed, which included viewing, downloading, and sharing of recordings, livestream videos, and customer profiles.

Amazon Settles Ring Consumer Privacy Complaint

The Ring settlement with the DOJ and the FTC requires Amazon to pay $5.8 million. That money will be used to issue refunds to Ring customers who were affected by any privacy violations and data breaches. The settlement also requires Amazon to delete Ring data that had been stored since before Amazon acquired the company. Amazon must also implement new privacy and security measures to ensure that consumer data is not exposed or compromised, including multi-factor authentication before access is granted to customer accounts.

Both the Alexa settlement and the Ring settlement will need to be approved by federal judges before they take effect.

California Laws Protecting Consumers Against Invasion of Privacy: CIPA, CCPA, CLRA, and UCL

California’s consumer protection laws are among the strongest in the country, with the California Invasion of Privacy Act (CIPA), the California Consumer Privacy Act (CCPA), the Consumers Legal Remedies Act (CLRA), and the California Unfair Competition Law (UCL) providing robust protections against invasion of privacy, false advertising, and consumer fraud that go even further than federal laws like the FTC Act and COPPA. For example, companies that do business in California are not allowed to expose or share the sensitive personal information that you disclose when you use their products, services, or websites.

California’s digital privacy and consumer protection laws also explicitly prohibit companies from illegal wiretapping on websites, unauthorized recording of online chats, sharing the personal data of customers, false advertising that misleads consumers, and other deceptive business practices.

Contact the California Consumer Protection Attorneys at Tauler Smith LLP

Did you purchase or use a home security camera, doorbell camera, Alexa device, or any other internet-connected device? If so, your privacy may have been invaded in violation of both federal and California state laws. The experienced Los Angeles consumer protection lawyers at Tauler Smith LLP can help you file a civil suit for invasion of privacy and get financial compensation. Call 310-590-3927 or email us today.

Shipping Insurance Claims and the UCL

February 4, 2023/in False Advertising /by taulersmith

Many companies that offer shipping insurance on e-commerce sites are violating California insurance laws, which have strict requirements about who is allowed to offer insurance and how that insurance can be offered. Moreover, California’s insurance laws can serve as a predicate for civil lawsuits brought under other statutes, including the California Unfair Competition Law (UCL). When it comes to shipping insurance claims and the UCL, there is strong legal precedent in favor of consumers who are charged for insurance by an unlicensed agent. Additionally, the shipping insurance offered by online sellers is often just a surcharge on services already being provided, which is business fraud that can also be the basis for a civil suit.

To learn more about how California consumer protection laws can be used to file a shipping insurance lawsuit against e-commerce sellers, keep reading.

Filing a Shipping Insurance Lawsuit Under California’s Unfair Competition Law (UCL)

Some companies that offer shipping insurance on their e-commerce websites expressly label it as “insurance,” while other companies call it “safe ship” or use another term. In fact, it is common for online sellers to refer to an insurance fee by some other name. For example, the plaintiff in Miller v. Travel Guard Group alleged that the company mislabeled the travel insurance fee on their website in order to get around the state prohibition against unlicensed agents selling insurance. Regardless of what term is used, however, both the California Insurance Code and the Unfair Competition Law (UCL) protect consumers against unlawful offers of insurance.

Section 1631 of the California Insurance Code imposes licensing requirements on any entity that seeks to sell insurance in the state. If a company violates the California Insurance Code by attempting to sell insurance as an unlicensed agent, consumers may be able to bring a UCL claim. Additionally, companies that hide a shipping insurance charge on a purchase could be exposed to lawsuits under the UCL for false, misleading, deceptive, and unlawful marketing and sales practices.

Section 17200 of the UCL

The California Unfair Competition Law (UCL) is set forth in Cal. Bus. & Prof. Code § 17200. The statute defines “unfair competition” as:

Any unlawful, unfair, or fraudulent business act or practice.
Unfair, deceptive, untrue, or misleading advertising.

The UCL is a sweeping law that is meant to protect both consumers and businesses. In fact, the statute has been interpreted broadly by California courts to cover a wide variety of business acts and consumer transactions, including antitrust violations, intellectual property claims, employment claims, misbranded drug products, and disputes over shipping insurance charges.

Both federal and California courts have held that companies may be sued for breach of contract and unfair competition when they violate state insurance laws. In fact, the U.S. Court of Appeals for the Ninth Circuit said that the California Insurance Code can serve as a predicate for a claim brought under the California Unfair Competition Law (UCL) even though the UCL does not explicitly provide for a private right of action for shipping insurance claims. In Miller v. Travel Guard Group, the California Northern District Court went even further by ruling that consumers may bring a claim under the UCL based on both an illegal agent theory and an illegal premium theory when the insurance fee is automatically included in the total price and the customer is not given an opportunity to opt out of paying it.

Only Licensed Agents Can Sell Insurance in California

California has strict laws regulating exactly who can sell insurance. Whether it’s auto insurance, property insurance, health insurance, general liability insurance, or shipping insurance, only licensed agents are allowed to offer insurance to customers. One way that California law protects consumers against insurance fraud is by requiring many types of insurance agents (e.g., home and auto insurance) to file bonds with the state insurance commission.

In order to charge customers for shipping insurance, a company must comply with California’s insurance laws. This means that insurance agents need to be registered with the state. Beyond that, owners, insurance agents, and even non-licensed employees must provide fingerprints that are kept on file with the state. All of this is in addition to standard business certification requirements, such as securing a certificate of good standing if the company is a corporation and a certificate of organization if the company is an LLC.

Friedman v. AARP Established Precedent for Shipping Insurance Claims in California

In Friedman v. AARP, Inc., the Ninth Circuit Court issued an important ruling that set precedent for subsequent cases involving offers of insurance to California consumers. The plaintiff in Friedman was a Medicare recipient who purchased UnitedHealth supplemental health insurance coverage through the AARP (previously known as the American Association of Retired Persons). Since AARP earned a 5% commission on the sale, they were essentially acting as an insurance seller without a license. This would be in direct violation of California Insurance Code § 1631. That statute prohibits anyone from soliciting, negotiating, or effecting an insurance contract unless the person holds a valid license from the California Commissioner of Insurance. California Insurance Code § 1633 goes even further by explicitly prohibiting an unlicensed company from “transacting” insurance regardless of whether the company reports itself as an insurance agent.

Facts of the Case

The plaintiff in the case was Jerald Friedman. He was one of several AARP members who filed a class action against AARP because the organization allegedly charged inflated insurance rates for Medigap coverage. (Medigap policies provide supplemental health insurance for costs that are not already covered by Medicare.) These exaggerated charges allegedly stemmed from a hidden commission that AARP was collecting.

The lower court in Friedman dismissed a class action brought by the plaintiff under the UCL. The Ninth Circuit then reversed that decision because the federal appellate court determined that AARP’s fee arrangement qualified as a commission on every insurance sale. In other words, AARP was acting as an insurance agent by selling insurance.

UCL Violation

Section 17200 of the California Unfair Competition Law (UCL) explicitly prohibits companies from engaging in “any unlawful, unfair, or fraudulent business act or practice.” AARP was accused of violating the UCL by committing the unlawful act of selling insurance without a license.

Since AARP is not licensed to sell insurance in California, it is unlawful for the group to offer insurance to its California members. AARP marketed the Medigap policy to its members in a number of ways, including television ads, websites, and materials sent directly through the mail. A lot of these advertisements included text reading, “This is a solicitation of insurance.” Although AARP later tried to describe its insurance commission as a “royalty,” the federal government determined that it was still a commission being charged on top of the typical monthly premium. This meant that AARP was essentially acting as an insurance agent despite not having a license to do so in California.

Unlawful to Conceal a Shipping Insurance Charge in California

Under California law, there is an expectation that consumers will be able to provide informed consent for purchases they make online. Unfortunately, some businesses trick customers into paying more for shipping insurance with hidden or confusing features on their e-commerce websites, particularly when it comes to placing and finalizing orders. The businesses generate additional revenues by offering a service that they are not legally allowed to offer without a valid, state-issued license.

Companies that do business in California and use deceptive marketing and sales tactics could be subject to civil suits for violating the UCL. That’s because the statute prohibits false, misleading, deceptive, and fraudulent acts or practices, which may include attempts by the business to deceive customers about hidden shipping insurance fees. An experienced Los Angeles insurance claim lawyer can help consumers bring a lawsuit against companies that violate the UCL by making an unlawful offer of shipping insurance.

UCL Claims

When consumers unknowingly purchase shipping insurance on a website due to misleading and/or deceptive information, they suffer an injury. The Unfair Competition Law can be used as the basis for a shipping insurance lawsuit if the defendant violated the “fraudulent” prong of the statute by misleading customers about the additional charge. In these cases, the plaintiff will need to establish two elements to bring a successful claim: (1) that the company deceived the public in some way either in an advertisement or during the checkout process; and (2) that the consumer relied upon the company’s statements or advertisement.

There are several ways that a company could violate the UCL by attempting to charge customers for shipping insurance:

Confusing Language: The company might use ambiguous and confusing language to describe the insurance charge, which means that consumers won’t necessarily understand what it is that they are purchasing.
Hiding the Insurance Charge: It’s also possible that the company might hide the total purchase price from the consumer by failing to clearly inform them of the total cost when shipping insurance is included, or by failing to allow the consumer to edit their order once a shipping insurance charge has been added.
Lack of Consent: In the most egregious cases, the company might not even give the consumer an opportunity to consent to the shipping insurance charge. There have been cases in which a company automatically charges for shipping insurance unless the purchaser clicks on a random and inconspicuous “decline” button before completing the order.

When a company fails to disclose information that consumers need in order to make informed decisions about a purchase, it could be a violation of the UCL. Whether it’s a misleading advertisement or a concealed charge on a company’s website order form, California consumers may be able to bring a shipping insurance claim under the UCL.

CLRA Claims

This type of conduct by a business might also violate the California Consumers Legal Remedies Act (CLRA), which prohibits certain unlawful acts involving consumers. For example, the CLRA explicitly forbids companies from “advertising goods or services with intent not to sell them as advertised.”

The ordering and check-out processes on some e-commerce websites are confusing and possibly even deceptive. As a result, it’s very possible that consumers are unknowingly purchasing shipping insurance as an upcharge or add-on because websites don’t make the additional charge immediately apparent to site visitors. Moreover, it’s possible that some consumers would not have purchased the product at all if they had known about the shipping insurance charge. Worse yet, many consumers might not become aware of the additional charges until much later when their bank account or credit card is debited for the order.

Contact the Los Angeles False Advertising Lawyers at Tauler Smith LLP

Were you charged for shipping insurance while making a purchase on an e-commerce website? The Los Angeles false advertising lawyers at Tauler Smith LLP represent clients in civil lawsuits and class action lawsuits against companies that commit business fraud, including litigation involving shipping insurance claims against companies that illegally offer shipping insurance in online transactions. Call 310-590-3927 or email us to schedule a free initial consultation.

California’s Unfair Competition Law (UCL)

February 3, 2023/in False Advertising /by taulersmith

California’s Unfair Competition Law (UCL) is one of the most important consumer protection laws in the country. California courts tend to interpret the UCL broadly so that it applies to a wide range of unethical business practices. The statute explicitly prohibits companies from engaging in unlawful, unfair, or fraudulent business actions. It also prohibits companies from using false advertising. Businesses that violate the UCL may be subject to penalties that include financial compensation, monetary fines, and injunctions to stop committing certain acts. This means that consumers who purchase a product or service from a business that violates the UCL may be able to have an experienced California consumer fraud lawyer file a lawsuit and seek financial restitution.

To learn more about the California Unfair Competition Law, keep reading this blog.

What Is the California Unfair Competition Law?

The California Unfair Competition Law (UCL) is codified in Bus. & Prof. Code section 17200. The UCL protects consumers against business fraud, false advertising, and other deceptive practices by placing limits on companies doing business in California. The statute also protects honest companies and ensures that competition remains fair and strong, with no one company allowed to stifle competition and gain a competitive advantage by breaking the law.

Importantly, the UCL applies to all private companies doing business in California. This means that if a company is based in another state, if they sell to consumers located in the state, or even if they advertise in the state, they can be sued under the UCL.

What Is “Unfair Competition”?

The California Unfair Competition Law defines “unfair competition” as any of the following:

An unlawful business act or practice.
An unfair business act or practice.
A fraudulent business act or practice.
Unfair, deceptive, untrue, or misleading advertising.
Any other act prohibited by the UCL.

Courts have interpreted the UCL broadly so that just about any violation of the law by a business can also constitute a violation, so long as the action or practice injured consumers or gave the business an advantage over its competitors. One of the most common examples of unfair competition in consumer transactions is when a company makes misrepresentations to customers about the type, quality, or cost of a product or service.

Deceptive Advertising

Examples of deceptive advertising that may violate the UCL include robocalling customers, using bait and switch advertising to trick customers, using fake endorsements in ads, exaggerating product descriptions, omitting important information about a product or service in an advertisement, manipulating prices, using false reference pricing in ads, and infringing on another company’s intellectual property.

Unlawful, Unfair, and Fraudulent Business Acts

The UCL defines “unlawful” business acts or practices as any action taken by a company that violates state or federal law. Even if the company committed the unlawful act just once, that can be enough to trigger legal action under the UCL.

An “unfair” business act or practice, as defined by the UCL, is typically committed by either a company or a business competitor. Generally speaking, a company violates the UCL when they attempt to sell goods or services that harm consumers. In the context of a business competitor, it is considered an unfair business act when the company does something that broadly undermines competition in the marketplace.

The UCL also prohibits “fraudulent” business acts or practices, which means any conduct that misleads or deceives consumers. When a consumer relies on false statements made by the company in an advertisement or at the point of sale and subsequently suffers an economic injury, they may be able to bring a UCL claim for restitution.

Private Right of Action Under Section 17200 of the UCL

The California Unfair Competition Law (UCL) allows both private parties and public prosecutors to take legal action against companies that commit fraudulent business acts. In most cases, an individual who has suffered an injury because of unfair competition must have their lawsuit filed by a county or city prosecutor. When the lawsuit is filed as a class action, however, a consumer may bring the action as a private plaintiff.

Standing to sue under the UCL can be established by showing that the plaintiff sustained an economic injury because of the business’ conduct. If the plaintiff bought an item from the business, then this would be enough to meet the UCL standing requirement.

False advertising claims brought under the UCL must establish that the plaintiff sustained economic injury because the defendant company engaged in misleading advertising of goods or services. Basically, this means that the consumer needs to show that they purchased an item or service and that they did so because of a deceptive advertisement.

Strict Liability

Section 17200 of the Unfair Competition Law imposes strict liability on businesses that commit fraud, which means that it does not matter whether they intended to commit fraud. The mere fact that their actions were unlawful, unfair, or fraudulent is enough to violate the statute. Additionally, it is not a defense against a UCL claim that the company’s ad was true or accurate. That’s because the plaintiff in a UCL case merely needs to show that the ad was likely to mislead consumers.

Moreover, it is important for businesses to understand that they can be sued under the UCL even if their actions are not technically unlawful. That’s because the statute explicitly prohibits “unfair” business acts and practices.

Restitution and Damages Available in UCL Claims

There are two remedies available to plaintiffs in an Unfair Competition Law claim:

Actual economic damages, which means the defendant company is ordered to pay back any money received from the consumer.
An injunction ordering the defendant to stop committing the fraud.

There are no punitive damages allowed in UCL cases. This is one reason that individual consumers often join forces to file a UCL claim as a class action, which can make it harder for the defendant to avoid paying a large damages award. A knowledgeable California UCL attorney can help the plaintiffs determine if it would be better to bring a class action lawsuit.

What Is the Statute of Limitations for UCL Claims?

The statute of limitations for a UCL claim is four (4) years, with the clock starting as soon as the business commits the fraudulent act or as soon as the plaintiff discovers the fraud. The standard used in these cases is a reasonable person standard, which means that the court will ask whether a person who exercised reasonable diligence would have discovered the unlawful business act when the statute of limitations period started to run.

Consumer Fraud Defense: Answering UCL Claims

Sometimes, a consumer brings a UCL claim against a company without merit. These claims can be tricky for businesses to answer because the statute is interpreted broadly by courts, and plaintiffs are typically given wide latitude to prove their case. If you have been sued in state court for allegedly violating the Unfair Competition Law, you need to speak with a knowledgeable consumer fraud defense lawyer immediately.

Related Laws: CLRA, ARL, and FTC Act

There are a few other related statutes that California consumers should be aware of when deciding whether to file a UCL claim.

CLRA Claims

Unfair Competition Law claims are often accompanied by claims under the California Consumers Legal Remedies Act (CLRA). The CLRA is more limited than the UCL because the CLRA includes protections for specific actions by businesses, whereas the UCL applies broadly to business fraud. It may be in the best interests of a plaintiff to bring a claim under both statutes because the remedies are cumulative. Beyond that, only the CLRA allows for punitive damages to be imposed against the defendant. Additionally, the CLRA allows plaintiffs to recover attorney’s fees.

ARL Claims

It is also possible for California consumers to use the Unfair Competition Law to bring a private civil action against companies that violate California’s automatic renewal laws. This is significant because the California ARL does not allow for a private right of action, which means that consumers who are deceived into signing up for an auto-renewal subscription may still be able to sue for full restitution under the UCL.

Federal Laws

There are also federal laws, such as the Federal Trade Commission Act (FTC Act), that protect California consumers against business fraud and false advertising. One advantage for plaintiffs filing a UCL claim is that the state statute has broad consumer protections that go beyond the protections provided under federal law.

Keep in mind that defendants may argue that more lenient federal law should apply in a particular case instead of the stringent California state law. That’s why it is important to have a skilled Los Angeles false advertising attorney on your side throughout the case.

Contact the California Consumer Protection Attorneys at Tauler Smith LLP

Tauler Smith LLP is a Los Angeles law firm that represents consumers in civil litigation, including class actions based on UCL violations. Our Los Angeles consumer protection lawyers understand the nuances of the California Unfair Competition Law, and we can help you get financial restitution from a company that used fraudulent business practices. Call us today at 310-590-3927 or email us to discuss your case.