Wednesday
01Oct
Court Holds that "Safe-Harbor" Doctrine May Be Based on Regulations, Not Just Statutes
Wednesday, October 1, 2008 at 04:10PM Yabsley v. Cingular Wireless, LLC (opinion here) is a must read for companies currently litigating against class UCL lawsuit as it potentially provides a defense that a trial court may have rejected based on prior-existing law. Yabsley, which will no doubt be the subject of a petition for review to the California Supreme Court and requests for depublication, makes clear that the "safe-harbor" doctrine can be based upon on regulations, as well as statutes, in defense of a UCL claim.
For the uninitiated, under the "safe harbor" doctrine, a company may argue that it should be
immune from liability under the UCL where the law permits the
challenged conduct. As articulated by the California Supreme
Court:
"Courts may not simply impose their own notions of the day as to what is fair or unfair. Specific legislation may limit the judiciary's power to declare [business] conduct unfair. If the Legislature has permitted certain conduct ... courts may not override that determination. When specific legislation provides a 'safe harbor,' plaintiffs may not use the general unfair competition law to assault that harbor."Up until this opinion, however, there has been a great deal of debate as to whether a defendant company can raise a "safe-harbor" defense to a UCL claim based upon regulations that have been promulgated by a governmental agency (not just a statute approved by the California legislature) that permits the alleged unfair act. This debate primarily stems from the an appellate court's opinion in Krumme v. Mercury Insurance Co., 123 Cal. App. 4th 924 (2004), which has been cited to stand for this proposition.
Cel-Tech Comms. Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163, 182 (1999).
The Yabsley court, however, rejects this limited view of the
"safe-harbor" doctrine. In looking at the California Supreme Court's
opinion in Cel-Tech, upon which Krumme was based, the Yabsely court
held that Cel-Tech only happened to deal with statutes and made no
reference to regulations. "Like the trial court here, we conclude that
there is nothing in the Cel-Tech decision purporting to limit the safe
harbor doctrine to statues enacted by the Legislature."
The importance of this opinion is particularly heightened in the
insurance industry as a great deal of insurer conduct is regulated by
regulations promulgated by the Insurance Commissioner under his general
powers as set forth by the Insurance Code. To the extent that the
industry can now rely upon regulations, as well as statutes, to
demonstrate that they have been engaged in lawfully permitted conduct,
the industry has a greater base upon which it can set forth a
"safe-harbor" doctrine defense.
[Please note that this post does not constitute legal advice and provides only the author's own snapshot view of the cited opinion. No warranties are made as to the accuracy of the author's view of the opinion or as to its legal effect (including, but not limited to, whether it may be subsequently modified, depublished, and/or overruled). The import and applicability of a cited opinion to an actual matter depends upon the specific facts presented and should be reviewed by an attorney. ]
[Please note that this post does not constitute legal advice and provides only the author's own snapshot view of the cited opinion. No warranties are made as to the accuracy of the author's view of the opinion or as to its legal effect (including, but not limited to, whether it may be subsequently modified, depublished, and/or overruled). The import and applicability of a cited opinion to an actual matter depends upon the specific facts presented and should be reviewed by an attorney. ]
Update on Wednesday, October 29, 2008 at 11:44AM by
Spencer Y. Kook
Spencer Y. Kook
NOTE: For those of you who have been keeping up, the Yabsley decision is currently not citable as it has been set for rehearing due to the fact that the Attorney General or the District Attorney did not receive notice of the lawsuit as required by the California Business and Professions Code.
The Yabsley court ordered that the AG and DA be served with the appellate briefs and they have been given an opportunity to file their own amicus curiae briefs. Their time to file briefs is November 14, 2008.
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