Recent decisions on the litigation privilege’s application on UCL claims

The litigation privilege, codified in California Civil Code Section 47(b), shields communications and conduct in connection with litigation from most tort claims. But the privilege is not without limit. California Courts have limited the privilege where its application would be inconsistent with another, more specific statute. In December 2023, the Court of Appeal published two decisions that explored this limitation in the context of California's unfair competition law (UCL) claims but came to opposite conclusions, providing crucial insights for practitioners and litigants.

People v. Potter Handy, LLP

In Potter, the district attorneys of Los Angeles and San Francisco sued a law firm that allegedly filed thousands of boilerplate Americans with Disabilities Act lawsuits in federal courts to circumvent state procedural rules to limit such abusive claims for violation of California's UCL. People v. Potter Handy, LLP (2023) 97 Cal.App.5th 938. The 1st District Court of Appeal deliberated whether the UCL claim could survive a demurrer based on the litigation privilege shielding the law firm's alleged conduct.

The court held that litigants "may not use the UCL to plead around an absolute barrier to relief by relabeling a cause of action as a UCL claim." Id. at 952. The government argued that the conduct at issue would be a violation of Section 6128 of the Business and Professions Code, which was a predicate for the UCL claim. The court rejected this argument, highlighting the distinction "between criminal prosecution for solicitation (not barred) and liability in tort or under the UCL for the same conduct (barred)." Id. In addition, the court highlighted the government's choice to pursue a civil action under the UCL instead of criminal charges under Section 6128. Id.

The court also distinguished and refused to follow a precedent cited by the government, People v. Persolve, LLC (2013) 218 Cal.App. 4th 1267. In Persolve, the district attorney of Kern County brought UCL claims against a debt collection company based on conduct that allegedly violated Federal and California Debt Collection Practices Acts. Persolve found that UCL claims "that are based on conduct that is specifically prohibited by the California Act and/or the Federal Act are not barred by the litigation privilege." Id. at 1277. But the Potter court disagreed with Persolve's focus on the predicate statute and contrasted it with the Supreme Court decision in Rubin v. Green (1993) 4 Cal.4th 1187, which held that the litigation privilege barred a UCL claim predicated on alleged violations of the Business & Professions Code that were criminally prosecutable.

In the end, the court narrowly reconciled its ruling with Persolve by noting that the Persovle court opined that applying the litigation privilege to the UCL claim would render the protections afforded by the Federal and California Acts meaningless, whereas the court did not find that to be the case with the predicate statute in Potter. The predicate statute, section 6128, shows that the Legislature chose a criminal remedy for an attorney's deceit and collusion. That remedy remains available even if the UCL claim based on a violation of section 6128 is barred by the litigation privilege.

Moten v. Transworld Sys.

In Moten, the fact pattern was highly similar to that in Persolve: A student loan borrower filed a class action against a debt collection company that allegedly filed over 37,000 collection lawsuits with false affidavits for violations of Federal and California Fair Debt Collection Practices Acts and California's UCL. Moten v. Transworld Sys. (2023) 98 Cal.App.5th 691. The 4th District Court of Appeal reversed the grant of an anti-SLAPP motion, finding that the trial court erred by ruling that the litigation privilege barred plaintiff's claims. The court agreed with the Attorney General of the State of California, who filed an amicus brief, that the litigation privilege does not apply to consumer debt collection litigation, because otherwise the California Act would be significantly impacted or wholly inoperable. The court also cited Persolve favorably. Like Persolve, the court concluded that to bar consumer litigation based on violations of the California Act would "undermine the gravamen of the [California] Act." Id.

Conclusion

One way to reconcile Potter and Moten is to look closely at the predicate statutes on which their UCL claims were based. In Potter, the predicate statute provides only a criminal remedy and not civil enforcement, whereas in Moten, the predicate statute provides a civil remedy. As the court in Potter noted, since the Legislature chose to provide only a criminal remedy in Section 6128 of the Business and Professions Code, barring a UCL claim based on Section 6128 is not irreconcilable with Section 6128. But in Moten, as the California Fair Debt Collection Practices Act provides civil remedies, barring a UCL claim predicated on a California Act violation would frustrate the purpose of the California Act. Therefore, when filing a UCL claim that might be subject to the litigation privilege, practitioner should assess whether there is a separate statute that provides civil remedies for the same conduct. If so, Moten and Persolve would likely support the limitation on the application of the litigation privilege. If not, under Potter and Rubin, the UCL claim would likely be barred because of the litigation privilege.