Maybe JTH Tax Decision Was Not the End of the Inquiry: District Court (Cal.) Finds No UCL Claim Stated for the Act of Another Absent Direct Involvement

The California Court of Appeal in People v. JTH Tax, Inc. held that vicarious liability could be imposed under the UCL. However, in  Herron v. Best Buy Co. Inc., 2013 WL 595474 (E.D.Cal. 2013), Judge Burrell found that a UCL claim could not be stated against a computer manufacturer for the misrepresentations of the seller.

 Toshiba seeks dismissal of all UCL claims against it, arguing that “[t]o impose UCL … liability … [P]laintiff must allege with particularity facts demonstrating [Toshiba’s] ‘personal participation in the unlawful practices and unbridled control over the practices that are found to violate’ the UCL.” (Mot. 13:5–7 (quoting Perfect 10, Inc. v. Visa Int’l Serv. Ass’n, 494 F.3d 788, 808 (9th Cir.2007)).) Toshiba asserts that “Plaintiff has failed to plead any representations by [Toshiba], and has failed to plead any facts demonstrating [its] participation and unbridled control over Best Buy’s representations.” (Mot.14:8–10.)  ¶ Plaintiff counters that it has “sufficiently establish[ed] Toshiba’s participation in the creation of [Best Buy’s] product tags” since the information on the product tags “was provided directly by, and therefore controlled by, Toshiba.” (Opp’n 21:21–23.) Toshiba rejoins this contention is insufficient since “Plaintiff does not allege that [Toshiba] told Best Buy what it should or should not put on its product tags or its website, nor does he allege that Best Buy was required to follow such instructions had they been given,” and the “practices that are alleged to have violated the UCL … here are solely Best Buy practices.” (Reply 11:17–19, 11:22–23.)  ¶  “A defendant’s liability [under the UCL] must be based on his personal ‘participation in the unlawful practices’ and ‘unbridled control’ over the practices.” Emery v. Visa Int’l Serv. Ass’n, 95 Cal.App. 4th 952, 960 (2002) (quoting People v. Toomey, 157 Cal.App.3d 1, 15 (1984)); see also In re Firearm Cases, 126 Cal.App. 4th 959, 985, 983 (2005) (rejecting UCL claim where defendants “did not control the wrongful acts [in question] or encourage others to engage in questionable acts,” even though defendants did “have a relationship with the wrongdoers”). Here, rather than “exercis[ing] control over the preparation or distribution” of Best Buy’s battery life representation, Emery, 95 Cal.App. 4th at 960, Toshiba merely “convey[ed to Best Buy] the results of the Laptop’s MM07 test.” (FAC ¶ 36.) Given these allegations, “[t]he worst that can be said is that [Toshiba] did not take more aggressive corrective steps” to police Best Buy’s representations concerning the Laptop’s battery test results. Emery, 95 Cal.App. 4th at 965. Failure to take on the role of “global policeman” is insufficient to support liability under the UCL. Id. at 966. Accordingly, Plaintiff’s UCL claims against Toshiba for unlawful, unfair, and fraudulent practices are dismissed.