California’s Unfair Competition Law (UCL) was not Violated by Efforts of Insurers and Collection Company to Collect Money from Uninsured Motorist who Caused Accident
An uninsured driver filed a putative class action against various defendants arising from their efforts to collect amounts that he owed for rear-ending an insured driver. The trial court sua sponte recast as a motion for judgment on the pleadings the demurrer filed by defense attorneys to the unfair business practice claims premised on California’s Business & Professions Code section 17200. The trial court then granted the judgment on the pleadings as to the UCL claims in the class action complaint, and the Court of Appeal affirmed. Camacho v. Automobile Club of Southern California, ___ Cal.App.4th ___, 48 Cal.Rptr.3d 770 (Cal.App. September 14, 2006).
Briefly, plaintiff rear-ended an insured driver whose carrier paid the claim and assigned its rights against plaintiff to a collection company. Plaintiff paid $500 of the roughly $9400 he owed, and then filed his class action lawsuit alleging violations of California’s unfair competition law (UCL), Business & Professions Code section 17200, arising out of the efforts of the collection company to recover money due the insurers. In part the class action challenged letters sent by the collection company, but the complaint also alleged unfair business practices unrelated to those letters. Camacho, at 771-73. The appellate court summarized the claims based on the letters at page 773 as follows:
Suggesting in the collection letter that the subrogation claim asserted by defendants is a liquidated debt; creating the false impression in the mind of a reasonable recipient of the collection letter that he or she is receiving the protection of the Fair Debt Collection Practices Act (FDCPA), when in fact the defendants are not complying with FDCPA; and asserting in the letter that an investigation has revealed that the recipient of the letter is responsible for the accident, even though responsibility is determined by means of a court action or uninsured motorist’s arbitration. (Footnote omitted.)
The balance of the unfair business practice claims were premised on the allegations that the defendants “threaten to report the failure to pay the subrogation claim to credit reporting bureaus, as though it was an unsatisfied consumer debt; improperly report the failure to pay the subrogation claim to credit reporting bureaus; collect the insured’s deductible, even though defendants are not entitled to it; and threaten to petition the Department of Motor Vehicles to revoke the recipient’s driver’s license if he or she does not pay the claimed debt.” Camacho, at 773.
Preliminarily, the Court of Appeal considered the proper test for determining whether conduct was “unfair” within the meaning of California’s UCL, and concluded that the trial court erroneously employed a test that had been rejected by the California Supreme Court in Cal-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal.4th 163 (Cal. 1999). Camacho, at 774. After considerable analysis, see id., at 774-79, the appellate court held that the “section 5 test” codified in 15 U.S.C. § 45(n) defines “unfair” conduct in consumer cases premised on Section 17200. The Court explained at page 777,
Since 1980, the factors that define unfairness under section 5 are: (1) the consumer injury must be substantial; (2) the injury must not be outweighed by any countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves could not reasonably have avoided. (Citation omitted.)
Applying this test, the California appellate court affirmed the trial court’s ruling. The Court began with the observation that plaintiff was at fault for the accident. Camacho, at 779. Thus, “the class cannot include persons who are not liable, and from whom [the collection company] seeks to collect monies that are not actually owed.” Id. The fact plaintiff was at fault also meant that he could not have been injured by the alleged unfair business practice; by definition, then, his alleged injury was not “substantial.” As the Court of Appeal explained at page 779:
Since [plaintiff] was liable for the damages arising from the accident, it does not violate his rights to attempt to collect those damages. In other words, he was not injured. Our conclusion is the same that the trial court reached, when it concluded that even if there was some conduct that was “theoretically unfair, no actual unfairness is alleged to have harmed plaintiff.”
The Court next found that the class action complaint also failed to meet the second part of the test, because “the object of the business practice at issue is to collect a sum that is actually owed.” Camacho, at 779. The appellate court held that “The public is well served when an uninsured driver who was at fault responds to his or her [financial] obligations.” Id.
Finally, the complaint plainly failed the third prong of the test because plaintiff would have avoided the “injury” if he had simply complied with state law and carried automobile insurance. Camacho, at 779.