Is the California Unfair Practices Act a Free Pass on Motions to Dismiss?

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Probably not, but UPA claims can be tough to defeat at the motion to dismiss stage. Witness Rheumatology Diagnostics Laboratory, Inc. v. Aetna, Inc., 2013 U.S. Dist. LEXIS 151128 (N.D. Cal. Oct. 18, 2013) (Orrick, J.), where the court dismissed many of the plaintiffs’ Sherman Act Section 1 and Section 2 claims. However, the court refused to dismiss the plaintiffs’ below-cost pricing claims against Quest Diagnostics under the UPA, reasoning:

The UPA “appears to be a painstaking endeavor by the legislature to combat the abuses which the business interests have deemed unfair practices in the competitive field.” To require the plaintiffs to plead with an unreasonable degree of specificity would undermine the UPA’s admonition that the statute “shall be liberally construed that its beneficial purposes may be subserved.” Cal. Bus. & Prof. Code § 17002. Much of the information that must be pleaded—Quest’s costs and the prices it charges by product—is in Quest’s hands and not easily accessed by the plaintiffs. The Court does not “forget that proceeding to [ ] discovery can be expensive” or that the plaintiffs must meet their burden under Federal Rule of Civil Procedure 8. However, even in a case where the plaintiff “fail[ed] to allege a definite cost of doing business,” the California Court of Appeal held that “it would serve no useful purpose to require a speculative allegation of cost which adds nothing to the notice given by the pleadings in their present state. Accordingly, we view the present pleadings as sufficient under section 17043 and find error in sustaining the demurrer thereto.”

In sum, “the determination of cost is best approached on a case-by-case basis.” So long as the method used was not “arbitrary or irrational,” it is sufficient for pleading purposes. Finding that the plaintiffs adequately plead their UPA claim based on the information alleged in the [complaint] does not mean that the information or calculations provided are necessarily correct or even that the plaintiffs are likely to succeed in proving their claim. Quest may dispute the details of the calculation method later to the trier of fact. However, the purpose of pleading is to put a defendant on sufficient notice of its alleged wrongdoing, and the plaintiffs have done so here.

(Citations omitted). This liberal standard – coupled with the fact that a UPA plaintiff probably need not prove a dangerous probability of recoupment after the predatory period, a requirement under federal law – makes it difficult to target these claims on a motion to dismiss.

[View source.]

Topics:  Below-Cost Pricing, Motion to Dismiss, Pleading Standards, Sherman Act, Unfair or Deceptive Trade Practices

Published In: Antitrust & Trade Regulation Updates, Civil Procedure Updates, General Business Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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