LEGISLATIVE UPDATES
(Published April 2003)
Is the Tide Turning on California's Unfair Competition Law?
Readers of Cruise & Carrier Legal Update will recall a recent article addressing how state consumer protection statutes, particularly California's Unfair Competition Law (UCL), Cal. Business and Professions Code §§ 17200 et seq., confront seafaring businesses with a host of legal hazards in matters as diverse as passenger and environmental claims. Recent events have some predicting rougher seas ahead in Sacramento for supporters of the UCL.
California's
Unfair Competition Law traces its origins back to the 1930s and is a form of
consumer protection statute known generally as a "little FTC Act." The current
version of the UCL was enacted in the 1970s and was intended to prevent businesses
from engaging in "unfair competition" in the form of unfair, fraudulent, or
deceptive business practices. The statutory definitions of "unfair, fraudulent,
or deceptive" business practices is intentionally very broad. The UCL allows
both public prosecutors and private attorneys to bring enforcement actions
and permits injunctive relief and civil penalties. Private attorneys may act
as "private attorneys general" and obtain attorney's fees even without actual
clients. There is no conventional "standing" requirement under the UCL, and
it is little stretch to say that anyone can sue any business for anything under
the UCL that is alleged to affect California consumers.
Business interests have tried without success every year since 1996 to bring needed reform to California's UCL, but have been thwarted by a Legislature unwilling to alienate trial lawyer and consumer special interest groups. However, a rising tide of rampant abuse of the UCL by private attorneys has led to talk of reform by politicians traditionally allied with such consumer interest groups.
In the past few years, private attorneys ranging from recent law school graduates to "reputable" law firms have been accused of using the UCL to file "shakedown" or "extortion" suits against small, primarily minority-owned, businesses in Southern California. Such suits are often brought by so-called "consumer watchdog groups" acting as fronts for law firms. California's traditionally consumer-friendly Attorney General, Bill Lockyer, has taken the unprecedented step of asking the State Bar of California to investigate attorneys behind such shakedown suits. State Bar Deputy Trial Counsel has been quoted as saying, "This is a top priority for our office."
In the meantime, several California legislators have expressed intent to introduce legislation to reform California's UCL. Most of the attention is currently focused on AB 69, introduced by Assemblyman Lou Correa, an Orange County Democrat who has already conducted several lively town hall meetings on the bill. A San Diego law professor who helped draft the UCL in the early 1970s testified in favor of needed reforms. Among the suggestions are creating special defendant classes, limiting use of the statute to public prosecutors, having those acting as "private attorneys general" notify the state AG, requiring court review of settlements, disallowing attorney's fees, disallowing suits when a regulatory agency has already investigated and dealt with the alleged practice, and making final judgments or regulatory actions "final" by giving them res judicata effect.
California appellate courts have been encouraged to chip away at the UCL, but most courts prefer to leave legislation to the Legislature. Though supporters of needed reforms hope to push their proposals through the 2003-2004 legislative session, the measure is certain to be hotly contested. KRM attorneys will continue to closely monitor these developments, which are of concern to all clients doing business in California.
Bills Introduced to Control Cruise Ship Air and Water Discharge
Two bills aimed directly at controlling air and water emissions from cruise ships operating in California waters have been introduced in the 2003-2004 session of the California legislature. AB 471, sponsored by Assembly members Joseph Simitian, George Nakano, and John Laird (representing the South San Francisco Bay, South Los Angeles Bay, and greater Monterey Bay areas, respectively) would prohibit a cruise ship from conducting on-board waste incineration while operating within 90 miles of the California coast, require a cruise ship to use only specified diesel fuel while operating within 25 miles of the California coast, and prohibit a cruise ship from operating its main propulsion or auxiliary engines while docked, beginning 30 minutes after docking until one hour prior to scheduled departure time. The bill would require the State Air Resources Control Board ("SARCB") to enforce these provisions. Existing law, repealed as of July 1, 2003, requires the Board to measure and record the opacity of visible emissions of a representative sample of large passenger vessels while at berth or at anchor in a California port.
AB 121, also sponsored by Assemblyman Simitian would require cruise ships and other large passenger vessels to submit a report to the State Water Resources Control Board ("SWRCB") of any release of greywater or sewage that occurred during a specified time in state marine waters. AB 121 would also direct the board to apply to the Administrator of the United States Environmental Protection Agency ("EPA") to authorize California to prohibit discharge of both greywater and sewage by large passenger vessels operating in the marine waters of the state. Sewage and greywater discharges from large passenger vessels are exempt from the Clean Water Act and federal law prohibits states from prohibiting vessels from discharging greywater and sewage unless the state first applies to and receives approval from the EPA. The Clean Water Act requires all ships to treat sewage with a U.S. Coast Guard approved marine sanitation device ("MSD"). Environmentalists have raised concerns about the effectiveness of this requirement, as the Coast Guard rarely boards ships to inspect MSDs, there is no requirement to test the treated water for compliance with mandated water quality standards, and the law only applies within three miles of the U.S. coast. As of this writing, Alaska is the only state with legislation pertaining specifically to reducing cruise ship pollution.
U.S. Cabotage Violations Penalties Increased
Pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990, U.S. Customs recently increased for inflation the maximum civil penalties for certain cabotage violations. Effective March 21, 2003, the penalty for the illegal transport of passengers by foreign vessels between ports in the U. S. increased from $200 per passenger to $300. The penalties for illegal towing of vessels, other than vessels in distress, increased from a minimum of $250 to $300 and a maximum of $1,000 to $1,110, plus $60 per ton of the vessel towed.
