Lee v. Luxottica Retail N. Am., Inc.

65 Cal.App.5th 793

280 Cal.Rptr.3d 230

Kim LEE, Plaintiff and Appellant,

v.LUXOTTICA RETAIL NORTH AMERICA, INC., et al., Defendants and Respondents.

A157657

Court of Appeal, First District, Division 2, California.

Filed June 16, 2021

Quadra & Coll, San Francisco, CA, James A. Quadra, San Francisco, CA, Rebecca Coll, San Francisco, CA, and Robert Sanford, Washington, DC, for Plaintiff and Appellant.

Crowell & Moring, Emily T. Kuwahara, Los Angeles, CA, and Gregory D. Call, San Francisco, CA, for Defendants and Respondents.

STEWART, J.

Appellant Kim Lee, O.D., acting on behalf of a putative class of optometrists in California with independent optometry practices, brought suit against a competing chain of optical retailers. He now appeals from a judgment sustaining without leave to amend a demurrer to his second amended complaint, which asserts a single cause of action under California's Unfair Competition Law (UCL) ( Bus. and Prof. Code, § 17200 et seq. ).

We hold that the only relief plaintiff requests against his competitors—compensation for lost market share—is not a remedy authorized by the UCL, because it does not constitute restitution, the only form of nonpunitive monetary recovery authorized under the UCL. Simply put, compensation for expected but unearned future income to which the plaintiff has no legal entitlement is not recoverable as restitution under the UCL, regardless whether it is characterized as lost market share. Lost profits are damages, not restitution, and are unavailable in a private action under the UCL. Accordingly, the demurrer was properly sustained, and we will affirm the judgment.

BACKGROUND

" ‘Because "[t]his case comes to us after the sustaining of a general demurrer ..., we accept as true all the material allegations of the complaint." ’ " ( Korea Supply Co. v. Lockheed Martin Corp . (2003) 29 Cal.4th 1134, 1141, 131 Cal.Rptr.2d 29, 63 P.3d 937 ( Korea Supply ).)

Plaintiff Kim Lee, O.D., is a San Francisco optometrist who has operated his independent practice since 2002. In 2017, he commenced this action against two corporate affiliates operating a chain of optical retail stores in California that offer competing eyeglass products and optometry services: parent company Luxottica Retail North America, Inc., an Ohio corporation doing business in California under the name LensCrafters, and its wholly owned subsidiary, Eyexam of California, Inc.¹ The action was brought on behalf of a putative class of optometrists consisting of "All California doctors of optometry in practices independent of control by a retail chain optical store in California, and whose practices were located within 20 miles of a LensCrafters location between November 30, 2013 and September 1, 2015."

Lee's second amended complaint alleges that during this period, defendants operated the LensCrafters chain of stores in a manner that violated state laws regulating the practice of optometry and the dispensing of optical products, thereby constituting unfair and/or unlawful business practices in violation of the UCL.

He alleges that, as a result of these practices, the putative class members lost "market share" in retail sales based on allegations they had "vested interests in the Total Addressable Market of individuals who visited optometrists." In particular, he alleges "[s]tudies have shown that adults are, on average, willing to drive more than 20 miles for routine medical care" and that "[i]f patients had not been able to visit illegal optometry locations, a statistically significant and statistically ascertainable percentage of such patients would have instead visited at least one member of the Class within 20 miles of the illegal locations [operated by defendants that] such patients visited." Thus, he alleges that the putative class members "lost market share in their optical retail sales" due to defendants’ conduct which, conversely, "improperly increase[ed] their market share of optical product sales in California." He alleges that "during the Class Period there were approximately 150 LensCrafters locations throughout California which serviced customers who would have gone to different optometrist[s] if they had not visited LensCrafters, creating a pool of funds in which every legally operating optometrist in the area had a vested interest," and that "[m]embers of the class are each entitled to their fair share of their cumulative vested interest." The putative class members allegedly "lost their vested interest in the pool of funds that were spent on illegal optometry services and illegal retail sales of optical goods, which would have instead been spent in a legal location."

The only remedy prayed for is a judgment "[o]rdering the restitution/disgorgement of all sums obtained by Defendants through improper taking of market share from Class Members through violations of the UCL."

LensCrafters demurred to the second amended complaint, challenging both the remedy sought and the class allegations.² The trial court sustained the demurer without leave to amend, on the ground that plaintiff failed to allege an entitlement to restitution under the UCL. Judgment was entered, and plaintiff timely appealed.

DISCUSSION

"A demurrer is properly sustained when ‘[t]he pleading does not state facts sufficient to constitute a cause of action.’ ( Code Civ. Proc., § 430.10, subd. (e).) On appeal, a resulting judgment of dismissal is reviewed independently. [Citation.] ‘ " ‘[W]e accept as true all the material allegations of the complaint’ " ’ [citation], but do not ‘assume the truth of contentions, deductions or conclusions of law.’ " ( Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc. (2017) 2 Cal.5th 505, 512, 213 Cal.Rptr.3d 568, 388 P.3d 800.)

The UCL proscribes "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising," and any act prohibited by California's false advertising law. ( Bus. & Prof. Code, § 17200 ; see also id. , § 17500.) Its purpose " ‘is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services’ [citation][,] ... [and to] ‘provide[ ] an equitable means through which both public prosecutors and private individuals can bring suit to prevent unfair business practices and restore money or property to victims of these practices.’ " ( Solus Industrial Innovations, LLC v. Superior Court (2018) 4 Cal.5th 316, 340, 228 Cal.Rptr.3d 406, 410 P.3d 32.) "By prohibiting unlawful business practices, ‘ " section 17200 ‘borrows’ violations of other laws and treats them as unlawful practices" that the unfair competition law makes independently actionable.’ " ( De La Torre v. CashCall, Inc. (2018) 5 Cal.5th 966, 980, 236 Cal.Rptr.3d 353, 422 P.3d 1004.) Actions may be brought by the Attorney General or other specified public officials, and "by a person who has suffered injury in fact and has lost money or property as a result of the unfair competition."³ ( Bus. & Prof. Code, § 17204.)

"While the scope of conduct covered by the UCL is broad, its remedies are limited." ( Korea Supply, supra, 29 Cal.4th at p. 1144, 131 Cal.Rptr.2d 29, 63 P.3d 937.) Injunctive relief is the primary form of relief available. ( McGill v. Citibank, N.A. (2017) 2 Cal.5th 945, 954, 216 Cal.Rptr.3d 627, 393 P.3d 85 ; Bus. & Prof. Code, § 17203.) In public enforcement actions, civil penalties also may be assessed. (See Bus. & Prof. Code, § 17206.) But in a private action, "[t]he only monetary remedy available ... is restitution." ( Clark v. Superior Court (2010) 50 Cal.4th 605, 613, 112 Cal.Rptr.3d 876, 235 P.3d 171 ; see Bus. & Prof. Code, § 17203 [court may "make such orders and judgments ... as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition"].) Damages are not recoverable. ( Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1266, 10 Cal.Rptr.2d 538, 833 P.2d 545.) In short, "under the UCL, ‘[p]revailing plaintiffs are generally limited to injunctive relief and restitution.’ " ( Korea Supply , at p. 1144, 131 Cal.Rptr.2d 29, 63 P.3d 937.)

Here, plaintiff contends the demurrer was improperly sustained because lost market share is a restitutionary remedy authorized by the UCL. We do not agree.

Although the precise question here is one of first impression in California, it is squarely controlled by our Supreme Court's 2003 decision in Korea Supply , supra , 29 Cal.4th 1134, 131 Cal.Rptr.2d 29, 63 P.3d 937, which addressed "what claims and remedies may be pursued by a plaintiff who alleges a lost business opportunity due to the unfair practices of a competitor." ( Id . at p. 1140, 131 Cal.Rptr.2d 29, 63 P.3d 937.)

In Korea Supply , the plaintiff was an agent representing the supplier of military equipment in the supplier's bid to procure a lucrative military contract with a foreign government. ( Korea Supply , supra , 29 Cal.4th at p. 1141, 131 Cal.Rptr.2d 29, 63 P.3d 937.) If the bid was successful, the plaintiff stood to earn a $30 million commission. ( Ibid . ) The contract was awarded to a competitor, however. The agent then brought suit against the winning bidder under the UCL (and asserted related tort claims), alleging the contract had been procured by wrongful means (i.e., bribes and sexual favors). ( Korea Supply, at pp. 1141-1142, 131 Cal.Rptr.2d 29, 63 P.3d 937.) Its UCL claim sought disgorgement of all profits the winning bidder had realized under the winning contract. ( Korea Supply, at p. 1142, 131 Cal.Rptr.2d 29, 63 P.3d 937.) The trial court sustained a demurrer without leave to amend to the UCL claim on the ground it did not allege facts sufficient to state a cause of action. ( Korea Supply, at pp. 1142-1143, 131 Cal.Rptr.2d 29, 63 P.3d 937.) The appellate court reversed, but the Supreme Court ruled the demurrer to the UCL cause of action had been properly sustained because the plaintiff could not...