Note: on February 19, 2003, the California Supreme Court declined to review this case making the Court of Appeals' decision final.

The California Court of Appeals, in Greenlining Institute v. Public Utilities Commission, No. A098037 (Cal. 1st Dist. Ct. App. Nov. 27, 2002), recently held that jurisdiction over unfair competition and false advertising claims rests solely with the courts. This ruling will limit the types of complaints that may be considered by the California Public Utilities Commission ("CPUC") and diminish the area of concurrent jurisdiction between the CPUC and the courts. This case is also significant in light of two cases pending before the California Supreme Court involving the related issue of whether courts have jurisdiction over unfair competition claims where proceedings based on the same underlying facts are pending before the CPUC. See People ex rel. Orloff v. Pacific Bell, 89 Cal. App. 4th 844 (2001), review granted, S099131 (Sept. 26, 2001); Pacific Gas & Electric Co. v. Superior Court, 95 Cal. App. 4th 1389 (2002), review granted, S104412 (May 1, 2002). [1]

Background

Plaintiffs Greenlining Institute, Latino Issues Forum, and 17 individual residents filed a complaint with the CPUC against Pacific Bell, alleging the use of misleading and deceptive marketing practices to sell optional phone services. In addition to violations of the Public Utilities Code, plaintiffs alleged violations of the California Business and Professions Code sections 17200 et seq., for unfair competition, and 17500 et seq., for false advertising. The CPUC determined that Pacific Bell had engaged in misleading marketing practices, but declined to rule on plaintiffs' unfair competition and false advertising claims.

Plaintiffs filed a writ of review with the Court of Appeals under Public Utilities Code section 1756, seeking to force the CPUC to adjudicate their unfair competition and false advertising claims. The Court of Appeals denied plaintiffs' writ, holding that the CPUC lacks jurisdiction to adjudicate unfair competition and false advertising claims.

The Court's Rationale

Plaintiffs argued that the CPUC's broad authority to adjudicate complaints grants it jurisdiction over unfair competition claims, including claims of false advertising. Looking at the plain language, statutory scheme, and legislative history of the Unfair Business Practices Act, however, the court concluded that jurisdiction over unfair competition claims lies solely with the courts.

Unfair Competition – Analysis of Business and Professions Code § 17200

The court began its analysis of jurisdiction for unfair competition claims by examining the language of section 17204, which states that "[a]ctions for relief shall be prosecuted in a court of competent jurisdiction." The court interpreted the mandatory term "shall" and reference to "court," to prohibit section 17200 claims both in courts lacking proper jurisdiction and in non-court proceedings. The fact that "shall" replaced "may" in a 1993 amendment, coupled with the legislative history of the amendment, demonstrated to the court a legislative intent to limit jurisdiction to the courts. The court also observed that other relevant provisions of the Unfair Business Practices Act are littered with references to "actions" and "courts," further demonstrating the Legislature's intent for unfair competition claims to be adjudicated in court proceedings.

Plaintiffs argued that section 17204 applies only to "actions" and not to administrative complaints such as the one filed in this proceeding. The court, however, dismissed this reading of section 17204 as "absurd." Plaintiffs also pointed to Public Utilities Code section 1702, which confers on the CPUC jurisdiction over complaints relating to utilities regulation, arguing that this broad grant of authority extends to unfair competition claims. The court observed that, as with any statute, the more specific provisions of 17204 limiting jurisdiction to the courts, control over the more general provisions of section 1702.

Plaintiffs also contended that the courts and the CPUC have recognized CPUC jurisdiction over unfair competition claims, citing the primary jurisdiction doctrine and cases in which the CPUC has purportedly adjudicated unfair competition claims. The primary jurisdiction doctrine allows a court to stay an action for referral of issues to an administrative body where resolution of a claim involves issues within the special competence of an agency. The court observed that unfair competition claims do not fall within the CPUC's special competence. Thus, any application of the primary jurisdiction doctrine to a case including unfair competition claims is not itself an indication of the CPUC's jurisdiction over those claims. The court also observed that the CPUC cases plaintiffs cited as adjudicating unfair competition claims in fact only considered unfair competition as an adjunct to other claims and did not amount to an adjudication of unfair competition claims themselves. Therefore, the court held that the CPUC does not have jurisdiction over unfair competition claims.

Consideration of Business and Professions Code § 17500 – False Advertising

Plaintiffs put forth the same arguments for CPUC jurisdiction over false advertising claims, but the court was similarly unconvinced. One difference between false advertising and unfair competition claims is that section 17535, which articulates jurisdiction for false advertising, lacks the mandatory "shall" language of section 17204, stating instead that a court "may" impose an injunction, and that the Attorney General "may" bring a "civil action" in "any court of competent jurisdiction." Although the court had emphasized the importance of the mandatory language for section 17204, here the court found that references to "civil action" and "court" were sufficient to prohibit jurisdiction over false advertising claims in non-court proceedings. The court observed that the broader context of the False Advertising Act does not contemplate enforcement of false advertising claims in non-court proceedings. The Unfair Business Practices Act also provided context for determining jurisdiction, as a violation of the False Advertising Act is a per se violation of the Unfair Business Practices Act. Thus the court held that the CPUC lacks jurisdiction over false advertising claims as well.

Unfair Competition Before the CPUC

Although the court held that the CPUC has no jurisdiction to adjudicate unfair competition claims, it did not bar the CPUC from considering such claims. Rather, the court observed that the CPUC must often consider areas of law outside its jurisdiction to determine whether a utility has violated a law within its jurisdiction. For instance, the CPUC may consider the law of unfair competition to determine whether a utility has imposed an unreasonable charge in violation of Public Utilities Code section 451. Without jurisdiction over unfair competition claims, however, the CPUC cannot rule on whether the utility has violated unfair competition law. Accordingly, the CPUC cannot impose remedies based on unfair competition.

The CPUC's consideration of an unfair competition claim may nevertheless affect a court's ruling on that claim. Although a court must determine whether a utility has violated the unfair competition laws, factual determinations by the CPUC may be treated as binding on the court, and thus may affect the court's ruling. Except in a complaint or enforcement proceeding or a ratemaking or licensing decision, the CPUC's findings of fact are final and not subject to review. Cal Pub. Util. Code §§ 1757, 1757.1.

Implications for Concurrent Court and CPUC Proceedings

It is unclear how the holding in Greenlining will affect concurrent proceedings before a court and the CPUC. Section 1759 of the California Public Utilities Code prohibits a superior court from reviewing a decision of the CPUC or interfering with the CPUC's performance of duties. Under current law, actions against a public utility are thus barred in Superior Court if an award of damages would undermine or hinder CPUC policy. San Diego Gas & Electric Co. v. Superior Court, 13 Cal. 4th 893, 918 (1996). In Orloff, 89 Cal. App. 4th 844, currently under review by the California Supreme Court, the Court of Appeals upheld a dismissal of an unfair competition action where the identical issue was pending before the CPUC. Similarly, in Pacific Gas & Electric Co. v. Superior Court, 95 Cal. App. 4th 1389, also pending California Supreme Court review, the Court of Appeals held that an unfair competition action was preempted by an adjudicatory proceeding before the CPUC raising identical challenges to the utility's practices and seeking comparable remedies.

If upheld, these cases could severely limit a plaintiff's ability to adjudicate related claims concurrently before the courts and the CPUC. In light of the holding in Greenlining, the mere filing of a complaint before the CPUC on the same subject matter could be argued to preclude the filing of a concurrent unfair competition claim in court. This would undermine a plaintiff's ability to recover for unfair competition since the CPUC's factual determination of the matter could affect the court's determination of the unfair competition claim, as discussed above. A plaintiff might choose to file its claim with the court, but would then still run the risk of the court's invoking the primary jurisdiction doctrine and staying suit pending determination of certain issues by the CPUC.

On the other hand, the holding in Greenlining may suggest that a pending CPUC proceeding should not preclude a parallel unfair competition claim in court. Orloff and Pacific Gas & Electric turned on the fact that proceedings before the court and the CPUC involved identical issues and remedies. An unfair competition action, however, does not necessarily involve the same issues as a violation of the Public Utilities Code; and it certainly does not involve the same remedies.[2] Since the CPUC may only consider unfair competition law, a court's determination that a utility has participated in unfair competition may not hinder its ability to determine whether the utility has also violated a provision of the Public Utilities Code. It is uncertain how the courts will reconcile these potentially conflicting lines of authority. The California Supreme Court's determination of Orloff and Pacific Gas & Electric should shed more light on this issue.

If you have any questions about Greenlining Institute v. Public Utilities Commission or its potential implications for your company, please feel free to contact a member of Morrison & Foerster's Energy Group.