Rothschild v. Tyco International (Us), Inc.

• Decision Date: 30 August 2000
• Docket Number: No. D034567.,D034567.
• Court: California Court of Appeals Court of Appeals
• Parties: Marianne ROTHSCHILD, Plaintiff and Appellant, v. TYCO INTERNATIONAL (US), INC., et al., Defendants and Respondents.

99 Cal.Rptr.2d 721

83 Cal.App.4th 488

Marianne ROTHSCHILD, Plaintiff and Appellant, v. TYCO INTERNATIONAL (US), INC., et al., Defendants and Respondents.

No. D034567.

Court of Appeal, Fourth District, Division 1.

August 30, 2000.

Finkelstein & Krinsk, Howard D. Finkelstein, San Diego, Jeffrey R. Krinsk and Arthur L. Shingler, for Plaintiff and Appellant.

McKenna & Cuneo, Robert S. Brewer, Jr. and Michael H. Fish, San Diego, for Defendants and Respondents Westburne Supply, Inc. and Marden Susco Company.

Weston, Benshoof, Rochefort, Rubalcava & MacCuish, David S. MacCuish, John M. Rochefort, Kurt Osenbaugh, Todd Benoff, Sheppard Mullin Richter & Hampton and Scott Frank Roybal, Los Angeles, for Defendant and Respondent Watts Industries, Inc.

Beck, De Corso, Daly & Kreindler, Bryan D. Daly, Anthony A. De Corso, Teresa Reyna Barrera and Suzanne Tracy, Los Angeles, for Defendants and Respondents Tyco International (US), Inc., James Jones Co., and Mueller Co.

McINTYRE, J.

Marianne Rothschild filed an action against Tyco International (US), Inc. (Tyco), Watts Industries, Inc. (Watts), James Jones Co. (Jones), Mueller Co. (Mueller), Westburne Supply, Inc. and Marden Susco Company (collectively, the defendants), alleging that the defendants violated the unfair competition law (Bus. & Prof.Code, § 17200 et seq.; Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 169, fn. 2, 83 Cal.Rptr.2d 548, 973 P.2d 527). The superior court sustained the defendants' demurrer to Rothschild's second amended complaint without leave to amend, holding that her action was barred by the California False Claims Act (Gov. Code, § 12650 et seq. (all statutory references are to the Government Code unless otherwise specified), because a separate lawsuit had been filed against the defendants for violations of that statutory scheme based on the same underlying factual allegations that provide the basis for this action. Rothschild appeals, contending that the court erred in finding that her action was barred. We agree and reverse the order.

FACTUAL AND PROCEDURAL BACKGROUND

In accordance with the traditional standards of appellate review of a ruling on demurrer, the factual recitation is taken from the allegations of Rothschild's second amended complaint. (Crystaplex Plastics, Ltd. v. Redevelopment Agency (2000) 77 Cal.App.4th 990, 993, 92 Cal.Rptr.2d 197.)

For over 100 years, Jones has been in the business of designing, manufacturing and selling water system hardware components, such as valves, balls, saddles and compression nuts, for use in municipal water systems. No later than 1987, and shortly after Jones was acquired by Watts, Jones attempted to cut its costs by purchasing and manufacturing parts made from inexpensive metal alloys that did not meet applicable industry specifications and were not suitable for use in components for systems that carried drinking water. The parts made from the inferior alloys deteriorated more quickly than those made from specification metals and in some instances, contained greater amounts of lead than is permissible under industry standards.

In June of 1997, Nora Armenta, then a Jones employee, filed in the Los Angeles Superior Court a civil qui tam action against Jones, Tyco, Watts and Mueller for violations of the False Claims Act. In her amended complaint, Armenta named as plaintiffs a number of municipal water districts, cities and counties in California (the real parties in interest). She alleged that Jones falsely represented to the real parties in interest that its products conformed to applicable industry standards for water works components and that, as a result of the misrepresentations, Jones' parts were incorporated into municipal water systems throughout the state. Armenta's amended complaint sought, inter alia, the issuance of a cease and desist order, as well as the recovery of treble damages and civil penalties of up to $10,000 for each violation of the False Claims Act.

In December 1998, Rothschild filed this action in the San Diego Superior Court on behalf of herself and all others similarly situated, based on virtually identical factual allegations as those set forth in Armenta's amended complaint. Rothschild's action, however, alleged that the defendants' conduct violated the unfair competition law and sought equitable and injunctive relief, including an injunction prohibiting the defendants from continuing their improper practices and restitution of money obtained by the defendants based on their wrongful acts and practices.

The defendants demurred to Rothschild's second amended complaint, arguing in part that her claims were barred by the False Claims Act (specifically, § 12652, subd. (c)(10), hereafter § 12652(c)(10)) based on the filing of Armenta's action. After hearing oral argument on the matter, the court entered an order sustaining the demurrer without leave to amend and dismissing the action with prejudice.

DISCUSSION

1. Appealability

Rothschild appeals the court's order of dismissal, which provided in part that "[j]udgment is hereby entered in favor of defendants...." Although this order is not appealable (Code Civ. Proc., § 904.1; Hill v. City of Long Beach (1995) 33 Cal.App.4th 1684, 1695, 40 Cal.Rptr.2d 125) and no judgment appears in the record before us, in the interests of justice and efficiency, we deem the appeal as taken from a judgment of dismissal entered in accordance with the trial court's order. (Gonzalez v. County of Tulare (1998) 65 Cal.App.4th 777, 782, fn. 4, 76 Cal.Rptr.2d 707; Lumpkin v. Jordan (1996) 49 Cal. App.4th 1223, 1225-1226, 57 Cal.Rptr.2d 303.)

2. Standard of Review

The question of whether Rothschild's action is barred by the False Claims Act requires the interpretation and application of statutes. As such, the issue presents a question of law, which is subject to our independent review. (Olsen v. Breeze, Inc. (1996) 48 Cal.App.4th 608, 621, 55 Cal.Rptr.2d 818; Service Employees Internal Union v. County of Los Angeles (1990) 225 Cal.App.3d 761, 774, 275 Cal. Rptr. 508.)

3. Rothschild's Unfair Competition Action

Rothschild brought this action pursuant to California's unfair competition law, the primary purpose of which is to preserve fair business competition by extending protections traditionally available to business competitors to the consuming public. (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264, 10 Cal. Rptr.2d 538, 833 P.2d 545, citing Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 109, 101 Cal.Rptr. 745, 496 P.2d 817.) "Unfair competition" is broadly defined to include "any unlawful, unfair or fraudulent business act or practice." (Bus & Prof.Code, § 17200.) The coverage of the law is "`sweeping, embracing "`anything that can properly be called a business practice and that at the same time is forbidden by law.'"`" (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., supra, 20 Cal.4th at p. 180, 83 Cal.Rptr.2d 548, 973 P.2d 527, quoting Rubin v. Green (1993) 4 Cal.4th 1187,1200, 17 Cal.Rptr.2d 828, 847 P.2d 1044.) Thus, the unfair competition law "borrows" from other laws, treating violations of those laws as unlawful practices independently actionable. (State Farm Fire & Casualty Co. v. Superior Court (1996) 45 Cal. App.4th 1093, 1103, 53 Cal.Rptr.2d 229.)

The unfair competition law imposes strict liability on persons who engage in conduct within its purview; to succeed on an unfair competition claim, it is not necessary to establish that the defendant intended to injure anyone. (State Farm Fire & Casualty Co. v. Superior Court, supra, 45 Cal.App.4th at p. 1102, 53 Cal. Rptr.2d 229.) However, remedies under the unfair competition law are generally limited to injunctive relief and restitution of money or property wrongfully obtained. (Bus. & Prof.Code, § 17203; see ABC Internal Traders, Inc. v. Matsushita Electric Corp. (1997) 14 Cal.4th 1247, 1268, 61 Cal.Rptr.2d 112, 931 P.2d 290; see also Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., supra, 20 Cal.4th at p. 179, 83 Cal.Rptr.2d 548, 973 P.2d 527 [the unfair competition law does not provide for the recovery of "damages, much less treble damages, or attorney fees," italics in original]; Bank of the West v. Superior Court, supra, 2 Cal.4th at p. 1266, 10 Cal.Rptr.2d 538, 833 P.2d 545.) Such remedies are expressly made "cumulative ... to the remedies or penalties available under all other laws of this state." (Bus. & Prof.Code, § 17205.)

It is clear that a plaintiff may not bring an action under the unfair competition law if some other statutory provision bars such an action or permits the underlying conduct. (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., supra, 20 Cal.4th at p. 182, 83 Cal.Rptr.2d 548, 973 P.2d 527.) However, "[t]o forestall an action under the unfair competition law, another [statutory] provision must actually `bar' the action or clearly permit the conduct [alleged to be unfair or unlawful]." (Id. at p. 183, 83 Cal. Rptr.2d 548, 973 P.2d 527.) The defendants contend that the False Claims Act establishes such a bar.

4. The False Claims Act

A. Introduction

In 1987, the California legislature enacted the False Claims Act, patterned on a similar federal statutory scheme (31 U.S.C. § 3729 et seq.), to supplement governmental efforts to identify and prosecute fraudulent claims made against state and local governmental entities. (See Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading Analysis of Assem. Bill No. 1441 (1987-1988 Reg. Sess.) as amended Sept. 8, 1987, p. 5.) As relevant here, the False Claims Act permits the recovery of civil penalties and treble damages from any person who "[k]nowingly presents or causes to be presented [to the state or any political subdivision] ... a false claim for payment or approval." (§ 12651, subd. (a)(1).) To be liable under the False Claims Act, a person must have actual knowledge...