North American made more than 300 home loans without a license, Justice Dato noted in his dissent in Lagrisola v. North American (D4d1 Nov. 3, 2023 No. D080758). Plaintiffs were among the borrowers, and sued to recover all “illegal interest” and finance charges the lender had charged on their loan.
The trial court disagreed with the borrowers, and sustained the lender’s demurrer. The majority of the appellate panel affirmed. True, making a loan without a proper license is an unlawful business practice under Business & Professions Code section 17200. But standing to sue for an unfair business practice requires an “injury in fact” and the “los[s] of money or property.”
Here, just because a loan is unlicensed does not, by itself, make it worse than a licensed loan. As the majority noted, the loan that the borrowers got “was identical to the terms and characteristics they desired.” And the Finance Code sections that prohibit lending without a license authorize no private right of action.
Justice Dato disagreed. Dissenting, he would have found the requisite “injury in fact” in the borrowers’ allegation that they would not have entered into the loan had they known the lender was unlicensed. Justice Dato argues that this is supported by the Supreme Court’s holding in Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 320-322, where the defendant had falsely advertised its locks were “Made in America” and the plaintiff had alleged reliance on that misrepresentation.
But the majority distinguished Kwikset by noting that the plaintiff in that case had specifically alleged reliance on an affirmative misrepresentation. In essence this is not a misrepresentation case but an omission case.
In his dissent, Justice Dato argued this distinction between misrepresentation and omission makes no difference because UCL claims may be based on omissions just as well as misrepresentations. Justice Dato’s read of Kwikset is that “UCL plaintiffs properly plead standing- economic injury and causation-if they allege they would not have entered into the challenged transaction but for the actionable business practice about which they complain.”
This one is a close call. The majority has the better textual argument: the statute requires an allegation that the plaintiff “has suffered injury in fact and has lost money or property as a result of the unfair competition.” (Bus. & Prof. Code, § 17204.) The borrowers here got the loan they wanted, and could not have gotten a better one somewhere else. So there was no injury, no loss of money or property. The end.
But Justice Dato has a point that the majority has to read the Supreme Court’s Kwikset holding pretty narrowly to stick with the textual interpretation. When a plaintiff relies on the defendant’s material misrepresentation, that sets up a UCL claim, including injury in fact. I agree with Justice Dato that setting up a different rule based on whether the defendant made a “misrepresentation” or an “omission” requires pretty fine parsing and is unpersuasive.
So Justice Dato is right that Kwikset probably requires finding injury-in-fact.
But the majority is still right that section 17204 requires finding no injury-in-fact.
But when legislated law conflicts with juridical law, the tie goes to the statute. If the Supreme Court is going to cut so close to the bone, we ought to do our best to preserve the limb and bring the surgeon in to deal with complications.
