What should you do if you face a lawsuit for unfair business practices. What are considered to be unfair business practices and why are they a common ingredient in California business disputes?
Here in California, unfair business practices are covered as part of the California Unfair Competition laws within our state’s Business and Professions Code. Unfair business practices generally apply to the relationships between people within a business setting. The main component of unfair business practices involves some form of fraud or deception.
A Lawsuit Against A Person You Are In Business With
The unfair business practices dispute is often alleged as part of a legal action against a fellow shareholder or business partner, the majority interest(s) in a corporation, its officers or executives or even a board member. It may surprise you to learn that employees owe their employers a duty of loyalty and can therefore face civil exposure for violating that duty and harming their employer.
A lawsuit for unfair business practices alleges that a party in a position of authority or power over another in a business setting has abused that authority or power or has misrepresented the situation in a way that causes harm to the party filing the complaint. This is often a component of a breach of contract case, but can also be based upon instances of business fraud, embezzlement, commingling, self-dealing, false reports regarding financials or the financial condition of the company (and therefore, your investment in that company), or a breach of the fiduciary duty owed to another.
The misappropriation of trade secrets, such as taking a customer list in order to compete against a former employer can be an example of an unfair business practice. If majority interests take actions with the intent of reducing the value of or voting power associated with a minority shareholder interests, they may be guilty of unfair business practices. Corporate raiders, minority shareholders who take actions that are adverse to the corporation’s best interests in order to increase the value of their holdings, can also face a lawsuit for unfair business practices.
Pro-Tip: “Unfair business practices is pretty widespread. It’s more of a question of what was the effect of your action? Were you accurate in your representations? Did someone rely on something you did say or said to their detriment? And were there any other statutory violations that you committed in the context of whatever contractor agreement you have that would make it unfair to whoever you’re dealing with. Misuse of power is another example of “I have power over you in one form or another and I’ve abused that privilege.” How does that come into play in these types of actions?
When you have a superior negotiating position and you enter into an agreement or a relationship in business and it turns out that you’re getting an unfair advantage over it, in addition to the unconscionable, unfair fraud cause of action, you’re going to get this unfair business practice cause of action. And it’s going to say that the terms of the contract should not be held against me. And you’re going to get a list of about 12 causes of action and one will be this unfair business practices one. And if they can make that stick, then they get all their attorneys’ fees.” – Dan Watkins, Founding Partner
Pursuing or Defending a Lawsuit for Unfair Business Practices
In most cases, a lawsuit for unfair business practices is based upon business fraud or some form of deception or even manipulation.
If there is a dispute between business owners, shareholders, partners, members or investors, one of the claims will be associated with unfair business practices. The challenge with these cases is they can quickly escalate from a relatively minor issue of a few thousand dollars to six figure lawsuits based upon punitive damages such as attorneys fees.
If you are concerned about the actions of someone with whom you do business, or you have been served with a lawsuit for unfair business practices you will need the advice, counsel and expert representation of the Watkins Firm. We bring 40+ years of experience serving the business, science and tech, real estate and medical / healthcare communities here in San Diego and across California. We are prepared to pursue or defend these types of cases and work to resolve them in a manner that accomplishes our client’s goals and objectives.
We invite you to review our podcast Episode 25 – Unfair Business Practice Overview as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
