California Supreme Court Unanimously Upholds “Organizational Standing” in Unfair Competition Law Cases

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Do you believe that an organization should be able to sue to stop actions that cost the organization money and directly harm its mission and purpose? If your answer is “yes,” you’re in luck—the California Supreme Court agrees.

In a unanimous decision published on Monday, July 17, the California Supreme Court upheld the ability of non-profit organizations and other groups to bring lawsuits under California’s Unfair Competition Law (“UCL”) when the organization is able to demonstrate that it diverted resources in response to a threat to its organizational mission or purpose.

The case arose out of actions that the California Medical Association (CMA) took in response to a policy adopted by Aetna, which CMA argued interfered with physicians’ ability to exercise their sound medical judgment. Both the trial and appellate courts had ruled in favor of Aetna, finding that CMA could not show it had suffered an economic injury sufficient for UCL standing, and therefore could not proceed with the case.

On appeal to the California Supreme Court, the key issue was whether CMA had standing as an organization to bring a UCL action on the theory that it had suffered an economic injury, caused by Aetna, through diverting its resources to address Aetna’s policy. This is the first California Supreme Court case to address the organizational standing doctrine in any context, not just the UCL.

Consumer Watchdog filed an amicus curiae, or “friend of the court,” brief with the California Supreme Court on behalf of the plaintiff CMA, arguing that CMA’s theory of organizational standing was clearly sufficient to meet the standing requirements imposed by the UCL. Aetna argued that CMA’s theory of standing was unavailable in light of changes made to the UCL in 2004 by Proposition 64.

Consumer Watchdog argued in its brief that:

“The Court of Appeal’s decision below, if left undisturbed, will have a wide-ranging impact on organizations seeking to bring both UCL and non-UCL claims alike, effectively precluding membership organizations from ever bringing direct suit over injuries personally suffered in responding to and assisting their members. [Aetna] would have this Court go even further, arguing that the doctrine of direct organizational standing is incompatible with Proposition 64, which would preclude all organizations, membership or not, from seeking redress under the UCL for harms they suffer when a defendant frustrates their organizational mission.”

In its opinion, the California Supreme Court rejected Aetna’s arguments and reversed the Court of Appeal’s decision in full. The court found that the organizational standing doctrine is “consistent” with the language of the UCL. (p. 32.) The court further correctly recognized that “CMA is far from the type of disinterested plaintiff Proposition 64 sought to bar from suing under the UCL.” (p. 34.) The court additionally rejected an effort by Aetna to restrict standing under the UCL to plaintiffs that had “business dealings” with the defendant(s). (pp. 33–34.)

The California Supreme Court’s decision to uphold organizational standing under the UCL reaffirms the broad consumer protection purposes animating the UCL. We applaud the high court’s careful analysis, which led it to the only reasonable conclusion—that organizational standing is consistent with both the language and purpose of the UCL after Proposition 64.

The case is titled California Medical Association v. Aetna Health of California Inc., No. S269212. A copy of the decision can be found here.

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