California Supreme Court Prohibits Senior Citizens from Trebling Damages

August 10, 2010

The California Supreme Court has ruled that plaintiffs may not seek treble damages under the state’s Unfair Competition Law, and instead can only seek remedies to injunction and restitution.

According to court documents in Clark v. Superior Court (National Western Life Insurance Co.), a group of senior citizens sued National Western Marine Life Insurance Co. alleging deceptive business practices to induce senior citizens to buy high-commission annuity contracts that had large penalties for “early surrender.”

The plaintiffs sought a monetary award and asserted that Civil Code section 3345 entitled them to a trebling of damages.

The trial court granted the plaintiff’s motion for class action certification, then granted the defendant’s motion for judgment on the pleadings, ruling that “Civil Code section 3345’s trebled recovery provision did not apply to private actions brought under the unfair competition law.”

The plaintiffs appealed, and the Court of Appeal directed the trial court to enter a new order, saying the plaintiffs were entitled to seek a trebling of restitution because that award had “a deterrent effect.”

The Supreme Court reversed, however, concluding that “Civil Code section 3345 authorizes the trebling of a remedy only when it is in the nature of a penalty, and because restitution under the unfair competition law is not a penalty, an award of restitution under the unfair competition law — which plaintiffs seek here — is not subject to section 3345’s trebling provision.”

“Because restitution in a private action brought under the unfair competition law is measured by what was taken from the plaintiff, that remedy is not a penalty and hence does not fall within the trebled recovery provision of Civil Code section 3345, subdivision (b),” the high court added.

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