Last week, I devoted several posts to the California Supreme Court's decision in De La Torre v. Cashcall Inc., 2018 Cal. LEXIS 5749. In that opinion, the Court was responding to a question certified to it by the Ninth Circuit Court of Appeals. De La Torre v. CashCall, Inc., 854 F.3d 1082, 1085 (9th Cir. 2017). The plaintiffs in the underlying class action did not allege that the defendant's advertising was deceptive nor did they allege that the defendant had failed to disclose accurately the terms of the loan as required by federal law. Instead, the plaintiffs alleged that the defendants made consumer loans with unconscionably high interest rates and thus violated California's Unfair Competition Law, Cal. Bus. & Prof. Code § 17200. The UCL defines “unfair competition” to include “any unlawful, unfair or fraudulent business act or practice.”
What is interesting about this is that the UCL makes no mention of unconscionability. Nor does the UCL mention interest rates. The plaintiffs' claim was brought under the “unlawful” prong of the UCL and asserted that the defendant's lending practice was unlawful because it violated Section 22302 of the California Financial Code, the provision of the California Financing Law that applies the unconscionability doctrine to consumer loans.
The plaintiffs did not pursue a claim under the CFL, perhaps because courts have held that no private action exists under the CFL. See, e.g., Gorman v. Wells Fargo Bank, N.A., 2015 U.S. Dist. LEXIS 54964 and Graves v. Southwestern & Pac. Specialty Fin., Inc., 2013 U.S. Dist. LEXIS 158512. Thus, the UCL by borrowing from the CFL (which in turn imports the defense of unconscionability) effectively creates a cause of action out of nothing. By allowing the UCL to borrow from other statutes, the courts create private rights of action even though the legislature did not. This may be so even when a legislature expressly negates private rights of action. See Will Delaware's New Voluntary Certification Act Lead To California Lawsuits?
The idea that creation of something from nothing might lead to problems is not new. The Roman Epicurean poet Titus Lucretius Carus argued that nullam rem e nihilo gigni (nothing is born from nothing) more than two millenia ago:
"Nam si de nihilo fierent, ex omnibus rebus
omne genus nasci posset, nil semine egeret.
e mare primum homines, e terra posset oriri
squamigerum genus et volucres erumpere caelo . . .".
"For if they should be made from nothing, it would be possible for every species to be begotten from everything. nothing would proceed from a single source. It would be possible for men to arise from the sea, fish from the land and birds to be emitted from the heavens."
De Rerum Natura (About the Nature of Things), 1:156-58 (my translation).