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California rejects “creative” collateral source theory of standing

9/19/23

By: Joseph Gonnella

California’s Unfair Competition Law requires an economic injury to establish standing to sue. The California Court of Appeal’s recent opinion rejected a party’s attempt to allege standing based upon his insurer’s overpayments under a collateral source theory.  

California’s Unfair Practices Act, also known as Unfair Competition Law (“UCL”), is codified in Business & Professions Code § 17200. Relief under the statute may be sought by a private person “who has suffered injury in fact and has lost money or property as a result of the unfair competition.”   

In Williamson v Genentech, plaintiff sued on behalf of himself and a putative class alleging a pharmaceutical company violated the UCL by selling excessively large single-use vials for certain cancer drugs. Williamson v. Genentech, Inc., No. A164426 (Cal. Ct. App., Aug. 11, 2023) (appeal from San Mateo Superior Ct., 19-CIV-01022). Plaintiff alleged the medication dosages varied based upon patient body size, and that the Genentech vials were too large for most patients, thereby creating waste of expensive medicine (and ostensibly raising the price per dose). It was undisputed that the plaintiff paid a deductible for the medication with the remaining cost paid by his insurer, and that he would have paid the same amount based on his insurance deductible even if the vial sizes were smaller.  

Defendant Genentech demurred to the plaintiff’s complaint on the grounds that plaintiff failed to allege any economic injury caused by the packaging practices, and therefore lacked standing under the UCL. Plaintiff argued that the collateral source rule provided standing for him to recover the amounts paid – and allegedly overpaid – by his insurer. The trial court sustained Genentech’s demurer and declined to apply the collateral source rule to the standing requirement. Plaintiff appealed.  

The Court of appeal affirmed the trial court ruling that plaintiff lacks standing under the UCL. The Court of Appeal described plaintiff’s standing argument as a “creative argument” to extend the application of the collateral source rule. As described by the Court, Plaintiff sought to “borrow” an economic injury from his insurer to establish standing. The Court’s analysis restated the collateral source rule: “if an injured party received some compensation for his injuries from a source wholly independent of the tortfeasor, such payment should not be deducted from the damages which the plaintiff would otherwise collect from the tortfeasor.” The Court’s analysis also contemplated federal courts’ analogous interpretation of the “injury in fact” standing requirement of a “particularized” injury that affects the plaintiff in a “personal and individual way.” The Court agreed with the federal court’s reasoning and distinguished the collateral source rule concerning how much an injured party should be compensated, from the instance where a party has suffered no economic injury at all.   

For more information, please contact Joseph Gonnella at joseph.gonnella@fmglaw.com or your local FMG attorney.