Attorney General Lockyer Files Second Action to Fight Abuse of Consumer Protection Law

(SANTA ANA) – Attorney General Bill Lockyer today filed a lawsuit against Long Beach attorney Harpreet Brar and his law firm, Brar & Gamulin, alleging the defendants committed illegal business practices in suing hundreds of nail salons and small retailers solely to obtain nuisance settlements and attorneys fees.

Lockyer filed his complaint under Business and Professions Code Section 17200 (Unfair Competition Law, or UCL) – the same statute Lockyer alleged Brar abused in suing small businesses, many of them minority-owned, in Orange, Los Angeles, Riverside and San Bernardino counties.

"The lawsuits filed by Brar and the other defendants were shams," said Lockyer. "When they brought these actions, they claimed to be representing the public's interest. But their only interest was in lining their pockets with easy money. Brar & Gamulin is not so much a law firm as a quick-buck racket that has inflicted financial harm on law-abiding small business owners. This enforcement action aims to shut their racket down."

The complaint, filed in Orange County Superior Court on behalf of the people of California, is the second such action taken by Lockyer. In Feburary 2003, Lockyer filed a lawsuit against the Trevor Law Group of Beverly Hills for abusing the UCL. That case is pending in the Los Angeles County Superior Court.

The complaint filed today asks the court to order the defendants to fully reimburse businesses for money they paid to settle lawsuits that the defendants brought, or threatened to bring, on behalf of the public under the UCL. The lawsuit also seeks civil penalties of not less than $1 million. Additionally, the complaint asks the court to prohibit the defendants from bringing UCL actions unless they conduct adequate investigations, and comply with laws and rules governing the naming of defendants.

The complaint alleges the defendants unlawfully exploited a UCA provision that permits private plaintiffs to represent the public in actions that allege unfair or unlawful business practices. Besides Brar and his firm, the lawsuit names as defendants: California Watchdog, the business entity controlled by the defendants and used as named plaintiff in their UCL cases, and Oscar Sohi, who conducts business in Orange County and other California communities.

The defendants have filed approximately 14 lawsuits, according to the complaint. At least three of the actions have named one nail salon and identified 500 other salons as "DOES," or unnamed defendants. The number of "DOES" in the three cases totals 1,500. The defendants also have sued small markets and retail stores, the complaint states. As described in the complaint, the defendants' unlawful litigation scheme worked like this:

They filed lawsuits against hundreds of small businesses alleging technical, sometimes nonexistent, violations of regulations. Almost immediately after filing the actions, they contacted businesses to obtain quick settlements. In one letter, they offered business owners a $1,000 settlement to "cover the costs and attorney's fees incurred by us to date," and warned that those costs and fees easily could "escalate to over $10,000." Further, the letter stated the minimum settlement would increase to $2,500 if businesses did not accept the $1,000 offer in two weeks.

In the three cases against nail salons, if the named businesses and 1,500 "DOES" paid the initial $1,000 to settle, Brar and the other defendants would have collected more than $1.5 million, the complaint notes. If half of the businesses settled after the two-week deadline, the complaint adds, the defendants' windfall would have topped $2.65 million.

"Defendants represent that they are in the business of enforcing consumer laws through litigation," the complaint states. "Defendants are actually in the business of extracting money, primarily from small businesses, under the guise of purporting to enforce consumer protection laws by engaging in the scheme" described in the lawsuit.

The defendants failed to conduct adequate investigations to lay factual foundations for their lawsuits, Lockyer's complaint adds. For example, the defendants alleged the nail salons violated rules of the Board of Barbering and Cosmetology by using the same bottle of nail polish for two or more customers. Such conduct, however, does not violate Board regulations.

According to the complaint, the defendants formed California Watchdog as a fictitious name in July 2001. They then filed UCL lawsuits using the fictitious name as the plaintiff. Fictitious names are not "persons," as defined in the UCL, which means California Watchdog could not legally be a plaintiff in a UCL lawsuit, the complaint alleges.

Additionally, the complaint alleges the defendants have: unlawfully named businesses as defendants in a single action when there was no connection among the businesses or their conduct; illegally filed lawsuits against businesses in counties where the businesses are not located and do not conduct business; misused the "DOE" process by failing to identify defendants in their complaints and then quickly contacting businesses to inform them they were defendants; and kept their settlements secret from the public whose interests they purported to serve in their UCL lawsuits.