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California Supreme Court Limits Available Remedies to Seniors and Disabled People


AARP's "friend of the court" brief before California's highest court asked the court to allow trial courts to award enhanced penalties under California's unfair competition law when the victims of consumer scams are older people or people with disabilities.

While rejecting the plaintiffs' claim that restitution damages under California Bus. & Prof. Code, § 17200 are subject to tripling, the court allowed tripling of other damages when seniors and disabled people are specifically targeted.

The Dispute

A group of investors in their 70s and 80s filed a class action lawsuit against National Western Life Insurance, alleging that they were the victims of deceptive business practices when they were sold high commission annuity policies with particularly onerous terms.

Among the more problematic provisions were maturity periods that far exceeded investor's life expectancy and surrender penalties of as much as 25% even if the person died during the maturity period. Plaintiffs said these provisions were hidden from them and further alleged they had been targeted for these policies based on their age.

The plaintiffs argued these policies violated California's unfair competition law and specifically invoked California's Civil Code to ask for enhanced restitution. California's Civil Code provides up to three times a damage award if the targeted victim of an unfair practice is a senior citizen (defined as someone 65 or older) or person with a disability. National Western Life argued that restitution awards under California's unfair competition law cannot be trebled under California's Civil Code.

AARP's Brief

AARP's brief, which was filed by AARP Foundation Litigation attorneys, argued that in enacting the treble damages provisions, the California legislature specifically spotlighted concerns about consumer fraud and deceptive business practices targeted at seniors. The brief notes the numerous hearings, reports and studies that document that older people are frequently targeted for investment scams.

The brief also highlighted the complexity of the marketplace that can confound any unsophisticated investor, also demonstrated in study after study. Lacking basic knowledge of how investment vehicles operate, individual investors rely heavily on third party advisors — leaving them at the mercy of unscrupulous practitioners. Because of this risk, enhanced damages are a critical tool that should be used not only to compensate victims, but to both put practitioners on alert and to hit them where it hurts: in their wallets.

AARP's brief pointed out that deferred annuities with hefty penalties for early withdrawal have long been a problem for older people, making this a particularly important case. Finally, the brief examined the wording of the Civil Code that allows treble damages and argues that holding deceptive investment scams to be outside the purview of the law would be counter to the plain language of the statute.

The Ruling

In a mixed ruling, the California Supreme Court held that California's Unfair Competition law provided limited damage options available to seniors and disabled people, but that seniors and disabled people could recover triple damages under other statutes when they were victims of consumer fraud.
In recent years, Americans have departed from the historic practice of relying primarily on federally insured products for their retirement needs. Older people (many of whom have retirement assets and find themselves investing in annuity and other markets for the first time) are targets of scams that prey on both their asset accumulation and inexperience in this arena.

While AARP and others have undertaken efforts to enhance investors' financial literacy, investment fraud targeted at older people continues to be a significant problem.