BILL ANALYSIS                                                                                                                                                                                                    






                             SENATE JUDICIARY COMMITTEE
                           Senator Ellen M. Corbett, Chair
                              2009-2010 Regular Session


          SB 367                                                      
          Senator Negrete-McLeod                                 
          As Amended August 31, 2009
          Hearing Date:  September 8, 2009                            
          Civil Code                                                  
          GMO:jd                                                  


                             PURSUANT TO SENATE RULE 29.10
          
                                        SUBJECT
                                           
             Unruh Civil Rights Act: Discrimination: Consumer Discounts

                                      DESCRIPTION  

          This bill would clarify that the Unruh Civil Rights Act, which  
          prohibits discrimination on the basis of sex, race, color,  
          religion, ancestry, national origin, disability, or medical  
          condition, and prohibits other forms of arbitrary discrimination  
          in business establishments, does not impose liability when a  
          business offers or confers a discount or other benefit to a  
          consumer or prospective consumer because the consumer or  
          prospective consumer has suffered loss of employment or  
          reduction of wages.  

          This bill is an urgency measure.

                                      BACKGROUND  

          SB 367 responds to recent reports of threatened legal action  
          against businesses that offered discounted goods or services to  
          state workers who had been furloughed.  The media reports of  
          threatened legal action include one against the Ikea store in  
          West Sacramento, which served free breakfasts to furloughed  
          state of California employees on specified Fridays, another  
          against a ski resort that offered discounted lift tickets to  
          workers who showed state IDs, and several actions targeting  
          carmakers who have advertised plans to aid customers who lose  
          their jobs. (The Recorder, July 8, 2009.)    

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          This bill intends to clarify that a discount or other privilege  
          or advantage benefiting a consumer who has suffered a loss of  
          employment or reduction in wages is not arbitrary discrimination  
          in violation of the Unruh Civil Rights Act, regardless of  
          whether the consumer was an employee in the private or public  
          sector.


          The contents of SB 367 relating to trusts and estates that were  
          heard and passed by this committee on May 5, 2009, have been  
          amended out of the bill.  SB 367 is now in this committee  
          pursuant to Senate Rule 29.10.

                                CHANGES TO EXISTING LAW
           
           Existing law  , the Unruh Civil Rights Act, provides that all  
          persons within the jurisdiction of this state are free and  
          equal, and, regardless of their sex, race, color, religion,  
          national origin, ancestry, disability, or medical condition, are  
          entitled to full and equal accommodations, advantages,  
          facilities, privileges, or services in all business  
          establishments of every kind. (Civ. Code Sec. 51.)

           Existing case law  has extended the application of the Unruh  
          Civil Rights Act to other forms of arbitrary discrimination by  
          business establishments. (See, e.g., Stoumen v. Reilly (1951) 37  
          Cal.2d 713, 715-716; In re Cox (1970) 3 Cal.3d 205; Hubert v.  
          Williams (1982) 133 Cal.App.3d, Supp.1, 5; Harris v. Capital  
          Growth Investors XIV (1991) 52 Cal.3d 1142; and Marina Point,  
          Ltd. v. Wolfson (1982) 30 Cal.3d 721.)

           This bill  would provide that any discount or other benefit  
          offered to or conferred on a consumer or prospective consumer by  
          a business because the consumer or prospective consumer has  
          suffered the loss or reduction of employment or reduction of  
          wages would not be considered an arbitrary discrimination in  
          violation of the Unruh Civil Rights Act.

           This bill  contains an urgency clause.
          
                                        COMMENT
           
          1.    Need for the bill
           
          The author states:
               
                                                                      



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             In the current unprecedented economic climate, many  
            individuals are seeing reductions in pay or loss of  
            employment.  Some private businesses have generously  
            offered these individuals discounts for services.  It has  
            come to my attention that some of these businesses have  
            been threatened with legal action under the Unruh Civil  
            Rights Act.  This is not the type of discrimination that  
            the Legislature intended the Act to protect against.  SB  
            367 would clarify that offering discounts or benefits to  
            individuals that have seen a reduction or elimination of  
            employment is not considered arbitrary discrimination under  
            the Unruh Civil Rights Act.




          2.   Protection against arbitrary discrimination extended by the  
          courts  

          In case after case, the California Supreme Court has rejected  
          the argument that the ban on discrimination under the Unruh  
          Civil Rights Act (Unruh Act or Act) reaches only the specific  
          characteristics or classifications enumerated in Civil Code  
          Section 51.  In fact, the Court has made it abundantly clear  
          that the Unruh Act also prohibits other arbitrary  
          discrimination, such as discrimination based on sexual  
          orientation, physical appearance, and family status.  (See  
          Harris v. Capital Growth Investors XIV (1991) 52 Cal.3d 1142,  
          delineating a three-part test for cognizable Unruh Act  
          violations; Marina Point, Ltd. v. Wolfson (1982) 30 Cal.3d 721,  
          to protect families who were denied housing because they had  
          minor children; In re Cox (1970) 3 Cal.3d 205, violation to deny  
          services to a customer because his companion has an  
          unconventional appearance; Isbister v. Boys' Club of Santa Cruz,  
          Inc. (1985) 40 Cal.3d 72, to defend girls denied access to a  
          boys-only club based solely on their gender.)  

          In Harris, the California State Supreme Court enumerated a three  
          part test for determining whether a claim not enumerated in the  
          statute or previously added by judicial construction should be  
          cognizable under the Unruh Act.  Courts must take into account:  
          1) the language of the statute; 2) the legitimate business  
          interest of the defendants; and 3) the consequences of allowing  
          the new discrimination claim.  The sponsor of SB 367, the  
          Consumer Attorneys of California (CAOC), contends that if the  
          Harris test were applied in court to the business practice of  
                                                                      



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          providing discounts or special prices to those suffering from  
          loss or reduced employment, it would fail the test (and thus not  
          be considered a violation of the Act) because of the legitimate  
          business interest and of the significant consequences of  
          allowing this kind of benefit to be considered a violation.
            
          In Long v. Valentino (1999) 216 Cal.App. 3d, 1287, the appellate  
          court even recognized occupational status as a protected class:  
          "[A]n announcement, such as 'You can't eat at my diner because  
          you are a lawyer, bricklayer, female, or Indian chief' would be  
          actionable under the Unruh Act." (Long, at 1297.)  The Ninth  
          Circuit has also recognized the reach of the Unruh Act in  
          McCalden v. California Library Ass'n (9th Cir. 1990) 955 F.2d  
          1214, 1221, where it noted that protected classes under the  
          Unruh Act have been broadly defined to include "students,  
          families with children, welfare recipients, and occupational  
          groups."  And, more recently, in Sisemore v. Master Financial,  
          Inc. (2007) 151 Cal.App.4th 1386, the court concluded that a  
          family day care operator denied a mortgage on that basis stated  
          a viable cause of action for occupational status discrimination.  
           In fact, the courts have interpreted the categories or classes  
          enumerated in the Unruh Act to be "illustrative" rather than  
          "restrictive," and this is borne by the intent language adopted  
          by the Legislature in reorganizing and consolidating various  
          civil rights statutes in 2005 (AB 1400, Laird, Ch. 420, Stats.  
          2005).

          This bill would clarify that a discount, benefit, or other  
          privilege or advantage given by a business to a consumer who has  
          suffered a loss of income due to loss or reduction of employment  
          or reduction of wages, is not arbitrary discrimination in  
          violation of the Unruh Act.

          3.    Relevant arguments
           
          This bill is sponsored by the Consumer Attorneys of California  
          (CAOC).  The CAOC believes clarifying the application of the  
          Unruh Civil Rights Act to legitimate business activities  
          identified in the media as the target of litigation is necessary  
          in order to preserve the integrity of the Act and to continue to  
          protect countless Californians from suffering true arbitrary  
          discrimination.  "The Act provides that all persons are entitled  
          to equal treatment by business establishments regardless of  
          their 'sex, race, color, religion, ancestry, national origin,  
          disability, medical condition, marital status, or sexual  
          orientation.'  Cal. Civ. Code Sec. 51.  In its correct  
                                                                      



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          application, the Act has ensured that Californians do not suffer  
          arbitrary discrimination on the basis of the enumerated personal  
          characteristics in the Act, as well as some other judicially  
          expanded categories.  The expansion of the act by the judiciary  
          has included only personal characteristics.  Hessians Motorcycle  
          Club v. J.C. Flanagans, 86 Cal.App.4th 833, 836 (2001)."   

           The CAOC also contends that even if the type of discrimination  
          claim addressed by this bill were found to satisfy the Harris  
          test (see Comment 2 above), it is unlikely that it would be held  
          to be an "arbitrary class based generalization" as required  
          under Pizarro v. Lamb's Players Theatre (2006) 135 Cal.App.4th  
          1171, 1174.  The sponsor however supports clarifying the law, to  
          address any misconceived belief of some that offering these  
          types of discounts or benefits are a violation of the Unruh  
          Civil Rights Act. "Businesses providing discounts to groups who  
          are suffering economically are not arbitrarily discriminating  
          against consumers.  In contrast, these discounts apply across  
          the board to persons of all personal characteristics (race, sex,  
          color, religion, etc.) and further the good public policy of  
          providing a benefit to a group of people who would not otherwise  
          be able to afford certain services.  Furthermore, these  
          discounts help stimulate an incredibly depressed economy.  
          Unemployment levels are at record highs and many other  
          Californians are facing forced reductions in employment.  For  
          example, starting in July, more than 200,000 state workers will  
          be forced to take three unpaid days off per month.  Those  
          businesses who wish to lend a helping hand should be commended."

          In support of SB 367, the California Chamber of Commerce  
          states," [w]e believe it is imperative that these businesses are  
          protected from unwarranted lawsuits brought by lawyers  
          inappropriately seeking benefit from the generosity and  
          compassion of businesses in this economic downturn.  This bill  
          will simply clarify current law, establishing that it is not a  
          violation of the Unruh Civil Rights Act when a business provides  
          discounts to people who have suffered a loss or reduction in  
          employment."

          The California Retailers Association (CRA) also supports SB 367  
          because it would clarify retailers' ability to offer discounts  
          and specials (e.g., the "Furlough Friday" special discount or  
          special price) to customers who have experienced a loss or  
          reduction in employment.  "Current law prohibits discrimination  
          based on a number of factors and SB 367 states that discounts or  
          promotions offered to those customers do not constitute  
                                                                      



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          discrimination.  Given the tough economic climate, California  
          retailers are looking for new ways to provide customers with  
          discounts and incentives and this legislation is needed to  
          protect them from the threat of frivolous and costly  
          litigation."

          Although not opposed to SB 367, the attorney who had written a  
          letter to Squaw Valley Ski Lift challenging the "Furlough  
          Friday" discounted tickets for state workers promotion,  
          suggested elimination of "arbitrary discrimination" in all types  
          of business-offered discounts, such as "Ladies' Night"  
          promotions, so that "Men's Night" or other group night or day  
          activities at discounted rates may also escape characterization  
          as arbitrary discrimination.  It should be noted that a bona  
          fide business reason or interest could overcome a charge of  
          "arbitrary discrimination" against a business promotional  
          scheme.

          4.   Urgency measure
           
          The bill was most recently amended to add an urgency clause,  
          making it effective immediately upon passage and the Governor's  
          signature.  The rationale provided for the urgency mirrors the  
          arguments presented by the sponsor and the author of the bill,  
          i.e., that the economic condition of the state and the loss or  
          imminent loss of employment by tens of thousands of Californians  
          constitute the necessity to support businesses that are  
          providing discounts to those suffering from loss or reduction of  
          employment by clarifying such discounts are not in violation of  
          the Unruh Civil Rights Act.


           Support  : California Chamber of Commerce; California Retailers'  
          Association

           Opposition  : None Known

                                        HISTORY
           
           Source  : Consumer Attorneys of California (CAOC)

           Related Pending Legislation  : None Known
           Prior Legislation  : None Known

           Prior Vote  : 

                                                                      



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          Previous votes in the Senate not relevant
          Assembly Judiciary (Ayes 10, Noes 0)
          Assembly Floor (Ayes 78, Noes 0) 

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