California’s Unruh Act is a trial lawyer’s dream, and a nightmare for the rule of law.
It has been interpreted to ban “discrimination” against customers based on an infinite variety of categories, few of them even listed in the Act. Its text broadly declares everyone to be “equal” and bans discrimination “no matter” what the plaintiff’s race, sex, religion, etc., but does not expressly say that the categories it lists are the only categories covered by the law.
So courts in California have held that all sorts of categories, ranging from the commonplace to the bizarre, are protected against discrimination by California law. The Unruh Act’s protected classes include men with long hair, John Birch society members, ACLU members, and Holocaust deniers, all of whom are deemed protected against any “discrimination.”
That seriously menaces freedom of association, since the Unruh Act applies even to private associations like country clubs and many boys and girls clubs (although not, at least for the moment, the Boy Scouts), whose members are deemed “customers” by the Act. (Courts have also allowed colleges and schools to be sued under the Act).
To keep the law from being used to destroy California’s economy, the California Supreme Court finally limited the reach of the Act to social classes, rather than economic classes, in its 1991 Harris v. Capital Growth Investors XIV ruling. (The Court’s common-sense decision to finally limit the Act’s reach was issued over bitter dissents from liberal justices, and was possible only because the California voters in 1986 removed three liberal state Supreme Court justices who repeatedly ruled in favor of violent criminals and against the death penalty). The California courts also made clear that only “arbitrary” discrimination against social classes is necessarily prohibited.
But the Court’s ruling permitting economic classifications still leaves a huge variety of social classes covered by the law. And its distinction between social and economic classes, and between “arbitrary” and non-arbitrary, discrimination is fuzzy, as a lender recently found out to its dismay.
The California Court of Appeal has just held in Sisemore v. Master Financial that a lender can be sued under the Act simply because it refused to lend money to finance the purchase of a home to be used as a daycare facility, declaring that to be “arbitrary” discrimination based on source of income.
Apparently, the Court of Appeal thinks it knows better than the free market how to invest money. Nevermind that it is commonplace for lenders to consider what a loan will be used for, and the borrower’s source of income, in making a loan.
The Georgia Supreme Court declared a state hate crimes law unconstitutionally vague in Botts v. State (2004), because it similarly covered any discriminatory classification, without limiting its reach to a finite list of specified categories.
The Unruh Act’s ban on discrimination against any social class has the same vice as the Georgia hate crimes law, and should be struck down as unconstitutionally vague for the same reason.
Indeed, while an Unruh Act lawsuit doesn’t involve criminal sanctions, the Unruh Act is much worse than the George hate crimes law, since the ambiguity over what it prohibits has a chilling effect on freedom of association. The California-based Ninth Circuit struck down a civil regulation on vagueness grounds in Bull Frog Films v. Wick (1988), because it had a chilling effect on First Amendment freedoms.
It allows statutory damages even in the absence of any actual damages, and thus permits trial lawyers to collect huge amounts of money even for conduct that results in no real harm. As the Supreme Court observed in New York Times v. Sullivan (1964), a damage award can have an even more marked chilling effect on First Amendment freedoms than a criminal prosecution, and trigger First Amendment scrutiny for that reason.