Unsanitary Practices- or Unscrupulous Lawyers?

“What now?” we asked this past November when we saw the news headline “Is Your Nail Salon Safe?” come of the Associated Press (AP) newswire. As images of crumbling fungal nails and unsightly leg lesions flashed through our minds. We read on: “Lawmakers crackdown on salon sanitary condition.” Uh-oh.

But our concern quickly turned to outrage as we understood that the “unsanitary practices,” a California consumer group had fingered were actually decades-old customs practiced not only in salons but in schools and homes around the world: polishing nails.

And the “lawmakers” referenced actually was one lawyer who represented the plaintiff, California Watchdog, a one-man consumer group crying foul, but no harm, from the practice of re-using the same bottle of polish on multiple clients.

In lawsuits filed against Perfect Nails and Express Nails in the Superior Courts of San Bernardino and Riverside counties, respectively, California Watchdog contends the salon pol­ishing practice violates both the state’s Board of Barbering and Cosmetology regulations and Unfair Business Practices law.

“If the other regulatory agencies were doing their jobs, we wouldn’t be here doing this,” Harpreet Brar, California Watch dog’s attorney, told AP.

The California State Board, however, disagrees. “We are not aware of any consumer who has been harmed by this practice, so our feeling is that the professional conduct of [nail techs] is not what’s at issue,” counters State Board spokesperson Rick Lopes. “What is at issue is the professional conduct of attorneys.”

Many industry observers agree, charging California Watchdog and its attorney with abusing the controversial California Business & Professional Code 17200, a law intended to provide consumer protection against unfair and unlawful business practices.

Even if the court ultimately dismisses the case (as the defense attorney for a group of salon owners promises), many California nail salons have already lost. Only two salons were named in the lawsuits, but hundreds more were listed as “Doe” defendants (“Doe” meaning unnamed in court filings). And many owners say their service sales were hurt by the flurry of publicity regarding the lawsuits.

At what gain? The so-called Unfair Competition Act is intended to allow consumers recourse against illegal or unscrupulous business practices. But some say the law unintentionally enables groups and attorneys to target minority small-business owners with lawsuits and then to profit by allowing them to settle the suits for “lawyer fees” ranging from $500-$1,000.

Phuson Nguyen, owner of Sally’s Hair & Nails in Norco, Calif., and a “Doe” defendant in the Riverside County case, says he received such an offer from California Watchdog’s attorney that invited him to settle out-of-court for $1,000 — an offer he worries some salon owners accepted.

“California Watchdog tells you that you violate such-and-such codes according to the State Board and that if you want them to clear you from the lawsuit then you pay $1,000,” explains Nguyen, who spearheaded the formation of the Nail Salon Owners Mutual Association (NSOMA) to battle the consumer group’s lawsuits.

“The bad thing is that most of the nail salons are owned by Vietnamese, who get scared and sign a check with the hope that the Watchdog will leave them alone,” he continues. “They just want things to be peaceful. But we want to make it clear that nail salon owners are not to be intimidated because we have done nothing wrong.”

To Nguyen, the stakes are much higher than $1,000: He maintains that he and other NSOMA members saw their nail salon traffic dip by as much as half in the weeks following the news coverage of the lawsuits — although none of their salons were named in the press or in any court documents, for that matter. Nguyen has worked full-time these past months to inform and rally other salon owners to fight what he calls “abuses” of the business and professional code.

Look Out for Loopholes

Brar, California Watchdog’s attorney, did not return NAILS’ repeated calls, but a review of the State Board regulations cited in the lawsuits reveals that the accusations adhere to the letter, if not the spirit, of the regulations. For example, California Watchdog accuses the salons of violating State Board Regulations 979 and 988. Regulation 979 requires practitioners to disinfect or dispose of non-electrical instruments and implements after use on an individual client, which California Watchdog says includes the polish-bottle brush. Regulation 988, on the other hand, states that when only a portion of a cosmetic preparation is to be used, it shall be removed from the container in such a way as to not contaminate the remaining portion. California Watchdog interprets this to mean that nail techs should pour nail polish into a separate container.

But Lopes says those regulations were never intended to regulate nail polish. “The bureau feels that it’s standard industry practice for the same bottle of polish to be used on multiple clients,” he explains. “The practice is taught in industry textbooks, and during the practical portion of the exam [administered by the state board], they are allowed to re- dip the brush.”

The board most likely would have made the same conclusion had California Watchdog adhered to the board’s consumer complaint process—which is in place to address exactly the types of issues set forth in the lawsuits. “It’s [the board’s] job to determine when violations occur, and we have a system in place to investigate consumer complaints,” Lopes explains.

But code 17200 gives consumers another option. The act allows any California consumer or business to file suit against a business engaged in an “unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.”

“Acting as a kind of private attorney general, the individual or business can sue to stop the improper conduct as well as to make the company give up the money it made from that conduct,” states Orinda, Calif.-based law firm Perez & McNabb. Conceived to give consumers power to act on the small wrongs of businesses, code 17200 allows consumers to fight any manner of wrongs, ranging from wrongly charged tax on a late fee to inflated charges on loan-related expenses.

“Simply put, any lawyer can file a suit against any business alleging unfair competition, since the standards of what constitutes the practice are very broad,” explains Sacramento Bee columnist Dan Walters in the December 9,2002, edition. “The defendant must then decide whether to contest the suit, which is costly and runs the risk of an adverse verdict, or reach an out-of-court settlement.” For example, filing to appear in Superior Court (where the suits will be decided) costs approximately $250. And attorney fees can cost upward of $150 per hour.

Barking up the Wrong Tree?

Not mincing any words, Nguyen denounces the lawsuits, saying California Watchdog and its lawyer are barking up the wrong tree. “California Watchdog’s accusations have no merit,” he asserts. “The [State Board] agrees that we are doing nothing wrong.”

Nor do these salon owners have to rely on standard practice to build their case: According to Doug Schoon, an experienced cosmetic chemist and director of research and development for Creative Nail Design, bacteria can’t survive in nail polish. “All living organisms, including bacteria and fungi [and viruses], can’t survive without water,” Schoon explains. “Nail polish contains no water, so any organisms that do get into the bottle can’t survive.”

Then again, the individuals NAILS interviewed say that neither California Watchdog nor its attorney expected salon owners to contact the state board or, for that matter, each other. But after receiving the court summons and settlement offer, Nguyen began working the phones. As owners learned they weren’t alone, several decided to join forces and fight the suits.

Word spread quickly, and in mid- November approximately 300 nail salon owners from Riverside and San Bernardino counties met to form the NSOMA. With funds collected from each member, the group retained San Diego attorney Steven Sayler, a partner at Goode, Hemme, Peterson and Sayler.

Aware of California Watchdog’s threat to file lawsuits against additional salons in other California counties, Sayler quickly filed a motion requesting a temporary injunction against California Watchdog and its attorney to block them from contacting any more potential “Doe” defendants until the court had reviewed the case.

“Most of these cases get dismissed... after the court reviews all the documentation,” Sayler explains. “The cases get thrown out because they’re not pleaded right or there’s a motion that there’s no basis for the suit.” In this case, Sayler anticipates the cases will be thrown out by the respective Superior Courts for having no basis. After all, the industry’s own regulatory agency says defendants are following standard practice.

The plaintiff doesn’t really want this case to go to court, Sayler says. Instead, the attorney typically relies on defendants accepting the settlement offer to pay attorney fees. If just 100 California salons accept the offer (and there’s no way to know how many do because the courts require no accounting), the lawyer has “earned” $100,000 in legal fees for minimal expense and effort.

Auto Repair, Restaurants Also Targets

Nail salons aren’t the first businesses to be targeted under the Unfair Competition Act The Trevor Law Group in Beverly Hills has come under fire for filing more than 2,000 lawsuits against auto repair businesses and restaurants under the aegis of Section 17200 of the Business and Professional Code.

“This is not about right and wrong,” asserts Julia Lynne with the John and Ken Show at KFI AM 640 in Los Angeles. “Everyone’s focusing on the allegations, but the most important point is that just by naming you they have the right to approach you for attorney’s fees.”

Ethnicity is another factor all of these industries have in common. Lynne, who has spent countless hours trying to coordinate owners of auto repair businesses, says her efforts have been hampered by a multitude of cultural and language barriers.

She believes the attorneys behind the lawsuits favour minority-dominated industries for several reasons: Minorities are more hesitant to complain to government agencies, and people in some cultures not only expect but accept ex-tortionistic tactics. “The attorneys find [minorities] will settle pretty rapidly because they don’t understand the law or they feel shamed,” Lynne says.

Nguyen isn’t shamed, however — nor is he settling. “We are not going to let them do this,” he says. “Nail salon owners are not going to be intimidated by Watchdog.”

Salons Strike Back

What’s more, Sayler plans to make sure other salons in other California counties won’t be faced with the difficult choice to settle or fight. In addition to filing motions requesting the San Bernardino and Riverside counties Superior Courts to dismiss the lawsuits, NSOMA members and Sayler plan to reveal any illegal or unethical actions to the court and to request sanctions against the group.

To top it off, Sayler says that California Watchdog hadn’t filed amendments naming the Doe defendants at the time we spoke, “so the court is unaware he’s got this scheme where he’s extorting money from salon owners.”

NSOMA also has joined the automotive repair industry and others in petitioning California Attorney General Bill Lockyer to investigate these so-called “frivolous” lawsuits. Relief may come sooner than previously hoped: in early December, Tom Dresslar noted the At­torney General’s response to the pleas, saying only that “We’re going to contin­ue working with various interested parties, to pin down, with good evidence, what the abuses are and... the extent of such abuses.”

But in mid-December the Los Angeles Times reported that the attorney general had asked the State Bar investigate The Trevor Law Group. In the De­cember 17 article, Dresslar also told Times staff writers the Attorney General is “concerned about the way these guys operate.... Some of their tactics appear to be extortionist.”

Sayler plans to ask the courts to sanction California Watchdog’s attorney “for basically misusing the legal system,” he says. Sayler also is monitoring filings in other California counties, which he says he’ll use to support a motion to have the attorney deemed a “vexatious litigant,” which will bring him under the supervision of the courts. Additionally, Sayler has advised NSOMA to file a complaint with the California State Bar for ethics violations.

But even if it all plays out as they hope, these salon owners have lost far more than they can possibly win. “I lost half my business when the newspaper articles ran,” Nguyen says. “Clients are coming back, but it’s slow.”