Covington attorneys say the California attorney general’s plans to use state law to pursue enforcement actions for Foreign Corrupt Practices Act violations could run into challenges—but should prompt businesses’ caution.
The Trump administration’s executive order temporarily suspending enforcement of the Foreign Corrupt Practices Act led to the possibility that states would step into the vacuum and investigate those who pay bribes to foreign officials.
California Attorney General Rob Bonta said he intends to do exactly that, by using the state’s Unfair Competition Law to pursue civil enforcement actions in state court “predicated on FCPA violations.” He could face several challenges if he follows through, including the absence of clear legal precedent supporting his theory, the resources that these investigations would require, and the possibility of federal preemption.
But companies with ties to California should remain cautious about anti-bribery enforcement as the area continues to evolve.
Five cases involving FCPA charges against individuals already had been scheduled for trial this year when President Donald Trump issued the FCPA executive order. The Department of Justice has stated its intention to proceed in three of those cases after completing the review that the executive order requires.
However, the DOJ on April 2 moved to dismiss with prejudice United States v. Coburn, an FCPA case against two former Cognizant Technology Solutions Corp. executives facing imminent trial. That same day, Bonta issued an alert to businesses on Foreign Corrupt Practices Act violations and a companion news release.
While noting that “the FCPA remains binding federal law,” Bonta emphasized a different enforcement angle that doesn’t depend on federal decisionmakers—specifically, that violating the FCPA is actionable under California’s law, “which was enacted to preserve fair business competition and protect consumers.”
California’s Unfair Competition Law sweeps broadly and proscribes “any unlawful, unfair or fraudulent business act,” and such unlawful acts can include conduct that violates either state or federal law. Both the state and private plaintiffs can bring UCL actions.
The legal alert referenced Rose v. Bank of America, N.A., for the general proposition that federal law can serve as the basis for violations of California’s Unfair Competition Law, and then cited Korea Supply Co. v. Lockheed Martin Corp., for the specific proposition that a “UCL claim may be predicated on [an] FCPA violation.”
But a close analysis of Rose and Korea Supply raises questions about whether the California attorney general will be able to bring FCPA-like cases in practice.
In Rose, the California Supreme Court addressed whether a UCL action could be based on a violation of the US Truth in Savings Act, where the allegedly unlawful conduct affected residents in California. In answering that it could, the Rose court explained that the UCL “‘borrows’ violations of other laws and treats them as unlawful practices that the [UCL] makes independently actionable.”
The court reached this conclusion despite the fact that the case involved a private plaintiff who brought the UCL action after Congress had repealed the portion of TISA permitting private rights of action under federal law.
In Korea Supply, a private plaintiff brought a UCL action based on a FCPA violation involving bribes that a competitor allegedly paid in South Korea.
While the California Court of Appeals found that the FCPA was a viable basis for a UCL action, the California Supreme Court didn’t address this issue on appeal, explaining in a footnote that the parties didn’t challenge the ruling, “so we accept, without deciding, that a claim under the UCL may be predicated on a violation of the Foreign Corrupt Practices Act.”
Turning to the issue before it, the state Supreme Court reversed the appellate court’s conclusion that disgorgement of profits was an available remedy for a UCL violation brought by a private plaintiff.
As a result, private UCL actions may obtain restitution or injunctive relief, whereas state-led UCL actions also are eligible for civil penalties and disgorgement of profits.
In light of Rose and Korea Supply, there are three points worth watching.
First, while the FCPA may be a viable predicate for a UCL action, the California Supreme Court hasn’t endorsed this theory. The US government might try to intervene if California adopts Bonta’s stance, perhaps arguing that state action is preempted because it interferes with the US government’s prerogative to conduct foreign policy.
Second, unlike the FCPA, the UCL doesn’t apply extraterritorially—UCL claims must be based on either injury to individuals in California or conduct in California. How that would be satisfied with foreign bribery is unclear.
Many UCL cases, like Rose, don’t grapple with this requirement because the conduct clearly affected California residents. And neither court in Korea Supply addressed this issue, perhaps because the plaintiff’s principal place of business was in California and the bribes allegedly paid overseas resulted in the loss of business.
Third, FCPA cases often require significant investment of investigation resources over long periods. To date, it’s unclear if the California attorney general (or any other state) has invested in such resources to pursue these complex cases, even as California and other states reportedly are ramping up their overall enforcement capabilities.
Additionally, Korea Supply’s holding—limiting the remedies available in non-state UCL actions—means private litigants are unlikely to pursue foreign bribery cases, thus foreclosing a potential avenue for spinning off enforcement actions brought by the California attorney general.
While uncertainty may be the current defining characteristic of anti-corruption enforcement in the US, Bonta’s recent announcement does reinforce one point that businesses should take to heart: The best plan for now is to stay the course because illegal activity is still illegal.
Copyright 2025 Bloomberg Industry Group, Inc. (800-372-1033) California AG’s Anti-Bribery Enforcement Stance Faces Barriers. Reproduced with permission.
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