UPDATE 7/22/2022: The California Supreme Court recently weighed in on civil causes of action under Penal Code section 496. Check back soon for updated analysis.
California courts have struggled with whether California Penal Code section 496(c) applies to run-of-the-mill civil fraud claims.
How the Statute Operates
Subdivision (c) of section 496 provides a civil cause of action for any person who has been injured by a violation of subdivision (a). The civil remedies include treble damages and attorney’s fees – heightened remedies which are otherwise rarely available. Generally speaking, subdivision (a) renders unlawful the possession of stolen property. The subdivision covers a wide range of conduct, including buying, selling, receiving, concealing, or even withholding stolen property. Subdivision (a) further states that a principal in the actual theft can be liable for violating the subdivision.
Subdivision (a) is quite broad. The court applied section 496 in a civil case where a scammer refused to repay his loan when the lender asked for her money back. The borrower thus “withheld” stolen funds, constituting a violation of subdivision (a) and triggering civil liability under subdivision (c). The fact that he was never convicted criminally did not matter. (Bell v. Feibush (2013) 212 Cal.App.4th 1041.)
The wording of subdivision (c) allows a person to sue even if nothing was stolen from them. For example, when high-end jeans were sold at the discount store Costco, the jeans manufacturer alleged that its brand was tarnished. The court held that the reputational harm satisfied the injury requirement in subdivision (c). (Citizens of Humanity, LLC v. Costco Wholesale Corp. (2009) 171 Cal.App.4th 1, overruled on other grounds.)
The Court’s Efforts to Rein in the Civil Cause of Action
By allowing for treble damages and attorney’s fees, section 496 potentially upends the limitations on these remedies in the civil context, a concern raised by one court that felt constrained to apply section 496. (Bell, supra, at p. 1049.) Thus, courts have struggled to rein in the use of section 496 in civil disputes.
The fact that there is a dispute between the parties is one reason a court might avoid applying section 496. Subdivision (a) requires the defendant to know that the property is stolen. A defendant who genuinely – in good faith – believes no further payment is due, does not “know the property to be stolen”. (Lacagnina, supra, at p. 971.)
Another court ruled that the statute applies in civil cases only when stolen goods are involved. (Siry Investment, L.P. v. Farkhondehpour (2020) 45 Cal.App.5th 1098.) In Siry, one business partner diverted partnership funds that should have been paid as distributions. This type of fraud did not trigger section 496 because it did not further the policy underlying the statute (drying up the market for stolen goods).
The cases from the Court of Appeals are inconsistent, such that the law differs from one appellate district to the next. The conflicting approaches can only be reconciled by the California Supreme Court, which, as of the date this article is published, has not yet ruled on civil claims for section 496.
Angela Shaw is an associate attorney in the litigation department at Berliner Cohen, LLP. She can be reached at firstname.lastname@example.org.
This article is not intended to and does not constitute legal advice or a solicitation for the formation of an attorney-client relationship. Anyone with questions about this topic should consult an attorney.
 Subdivision (b), which governs flea market vendors and people in the business of selling and collecting items, is not addressed here because it typically does not apply in civil claims under section 496.
 The appellate court for San Jose (the Sixth Appellate District) has not yet ruled on a civil claim under section 496.