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JAMES J. MITTERMILLER, Cal. Bar No. 85177 lmittermiller pppardmullin.com LEK, FRANK J. P6she Cal. Bar No. 167852 fpolek(a sheppardmullin.com JOHN C. DINE EN^a Bar No. 222095 jdineen shepppard, mullin.com SHEPP^RD ,IVIULLIN, RICHTER & HAMPTON LLP A Limited Liability Partnership Including Professional Corporations 501 West Broadway, 19th Floor San Diego, California 92101-3598 Telephone : 619-338-6500 Facsimile: 619-234-3815 Attorneys for Defendants SPRINT SOLUTIONS, INC. and SPRINTSPECTRUM L.P. UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA
UTILITY CONSUMERS' ACTION NETWORK and ERIC TAYLOR, on behalf of themselves, their members and/or all others similarly situated, as applicable, Plaintiffs,
V.
Case No. 07 CV 2231 W (LSP) DEFENDANTS' NOTICE OF LODGMENT OF FOREIGN AUTHORITIES IN SUPPORT OF MOTIONS TO DISMISS
SPRINT SOLUTIONS, INC.; SPRINT SPECTRUM L.P.; SPRINT-NEXTEL CORPORATION, Defendants.
Hon. Thomas J. Whelan Judge: Courtroom: Seven March 3, 2008 Date: 10:30 a.m. Time: NO ORAL ARGUMENT PER LOCAL RULE 7. 1(d)(1)
Defendants Sprint Solutions, Inc. and Sprint Spectrum L.P. (collectively "Sprint") hereby lodge the following foreign authorities in support of their motions (1) to dismiss for lack of subject matter jurisdiction, pursuant to Rule 12(b)(1) and (2) to dismiss pursuant to Rule 12(b)(6), or in the alternative to strike pursuant to Rule 12(f).
-1W02-WEST:8JCD 1 \400684232.2 USDC Case No. 07 CV 2231 W (LSP)
NOL FOREIGN AUTHORITIES IN SUPPORT OF MOTIONS TO DISMISS
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I 2
CASES
Waudby v. Verizon Wireless Services, LLC, Slip Copy, 2007 WL 1560295 (D.N.J.)
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4 5
2.
Hall v. Time Inc., _ Cal. Rptr.3d _, 2008 WL 68631 (Cal.App. 4 Dist., 2008)
6
7
8
OTHER 3. 47 C.F.R. § 64.2401
9
10 11 12
4.
47 C.F.R. § 64.2400
13
14 15
5.
In the Matters of Appropriate Framework for Broadband Access to the Internet over Wireline Facilities, Report & Order & Notice of Proposed Rulemaking, 20 FCC Rcd 14853, ¶ 152-53 (2005)
16
17
DATED: January
, 2008 SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
18 19
20 21 22 23 24 25 26 27 28
W02-WEST:8JCDI\400684232.2 USDC Case No. 07 CV 2231 W (LSP)
s/James J. Mittermiller Attorneys for Defendants SPRINT SOLUTIONS, INC. and SPRINT SPECTRUM L.P. E-mail: jmittermiller(a,shopardmullin.com
NOL FOREIGN AUTHORITIES IN SUPPORT OF MOTIONS TO DISMISS
Case 3:07-cv-02231-RJB
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EXHIBI T 1
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Not Reported in F.Supp.2d Not Reported in F.Supp.2d, 2007 WL 1560295 (D.N.J.) (Cite as: 2007 WL 1560295 (D.N.J.))
Page 1
Only the Westlaw citation is,currently available. United States District Court, D. New Jersey. John WAUDBY, individually and on behalf of all others similarly situated, Plaintiffs,
V. VERIZON WIRELESS SERVICES, LLC, et al.,
Defendants. Civil Action No. 07- 470(FLW). May 25, 2007. David R. Buchanan Scott A. George, Seeger Weiss, LLP, Newark, NJ, for Plaintiffs. Todd Lawrence Schleifstein Greenberg Traurig, LLP, Florham Park, NJ, for Defendants. MEMORANDUM OPINION HUGHES, U.S.M.J. *1 This matter is before the Court upon the Motion of Defendant Cellco Partnership, d/b/a Verizon Wireless ("Verizon") to stay state law claims pending the outcome of proceedings before the FCC on pre-emption issues, and for a stay and referral of a federal law claim to the FCC. Plaintiff John Waudby, individually and on behalf of all others similarly situated, ("Plaintiff") opposes the motion. This case involves Verizon's practice of including in its wireless customer service agreements an early termination fee ("ETF") clause. Verizon charged members of the Plaintiff class an ETF of $175.00 when they cancelled their wireless service at some time after the trial period but before the end of the "service plan" term, regardless of their reasons for cancellation. The Federal Communications Commission ("FCC") has currently undertaken to determine whether ETFs constitute "rates charged," or are part of a rate structure within the meaning of 47 U.S.C. 332(c)(3)(A.) of the Federal Communications Act ("FCA"). Therefore, Verizon seeks to (1) stay all state law claims asserted by Plaintiff pending the
outcome of the ongoing proceeding before the FCC to determine whether such claims are pre -empted by federal law, and (2) refer Plaintiffs federal law claim, brought under 47 tJ.S.C. § 201(b), to the FCC and stay the litigation of such claim in the interim. The Court reviewed the written submissions of the parties and conducted oral argument by recorded telephone conference on May 15, 2007. For the reasons that follow, Verizon's Motion to stay state law claims pending the outcome of proceedings before the FCC on pre-emption issues, and for stay and referral of a federal law claim to the FCC is granted.
L BACKGROUND AND PROCEDURAL HISTORY
A. Factual Background and Procedural History This class action involves the business acts and practices of Defendant Verizon Wireless Services, LLC, and Cellco Partnership d/b/a Verizon Wireless ("Verizon") of charging Early Termination Fees ("ETF") when customers having Verizon accounts cancel their Verizon service. ( See Pl.'s Compl. at ¶' 1-2). Verizon requires its customers to enter into a wireless customer service agreement ("Agreement"). Id. at ^ 9. These Agreements are preprinted standardized forms that are not subject to modification or negotiation. Id at ¶ 10. Each of Verizon's Agreements includes, as a term and condition of service, a clause that requires subscribers to pay early termination penalties if they seek, for any reason, to terminate service before the expiration of the contract period which is typically one to two years. Id. at T 11. These termination fees are also due if Verizon terminates the Agreement for such reasons as nonpayment by the customer. Id. at T 12. The fee charged to customers by Verizon for termination of service before the expiration of the contract term is typically $175 .00. Id at ^ 13. Specifically, the following clause is included in "Verizon Terms and Conditions":
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*2 EARLY TERMINATION FEE: If you select any one (1) or two (2) year Calling Plan and cancel Service during your Minimum Term, then you are responsible for a $175.00 Early Termination Fee in addition to all other outstanding charges on your account.... Id. The customer must pay the full fee whether he or she cancels immediately after entering into the contract or one day before the contract period expires. Id. at ¶ 14. The customer must pay the full fee regardless of the reasons for cancellation. Id. at ¶ 15. The Cellular Telecommunications and Internet Association ("CTIA"), of which Verizon is a member, recently stated the following in a filing to the FCC: "The longer assured commitment under these term contracts enables the carriers to reduce handset prices at the inception of the term and to reduce monthly service charges, based on the expectation that initial and ongoing costs can be recouped gradually over time." Id. at 'l 17. Plaintiff John Waudby ("Plaintiff') began using Verizon wireless cellular service in 2002. Id. at 1 25. Plaintiff upgraded his phone in February 2006, and Verizon required him to sign a new contract. Id. When Plaintiff was unable to use the phone due to repeated dropped calls, he made over 50 calls to Verizon for assistance in resolving the issue. Id. When Plaintiffs service did not improve,, he cancelled his subscription. Id. As a result, Verizon charged Plaintiff a $175.00 ETF under the agreement. Id. On January 26, 2007, Plaintiff, individually and on behalf of all others similarly situated, filed a Class Action Complaint against Verizon. (See Dkt. no. 07-470, entry no. 1). In the Complaint, Plaintiff contends that Verizon disguises a fee to recover equipment costs as a liquidated damages clause, which is an illegal penalty when the damages are readily calculable. Id Plaintiff asserts that the termination fee is not actually designed to compensate Verizon for any damages arising from the termination, but has the effect and purpose of locking in the subscribers of Verizon and discouraging them
from switching to competing services. (Pl.'s Compl. at ¶ 18). Plaintiff further contends- that Verizon's ETF discourages competition in the wireless industry because consumers cannot freely shop around for the best wireless service. Id. at 119. Specifically, Plaintiff alleged the following Counts against Verizon; Count 1- -violation ofd 201 of the Federal Communications Act; Count 2--violation of New Jersey Consumer Fraud Act; Count 3--violation of substantially similar consumer fraud statutes of certain states; and Count 4-declaratory relief pursuant to 28 U.S.C. ^ 2201. (See Dkt. no. 07-470, entry no. 1). Verizon filed an Answer to Plaintiffs Complaint and Counterclaims on March 23, 2007. (See Dkt. no. 07-470, entry no. 8). Verizon's Counterclaims include breach of contract and unjust enrichment. Id. As the result of petitions filed by the defendant in Edwards v. SunCom, Case No. 02-CP-26-3539 (Horry County, S.C.) and the CTIA in March 2005, the Federal Communications Commission ("FCC") has undertaken to determine whether ETFs constitute "rates charged," or are part of a rate structure within the meaning of 47 U.S.C. & 332(e)(3)(Al of the FCA and thus whether "any application of state law by a court or other tribunal to invalidate, modify, or condition the use or enforcement of early termination fees based, in whole or in part, upon an assessment of reasonableness, fairness, or costbasis of the early termination fee, or to prohibit the use of early termination fees as unlawful liquidated damages or penalties, constitutes prohibited rate regulation preempted by Section 332(c;D ( A)." (Verizon's Br. at 1, 4). The FCC issued formal notices in the Federal Register and has completed the process of receiving comments and replies from interested parties. Id. at 4. Although no further action has been taken by the FCC since 2005, a March 2007 article in the Telecommunications Report Daily states that FCC Chairman Kevin Martin "hopes the Commission will act in the ETF proceeding in the next few months." (Verizon's Reply Br. at 8-9). *3 On March 23, 2007, Verizon filed the present
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Motion to (1) stay all state law claims asserted by Plaintiff pending the outcome of an ongoing proceeding before the FCC to,determine whether such claims are pre-empted by federal law, and (2) refer Plaintiffs federal law claim, brought under 47 U.S.C. & 201tb1, to the FCC and stay the litigation of such claim in the interim. (See Dkt. no. 07-470, entry no. 9). Verizon asserts that application of the primary jurisdiction doctrine is necessary to provide the Court with the FCC's controlling decision on the preemption and ¢ 201 Lb issues, to preserve the strong federal interest in regulatory uniformity, and to avoid wasting judicial and party resources. (Verizon's Br. at 1). Plaintiff filed opposition to Verizon's motion on April 16, 2007 and argues that the FCA does not preempt state claims and that this case is "a simple case of consumer protection violations and allegations of unfair and unjust conduct." (PL's Opp. Br: at 1). II. DISCUSSION Verizon asserts that the FCC has both the expertise and authority delegated by Congress to determine both (1) whether ETFs constitute "rates charged" under 332(c)(3)(A), such that state law claims are pre-empted, and (2) whether ETFs are "reasonable" or "just under s 201 b of the FCA. (Verizon's Br. at 7). Verizon further asserts that the FCC's determination of whether 332(cI(3)(A1 preempts state law claims will bind this Court. Id. at 10. Verizon argues that the primary jurisdiction doctrine, which applies when a case implicates questions of statutory construction, promotes uniformity in the administration of federal statutes. Id . at 13. Verizon further argues that the primary purpose of the FCA is the establishment of a national regulatory policy for wireless services. Id. Plaintiff opposes Verizon's motion and contends that because the FCA does not preempt state law consumer protection claims, but rather supplements state law claims with an additional cause of action, preemption is unwarranted. (Pl.'s Opp. Br. at 4). Plaintiff further argues that the primary jurisdiction doctrine is inapplicable because there are no technical issues to be resolved in this case. Id. at 9. In-
stead, Plaintiff contends that this case is based in statutory fraud and whether the ETF was "unjust or unreasonable" in violation of the FCA, issues that are well within the conventional experience of a court. Id. Plaintiff requests that if the Court defers to the FCC, the remainder of the case, specifically discovery on class certification, should move forward because even if the FCC were to issue a ruling in a timely fashion, the Court can still consider whether the ETF, as a rate, was unjust or unreasonable or whether state law was violated. Id. at 13. Verizon states in reply that the FCC possesses unique technical expertise relevant to whether ETFs constitute "rates charged" under ,section 332(6(3)(A), or are "reasonable" or "just" under section 201(b) . (Verizon's Reply Br. at 4). Verizon argues that claims directly challenging the "reasonableness" or "justness" of a carrier's rates or practices under section 201(b) "squarely fall within the FCC's primary jurisdiction." Id. at 9. A. Primary Jurisdiction Doctrine *4 The primary jurisdiction doctrine was developed by the courts to "avoid conflict between the courts and an administrative agency arising from either the court's lack of expertise with the subject matter of the agency's regulation or from contradictory rulings by the agency and the court." 1110 Conznrc'n Cory, v AT & 7' Co.. 496 F.2d 214. 221 (3d. Cir.1974 . The doctrine is specifically applicable to "claims properly cognizable in court that contain some issue within the special competence of an administrative agency ." 13oi es v. Shed Uil .Prod. Co199 F.3d 12.601264; ( I 1 th Cir.2000). The doctrine requires the court to refer such an issue to the agency, staying further proceedings until the parties receive an administrative ruling. Id. (citing Reiter v°. U _ Coo Uer 507 S2_5 8 268 (1993)). "The main justifications for the rule of primary jurisdiction are the expertise of the agency deferred to and the need for a uniform interpretation of a statute or regulation." Id. (citing County of Suffolk v. Lone Island Lighting Co 907 F.2d 1295. 1310 (2d Cir.1990 ; see also 13Ihite v. Interstate Conun2erce
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Comrn'n. 989 F.2d 643. 64S (3d Cir.1993) (noting that pursuant to the primary jurisdiction doctrine "a court should refer to an agency those matters that lie within the agency's expertise or that require a nationally uniform decision"). Courts must balance the advantages of applying the primary jurisdiction doctrine against the potential costs resulting from complications and delay in the administrative proceedings. ,Vat'l Coimnc'n Ars`n Inc. v. AT & T Co. . 46 173d 220. 223(2d _Cir.1995) (citing Ricci v. Ch ica.^4L) .llercantile Exch.. 409 U.S. 289 (1973)). Courts have referred matters to the FCC under the primary jurisdiction doctrine. MCI 496 F.2d at 220-221 (noting that it was appropriate for the district court to defer to the FCC to avoid conflict with the FCC in the resolution of certain issues). The FCC was created to "execute and enforce" the provisions of the FCA. 47 U.S.C. § 151. Accordingly, Congress has delegated to the FCC the authority to interpret ambiguous terms in the FCA and to provide parties clarification of those terms. See AT & T Cora v. Irma Utils. BJ. 525 U.S. 366. 397 li _999,), (explaining that "Congress is well aware that the ambiguities ... in a statute will be resolved by the implementing agency") (citing Chevron, LISA Inc v NRDC Inc. 467 U.S. 837, 842-43 1984. The FCA preempts any state regulation of the "rates charged" by any commercial mobile service provider, while allowing state regulation of "terms and conditions." 47 U.S.C. ' 332(c (3)(A). Currently pending before the FCC is the issue as to whether ETFs constitute "rates charged" under section 332{clj3}(A) such that state law claims are preempted. Recently, the United States District Court for the Central District of California ruled that a stay was appropriate in a Class Action suit against Defendant Cellco Partnership, d/b/a Verizon Wireless seeking injunctive and restitutionary relief for Defendant's practice of charging ETFs when wireless customers choose to cancel or terminate their service contract because of poor quality service. Gentry a Cellco P'ship, d1b/a Verizon Wireless, No. CV057888(GAF) (CD.Cal.2006). The Court held that the FCC's ruling as to whether ETFs are "rates" under
the FCA may be dispositive of the plaintiffs' claims. The Court further held that the doctrine of primary jurisdiction applied because (1) issues of FCA interpretation were within the FCC's jurisdiction and competence, (2) the Court would greatly benefit from the FCC's expertise and experience in interpreting whether ETFs are "rates charged" or "terms and conditions," (-3) the need for uniformity is acute because lower courts have already reached conflicting conclusions on the question, and (4) any FCC ruling on the issue shall be afforded substantial deference by the Court. (See Verizon's Ex. A, Gentry Memorandum and Order). B. Reasonableness Pursuant to Section 201fb) *5 Defendants in the present matter seek referral to the FCC of Plaintiffs federal claim as to whether ETFs are "reasonable" or "just" under Section 201 ) of the FCA. Pursuant to section 201(b), "[a]ll charges, practices, classifications, and regulations for and in connection with such communication service, shall be just and reasonable, and any such charge, practice, classification, or regulation that is unjust or unreasonable is hereby declared to be unlawful." 47 U.S.C. ^ 201(b). The United States Court of Appeals for the Second Circuit ruled against referral to the FCC in National Communications. 46 F.3d 220. In National Communications, plaintiff brought suit against AT & T under the FCA alleging that in denying it telecommunications services under Contract Tariff No. 54., AT & T had engaged in unreasonable practices in violation of Section 201 and unlawful discrimination in violation of Section 202. Id. at 222. The Court held that the district court erred in referring the matter to the FCC. Id. at 223. Instead, the Court found that (1) there were no technical or policy issues presented that required agency expertise, (2) there was no risk of inconsistent interpretations, and (3) the fair administration of justice weighed substantially against referral- Id. Specifically, the Second Circuit held that primary jurisdiction did not apply to cases involving the enforcement of a tariff including the threshold ques-
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tion in the case as to whether at the time plaintiff applied, it qualified for Contract Tariff No. 54. Id. However, the Court noted, that "statutory reasonableness of a tariff should, of course, be reviewed by an agency because it is an 'abstract quality represented by an area rather than a pinpoint.' " Id. (citing Danna v. Air France. 463 F'.2d 407. 410 (2d Cir.1972 . The Court also held that because the case did not require interpretation of the tariff, there was no risk of substantial inconsistent interpretations, 7d. at 224. The Court further recognized that agency decision-making often takes a long time and the subsequent delay imposes enormous costs on individuals, society and the legal process. Id. at 225. In another case, plaintiffs brought a class action challenging defendant wireless company's $5 late payment charges, asserting state common law claims for "unlawful liquidated damages" and "unjust enrichment," and claims that the fees were "unjust and unreasonable" under "Section 201(b) of the Communications Act." Kie er v..Pacrinl; 1Vetwork Inc.. 50 F.Sunn.2d 681, 683 (E.D.Mich.1999). The Court held that "[a]llowing the FCC to first consider whether Defendants' late payment charges and billing practices are 'reasonable' as required under Section 201(b) of the Communications Act is consistent with the purposes of the primary jurisdiction doctrine." Lei. at 684. The Court also held that referral to the FCC would promote uniformity and consistency in its regulation of the telecommunications industry. Id. The Court stayed further proceedings until after the FCC ruled on the reasonableness issue to prevent the Court from interfering with or contradicting any FCC rulings and to allow the Court to address remedy issues left open after the FCC decision. Id. at 686. C. Administration of Justice *6 Pursuant to Federal Mule of Civil Procedure 1 the Rules "shall be construed to secure the just, speedy, and inexpensive determination of every action." Fed.R.Civ,.P. 1. Upon referral of an issue to the FCC, a court can either stay or dismiss an action. See Airtouch Paging of California v. Pacific
Bell, No. C-98-2216, 1999 U.S. Dist. LEXIS 16615, at * 25-26 (N.D.Cal. May 1999) (noting that under the doctrine, federal courts can "stay or dismiss actions over which they have jurisdiction pending resolution of some issue within the special competence of an administrative agency"). In Phone-Tel Consmc`n. Inca. V. AT & 7' Corh.. 100 F.SuI212.2d 313 (E.D.Pa.2000), the Court referred certain technical and policy issues to the FCC, but did not dismiss the case. 100 F.Supp.2d at 321-22. The Court explained that dismissal of the case would unfairly disadvantage plaintiff by (1) depriving plaintiff of its chosen forum, and (2) preventing plaintiff from receiving class-wide relief. Id. at 322. The Court noted that Congress vested the Court with concurrent jurisdiction over plaintiffs claim, a grant that the doctrine of primary jurisdiction does not alter. Id. "Rather, the doctrine of primary jurisdiction requires only that the court refer certain discrete issues raised in the case, in the first instance, to the appropriate administrative agency." Id. Following a decision by the FCC on those issues, plaintiff was entitled to return to its chosen forum to proceed to final judgment. Id. The Court permitted the plaintiff to seek termination or modification of the stay based upon a change of circumstances, undue delay by the FCC in addressing the referred issues, or for any other equitable or legal reason as was warranted. Id. III. ANALYSIS A. Stay of State Law Claims Currently pending before the FCC is the issue of whether ETFs constitute "rates charged" or "terms and conditions" under section 332 c (3 (A) of the FTA. If the FCC determines that ETFs are "rates," then Plaintiffs state law claims in this matter will be preempted by federal law. Similar to Gentry, the outcome of the FCC's ruling may be dispositive of Plaintiffs claims. Further, if ETFs are found by the FCC to be "rates," then Plaintiffs state law claims would be pre-empted by federal law. Because this issue is currently before the FCC and Plaintiffs state law claims might be preempted depending on
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the FCC's ruling, the Court finds that a stay of Plaintiffs state law claims is appropriate until the FCC determines whether ETFs are "rates" or "terms and conditions" and thus whether Plaintiffs state law claims can go forward. B. Referral of the Section 20L(b) Claim to the FCC Plaintiff argues that the primary jurisdiction doctrine is inapplicable because there are no technical issues to be resolved. (PL's Opp. Br. at 9). Instead, Plaintiff contends that this case is based in statutory fraud and whether the ETF was "unjust or unreasonable" in violation of the FCA which are well within the conventional expertise of the Court. Id. However, as noted in National Communications and Kiefer, "reasonableness" has been consistently determined by the FCC. "Reasonableness" of ETFs is a matter of statutory interpretation and therefore, within the authority and competence of the FCC. Further, there is a significant need for uniformity in this matter. Not only would Verizon's New Jersey competitors be affected by an FCC decision on the "reasonableness" of ETFs, but competitors elsewhere in the country would also be impacted. Therefore, the Court finds that the primary jurisdiction doctrine applies to this matter. 1. Expertise and Competence of the FCC *7 Unlike the claims presented in National Communications which turned on whether plaintiff qualified for a contract tariff, Plaintiffs claims in this case require a determination of "reasonableness" under the FCA. Although the Court in National Communication overturned the district court's referral to the FCC, it specifically noted that statutory reasonableness, not an issue in that case, should be reviewed by an agency. National Comrnunicationc 46 F.3d at 223. Here, statutory reasonableness of ETFs is a central issue of Plaintiffs Section 203 claim against Verizon. Therefore, the FCC's expertise and competence in deciding issues of statutory reasonableness weigh in favor of referral of Plaintiffs 4ection 201(b) claim to the FCC. Similar to the plaintiff in Kiefer, Plaintiff in the
present action is seeking relief pursuant to Section 201}, of the FCA. Specifically, Plaintiffs claims are based on Verizon's practice of charging ETFs upon cancellation of service contracts. Plaintiff seeks a determination as to whether ETFs are "reasonable" under Section 201(b). Just as in Kiefer, the determination as to whether ETFs are "reasonable" falls within the FCC's authority and expertise granted to the agency by Congress in the FCA. Kieer 50 F.Su .2d at 684. Both cases involve matters of statutory interpretation which the FCC would ,be better able to analyze. Further, in both cases, the Courts would benefit from the FCC's expertise and experience. Therefore, similar to Kiefer, referral of Plaintiffs Section 201(b) claim to the FCC would be consistent with the purposes of the primary jurisdiction doctrine. Plaintiffs action is also similar to that in Kiefer in that in both cases, plaintiffs asserted state common law claims in addition to claims under Section 201 b . Kiefer. 50 F.Sunn.2d at 683. Similarly, Plaintiff in the present action claims that the "reasonableness" issue is within the conventional expertise of the Court and that the case is really one based in statutory fraud. However, just as in Kiefer, allowing the FCC to first determine whether ETFs are "reasonable" under Section 20Fb) of the FCA is consistent with the purposes of the primary jurisdiction doctrine. Id. at 684. Referral would allow the FCC, the agency with expertise, to consider the issue of statutory reasonableness and would also promote uniformity and consistency in the FCC's regulation of the telecommunications industry. 2. Uniformity In Gentry, the Court noted that the need for uniformity was acute, partly because several district courts had already addressed the issue before the Court and reached conflicting conclusions. (See Verizon's Ex. A. Gentry Memorandum and Order at 10). Further, the Court in Kiefer-, a case with circumstances similar to the present action, held that referral of the "reasonableness" of fees to the FCC would "promote uniformity and consistency in its regulation of the telecommunications industry."
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Kiefer, 50 F.Sup .2d at 686. The issues raised in
the present action also calls for uniformity. A decision regarding the reasonableness of ETFs pursuant to Section 201(b) of the FCA would affect not only Defendant in this present matter, but also its competitors in New Jersey and elsewhere. Conflicting decisions would result in significant inconsistency in the telecommunications industry with regard to ETFs. Therefore, based on the FCC's expertise in determining statutory reasonableness and the need for uniformity, the Court finds that the primary jurisdiction doctrine applies and supports referral of Plaintiffs Section 201(bl claim to the FCC. C. Stay of the Present Action *8 Upon referral of an issue to the FCC, the Court can dismiss or stay the present action. The Court finds that similar to Phone-Tel, dismissal of this action would prejudice the Plaintiff class given that federal court was its chosen forum and that the FCC cannot adequately provide Plaintiff with`the relief it seeks. Therefore, a stay of Plaintiffs case pending decision by the FCC is more appropriate. The Court recognizes the potential delay facing Plaintiff following referral of the Section 201(b) claim to the FCC. However, although FCC proceedings can often take a long time, the FCC issued formal notices in the Federal Register and has completed the process of receiving comments and replies from interested parties. (Verizon's Br. at 4). Although no further action has been taken by the FCC since 2005, a March 2007 article in the Telecommunications Report Daily states that FCC Chairman Kevin Martin "hopes the Commission will act in the ETF proceeding in the next few months." (Verizon's Reply Br. at 8- 9). Similar to Phone-Tel, the Court finds that it is only referring to the FCC a discrete issue regarding the reasonableness of ETFs pursuant to Section 201(b) of the FCA. Following a decision by the FCC on that issue, Plaintiff may return to this Court and proceed to final judgment. Also, Plaintiff may seek termination or modification of the stay based upon
a change of circumstances, undue delay by the FCC in addressing the referred issues, or for any other equitable or legal reason as may be warranted. III. CONCLUSION For the reasons expressed here, the Court finds that Plaintiffs state law claims are stayed pending the FCC's ruling as to whether ETFs are "rates" or "terms and conditions" which may result in preemption of these claims. The Court further finds that the primary jurisdiction doctrine applies to the present matter and based on the FCC's expertise in determining statutory "reasonableness" and the need for uniformity in this matter, the doctrine supports the referral of Plaintiffs federal claim pursuant to Section 201(b) to the FCC. The Court will also stay Plaintiffs federal claims pending the outcome of the FCC's examination of this issue. However, Plaintiff reserves the right to seek modification or termination of the stay. Therefore, Verizon's Motion to stay state law claims pending the outcome of proceedings before the FCC on preemption issues, and for a stay and referral of the federal law claim to the FCC is granted. An appropriate Order accompanies this Memorandum Opinion. Not Reported in F.Supp.2d, 2007 WL 1560295 (D.N.J.) END OF DOCUMENT
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VVestlaw. --- Cal.Rptr.3d ------ Cal.Rptr.3d ----, 2008 WL 68631 (Cal.App. 4 Dist.), 08 Cal. Daily Op. Serv. 215 (Cite as: --- Cal.Rptr.3d ----) Page I
Hall v. Time Inc. Cal.App. 4 Dist., 2008. Court of Appeal, Fourth District, Division 3, California. Jeffrey R. HALL, Plaintiff and Appellant, V. TIME INC. et al., Defendants and Respondents. No. G038040. Jan. 7, 2008. Customer brought unfair Background: competition law class action against book seller, alleging that seller unlawfully induced consumers to purchase books by offering a "free preview period" but then sent invoices prior to the expiration of that period which asked for full payment. The Superior Court, Orange County, Ronald L. Bauer, J., sustained demurrer and granted motion for judgment on the pleadings, and customer appealed. Holdings: The Court of Appeal, Fybel, J., held that: (1) customer did not suffer any injury in fact,
d
29Tk128 k. Purpose and Construction in General. Most Cited Cases The purpose of the unfair competition law is to protect both consumers and competitors from unlawful, unfair or fraudulent business practices by promoting fair competition in commercial markets for goods and services. West's Ann.Cal.Bus. & Pro£Code § 17200. [21 Statutes 361 x'325 361 Statutes 361IX Initiative 361025 k. Constructions, Operation and Effect of Initiated Acts. Most Cited Cases In interpreting a voter initiative, the court applies the same principles that govern statutory construction. 131 Antitrust and Trade Regulation 29T X239 29T Antitrust and Trade Regulation 29TIII Statutory Unfair Trade Practices and Consumer Protection 29TIII(C) Particular Subjects and Regulations 29Tk239 k. Other Particular Subjects and Regulations. Most Cited Cases Customer who ordered book from seller, which gave customer a "free preview period" but required customer to pay for book after preview period ended, did not suffer any injury in fact and thus lacked standing to pursue unfair competition law claim against seller, where customer paid $29.51 and received book in exchange, and customer did not allege that he did not want the book, the book was unsatisfactory, or the book was worth less than what he paid for it. West's Ann.Cal.Bus. & Prof.Code § 17204. [4] Antitrust and Trade Regulation 29T^239 29T Antitrust and Trade Regulation 29TIII Statutory Unfair Trade Practices and Consumer Protection
(2) customer failed to allege causation.
Affirmed. [11 Antitrust and Trade Regulation 29T X128 29T Antitrust and Trade Regulation 29TIII Statutory Unfair Trade Practices and Consumer Protection 29TIII(A) In General 29Tk126 Constitutional and Statutory Provisions
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29TIII(C) Particular Subjects and Regulations 29Tk239 k. Other Particular Subjects and Regulations. Most Cited Cases Customer did not allege he lost money or property as a result of book seller's alleged unfair competition in providing customer with free 21-day preview period but sending invoice for book before preview period ended, and thus lacked standing to bring unfair competition law claim; customer alleged that conduct was fraudulent or unfair because it caused the consumer to believe he or she did not have a free trial period and was obligated to keep and pay for the book upon receipt, but invoice did not cause customer to remit payment immediately on receiving the book, as customer remitted payment 10 months after receiving the book, and customer did not allege he did not want the book or that he was induced to keep book he otherwise would have returned during preview period. West's Ann.Cal.Bus. & Prof Code § 17204. [51 Fraud 184 X20
184 Fraud
Michael J. Trotter; Hall & Bailey and Donald R. Hall for Plaintiff and Appellant. Jones Day, Richard S. Ruben, Craig E. Stewart and Matthew A. Berliner for Defendants and Respondents.
OPINION FYBEL, J.
INTRODUCTION
1841 Deception Constituting Fraud, and Liability Therefor 184k19 Reliance on Representations and Inducement to Act 184k20 k. In General. Most Cited Cases Fraud 184 x'25 184 Fraud 1841 Deception Constituting Fraud, and Liability Therefor 184k25 k. Injury and Causation. Most Cited Cases In a fraud case, "justifiable" reliance is the same as " causation," thus, "actual reliance" occurs when a misrepresentation is an immediate cause of a plaintiffs conduct, which alters his legal relations, and when, absent such representation, the plaintiff would not, in all reasonable probability, have entered into the contract or other transaction.
"1 A plaintiff must have suffered an "injury in fact" and "lost money or property as a result of such unfair competition" to have standing to pursue either an individual or a representative claim under the California unfair competition law, Business and Professions Code section 17200 et seq. (UCL). We hold the phrase "as a result of in the UCL imposes a causation requirement; that is, the alleged unfair competition must have caused the plaintiff to lose money or property. Because plaintiff Jeffrey R. Hall alleged neither injury in fact nor causation, he lacked standing to pursue a UCL claim against Time Inc., Time Warner Inc., and Time Inc. Home Entertainment (collectively Time). Thus, the trial court correctly granted Time Inc. and Time Warner Inc.'s motion for judgment on the pleadings and sustained Time Inc. Home Entertainment's demurrer to Hall's first amended complaint. We affirm the resulting judgment.
ALLEGATIONS
Appeal from a judgment of the Superior Court of Orange County, Ronald L. Bauer, Judge. Affirmed. Carroll, Kelly, Trotter, Franzen & McKenna,
The first amended complaint (the complaint) alleged Time engaged in a scheme by which it induced consumers to purchase books by offering a " `free preview period' " during which the consumer had 21 days in which to review the book and return it to Time with no obligation to buy. The complaint alleged Time had no intention of
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fulfilling its promise of a " `no obligation -free trial period' "; rather, "after the consumer receives the book pursuant to an ostensible no obligation free trial basis, Time employs a scheme to obtain immediate payment from the consumer through ... misleading and deceitful tactics." The complaint alleged that after the consumer agrees to the free trial period, Time mails the book to the consumer with an invoice prominently displaying to the consumer "a non-contingent obligation which is immediately payable [,] contrary to Time's earlier promise of a no obligation free trial period."The complaint attached a copy of the invoice and alleged it refers to an amount due on the consumer's "order" rather than to a free preview period. In that way, the complaint alleged, the invoice "deceiv[es] the consumer into believing that an amount of money is due when, in reality, there is no money due until the expiration of the free trial period according to Time's promise during the consumer solicitation." The complaint alleged Time would send the consumer a bill if the consumer did not pay the invoice. The complaint alleged the bill, a copy of which was attached to the complaint, did not inform the consumer he or she has no obligation during the 21-day trial period, but instead advised the consumer he or she has an unconditional and immediate obligation to pay for the book. The complaint alleged if the consumer does not pay the bill, then Time sends the consumer a second bill informing the consumer that " `[aJs of this letter date, your free preview has ended.' " According to the complaint, "it is only after the free preview period has expired that Time informs the consumer of the free preview period." Thereafter, the complaint alleged, Time coerces payment by threatening economic sanctions, third parry collections, and damage to the consumer's credit. *2 In August 2000, Hall ordered from Time a copy of the book Life Millennium subject to the 21-day free trial period. He received the book along with an invoice dated September 6, 2000 (attached to the complaint), stating: "When you decide to keep your new book, please take a moment to
review the account information above and make out a check for $ 10.79-the amount n[o]w due, or if you prefer, the total balance of $29.51. Best of all, if you decide to keep [the book] you will receive advance announcements of future books in the LIFE Books Series as they are published on a periodic basis (no more than 3 times a year). You can say `no ' simply by returning the advance announcement card within 21 days. We guarantee it! If you ever have less than 21 days, simply return the book at our expense. There is never an obligation to buy and you may cancel at any time."The invoice closed by stating, "[t]hank you in advance for your prompt payment and welcome to the LIFE Books family." Hall kept the book and did not pay for it during the free trial period. He later received a "bill" with a payment due date of November 28, 2000, followed by another bill with a payment due date of December 26, 2000. Both bills were attached as exhibits to the complaint. The second bill stated, "[ a]s of this letter date, your free preview has ended." Hall did not pay the bill, and thereafter received a series of payment notices stating the matter would be turned over to a collection agency. Each of these notices was attached as an exhibit to the complaint. After receiving a demand for payment from a collection agency, Hall submitted a check dated June 25, 2001 in the amount of $29.51 as payment for the book. The complaint alleged a single cause of action for class action relief under the UCL. Hall alleged Time engaged in an "ongoing, unfair and/or fraudulent and/or unlawful business practice" by sending invoices before the expiration of the free trial period to obtain immediate payment for the book requested.
PROCEDURAL HISTORY
Hall filed the complaint after the trial court sustained Time's demurrer to the original complaint. Time Inc. and Time Warner Inc. moved for judgment on the pleadings and Time Inc. Home Entertainment demurred to the complaint on the
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ground Hall did not have standing to pursue a UCL claim. The trial court sustained the demurrer and granted the motion for judgment on the pleadings, both without leave to amend, stating: "The plaintiff got the book that he asked for, at the price he asked for it, and the payment schedule he wanted." Judgment was entered in November 2006.
amending Business and Professions Code section 17204, which prescribes who may sue to enforce the UCL, by deleting the language authorizing suits by any person acting on behalf of the general public and by replacing it with the phrase, "who has suffered injury in fact and has lost money or property as a result of such unfair competition."( Bus. & Prof Code, § 17204; Mervyn's, supra, 39 CalAth at p. 228, 46 Cal.Rptr.3d 57, 138 P.3d 207.) Proposition 64 also amended Business and Professions Code section 17203, which authorizes courts to enjoin unfair competition, by adding this sentence: "Any person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of Section 17204 and complies with Section 382 of the Code of Civil Procedure, but these limitations do not apply to claims brought under this chapter by the Attorney General, or any district attorney, county counsel, city attorney, or city prosecutor in this state. "(Bus. & Prof.Code, § 17203; Mervyn's, supra, 39 Cal.4th at pp. 228-229, 46 Cal.Rptr.3d 57, 138 P.3d 207.)
DISCUSSION
1. Proposition 64 Amendments to the UCL
[1] The UCL permits civil recovery for "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising."(Bus. & Prof Code, § 17200; see also id., § 17203 [injunction and restitution remedies]; Kraus v. Trinity Management Services, Inc. (2000) 23 CalAth 116, 126-127, 96 Cal.Rptr.2d 485, 999 P.2d 718.) The UCL's purpose is to protect both consumers and competitors from unlawful, unfair or fraudulent business practices "by promoting fair competition in commercial markets for goods and services ."(Kasky v. Nike, Inc. (2002) 27 CalAth 939, 949, 119 Cal.Rptr.2d 296, 45 P.3d 243.) *3 California law previously authorized "any person acting for the interests of ... the general public" to sue for relief for unfair competition notwithstanding lack of injury or damages. (Bus. & Prof Code, former § 17204; see also Californians for Disability Rights v. Mervyn's, LLC (2006) 39 CalAth 223, 227, 228, 46 Cal.Rptr.3d 57, 138 P.3d 207(Mervyn's ).) Proposition 64, approved by the voters at the November 2, 2004, General Election, changed the standing requirements for a UCL claim to create a two-prong test: A private person now has standing to assert a UCL claim only if he or she (1) " has suffered injury in fact," and (2) "has lost money or property as a result of such unfair competition."( Bus. & Prof Code, § 17204; Mervyn's, supra, 39 CalAth at p. 227, 46 Cal.Rptr3d 57, 138 P.3d 207.) Proposition 64 accomplished that change by
II. Whether Hall Has Standing to Pursue a UCL
Claim
[2]Hall contends he has standing to pursue a UCL claim because (1) he alleged an injury in fact as required by the Proposition 64 amendments to Business and Professions Code section 17204; and (2) the phrase "as a result of such unfair competition in the Proposition 64 amendments to section 17204 does not impose a causation requirement. To address those contentions, we must construe UCL standing requirements imposed by Proposition 64. In interpreting a voter initiative, " `we apply the same principles that govern statutory construction. [Citation.] Thus, ..."we turn first to the language of the statute, giving the words their ordinary meaning. "[Citation.] ... The statutory language must also be construed in the context of the statute as a whole and the overall statutory scheme [in light of the electorate's intent]. [Citation.] ... When the language is ambiguous, "we refer to other indicia of the
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voters' intent, particularly the analyses and arguments contained in the official ballot pamphlet." [Citation.]' [Citation.] [¶] In other words, our ` task is simply to interpret and apply the initiative's language so as to effectuate the electorate's intent.' [Citation.]" (Robert L. v. Superior Court (2003) 30 CalAth 894, 900-901, 135 Cal.Rptr.2d 30, 69 P.3d 951.) *4 The ordinary meaning of the new language of Business and Professions Code section 17204, combined with its purpose as stated in Proposition 64, guides us to the conclusion Hall lacks standing to pursue his UCL claim.
A. Injury in Fact [3] An injury is "an act that damages, harms, or hurts:... a violation of another's rights for which the law allows an action to recover damages or specific property or both: an actionable wrong."(Webster's 3d New Internat. Dict. (1993) p. 1164.) FNiAn injury in fact is "[a]n actual or imminent invasion of a legally protected interest, in contrast to an invasion that is conjectural or hypothetical."(Black's Law Dict. (8th ed.2004) p. 801.) To lose is "to suffer deprivation of." (Webster's 3d New Internat. Dict., supra, at p. 1338.)A loss is "[a]n undesirable outcome of a risk; the disappearance or diminution of value, usu. in an unexpected or relatively unpredictable way."(Black's Law Dict., supra, at p. 963.) The voters' intent in passing Proposition 64 and enacting the changes to the standing rules in Business and Professions Code section 17204 was unequivocally to narrow the category of persons who could sue businesses under the UCL. "In Proposition 64, as stated in the measure's preamble, the voters found and declared that the UCL's broad grant of standing had encouraged `[f]rivolous unfair competition lawsuits [that] clog our courts[,] cost taxpayers' and `threaten[ ] the survival of small businesses....' (Prop.64, § 1, subd. (c) [`Findings and Declarations of Purpose'].) The former law, the voters determined, had been `misused by some private attorneys who"[f]ile frivolous lawsuits as a
means of generating attorney's fees without creating a corresponding public benefit,"[f]ile lawsuits where no client has been injured in fact,"[f]ile lawsuits for clients who have not used the defendant's product or service, viewed the defendant's advertising, or had any other business dealing with the defendant,' and `[f]ile lawsuits on behalf of the general public without any accountability to the public and without adequate court supervision.'(Prop.64, § 1, subd. (b)(1)-(4) .) `[T]he intent of California voters in enacting' Proposition 64 was to limit such abuses by ` prohibit[ing] private attorneys from filing lawsuits for unfair competition where they have no client who has been injured in fact' (id., § 1, subd. (e)) and by providing `that only the California Attorney General and local public officials be authorized to file and prosecute actions on behalf of the general public' (id., § 1, subd. (f))." (Mervyn's, supra, 39 Cal.4th at p. 228, 46 Cal.Rptr.3d 57, 138 P.3d 207.) Our holding in this case is consistent with the ordinary meaning of the language of section 17204 and the voters' stated intent. Few cases since Proposition 64's passage have directly addressed what constitutes injury in fact or loss of money as a result of unfair competition for purposes of determining standing. Cases decided since Proposition 64 changed the language of Business and Professions Code section 17204 have concluded a plaintiff suffers an injury in fact for purposes of standing under the UCL when he or she has: *5 (1) expended money due to the defendant's acts of unfair competition (Aron v. U-Haul Co. of California (2006) 143 Cal.AppAth 796, 802-803, 49 Cal.Rptr.3d 555 [plaintiff alleged he was required to purchase excess fuel when returning rental truck]; Monarch Plumbing Co. v. Ranger Ins. Co. (E.D.Cal., Sept. 25, 2006, No. Civ.S-06-1357) 2006 U.S.Dist. Lexis 68850, *20 [plaintiff alleged he paid higher insurance premiums because of defendant insurer's settlement policies]; Witriol v. LexisNexis Group (N.D.Cal., Feb. 10, 2006, No. C05-02392) 2006 U.S.Dist. Lexis 26670, *18-19 [plaintiff incurred costs to monitor and repair damage to his credit caused by defendants' unauthorized release of private information]; Southern Cal. Housing v. Los Feliz Towers
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--- Cal.Rptr.3d ------ Ca1.Rptr.3d ----, 2008 WL 68631 (Cal.App. 4 Dist.), 08 Cal. Daily Op. Serv. 215 (Cite as: --- Cal.Rptr.3d ----) Homeow.(C.D.Cal.2005) 426 F.Supp.2d 1061, 1069 [housing rights center lost financial resources and diverted staff time investigating case against defendants]; Laster v. T-Mobile USA, Inc. (S.D.Ca1.2005) 407 F.Supp.2d 1181, 1194 [defendants advertised cellular phones as free or substantially discounted when purchased with cellular telephone service, but plaintiffs were required to pay sales tax on the full retail value of the phones] ); (2) lost money or property (Huntingdon Life Sciences, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (2005) 129 Cal.AppAth 1228, 1240, 1262, 29 Cal.Rptr.3d 521 [plaintiffs home and car were vandalized by animal rights protestors] ); or (3) been denied money to which he or she has a cognizable claim (Progressive West Ins. Co. v. Superior Court (2005) 135 Cal.AppAth 263, 269-270, 285, fn. 5, 37 Ca1.Rptr.3d 434 [insurance company paid insured's medical bills, then sued to recover that money when insured collected damages from the third party who caused his injuries; insured had standing to bring UCL claim against insurance company]; Starr-Gordon v. Mass. Mut. Life Ins. Co. (E.D.Cal., Nov. 7, 2006, No. Civ.S-03-68) 2006 U.S.Dist. Lexis 83110, *1, *18-19 [plaintiff challenged the process by which defendant terminated her disability benefits] ). In this case, Hall did not allege he suffered an injury in fact under any of these definitions. He expended money by paying Time $29.51-but he received a book in exchange. He did not allege he did not want the book, the book was unsatisfactory, or the book was worth less than what he paid for it.
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requires a showing of a causal connection or reliance on the alleged misrepresentation.
1. Recent Case Law Requiring Causation in UCL Claims Several recent cases correctly analyze the issue whether standing to pursue a UCL claim requires a showing of causation FN3In Brown v. Bank of America, N.A. (D.Mass.2006) 457 F.Supp.2d 82, 84, the plaintiffs sued Bank of America, alleging the notice of an additional fee charged to customers of other banks using Bank of America's ATM's was insufficient, under the Electronic Fund Transfer Act (15 U.S.C. § 1693 et seq.), the consumer protection laws of Massachusetts (Mass. Gen. Laws, ch. 93A, § § 2, 9 (2006)), and the UCL. The federal district court found Bank of America was entitled to summary judgment on the UCL claim because the plaintiffs could not show a loss of money or property caused by Bank of America's unfair practices. (Brown v. Bank of America, N.A., supra, 457 F .Supp.2d at p. 89.) Even if the plaintiffs could have established the fee notice posted on Bank of America's ATM's was insufficient, they could not establish causation of loss because the ATM customer was required to accept the imposition of an additional fee by means of an on-screen prompt during the ATM transaction. (Ibid.) Thus, the loss of money in the form of the additional fee was not a result of the inadequate fee notice posted on the ATM's. *6 In Laster v. T-Mobile USA, Inc., supra, 407 F.Supp.2d at page 1183, the plaintiffs sued the defendants for, among other things, violation of the UCL. The plaintiffs had entered into bundled transactions with the defendants-cellular telephone service providers-to purchase cellular telephones and acquire cellular telephone service. (Id. at pp. 1184-1185.)The defendants moved to dismiss the UCL claim for lack of standing. (Id. at p. 1193.) Applying the two-prong test of Business and Professions Code section 17204, the federal district court concluded the plaintiffs had alleged injury in fact. "Plaintiffs claim they entered into a bundled transaction with Defendants whereby they
B. Causation [4][5] Even if Hall's payment for the book could be construed as an injury in fact, he nonetheless would fail to satisfy the second prong of the standing test-that he "lost money or property as a result" of the alleged unfair competition. We conclude this second prong imposes a causation requirement.FN2The phrase "as a result of" in its plain and ordinary sense means "caused by" and
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purchased both a phone and cellular service, and in doing so, were provided with a phone that was falsely advertised as `free' or substantially discounted, when in fact, they were required to pay the sales tax on the full retail value.... Such allegations sufficiently allege an injury in fact."( Laster v. T-Mobile USA, Inc., supra, 407 F.Supp.2d at p. 1194.) The plaintiffs' claim, however, failed with respect to the second prong of the test-causation. "Plaintiffs, however, do not include any allegations in their [first amended class action complaint] that they relied on Defendants' advertisements in entering into the transactions. While Plaintiffs meticulously describe the allegedly misleading advertisements (as later described in Plaintiffs' pleadings, a `bait-and-switch' leading to a `fleece'), none of the named Plaintiffs allege that they saw, read, or in any way relied on the advertisements; nor do they allege that they entered into the transaction as a result of those advertisements. [T] The language of the UCL, as .amended by Proposition 64, makes clear. that a showing of causation is required as to each representative plaintiff.... Because Plaintiffs fail to allege they actually relied on false or misleading advertisements, they fail to adequately allege causation as required by Proposition 64. Thus, ... Plaintiffs lack standing to bring their UCL and [false advertising law] claims ."(Ibid. ) Cattie v. Wal-Mart Stores, Inc. In (S.D.Cal.2007) 504 F.Supp.2d 939, 948, the district court concluded that omitting a reliance requirement for standing to bring a UCL claim would "undermine Proposition 64's reform purposes. " The plaintiffs UCL claim alleged the thread count of the bed linens she purchased from the defendants' Web site was lower than advertised. (Id. at p. 941.) The plaintiff purchased one set of bedsheets 11 days before filing the lawsuit and did not allege she relied on any misrepresentation in making her purchase.(Id. at pp. 946 -947.)In deciding whether the Proposition 64 amendments created a reliance/causation requirement, the court looked to Proposition 64's purpose of foreclosing the ability of an " ` "unaffected plaintiff," which was often the sham creation of attorneys,' " to bring frivolous lawsuits with no public benefit or accountability to the public. (Id. at p. 948.)The court stated: "An
attorney who became aware of false advertising but who had no client who was harmed by it could easily `create' a client with standing to sue by directing a willing parry who was not deceived by the advertising to make a purchase. Thus, omitting a `reliance' requirement would blunt Proposition 64's intended reforms." (Ibid.) The court dismissed the UCL claim because the plaintiff could not allege reliance or causation. (Id. at p. 949.)
2. Hall Did Not Allege Causation *7 Hall did not allege he lost money or property as a result of Time's acts of alleged unfair competition. He alleged Time engaged in unfair competition by sending a customer an invoice before the end of the free trial period in order to induce the customer immediately to send payment for the book. What was fraudulent or unfair about Time's conduct, according to the complaint, was it caused the customer to believe he or she did not have a free trial period and was obligated to keep and pay for the book upon receipt. But the invoice did not cause Hall to remit payment immediately on receiving the book: Rather, he remitted payment 10 months after receiving the book, long after the free trial period had expired. Hall did not allege he did not want the book or Time's alleged acts of unfair competition induced him to keep a book he otherwise would have returned during the free trial period. Thus, Hall did not allege Time's acts of alleged unfair competition caused him to lose money or property. Hall relies on Anunziato v. eMachines, Inc. (C.D.Cal .2005 ) 402 F.Supp .2d 1133(Anunziato ), as supporting his argument that standing to pursue a UCL claim after Proposition 64 does not require an allegation of causation. In Anunziato, the plaintiff alleged a line of the defendant's laptop computers had a defect causing some of them to overheat. ( Anunziato, at p. 1135.)The plaintiff alleged the defendant made misrepresentations about the quality, reliability, and performance of its laptop computers in a press release and in each computer's user manual. (Id. at pp. 1139-1140.)The defendant argued the plaintiff lacked standing to pursue a
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--- Cal.Rptr.3d ------ Cal.Rptr.3d ----, 2008 WL 68631 (Cal.App. 4 Dist.), 08 Cal. Daily Op. Serv. 215 (Cite as: --- Cal.Rptr.3d ----) UCL claim because he could not show he relied on any of the alleged misrepresentations in purchasing the computer. The court, rejecting that argument, held a plaintiff does not have to show actual reliance on the alleged misrepresentation to have standing to pursue a fraud-based claim under the UCL. (Id. at pp. 1137-1138.)The court reasoned: " [T]he Court can envision numerous situations in which the addition of a reliance requirement would foreclose the opportunity of many consumers to sue under the UCL and the FAL [false advertising law]. One common form of UCL or FAL claim is a `short weight' or `short count' claim. For example, a box of cookies may indicate that it weighs sixteen ounces and contains twenty-four cookies, but actually be short. Even in this day of increased consumer awareness, not every consumer reads every label. If actual reliance were required, a consumer who did not read the label and rely on the count and weight representations would be barred from proceeding under the UCL or the FAL because he or she could not claim reliance on the representation in making his or her purchase. Yet the consumer would be harmed as a result of the falsity of the representation."(Id. at p. 1137.) In Cattie v. Wal-Mart Stores, Inc., the court criticized Anunziato, stating, "[w]hile removing disparities between consumers might be a laudable goal, it is not clear that the ... UCL ... [is] intended to address this potential disparity. While California courts recognize the `broad, sweeping' scope of the UCL, they are also wary of exceeding legislative intent."(Cattie v. Wal-Mart Stores, Inc., supra, 504 F.Supp.2d at p. 948.) We tend to agree with the Cattie court's criticism of portions of the Anunziato decision, but find Anunziato is distinguishable. By purchasing a defective computer, the plaintiff in Anunziato did suffer actual damage caused by the defendant. In contrast, Hall did not allege the book he purchased was defective or unsatisfactory, or that he did not want it.
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Instead, he relies on McAdams v. Monier, Inc. (2007) 151 Cal.AppAth 667, 683, 60 Cal.Rptr.3d 111, review granted September 19, 2007, S154088, to argue he has satisfied or can satisfy a causation requirement by inference. The Supreme Court granted review of McAdams on September 19, 2007, S154088, after Hall filed his reply brief. Business and Professions Code section 17203 plainly states a UCL plaintiff must meet the standing requirements of section 17204 to pursue representative claims on behalf others. Accordingly, the representative UCL plaintiff must plead he or she suffered an injury in fact caused by, or in justifiable reliance on, the alleged acts of unfair competition. Hall's allegations did not satisfy the injury in fact and causation requirements either expressly or by reasonable inference. Thus, the trial court correctly dismissed his complaint without leave to amend.
DISPOSITION The judgment is affirmed. Respondents to recover costs incurred on appeal. WE CONCUR: SILLS, P.J., and ARONSON, JJ. FN1. Definitions from a dictionary, although not binding, are "useful" to our analysis. (MacKinnon v. Truck Ins. Exchange (2003) 31 CalAth 635, 649, 3 Ca1.Rptr.3d 228, 73 P.3d 1205.) FN2. We use the word "causation" to refer both to the causation element of a negligence cause of action (Ladd v. County of San Mateo (1996) 12 CalAth 913, 917, 50 Ca1.Rptr.2d 309, 911 P.2d 496), and to the justifiable reliance element of a fraud cause of action (Engalla v. Permanente Medical Group, Inc. (1997) 15 CalAth 951, 974, 64 Cal.Rpt