Chapman v. Skype, Inc.
220 Cal. App. 4th 217
| Cal. Ct. App. | 2013Background
- Skype marketed monthly calling plans labeled “Unlimited” (e.g., “Unlimited US & Canada”) on its website, with a small superscript footnote linking to a separate “Fair Usage Policy.”
- The Fair Usage Policy (on a different page) limited calls to 6 hours/day, 10,000 minutes/month, and 50 numbers/day, and excluded many mobile calls to foreign countries.
- Chapman purchased the “Unlimited US & Canada” subscription in December 2010, did not notice or read the Fair Usage Policy link, used the service, and incurred overage charges when limits were exceeded.
- Chapman sued on behalf of a nationwide class asserting unjust enrichment, negligent and intentional misrepresentation, and violations of the UCL, the False Advertising Law (FAL), and the CLRA.
- The trial court sustained Skype’s demurrer without leave to amend, concluding Skype’s disclosures (superscript + clickwrap) made limits conspicuous and that Chapman failed to plead justifiable reliance; Chapman appealed.
- The Court of Appeal reversed in part: it held Chapman adequately pleaded UCL, FAL, and CLRA deceptive-advertising claims, but the fraud-based misrepresentation counts lacked particularized allegations of actual reliance (granting leave to amend); unjust enrichment required an allegation of rescission or offer to restore and thus also warranted leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether labeling plans “Unlimited” while disclosing limits in a small-linked Fair Usage Policy is deceptive under the UCL/FAL | “Unlimited” is misleading; the footnote/link is insufficient to prevent deception | The footnote/link and clickwrap to Terms of Service/Fair Usage Policy make limits conspicuous and preclude deception | Court: whether ordinary consumers are likely to be deceived is a factual question; Chapman adequately pleaded deceptive advertising; demurrer improperly sustained as to UCL/FAL |
| Whether CLRA claim (misrepresenting characteristics/uses) was pleaded | Same misrepresentation supports CLRA claim | Disclosure in policy bars claim because limits were provided | Court: CLRA standard aligns with UCL/FAL; question of consumer deception is factual; CLRA claim adequately pleaded |
| Whether Chapman alleged actual and justifiable reliance for fraud (intentional/negligent misrepresentation) | She relied on “Unlimited” representation and suffered overage fees; would not have purchased if aware of limits | Chapman had notice/opportunity to read the terms (clickwrap); failure to read precludes reliance; renewals (if any) undermine causation | Court: misrepresentation adequately alleged, but actual reliance for fraud must be pleaded with particularity; leave to amend to plead causation/justifiable reliance granted |
| Whether unjust enrichment/restitution is available when an express subscription contract exists | Seeks restitution because retention of fees would be inequitable; may rescind due to fraud | Enforceable contract governs; restitution unavailable absent rescission or contract unenforceability | Court: unjust enrichment barred while a valid contract stands; plaintiff may amend to allege rescission/offer to restore and seek restitution; leave to amend granted |
Key Cases Cited
- Kasky v. Nike, Inc., 27 Cal.4th 939 (California Supreme Court) (UCL/FAL prohibit advertising that is true but actually misleading or has capacity to deceive)
- In re Tobacco II Cases, 46 Cal.4th 298 (California Supreme Court) (misrepresentation-based UCL claims require proof of actual reliance; causation need not be sole cause)
- Kwikset Corp. v. Superior Court, 51 Cal.4th 310 (California Supreme Court) (pleading economic injury and causation in UCL/FAL claims; reliance is causal mechanism)
- Lavie v. Procter & Gamble Co., 105 Cal.App.4th 496 (Cal. Ct. App.) (reasonable consumer standard; likelihood to deceive inquiry)
- Klein v. Chevron U.S.A., Inc., 202 Cal.App.4th 1342 (Cal. Ct. App.) (consumer deception usually a fact question; demurrer appropriate only if no reasonable consumer could be misled)
- Engalla v. Permanente Medical Group, Inc., 15 Cal.4th 951 (California Supreme Court) (materiality and inference of reliance)
- Lazar v. Superior Court, 12 Cal.4th 631 (California Supreme Court) (elements of intentional misrepresentation/ fraud)
- Rosenthal v. Great Western Financial Securities Corp., 14 Cal.4th 394 (California Supreme Court) (distinguishing fraud in execution from fraud in inducement; reading the contract and opportunity to do so)
- Durell v. Sharp Healthcare, 183 Cal.App.4th 1350 (Cal. Ct. App.) (unjust enrichment equals restitution; restitution available if contract rescinded or unenforceable)
- Careau & Co. v. Security Pacific Business Credit, Inc., 222 Cal.App.3d 1371 (Cal. Ct. App.) (leave to amend should be granted when plaintiff can show how to cure defects)