34 Cal. App. 5th 376
Cal. Ct. App. 5th2019Background
- Los Angeles City Attorney sued J.C. Penney, Kohl's, Macy's, and Sears under the False Advertising Law (Bus. & Prof. Code §§ 17500, 17501) alleging online "reference" or "former" prices were misleading because they exceeded actual prior selling prices.
- Each complaint pleaded claims under the Unfair Competition Law, the False Advertising Law, and section 17501; petitioner sought civil penalties, restitution, and injunctive/declaratory relief.
- Real parties demurred, arguing section 17501 is void for vagueness and an unconstitutional regulation of protected commercial speech; the trial court sustained the demurrer to the § 17501 claims without leave to amend on vagueness grounds.
- Petitioner petitioned for writ of mandate; the Court of Appeal issued an order to show cause and took judicial notice of a 1957 AG opinion and a 1984 committee report.
- The appellate court concluded § 17501, by its plain language, prohibits many truthful former-price claims (it defines permissible former-price claims by reference to a "prevailing market price" within the prior three months or by a clearly stated date), but on the record the free-speech challenge failed on demurrer; the court also rejected real parties' facial and as-applied vagueness challenges and directed the trial court to deny the demurrer.
Issues
| Issue | Plaintiff's Argument (City) | Defendant's Argument (Retailers) | Held |
|---|---|---|---|
| Whether § 17501 regulates protected commercial speech | § 17501 targets false/misleading advertising and may be construed to reach only unprotected speech | § 17501 bans vast amounts of truthful former-price advertising and thus restricts protected commercial speech | § 17501, read plainly, does restrict truthful commercial speech (bans former-price claims except where they match the statutory market-price tests) |
| Whether § 17501 is an unconstitutional regulation of commercial speech (Central Hudson) | City: statute can be justified and record insufficient to resolve Central Hudson on demurrer | Retailers: statute bans truthful speech and must fail under heightened First Amendment scrutiny | Court: Central Hudson applies, but record is undeveloped; free-speech challenge fails on demurrer because defendants must plead facts to show invalidity |
| Whether § 17501 is void for vagueness on its face | City: statute has ascertainable meaning ("prevailing market price", locality, three-month period) and facial challenge fails because statute clearly covers some alleged conduct | Retailers: statute's key terms are indeterminate ("prevailing market price", "locality", "time of publication") and Johnson undermines prior facial-vagueness approach | Court: Hoffman Estates "as-applied-first" approach remains viable; facial challenge fails because statute clearly applies to alleged conduct (esp. in-house goods) |
| Whether § 17501 is void for vagueness as applied to defendants' alleged conduct | City: allegations show routine mismatch between advertised reference prices and the § 17501 market-price tests; defendants can litigate details later | Retailers: statute is unworkable in practice, especially online, and ambiguous as applied to nonexclusive goods and multi-channel pricing | Court: as-applied challenge fails on demurrer for in-house goods (Spann rationale); for nonexclusive goods the record is insufficient to sustain an as-applied vagueness dismissal |
Key Cases Cited
- Central Hudson Gas & Elec. v. Pub. Serv. Comm'n, 447 U.S. 557 (establishes Central Hudson commercial-speech test)
- Village of Hoffman Estates v. Flipside, 455 U.S. 489 (facial vagueness doctrine; examine as-applied first)
- Holder v. Humanitarian Law Project, 561 U.S. 1 (application of Hoffman Estates to speech-related vagueness claims)
- Kasky v. Nike, Inc., 27 Cal.4th 939 (California on commercial-speech protection and false/misleading advertising)
- Spann v. J.C. Penney Corp., 307 F.R.D. 508 (C.D. Cal. class action adopting the view that § 17501 treats in-house items’ prices as the market price)
- People v. Superior Court (Olson), 96 Cal.App.3d 181 (construction of § 17500 and relation to First Amendment protections)