ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS
(Docket No. 44)
I. INTRODUCTION
Plаintiff Caren Ehret seeks to represent a nationwide class of customers who have
II. FACTUAL BACKGROUND
Uber provides a mobile phone application that permits consumers to “summon, arrange and pay for taxi cab rides and other transportation services electronically via their mobile phone.” First Amended Complaint (“FAC”) ¶ 10 (Docket No. 40). Consumers provide payment through the Uber app through credit card information provided by the consumers. Id. Plaintiff alleges that on its website and in its application, Uber represents ‘Hassle-free Payments” by stating: “We automatically charge your credit card the metered fare + 20% gratuity.” Id. ¶ 11. Uber allegedly further represents that the “20 % gratuity is automatically added for the driver.” Id. Finally, when rides are arranged through the Uber app, “the text of the app represents to those consumers that a 20% gratuity will be automatically added to the metered fare.” Id.
Contrary to its representations, Uber allegedly fails to remit the full amount of the “gratuity” charge to its drivers. Id. ¶ 13. Rather, it “keeps a substantial portion of this additional charge for itself as its own additional revenue and profit on each ride arranged and paid for by consumers.” Id. Plaintiff contends that Uber’s “gratuity” representations are false, misleading, and likely to deceive members of the public insofar as the term “gratuity” suggests a sum paid to the driver that “is distinct and different from the actual fair.” Id. ¶ 14. Plaintiff further alleges that by continually misrepresenting the “gratuity” in its advertisements and then keeping a substantial portion of the gratuity, Uber “effectively increases the ‘metered fare’ and/or is charging an undisclosed fee. This is false advertising.” Id.
On September 9, 2012, Plaintiff utilized Uber’s app to arrange for a taxi cab ride in Chicago, Illinois. Id. ¶ 15. Plaintiff alleges that she was misled into “paying sums greater than the ‘metered fare’ for taxi cab rides based upon Uber’s misrepresentations that all of the additional 20% charge over and above the ‘metered fare’ was a ‘gratuity.’ ” Id. ¶ 16. Accordingly, “but for” Uber’s misrepresentations, Plaintiff alleges she “would not have agreed to or paid Uber the full amount that Uber charged her and that she paid to Uber.” Id.
Plaintiff asserts five causes of action on behalf of a class. First, she alleges that the conduct alleged constitutes an unfair business practice in violation of California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof.Code § 17200. Id. ¶¶ 25-30: Second, she alleges that the conduct constitutes an unlawful business practice in violation of the UCL insofar as the conduct in question violates California Civil Code §§ 1572, 1709, 1710, and 1750 and California Business and Professions Code § 17500. Id. ¶¶ 31-36. Third, Plaintiff contends that Uber’s actions constitute a fraudulent business practice in violation of the UCL. Id. ¶¶ 37-41. Fourth, Plaintiff alleges a violation of the Consumers Legal Remedies Act (“CLRA”), Cal. Civ.Code § 1750, et seq. Id. ¶¶ 42-59. Finally,
III. DISCUSSION
Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss based on the failure to state a claim upon which relief may be granted. See Fed. R. Civ. P. 12(b)(6). A motion to dismiss based on Rule 12(b)(6) challenges the legal sufficiency of the claims alleged. See Parks Sch. of Bus. v. Symington,
Insofar as Plaintiffs claims sound in fraud, her complaint must meet the heightened pleading standard of Federal Rule of Civil Procedure 9(b). See Kearns v. Ford Motor Co.,
A. Plaintiff Has Pled Sufficient Detail Under Rule 9(b)
To begin, the Court finds that Plaintiff has pleaded her UCL cause of action with sufficient particularity to satisfy Fed.R.Civ.P. 9(b). In her FAC, Plaintiff alleges that on September 9, 2012, she used Uber’s App to arrange and pay for taxi cab rides in Chicago, IL, and paid 20% over the metered fare “in reliance upon Uber’s representation that the 20% charge was a ‘gratuity.’ ” FAC ¶ 15. She further alleged that on its website and in its application, Uber advertises a “Hassle-free Payment” which automatically сharges the consumer the metered fair and 20% gratuity.” Id. ¶ 11. She farther alleges that” [b]ut for Uber’s misrepresentations Plaintiff would not have agreed to or paid Uber the full amount Uber charged her.” FAC ¶ 16. Despite these allegations, Uber contends that Plaintiff has failed to allege when Uber made the alleged representa
The Court finds that Plaintiffs allegations are sufficiently specific as to when and where Uber made the alleged misrepresentations. While the FAC does not expressly allege when and where Plaintiff saw the statements, it does allege that on September 9, 2012 she used the App and paid the 20% additional charge in reliance on Uber’s representation that it was a “gratuity.” FAC ¶ 15. The inference is that she knew there was a “20% gratuity” charge and that the source of her knowlеdge was the App and/or website, if not precisely on September 9, 2012, sometime before then. Plaintiff has specified the statements on which she allegedly relied. The Court declines to require Plaintiff-to allege the precise web pages viewed and the precise date she viewed the representation. See Bronson v. Johnson & Johnson, Inc., C 12-04184 CRB,
Similarly, the Court finds that Plaintiff has sufficiently alleged that Uber’s misrepresentations were false and misleading and why they were false and misleading. Specifically, it is alleged that Uber has represented that a 20% gratuity charge is added to each metered fair but that Uber keeps a “substantial” sum for itself. FAC ¶ 13, 14. Uber contends that Plaintiff has failed to allege how much is “substantial” and that this allegation is factually incorrect. Nonetheless, the Court concludes that Plaintiffs allegation is sufficient for purposes of Rule 9(b) and the motion to dismiss stage. The ultimate question under Rule 9(b) is not whether the allegation has been or likely will be proven, but whether the allegations are “specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong.” Bly-Magee v. California,
B. Plaintiff Has Stated a Claim under the UCL and CLRA
Uber has moved to dismiss the UCL and CLRA claims on a number of bases. Uber сontends that Plaintiffs UCL and CLRA claims fail (1) because the UCL does not apply to non-California residents alleging non-California conduct; and (2) because she has failed to allege standing under either statute. The Court first addresses Uber’s extraterritoriality arguments, then its standing arguments, before addressing the sufficiency of Plaintiff’s allegations.
1. Plaintiff’s Claims Do Not Require Extra-Territorial Application of Either the UCL or the CLRA
California’s Supreme Court has made clear that there is a strong presumption against the extra-territorial applica
However far the Legislature’s power may theoretically extend, we presume the Legislature did not intend a statute to be “operative, with respect to occurrences outside the state, ... unless such intention is clearly expressed or reasonably to be inferred from the language of the act or from its purpose, subject matter or history.”
Id. at 1207,
However, the critical question presented by Plaintiffs complaint is whether application of the UCL and CLRA in the circumstances alleged actually entails an extraterritorial apрlication of those statutes. Multiple courts — including the California Supreme Court in Sullivan — have permitted the application of California law where the plaintiffs’ claims were based on alleged misrepresentations that were disseminated from California. In Sullivan, the court distinguished the cases of Weshba v. Apple Computer, Inc.,
Multiple federal district courts have denied motions to dismiss similar claims to those raised in this action on the basis of alleged-extraterritorial application of California law. For example, in In re iPhone 4S Consumer Litigation, No. C12-1127 CW,
their injuries were caused by Apple’s wrongful conduct in false advertising that originated in California. Here, Plaintiffs have alleged that Apple’s purportedly misleading marketing, promotional activities and literature were coordinated at, emanate from and are developed at its California headquarters, and that all “critical decisions” regarding the marketing and advertising were made within the state.
On this basis, Judge Wilken held that “California’s presumption against the extraterritorial application of its statutes therefore does not bar the claims of the out-of-state Plaintiffs, because this principle is ‘one against an intent to encompass conduct occurring in a foreign jurisdiction in the prohibitions and remedies of a domestic statute.’ ” Id. (quoting Diamond Multimedia Sys.,
In the FAC, Plaintiff alleges that Uber is a “Delaware corporation with its headquarters in San Francisco, California.” FAC ¶ 9. It further allegеs that:
The deceptive practices alleged herein were conceived, reviewed, approved and otherwise controlled from Defendant’s headquarters in San Francisco, California. Furthermore, the misrepresentations and omissions alleged herein were contained on Defendant’s website and mobile phone application, which are maintained in California. When Plaintiff and class members used Defendant’s services those [sic] transactions, including the billing and payment for thoseservices, were processed on Defendant’s servers in San Francisco, California.
Id. ¶ 6. On the basis of these allegations, the Court finds that Plaintiff has alleged a sufficient nexus between California and the misrepresentations which form the basis of Plaintiffs claims. Specifically, allegations that the misrepresentations were developed in California, contained on websites and an application that are maintained in California, and that billing and payment of services went through servers located in California distinguish this case from those relied upon by Uber in its reply brief. Compare Cannon v. Wells Fargo N.A,
Plaintiff has provided sufficient factual allegations from which the Court can plausibly infer that Uber’s alleged gratuity misrepresentations emanated from California. Accordingly, the Court concludes that, for purposes of the motion to dismiss, application of the UCL and CLRA in these circumstances would not constitute extraterritorial application of these statutes and therefore DENIES Uber’s motion on this ground.
2. Plaintiff Has Sufficiently Alleged Standing Under the UCL and CLRA
Uber contends that Plaintiffs CLRA and UCL claims fail because Plaintiff has failed to allege economic harm. Proposition 64 amended the UCL to require a Plaintiff to demonstrate that she had “lost money or property as a result of [the] unfair competition.” Cal. Bus. & Prof.Code § 17204. Accordingly, standing under the UCL is far narrower than traditional federal standing requirements: “We note UCl’s standing requirements appear to be more stringent than the federal standing requirements. Whereas a federal plaintiffs ‘injury in fact’ may be intangible and need not involve lost money or property, Proposition 64, in effect, added a requirement that a UCL plaintiffs ‘injury in fact’ specifically involve ‘lost money or property.’ ” Troyk v. Farmers Group, Inc.,
In Kwisket v. Superior Court,
A plaintiff may (1) surrender in a transaction more, or acquire in a transaction less, than he or she otherwise would have; (2) have a present or future property interest diminished; (3) be deprived of money or property to which he or she has a cognizable claim; or (4) be required to enter into a transaction, costing money or property, thаt would otherwise have been unnecessary.
Id. at 323,
(1) Kwikset labeled certain locksets with “Made in U.S.A.” or a similar designation, (2) these representations were false, (3) plaintiffs saw and relied on the labels for their truth in purchasing Kwikset’s locksets, and (4) plaintiffs would not have bought the locksets otherwise.
Id. at 328,
Plaintiff alleges that, but for Uber’s “gratuity” misrepresentations, “Plaintiff would not have agreed to or paid Uber the full amount that Uber charged her and that she paid to Uber.” FAC ¶ 16. Uber argues this allegation is insufficient to allege that Plaintiff lost money or property for purposes of the UCL. Rather, it argues that Plaintiff received precisely what she bargained for — a “taxi ride at a stated price. Docket No. 44, at 13. Therefore, it contends that “Plaintiff would be in exactly the same position regardless of whether the full 20% charge went to the taxi driver.” Id. at 14. Relatedly, at the hearing, Uber argued that because the 20% fee allegedly misrepresented as a “gratuity” was a mandatory fee that Plaintiff could not have avoided, how Uber chose to distribute the collected fee was a “mere curiosity” to Plaintiff and, therefore, not an economic injury.
The Court finds that Plaintiff has adequately alleged an economic injury. First, in discussing the “benefit of the bargain” defense upon which Uber relies, the Ninth Circuit has noted that, under Kwikset, the defense is “permissible only if the misrepresentation that the consumer alleges was not ‘material.’ ” Hinojos,
Second, by alleging that she would not have agreed to the full amount that Uber charged her but for Uber’s purported misrepresentation, Plaintiff has alleged a sufficiently material misrepresentation. Contrary to Uber’s argument, to obtain standing under the UCL, it is not nеcessary to allege and prove the plaintiff would not have entered the transaction but for the misrepresentation. Such but-for causation is only one of the “innumerable” ways of establishing standing identified in Kwikset,
Whether Plaintiff had the option of not paying the additional fee (the 20% gratuity) bеcause it was integral to Uber’s charge is immaterial to standing under the UCL. A number of cases are instructive on this point. In Blessing v. Sirius XM Radio Inc.,
Similarly, in Johnson v. Wal-Mart Stores, Inc.,
These cases are consistent with longstanding rule that under the UCL even a mandatory charge can be deceptive if it is labeled as something it is not. For example, in McKell v. Washington Mutual, Inc., supra,
Looking at these documents, plaintiffs reasonably would conclude that the fees charged were the costs Washington Mutual incurred in providing these services. The fees charged were substantially above Washington Mutual’s costs, however.... Washington Mutual’s practice of charging its customers more for services than the actual cost of those services, with no indication to the customers that they were doing so, may constitute a deceptive business practice within the meaning of the UCL, as a reasonable consumer likely would believe that fees charged in connection with a home mortgage loan bore some correlation to services rendered.
Id. at 1472,
To hold otherwise would result in perverse outcomes. Were the UCL to recognize economic injury only where a consumer proves he or she would not have entered the transaction at all would mean that someone who, for example: (1) bought a computer advertised at a processor speed of 2ghz but which actually ran at 1.8ghz; (2) purchased a car advertised as having an engine that ran at 250 horsepower when, in fact, it only had 225 horsepower; (3) paid for service in which the seller that falsely represented it included necessary transaction fees; or (4) donated to a charity which falsely representing that a certain percentage of the funds would go to beneficiaries as opposed to overhead, would be left with no remedy under the UCL despite being defrauded by the defendant if she cannot prove she would not have entered the transaction at all. The economic injury requirement of Proposition 64 was not intended to gut the UCL; it was intended to stop drive-by lawsuits and “fishing expeditions” by attorneys representing clients who never intended to purchase the product. See Hinojos,
At the hearing, Uber relied extensively on the California Court of Appeal decision in Searle v. Wyndham International, Inc.,
Searle is readily distinguishable. There, the defendant made no representation about the nature of the service charge or where the collected funds would be distributed. There was no representation made one way or the other regarding whether the “service charge” was actually a gratuity payable to the server. . Rather, it was— as Uber repeatedly argued at the hearing — a mandatory charge that was presented to the plaintiff as a charge attendant to ordering room service. In the case at bar, in contrast, it is alleged that Uber expressly represented a 20% charge was added to every metered fare specifically for purposes of paying the driver a gratuity. In short, in Searle, there was no misrepresentation; ■ here, allegedly, there was.
The Court cannot conclude at the motion to dismiss stage that Uber’s representations regarding gratuities is immaterial as a matter of law. Accordingly, Uber’s motion to dismiss Plaintiffs UCL and CLRA claims for lack of standing is DENIED.
3. Plaintiff Has Stated a Claim Under the UCL’s Fraudulent and Unfairness Prongs
To state a claim under the UCL’s fraudulent prong based on false advertising or promotional practices “it is
In addressing similar allegations regarding Uber’s alleged “gratuity” misrepresentations, this Court has previously held:
The Complaint alleges the following: Uber advertises “on its website and in marketing materials, that gratuity is included and therе is no need 'to tip the drive,” reasonable customers would expect that drivers would receive that gratuity, Uber does not remit the entirety of the gratuity to drivers, and as such, Uber’s statements are “deceptive and misleading.” These allegations make it plausible that a reasonable consumer would likely be deceived to the detriment of drivers.
O’Connor,
Similarly, in determining whether а business practice is unfair under the approach adopted by the parties, “California courts balance the ‘impact on the its alleged victim’ against ‘the reasons, justifications, and motives of the alleged wrongdoer.’ ” Plumlee,
In arguing that Plaintiff has failed to state a claim under either the fraudulent or unfairness prongs of the UCL, Uber relies almost exclusively on the California Court of Appeal’s decision in Searle, discussed above. Uber appears to contend that Searle stands for the proposition that where a charge is mandatory, the consumer has no legitimate interest in what is ultimately done with the funds recouped as a result of that charge. Similarly, it contends that, under Searle, so long as a consumer is not deceived about the total cost of the services it receives from the defendant, the UCL is not offended. Docket No. 44, at 8-9.
For the reasons stated above in connection with standing, Uber reads Searle too broadly. The Court finds that Plaintiff has stated a claim under the UCL’s fraudulent and unfairness prongs, and Uber’s motion to dismiss on this ground is DENIED.
4. Plaintiff Has Stated a Claim Under the CLRA
The CLRA prohibits “unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer.” Cal. Civ.Code § 1770. Plaintiff alleges that Uber violated a number of the CLRA’s provisions.
First, Plaintiff alleges that Uber has violated § 1770(a)(5), which makes it unlawful to represent “that goods or services have ... characteristics ... which they do not have.” Cal. Civ.Code § 1770(a)(5). Similarly, Plaintiff alleges a violation of § 1770(a)(9) which prohibits “advertising goods or services with intent not to sell them as advertised.” Id. § 1770(a)(9). Plaintiffs arguments under both sections are similar — that Uber representing that it would collect and automatically remit a 20% gratuity to the driver, “thus allowing the consumer to arrange for a taxi without the necessity fo pulling out his or her wallet and/or exchanging cash with the driver,” Uber has misrepresented a characteristic and benefit of its service. Docket No. 46, at 12. The Court finds Plaintiffs allegations are sufficient to state a claim under § 1770(a)(5). As alleged, Uber represents that its application service remits a 20% gratuity to drivers when, in fact, it does not do so. This is sufficient to allege that Uber’s service was advertised as having a characteristic it did not have. Cf. Blessing,
Second, Plaintiffs have alleged that Uber has violated § 1770(a)(14), which prohibits a defendant from “[r]epresenting that a transaction confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law.” Cal. Civ.Code § 1770(a)(14). The Court finds that Plaintiff has sufficiently alleged a violation of this provision. The allegation that Uber represented that the 20% gratuity fee would be remitted to drivers is sufficient to allege the existence of an obligation on the part of Uber — an obligation that Uber misrepresented by using the charged fee as a revenue source. See Blessing,
However, the Court finds that Plaintiff has failed to state a claim under §§ 1770(a)(13) or 1770(a)(16). Section 1770(a)(13) prohibits making “false or misleading statements of fact concerning reasons for, existence of, or amounts of price reductions.” Cal. Civ.Code § 1770(a)(13). Plaintiff has failed to state a claim under this section because she has failed to allege that Uber made any representations with regards to a “fee reduction” nor, contrary to her arguments in her opposition, has she alleged that Uber ever represented that its service was a “free or no fee service.” Finally, § 1770(a)(16) makes unlawful “[r]epresenting that the subject of a transaction has been supplied in accordance with a previous representation when it has not.” Id. § 1770(a)(16). Plaintiff asserts that Uber violated § 1770(a)(16) by charging the consumer’s credit card after representing that it would remit the 20% gratuity to the driver. She argues that charging the сard is “necessarily” “representing” that Uber would remit the amount according to its prior representation. The Court disagrees. This subsection “appears to target not the initial representation in a transaction, but a subsequent representation which is deceptive.” Blessing,
5. Plaintiff Has Stated a Claim Under the UCL’s Unlawful Prong
“By proscribing ‘any unlawful’ business practice, section 17200 borrows violations of other laws and treats them as unlawful practices that the unfair competition law makes independently actionable.” Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co.,
6. Summary
For the foregoing reasons, the Court finds that Plaintiff has stated a claim under the fraudulent, unfairness, and unlawful prongs of the UCL. Further, Plaintiff has stated a claim under the CLRA to the extent she relies on § 1770(a)(5), (9), (14) but has failed to state a claim under the CLRA to the extent she relies on § 1770(a)(13), (16). Accordingly, Uber’s motion to dismiss is GRANTED with respect to CLRA claims under § 1770(a)(13) and (16); in all other respects the motion to dismiss is DENIED.
C. Plaintiff Has Failed to State a Claim for Breach of Contract
Under California law, “[a] cause of action for breach of contract requires proof of the following elements: (1) existence of the contract; (2) plaintiffs performance or excuse for nonperformance; (3) defendant’s breach; and (4) damages to plaintiff as a result of the breach.” CDF Firefighters v. Maldonado,
Uber argues in its motion, even if the alleged breach in question had not occurred — that is, if Uber had remitted the 20% gratuity as it allegedly promised in its advertisements — Plaintiff (and the class of Uber customers) would be in precisely the same financial position as they are after the breach. According to Uber, Plaintiff has not, and cannot, allege that they suffered damages for purposes of a breach of contract action.
In contrast to its briefing on the UCL claim, Plaintiff does not respond to the argument that it has suffered cognizable contract damages, even if the parol evidence of the advertisement is considered in interpreting the terms and conditions of the contract. Plaintiffs failure to respond is understandable.- Under common law contract principles, a promisee’s right to enforce a contract term that benefits a third party depends on whether that third party is a “creditor” beneficiary or a “donee” beneficiary. If the beneficiary is a creditor, the promisee can sue for contract damages for the promisor’s failure to benefit the donee. If the beneficiary is a donee, the promisee cannot sue for such damages.
In In re Marriage of Smith & Maescher,
While tips or gratuities may be customary in the service industry, they are not binding obligations on the part of customers. Uber’s failure to remit the 20% gratuity to the drivers does not leave Plaintiff or the putative class members liable to the drivers for any debt or amount. Accordingly, the, drivers are properly considered donee beneficiaries. See Dateline Builders, Inc. v. City of Sa
Such a holding is not inconsistent with the Court’s holding above that Plaintiffs’ have suffered an economic injury for purposes of the UCL. Breach of contract actions seeking recovery of damages are focused on placing plaintiffs in the same position they would have been in had defendants performed their contractual obligations. See,, e.g., General Employees Trust Fund v. Victory Bldg. Maint., Inc., No. C06-6654 CW (MEJ),
Accordingly, Uber’s motion to dismiss this claim is GRANTED and the claim is dismissed with prejudice.
IV. CONCLUSION
For the foregoing reasons, Uber’s motion to dismiss Plaintiffs UCL claims is DENIED. Further, Uber’s motion to dismiss Plaintiffs CLRA claim is DENIED to the extent Plaintiffs claim is predicated on Cal. Civ.Code § 1770(a)(5), (9), (14) and GRANTED to the extent the claim is predicated on Cal. Civ.Code § 1770(a)(13),
This order disposes of Docket No. 44.
IT IS SO ORDERED.
Notes
. Indeed, it is also plausible that had Uber not made the alleged misrepresentation, the total fee it charged would have been less than what it charged with the misrepresentation. In this regard, there is an arguable cause-in-fact in that consumers paid more than they would have but for Uber's alleged misrepresentation.
. Uber's reliance on Aron v. U-Haul Co. of Cal.,
. Plaintiff does not seek specific performance or assert any common law fraud claims.
. The Court notes that in O’Connor v. Uber it dismissed a claim alleging breach of implied contract asserted under a third-party beneficiary theory brought on behalf of the drivers. See O’Connor v. Uber Techs., Inc., No. C13-3826 EMC,