Plaintiffs (Plaintiffs) alleged that the defendant wireless telephone companies (collectively, Defendants)
I. Background
Plaintiffs’
Defendants demurred to the class allegations of the FAC on the ground that there was no reasonable probability Plaintiffs could certify a class following the decision in Knapp, and that Plaintiffs were collaterally estopped from doing so. Defendants requested judicial notice of portions of the papers Plaintiffs had filed in support of their motion for leave to file the FAC, of trial court pleadings filed in Ball, of the then unpublished appellate decision in Knapp, and of the operative trial court pleading at issue in Knapp. Plaintiffs also filed a request seeking judicial notice of prior pleadings in the instant case, certain trial court pleadings in Ball, and a declaration filed on behalf of Cingular in the Alameda County Superior Court in coordination proceedings seeking to compel arbitration (Cellphone Termination Fee Cases, JCCP No. 4332).
A hearing on the demurrer was held on June 17, 2011. The court granted the unopposed requests for judicial notice of both parties. The demurrer of Defendants to the class allegations of the FAC was sustained without leave to amend.
The court entered its order after a hearing on July 1, 2011. A timely notice of appeal was filed on July 13, 2011.
Plaintiffs contend that the trial court erred in making a determination of class sufficiency at the pleading stage, and in its reliance on Knapp, which Plaintiffs insist is a case involving the policies, practices and procedures of a completely separate entity in the marketing and sale of rate and service plans.
We first note our standard of review in this circumstance. We do not consider here the denial of a motion for class certification. In that instance, “ ‘[bjecause trial courts are ideally situated to evaluate the efficiencies and practicalities of permitting group action, they are afforded great discretion in granting or denying certification. . . . [Accordingly,] a trial court ruling supported by substantial evidence generally will not be disturbed “unless (1) improper criteria were used [citation]; or (2) erroneous legal assumptions were made [citation]” [citation], . . . “Any valid pertinent reason stated will be sufficient to uphold the order.” ’ [Citations.]” (Sav-On Drug Stores, Inc. v. Superior Court (2004)
“On review from an order sustaining a demurrer, ‘we examine the complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory, such facts being assumed true for this purpose. [Citations.]’ [Citation.] We may also consider matters that have been judicially noticed. [Citations.]” (Committee for Green Foothills v. Santa Clara County Bd. of Supervisors (2010)
If denying class certification, the trial court must state at least one valid reason for denying the motion. (Linder v. Thrifty Oil Co. (2000)
When a demurrer is sustained without leave to amend, “we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff.” (Blank v. Kirwan (1985)
“The plaintiff ‘bears the burden of demonstrating that the trial court erroneously sustained the demurrer as a matter of law’ and ‘must show the complaint alleges facts sufficient to establish every element of [the] cause of action.’ [Citation.]” (Sui v. Price (2011)
A. Disposition of Class Actions on Demurrer
The decision whether a case is suitable to proceed as a class action ordinarily is made on a motion for class certification. But our Supreme Court found it “settled” that courts are authorized to “weed[] out” legally meritless class action suits prior to certification by demurrer or pretrial motion. (Linder, supra,
There is a divergence in intermediate appellate authority on the level of scrutiny to be given to demurrer rulings on class action pleadings, particularly to those sustaining a demurrer. In this district, we have said that
Some courts have stated broadly that “it is only in mass tort actions (or other actions equally unsuited to class action treatment) that class suitability can and should be determined at the pleading stage. In other cases, particularly those involving wage and hour claims, class suitability should not be determined by demurrer.”
In La Sala, supra,
Continued reliance on Beckstead’& questionable conclusion that consideration of the sufficiency of class action allegations by demurrer is disfavored seems especially difficult to reconcile with the Supreme Court’s far more recent statement that “nothing prevents a court from weeding out legally meritless suits prior to certification via a defendant’s demurrer or pretrial motion. In fact, it is settled that courts are authorized to do so. [Citations.] [][] When the substantive theories and claims of a proposed class suit are alleged to be without legal or factual merit, the interests of fairness and efficiency are furthered when the contention is resolved in the context of a formal pleading (demurrer) or motion (judgment on the pleadings, summary judgment, or summary adjudication) that affords proper notice and employs clear standards.” (Linder, supra,
Our Supreme Court has clearly recognized the substantial benefits inherent in consumer class actions. (See Vasquez, supra, 4 Cal.3d at pp. 807-810.) The court has also recognized that, while class actions provide
B. Class Action Requirements
Our Supreme Court has only recently had occasion to review the requirements for maintaining a class action. (Brinker Restaurant Corp. v. Superior Court (2012)
The question here is whether Plaintiffs’ complaint adequately presents predominant common questions of law or fact. “Commonality as a general rule depends on whether the defendant’s liability can be determined by issues common to all class members: ‘ “A class may be certified when common questions of law and fact predominate over individualized questions. As a general rule if the defendant’s liability can be determined by facts common to all members of the class, a class will be certified even if the members must individually prove their damages. . . . [T]o determine whether common questions of fact predominate the trial court must examine the issues framed by the pleadings and the law applicable to the causes of action alleged.” ’ [Citation.] [1] ‘In examining whether common issues of law or fact predominate, the court must consider the plaintiff’s legal theory of liability. [Citation.]’ ” (Knapp, supra,
In sustaining Defendants’ demurrer in this case to the class allegations without leave to amend, the trial court cited Knapp and concluded that “[f]or the same reasons as Knapp the members of the proposed class here ‘stand in a myriad of different positions insofar as the essential allegation in the complaint is concerned’ ” and that “there is no reasonable possibility that Plaintiffs can establish a community of interest among the potential class members and that individual issues predominate over common questions of law and fact.”
C. Knapp
The complaint in Knapp was filed in the Orange County Superior Court (the Orange County case) by the same law firms representing Plaintiffs here, alleging as in the instant case, fraud and violations of the UCL and CLRA, based on claims that the defendant’s “descriptions of its wireless service plans as providing a certain number of minutes each month for a certain rate were misleading in light of [the] billing practice of rounding up any partially used minutes for a call to the next full minute.”
D. Plaintiffs’ FAC
The operative pleading allegations of the FAC before us, and of the third amended complaint at issue in Knapp, are substantially similar, although not
E. Material Judicially Noticed
The trial court took judicial notice, without objection,
Knapp testified that she was originally a customer of AT&T Wireless Services, Inc. (AT&T), defendant in the Orange County case, and her testimony focused on her original purchase of wireless service from AT&T. In selecting a rate plan with AT&T, Knapp reviewed plan information on the AT&T Web site and then spoke on the telephone with an AT&T representative. (Knapp, supra, 195 Cal.App.4th at pp. 937-938.) She selected a “Digital Advantage” rate plan for $39.99 per month, rather than a cheaper plan available at $29.99 per month for 250 airtime minutes, to ensure that she would have “a little bit of a cushion” and not incur overage charges. She subsequently switched to the $29.99 per month plan. She was provided an AT&T “Wireless Service Guide” with her telephone handset, but did not review the guide.
Hodge obtained wireless service with Cingular in 2004. She testified that she called her landline carrier to discuss her account, and was offered a mobile phone with Cingular. The carrier representative discussed the various rate plans available. Hodge wanted the cheapest rate plan, which provided 250 minutes of airtime, plus night and weekend minutes, under a two-year contract.
F. Commonality
Considering the allegations of the FAC, the pleading exhibits, and the judicially noticed facts, have Plaintiffs pled a prima facie community of interest among class members? (Newell, supra, 118 Cal.App.4th at pp. 1101-1102; Canon U.S.A., Inc. v. Superior Court, supra,
Plaintiffs insist that nothing in the judicially noticed facts detracts from their pleading contentions that Defendants engaged in a common scheme involving false representations and the concealment of material facts in the marketing and sale of rate plans to the consuming public. They argue that the FAC adequately sets forth the existence and predominance of common questions of fact and law on whether Defendants falsely represented to members of the putative class, the number of usable airtime minutes contained within each of Defendants’ rate and service plans, and whether Defendants concealed from the putative class members, through uniform billing practices, that the number of usable airtime minutes contained in each of Defendants’ rate and service plans are reduced by up to 25 percent. Plaintiffs allege that they, and members of the proposed class, were deceivéd and led to believe that they were being provided more usable airtime minutes than what was actually being provided.
Defendants respond that the FAC alleges, and the attached exhibits (portions of two wireless service agreements and a rate plan brochure) demonstrate, that subscriber rate plan information was communicated to class members through a variety of written materials, including “a ‘terms and conditions’ booklet, the rate plan brochure and the features brochure”; through the mail; and via “the internet at the website of AT&T Mobility,
As in Knapp, Plaintiffs’ central pleading contention here is that Defendants “violated the UCL and the CLRA and engaged in common law fraud by making representations about its service plans which misled [Plaintiffs] and others to believe that the number of minutes attached to each of [Defendants’] service plans were all usable airtime minutes when in fact it is [Defendants’] policy to round up partially used airtime minutes to the next full minute for billing purposes.” (Knapp, supra,
The putative class consisted of “all consumers who have subscribed to a term contract for wireless telephone service in California from one or more of the Defendants herein, at any time from and after January 1, 1999 until the present time.” The pleading exhibits and judicially noticed materials before the trial court make clear that, as in Knapp, Defendants’ alleged misrepresentations were made to the named Plaintiffs and to proposed class members in a variety of ways. Individual members of this broad group may, or may not, have seen or relied upon any of them. It is not even clear that the named Plaintiffs allege actual reliance. Hodge, for example, selected her rate plan because it was the cheapest available, and recalled no discussion of how the 250 minutes in her plan were calculated. She identified a “Welcome Kit” provided to new subscribers, but testified that she did not review the service agreement or the terms and conditions provided. The evidence also reflects that, at least in some instances, the policy of billing in full minute increments and rounding up partial minutes of use was disclosed to subscribers in the same materials that Plaintiffs cite in support of their misrepresentation claims. A consumer who saw, or was otherwise aware of such disclosures, could not have been deceived.
1. Fraud and CLRA Claims
With respect to the common law fraud and CLRA claims in the fourth and fifth causes of action of the FAC, actual reliance must be established for an award of damages. (Cohen v. DIRECTV, Inc. (2009)
It is true that causation, on a classwide basis, may be established by materiality. (Massachusetts Mutual, supra,
The above cited cases are illustrative. In Massachusetts Mutual, the trial court certified a class of life insurance policy purchasers who alleged that, when they bought their policies, the insurer had no intention of maintaining the discretionary dividend rate which it had been paying, and failed to disclose information about its plans to lower the rate of dividends. {Massachusetts Mutual, supra,
In contrast, in the Vioxx Cases, the appellate court affirmed a trial court order denying class certification of CLRA and UCL claims which alleged that the manufacturer misled consumers into buying Vioxx, providing misleading information, or failing to disclose information, about associated cardiovascular risks. (Vioxx Cases, supra,
In Cohen, the plaintiff alleged that the defendant satellite television company made advertising misrepresentations concerning the technical specifications of its high-definition television services. (Cohen, supra, 178 Cal.App.4th at pp. 969-970.) The trial court found that common issues of fact did not predominate because the proposed class would include subscribers who never saw the advertisements or representations of any kind before deciding to purchase the company’s HD services, or who decided to subscribe to the services for entirely different reasons. (Id. at p. 979.) The Second District Court of Appeal affirmed “because the members of the class stand in a myriad of different positions insofar as the essential allegation in the complaint is concerned, namely, that DIRECTV violated the CLRA and the UCL by inducing subscribers to purchase HD services with false advertising.” (Ibid., in. omitted.)
In Caro, the plaintiff alleged that the defendant’s advertising and labeling of orange juice as “fresh” was false and misleading. (Caro, supra,
While it may be true, as Plaintiffs contend, that the case before us involves the “policies, practices and procedures of a completely separate entity” than those at issue in Knapp, the fact remains that the policies, practices and procedures that Plaintiffs challenge here are identical to those complained of in Knapp, where it was alleged that “ ‘the number of airtime minutes which were represented to be available for the customers’ use was substantially overstated . . . because . . . every single telephone call is rounded up.’ ” (Knapp, supra, 195 Cal.App.4th at pp. 944-945.) Here Plaintiffs allege that Defendants “misrepresent the amount of usable airtime minutes contained in each of their rate plans/service plans which are offered for sale to the consuming public, and fail to disclose to their prospective customers the percentage of airtime minutes in each one of the Defendants’ rate plans/service plans which are rendered unusable to the subscribers as a result of uniform practices and uniform billing practices engaged in by the Defendants.”
We find Knapp factually indistinguishable. As in Knapp, the purported misrepresentations were communicated to class members through a variety of written materials, through the mail, via the Internet, by telephone and in retail stores. (Knapp, supra,
2. The UCL Claims
Somewhat different considerations apply in evaluating the sufficiency of the UCL causes of action at the pleading stage. The first three causes of action of the FAC assert claims under the UCL. “The UCL defines unfair competition as ‘any unlawful, unfair or fraudulent business act or practice.’ (§ 17200.) Therefore, under the statute ‘there are three varieties of unfair competition: practices which are unlawful, unfair or fraudulent.’ [Citation.]” (In re Tobacco II Cases (2009)
“The definitions of unlawful and fraudulent business practices are straightforward and well established. An unlawful business practice under the UCL is ‘ “ ‘ “anything that can properly be called a business practice and that at the same time is forbidden by law.” ’ ” ’ [Citation.] A fraudulent business practice is one in which ‘ “ ‘ “members of the public are likely to be deceived.” ’ ” ’ [Citation.]” (Morgan v. AT&T Wireless Services, Inc. (2009)
Section 17200 is a consumer protection statute designed, in part, to protect the public by prohibiting false, unfair, misleading or deceptive advertising. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983)
The scope of the remedies available under the UCL, however, is limited. “ ‘A UCL action is equitable in nature; damages cannot be recovered. [Citation.] . . . We have stated under the UCL, “[prevailing plaintiffs are generally limited to injunctive relief and restitution.” [Citation.]’ [Citation.]” (Tobacco II Cases, supra,
a. Materiality and Presumptive Reliance Under the UCL
Plaintiffs argue that Tobacco II Cases provides support for their UCL claims, without regard to classwide proof of reliance and materiality. Plaintiffs emphasize the Supreme Court’s statement that “ ‘a presumption, or at least an inference, of reliance arises wherever there is a showing that a misrepresentation was material. [Citations.] A misrepresentation is judged to be “material” if “a reasonable man would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question” [citations], and as such materiality is generally a question of fact unless the “fact misrepresented is so obviously unimportant that the jury could not reasonably find that a reasonable man would have been influenced by it.” [Citation.]’ [Citation.]” (Tobacco II Cases, supra,
Both before and after Tobacco II Cases, courts have found class certification appropriate based on an inference of common reliance. (See McAdams v. Monier, Inc. (2010)
Further, some cases have held that a complaint alleging advertising fraud under the UCL is sufficient to survive pleading challenges unless it can be said as a matter of law that the purported misrepresentations cannot be considered material. In Morgan, supra,
Other courts, however, have observed that Tobacco II Cases, supra,
Plaintiffs insist that, by virtue of Defendants’ rounding up billing practices, uniform misrepresentations as to the true number of useable minutes in each of the rate plans are necessarily made to all consumers. But as discussed ante, and as in Knapp, whether members of the putative class (of all consumers who have subscribed to one of Defendants’ service plans) were aware of the rounding up policy, and “[w]hether the mere association of a certain number of minutes to a rate plan would . . . mislead proposed class members necessarily involves individualized inquiries . . . .” (Knapp, supra, 195 Cal.App.4th at pp. 944-945.) The rule permitting an inference of common reliance where material misstatements have been made to a class of plaintiffs will not arise where the record will not permit it. (Massachusetts Mutual, supra,
b. Restitution Under the UCL
Even if we assume that there were common misrepresentations as to the number of conversational minutes in Defendants’ advertised rate plans, and that the representations were material, Plaintiffs could not present UCL class claims for restitution. “[I]n order to obtain classwide restitution under the UCL, plaintiffs need establish not only a misrepresentation that was likely to deceive [citation] but also the existence of a ‘measurable amount’ of restitution, supported by the evidence [citation].” (Vioxx Cases, supra,
This does not mean that Plaintiffs’ UCL claims for other equitable relief are necessarily barred. Section 17200 has been interpreted broadly to bar all ongoing wrongful business activity, including misleading advertising, where the language used is likely to deceive, mislead or confuse. (Day, supra,
The FAL does not prevent a plaintiff from maintaining a state law action in state court for an alleged failure to disclose a particular rate or rate practice. (Ball, supra,
We believe the trial court erred in sustaining the demurrer, without leave to amend, as to the first, second and third causes of action of the FAC to the extent that those claims seek injunctive relief under the UCL. We cannot say, as a matter of law, that Plaintiffs cannot state a claim on this basis. (Morgan, supra,
How does this result square with Knapp, which presents nearly identical facts, and which we have found persuasive in other respects? Simply that, as we noted initially, we are required to apply a different standard of review when the decision below is made on the pleadings. Ultimately, it is still up to the trial court, in the exercise of its considerable discretion, to determine if Plaintiffs’ UCL claims for equitable relief are appropriate for class treatment at all. (Brinker, supra,
The order sustaining Defendants’ demurrer to the first, second and third causes of action of Plaintiffs’ FAC is reversed. The judgment is otherwise affirmed. Each party will bear its own costs.
Simons, Acting P. J., and Needham, J., concurred.
Notes
The named defendants, Cingular Wireless LLC (Cingular) and Pacific Bell Mobile Services (Pacific Bell), are cellular telephone service providers. By way of merger and acquisition, Pacific Bell’s customers became customers of Cingular in October 2000, and Defendants represent that the entities are now known as AT&T Mobility LLC.
These rate or service plans are sometimes referred to as “bucket plans.” “A 1 “bucket plan” gives a customer a certain number of minutes of use per month’ for a monthly rate.” (Tucker v. Pacific Bell Mobile Services (2010)
All further statutory references are to the Business and Professions Code unless otherwise indicated.
Diane Tucker was the named plaintiff when this matter was first filed in the San Mateo County Superior Court on December 8, 2003. Tucker lost her standing to sue under the UCL with the passage of Proposition 64 in November 2004. Angela Rel was added as a plaintiff in place of Tucker in a first amended complaint filed in October 2006. Julia Knapp and Monica Zoe Hodge were added as plaintiffs in a third amended complaint in May 2007. Knapp voluntarily dismissed her claims without prejudice on June 17, 2011.
A rounding up policy is standard in the telecommunications industry. (Knapp, supra,
Defendants also demurred to the fourth cause of action of the FAC for fraud on the ground that Plaintiffs failed to plead fraud with the requisite specificity, and demurred to each cause of action of the FAC on the ground that the claims are time-barred. The demurrer to the fourth cause of action was sustained with leave to amend. The demurrer on the grounds that the claims were time-barred was overruled. Defendants moved to strike those portions of the FAC seeking restitution or damages on the basis of federal preemption. That motion was denied without discussion.
The order had the effect of denying certification as a class action. It effectively was the “death knell” for the class claims, and was tantamount to a dismissal of the action as to all members of the class other than the named plaintiffs. In essence, it is a final judgment on those
But see In re BCBG Overtime Cases (2008)
Class claims under the CLRA are governed by Civil Code section 1781, “ ‘which sets out the four conditions that, if met, mandate certification of a class: (1) it is impracticable to bring all members of the class before the court; (2) the questions of law or fact common to the class are substantially similar and predominate over the questions affecting the individual members; (3) the claims or defenses of the representative plaintiffs are typical of the claims or defenses of the class; and (4) the representative plaintiffs will fairly and adequately protect the interests of the class.’ ” (Davis-Miller v. Automobile Club of Southern California (2011)
As in the case before us, the originally named plaintiff was Tucker. (Knapp, supra,
Plaintiffs here object only that judicial notice cannot properly be taken of the truth of matters contained in judicially noticed pleadings, and that a hearing on a demurrer cannot be turned into a contested evidentiary hearing under the guise of judicial notice of contested or controverted documents. While that is generally correct, a court may take judicial notice of a party’s admissions or concessions in cases where the admission “ ‘cannot reasonably be controverted,’ ” such as in answers to interrogatories or requests for admission, or in affidavits and declarations filed on the party’s behalf. (Arce, supra,
The Wireless Service Guide included information that “[a]irtime usage on each call is billed in full minute increments, with partial minutes of use rounded up to the next full minute.” The disclosure, in small font text and undistinguished from surrounding information, is on page 22 of the Wireless Service Guide, under the heading “CHARGESZPAY-MENTS/DEFAULT.”
At the time of her deposition, Hodge had apparently changed to a rate plan offering her 900 minutes per month. The circumstances of the change are not revealed in the deposition excerpts provided.
The Welcome Kit included a customer copy of the “Cingular Wireless Service Agreement.” The “Terms & Conditions” included, in two full pages of text, the statement, in
Proposition 64 amended section 17204 to require that a private plaintiff “suffer[] injury in fact and has lost money or property as a result of [such] unfair competition” in order to bring an action under the UCL. (See Californians for Disability Rights v. Mervyn’s, LLC (2006)
Section 17203 provides, in pertinent part: “Any person who engages, has engaged, or proposes to engage in unfair competition may be enjoined in any court of competent jurisdiction. The court may make such orders or judgments, including the appointment of a receiver, as may be necessary to prevent the use or employment by any person of any practice which constitutes unfair competition, as defined in this chapter, or as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition.” This language is “patently less stringent” than the standing requirement for the class representative under section 17204 (“a person who has suffered injury in fact and has lost money or property as a result of the unfair competition.”). (Tobacco II Cases, supra,
We see another apparent impediment to the restitution claims. As we have noted, Plaintiffs are precluded from challenging the rounding up billing practice itself by federal preemption, under section 332(c)(3)(A) of title 47 of the United States Code, of rates charged for cellular communications services. (Ball, supra, 81 Cal.App.4th at pp. 540-541.) In Ball, the plaintiffs also sought “ ‘restitution of all amounts overpaid by [them] and other members of the general public ... as a result of the aforesaid unfair business act or practice,’ ” as well as “a permanent injunction enjoining defendants from engaging in any of these unfair or unlawful business practices.” (Id. at p. 536.) As the court observed in Ball, the rate charged for wireless service includes both price and time. (Id. at p. 538.)
In Day, this district Court of Appeal specifically addressed the viability of a UCL restitution claim in a closely related context. The plaintiffs there sought injunctive relief and disgorgement of profits under both the UCL and PAL, alleging misleading and deceptive advertising of prepaid phone cards by virtue of the rounding up policy on minutes used. (Day, supra, 63 Cal.App.4th at pp. 328-329.) The trial court sustained a demurrer without leave to amend on the ground that the action was barred by the “filed rate doctrine.” (Id. at p. 330.) Decided prior to Ball, the court found that “[a]ny attempt to calculate a monetary amount to be paid on behalf of those who purchased the cards would necessarily result in a refund or rebate of properly collected fees for services. This would enmesh the court in the rate-setting process .... Appellants are not entitled to seek restoration of any money under section 17203.” (Id. at p. 340.) While we disagree with Day in its application of the filed rate doctrine (see Cellphone Termination Fee Cases (2011)
At oral argument both parties agreed that the preemption issue is not directly raised in this appeal. Since we otherwise decide that reversal and remand is required on the UCL causes of action, we do not decide this question.