TWO JINN, INC., Plаintiff and Appellant, v. GOVERNMENT PAYMENT SERVICE, INC., Defendant and Respondent.
Nos. A136984, A137479
First Dist., Div. Four
Feb. 3, 2015
1321
Robert W. Hicks & Associates, Robert W. Hicks and Kenneth R. Wright for Plaintiff and Appellant.
Dillon & Gerardi, Scott Alan Miller; Abbey, Weitzenberg, Warren & Emery and Mitchell B. Greensberg for Defendant and Respondent.
OPINION
RUVOLO, P. J.—
I.
INTRODUCTION
Two Jinn, Inc., doing business in California as Aladdin Bail Bonds (Aladdin), a licensed bail agent, brought this action to enjoin Government Payment Service, Inc. (GPS), from engaging in bail agent activities in violation of state licensing and regulatory requirements. The superior court sustained a demurrer to Aladdin‘s claim for false advertising under the federal
We conclude that (1) Aladdin lacks standing to maintain a UCL claim; (2) undisputed evidence submitted by the parties shows that the commercial activities of GPS associated with its processing of credit or debit card transactions for cash bail payments do not require GPS to obtain a bail bond license, and therefore, GPS is not in violation of the UCL; and (3) the second cause of action in Aladdin‘s second amended complaint fails to state a
II.
STATEMENT OF FACTS
A. The Complaint Allegations
In December 2010, Aladdin filed a second amended complaint and petition for writ of mandate (the SAC) in which it alleged the following facts: Aladdin does business in California as Aladdin Bail Bonds, a “duly licensed” bail agent. GPS purports to be a “financial services entity,” but actually conducts activities “relating to arranging pretrial release for incarcerated detainees accused of committing both felonies and misdemeanors, including but not limited to solicitation and transaction of bail within the meaning of the [Insurance] Code.” Both Aladdin and GPS “provide pretrial release services to detainees in exchange for a monetary compensation.” Aladdin performs that service through the posting of surety bonds, while GPS allegedly performs that service by posting cash bail for detainees.
According to the SAC, GPS solicits clients and posts cash bail for detainees рursuant to “contractual arrangements” with county sheriffs in Sonoma, Solano, Marin, Monterey, and Ventura. Aladdin attached copies of these contracts as exhibits to the SAC. For example, exhibit B is an “Agreement for Processing Credit or Debit Card For Cash Bail Payments,” which was executed by GPS‘s CEO and the Sheriff-Coroner of Sonoma County in June 2009. According to that document, GPS agreed to “process credit/debit card transaction requests for cash bail payments for persons in the custody of the Sheriff upon their (or their agents[‘]) telephone or [I]nternet request.” GPS agreed these services would be available “at all times,” and that it would process payments “in real-time and, upon credit/debit card approval, [it would] transmit a payment receipt document to an authorized agent of the Sheriff” for review and approval. Upon notice of approval, GPS would then “transmit all funds for the cash bail payments electronically.”
The SAC alleged that these contractual arrangements are unlawful for three primary reasons. First, GPS‘s business activities allegedly require а valid license under
Third, Aladdin alleged that advertisements GPS posts in county jails are false, misleading and confusing to consumers because it employs the terms “Government,” and “GOV” in combination with a state capitol dome logo to create the false impressiоn that GPS‘s services “are performed either by a government agency” or are performed by an entity which is “sponsored by or affiliated with the government.”
Aladdin incorporated these general allegations into four causes of action, the first three against GPS for unlawful business practices under the UCL, false advertising under the Lanham Act, and declaratory relief to resolve a dispute about whether GPS‘s activities require a bail agent license.
The fourth cause of action was a petition for writ of mandate against the Department of Insurance (the Department). Aladdin added this claim to the SAC after the superior court sustained a demurrer to the first amended complaint and stayed proceedings pursuant to the primary jurisdiction doctrine, finding that the Department‘s position regarding the nature of GPS‘s business was critical to a resolution of this case. In support of the mandate claim, Aladdin alleged that the California Insurance Commissioner (the Commissioner) was aware of GPS‘s unlawful activities, Aladdin had requested that the Department initiate an enforcement action, and the Commissioner “refused to initiate or pursue an enforcement action or otherwise attempt to enforce the [Insurance] Code with respect to Defendant‘s unlawful conduct.”
B. The Department‘s Demurrer
In February 2011, the Commissioner filed a demurer to the fourth cause of action for a writ of mandate. Evidence supporting the demurrer included an October 2010 letter from the Department‘s general counsel to Aladdin‘s trial counsel in which the Department officially declined to “exercise primary jurisdiction or initiate an enforcement action” against GPS. The Department determined GPS was exempt from the Insurance Code license and regulatory requirements covering the transaction of bail in California under
The Department interpreted this statute as permitting “counties and other public agencies to contract with companies for the payment by credit card, debit card or electronic funds transfer of nonfelony bail by arrestees.” As the Department‘s counsel explained in his October 2010 letter, “[i]f a company has a valid contract under Section 6159 to process bail by credit card, the Department reads Section 6159 as preempting Insurance Code laws related to bail. For example, if a sheriff‘s office contracts with Bank of America to provide Visa and MasterCard services at a jail, we do not believe Bank of America must obtain a bail license from the Department.”
On March 30, 2011, the superior court sustained the Department‘s demurrer to Aladdin‘s mandate claim without leave to amend. In reaching this decision, the court found that “[a]ny action that the Commissioner can take pursuant to
C. GPS‘s Demurrer
On August 23, 2011, the court sustained GPS‘s demurrer to the SAC‘S second cause of action for false advertising without leave to amend. The court fоund that Aladdin failed to state a cause of action under the Lanham Act because the SAC did not identify any false statement of fact that GPS allegedly made. Instead, the theory alleged in the SAC was that GPS “uses
In its order sustaining the demurrer, the court recognized that, although Aladdin labeled its second cause of action as a false advertising claim, the Lanham Act also prohibits “false associations.” However, the court found that a false association claim is substantively distinct from a false advertising claim with different elements and standing requirements that were not established by the factual allegations in the SAC.
D. Summary Judgment
On September 19, 2012, the superior court granted a defense motion for summary judgment on the remaining causes of action in the SAC, the UCL and declaratory relief claims.1 The court found that the summary judgment evidence established the following facts: GPS is an electronic funds transfer processor; it processes credit or debit card transactiоns for cardholders who deposit cash bail to a local government entity. It uses common industry practices to “make[] transfers by electronic means” of the cardholder‘s own funds. And, it provides these “electronic funds transfer processing services for the payment of cash bail from credit or debit cards” to sheriffs’ departments pursuant to contractual relationships with Sonoma County and several other California counties.
Pursuant to defense requests for judicial notice, the court also found that a company referred to as EZ Card and Kiosk, LLC, is not a licensed bail agent and that it has contracts with Madera and Orange Counties to provide the same type of services GPS provides. The court also took judicial notice of the fact that the Department officially declined to pursue any action against GPS. Finally, the court took judicial notice of legislative history material pertaining to
Based on these facts, the court found that (1) Aladdin does not have standing to bring a UCL claim because GPS‘s allegedly unfair business practices did not cause Aladdin to suffer an actual economic injury; (2) GPS‘s business activities do not require that it comply with the bail agent license requirement and related regulations set forth in
On November 29, 2012, the court entered judgment against Aladdin on both the SAC and GPS‘s cross-complaint for declaratory relief. In support of the judgment, the court set forth five findings: (1) Aladdin lacks standing to maintain a UCL claim; (2)
III.
SUMMARY JUDGMENT
A. Standard of Review and Issues on Appeal
“We review a summary judgment ruling de novo to determine whether there is a triable issue as to any material fact and whether the moving party is entitled to judgment as a matter of law. [Citation.] ‘In practical effect, we assume the role of a trial court and apply the same rules and standards which govern a trial court‘s determination of a motion for summary judgment.’ [Citation.]” (Bjork v. State Farm Fire & Casualty Co. (2007) 157 Cal.App.4th 1, 5-6 [68 Cal.Rptr.3d 405].) ” ‘A trial court properly grants a motion for summary judgment only if no issues of triable fact appear and the moving party is entitled to judgment as a matter of law. [Citations.] The moving party bears the burden of showing the court that the plaintiff “has not established, and cannot reasonably expect to establish,” the elements of his or her cause of action. [Citation.]” (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 720 [68 Cal.Rptr.3d 746, 171 P.3d 1082].)
Aladdin contends the summary judgment must be reversed without providing any independent analysis of its declaratory relief claim. By focusing exclusively on the UCL cause of action, Aladdin implicitly concedes it cannot obtain declaratory relief if the UCL claim fails. Thus, we confine our review of the summary judgment rulings to the SAC‘s first cause of action alleging unlawful business practices in violation of the UCL.
As reflected above, judgment was entered against Aladdin on its UCL claim because evidence produced in the summary judgment proceeding established that (1) Aladdin lacks standing, and (2) GPS‘s business activities are not unlawful or unfair under the theory alleged in the SAC. Aladdin disputes both of these findings.
B. Aladdin Does Not Have Standing Under the UCL
A “private person has standing to sue under the UCL only if that person has suffered injury and lost money or property ‘as a result of such unfair competition.’ [Citation.]” (Daro, supra, 151 Cal.App.4th at p. 1098, italics omitted.) To satisfy the UCL standing requirement, the plaintiff must “(1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.” (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 322 [120 Cal.Rptr.3d 741, 246 P.3d 877], italics omitted (Kwikset).)
1. Lost Customers
Aladdin contends that GPS‘s allegedly unfair business practices caused it economic injury when customers who would otherwise have used Aladdin‘s services used GPS‘s services instead. We disagree because the summary judgment evidence shows that any diversion of customers from Aladdin to GPS did not result from the fact that GPS does not have a bail bond license, or that it does not comply with other regulations governing the activities of licensed bail bond agents.
GPS produced evidence that it is not a bail bond agent, and thus, does not directly compete with Aladdin. It does not sell bail bonds to arrested
As reflected in our discussion of Aladdin‘s unsuccessful mandate claim against the Department,
The record also shows that GPS is not the only company that provides EFT services to California counties that operate
When a UCL action is based on an unlawful business practice, “there must be a causal connection between the harm suffered and the unlawful business activity. That causal connection is broken when a complaining party would suffer the same harm whether or not a defendant complied with the law.” (Daro, supra, 151 Cal.App.4th at p. 1099.) Here, GPS‘s evidence established a lack of causation by showing that any diversion of potential customers from Aladdin to GPS results from the Legislature‘s establishment of the cash bail payment system as an alternative to the traditional bail bond service, and not from the fact that GPS conducts its business without a bail agent license.
Aladdin contends that the issue of causation cannot properly be decided on summary judgment. However, in making this assertion, it relies on cases addressing a different issue, the causation element of a negligence claim. In that context, the elements of breach of duty and causation are often questions
Alternatively, Aladdin contends that even if causation “is capable of summary resolution,” GPS failed to carry its burden of showing that it did not injure Aladdin because there are factual disputes about whether GPS engaged in the activities that Aladdin characterizes as unlawful. This argument rests on a misunderstanding of UCL standing which fails to distinguish this independent requirement from the elements of the claim itself. In order to pursue a UCL claim, the plaintiff must show that the practices that it characterizes as unlawful caused it to suffer an actual economic injury. (Kwikset, supra, 51 Cal.4th at pp. 321-322.) The summary judgment evidence GPS produced shows that Aladdin cannot satisfy that requirement.
Aladdin contends that even if GPS met its initial evidentiary burden, Aladdin‘s evidencе creates a “material factual dispute on the issues of causation and standing.” According to Aladdin, it produced evidence which proves that GPS is not just a card processor, but also provides other services which facilitate the completion of cash bail transactions. From Aladdin‘s perspective, this evidence establishes two relevant facts: (1) GPS‘s business model requires that it “undertake all of the regulated functions of a traditional bail agent in order to actually complete cash bail transactions,” and (2) if GPS did not perform these “regulated bail agent activities,” consumers would not use the cash bail option, but would instead engage the services of a bail bond agent like Aladdin.
We disagree with this argument for several independent reasons. First, the record citation Aladdin provides for its “evidence” simply refers to several pages in a statement of “undisputed material facts and supporting evidence” that Aladdin filed in opposition to the summary judgment motion, and not to any underlying evidence. Many of those statements are argumentative, conclusory and expressly disputed by GPS. Second, Aladdin‘s contention on appeal that GPS “completes cash bail transactions” is not supported by the evidence we have found in the record going beyond Aladdin‘s “statement of undisputed material facts.” This evidence appears to relate only to GPS‘s business activities outside California that are not material to this dispute. Third, Aladdin‘s observation that GPS‘s services would be regulated by the
In sum, evidence that GPS provides support services to cash bail payment programs operating under
2. Investigation Costs
Alternatively, Aladdin contends it has standing because it suffered an eсonomic injury by incurring “significant costs and expenses” to investigate the “nature, scope and extent of Defendant‘s conduct.” To support this contention, Aladdin relies on the declaration of Justin Pinney, its associate general counsel and director of corporate compliance. Pinney confirmed that Aladdin used employees and paid outside vendors to investigate GPS‘s conduct. He stated that Aladdin paid money to hire outside counsel, obtain copies of GPS‘s contracts, and to determine which California counties were involved with GPS‘s allegedly unlawful activities. Pinney also stated that Aladdin incurred expenses by diverting staff to investigate GPS‘s activities. In this regard, Pinney estimated that he personally spent between 6 and 15 hours “conducting pre[-]litigation activities.”
These “pre-litigation” costs do not establish standing to bring a UCL claim because they are not an economic injury caused by the business practices that Aladdin characterizes as unlawful. Rather, as Pinney‘s declaration confirms, the reason Aladdin incurred prelitigation expenses was to generate evidence. Aladdin then used that evidence to support this lawsuit. “Plaintiffs cannot establish standing to pursue a UCL claim based on expenses incurred in order to bring their UCL claim. If they could, the requirement that individuals show they lost money or property ‘as a result’ of the challenged practice in order to have standing to sue under the UCL would be meaningless. [Citation.]” (Robinson v. HSBC Bank USA (N.D.Cal. 2010) 732 F.Supp.2d 976, 989.)
Aladdin mistakenly relies on Havens Realty Corp v. Coleman (1982) 455 U.S. 363 [71 L.Ed.2d 214, 102 S.Ct. 1114] (Havens). Havens was a federal action against a realty company for racial steering in violation of the
Relying on Havens, Aladdin attempts to characterize its prelitigation costs as ”Havens expenses.” But, unlike this case, the Havens plaintiff alleged that it could not continue to provide its services to the public without expending resources to ” ‘counteract’ ” the defendants’ unlawful activity. (Havens, supra, 455 U.S. at p. 379.) This allegation was sufficient to establish standing because proving it would show that the allegedly illegal conduct impacted HOME‘s operating budget, causing it an actual economic injury. Here, proof that Aladdin spent money to investigate GPS‘s activities would not show that those allegedly unfair business activities had any independent economic impact on Alаddin‘s bail bond business. Beyond that, Havens does not hold or intimate that a party can manufacture an economic injury by incurring investigation costs to generate evidence for its lawsuit.
Aladdin also relies on Buckland v. Threshold Enterprises, Ltd. (2007) 155 Cal.App.4th 798 [66 Cal.Rptr.3d 543] (Buckland), overruled on another ground in Kwikset, supra, 51 Cal.4th at page 337. There, an individual and her organization brought an action to prevent the defendants from marketing their skin lotions and creams. The claims of the individual plaintiff were dismissed pursuant to a demurrer. One issue on appeal was whether Aladdin had standing to bring a UCL claim when the “only loss of money or property she identified was her expenditures of funds to buy respondents’ allegedly defective products....” (Buckland, at p. 813.)
Because the injury in fact standing requirement is rooted in the federal Constitution, the Buckland court consulted federal authority. (Buckland, supra, 155 Cal.App.4th at pp. 815-816.) It found that the circuit courts were divided “over whether the costs an organization incurs to pursue litigation are sufficient, in themselves, to establish injury in fact.” (Id. at p. 815.) According to the Buckland court, the majority view is that ” ‘[a]n organization cannot, of
Relying on Buckland, Aladdin contends that it has standing because it incurred expenses independently of this litigation to investigate and combat GPS‘s allegedly unlawful activity. However, this contention is not supported by Pinney‘s declaration, the only evidence that Aladdin references. Indeed, Pinney expressly conceded that Aladdin‘s investigation constituted “pre[-]litigation activities.”
Ignoring this fact, Aladdin insists that, “[w]ell before any litigation was considered,” it expended significant time and resources investigating and documenting GPS‘s activities in order to assist government regulators and convince them to uniformly enforce the law. We find no evidence in Pinney‘s declaration or anywhere else that Aladdin‘s investigation was conducted independently of this lawsuit. While the record shows that Aladdin shared its еvidence with the Department, it did so as part of this litigation in order to support its petition for a writ of mandate. Thus, Aladdin has failed to identify any evidence supporting its remarkable claim that it investigated GPS‘s activities for nonlitigation reasons.
For all of these reasons, we conclude that the trial court did not err in granting summary judgment on the ground that Aladdin lacked standing to bring the remaining claims asserted in the SAC that were not dismissed on demurrer.
C. GPS‘s Business Practices Were Not Unlawful or Unfair Under the UCL
As noted in our factual statement, the superior court granted summary judgment not only because Aladdin lacked standing but also because the evidence established that GPS‘s business activities are not unlawful and unfair as required for a claim brought under the UCL. We agree with the trial court that the summary judgment evidence establishes Aladdin cannot prove its UCL claim based on the theory of liability alleged in the SAC.
“The UCL‘s unlawful prong ‘borrows’ violations of other laws and treats them as unlawful practices” that the unfair competition law makes
1. The Insurance Code Provisions
There does not appear to be any case authority construing the scope of the licensing requirement imposed by
A bail bond is defined in
The evidence below shows that GPS does not provide services related to the posting of an undertaking of bail or a bail bond by an insurer. Unlike Alаddin, GPS is not a bail bond agent for an insurance company. Instead, GPS processes credit and debit card payments of cash bail that are made to government agencies pursuant to
Aladdin‘s contrary arguments are based on an erroneous interpretation of
We disagree. By its express terms,
Aladdin goes on to argue that
Aladdin also argues that limiting the reach of the
GPS submitted evidence regarding the nature and scope of its services through the declaration of its president and chief operating officer, Mark MacKenzie. For a fee, GPS contacts a cardholder‘s issuing bank on behalf of the government agency to verify that the debit or credit cardholder possesses sufficient funds or credit with its card company to pay the charge. If funds are available, and payment is authorized, GPS forwards the authorization to the participating agency. The card issuing bank then captures the funds from the cardholder‘s account and transmits the payment to a “gateway” organization affiliated with GPS. That affiliate then wires the funds to a GPS account from where they are paid out to the participating agency, usually pursuant to an automated deposit system but sometimes by payment of a check. According to MacKenzie the settlement of the funds into the agency‘s account occurs within 48 hours after authorization from the cardholder‘s bank. GPS does not play any role in the exoneration or forfeiture of a cash bail payment. If any part of the payment is returned to the cardholder, that payment is made directly by the Agency to the cardholder who posted the cash bail.
Aladdin concedes that GPS has no involvement in the procedures governing the exoneration and forfeiture of bail. (See
GPS produced evidence that it handles a cardholder‘s funds solely for administrative purposes, that the funds are always the property of the cardholder, and that it is “only acting to provide remote payment service for the benefit of [the] payee (debit/credit cardholder).” Aladdin failed to produce any evidence to the contrary. Thus, the record shows that GPS is not a guarantor within the meaning of
Alternatively, Aladdin argues that even if GPS is not a guarantor, it participates in the execution of a bail bond because the cardholder‘s payment itself constitutes a “guarantee” that brings the transaction within the definition of a bail bond. However, under this version of Aladdin‘s theory, the parties to the alleged bail bond transaction are the cardholder and the government. GPS would not need a license to process the cardholder‘s payment on behalf of the government because it would not be soliciting, negotiating or executing a bail bond by an insurer. (
Changing course, Aladdin argues that even if
2. Government Code Section 6159
As discussed above,
We have already summarized the evidence GPS produced to establish that it provides EFT services to California counties pursuant to
Aladdin contends that
Aladdin next argues that it produced evidence which creates a material factual dispute as to whether GPS is really an EFT processor. Aladdin asserts
Furthermore, Aladdin‘s contention that GPS does not “operate” under
Aladdin also asserts it produced evidence that GPS‘s business includes a panoply of bail-related services other than processing EFT payments, and that GPS has touted these services in other litigation in which it has been involved. Aladdin contends that this evidence create a material factual dispute as to whether the services GPS provides through its contracts with several county sheriffs in this state are unfair and unlawful because GPS does not comply with
3. Insurance Regulations
In its SAC, Aladdin alleged on information and belief that GPS‘s business activities violate several insurance regulations set forth in title 10 of the California Code of Regulations. Aladdin contends these insurance regulations are independent predicate laws supporting its UCL claim against GPS.
As examples, Aladdin invokes regulations which prohibit a “bail licensee” from giving gifts to public officials (
IV.
THE DEMURRER RULING
A. Standard of Review
“A demurrer tests the sufficiency of the plaintiff‘s complaint, i.e., whether it states facts sufficient to constitute a cause of action uрon which relief may be based. [Citations.] In determining whether the complaint states facts sufficient to constitute a cause of action, the trial court may consider all material facts pleaded in the complaint and those arising by reasonable implication therefrom; it may not consider contentions, deductions or conclusions of fact or law. [Citations.] The trial court also may consider matters of which it may take judicial notice. [Citations.] A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment. [Citations.]” (Young v. Gannon (2002) 97 Cal.App.4th 209, 220 [118 Cal.Rptr.2d 187].)
In this case, Aladdin did not request leave to amend its second cause of action in the trial court and it does not seek that opportunity here either. Rather, Aladdin steadfastly maintains that the SAC states a cause of action for false advertising under the Lanham Act. Thus, we independently review the SAC to determine if Aladdin alleged facts sufficient to support its false advertising claim.
B. Aladdin Did Not Allege a Cause of Action Under the Lanham Act
Section 43 of the Lanham Act “authorizes suit against persons who make false and deceptive statements in a commercial advertisement about their own or the plaintiff‘s product. [Citations.]” (Jarrow Formulas, Inc. v. Nutrition Now, Inc. (9th Cir. 2002) 304 F.3d 829, 835.) “A prima facie case requires a showing that (1) the defendant made a false statement either about the plaintiff‘s or its own product; (2) the statement was made in a commercial advertisement or promotion; (3) the statement actually deceived or has the tendency to deceive a substantial segment of its audience; (4) the deception is material, in that it is likely to influence the purchasing decision; (5) the defendant caused its false statement to enter interstate commerce; and (6) the plaintiff has been or is likely to be injured as a result of the false statement, either by direct diversion of sales from itself to the defendant, or by a lessening of goodwill associated with the plaintiff‘s product. [Citations.]” (Id. at p. 835, fn. 4.)
Here, the SAC does not state facts which if proven would satisfy the first element of a false advertising claim because it does not identify an allegedly
A Lanham Act claim can be based on a theory of “false association,” i.e., that the defendants made “false representations concerning the origin, association, or endorsement of goods or services through the wrongful use of another‘s distinctive mark, name, trade dress, or other device.... [Citations.]” (Waits v. Frito-Lay, Inc. (9th Cir. 1992) 978 F.2d 1093, 1108.) However, to have standing to bring such a claim, the plaintiff must possess a commercial interest in the misused mark, name or device or in the good or service that is allegedly being misrepresented. (Id. at pp. 1109-1110 [and authority cited there].) In this case, even if Aladdin had requested leave to amend its pleading, we cannot conceive of facts it could allege in order to establish that it suffered this type of commercial injury.
Aladdin contends the Lanham Act “prohibits misleading advertisements, not those containing direct false factual assertions, and it specifically prohibits misleading statements that the competitor is associated with, endorsed by, or approved by another, including the government.” This argument conflates two distinct theories for alleging a claim under the Lanham Act. As explained above, a claim may be based on a false statement of fact, or it can be based on an advertisement which uses a distinct name or mark to create a false association. Here, the SAC does not identify a false statement in a GPS advertisement. Nor does that pleading allege facts which, if proven, would give Aladdin a commercial interest in the distinctive names or marks that defendant allegedly used to create a false association with the government.
Aladdin mistakenly relies on Trafficschool.com, Inc. v. Edriver, Inc. (C.D.Cal. 2008) 633 F.Supp.2d 1063 (Edriver).7 In that case, an Internet provider of consumer referrals to traffic schools and driver‘s education classes was found liable for false advertising under the Lanham Act. The plaintiff had alleged that the defendant‘s Web site, DMV.ORG, contained
Aladdin contends that Edriver illustrates that “[m]isleading consumers into believing a private company is actually a government agency is a sufficient basis on which to allege a Lanham Act false advertising claim.” However, Edriver was not a pleading case; it did not address or even consider what allegations are sufficient to allege a false advertising claim. Furthermore, Aladdin overlooks that Edriver expressly confirms that the first element of false advertising under the Lanham Act is ” ‘a false statement of fact.’ ” (Edriver, supra, 633 F.Supp.2d at p. 1074.)
Edriver does support the proposition that a false statement can either be literally false or literally true but materially misleading. (Edriver, supra, 633 F.Supp.2d at p. 1074.) The Edriver court found that although the defendant‘s statements were literally true, they constituted false advertising because they actually misled consumers to believe that the defendant‘s Web site was an official government Web site. But this ruling does not help Aladdin because its SAC does not identify any actual statement in a GPS advertisement that allegedly misled or deceived consumers. As reflected in our factual summary, the SAC allegations identified words rather than statements; Aladdin alleged that the use of the words “gov” and “government” was misleading. But it did not allege that these isolated words were used in a statement of fact that was provably false or misleading.
Aladdin argues that its pleading allegation that GPS‘s advertising is misleading is sufficient for purposes of a demurrer because that allegation must be accepted as true. (Citing Guerrero v. Superior Court (2013) 213 Cal.App.4th 912, 925-926 [153 Cal.Rptr.3d 315].) The correct rule is that ” ‘we assume the truth of all properly pleaded facts‘” and those that can be implied or inferred from the facts that werе expressly alleged. (Id. at p. 925.) The bare allegation that GPS‘s advertising is misleading is not a properly pleaded fact; it is a legal conclusion which may not be considered when ruling on a demurrer. (Young v. Gannon, supra, 97 Cal.App.4th at p. 220.)
For all these reasons, we conclude the demurrer to the second cause of action was properly sustained.
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to GPS.
Reardon, J., and Rivera, J., concurred.