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Utility Consumers' Action Network v. Sprint Solutions

April 25, 2008

UTILITY CONSUMERS' ACTION NETWORK AND ERIC TAYLOR, ON BEHALF OF THEMSELVES, THEIR MEMBERS AND/OR ALL OTHERS SIMILARLY SITUATED, AS APPLICABLE, PLAINTIFFS,
v.
SPRINT SOLUTIONS, INC.; SPRINT SPECTRUM L.P.; SPRINT-NEXTEL CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: Robert J. Bryan United States District Judge

ORDER ON DEFENDANTS' MOTION TO DISMISS AND, ALTERNATIVELY, MOTION TO STRIKE

This matter comes before the court on Defendants' Motion to Dismiss and, Alternatively, Motion to Strike. Dkt. 12. The court has considered the relevant documents and the remainder of the file herein.

PROCEDURAL HISTORY

On November 21, 2007, plaintiffs Utility Consumers' Action Network (UCAN) and Eric Taylor filed a civil action against defendants Sprint Solutions, Inc., Sprint Spectrum L.P., and Sprint-Nextel Corporation (Sprint). Dkt. 1. On January 2, 2008, plaintiffs filed an amended complaint, alleging that Sprint improperly included taxes, fees and other charges on monthly invoices to customers who obtained data service or data card plans from Sprint, and improperly charged these customers for text messages. Dkt. 9. The amended complaint asserts class action claims for (1) violation of California Business and Professions Code § 17200; (2) breach of contract; (3) violation of the Consumers Legal Remedies Act, Cal. Civ. Code § 1750 et seq.; (4) declaratory relief; (5) violation of the Federal Communications Act,47 U.S.C. § 201(b); (6) money had and received, money paid and unjust enrichment; (7) conversion; and (8) pursuant to California Public Utilities Code § 2890. Id. The amended complaint requests certification of this case as a class action; declaratory, equitable, injunctive and/or monetary relief; actual, direct, incidental, consequential, statutory and exemplary damages; pre- and post-judgment interest; attorneys' fees; and other relief as the court may deem just and proper. Dkt. 9, at 26.

On January 23, 2007, Sprint filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) and 12(f).

MOTION TO DISMISS

Sprint moves to dismiss plaintiffs' claims for violation of California Business and Professions Code § 17200; violation of the Consumer Legal Remedies Act, Cal. Civ. Code § 1750 et seq; violation of the Federal Communications Act, 47 U.S.C. § 201(b); conversion; and cramming, on the basis that they fail to state a claim. Dkt. 12, at 2. In addition, Sprint moves under Fed.R.Civ.P. 12(f) to strike ¶¶ 45, 61, 79, and ¶ 3 of the prayer for relief, on the basis that they contain immaterial and impertinent matters. Id. Plaintiffs oppose the motion, contending that the causes of action in the amended complaint state a claim and that there is not basis for striking the identified portions of the amended complaint.

LEGAL STANDARD

A complaint must be dismissed under Fed.R.Civ.P.12(b)(1) if, considering the factual allegations in the light most favorable to the plaintiff, the action: (1) does not arise under the Constitution, laws, or treaties of the United States, or does not fall within one of the other enumerated categories of Article III, Section 2, of the Constitution; (2) is not a case or controversy within the meaning of the Constitution; or (3) is not one described by any jurisdictional statute. Baker v. Carr, 369 U.S. 186, 198 (1962); D.G. Rung Indus., Inc. v. Tinnerman, 626 F.Supp. 1062, 1063 (W.D. Wash. 1986). When considering a motion to dismiss pursuant to Rule 12(b)(1), the court is not restricted to the face of the pleadings, but may review any evidence to resolve factual disputes concerning the existence of jurisdiction. McCarthy v. United, 850 F.2d 558, 560 (9th Cir. 1988), cert. denied, 489 U.S. 1052 (1989); Biotics Research Corp. v. , 710 F.2d 1375, 1379 (9th Cir. 1983). A federal court is presumed to lack subject matter jurisdiction until plaintiff establishes otherwise. Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375 (1994); Stock West, Inc. v. Confederated Tribes, 873 F.2d 1221, 1225 (9th Cir. 1989). Therefore, plaintiff bears the burden of proving the existence of subject matter jurisdiction. Stock West, 873 F.2d at Thornhill Publishing Co., Inc. v. Gen'l Tel & Elect. Corp., 594 F.2d 730, 733 (9th Cir. 1979). Pursuant to Fed.R.Civ.P. 12(f), the court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.

DISCUSSION

1. Violation of Business and Professions Code § 17200, et seq. (Unfair Competition Law, or UCL)

In the first amended complaint, plaintiffs allege that defendants' acts and practices, as alleged in the amended complaint, "constitute acts of unfair competition. Defendants have engaged in an unlawful, unfair or fraudulent business act and/or practice within the meaning of California Business & Professions Code et seq." Dkt. 9, at 17, ¶ 43. The amended complaint alleges that "[t]hese business acts and practices violated numerous provisions of law, including, inter alia, California Civil Code §1565, California Civil Code §1670.5, California Civil Code §1709 and §1770, et seq. Id. at 17, ¶ 45.

Sprint contends that the court should dismiss and strike from the amended complaint that part of the UCL claim that is alleges "unlawful" conduct based upon violation of Civil Code §§ 1565 and 1670.4. Dkt. 12-2. Sprint also contends that UCAN's UCL claim against Sprint should be dismissed because UCL has failed to allege it suffered any injury as a result of the conduct it complains of. Id.

The UCL creates a private right of action for "any unlawful, unfair, or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising." Cal. Bus. & Prof.Code § 17200. The UCL's purpose is to protect both consumers and competitors from unlawful, unfair or fraudulent business practices by promoting fair competition in commercial markets for goods and services. Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 949 (2002)

An "unlawful business activity" includes "'anything that can properly be called a business practice at the same time is forbidden by law."' People v. McKale, 25 Cal.3d 626, 632, quoting Barquis v. Merchants Collection Assn. 7 Cal.3d 94 (1972). In essence, an action based on section § 17200 to redress unlawful business practices "borrows" violations of other laws and treats them as unlawful practices independently actionable under § 17200. (2 Cal.4th at p. 383; Saunders v. Superior Court, 27 Cal.App.4th 832, 839 (1994).

Plaintiffs base their UCL claims in part on an "unlawful" business act or practice, in violation of Cal.Civ.Code §§ 1565 and 1670.5. Sprint contends that these are contract provisions that may not serve as the basis for an "unlawful" business act or practice, and request that the citation to these sections of the California Civil Code be stricken. Sprint is correct with respect to § 1565, which provides the elements of consent for purposes of a contract. This section does not proscribe any behavior, and as such, cannot serve as the basis for an unlawful business act or practice. Section 1670.5, however, addresses an unconscionable contract or clause of a contract, finding unconscionability as a matter of law, and remedies. A claim for unlawful business act or practice could conceivably be based upon the unconscionability section of the California Civil Code. See National Rural Telecommunications Cooperative v. DirecTV, , 319 F. Supp. 2d 1059 (C.D. Cal. 2003)(citing Bondanza v. Peninsula Hosp. and Med. Center, 23 Cal. 3d 260, 266 (1979). Reliance on an unconsionability section of the California Civil Code is distinguishable from the facts in In re Microsoft Cor. Antitrust Litigation, 274 F.Supp 2d 747 (D.Md. 2003), in which the district court of Maryland concluded that common law breach of contract and breach of the covenant of good faith could not be relied upon to establish the "unlawful" prong of the UCL.

The court should grant Sprint's motion to strike Cal.Civ.Code § 1565 as providing a basis a claim of unlawful business act or practice, in violation of Business and Professions Code § 17200, et seq.; and should deny the motion with regard to Sprint's request that the court strike Cal.Civ.Code § 1670.5 as a basis for a claim of unlawful business act or practice, in violation of Business and Professions Code § 17200, et seq.

2. Consumer Legal Remedies Act, Cal. Civ. Code § 1750, et seq (CLRA)

Sprint moves to dismiss plaintiffs' claims under the CLRA because plaintiffs failed to follow the procedure set forth in Cal.Civ. Code § 1782(a) by giving Sprint at least 30 days to correct the violations before filing suit.

The threshold issue is whether the issue regarding prefiling notice is appropriate to resolve on a motion to dismiss or whether the court should convert this issue to a motion for summary judgment.

In Cattie v. Wal-Mart Stores, Inc. v. 504 F.Supp.2d 939, 949-950 (S.D.Cal. 2007), the district court for the Southern District of California concluded that the notice requirement of the CLRA should be resolved on a motion to dismiss under Fed.R.Civ.P. 12(b)(6), noting that "[t]he CLRA's notice requirement is not jurisdictional, but compliance with this requirement is necessary to state a claim." See Outboard Marine Corp. v. Superior Court, 52 Cal.App.3d 30, 40-41, 124 Cal.Rptr. 852 (1975) (addressing failure to give notice under demurrer standard); Laster v. T-Mobile U.S.A., Inc., 407F.Supp.2d, 1181, 1195-96 (dismissing CLRA damages claim with prejudice under Rule 12(b)(6) for failing to comply with notice requirements); Von Grabe v. Sprint, 312 F.Supp.2d 1285, 1304 (S.D.Cal.2003 (dismissing premature claims for damages with prejudice).

A court may consider material which is properly submitted as part of the complaint on a motion to dismiss without converting into a motion for summary judgment. Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). Where the documents are not physically attached to the complaint, they may be considered if the documents' "authenticity ... is not contested" and "the plaintiff's complaint necessarily relies" on them." Branch v. Tunnell, 14 F.3d 449, 453 (9th Cir. 1994)) (quoting Parrino v. FHP, Inc., 146 F.3d 699, 705-06 (9th Cir. 1998)). Sprint has requested that the court take judicial notice of the November 20, 2007, letter from Mr. Taylor to Sprint (Dkt. 12-3, at 5-7). Plaintiffs have requested that the court take judicial notice of two January 4, 2008 letters from Sprint's counsel to plaintiffs' counsel (Dkt. 18-2, at 4-6); and the January 8, 2008 letter from plaintiffs' counsel to Sprint's counsel (Dkt. 18-2, at 8-10). The authenticity of these documents is not contested and the complaint necessarily relies on them. Accordingly, the court has considered these documents in connection with this motion to dismiss and has not converted this motion to a motion for summary judgment. The issue of the adequacy of notice under the CLRA is ripe for decision.

Cal.Civ.Code § 1750(a) lists unfair methods of competition and unfair or deceptive acts or practices, and provides that these methods and acts, 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 are unlawful. Plaintiffs allege that defendants violated the following provisions of Section 1750(a):

(2) Misrepresenting the source, sponsorship, approval, or certification of goods or services.

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(5) Representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have or that a person has a sponsorship, approval, status, affiliation, or connection which he or she does not have.

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(9) Advertising goods or services with intent not to sell ...


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