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McCarthy v. CB Richard Ellis

May 21, 2009


APPEAL from a judgment of the Superior Court of Los Angeles County, Carl J. West, Judge. Reversed and remanded. (Los Angeles County Super. Ct. No. BC348916).

The opinion of the court was delivered by: Kriegler, J.


Without filing a motion for summary judgment or mandatory separate statements of undisputed facts, and for the purpose of creating appellate review of pretrial rulings, the parties to an action in a complex litigation case stipulated that the court would have granted summary judgment based upon its ruling on certain "threshold issues" in favor of the defendant. The stipulation also included a dismissal, without prejudice, of class action allegations.

We disapprove of the unauthorized procedure utilized to create appellate review without compliance with the mandatory requirements of a summary judgment, and reverse. The requirements of a motion for summary judgment and the supporting separate statements of undisputed facts are expressly mandated by statute and court rules. In the absence of such documents, the stipulated judgment cannot stand. The convenience of the parties in a complex litigation case, and their desire to be spared the expense of a summary judgment motion, do not warrant deviation from the procedural requirements of summary judgment applicable to litigants who do not have the benefit of appearing in the complex litigation court. In addition, the stipulated judgment in this case violates an express agreement between the parties and the trial court that rulings on the threshold issues would not be a substitute for a motion for summary judgment that complies with the Code of Civil Procedure. We also conclude there is nothing about this action that warrants an exception to the foregoing rules promulgated by the Legislature and Judicial Council in a case which, in its current posture, involves a potential penalty of $500 and treble damages.


Plaintiff and appellant Magaña Cathcart McCarthy (Magaña), as an individual law firm and on behalf of a class of others, filed a first amended complaint alleging that defendant and respondent CB Richard Ellis, Inc. (CBRE) engaged in a course of conduct sending hundreds of thousands of unsolicited faxes to persons and entities whose telephone numbers were contained in databases maintained by CBRE. It was alleged that a fax sent to Magaña on or about June 18, 2005, was representative of the faxes sent by CBRE. Magaña alleged CBRE's conduct violated the Telephone Consumer Protection Act (TCPA) (47 U.S.C § 227), as amended in 2005 by the Junk Fax Prevention Act (JFPA). Magaña's action sought injunctive relief, statutory damages in the amount of $500 for each unsolicited fax, and treble damages as provided in the statute.

The cause of action was screened for the complex litigation court, but initially was not designated as a complex litigation case. (Super. Ct. L.A. County, Local Rules, rule 7.3(k)(2).) At a hearing on objections to the designation, counsel for Magaña orally advised the court "on information and belief" that "class members number well into the tens of thousands." Based upon that representation, the court designated the action as complex and a trial court was assigned.

With the assistance of the complex litigation court, the parties stipulated that it would be helpful to manage the litigation (see Cal. Rules of Court, rule 1800(a)) by determination of three threshold issues: (1) the effective date of the opt-out provisions of the JFPA-either the date of enactment of the statute (July 9, 2005) or the date of the adoption of implementing regulations by the Federal Communications Commission (FCC) (August 1, 2006); (2) whether the fax received by Magaña on its face complied with the opt-out notice requirements of the JFPA, including determination of issues of "materiality" and "substantial compliance" with the opt-out notice requirements; and (3) whether an express invitation or permission to send a fax may be given orally.

The parties stipulated that consideration of these issues prior to class certification was an efficient means of narrowing the litigation. In addition, "The parties recognize that the Court's determination of these issues is not meant as a substitute for any future summary adjudication motions as to specific facts" and if any party wished to use the court's ruling on threshold issues, "an appropriate [motion] may be made in accordance with the Code of Civil Procedure and any future Case Management Orders by this Court." (Emphasis added.) The trial court orally stated: "This is not in lieu of a motion for summary judgment or in lieu of summary adjudication of issues."

Simultaneous briefs on the merits were filed by the parties on the threshold issues. In addition, Magaña filed a motion to strike factual assertions in CBRE's briefs, arguing the parties had agreed to seek "a pure legal determination" of the threshold issues, but that CBRE raised multiple factual issues in its brief.*fn1

The trial court resolved the threshold issues as follows: (1) the opt-out notice provisions of JFPA became effective only when the FCC promulgated regulations on August 1, 2006, and prior to that, entities with an established business relationship with fax recipients could not be held liable for failure to adhere to the opt-out notice requirements; (2) substantial compliance is a defense to a claim of failure to comply with the opt-out mechanisms of the statute; and (3) express permission to receive a fax under the JFPA need not be in writing. The court denied Magaña's motion to strike but did not consider the factual assertions of CBRE.

After the trial court's resolution of the threshold issues, Magaña petitioned for writ relief in this court, which was summarily denied. (Magaña Cathcart McCarthy v. Superior Court (Mar. 23, 2007, B197657) [nonpub. order].)

After denial of the writ petition, the parties and the trial court discussed resolution of the action. The court again noted the parties' stipulation that its rulings on threshold issues would not be in lieu of a motion for summary judgment. The court suggested the issues be tendered as a demurrer or motion for judgment on the pleadings, which the court would grant. Instead, the parties entered into a stipulation for judgment.

I. The Stipulation for Judgment

A. Factual Stipulations

In a document entitled "Stipulation for Judgment," the parties stipulated to the following facts:

(1) CBRE sent a fax advertisement to Magaña on July 18, 2005, a copy of which was attached to the complaint. At that time, Magaña had an established business relationship with CBRE pursuant to the TCPA;

(2) On March 14, 2006, Magaña commenced this action for violation of the TCPA, as amended by the JFPA, asserting an individual claim for receipt of the fax and claims on behalf of a putative class of similarly situated fax recipients;

(3) No motion for class certification had been made and discovery had been stayed;

(4) On January 24, 2007, the trial court issued its ruling on the threshold issues and found "[a]mong other things," that the FCC regulations recognized an established business relationship exception to unsolicited faxes, applicable to the fax received by Magaña, the exception applied to both business and residential telephone subscribers, and the opt-out notice requirements of the JFPA were not in effect on the date Magaña received the fax;

(5) The trial court's order was issued pursuant to a written stipulation of the parties that the ruling would not substitute for a summary adjudication motion, and if a party wished to file a subsequent motion applying the court's ruling, it would do so in accordance with the Code of Civil Procedure. Since the court issued its ruling, Magaña has not requested leave to file an amended complaint;

(6) A petition for writ of mandate, filed by Magaña challenging the trial court's rulings, was summarily denied by the Court of Appeal;

(7) The parties "desire that the Court of Appeal review the merits of the [trial] court's January 24 Order. The parties make this Stipulation in order to put the case in a position for immediate appeal to the Court of Appeal and to minimize additional proceedings in the trial court;" and

(8) Neither Magaña nor Magaña's counsel received any consideration in connection with the stipulation, including the dismissal of the claims of the putative class.

B. Additional Stipulations

The parties further stipulated that if CBRE brought a motion for summary judgment on Magaña's individual claim, the trial court would grant summary judgment because the JFPA's opt out notice requirements were not in effect on the date CBRE sent the fax, CBRE had an established business relationship with Magaña, and as a result of that relationship, Magaña is deemed to have invited or given permission to CBRE to send the fax.

Because the trial court ruled on these threshold issues, "a formal motion asserting these dispositive grounds would be time-consuming and expensive, and a waste of limited judicial resources. For purposes of entry of judgment in this case, the Court shall be deemed to have granted summary judgment [for the reasons set forth above] and on no other basis." The judgment resolves all claims in the First Amended Complaint between Magaña and CBRE, and if affirmed on appeal, the judgment shall be final as to all claims of Magaña as an individual.

In addition, Magaña voluntarily dismissed without prejudice all claims in the first amended complaint on behalf of the putative class. The dismissal does not prejudice the putative plaintiffs as to class certification, or CBRE's position that class certification is improper. Magaña intends to appeal the judgment dismissing its individual claim, and nothing in the stipulation "shall prejudice or moot the appeal." Detailed preservation of rights was set forth as to the putative class.

C. The Judgment

The trial court entered judgment in accordance with the stipulation. Magaña appeals from the judgment.


I. Issues Relating to the TCPA and the JFPA in the Trial Court

For purposes of the proceedings in the trial court, the relevant portions of the TCPA and JFPA are the effective date of the JFPA and its regulations (either the date of enactment of the statute or the date of adoption of the FCC regulations), and whether the established business relationship exception applied at the time CBRE sent the fax to Magaña. As we do not reach the merits of the parties' contentions, only a brief summary of the legal principles is necessary.

Enacted in December 1991, the TCPA makes it unlawful to send an unsolicited advertisement to a telephone fax machine. (47 U.S.C. § 227(b)(1)(C).) An unsolicited advertisement is defined as "any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person's prior express invitation or permission." (Id., § 227(a)(5); see Kaufman v. ACS Systems, Inc. (2003) 110 Cal.App.4th 886, 894 (Kaufman).)

An individual has the right to bring a state court action for violation the TCPA or the regulations promulgated by the FCC pursuant to the TCPA. Available remedies include recovery of actual monetary loss or recovery of $500 in damages for each violation, whichever is greater. (47 U.S.C. § 227(b)(3)(A)-(C).) Treble damages may be awarded for willful or knowing violations. (Id., § 227(b)(3); see Kaufman, supra, 110 Cal.App.4th at p. 896.)

Congress authorized the FCC to adopt regulations to implement the TCPA. (47 U.S.C. § 227, subd. (b)(2).) Initially, the FCC interpreted the act to provide that a fax from a person or entity with an established business relationship with the recipient can be deemed to be invited or permitted by the recipient. (Gottlieb v. Carnival Corp. (E.D.N.Y. 2009) 595 F.Supp.2d 212, 216-217 (Gottlieb).) However, this interpretation was not incorporated into the FCC's final regulations implementing the TCPA in 1992. "The rules regarding fax advertisements stated simply that `[n]o person may... use a telephone facsimile machine, computer, or other device to send an unsolicited advertisement to a telephone facsimile machine.'" (Gottlieb, supra, 595 F.Supp.2d at pp. 216-217.)

In July 2003, the FCC declared it was reversing its prior determination that the existence of an established business relationship constituted express permission to send faxes to customer. Because Congress was considering amendments to the TCPA, the FCC delayed implementation of its revised interpretation. (Gottlieb, supra, 595 F.Supp.2d at p. 217.)

On July 9, 2005, Congress amended the TCPA by enactment of the JFPA, which codified the existing business relationship exception for advertisements by fax. (47 U.S.C. § 227(b)(1)(C) [amended to read make it unlawful for any person "to use any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement, unless-- [¶] (i) the unsolicited advertisement is from a sender with an established business relationship with the recipient"]; Gottlieb, supra, 595 F.Supp.2d at p. 217.)

Under the JFPA, a sender of a fax advertisement is required to provide notice and contact information on the fax explaining how to opt- out of future fax transmissions from the sender. (47 U.S.C. § 227(b)(2)(D).) The circumstances which comply with the opt-out provision are specified in the amended statute. (Ibid.)

As with the TCPA, Congress empowered the FCC to promulgate implementing regulations within 270 days after enactment of the JFPA. The regulations took effect on August 1, 2006.

II. Failure to Comply with the Summary Judgment Law

A. Requirement of Separate Statements of Undisputed Facts

The stipulated judgment in this action reflects that the trial court would have granted summary judgment in favor of CBRE, although no summary judgment motion was on file and the parties had stipulated that the ruling on threshold issues was not a substitute for a proper summary judgment motion. We requested the parties to address whether the procedure in the stipulated judgment conflicts with the statute and rule governing summary judgment. The parties' responses acknowledge the stipulated judgment does not comply with the summary judgment statute and court rule. We conclude the procedure impermissibly conflicts with the mandatory requirements of summary judgment, requiring reversal of the judgment.

Neither the parties nor the dissent cite any authority which even remotely supports deviation from mandated rules of procedure applicable to motions for summary judgment. As described in clear terms in Monarch Healthcare v. Superior Court (2000) 78 Cal.App.4th 1282, 1285-1286, courts are not free to ignore the Legislature's procedural requirements for the convenience of the parties: "Notwithstanding the parties' express or tacit agreement, the court had a responsibility to act in accordance with the statutory procedures set out by the Legislature. (People v. Mendez (1991) 234 Cal.App.3d 1773, 1782-1783 [`"waiver of procedural requirements may not be permitted when the allowance of a deviation would lead to confusion in the processing of other cases by other litigants"']; People v. Silva (1981) 114 Cal.App.3d 538, 549 [`Where a statute requires a court to follow a particular procedure, an act beyond those limits is in excess of the court's jurisdiction.'].) Parties cannot stipulate to circumvent a legislatively designated code section as the exclusive statutory vehicle. (Gilberd v. AC Transit (1995) 32 Cal.App.4th 1494, 1501.) The court would have been derelict in its duty had it put aside its disquiet regarding `what the code says' and allowed the litigants to freely rewrite the discovery statutes."

The parties' attempt to create appellate review, by stipulating the trial court would have granted summary judgment based upon its ruling on threshold issues, fails at the outset as there is nothing before this court that remotely complies with the requirements for summary judgment motions found in Code of Civil Procedure section 437c or rule 3.1350 of the California Rules of Court. The parties do not dispute the complete absence of a motion for summary judgment and separate statements of undisputed facts, which are made mandatory by statute and court rules. The record presented is inadequate for the type of review of a motion for summary judgment contemplated in the law. Moreover, there is nothing about this particular action which creates a compelling argument to abandon the Code of Civil Procedure in favor of the expediency of the parties.

"Summary judgment, although a very useful tool in litigation, is also a drastic remedy. Because of this, it is important that all of the procedural requirements for the granting of such a motion be satisfied before the trial court grants the remedy." (Sierra Craft, ...

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