EDWARD M. CHEN, United States District Judge.
Plaintiff Caren Ehret seeks to represent a nationwide class of customers who have
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,
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, 51 F.3d 1480, 1484 (9th Cir.1995). In considering such a motion, a court must take all allegations of material fact as true and construe them in the light most favorable to the nonmoving party, although "conclusory allegations of law and unwarranted inferences are insufficient to avoid a Rule 12(b)(6) dismissal." Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir.2009). While "a complaint need not contain detailed factual allegations ... it must plead `enough facts to state a claim to relief that is plausible on its face.'" Id. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "The plausibility standard is not akin to a `probability requirement,' but it asks for more than sheer possibility that a defendant acted unlawfully." Iqbal, 129 S.Ct. at 1949.
Insofar as Plaintiff's 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., 567 F.3d 1120, 1125 (9th Cir.2009). Rule 9(b) provides: "In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed.R.Civ.P. 9(b). To satisfy Rule 9(b), the "complaint must `identify the who, what, when, where, and how of the misconduct charged, as well as what is false or misleading about the purportedly fraudulent statement, and why it is false.'" Salameh v. Tarsadia Hotel, 726 F.3d 1124, 1133 (9th Cir.2013) (quoting Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir.2011)). This encompasses the circumstances surrounding reliance. See Kearns, 567 F.3d at 1125 (holding that the complaint did not meet the standard of Rule 9(b) partly because the plaintiff failed to specify when he was exposed to the allegedly fraudulent advertisements, which ones he found material, and on which ones he relied).
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 charges the consumer the metered fair and 20% gratuity." Id. ¶ 11. She further 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 representations,
The Court finds that Plaintiff's 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 knowledge 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, 2013 WL 5731817 (N.D.Cal. Oct. 22, 2013) ("Defendants contend[] that Plaintiffs fail to allege `which pages of the website' were reviewed, `when' they were viewed,.... But Kearns [v. Ford Motor Co., 567 F.3d 1120 (9th Cir.2009)] did not require such specific allegations."). To so require would be unrealistic and needlessly impede access to an important remedial statute. See In re Tobacco II Cases, 46 Cal.4th 298, 328, 93 Cal.Rptr.3d 559, 207 P.3d 20 (2009) ("[W]here, as here, a plaintiff alleges exposure to a long-term advertising campaign, the plaintiff is not required to plead with an unrealistic degree of specificity that the plaintiff relied on particular advertisements or statements.").
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 Plaintiff's 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, 236 F.3d 1014, 1019 (9th Cir.2001) (citation omitted)). The Court concludes that Plaintiff's allegations have provided Uber with sufficient detail to defend against Plaintiff's allegations.
Uber has moved to dismiss the UCL and CLRA claims on a number of bases. Uber contends 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.
California's Supreme Court has made clear that there is a strong presumption against the extra-territorial application
Id. at 1207, 127 Cal.Rptr.3d 185, 254 P.3d 237 (quoting Diamond Multimedia Systems, Inc. v. Superior Court, 19 Cal.4th 1036, 1059, 80 Cal.Rptr.2d 828, 968 P.2d 539 (1999)) (internal citation and quotation marks omitted). This presumption against the extraterritorial application has been established in California for almost a century. See N. Alaska Salmon Co. v. Pillsbury, 174 Cal. 1, 162 P. 93, 94 (1916). In Sullivan, the California Supreme Court made explicit that this presumption applies to the UCL, noting that "[n]either the language of the UCL nor its legislative history provides any basis for concluding the Legislature intended the UCL to operate extraterritorially," and, therefore, the presumption against extraterritoriality "applies to the UCL in full force." Id. Simply put, "the UCL does not apply to actions occurring outside of California that injure non-residents." Ice Cream Distributors of Evansville, LLC v. Dreyer's Grand Ice Cream, Inc., C-09-5815 CW, 2010 WL 3619884 (N.D.Cal. Sept. 10, 2010), aff'd, 487 Fed.Appx. 362 (9th Cir. 2012) (internal citation and quotation marks omitted). Courts have assumed the presumption against extraterritoriality applies equally to the CLRA and, based on the reasoning in Sullivan, the Court finds no basis to hold otherwise. See McKinnon v. Dollar Thrifty Auto. Grp., Inc., No. C12-4457-SC, 2013 WL 791457 (N.D.Cal. Mar. 4, 2013); In re iPhone 4S Consumer Litig., No. C12-1127-CW, 2013 WL 3829653 (N.D.Cal. July 23, 2013).
However, the critical question presented by Plaintiff's complaint is whether application of the UCL and CLRA in the circumstances alleged actually entails an extraterritorial application 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., 91 Cal.App.4th 224, 110 Cal.Rptr.2d 145 (2001) and Clothsrigger, Inc. v. GTE Corp., 191 Cal.App.3d 605, 236 Cal.Rptr. 605 (1997), by noting that, in those cases, "the unlawful conduct that formed the basis of the out-of-state plaintiffs' claims (i.e., fraudulent misrepresentations made to induce consumer transactions), and that justified the application of California law to resolve those claims, occurred in California." Sullivan, 51 Cal.4th at 1208 n. 10, 127 Cal.Rptr.3d 185, 254 P.3d 237. In Weshba, the California Court of Appeals, in the context of Cal. Bus. & Prof.Code § 17500, rejected the argument that California's unfair business law "cannot support nationwide class certification." Id. at 241, 110 Cal.Rptr.2d 145. First, the court noted that the defendant (Apple) was a "California corporation" and that the brochures containing the purported misrepresentations "were prepared in and distributed from California." Id. at 242, 110 Cal.Rptr.2d 145. A rule permitting application of the UCL or CLRA where the alleged fraudulent activity emanated from California is consistent with the California Supreme Court's statement in In Re Tobacco II Cases, 46 Cal.4th 298, 93 Cal.Rptr.3d 559, 207 P.3d 20 (2009) that the UCL's focus is "on the defendant's conduct, rather than the plaintiff's damages, in service of the statute's larger purpose of
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, 2013 WL 3829653 (N.D.Cal. July 23, 2013), plaintiffs asserted, inter alia, UCL and CLRA claims against Apple based on alleged misrepresentations regarding the functionality of the iPhone 4's "Siri" feature. Id. at *4. Judge Wilken noted that "California courts have concluded that `state statutory remedies may be invoked by out-of-state parties when they are harmed by wrongful conduct occurring in California.'" Id. at *7 (quoting Norwest Mortg., Inc. v. Superior Ct., 72 Cal.App.4th 214, 224-25, 85 Cal.Rptr.2d 18 (1999)). She noted that the Plaintiffs had alleged that that
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., 19 Cal.4th at 1060 n. 20, 80 Cal.Rptr.2d 828, 968 P.2d 539). Numerous cases are in accord. See TRC & Assocs. v. NuScience Corp., No. 2:13-cv-6903-ODW(CWx), 2013 WL 6073004, at *5 (C.D.Cal. Nov. 18, 2013) ("[T]he alleged fraudulent conduct occurred in California. The Complaint is not based solely on a commercial transaction outside of California, but is instead based on material misrepresentations originating in California with NuScience, traveling through Florida, and ending up in Ohio with TRC."); Wang v. OCZ Tech. Group, Inc., 276 F.R.D. 618, 630 (N.D.Cal.2011) ("Though Wang's allegations of OCZ's California-based conduct are general, they provide a sufficient basis at the pleading stage for the invocation of California law.... [T]he facts alleged are that the misleading marketing, advertising, and product information are `conceived, reviewed, approved, or otherwise controlled from [OCZ's] headquarters in California.'"); In re Mattel, Inc., 588 F.Supp.2d 1111, 1119 (C.D.Cal.2008) ("Plaintiffs have adequately alleged that Mattel and Fisher-Price's conduct occurred, if at all, in — or had strong connections to — California. Plaintiffs complain of misrepresentations made in reports, company statements, and advertising that are reasonably likely to have come from or been approved by Mattel corporate headquarters in California." (citation omitted)).
In the FAC, Plaintiff alleges that Uber is a "Delaware corporation with its headquarters in San Francisco, California." FAC ¶ 9. It further alleges that:
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 Plaintiff's 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., 917 F.Supp.2d 1025, 1055-56 (N.D.Cal.2013) (allegations that the defendant was headquartered in California were insufficient to plausibly allege that the advertising in question originated from California); Gustafson v. BAC Home Loans Servicing, LP, No. SACV 11-915-JST (ANx), 2012 WL 4761733, at *6 (C.D.Cal. Apr. 12, 2012) (finding the single allegation that "Defendants' scheme was devised, implemented and directed from BAC Home Loans Servicing's and Balboa's offices in California" was "too vague to `plausibly suggest an entitlement to relief'"); In re Toyota Motor Corp., 785 F.Supp.2d 883, 917 & n. 26 (C.D.Cal.2011) (noting that "Plaintiffs have not alleged that marketing decisions about the representations each Plaintiff saw in his or her home country were made in California").
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 extra-territorial application of these statutes and therefore
Uber contends that Plaintiff's 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 plaintiff's `injury in fact' may be intangible and need not involve lost money or property, Proposition 64, in effect, added a requirement that a UCL plaintiff's `injury in fact' specifically involve `lost money or property.'" Troyk v. Farmers Group, Inc., 171 Cal.App.4th 1305, 1348 n. 31, 90 Cal.Rptr.3d 589 (2009). Similarly, a plaintiff will have standing under the CLRA if she "suffers any damage as a result of the use or employment any person of a method, act, or practice declared to be unlawful by Section 1770." Hinojos v. Kohl's Corp., 718 F.3d 1098, 1107 (9th Cir.2013) (emphasis in original) (quoting Cal. Civ.Code § 1780(a)). "[A]ny plaintiff who has standing under the UCL's and FAL's `lost money or property' requirement will, a fortiori, have suffered `any damage' for purposes of establishing CLRA standing." Id. at 1108.
In Kwisket v. Superior Court, 51 Cal.4th 310, 120 Cal.Rptr.3d 741, 246 P.3d 877 (2011), the California Supreme Court addressed the UCL's standing requirement in the context of allegedly misleading advertising. There, plaintiff alleged that Kwikset Corporation produced locksets which were falsely represented in advertising to have been "Made in U.S.A." Id. at
Id. at 323, 120 Cal.Rptr.3d 741, 246 P.3d 877. Further, the Court found that "[n]either the text of Proposition 64 nor the ballot arguments in support of it purport to define or limit the concept of `lost money or property'" and that it did not "supply an exhaustive list of the ways in which unfair competition may cause economic harm." Id. Ultimately, on the facts of Kwikset, the Court found the following allegations sufficient to establish standing under the UCL:
Id. at 328, 120 Cal.Rptr.3d 741, 246 P.3d 877. The Ninth Circuit has noted that "Kwikset emphasized that Proposition 64 was enacted not to eliminate individual consumer suits when the consumer was actually deceived by a misleading advertisement, but rather to stop `fishing expeditions' by consumers and attorneys who may have never even intended to purchase a product that was being falsely advertised." Hinojos v. Kohl's Corp., 718 F.3d 1098, 1107 (9th Cir.2013).
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, 718 F.3d at 1107. "A misrepresentation is judged to be `material' if a reasonable man would attach importance" or "if the maker of the representation knows or has reason to know that its recipient regards or is likely to regard the matter as important in determining his choice of action, although a reasonable man would not so regard it." Kwikset, 51 Cal.4th at 333, 120 Cal.Rptr.3d 741, 246 P.3d 877 (internal citations and quotation marks omitted). "[T]he materiality of a misrepresentation is typically an issue of fact, and therefore should not be decided at the motion to dismiss stage." Hinojos, 718 F.3d at 1107 n. 7 (citing In re Steroid Hormone Product Cases, 181 Cal.App.4th 145,
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 necessary 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, 51 Cal.4th at 323, 120 Cal.Rptr.3d 741, 246 P.3d 877. Economic injury sufficient to support UCL standing exists where the plaintiff "surrender[ed] in a transaction more, or acquire[d] less than he or she otherwise would have." Id. As Uber acknowledged, a UCL claim is stated when the plaintiff, as a result of a defendant's misrepresentation, did not receive what he or she had bargained for. Reply Br., p. 5. This makes sense; materiality for purposes of the UCL is defined not in terms of a "but for" cause, but whether a reasonable person "would attach importance" to it. Kwikset, 51 Cal.4th at 333, 120 Cal.Rptr.3d 741, 246 P.3d 877. Here it is enough that Plaintiff has alleged that but for Uber's misrepresentations, she would not "have agreed to or paid Uber the full amount that Uber charged her and that she paid to Uber." FAC ¶ 16.
Whether Plaintiff had the option of not paying the additional fee (the 20% gratuity) because 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., 756 F.Supp.2d 445 (S.D.N.Y. 2010), the court interpreted the CLRA's standing requirements. There, plaintiffs who purchased defendant's satellite digital radio services alleged that the defendant had misrepresented in its customer agreements that a "royalty fee" would be included in the subscription cost and that this charge would be "limited to the amount necessary to `pass through' its own increased costs.'" Id. at 450. Instead, Plaintiffs alleged that the royalty fee charged "exceeded the amount of Defendant's increase in royalty obligations." Id. Plaintiffs asserted a claim under the CLRA, and the Southern District of New York found that plaintiffs could proceed with this claim. It held that the "California plaintiffs suffered injury by paying a Royalty Fee that was greater than what it would have been had it been calculated as an actual `pass through' of the fee paid by Defendant. This states a claim under § 1770(a)(5) [of the CLRA]." Id. at 455. Importantly, the court did not suggest the payment of the included "royalty fee" was avoidable by the consumer.
Similarly, in Johnson v. Wal-Mart Stores, Inc., 544 Fed.Appx. 696, 697 (9th Cir.2013), plaintiff alleged that Wal-Mart included a $9 fee every time a customer purchased a car battery and misrepresented the fee was required by California law. In fact, California law did not require the imposition of the fee and Wal-Mart kept the nine dollars for itself. Id. at 697 Plaintiff alleged that "she would not have paid the additional nine dollar fee if she had known that California law did not require her to pay it and that Wal-Mart intended to keep the nine dollars for itself." Id. The Ninth Circuit found that these factual allegations "permit a reasonable inference that Johnson paid more `than she otherwise would have' if Wal-Mart had not engaged in the alleged misrepresentation." Id.
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, 142 Cal.App.4th 1457, 49 Cal.Rptr.3d 227, plaintiff alleged that Washington Mutual had represented in its statements that certain costs of underwriting and wire transfers were included. These fees were "mandatory" insofar as Washington Mutual required home buyers to pay them. Nonetheless, the court found that plaintiff had stated a claim under the UCL's fraudulent prong:
Id. at 1472, 49 Cal.Rptr.3d 227; see also People v. Dollar Rent-A-Car Sys., Inc., 211 Cal.App.3d 119, 129, 259 Cal.Rptr. 191 (1989) (holding that the defendant violated the UCL by charging for the "retail cost" of car repairs in excess of actual repair costs).
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, 718 F.3d at 1107; see also Kwikset, 51 Cal.4th at 321, 120 Cal.Rptr.3d 741, 246 P.3d 877 ("While the voters clearly intended to restrict UCL standing, they just as plainly preserved standing for those who had had business dealings with a defendant and had lost money or property as a result of the defendant's unfair business
At the hearing, Uber relied extensively on the California Court of Appeal decision in Searle v. Wyndham International, Inc., 102 Cal.App.4th 1327, 126 Cal.Rptr.2d 231 (2002). There, plaintiff alleged that after ordering room service at one of defendant's hotels, she was assessed a 17% service charge which was, in fact, a gratuity paid to the server. At the same time, the room service bill allegedly contained a blank line for the customer to add a tip or gratuity. Id. at 1330, 126 Cal.Rptr.2d 231. Plaintiff alleged that the service charge was deceptive under the UCL as customers were "not advised the service charge is in fact a gratuity paid to the server." Id. The California Court of Appeal found that plaintiff had failed to state a claim, finding that "[w]hat a hotel does with the revenue it earns — either from the mini-bar, in home movies or its room service charges — is of no direct concern to hotel guests." Id. at 1334, 126 Cal.Rptr.2d 231. Rather, the "room service patron[] is given both clear notice the service being offered comes at a hefty premium and the freedom to decline the service.... [T]he patron has no legitimate interest in what the hotel does with the service charge." Id.
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 Plaintiff's UCL and CLRA claims for lack of standing is
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:
O'Connor, 2013 WL 6354534, at *17. Similarly, here, Plaintiff has alleged that Uber represents that it automatically charges consumer credit card "the metered fare + 20% gratuity" and that this "20% gratuity is automatically added for the driver" while, at the same time, it "keeps a substantial portion of this additional charge for itself as its own additional revenue and profit." FAC ¶ 13. These allegations are sufficient to plausibly allege that a reasonable consumer would be deceived and, as a result of this deception, they expended more money than they otherwise would have but for the misrepresentation (as discussed above).
Similarly, in determining whether a 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, 2014 WL 4275519, at *5 (quoting McKell v. Wash. Mut., Inc., 142 Cal.App.4th 1457, 1473, 49 Cal.Rptr.3d 227 (2006)). As discussed above, Plaintiff has alleged that Uber adds a fee above its metered fair, misrepresents this fee as a gratuity that is given to the consumers, and keeps a substantial portion of this fee to boost its revenue. The Court cannot conclude at this early stage that the alleged cost of this misrepresentation to Uber's consumers is justified by Uber's reasons and motives. See Pirozzi v. Apple, Inc., 966 F.Supp.2d 909 (N.D.Cal.2013) ("Apple offers nothing in the way of `reasons, justifications, or motives,' or `utility of [its[ conduct,' to weigh against the alleged harm. Thus, `the Court cannot say that Apple's practices are not injurious to consumers, or that any benefit to consumers
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
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). Plaintiff's 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, 756 F.Supp.2d at 455 (holding that the plaintiffs had stated a claim for violation of sections 1770(a)(5) and 1770(a)(9), where the defendant represented it was charging a "pass through" royalty fee, but where the actual royalty fee was much less).
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, 756 F.Supp.2d at 455 (finding that plaintiff had stated a claim under § 1770(a)(14) because, the "royalty fee" imposed by the defendant "certainly imposes an `obligation' and the alleged misrepresentation with respect to that fee ... suggests that the obligation entails covering a `pass through' of increased royalty obligations
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 card 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, 756 F.Supp.2d at 455. Here, Plaintiff has not alleged the existence of a representation subsequent to the alleged initial misrepresentation, and the Court concludes that the subsequent charging of the credit card does not constitute a "representation" on the part of Uber.
"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., 20 Cal.4th 163, 180, 83 Cal.Rptr.2d 548, 973 P.2d 527 (1999) (citations and quotation marks omitted). The UCL's "coverage is sweeping, embracing anything that can properly be called a business practice and that at the same time is forbidden by law." Id. Because the Court finds that Plaintiff has adequately alleged a violation of the CLRA, she has also sufficiently alleged a violation under the unlawfulness prong of the UCL.
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
Under California law, "[a] cause of action for breach of contract requires proof of the following elements: (1) existence of the contract; (2) plaintiff's performance or excuse for nonperformance; (3) defendant's breach; and (4) damages to plaintiff as a result of the breach." CDF Firefighters v. Maldonado, 158 Cal.App.4th 1226, 1239, 70 Cal.Rptr.3d 667 (2008). Where a plaintiff has failed to allege that the defendant's breach has caused her to suffer any damage, a breach of contract action for damages will not lie. See Low v. LinkedIn Corp., 900 F.Supp.2d 1010, 1028 (N.D.Cal.2012) (noting that to
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. Plaintiff's 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, 21 Cal.App.4th 100, 26 Cal.Rptr.2d 133 (1993), the court addressed a marital separation agreement in which the husband agreed to pay for his children's undergraduate education. Id. at 104, 26 Cal.Rptr.2d 133. Eventually, the husband stopped paying the expenses, and the wife filed an action to enforce the separation agreement. The marital separation agreement was governed by Massachusetts law and the court, applying the Restatement (Second) of Contracts held that in that case, the "promisee cannot recover damages which may be suffered by the intended third party beneficiary." Id. at 107, 26 Cal.Rptr.2d 133. The court noted that the Restatement differentiates between "creditor" beneficiaries (that is, beneficiaries who receive payments from the promisor of a debt or obligation owed the beneficiary by the promisee) and "donee" beneficiaries who essentially receives a "gift" in the form of the promisor's obligation to it. Id. at 106, 26 Cal.Rptr.2d 133. The court then held that if a "promisor does not pay the promisee's debt to the creditor beneficiary, then the promisee will remain liable to the beneficiary for the full amount of the debt and could directly suffer damages in this full amount. In contrast, if the promisor does not perform its obligation to the donee beneficiary, the promisee will not be liable to the beneficiary for such performance," and thus will not incur cognizable damages to support a claim for breach of contract against the promisor. Id. at 106, 26 Cal.Rptr.2d 133. The court did note, a promisee may sue for specific performance. Id.
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 Santa
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), 2007 WL 1288393, at *5 (N.D.Cal. Apr. 11, 2007). For the reasons stated above, Plaintiffs are not entitled to any money damages under this test. Plaintiffs UCL claim, by contrast, is not limited to the strictures of the alleged contractual terms its prescriptions are aimed at unlawful or unfair business practices (wherein a violation may be found even if conduct violates no specific law). See Cel-Tech Commc'ns, 20 Cal.4th at 180, 83 Cal.Rptr.2d 548, 973 P.2d 527 ("In other words, a practice is prohibited as `unfair' or `deceptive' even if not `unlawful' and vice versa."). Nor is the UCL geared to award traditional contract damages. See In re Tobacco II, 46 Cal.4th at 312, 93 Cal.Rptr.3d 559, 207 P.3d 20 ("`A UCL action is equitable in nature; damages cannot be recovered.... We have stated under the UCL, [p]revailing plaintiffs are generally limited to injunctive relief and restitution.'" (quoting Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134, 1144, 131 Cal.Rptr.2d 29, 63 P.3d 937 (2003)). Under the UCL claim, the operative effect of the 20% gratuity statement is not a contractual promise, but rather an alleged misrepresentation which skewed the transaction and caused Plaintiffs to expend more money than they otherwise would have had the representation not been made. Stated another way, the breach of contract claim looks at the 20% gratuity statement and asks how Plaintiffs can be put in the same situation they would be in had Defendants performed. The UCL claim looks at the 20% gratuity statement and asks how Plaintiffs would be positioned had the misrepresentation not been made.
Accordingly, Uber's motion to dismiss this claim is
For the foregoing reasons, Uber's motion to dismiss Plaintiff's UCL claims is
This order disposes of Docket No. 44.
IT IS SO ORDERED.
