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holding that "the brochure may have formed the basis of the contract between Office Depot and Sanbrook" where terms and conditions were only available online
Summary of this case from Orlander v. Staples, Inc.Opinion
No. C-07-05938 RMW.
May 5, 2008
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS [Re Docket No. 6, 14]
Defendant Office Depot, Inc. ("Office Depot") moves to dismiss plaintiff Mary Sanbrook's complaint. For the reasons set forth below, the court grants in part and denies in part defendant's motion.
I. BACKGROUND
On July 24, 2006, plaintiff Mary Sanbrook bought a computer, printer and other products from an Office Depot store in Mountain View, California. Compl. ¶ 5, Ex. 1. On the same date, after seeing Office Depot's advertisements for the Performance Protection Plan ("the Plan"), Sanbrook also purchased a two-year repair plan for $119.99. Id. ¶¶ 6, 21. The Plan is offered for sale by Office Depot throughout the country to consumers who purchase items such as computers and peripherals. Id. ¶ 8. Office Depot advertises the Plan as providing "100% of parts and labor coverage from day one," "on-site service for your computer system," and "[c]ertified technical assistance available toll free, 24 hours a day, 7 days a week." Compl. ¶¶ 9-11, Ex. 2. A brochure containing the foregoing representations was given to Sanbrook and is allegedly given to every purchaser at the time of sale. Id. ¶ 12. The terms and conditions for the Plan are separately available on a website to users who click a link labeled "Register Your Plan." Id. ¶ 13. The terms and conditions are not distributed with the brochure and allegedly differ materially from the representations set forth in the brochure distributed to consumers at the Office Depot store. Id. ¶¶ 13-14; see also id. ¶¶ 16-18 (asserting that there are 26 categories of exclusions set forth in the terms and conditions for the Plan that do not appear in the Plan's brochure).
This brochure is attached to the complaint as Exhibit 2.
The terms and conditions are attached to the complaint as Exhibit 3.
In May 2007, Sanbrook's computer froze and she sought to have it repaired under the Plan. Compl. ¶ 22. Office Depot allegedly refused to repair the computer, asserting that it was still under the manufacturer's warranty. Id. ¶ 23. Sanbrook then sought to have the problem fixed by the manufacturer, only to be told that the problem was not covered by the manufacturer's warranty. Id. ¶ 24. Sanbrook again contacted Office Depot and requested on-site repair of the computer, but was told that Office Depot did not offer on-site repair. Id. ¶ 25. Sanbrook ultimately hired a third party to repair the computer at a cost of $650.00. Id.
Sanbrook complained to Office Depot and received a refund of her $119.99 purchase price for the Plan. Id. ¶ 26. She was also refunded approximately half of what she paid for the third party repair of her computer, for a total refund of $450.00. Id. Sanbrook claims to have sustained damages in the amount of the interest lost on the funds paid to Office Depot (or the amount gained by Office Depot during the time Office Depot held Sanbrook's funds) as well as "consequential damages of approximately $323.00." Id. ¶ 27.
On October 12, 2007, Sanbrook filed a putative class action against Office Depot in the Superior Court of California for the County of Santa Clara asserting causes of action for (1) violation of Cal. Bus. Prof. Code § 17200; (2) violation of the Consumer Legal Remedies Act ("CLRA"), Cal. Civ. Code § 1750; (3) violation of the Song-Beverly Consumer Warranty Act, Cal. Civ. Code § 1790; (4) unjust enrichment; (5) breach of contract; (6) fraud; and (7) negligent misrepresentation. On November 7, 2007, Office Depot removed the action to this court.
Plaintiff filed a motion to remand on December 26, 2007. She has since withdrawn that motion stating that Office Depot has provided evidence that supports this court's jurisdiction over the action. See Docket No. 20.
II. ANALYSIS
A. CLRAOffice Depot argues that the CLRA is the exclusive mechanism for pursuing the remedies sought in the instant action. Accordingly, Office Depot asks the court to dismiss plaintiff's first and third through seventh claims for violations of Cal. Bus. Prof. Code § 17200 and Cal. Civ. Code § 1790, and for unjust enrichment, breach of contract, fraud and negligent misrepresentation.
In support of its position, Office Depot cites Vasquez v. Superior Court, 4 Cal. 3d 800 (1971) and Outboard Marine Corp. v. Superior Court, 52 Cal. App. 3d 30 (1975), which state that the CLRA "provides the exclusive remedy for conduct falling within its purview." Outboard Marine, 52 Cal. App. 3d at 35-36 (citing Vasquez, 4 Cal. 3d at 818).
The current text of the CLRA contradicts Office Depot's position. Section 1752 of the CLRA reads:
The provisions of this title are not exclusive. The remedies provided herein for violation of any section of this title or for conduct proscribed by any section of this title shall be in addition to any other procedures or remedies for any violation or conduct provided for in any other law.
Nothing in this title shall limit any other statutory or any common law rights of the Attorney General or any other person to bring class actions. Class actions by consumers brought under the specific provisions of Chapter 3 of this title shall be governed exclusively by the provisions of Chapter 4 ; however this shall not be construed so as to deprive a consumer of any statutory or common law right to bring a class action without resort to this title. If any act or practice proscribed under this title also constitutes a cause of action in common law or a violation of another statute, the consumer may assert such common law or statutory cause of action under the procedures and with the remedies provide for in such law.
Cal. Civ. Code § 1752 (emphasis added). In 1975, this section was amended to add the highlighted text above. As plaintiff points out, Vasquez was decided before the 1975 amendment of the CLRA. Outboard Marine, although decided in 1975, does not appear to have considered the 1975 amendment to the CLRA, but instead relies heavily on Vasquez in reaching its conclusion that the CLRA provides the exclusive remedy for conduct falling within the proscriptions set forth in the act. See Outboard Marine, 52 Cal. App. 3d at 36 ("The Supreme Court has made it clear in Vasquez that the legislative intent was not to grant consumers the unfettered discretion whether or not to sue under the act. The court pointed out that consumers have no choice if the defendant's conduct falls within the purview of the act, for it provides the exclusive remedy."). Thus, the court finds Office Depot's contention that the CLRA provides the exclusive mechanism for plaintiff's claims to be without merit. Cf. Kraus v. Trinity Management Services, Inc., 23 Cal. 4th 116, 153-54 (2000) (Werdegar, J., concurring and dissenting) ("[T]he CLRA sweepingly declares its provisions are `not exclusive' and are `in addition to any other procedures or remedies' in `any other law.'"). Accordingly, the court declines to dismiss plaintiff's first and third through seventh causes of action on that basis at the pleading stage.
B. CLRA Demand Letter
At least thirty days prior to initiating an action for damages under the CLRA, a consumer plaintiff must "(1) Notify the person alleged to have employed or committed methods, acts, or practices declared unlawful by Section 1770 of the particular alleged violations of Section 1770." and "(2) Demand that the person correct, repair, replace, or otherwise rectify the goods or services alleged to be in violation of Section 1770." Cal. Civ. Code § 1782(a). This section requires the notice to be in writing and be sent certified or registered mail, return receipt requested, to the place where the transaction occurred or to the person's principal place of business within California. Id. By contrast, under § 1782(d), a consumer who brings an action for injunctive relief may give notice after filing suit, and at least thirty days after giving notice, may amend her complaint to add a request for damages.
Plaintiff acknowledges that although her complaint was filed on October 12, 2007, she did not serve a demand letter as required by the CLRA until October 23, 2007. Nevertheless, she contends that because the demand letter has now been filed, she may amend her complaint to include claims for damages under the CLRA. Office Depot, on the other hand, argues that plaintiff's complaint originally claimed damages under the CLRA and that any such claim must be dismissed for failure to comply with § 1782(a).
Plaintiff asserts that it is clear that she sought only injunctive relief and not damages under the CLRA in her complaint such that her having failed to give the required thirty-day notice is irrelevant. It is true that the paragraphs of the complaint in which she sets forth her CLRA claim do not expressly seek damages. Compl. ¶¶ 54-59. Instead, plaintiff cites Cal. Civ. Code § 1780(a) and seeks relief as follows:
California Civil Code § 1780(a) provides, "Any consumer who suffers damages as a result of the use or employment by any person of a method, act, or practice declared to be unlawful by Section 1770 may bring an action against that person to obtain an order enjoining those methods, acts, or practices.["] In accordance with that provision, Named Plaintiff seeks an order prohibiting Defendant from misrepresenting the Plan to potential purchasers.Id. ¶ 59. Office Depot points out, however, that in her prayer for relief, plaintiff seeks not only an injunction, but "an order awarding as damages all monies paid by Plaintiff and the Class Members for any repairs that had to be made by third party companies because Office Depot refused to perform under the Plan"; and "actual and punitive damages plus interest thereon." Compl. at 15 ¶¶ d, i. These prayers for relief make no attempt to differentiate between the theories of liability that plaintiff asserts, thus Office Depot contends that plaintiff impermissibly seeks damages under the CLRA without having complied with § 1782.
Although a close call, the court concludes that, as pleaded, plaintiff's complaint does not seek damages for the alleged CLRA violations. In her third, fifth, sixth and seventh claims, plaintiff specifies with respect to each of those claims that she is seeking damages. In contrast, she only specifies a request for equitable relief in her first, second and fourth claims. Although her global prayer for relief does not limit her damages claims to specific legal theories and thus could be read to ask for damages on her CLRA claim, the prayer is not technically part of the complaint. Bontkowski v. Smith, 305 F.3d 757, 761 (7th Cir. 2000). Therefore, plaintiff's CLRA claim is governed by § 1782(d) and no pre-filing demand was required.
Since the court concludes that plaintiff's complaint does not seek damages on her CLRA claim, the court does not reach the question of whether, if it did, the failure to give pre-suit notice would be fatal. District court decisions go both ways. However, in a well-reasoned case from this district, wherein the complaint asserted injunctive relief and alluded to a request for damages, the court stated, "Given that the legislature specifically contemplated that an action seeking injunctions can be amended to include a damages claim after the thirty days have run, the goal of the legislature would best be served by allowing amendment in the circumstances of this case." Deitz v. Comcast Corp., 2006 WL 3782902 at *6 (N.D. Cal. Dec. 21, 2006) (Alsup, J.) (suggesting that "[t]here are other disciplinary ways to deal with any willful disregard of the law, such as attorney's fees awards . . ."); see also Kennedy, 2007 WL 2300746 at *3 ("Here, the complaint is unclear as to whether Plaintiff seeks damages under the CLRA. Under the circumstances of this case, the Court dismisses any damages allegation under the CLRA without prejudice.").
C. Plaintiff's § 17200 Standing
In November 2004, California voters approved Proposition 64, which amended Cal. Bus. Prof. Code § 17200 to provide that a private individual only has standing to assert a claim under California's Unfair Competition Law ("UCL") if she "has suffered injury in fact and has lost money or property as a result of such unfair competition. Cal. Bus. Prof. Code § 17204. Office Depot contends that Sanbrook cannot assert claim under the UCL because she has not alleged that she has been injured by Office Depot's alleged misconduct. It contends that the allegation in the complaint that Office Depot has paid approximately $450.00, which includes a refund of her $119.99 payment for the Plan, demonstrates that Sanbrook has not suffered any injury in fact or lost money or property as a result of the actions allegedly undertaken by Office Depot. Compl. ¶ 26. Office Depot contends that this amount refunds plaintiff for all sums she spent purchasing the Plan, including any interest associated with the lost use of the funds used to pay the original purchase price.
Office Depot contends that because remedies under the UCL are restricted to injunctive relief and restitution, Sanbrook cannot demonstrate that she has suffered injury for which restitution would be appropriate. An order for restitution is one "compelling a UCL defendant to return money obtained through an unfair business practice to those persons in interest from whom the property was taken, that is, to persons who had an ownership interest in the property or those claiming through that person." Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1149 (2003). Office Depot argues that Sanbrook's allegations cannot state a claim for restitution. To the extent that Sanbrook has alleged that she was required to pay for third party repairs, Office Depot argues that the amount paid for such repairs was paid to the third party, not to Office Depot. Because Office Depot was not a recipient of these amounts paid to third parties for repair, Sanbrook cannot seek restitution against Office Depot.
Plaintiff, on the other hand, argues that she had a vested interest in receiving services under the Plan because she experienced problems with her computer. Because repair of these problems should have been covered under the Plan but were not, plaintiff argues that she is entitled to restitution in the amount of the services denied by Office Depot, which, she contends, is equal to the cost of the service she was forced to obtain from a third party. In support of her argument, she cites Lozano v. AT T Wireless, 504 F.3d 718, 734 (9th Cir. 2007). In Lozano, the Ninth Circuit assessed whether restoring "reserved" minutes to a user who was deprived of them under his cell phone plan constituted restitution for purposes of the UCL. The question was whether restitution could lie where the plaintiff had never had "possession" of the minutes. Ninth Circuit noted, "The California Supreme Court has `stated that the concept of restoration or restitution, as used in the UCL, is not limited only to the return of money or property that was once in the possession of that person. Instead, restitution is broad enough to allow a plaintiff to recover money or property in which he or she has a vested interest.'" Lozano, 504 F.3d at 733-34 (citing Juarez v. Arcadia Fin., Ltd., 152 Cal. App. 4th 889, ___, 61 Cal. Rptr. 3d 382, 400 (2007)). Although the court does not quarrel with the proposition that a plaintiff may have a restitutionary interest in property that was never in plaintiff's possession where plaintiff has a vested interest, the court does not find that this is the question presented here. Rather, the question is whether plaintiff has a restitutionary interest in property that was never in the possession of the defendant. The court finds that Lorenzo does not support plaintiff's position.
Based on the allegations of the complaint, the court agrees that Sanbrook lacks standing to pursue a claim for restitution under the UCL. Sanbrook's allegations establish that Office Depot has paid Sanbrook approximately $450.00, an amount that reimburses Sanbrook for the $119.99 purchase price for the Plan as well as for any detriment Sanbrook may have suffered for the use of the funds otherwise used to purchase the Plan. The money Sanbrook paid for third party repair is not money that Office Depot obtained through any alleged unfair business practice. Therefore, Sanbrook does not have standing to seek restitution under the UCL based on the allegations of her complaint.
Nevertheless, the court does not come to the same conclusion regarding Sanbrook's standing to pursue injunctive relief. Taking her allegations as true as the court must for purposes of a motion to dismiss, Sanbrook suffered an injury in fact by having had to pay $650.00 to obtain third party repair of her computer. She has not alleged that the entire amount of the third party repair has been repaid by Office Depot, therefore she has experienced an injury as a result of Office Depot's alleged unfair business practices.
For the same reason, Office Depot's argument that Sanbrook cannot state a claim under the Song-Beverly Consumer Warranty Act fails. The allegation that Sanbrook had to pay $650.00 for a third party to repair her computer, which was not reimbursed by Office Depot, is sufficient to demonstrate damages under the act for purposes of a motion to dismiss.
Office Depot further argues that Sanbrook lacks Article III standing to pursue any claim for prospective relief because all she can demonstrate is "past exposure to illegal conduct" which "does not in itself show a present case or controversy regarding injunctive releif if unaccompanied by any continuing, present adverse effects." Mot. at 20 (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 564 (1992)). Specifically, Office Depot argues that there is no evidence that Sanbrook's injury is likely to be repeated because the return of Sanbrook's purchase price for the Plan demonstrates that she is no longer utilizing the Plan, and, even assuming Sanbrook is still entitled to coverage under the Plan, the two-year term of the Plan is due to expire in less than seven months and there is no evidence that Sanbrook's computer will fail again during that time. Neither argument is particularly persuasive in the context of a motion to dismiss. First, the pleadings do not sufficiently establish that Sanbrook is no longer entitled to coverage on the Plan, even assuming the purchase price was refunded. Second, assuming that Sanbrook still has coverage for her computer under the Plan, there is still a likelihood that some repair or replacement of the computer may be required during the time remaining on the Plan.
In sum, the court concludes that Sanbrook does not have standing to seek restitution under the UCL, therefore her remedy under the UCL is limited to injunctive relief.
C. Failure to State A Claim
Finally, Office Depot argues that plaintiff fails to state a claim for unjust enrichment, breach of contract, fraud or negligent misrepresentation.
Unjust enrichment is a general equitable principle "underlying various legal doctrines and remedies." Dinosaur Development, Inc. v. White, 216 Cal. App. 3d 1310, 1315 (1989). It is "based on the idea `that one person should not be permitted unjustly to enrich himself at the expense of another, but should be required to make restitution of or for property or benefits received, retained, or appropriated, where it is just and equitable that such restitution be made, and where such action involves no violation or frustration of law or opposition to public policy, either directly or indirectly.'" County of San Bernardino v. Walsh, 158 Cal. App. 4th 533, ___, 69 Cal. Rptr. 3d 848, 855 (2007) (citing Dinosaur Development, 216 Cal. App. 3d at 1315). As set forth above in the court's discussion of Sanbrook's standing under the UCL, Sanbrook has been repaid $450.00, which includes her cost for the Plan and any interest that may have been due on her original $119.99 payment. Thus, as currently pleaded, she does not have standing to seek restitution. Accordingly, the court dismisses her unjust enrichment claim.
Office Depot also contends that plaintiff's allegations fail to establish that Office Depot breached the actual terms and conditions of the Plan. Plaintiff's allegations establish that the terms and conditions of the Plan were available on a website and are attached to the complaint. Office Depot argues that these online terms and conditions, not the brochure, set forth the terms of the contract and that plaintiff's pleadings do not allege that Office Depot ever breached those terms and conditions. The court agrees that plaintiff's complaint does not sufficiently allege that Office Depot breached the online terms and conditions. Nevertheless, plaintiff alleges that it is the content of the brochure, not the online terms and conditions, that constitutes the terms of the contract between plaintiff and Office Depot because the online terms and conditions were not provided at the time the Plan was purchased and could not have been reviewed by the purchaser. See, e.g., Compl. ¶ 19 ("Defendant cannot reasonably expect customers to read the Terms and Conditions prior to purchasing the Plan when it is offered at the time of sale. In order to read the Terms and Conditions, customers must first find them online at http://www.officedepotservices.com. Even after customers access the designated website, they still have to click on a link titled "Register Your Plan" in order to finally view the Terms and Conditions."); id. ¶¶ 71-73 (alleging that the brochure constituted an offer to enter into a service contract, which was accepted by purchasing the Plan and subsequently breached when Office Depot refused to provide the coverage as promised in the brochure). Because the facts alleged set forth that the brochure may have formed the basis of the contract between Office Depot and Sanbrook, these allegations are sufficient to plead a breach of contract.
Based on similar arguments, Office Depot argues that plaintiff's sixth and seventh causes of action for fraud and negligent misrepresentation fail. Specifically, Office Depot asserts that the "claims for fraud and negligent misrepresentation fail because the Terms and Conditions attached to the Complaint show that Plaintiff was not defrauded." Mot. at 24. As discussed above, even though the complaint does not allege that Office Depot misrepresented the services available under the Plan as set forth in the online terms and conditions, plaintiff sufficiently alleges that she relied upon the terms of the brochure because of the unavailability of the online terms at the time the Plan was sold. While it is questionable whether this would be sufficient to sustain a claim for fraud or negligent misrepresentation for purposes of a motion for summary judgment, the allegations are sufficient to state a claim.
III. ORDER
For the foregoing reasons, the court grants in part and denies in part Office Depot's motion to dismiss as follows:
1. defendant's motion to dismiss plaintiff's claim under the CLRA is denied as the claim is deemed to be one for equitable relief only;
2. plaintiff's claim for restitution under the UCL is dismissed without prejudice;
3. plaintiff's claim for unjust enrichment is dismissed without prejudice;
4. defendant's motion to dismiss is denied with respect to all other claims.
Plaintiff shall have twenty (20) days to amend her complaint to state a claim for restitution and unjust enrichment.