Apex Wholesale v. Fry's Electronics

Filed 6/15/06 Apex Wholesale v. Fry's Electronics CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEALS from a judgment and APPEAL from postjudgment orders of the Superior Court of San Diego County, Kevin A. Enright, Judge. Judgment reversed in part and affirmed in part; orders affirmed.

Plaintiff Apex Wholesale, Inc. (Apex), a seller of computer equipment, sued defendants Fry's Electronics, Inc. (Fry's), Randy Fry, and David Bicknell for alleged violations of the Unfair Practices Act (UPA) (Bus. & Prof. Code^[1], § 17000 et seq.), false advertising (§ 17500), unfair competition (§ 17200), and intentional and negligent interference with prospective advantage. Randy Fry is a founder, officer, and director of Fry's, and Bicknell was a manager of Fry's San Diego store. A bifurcated trial in which legal issues were tried to a jury and equitable issues were tried to the court resulted in a judgment in favor of defendants on all claims, with the exception that the judgment permanently enjoins Fry's and Randy Fry from advertising the single unit price of goods sold only in multiple units unless the advertisement discloses the multiple unit price at least as prominently as the single unit price, as required by section 17504.

Apex appeals from the judgment, contending: (1) The court committed prejudicial instructional error with respect to Apex's first cause of action for violations of the UPA and fourth cause of action for intentional interference with prospective economic advantage; (2) the court's statement of decision on Apex's equitable claims is prejudicially defective; (3) the judgment as it relates to Apex's claims for competitor unfairness and consumer claims brought on behalf of the general public is not supported by the evidence; and (4) the court erred in granting Bicknell's motion for summary adjudication of the first cause of action. Apex also appeals from postjudgment orders denying its motion for judgment notwithstanding the verdict (JNOV) as to its first cause of action and its motion for "cost of proof" sanctions under former Code of Civil Procedure section 2033, subdivision (o) (regarding requests for admission).^[2] Fry's and Randy Fry appeal the portion of the judgment permanently enjoining them from violating section 17504, contending the court misconstrued that statute and there is insufficient evidence the enjoined acts are likely to recur.

We conclude the court committed prejudicial instructional error with respect to Apex's fourth cause of action for intentional interference with prospective economic advantage and, accordingly, reverse the judgment as to that cause of action. We otherwise affirm the judgment and affirm the postjudgment orders challenged by Apex.^[3]

FACTUAL AND PROCEDURAL BACKGROUND

Apex is a wholesale and retail seller of computers and computer parts. Apex was incorporated in the late 1980's to act as the "mother ship" of several predecessor business entities, the names of which became fictitious business names of Apex. In 1997 Fry's opened a store in San Diego.

In December 1999 Apex filed a second amended complaint that included causes of action for (1) violations of the UPA; (2) false advertising; (3) unfair competition; and (4) intentional interference with prospective economic advantage.^[4] The first cause of action for violations of the UPA alleges that Fry's unlawfully sold items as loss leaders, advertised items for sale at prices below their replacement or invoice cost, and engaged in discriminatory pricing between its San Diego store and other stores throughout California.^[5] The second cause of action for false advertising includes allegations that Fry's engaged in "bait and switch" tactics;^[6] advertised items at after-rebate prices without adequately disclosing the uncertainty of receiving the rebate or that sales tax would be charged on the full in-store price; misled customers regarding the terms of extended warranties (called "Performance Guarantees") they purchased; and represented that certain merchandise carried a manufacturer's warranty without disclosing that the warranty was shorter than normally provided by the manufacturer or that the manufacturer was insolvent and unable to honor the warranty.

The third cause of action for unfair competition is largely based on the wrongful acts alleged in the first and second causes of action. In addition, the third cause of action alleges that Fry's advertised secondhand or refurbished goods as new, and "advertis[ed] consumer goods which are sold only in multiple units but which are advertised at prices that are different than the minimum multiple unit price, a practice prohibited by Section 17504." The fourth cause of action is based on the wrongful acts alleged in the preceding causes of action and alleges that Fry's "intentionally committed various wrongful acts" that damaged Apex by disrupting its relationships with its customers.

Before trial, Bicknell moved for summary adjudication of the first, second and third causes of action on the ground he could not be held vicariously or secondarily liable for the wrongful acts alleged in those causes of action. The court granted the motion as to the first cause of action, ruling Bicknell could not be held liable under that cause of action because the evidence showed he "had no authority regarding Fry's price setting policy."

The first phase of the bifurcated trial was a jury trial on the first cause of action for violations of the UPA and fourth cause of action for intentional interference with prospective economic advantage. The jury filled out three special verdict forms addressing Apex's claims of below cost sales and loss leaders, locality discrimination, and prospective economic advantage, respectively. Fry's prevailed on all of these claims. Although the jury found Fry's sold merchandise below cost in San Diego, it answered "yes" to the question, "Has Fry's proved, by a preponderance of the evidence, that in selling merchandise in San Diego below its cost, it did not have the purpose – that is, the conscious and positive desire – of injuring competitors or destroying competition?" On the locality discrimination verdict form, the jury found Fry's sold merchandise in San Diego at a lower price than in other locations at the same time, but answered "yes" to the question, "Has Fry's proved, by a preponderance of the evidence, that in selling merchandise in San Diego at a lower price than in other locations, it did not have the intent of injuring competitors or destroying competition, and that it did not know, to a substantial certainty, that this result would occur?"

On the intentional interference verdict form, the jury found that Fry's committed "intentional acts that were designed to disrupt, and that did actually disrupt, the relationship between Apex Wholesale and its customers . . . ." However, the jury found those acts were not "independently wrongful for one or more of the following reasons[]: [¶] a. Fry's advertised merchandise without intending to sell it; or [¶] b. Fry's used deceptive advertising; or [¶] c. Fry's sold secondhand merchandise as new."

Following the jury phase of the trial, the court heard evidence and argument on the equitable (i.e., second and third) causes of action for false advertising and unfair competition. The court initially issued a "Statement of Intended Decision" finding in favor of defendants on all of the claims asserted under those causes of action. In response, Apex filed a "Request for Statement of Decision Explaining the Factual and Legal Basis for the Court's Decision Regarding Controverted Issues," in which it asked the court to make over 650 evidentiary and legal findings. The court then directed defendants to prepare a statement of decision and proposed judgment. Defendants filed a proposed statement of decision and Apex filed a 118-page response, which set forth 58 objections to defendants' proposed statement and listed hundreds of factual and legal issues it contended the court should decide.

After hearing argument on defendants' proposed statement of decision, the court ordered defendants to make a number of modifications to the statement and to modify their proposed judgment accordingly. As noted, the judgment the court ultimately entered permanently enjoins Fry's and Randy Fry from violating section 17504 by advertising the single unit price of goods sold only in multiple units unless the advertisement discloses the multiple unit price at least as prominently as the single unit price. The court rendered judgment in favor of defendants on all of Apex's other claims.

After the court entered judgment, Apex moved for a new trial, for JNOV as to the first cause of action, to vacate the judgment, and for cost of proof sanctions under former Code of Civil Procedure section 2033, subdivision (o). The court denied all of these motions.

DISCUSSION

I

APEX'S REQUEST FOR JUDICIAL NOTICE

Apex requests that we take judicial notice of 46 separate items attached as exhibits to its request. We deny the request in its entirety.

"Although a court may judicially notice a variety of matters (Evid. Code, § 450 et seq.), only relevant material may be noticed." (Mangini v. R. J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1063 (Mangini).) If a document is relevant and subject to judicial notice, notice is taken of its existence but not of the truth of any matters asserted in it. (Ibid.) Although we may take judicial notice of matters that were not before the trial court, including records of another court (Evid. Code, §§ 459, subd. (a), 452, subd. (d)), we need not give effect to that evidence. (Doers v. Golden Gate Bridge etc. Dist. (1979) 23 Cal.3d 180, 184, fn. 1.)

Exhibits 1 and 2 to Apex's request for judicial notice are Federal Trade Commission (FTC) policy statements on unfairness and deception, respectively. Apex argues that these publications represent "the intent of the California Legislation contained in the California Code of Civil Procedure authorizing the underlying action."^[7] Apex adds: "State Legislatures often look to the Federal Government when drafting new legislation. There is reason to believe the California State Legislature and the [FTC] share concepts of fairness and deception." Apex has not established or attempted to explain any connection between these FTC policy statements and any of the statutes underlying its claims against Fry's or any issue involved in this appeal. We deny judicial notice of these items on the ground they are irrelevant.

Exhibits 3 through 38 are documents reflecting the legislative history of section 17504. "[I]t is crucial to note that resort to legislative history is appropriate only where statutory language is ambiguous. . . . 'Our role in construing a statute is to ascertain the Legislature's intent so as to effectuate the purpose of the law. [Citation.] In determining intent, we look first to the words of the statute, giving the language its usual, ordinary meaning. If there is no ambiguity in the language, we presume the Legislature meant what it said, and the plain meaning of the statute governs. [Citation.]' [Citations.] Thus, '[o]nly when the language of a statute is susceptible to more than one reasonable construction is it appropriate to turn to extrinsic aids, including the legislative history of the measure, to ascertain its meaning.' [Citations.]" (Kaufman & Broad Communities, Inc. v. Performance Plastering, Inc. (2005) 133 Cal.App.4th 26, 29-30; see also Tom v. City and County of San Francisco (2004) 120 Cal.App.4th 674, 688 [request for judicial notice of certain portions of the legislative history of the Ellis Act and its amendments denied on the ground judicial notice was irrelevant to the court's determinations]; JRS Products, Inc. v. Matsushita Elec. Corp. of America (2004) 115 Cal.App.4th 168, 174 [request for judicial notice of legislative history denied because language of statute was plain and consideration of legislative history was therefore unnecessary].) Because, as we discuss post, we find no ambiguity in the language of section 17504 in question, we deny Apex's request for judicial notice as to exhibits 3 through 38.

Exhibits 39 and 40 reflect a 1999 settlement of various false advertising claims brought by the Arizona Attorney General against Fry's in Arizona state court. Exhibit 40 is an "Assurance of Discontinuance" setting forth the Attorney General's specific claims, Fry's denial of those claims, and Fry's assurance that it will comply with specified advertising standards. We decline to take judicial notice of these items because they are not relevant to any issue in this appeal.

Exhibits 41 and 42 are court orders filed in this case on August 29, 2003, while this appeal was pending. Exhibit 41 is an order and judgment of contempt against Fry's based on its willful failure to comply with the permanent injunction prohibiting it from violating section 17504. Exhibit 42 is an order denying a motion for nonsuit made by Fry's after opening statements on the order to show cause re contempt. We decline to take judicial notice of these items because they involve postjudgment matters that are not relevant to any issue in these appeals. It would be improper for us to consider the court's postjudgment finding that Fry's violated the injunction in deciding whether the court properly issued the injunction in the first instance. (See People's Home Sav. Bank v. Sadler (1905) 1 Cal.App. 189, 193-194 [appellate review is limited to consideration of the record of proceedings before the trial court; assignments of trial court error cannot be based on matters occurring after rendition of the appealed judgment and it would be irrelevant for the appellate court to entertain evidence of such subsequent matters].)

Exhibit 43 is a 2002 unpublished appellate opinion in an Orange County Superior Court action against Fry's. Apex asserts: "Exhibit 43 is relevant because it tends to make more probable an issue of material fact." Apex explains that Fry's engaged in similar discovery violations in both the present case and the Orange County case. Apex later asserts that Fry's actions in the Orange County litigation "are representative of [its] actions in the case at bar and consequently tend to prove an issue of material fact[:] that Fry's willfully violated the court-ordered prohibitory injunction, and that said injunction was a valid exercise of judicial discretion."^[8]

Essentially, Apex is asking us to take judicial notice of the opinion in the Orange County case because it evidences the truth of a factual assertion Apex makes on appeal, namely that Fry's did not make diligent and reasonable efforts to respond to discovery. We decline to do so because we are not a factfinding tribunal (see In re Heather B. (2002) 98 Cal.App.4th 11, 14 [it is the province of the trial court to decide questions of fact and of the appellate court to decide questions of law]). Apex offers no basis for taking judicial notice of the opinion other than its claimed evidentiary value.^[9]

Exhibit 44 contains the contents of the Internet Web site of the National Institute for Literacy. Apex contends that the Web site is judicially noticeable under Evidence Code section 452, subdivision (h), which provides for discretionary judicial notice of "[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy." Apex argues that the illiteracy statistics on the Web site are relevant to whether consumers can calculate prices of products advertised at a unit price but sold only in multiple units and were likely considered by the Legislature in enacting section 17504. We deny the request to take judicial notice of exhibit 44 because the statistics cited by Apex have no relevance to Apex's appeal or Fry's cross-appeal and, in any event, Apex has not shown that the statistics qualify as facts or propositions that are not reasonably disputable and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.

Exhibits 45 and 46 are, respectively, a trial court memorandum of intended ruling and a request for statement of decision filed in the Superior Court of San Diego County case that resulted in the published opinion, People v. Casa Blanca Convalescent Homes, Inc. (1984) 159 Cal.App.3d 509 (Casa Blanca) In connection with the issue of the propriety of the statement of decision issued by the court in this case, Fry's compared Apex's request for a statement of decision with the request for statement of decision in Casa Blanca, which this court viewed as inappropriate because it required the trial court to answer over 75 questions and make numerous findings on evidentiary, as opposed to ultimate, facts. Apex requests that we take judicial notice of exhibits 45 and 46 "in order to properly distinguish the present matter from [the Casa Blanca] decision."

We deny the request to take judicial notice of Exhibits 45 and 46, as we consider it inappropriate to take judicial notice of trial court filings in an unrelated case resulting in a published appellate court opinion for the purpose of interpreting or distinguishing the published opinion. We can adequately determine Casa Blanca's applicability to the statement of decision issues raised in this appeal without resorting to the record of trial court proceedings in that case.

II

FRY'S OBJECTION TO APEX'S NOTICE OF LODGMENT

Fry's objects to Apex's notices of lodgment on the ground Apex transmitted the lodged exhibits late under California Rules of Court, rule 18(b).^[10] Fry's requests that we not consider those exhibits. We deny Fry's request. Apex filed opposition to Fry's objection explaining that its late transmittal of exhibits was due to mistake and inadvertence of its counsel. This court has not been prejudiced or hampered by the late transmittal of exhibits and Fry's does not contend it was prejudiced by the late transmittal. Under these circumstances, we will exercise our discretion to overlook Apex's noncompliance with rule 18. (See Marshallan Mfg. Co. of Cal. v. Brack (1959) 172 Cal.App.2d 22, 23 [although court rules regarding appeals expedite the orderly conduct of the work of the appellate courts and should be observed, "the policy of our law is to favor hearings on appeal upon their merits when such can be done without violence to the rules"].)

III

APEX'S APPEAL

A. The Court Committed Reversible Instructional Error with Respect to Apex's Fourth Cause of Action for Intentional Interference with Prospective Economic Advantage

Apex's claim of prejudicial instructional error primarily centers around a limiting instruction drafted by Fry's entitled "Court's Instruction on Introduction of Evidence" (the limiting instruction). (Capitalization omitted.) During trial, Fry's filed a motion in limine to exclude testimony of Apex's advertising expert Michael Belch about various unfair business practices allegedly committed by Fry's. The court denied the motion but invited Fry's counsel to draft a limiting instruction distinguishing between claims to be decided by the court and claims to be decided by the jury, and explaining the purposes for which the jury was to consider Apex's evidence, including Belch's testimony.

After Fry's counsel submitted a proposed limiting instruction, he moved for a mistrial, arguing the instruction was insufficient to eliminate the prejudice caused by Belch's improper legal-conclusion testimony.^[11] Apex submitted proposed changes to Fry's instruction and the court took Fry's motion for mistrial under submission. The court later presented the parties with a modified version of Fry's proposed instruction that incorporated changes proposed by Apex as well as modifications proposed by the court.

Fry's counsel voiced concern about the proposed limiting instruction, reminding the court: "In submitting this instruction, I indicated that it was, in essence, I don't know if the phrase is under protest, but with considerable reluctance." Fry's counsel essentially argued that the jury would not understand the limiting instruction and would improperly construe the instruction as allowing it to consider all of the testimony of Apex's consumer witnesses about their negative experiences with Fry's as evidence of Fry's intent or purpose to injure competitors or competition.^[12] Apex's counsel stated that "the jury instruction as proposed by the court is fine."

The court ultimately gave the limiting instruction as follows:

"As I instructed you at the beginning of this case, plaintiff has alleged four causes of action against defendants. The first cause of action is for violations of the Unfair . . . Business Practices Act. The second cause of action is for false advertising. The third cause of action is for unfair competition. And the fourth cause of action is for intentional interference with [pro]spective economic advantage. I will be deciding the second and third causes of action. Thus, I will decide whether Fry's engaged in false advertising and whether Fry's engaged in unfair competition.

"You are the trier of fact on the first and fourth causes of action. Thus, you will decide, for example, whether Fry's sold items below cost with the purpose to destroy competition. At the end of the case, I will instruct you regarding the law regarding the two causes of action[] you are to decide and you will decide the factual disputes between the parties in light of those instructions.

"With regard to first and fourth cause[s] of action[ that] you will decide[, ] I am allowing plaintiff to present testimony regarding Fry's advertising and business practices to you, the jury, for the limited purpose of determining whether defendants are liable to plaintiff under the first and fourth causes of action. For example, you have heard testimony about Fry's advertising from some of its customers and an expert witness called by the plaintiff. You are to consider that testimony and any later evidence that might be offered on these subjects for a limited purpose.

"Regarding the first cause of action, you may consider this evidence, but only to the extent that it may bear on whether, one, Fry's made sales below cost or sold loss leaders, as I will later define those terms, for the purpose of destroying competition in the San Diego electronics retail market generally, or for the purpose of injuring Apex or Abacus[^[13]] in particular; or two, Fry's engaged in locality discrimination, as I will later define that term, with the intent to injure Apex or Abacus or to destroy competitors. Regarding the fourth cause of action, you may consider this evidence, but only to the extent that it may bear on Fry's intent to interfere with the relationship between Apex or Abacus and its customers. Do not consider this evidence for any other purpose.

"In instructing you that you may consider this evidence, I am not suggesting that I have made any finding on such evidence. I have made no such finding. I am also not suggesting that such evidence necessarily shows any wrongful purpose or intent on the part of defendants. I am only instructing you that you . . . may consider such evidence for the limited purposes stated." (Italics added.)

The court read the limiting instruction to the jury twice – first, during Apex's case-in-chief and a second time when it instructed the jury before deliberations. The limiting instruction was included in the written instructions the jury took into deliberations.

In connection with Apex's fourth cause of action for intentional interference with prospective economic advantage,^[14] the court instructed on the privilege of competition with the following modified version of BAJI No. 7.86:

"Ordinarily, a person who engages in business with the primary aim of making profits for himself or herself is not liable for business losses suffered by a competitor. The privilege of competition is an affirmative defense to a claim of interference with prospective economic advantage. [¶] The essential elements of the privilege of competition are[:] [¶] 1. The plaintiff and defendant were engaged in economic competition; [¶] 2. The economic relationship between the plaintiff and its customers concerns a matter involved in the competition between the plaintiff and defendant; [¶] 3. The defendant did not use wrongful means; and [¶] 4. The defendant's purpose was at least in part to advance its interest in competing with the plaintiff."

The court instructed on the definition of "wrongful means" or "wrongful conduct" with the following modified version of BAJI No. 7.86.1:

" 'Wrongful Means' or 'Wrongful Conduct' is conduct that is wrongful separate and apart from the fact that the conduct interfered with or disrupted the economic relationship between the plaintiff and its customers, and is also wrongful in the sense that the conduct considered by itself constitutes the bas[i]s for a claim of: [¶] 1. Unlawful sales below cost; [¶] 2. Locality Discrimination; [¶] 3. False Advertising; or [¶] 4. Unfair Competition."

Thus, to find Fry's liable for intentional interference with prospective economic advantage, the jury was required to find that Fry's not only knowingly interfered with Apex's expectancy, "but engaged in conduct that was wrongful by some legal measure other than the fact of interference itself." (Della Penna v. Toyota Motor Sales, U.S.A., Inc (1995) 11 Cal.4th 376, 393.) Accordingly, the "Special Verdict Re Interference" form directed that if the jury found under "Question No. 4"^[15] that Fry's committed intentional acts that were designed to and actually did disrupt the economic relationship between Apex and its customers, it was to answer "Question No. 5," which read:

"Were the acts committed by Fry's that disrupted the relationship between Apex . . . and its customers independently wrongful for one or more of the following reasons?

"a. Fry's advertised merchandise without intending to sell it; or

"b. Fry's used deceptive advertising; or

"c. Fry's sold secondhand merchandise as new."

The jury answered "yes" to question No. 4 and "no" to question No. 5, resulting in judgment in Fry's favor on Apex's fourth cause of action.

Question No. 5 and the limiting instruction both conflict with the modified version of BAJI No. 7.86.1 that the court gave. Under the court's modified BAJI No. 7.86.1, the "independent wrongfulness" requirement for Apex's cause of action for intentional interference with prospective economic advantage was satisfied only if the jury found that Fry's engaged in independently wrongful conduct that, considered by itself, constituted the basis for a claim of unlawful sales below cost, locality discrimination, false advertising, or unfair competition.

The jury was likely confused by the fact that modified BAJI No. 7.86.1 directed it to consider whether Fry's engaged in independently wrongful conduct in the form of false advertising and unfair competition while the limiting instruction directed it not to decide whether Fry's engaged in false advertising or unfair competition because the court was to decide those issues. Adding to the confusion is the fact that Question No. 5 gave the jury only the following three bases for finding the independently wrongful element was satisfied: (1) Fry's advertised merchandise without intending to sell it; (2) Fry's used deceptive advertising; or (3) Fry's sold secondhand merchandise as new. The only one of these bases that the jury could have viewed as included in the court's instruction on independent wrongfulness (modified BAJI No. 7.86.1) is deceptive advertising, a form a false advertising. (Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 562-563, citing Committee On Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 211 [" '[A]ny advertising scheme involving false, unfair, misleading or deceptive advertising of food products equally violates" ' the Sherman Law, the UCL [Unfair Competition Law] and the false advertising law"].) However, the limiting instruction prohibited the jury from deciding whether Fry's engaged in deceptive or false advertising.

In light of the limiting instruction's directive that the jury not decide whether Fry's engaged in false advertising, the jury was likely confused about the inclusion in question No. 5 of deceptive advertising as a basis for finding that Fry's interference with the relationship between Apex and its customers (found under question No. 4) was independently wrongful. If the jury concluded that, under the limiting instruction, it was not allowed to make a "deceptive advertising" finding because whether Fry's engaged in "false advertising" was for the court to decide, question No. 5 left it only two possible bases for a finding that Fry's interference was independently wrongful: (1) Fry's advertised merchandise without intending to sell it or (2) Fry's sold secondhand merchandise as new. However, the jury was not adequately instructed on either of these bases for a finding of independent wrongfulness. As noted, modified BAJI No. 7.86.1, which specifically addressed the independent wrongfulness element, did not expressly refer to advertising merchandise without intending to sell it or selling secondhand merchandise as new as a basis for finding independent wrongfulness. The instructions on Apex's UPA claims addressed three claims: (1) selling merchandise below cost for the purpose of injuring competitors or destroying competition; (2) selling merchandise as a "loss leader" with the purpose to injure competitors or to destroy competition; and (3) engaging in locality discrimination with the intent to destroy the competition of an established dealer. None of the court's instructions on these UPA claims referred to advertising merchandise without intending to sell it or selling secondhand merchandise as new.

In addition to being inconsistent with modified BAJI No. 7.86.1 and question No. 5, the limiting instruction is problematic with respect to the fourth cause of action because it effectively precluded the jury from considering the testimony of Apex's lay consumer witnesses and expert witness Belch on the element of independent wrongfulness. The limiting instruction directed the jury that, regarding the fourth cause of action, it could "consider this evidence, but only to the extent that it may bear on Fry's intent to interfere with the relationship between Apex or Abacus and its customers. Do not consider this evidence for any other purpose." (Italics added.) The plain meaning of this language is that the jury could consider the testimony of Apex's witnesses on the element addressed by question No. 4 – i.e., whether Fry's committed "intentional acts that were designed to disrupt, and that did actually disrupt, the [economic] relationship between Apex . . . and its customers" – but the jury could not consider Apex's witness testimony on the independent wrongfulness element addressed by question No. 5 – i.e., whether Fry's conduct that disrupted the relationship between Apex and its customers was independently wrongful. The limiting instruction effectively compelled a verdict in Fry's favor on the fourth cause of action by precluding the jury from considering any of Apex's testimonial evidence on the issue of independent wrongfulness. Significantly, the jury found in favor of Apex on Question No. 4, but answered "no" to Question No. 5, which defeated Apex's fourth cause of action for intentional interference with prospective economic advantage.^[16]

A judgment in a civil case may be reversed for instructional error when the reviewing court, after examination of the entire cause, including the evidence, concludes that the error resulted in a miscarriage of justice. (Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 580 (citing Cal. Const. art. VI, § 13); Huffman v. Interstate Brands Companies (2004) 121 Cal.App.4th 679, 703.) Instructional "[e]rror is considered prejudicial when it appears probable that an improper instruction misled the jury and affected its verdict. [Citation.] As [the California Supreme Court has] observed, 'Whether a jury has been misled by an erroneous instruction or by the overall charge must be determined by an examination of all the circumstances of the case including a review of all of the evidence as well as the instructions as a whole.' [Citation.]" (Krouse v. Graham (1977) 19 Cal.3d 59, 72, italics added; Soule v. General Motors, supra, 8 Cal.4th at pp. 580-581 [In deciding whether instructional error was prejudicial the court must "evaluate (1) the state of the evidence, (2) the effect of other instructions, (3) the effect of counsel's arguments, and (4) any indications by the jury itself that it was misled" (fn. omitted)].)

"It is well settled that the giving of conflicting or contradictory instructions on a material point is error. [Citations.] The giving of an erroneous instruction is not cured by the giving of other correct instructions where the effect is simply to produce a clear conflict in the instructions and it is not possible to know which instruction was followed by the jury in arriving at a verdict. [Citations.]" (Lewis v. Franklin (1958) 161 Cal.App.2d 177, 185.) "Since the obvious purposes of instructions is to clarify the law for the jury, the giving of contradictory instructions resulting in a confused and misleading picture[] can hardly be other than prejudicial error. In such a situation, respondent's assertion that '[t]he charge to the jury must be read as a whole,' is not a sufficient answer." (Belletich v. Pollock (1946) 75 Cal.App.2d 142, 147.)

Fry's contends Apex is barred by the doctrine of invited error from objecting to the limiting instruction on appeal because Apex did not object to the instruction below and proposed modifications to the instruction that the court incorporated into the final version it read to the jury. Fry's cites Smith v. Americania Motor Lodge (1974) 39 Cal.App.3d 1, 7 for the rule that "[u]nder the doctrine of invited error, 'if instructions are given by the court at the request of the opposing party, or on its own motion, the complaining party cannot attack them if he himself proposed similar instructions.' [Citations.]" (Original italics.) This rule is inapplicable here because Apex did not propose the limiting instruction or a similar instruction. Apex's participation in the creation of the instruction was merely to propose certain nonsubstantive modifications to the instruction, which was invited by the court and "proposed" (i.e., drafted) by Fry's.

Fry's also cites People ex rel. Dept. of Transportation v. Salami (1991) 2 Cal.App.4th 37 (Salami) for the proposition that, in Fry's words, "[a] party shall be deemed to have waived any objection that an instruction is misleading or incomplete if the party fails to propose additional or qualifying language addressing the purported deficiencies." (Id. at p. 42, fn. 2, citing Agarwal v. Johnson (1979) 25 Cal.3d 932, 948-949 (Agarwal), overruled on another point in White v. Ultramar (1999) 21 Cal.4th 563, 575, fn. 4.) The rule Fry's is referring to concerns instructions that are objected to as being too general or incomplete; it does not apply to instructions that are claimed to be misleading. As stated in Agarwal, the rule is that "a party may not complain on appeal that an instruction correct in law is too general or incomplete unless he had requested an additional or qualifying instruction. [Citations.]" (Agarwal, supra, 25 Cal.3d at p. 948.) This rule is inapplicable because Apex is not objecting to the limiting instruction on the ground it is too general or incomplete.

The applicable rule to Apex's objection to the limiting instruction is the rule set forth in Code of Civil Procedure section 647, which provides that "the following are deemed excepted to: . . . giving an instruction, refusing to give an instruction, or modifying an instruction requested . . . ." Agarwal noted the distinction between the two rules: " ' "To hold that it is the duty of a party to correct the errors of his adversary's instructions . . . would be in contravention of section 647, Code of Civil Procedure, which gives a party an exception to instructions that are given . . . . While the exception will be of no avail where an instruction states the law correctly but is 'deficient merely by reason of generality,' in other cases he will not be foreclosed from claiming error and prejudice." ' " (Agarwal, supra, 25 Cal.3d at p. 949, quoting Rivera v. Parma (1960) 54 Cal.2d 313, 316.)

Although a party may not be relieved of the invited error rule by Code of Civil Procedure section 647 if the party has requested or agreed to an instruction (Pugh v. See's Candies, Inc. (1988) 203 Cal.App.3d 743, 759), the record here does not show that Apex requested or agreed to the limiting instruction, which the court invited and Fry's counsel drafted. Although Apex's counsel proposed minor changes and did not expressly object to Fry's proposed instruction, he essentially objected to the instruction's limitation of the jury's consideration of the testimony of customer and expert witnesses called by Apex to the element of Fry's intent to interfere with the relationship between Apex its customers, stating: "If Fry's was out there and just competing fairly, then that is not an interference – that is a defense to intentional interference with economic advantage. But if they are cheating, if they are engaging in false advertising, in below cost sales and loss leaders, then they are using improper [i.e., independently wrongful] means to compete. And that is one of the elements I have to show in my fourth cause of action. . . . [¶] . . . [Fry's advertising is] misleading. It's deceptive. It's false. . . . That is the means, improper means of unfairly competing." (Italics added.) When the court pointed out that unfair competition was to be decided by the court, Apex's counsel responded: "Yes, Your Honor, but I wasn't meaning for the cause of action of unfairly competing, I was meaning the improper means of interfering with economic advantage . . . . [¶] . . . We have to show that their intent is to destroy the competition and that they are doing it by unlawful means, or unfair means." (Italics added.) As noted, the limiting instruction precluded the jury from considering the testimony of Apex's witnesses on the "independent wrongfulness" element of the fourth cause of action.

It was only after the court made clear its intent to give the limiting instruction and informed the parties of its proposed modifications to the instruction that Apex's counsel stated, "[T]he jury instruction proposed by the court is fine." We do not view this as acquiescence by Apex in the giving of the limiting instruction per se, but merely as acquiescence in the court's proposed modifications to the instruction proposed by Fry's. Apex's acquiescence in the court's modifications did not constitute a waiver of the right to challenge the limiting instruction on appeal. We deem the limiting instruction excepted to by Apex under Code of Civil Procedure section 647.

In any event, even if Apex's participation and acquiescence in the drafting and giving of the limiting instruction amounted to a waiver of objection to that instruction, the instructional error as to the fourth cause of action goes beyond the wording of the limiting instruction; it includes the conflict between that instruction and the modified version of BAJI No.7.86.1 given to the jury and between the modified version of BAJI No. 7.86.1 and the special verdict. Apex did not waive the right to argue on appeal that the court committed prejudicial instructional error with respect to the fourth cause of action for intentional interference with prospective economic advantage.

We conclude prejudicial instructional error occurred with respect to the fourth cause of action, as it appears probable that the inconsistencies between the limiting instruction, the modified version of BAJI No. 7.86.1 given by the court, and question No. 5 misled the jury and affected its verdict on the fourth cause of action. The limiting instruction conflicted with modified BAJI No. 7.86.1 on the material point of whether the jury could consider unfair competition and false advertising as bases for finding independently wrongful conduct under the fourth cause of action, and modified BAJI No. 7.86.1 conflicted with question No. 5 on the material point of the allowable bases for a finding of independently wrongful conduct. These inconsistencies, along with the limiting instruction's preclusion of the jury's consideration of the testimony of Apex's witnesses on the element of independent wrongfulness, constitute prejudicial instructional error.^[17]

B. The Court Did Not Commit Prejudicial Instructional Error with Respect to Apex's First Cause of Action for Violations of the Unfair Practices Act (UPA)

Apex contends the court committed prejudicial error with respect to the loss leader and sales below cost claims in Apex's first cause of action for violations of the UPA by instructing the jury that "purpose . . . to injure competitors or destroy competition" means having a "conscious and positive desire" to do so and using the phrase "conscious and positive desire" in special verdict questions regarding the loss leader and sales below cost claims.

Defining "purpose" under sections 17043 and 17044 as a "conscious and positive desire" accords with Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163 (Cel-Tech). Cel-Tech considered the meaning of the word "purpose" in sections 17403 and 17044. Section 17043 provides: "It is unlawful for any person engaged in business within this State to sell any article or product at less that the cost thereof to such vendor, or to give away any article or product, for the purpose of injuring competitors or destroying competition." (Italics added.)^[18] The plaintiffs in Cel-Tech argued that the word "purpose" under the statute should be given the same meaning as "intent" under tort law – i.e. that the "purpose" requirement is satisfied if " 'the defendant believed or knew that harm was substantially certain to result, or that the manifest probability of harm was very great.' " (Cel-Tech, supra, at p. 172.)

Noting "that ' "intent," in the law of torts, denotes not only those results the actor desires, but also those consequences which he knows are substantially certain to result from his conduct[]' [citation]," Cel-Tech(, supra, 20 Cal.4th at p. 172) concluded: "If section 17043 used the word 'intent' to describe the necessary mental state, plaintiffs' position might have merit. Section 17043, however, does not say 'intent'; it says 'purpose.' 'Intent' might be ambiguous; 'purpose' is not. [¶] 'Purpose' has a precise meaning." (Cel-Tech, supra, 20 Cal.4th at pp. 172-173.)

Cel-Tech noted that the drafters of the Model Penal Code defined "four distinct culpable mental states. None of the definitions uses the ambiguous word 'intent.' The code's two highest mental states are to act 'purposely' and to act 'knowingly.' [Citation.] Persons act 'purposely' with respect to a result if it is their 'conscious object' to cause that result. [Citation.] Persons act 'knowingly' with respect to a result if they are 'practically certain' their conduct will cause that result. [Citation.] The comment to the code explains the difference between purpose and knowledge. 'In defining the kinds of culpability, the Code draws a narrow distinction between acting purposely and knowingly, one of the elements of ambiguity in legal usage of the term "intent."'""' (Cel-Tech, supra, 20 Cal.4th at p. 173, fn. omitted, italics added by Cel-Tech.) " 'The essence of the narrow distinction between these two culpability levels is the presence or absence of a positive desire to cause the result; purpose requires a culpability beyond the knowledge of a result's near certainty.' [Citation.]" (Ibid., original italics.)

Cel-Tech noted that the first Restatement of Torts also drew a distinction between purpose and knowledge, as reflected in its explanation that the "intentional act" element of battery is satisfied if the act in question is " 'done for the purpose of causing the contact or apprehension or with knowledge on the part of the actor that such contact or apprehension is substantially certain to be produced.' [Citation.]" (Cel-Tech, supra, 20 Cal.4th at p. 174, italics added by Cel-Tech.) Cel-Tech observed that "[a]lthough the Restatement defines intent broadly as including both purpose and knowledge, it recognizes the narrow meaning of the word 'purpose.' " (Ibid.) Cel-Tech concluded: "We do not doubt that an actor who knows but does not desire that an act will cause a result might be deemed to intend that result, or that this intent or knowledge might be sufficient for some forms of tort liability. But these circumstances do not change the meaning of the word 'purpose.' We are interpreting a statute. Section 17043 uses the word 'purpose,' not 'intent,' not 'knowledge.' We therefore conclude that to violate section 17043, a company must act with the purpose, i.e., the desire, of injuring competitors or destroying competition." (Id. at pp. 174-175, italics added.)

Thus, Cel-Tech supports defining "purpose" within the meaning of sections 17043 and 17044 as a "desire," "conscious object," or "positive desire." Adding the adjective "conscious" to "positive desire" is inconsequential, as a "positive" desire is necessarily a "conscious" desire. Accordingly, defining "purpose" under sections 17043 and 17044 as a "conscious and positive desire" accords with Cel-Tech's construction of those statutes.

Defining "purpose" as a "conscious and positive desire" also accords with the plain meaning of the term "purpose." The relevant definition of "purpose" is "something set up as an object or end to be attained." (Webster's Collegiate Dict. (11th ed. 1989) p. 957.) "Setting up something as an object or end to be attained" is not substantially different in meaning than "having a conscious and positive desire to attain an object or end." Accordingly, it is not reasonably probable the jury would have returned a different verdict had the court not defined "purpose" as a "conscious and positive desire." The court's definition of "purpose" does not constitute prejudicial error.

C. The Court's Statement of Decision Is Not Prejudicially Defective

Apex contends the court's statement of decision on Apex's second cause of action for false advertising under section 17500 and third cause of action for unfair competition under section 17200 is prejudicially defective in three respects: (1) it fails to address two of the three means of establishing competitor unfairness under Cel-Tech; (2) it fails to disclose the court's factual and legal reasoning in concluding there was no "incipient violation" of law; and (3) it fails to address principal controverted issues alleged in the third cause of action of Apex's second amended complaint as to which Apex presented substantial evidence.

Under Code of Civil Procedure section 632, "[u]pon the timely request of one of the parties in a nonjury trial, a trial court is required to render a statement of decision addressing the factual and legal bases for its decision as to each of the principal controverted issues of the case. [Citation.] A statement of decision need not address all the legal and factual issues raised by the parties. Instead, it need do no more than state the grounds upon which the judgment rests, without necessarily specifying the particular evidence considered by the trial court in reaching its decision. [Citations.] '[A] trial court rendering a statement of decision under . . . [Code of Civil Procedure] section 632 is required to state only ultimate rather than evidentiary facts because findings of ultimate facts necessarily include findings on all intermediate evidentiary facts necessary to sustain them. [Citation.]' [Citations.]" (Muzquiz v. City of Emeryville (2000) 79 Cal.App.4th 1106, 1124-1125.)

Code of Civil Procedure section 634 provides: "When a statement of decision does not resolve a controverted issue, or if the statement is ambiguous and the record shows that the omission or ambiguity was brought to the attention of the trial court . . . prior to entry of judgment . . . , it shall not be inferred on appeal . . . that the trial court decided in favor of the prevailing party as to those facts or on that issue." However, this section " 'does not require that a finding be made as to every minute matter on which evidence is received at the trial . . . .' " (Davis v. Kahn (1970) 7 Cal.App.3d 868, 880, quoting Coleman Engineering Co. v. North American Aviation, Inc. (1966) 65 Cal.2d 396, 410.)

1. The statement of decision adequately applies the Cel-Tech test for competitor unfairness

Cel-Tech required "that any finding of unfairness to competitors under section 17200 be tethered to some legislatively declared policy or proof of some actual or threatened impact on competition." (Cel-Tech, supra, 20 Cal.4th at pp. 186-187.) Accordingly, Cel-Tech adopted the following test: "When a plaintiff who claims to have suffered injury from a direct competitor's 'unfair' act or practice invokes section 17200, the word 'unfair' in that section means conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition." (Id. at p. 187, fn. omitted.)

We conclude the court's statement of decision adequately applies Cel-Tech to Apex's competitor unfair competition claims and includes sufficient ultimate fact findings as to those claims. In reaching that conclusion, we are mindful that Apex sought injunctive and restitutionary relief under its second and third cause of action – the only available remedies under the relevant statutes.

The statement of decision quotes Cel-Tech's test for unfair conduct in a direct competitor claim under section 17200. After listing the controverted issues raised by Apex's second and third causes of action, the court found Apex met its burden of proof on its claim that Fry's violated section 17504. Regarding the remaining controverted issues under the second and third causes of action, the statement of decision states: "[T]he Court has considered the evidence and testimony of the consumer witnesses and expert witnesses called by [Apex] and evidence and testimony, presented by Fry's personnel and expert witnesses called by the Defendants, and finds that the evidence presented by the Defendants preponderates and overcomes the presumptions against the Defendants. Those presumptions are contained within Sections 17071 and 17071.5 of the Business and Professions Code relating to below cost sales and locality discrimination in the former and below cost sales in the latter."

The court noted that as to each type of wrongful conduct shown by Apex, Fry's presented opposing evidence. The court stated: "Such opposing evidence consisted occasionally of, not a refutation that the act had occurred, but an explanation for it. Other opposing evidence persuaded the Court that the act, if unexplained, was aberrational. The opposing evidence also consisted of policies and procedures the Defendants have implemented, some even since the filing of the subject case, to prevent violations of Sections 17200 and 17500. While [Apex] has shown that some of the acts . . . took place after the dissemination of those policies and procedures, those policies and procedures nevertheless indicate the desire of corporate management to not run afoul of the false advertising and unfair competition laws." The court found Apex had not met its burden of proving that such isolated and inadvertent incidents amounted to a violation of false advertising and unfair competition law.

Accordingly, the court found that except for the violation of section 17504, Apex "did not prove, by a preponderance of the evidence, that Defendants disseminated advertising (i) as part of a plan or scheme the intent of which was not to sell goods as advertised; or (ii) that contained statements that were untrue or misleading and which the defendant knew, or in the exercise of reasonable care should have known, are untrue or misleading." The court summarized: "Other than as to Section 17504, with respect to Section 17200, . . . the Court finds [Apex] has failed to meet its burden of proof that Defendants engaged in 'unlawful' acts or practices; the Court also finds that [Apex] failed to carry its burden of proof that Defendants engaged in 'unfair' practices with respect to [Apex's] claims as a competitor, as that term is defined in Cel-Tech, in that there was no incipient violation of the law . . . ."

The court concluded that "one or two, or even a few instances of [Fry's] alleged misconduct" were insufficient "to warrant either injunctive relief to prevent the practice from occurring in the future or restitution to the victims to make them whole[.]" Elaborating on that point, the court stated: "[Apex] has failed to meet its burden of proof by the preponderance of the evidence to obtain the relief sought. The Court is not persuaded that the past acts result in a reasonable probability that such acts will continue in the future. The Court is convinced that such is the standard to obtain injunctive relief, even in unfair competition cases. As to some of the specific instances of alleged misconduct, opposing evidence was presented persuading the Court that the acts or practices have been discontinued. [¶] Thus, even if there were found to be separate, isolated acts that allegedly violate Sections 17200 or 17500, [Apex] cannot receive the relief for which it has prayed. The Court has very carefully weighed all of the evidence, including percipient and expert witnesses, and matters subject to judicial notice, and finds that [Apex] has not proven its case other than a violation of . . . Section 17504."

As noted, Apex argues the court committed reversible error in its statement of decision by failing to address two of the three means of establishing competitor unfairness under Cel-Tech<