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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 977.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

Story continue in Part II ………

Publication Courtesy of San Diego County Legal Resource Directory.

Analysis and review provided by San Diego County Apartment Manager Lawyers.

^[1] All further statutory references are to the Business and Professions Code unless otherwise noted.

^[2] Apex filed nine separate notices of appeal, one from the judgment and the others from various postjudgment orders. We address only the appealed orders that Apex addresses in its opening brief.

^[3] Fry's asserts in its respondent's brief that statutory changes resulting from Proposition 64, passed in the November 2004 election, apply to this action and bar Apex from obtaining any relief on its claims brought on behalf of the general public under section 17200. We need not address that issue because Apex's section 17200 claims on behalf of the general public fail for other reasons. Even if applied retroactively, Proposition 64 does not compel reversal of the portion of the judgment in favor of Apex on its claim that Fry's violated section 17504, as Apex brought that claim as a direct competitor allegedly injured by Fry's acts of unfair competition (in the form of false advertising) as well as on behalf of the general public.

The question of whether Proposition 64 applies retroactively is now pending before the California Supreme Court. (E.g., Bivens v. Corel Corp. (2005) 126 Cal.App.4th 1392, review granted April 27, 2005, S132695; Lytwyn v. Fry's Electronics, Inc. (2005) 126 Cal.App.4th 1455, review granted April 27, 2005, S133075.)

^[4] A fifth cause of action for negligent interference with prospective economic advantage was dismissed before trial.

^[5] References to "Fry's" in connection to the first, second and third causes of action include Randy Fry. The fourth cause of action was brought against the corporate defendant only.

^[6] Black's Law Dictionary defines "bait and switch" as "[a] sales practice whereby a merchant advertises a low-priced product to lure customers into the store, only to induce them to buy a higher-priced product." (Black's Law Dictionary (8th ed. 2004), p. 152, col. 2.) Apex does not use the term "bait and switch" in the second cause of action but alleges conduct falling within the definition of that term.

^[7] Presumably, Apex intended to refer to legislation contained in the Business and Professions Code authorizing its claims regarding Fry's alleged unfair and deceptive acts and practices.

^[8] Whether Fry's has violated the permanent injunction included in the judgment is not at issue in Apex's appeal or Fry's cross-appeal challenging the propriety of the court's issuance of the permanent injunction. Whether the court abused its discretion in issuing the injunction is a question of law we address in Fry's cross-appeal.

^[9] We decline the invitation in Apex's reply to Fry's opposition to the request for judicial notice to treat the request as a motion to take additional evidence under Code of Civil Procedure section 909.

^[10] All further rule references are to the California Rules of Court. Under rule 18(b)(2), unless the reviewing court orders otherwise, within 20 days after the first notice of designation of exhibits is filed under rule 18(a),"[a]ny party in possession of designated exhibits returned by the superior court must put them into numerical or alphabetical order and send them to the reviewing court with two copies of a list of the exhibits sent. If the reviewing court clerk finds the list correct, the clerk must sign and return one copy to the party."