Foundation for Taxpayer and Consumer Rights v. T-Mobile

Filed 10/4/06 Foundation for Taxpayer and Consumer Rights v. T-Mobile CA1/5

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FIVE

Plaintiff and appellant Foundation for Taxpayer and Consumer Rights (FTCR) appeals the judgment of dismissal after the demurrer of defendant and respondent T-Mobile, U.S.A., Inc. (T-Mobile) to FTCR’s action for unfair competition was sustained without leave to amend. FTCR acknowledges that the recently filed Californians for Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223 (Californians for Disability Rights) is determinative of the causes of action as pled in its complaint. It asserts that, pursuant to Branick v. Downey Savings and Loan Assn. (2006) 39 Cal.4th 235 (Branick), a companion decision to Californians for Disability Rights, the judgment should be reversed and remanded to allow it to seek leave to amend.^[1]

BACKGROUND

Because the only issue before us is whether the court abused its discretion in refusing to permit FTCR to amend its complaint, we set forth the procedural history in detail.

Cellphone Termination Fee Cases

In January 2004, the trial court issued a case management order concerning a “coordinated and complex case“ in which 10 complaints concerning unfair business practices had been brought against the seven major cellular telephone providers in California. The subject FTCR complaint had not yet been filed. The coordinated proceedings had been titled the “Cellphone Termination Fee Cases.” For purposes of case management, the court divided the coordinated proceeding into three substantive topics: early termination, handset policies, and deposits. The order explained that this structure “will permit all the claims against a defendant relating to [one of the three topics] to proceed to a final disposition through dismissal or trial without needing to resolve all claims against that defendant or to coordinate with other parties.” The order further required the filing of first amended consolidated complaints that were organized by claim and defendant.

FTCR Action

In June 2004 FTCR brought this action for unfair competition on behalf of the public against defendant T-Mobile, a cellular telephone provider. Two other providers, AT&T Wireless Services and Cingular Wireless, were also named as defendants. The gravaman of FTCR’s complaint challenged as unlawful the handset locking practices of the three providers. According to FTCR’s allegations, federal regulations permit customers to retain their cellular telephone number when they switch from one provider to another. However, customers are in fact prevented from doing so because providers “lock” the customers’ cellular telephones, known as handsets, so that when the customers wish to switch from an old to a new provider, the customers cannot use the handset they purchased from their old provider. Instead, they are required to purchase their new provider’s authorized handset.

In August 2004 the court granted the petition of defendant AT&T Wireless to have FTCR’s action added to the coordinated Cellphone Termination Fee Cases.

Proposition 64

At the November 4, 2004 general election the voters approved Proposition 64. Proposition 64 amended Government Code sections 17203 and 17204 and provides that a private person has standing to sue for relief from unfair competition only if he or she “has suffered injury in fact and has lost money or property as a result of such unfair competition.” (Californians for Disability Rights, supra, 39 Cal.4th at p. 227.)

Post Proposition 64 Trial Court Proceedings

1. T-Mobile’s Motion for Judgment on the Pleadings

In January 2005, T-Mobile, based on Proposition 64, moved for judgment on the pleadings in three actions within the Cellphone Termination Fee Cases in which it was a defendant. FTCR’s action was not one of the three actions.

T-Mobile’s motion was made on the grounds that the plaintiffs in the three cases did not have standing to assert their claims of unfair competition pursuant to the new standing requirements of Proposition 64. One of the three cases for which T-Mobile sought judgment on the pleadings was “Nguyen v. T-Mobile USA, Inc.: Handset Locking Claims.”

2. February 17, 2005 Order

On February 17, 2005, the court issued an order concerning the application of Proposition 64 to all cases filed before November 2, 2004. The Cellphone Termination Fee Cases were among the cases affected by the order.

The court concluded generally that, since the passage of Proposition 64, only public officials could prosecute unfair competition claims in the interest of the general public, and that persons prosecuting unfair competition claims in their own interest must now meet the standing requirements of Government Code section 17204. In the February 17, 2005 global order, the court permitted “the named plaintiffs” to amend their complaints to allege, in the language of Proposition 64, that they “’suffered injury in fact’” and have “’lost money or property’“ as a result of the alleged unfair competition. It gave the named plaintiffs the opportunity to seek permission “to amend their complaints to add new legal theories of recovery that are based on the same facts and circumstances as the existing [unfair competition] claims, to add new plaintiffs if the current plaintiff cannot meet the new standing requirements, and to otherwise amend their complaints.”

Specific to the Cellphone Termination Fee Cases the order stated: “This coordinated proceeding includes several complaints that are organized by defendant and the nature of the claims. The motions for judgment on the pleadings on the [unfair competition] claims by the named plaintiffs in the interest of the public are GRANTED. Plaintiffs must provide the Attorney General and the Alameda County District Attorney with notice of this litigation on or before February 25, 2005. If no public official has intervened in the case to prosecute the [unfair competition] claims in the interest of the general public by May 6, 2005, then the claims in the interest of the general public will be dismissed. The motions for judgment on the pleadings on the [unfair competition] claims by the named plaintiffs in their own interests are GRANTED WITH LEAVE TO AMEND. [Code Civ. Proc. § 438, subd. (h)(1).] Plaintiffs must allege facts that demonstrate standing under section 17204. On or before March 4, 2005, Plaintiffs must file either a stipulation to permit the filing of Amended Complaints or motions for leave to file Amended Complaints. If no stipulation or motions are filed by March 4, 2005, then the claims of plaintiffs on their own behalf will be dismissed.”

On February 17, 2005, the court served its order on the plaintiffs’ and defendants’ liaison counsel for the Cellphone Termination Fee Cases. On February 23, 2005, counsel for T-Mobile served the order on both FTCR and on its attorneys.^[2]

On March 22, 2005, the court issued a case management order in the Cellphone

Termination Fee cases extending to March 25, 2005 the date for plaintiffs to file amended complaints. On March 25, 2005, the parties in the Cellphone Termination Fee Cases agreed to extend the deadline for filing and serving plaintiffs’ amended complaints to April 4, 2005, and defendants’ responsive pleadings to April 25, 2005.

3. April 4, 2005 Amended Complaint

On April 4, 2005, an amended complaint was filed against T-Mobile alleging its wrongful handset locking practice. The amended complaint was brought by Christina Nguyen and Adrianne Grant (not plaintiffs in the instant action), individually and on “a classwide basis” on behalf of all California residents who purchased locking handsets from T-Mobile. Although FTCR’s attorneys did not execute the amended complaint, both Jordan Lurie of the Weiss & Lurie firm and Harvey Rosenfield, Pamela Pressley, and Lawrence Markey, Jr. of Foundation for Taxpayer and Consumer Rights (see fn. 2, ante) were listed among the attorneys for the plaintiffs. This amended complaint is now pending in the trial court.

4. Demurrer to FTCR Complaint

On April 25, 2005, T-Mobile demurred to FTCR’s complaint on the grounds FTCR lacked standing to sue as a result of Proposition 64 and could not allege facts sufficient to state a cause of action. It further argued that FTCR should not be granted leave to amend because the court’s February 17, 2005 order gave all plaintiffs in the Cellphone Termination Fee Cases an opportunity to amend their complaints by a specific date, and FTCR had taken no steps to comply with the order. T-Mobile also argued that FTCR should not be given leave to substitute parties, given the existing amended complaint brought against it by Nguyen and Grant on a claim of wrongful handset locking practices.

FTCR opposed the demurrer on the grounds it was untimely under Code of Civil Procedure sections 430.40, subdivision (a) and 1054, subdivision (a), insofar as it was filed more than 30 days after FTCR’s case was added in August 2004 to the coordinated Cellphone Termination Fee Cases, and more than 30 days after the February 17, 2005 order.^[3] FTCR further argued it should be granted leave to amend to allege injury in fact and loss of money or property and to add new parties, pursuant to the court’s February 17, 2005 order.

In support of FTCR’s opposition, Jordan Lurie, “counsel of record” for FTCR, declared: The court’s August 5, 2004 order adding FTCR to the Cellphone Termination Fee Cases was not served on FTCR. He first became aware and obtained a copy of this add-on order in February 2005. “[I]n an abundance of caution” he promptly served the order on all parties to the FTCR action on February 23, 2005.

In reply to FTCR’s opposition, T-Mobile argued that its demurrer was not untimely, given the filing schedule the parties had agreed to. Alternatively, it argued that even an untimely demurrer would not change the fact that FTCR had no standing to assert its claims under Proposition 64, and the court could consider the demurrer a motion for judgment on the pleadings.

The court characterized T-Mobile’s demurrer as a motion to strike the unfair competition claims in FTCR’s “Handset Locking” complaint, and, as such, sustained it without leave to amend. It held that, as an action within the coordinated Cellphone Termination Fee Cases, FTCR’s complaint was subject to the court’s February 17, 2005 order regarding the applicability of Proposition 64 to pending cases and its March 22, 2005 order setting the schedule for filing amended complaints. Because FTCR lacked standing and failed to file an amended complaint by the designated date, the court dismissed FTCR’s action.

This appeal followed the judgment of dismissal.

DISCUSSION

I. FTCR’S Request for Remand

FTCR appealed on the grounds Proposition 64 did not apply to cases pending when it was enacted. Alternatively, it contended the trial court abused its discretion in refusing to grant leave to amend, either to allow the substitution of new plaintiffs and/or to add class action allegations. While its appeal was pending, Californians for Disability Rights held that Proposition 64 applies to cases pending when it took effect. (Californians for Disability Rights, supra, 39 Cal. 4th at p. 227.) The companion case, Branick, held that Proposition 64 does not affect the ordinary rules governing the amendment of complaints and their relation back. (Branick, supra, 39 Cal.4th at p. 239.) Therefore, Branick held, Proposition 64 does not preclude a court from ever permitting plaintiffs whose standing has been revoked by Proposition 64 to amend their complaints to satisfy Proposition 64’s standing requirements. (Ibid.)

Branick affirmed the judgment of the Court of Appeal, which had reversed the judgment of dismissal against the Branick plaintiffs because they had not yet filed a motion for leave to amend. It remanded the case with instructions for the trial court to exercise its discretion under Code of Civil Procedure section 473, subdivision (a)(1) and to determine whether to grant leave to amend to allege injury in fact, as required by Proposition 64. (Branick, supra, 39 Cal.4th at p. 239.)

After these two Supreme Court opinions were filed, FTCR requested in this court that its appeal “be remanded to the trial court without argument [as it and T-Mobile had originally requested] with instructions to proceed in accordance” with the holdings of Californians for Disability Rights and Branick.

T-Mobile opposed FTCR’s request on the grounds that neither Supreme Court case raised new issues for the trial court to consider. T-Mobile asserted that the court’s February 17, 2005 order comported with Californians for Disability Rights by holding that Proposition 64 applied to pending cases, and comported with Branick by permitting FTCR to seek leave to amend its complaint to allege facts showing standing under Proposition 64 and to substitute new parties. Therefore, the only remaining issue in the case was whether the trial court abused its discretion in failing to grant FTCR further leave to amend.

Because T-Mobile timely requested oral argument and declined to stipulate to FTCR’s proposed remand, we denied FTCR’s request to remand.

II. No Abuse in Denial of Leave to Amend

FTCR did not dispute before the trial court nor does it now dispute that, since Proposition 64, its complaint, as pled, was properly subject to demurrer. Its appeal contends the court abused its discretion in not granting it leave to amend. It argues it was not subject to the court’s February 17 and March 22, 2005 orders, insofar as no defendant in the FTCR action had filed a demurrer or other motion specifically challenging the FTCR complaint prior to the February 17, 2005 order.

When a demurrer is sustained without leave to amend, the appellate court determines whether there is a reasonable possibility that the defect can be cured by amendment. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) If so, the court has abused its discretion and we reverse. (Ibid.) If not, there has been no abuse, and we affirm. (Ibid.) “The burden of proving such reasonable possibility is squarely on the plaintiff. [Citation.]” (Ibid.)

We find no abuse. A court may grant judgment on the pleadings on its own motion when a complaint does not state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 438, subd. (c)(3)(B)(ii).) The court made its February 17, 2005 order applicable to all plaintiffs in the coordinated Cellphone Termination Fee Cases. FTCR was among those plaintiffs and was served with the February 17 order on February 23, 2005.

The representatives for the Cellphone Termination Fee Cases thereafter agreed upon a filing schedule for amended complaints--April 4, 2005 for the amended complaint, April 25, 2005 for responsive pleadings thereto. FTCR did not file an amended complaint, and T-Mobile filed its demurrer, or, alternatively, motion for judgment on the pleadings, on April 25. A nonstatutory motion for judgment on the pleadings may be filed at any time and is governed by the same rules applicable to demurrers. (See Pierson v. Sharp Memorial Hospital, Inc. (1989) 216 Cal.App.3d 340, 342-343; Sofias v. Bank of America (1985) 172 Cal.App.3d 583, 586.) However, it is characterized, T-Mobile’s April 25, 2005 challenge to FTCR’s complaint was timely, either because, as a demurrer, it complied with the parties’ agreed-upon filing schedule, or, as a motion for judgment on the pleadings, it was not subject to a time limitation.

Furthermore, even if, as FTCR attorney Lurie declared in opposition to the demurrer, he did not become aware of the court’s August 5, 2004 order adding FTCR to the Cellphone Fee Termination Cases until February 2005, neither he nor any other FTCR attorney or representative ever asserted that, due to this late notice, FTCR was unable to seek leave to amend by the April 4, 2005 amended complaint filing deadline agreed to by the Cellphone Fee Termination Case parties. Indeed, all FTCR attorneys timely joined as counsel in the amended complaint of individuals Nguyen and Grant against T-Mobile that claimed unfair handset locking practices, the same unfair practice FTCR had alleged against T-Mobile in its own representative complaint. In so doing, FTCR manifestly knew that it had been given the opportunity to file an amended complaint that would satisfy the Proposition 64 requirements by substituting in new parties who could allege they had suffered injury in fact from this practice.

By failing to show (1) there was a reasonable possibility it could cure the Proposition 64 standing defects in its complaint, and (2) that it was unable to make this requisite showing by the agreed-upon filing schedule, FTCR did not satisfy its burden that it should be permitted to amend its complaint.

DISPOSITION

The judgment is affirmed. Parties to bear their own costs.

_________________________

Jones, P.J.

We concur:

________________________

Simons, J.

________________________

Gemello, J.

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^[1] We deferred ruling on FTCR’s request to take judicial notice of several documents relevant to its argument that Proposition 64 was not intended to apply retroactively. We now deny the request as moot, in light of the Californians for Disability Rights decision.

^[2] FTCR’s complaint lists “Jordan L. Lurie (130013) Leigh Parker (170565) WEISS & YOURMAN” and “Harvey Rosenfield (123082) Pamela M. Pressley (180362) Lawrence Markey, Jr. (222684) FOUNDATION FOR TAXPAYER AND CONSUMER RIGHTS” as “Attorneys for Plaintiff and the General Public.” The complaint was signed by Jordan Lurie. The Weiss & Yourman firm and Foundation for Taxpayer and Consumer Rights are listed separately on the Cellphone Termination Fee Cases service list.

^[3] Code of Civil Procedure section 430.40, subdivision (a) states: “A person against whom a complaint or cross-complain has been filed may, within 30 days after service of the complaint or cross-complaint, demur to the complaint or cross-complaint.”

Section 1054, subdivision (a) permits a court, on good cause shown, to extend any act related to pleadings in an action not more than 30 days but not without the consent of the adverse party.