In this opinion we consider the viability of appellants' claim for injunctive relief filed to prevent common carriers and retailers who sell prepaid phone cards to the public in several-minute blocks from allegedly engaging in misleading and deceptive advertising. Appellants contend that respondents have improperly failed to disclose in their advertising and packaging materials that calls made with the cards will be charged by rounding up to the next full minute, so that, for example, a call lasting one minute and one second will be debited from the card as a two-minute call. Appellants, who brought this action as private attorneys general on behalf of The People of the State of California, claim that respondents' advertising practices are unfair and misleading within the meaning of Business and Professions Code sections 17200 and 17500.
Based upon the filed rate doctrine, the trial court sustained without leave to amend the demurrer of each defendant, denied a motion for reconsideration brought by the retailer defendants and dismissed the action. We decide here that an action which seeks only to enjoin misleading or deceptive practices in the advertising of phone card rates, and seeks no monetary recovery, does not implicate the federal filed rate doctrine and can proceed under sections 17200 and 17500.
We also consider and reject respondents' several other grounds for demurrer, which were not specifically addressed by the trial court's ruling. We hold that the complaint is not preempted by the Federal Communications Act, that the California Public Utilities Commission does not have exclusive jurisdiction, that the doctrine of primary jurisdiction does not compel dismissal or stay of the action and that the appellants were not required to exhaust their administrative remedies. Accordingly, we reverse and remand for further proceedings on appellants' claim for injunctive relief.
FACTUAL AND PROCEDURAL BACKGROUND
On June 14, 1996, appellants filed, on behalf of The People of the State of California, a first amended complaint for injunctive relief, alleging that respondents were engaging in unfair business practices and false and misleading advertising, in violation of sections 17200 and 17500. Specifically, they alleged that respondents, who sell prepaid phone cards to the public, act deceptively in that the packaging for the cards does not "reveal to the consumer, prior to purchase, that calls made with these cards are, in fact, rounded up to the next higher minutes." For example, on the outer packaging of its "PrePaid Card" respondent AT & T states the card is "worth 10 minutes of phone calls in the U.S." and that "1 minute of calling time requires 1 unit when calling within the U.S." Appellants contend that these statements are false, deceptive and misleading because of the failure to state that calls are rounded up to the next minute, so that a twenty-second call will be billed at one minute, and a one-minute and ten-second call will be billed at two minutes. Statements made on packaging for phone cards sold by the
Appellants' first amended complaint alleges that respondents' practices, characterized as misrepresentations and nondisclosures of material facts, constitute unfair and fraudulent business acts or practices, within the meaning of section 17200 and unfair, deceptive, untrue or misleading advertising likely to have deceived the consuming public, within the meaning of section 17500. The complaint seeks "appropriate equitable relief including but not limited to an order: [¶] (1) Restraining defendants from continuing and/or pursuing the acts described and complained of in this action. [¶] (2) Restraining defendants from failing and/or refusing to undertake an immediate public information campaign to inform members of the general public in California of their policy of rounding up to the nearest minute when billing calls to their respective pre-paid phone cards. [¶] (3) Restraining defendants from failing and/or refusing to disgorge all ill-gotten monies which they obtained in California as a result of the acts set forth in this Complaint."
Respondents demurred to the first amended complaint, contending that it failed to state a cause of action under the filed rate doctrine because their billing practices, including that of rounding up phone card calls, had been fully disclosed in publicly filed rates, the contents of which the California public was conclusively presumed to know. They also demurred on the ground that the San Francisco Superior Court lacked subject matter jurisdiction over the raised claims, which were within the exclusive jurisdiction of the California Public Utilities Commission, the FCC and the federal courts. The demurrers were sustained without leave to amend and the action dismissed on the ground that the action was barred by the filed rate doctrine. This timely appeal followed.
STANDARD OF REVIEW
We will first consider sections 17200 and 17500 and address whether, assuming the truth of the complaint's well-pleaded allegations, a cause of action has been stated. Next we consider whether the claims fall within and are barred by the filed rate doctrine. Finally, we address the remainder of the grounds raised on demurrer.
Does the Complaint State a Cause of Action Under Sections 17200 and 17500?
Thus, the statutes are meant to protect the public from a wide spectrum of improper conduct in advertising. They may be invoked where the advertising complained of is not actually false, but thought likely to mislead or deceive, or is in fact false. By their breadth, the statutes encompass not only those advertisements which have deceived or misled because they are untrue, but also those which may be accurate on some level, but will nonetheless tend to mislead or deceive. We reiterate the point made in Saunders, that the concept encompassed in the phrase "likely to be deceived" has no relationship to the concept of common law fraud, which is also sometimes referred to as deception. A fraudulent deception must be actually false, known to be false by the perpetrator and reasonably relied upon by a victim who incurs damages. None of these elements are required to state a claim for injunctive relief under section 17200 or 17500. A perfectly true statement couched in
Respondents urge us to follow the lead taken by the courts in Alicke v. MCI Communications Corp. (D.C. Cir.1997) 111 F.3d 909 [324 App.D.C. 150] (Alicke) and Marcus, supra, 938 F.Supp. 1158, both of which considered state law false advertising and unfair business practice claims against common carriers arising out of the practice of rounding up on customer phone bills. Alicke held, in part, that the plaintiff had failed to state a claim for false advertising under the District of Columbia's Consumer Protection Act "[b]ecause no reasonable customer could actually believe that each and every phone call she made terminated at the end of a full minute, [so] the customer must be aware that MCI charges in full-minute increments only. Accordingly, MCI's billing practices could not mislead a reasonable customer." (Alicke, supra, at p. 912.) Similarly, in Marcus where the plaintiff sued under New York's Consumer Protection Act, the court held in part that the claims must be dismissed because "AT & T's failure to disclose the exact duration of the calls on its bills  is not materially misleading because no consumer reasonably could believe that a designation of a call in whole minutes accurately reflects the length of that call." (Marcus, supra, 938 F. Supp. at p. 1174.) Marcus also found the plaintiffs' claims to be insufficient under New York consumer protection law because AT & T's advertising and billing practices had not resulted in any damage to plaintiffs. (Ibid.) This reasoning was expanded upon by the appellate opinion affirming Marcus, in which the Second Circuit held that the plaintiffs' claims were property dismissed because the filed rate doctrine's conclusive presumption precluded the plaintiffs from showing that they had reasonably relied on AT & T's statements. (Marcus v. AT & T (2d Cir.1998) 138 F.3d at p. 46.)
We decline to conclude on the facts alleged here that no reasonable consumer of prepaid phone cards would be likely to be misled or deceived by respondents' practices. The rationale of the holdings in Alicke and Marcus rested in part upon the consumers' ability to read the phone bills provided by
In addition, the decisions in Alicke and Marcus are premised upon a finding that it was not reasonable for plaintiffs to rely only on defendants' billing format in formulating their understanding of the amounts they were being billed, because of the independent knowledge they must have possessed about their own calling habits. The appellate opinion affirming Marcus held similarly that plaintiffs could not reasonably rely on an understanding of the rates that was different from those filed with the FCC. As explained above, the appellants here are not required to allege reasonable reliance in order to sustain their claim under the California statutes. This is so because the statutes seek to protect against the likelihood that the public will be deceived, not against the actual harm incurred by the public. For this reason, "[t]he court may impose liability and civil penalties without individualized proof of reliance...." (People v. Dollar Rent-A-Car Systems, Inc., supra, 211 Cal. App.3d at p. 131.) For this independent reason, Alicke and Marcus do not support respondents' position.
Are These Well-pleaded State Claims Barred by the Filed Rate Doctrine?
Respondents contend that appellants' action implicates phone card rates as filed with the FCC and therefore is preempted or barred by the federal
Respondents contend that appellants' claims necessarily and exclusively arise under the Federal Communications Act
It has been said that the doctrine furthers two legitimate goals: nondiscriminatory rate setting and agency autonomy in rate setting without court interference. (Wegoland Ltd. v. NYNEX Corp. (2d Cir.1994) 27 F.3d 17, 21.) The Act is intended to protect those goals, and to occupy the field for claims which implicate them. The Act, however, is not completely preemptive. It contains a savings clause which provides that nothing contained therein "shall in any way abridge or alter the remedies now existing at common law or by statute, but the provisions of this chapter are in addition to such remedies." (47 U.S.C. § 414.) This clause has been interpreted as "preserv[ing] only state claims that address obligations different from those created by the Communications Act." (Marcus, supra, 938 F. Supp. at p. 1168.) Thus, the question we pose is whether appellants' claims address obligations the same as or different from those created by the Act.
The State of California has no requirement that common carriers disclose their rates anywhere other than in the rate schedules filed with the Public Utilities Commission. Nonetheless, businesses are prohibited from engaging
Scope of Relief Available
Appellants have asked for an injunction to prevent respondents from continuing their allegedly deceptive practices, and have asked for disgorgement of respondents' allegedly ill-gotten gains. Throughout this opinion we have alluded to the type of relief which may be available to appellants under sections 17200 and 17500 without implicating the filed rate doctrine bar. We explicitly repeat our holding: To the extent appellants do not seek a monetary recovery, they may proceed with their action for injunctive relief. They may not seek to recover any money from respondents, whether they label their request one for disgorgement or otherwise. The net effect of imposing any monetary sanction on the respondents will be to effectuate a rebate, thereby resulting in discriminatory rates. As we have seen, this is a matter which is strictly of federal concern under the Act, and is, therefore, barred by the filed rate doctrine.
Appellants insist that they do not run afoul of the filed rate doctrine by asking for disgorgement because they do not seek a rebate or refund, which they concede would violate the filed rate doctrine's prohibition against discriminatory rates. They seek, instead, that broad equitable remedy which is allowed by section 17203: "Any person who engages, has engaged, or proposes to engage in unfair competition may be enjoined in any court of competent jurisdiction. The court may make such orders or judgments, including the appointment of a receiver, as may be necessary to prevent the use or employment by any person of any practice which constitutes unfair competition, as defined in this chapter, or as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition." (Italics added.)
Respondents contend that any monetary award to appellants would be tantamount to a rebate which necessarily would result in rate discrimination against those not receiving a portion of the award. They argue, first, that there are no ill-gotten gains to disgorge, because the rates charged are those filed with the FCC, and are presumptively correct. (Marcus, supra, 938
In response to these concerns, appellants urge the use of a "fluid recovery" which would not be dependent upon a calculation or consideration of reasonable rates. Instead, for example, the court could order disgorgement of all respondents' profits or all sums collected from sales of the phone cards. These sums, appellants insist, would not represent damages paid for an injury, but instead would serve as a punishment for past and a deterrent from future misleading advertising campaigns.
In deciding this question we think it important to consider the unfair trade practice act's scheme for allowing monetary awards. In general, the unfair competition provisions allow for such equitable orders "as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired" by means of unfair competition or unlawful advertising practices. (§§ 17203, 17535, italics added.) The statutory scheme also allows for the imposition of civil penalties of up to $2,500 per violation in actions brought by certain governmental agencies. (§§ 17206, 17536.) In addition, it provides for a $6,000 civil penalty to be imposed against any person who intentionally violates any injunction issued pursuant to section 17203 or 17535. (§§ 17207, 17535.5.) These $2,500 and $6,000 sanctions, having been labeled by the Legislature as "civil penalties," can be understood as a form of punishment imposed for a defendant's wrongdoing.
Even in those cases which have allowed for a fluid recovery, as opposed to a restoration to identified individuals or classes, the amount being restored has been objectively measurable as that amount which the defendant would not have received but for the unfairly competitive practice. (See, e.g., People v. Thomas Shelton Powers, M.D., Inc. (1992) 2 Cal.App.4th 330 [3 Cal.Rptr.2d 34] [fluid recovery fund for profits obtained by selling moderate income housing at excessive price]; State of California v. Levi Strauss & Co. (1986) 41 Cal.3d 460 [224 Cal.Rptr. 605, 715 P.2d 564] [fluid recovery of amounts overcharged for product]; People ex rel. Smith v. Parkmerced Co. (1988) 198 Cal.App.3d 683 [244 Cal.Rptr. 22] [amount of illegally collected security deposits repaid to actual victims if possible, with balance going to fluid recovery fund].)
Other Grounds for Demurrer
We have held that appellants' claim for injunctive relief states a cause of action under sections 17200 and 17500 and does not implicate in any manner the reasonableness of respondents' practice of rounding up. It follows, therefore, that respondents' other grounds for demurrer that jurisdiction rests exclusively or primarily with the California Public Utilities Commission and/or the FCC and the federal courts cannot be sustained, as these theories are all dependent upon a conclusion that rate setting is implicated in the action. The superior court has jurisdiction to decide the matter.
Viability of Action Against Retailer Respondents
The retailer respondents have filed a separate brief claiming, as they did in seeking reconsideration before the trial court, that they cannot be held to answer appellants' complaint, as the fixed rate doctrine has no applicability to noncommon carriers. Again, because we decide that this action can go forward without implicating that doctrine, we need not reach the point raised. An action claiming unfair business practices and misleading advertising under California law can proceed against these respondents as well.
The trial court's orders sustaining respondents' demurrers and dismissing appellants' first amended complaint are reversed. The matter is remanded for further proceedings on appellants' claim for an injunction, but not on their
Corrigan, Acting P.J., and Parrilli, J., concurred.
Section 17500: "It is unlawful for any person, firm, corporation or association, or any employee thereof with intent directly or indirectly to dispose of real or personal property or to perform services, professional or otherwise, or anything of any nature whatsoever or to induce the public to enter into any obligation relating thereto, to make or disseminate or cause to be made or disseminated before the public in this state, or to make or disseminate or cause to be made or disseminated from this state before the public in any state, in any newspaper or other publication, or any advertising device, or by public outcry or proclamation, or in any other manner or means whatever, any statement, concerning such real or personal property or services, professional or otherwise, or concerning any circumstance or matter of fact connected with the proposed performance or disposition thereof, which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading, or for any such person, firm, or corporation to so make or disseminate or cause to be so made or disseminated any such statement as part of a plan or scheme with the intent not to sell such personal property or services, professional or otherwise, so advertised at the price stated therein, or as so advertised. Any violation of the provisions of this section is a misdemeanor punishable by imprisonment in the county jail not exceeding six months, or by a fine not exceeding two thousand five hundred dollars ($2,500), or by both."