In this case, plaintiffs sued defendant cellular telephone company alleging that its arbitration agreement and other remedial provisions were unconscionable, although plaintiffs did not otherwise allege that these provisions had been enforced against them or caused them damage. There are two questions before us. First, whether under these circumstances, a plaintiff may obtain injunctive relief to compel the removal of the allegedly unconscionable provisions under California's Consumers Legal Remedies Act (CLRA; Civ. Code, § 1750 et seq.). Second, whether a plaintiff may obtain declaratory relief pursuant to Code of Civil Procedure section 1060 to declare these provisions unlawful and unenforceable.
I. FACTS AND PROCEDURAL HISTORY
The facts, taken largely from the Court of Appeal's opinion, are not in dispute. Susanne Ball sued Sprint Spectrum L.P. (Sprint) on May 27, 2004, on behalf of the general public, for violating the unfair competition law (UCL; Bus. & Prof. Code, § 17200 et seq.). Following the enactment of Proposition 64, the complaint was amended; Ball, who was not a Sprint customer, withdrew from the litigation, and Pamela Meyer and Timothy Phillips were substituted as plaintiffs.
After three more amendments of the complaint, two in response to the trial court's sustaining a demurrer with leave to amend, plaintiffs filed a fourth amended complaint, which alleged three causes of action: violation of the UCL; violation of the CLRA; and for declaratory relief. The basis for each cause of action was plaintiffs' claim that certain provisions of Sprint's customer service agreement were unconscionable and illegal because they: (1) required that the parties submit disputes under the customer service agreement to binding arbitration pursuant to the rules of Judicial Arbitration and Mediation Services, National Arbitration Forum, or an organization chosen by the parties; (2) waived the right to resolve disputes through a jury trial; (3) waived class action in arbitration; (4) failed to provide for discovery before arbitration; (5) split the cost of arbitration; (6) disclaimed warranties and limited liability; (7) permitted Sprint to unilaterally change the terms of
Sprint demurred to the fourth amended complaint, arguing plaintiffs lacked standing to assert any of the alleged causes of action. The trial court sustained the demurrer without leave to amend. It concluded that "[p]laintiffs have not shown they were personally damaged or that the allegedly unconscionable or illegal provisions have been enforced against them." Plaintiffs did not request leave to amend from the trial court.
The Court of Appeal affirmed the trial court, holding that (1) plaintiffs could not demonstrate an "injury in fact," which is a prerequisite to asserting a claim under the UCL; (2) without any showing of damage, plaintiffs had no standing to sue under the CLRA; and (3) plaintiffs had alleged no actual controversy between them and Sprint, and that therefore declaratory relief was not available. Plaintiffs sought review in this court of the second and third issues only, and we granted review.
A. Does the CLRA Require a Showing of Damages in Order to Demonstrate Standing
Plaintiffs do not allege that there was any dispute between them and Sprint that necessitated resort to arbitration or to the other remedial provisions. Rather, theirs can be characterized as a preemptive lawsuit to strike these terms should any dispute arise. The question is whether the CLRA gives standing to permit such preemptive suits.
Sprint contends that plaintiffs do not have standing, relying on the plain language of section 1780, subdivision (a) (hereafter section 1780(a)), which states: "Any consumer who suffers any damage as a result of the use or employment by any person of a method, act, or practice declared to be unlawful by Section 1770 may bring an action against that person to recover or obtain any of the following: [¶] (1) Actual damages, but in no case shall the total award of damages in a class action be less than one thousand dollars ($1,000). [¶] (2) An order enjoining the methods, acts, or practices. [¶] (3) Restitution of property. [¶] (4) Punitive damages. [¶] (5) Any other relief that the court deems proper." Sprint contends plaintiffs have not "suffer[ed] any damage as a result of" the allegedly unlawful practices.
Plaintiffs make essentially two counterarguments. First, they contend that they have experienced some "damage" within the meaning of that statute. Second, they contend that section 1780(a) is in fact not a statute about standing and that there is no "damage" requirement for bringing a CLRA suit.
As to the first argument, plaintiffs contend that the phrase "any damage" is not synonymous with "actual damages," which generally refers to pecuniary damages. The language of section 1780(a) indicates that plaintiffs are correct. If "any damage" and "actual damages" were synonymous, then it seems likely only the latter phrase would have been used in the first part of subdivision (a). The juxtaposition of the two phrases so close together indicates that the phrases have different meanings. Moreover, the breadth of the phrase "any damage" indicates a category that includes, but is greater than, "actual damages," i.e., those who are eligible for the remedy of "actual damages" are a subset of those who have suffered "any damage." Sprint does not dispute this point. It concedes that "any damage" may encompass harms other than pecuniary damages, such as certain types of transaction costs and opportunity costs.
Plaintiffs cite in support Kagan v. Gibraltar Sav. & Loan Assn. (1984) 35 Cal.3d 582 [200 Cal.Rptr. 38, 676 P.2d 1060] (Kagan). In Kagan, the plaintiff chose a financial institution, Gibraltar Savings and Loan Association (Gibraltar), that had represented it would charge no management fees for an individual retirement account (IRA). After opening the account, Gibraltar informed the plaintiff that it would be charging a $7.50 fee for administering the account. Initial letters of protest against the fee were unavailing. The plaintiff hired counsel, who advised Gibraltar that it had violated the CLRA, and demanded that Gibraltar not deduct the fee, that it cease its misleading advertising practices, and that it rectify the charging of this fee to other similarly situated bank customers. Gibraltar responded by complying with some of the plaintiff's demands, but did not attempt to identify and reimburse all customers who had been charged the fee. The plaintiff filed a class action lawsuit on behalf of herself and those similarly situated who had been charged fees by Gibraltar. (35 Cal.3d at pp. 587-589.)
Gibraltar, in opposing the class action lawsuit, contended that because the administrative fee was not actually deducted from the plaintiff's account, the
In so holding, the Kagan court made clear that the CLRA was specifically designed "to preclude such `picking off' of prospective class action plaintiffs: `The most important point in connection with the settlement of class actions is that settlement with the named plaintiffs will not preclude them from further prosecuting the action on behalf of the remaining members of the class. Note that section 1782(c) precludes the further maintenance of the action only if all the described conditions are shown to exist. Those conditions require settlement with all reasonably identifiable members of the class.'" (Kagan, supra, 35 Cal.3d at p. 593.)
Having so concluded, the court went further, stating: "We thus reject Gibraltar's effort to equate pecuniary loss with the standing requirement that a consumer `suffer any damage.' As it is unlawful to engage in any of the deceptive business practices enumerated in section 1770, consumers have a corresponding legal right not to be subjected thereto. Accordingly, we interpret broadly the requirement of section 1780 that a consumer `suffer any damage' to include the infringement of any legal right as defined by section 1770." (Kagan, supra, 35 Cal.3d at pp. 592-593.)
Although the Kagan court equated the infringement of any legal right under section 1770 with "suffering any damage" pursuant to section 1780(a), its holding was ultimately based not on an analysis of that language, but on the provisions of section 1782, subdivision (c), that once a person has been the victim of a proscribed practice under the CLRA and makes a demand on behalf of a class, remedying the plaintiff's individual complaint does not disqualify her as class representative. Moreover, in Kagan it was indisputable
Plaintiffs' second argument is that section 1780(a) is not a standing statute at all, and that even though a consumer who suffers "any damage" may obtain various remedies, the statute does not provide explicitly or implicitly that one who does not suffer "any damage" is precluded from obtaining injunctive relief. Plaintiffs point to section 1782 in support of their position. Subdivision (a) provides: "Thirty days or more prior to the commencement of an action for damages pursuant to this title, the consumer shall do the following: [¶] (1) Notify the person alleged to have employed or committed methods, acts, or practices declared unlawful by Section 1770 of the particular alleged violations of Section 1770. [¶] (2) Demand that the person correct, repair, replace, or otherwise rectify the goods or services alleged to be in
Plaintiffs contend that requiring even a low damage threshold would allow corporations that deal with consumers to load their contracts with unconscionable remedial terms that would chill the efforts of consumers seeking to enforce their legal rights. Those concerns, while not unfounded, are overstated. The CLRA, in its injunctive relief provisions, allows plaintiffs to enjoin a corporation's deceptive or unlawful business practices throughout the state on behalf of the general public. (Broughton, supra, 21 Cal.4th at pp. 1080-1081.) Thus, when, for example, an arbitration clause unconscionable on its face is asserted against a consumer, that consumer would not only be able to resist its enforcement in defending against a motion to compel arbitration, but would be able to enjoin the enforcement of that clause statewide.
Nor, as the damages threshold was interpreted in Kagan and in the present case, would a corporation initially intent on engaging in an unlawful practice against a consumer, such as enforcing an unconscionable term, be able to avoid an injunction by remedying that consumer's individual grievance,
It is evident that any rule that would expand the ability of individuals to bring lawsuits has costs as well as benefits. (See Californians for Disability Rights v. Mervyn's LLC (2006) 39 Cal.4th 223, 228 [46 Cal.Rptr.3d 57, 138 P.3d 207] [discussing ballot arguments in favor of passage of Prop. 64 which cite litigation abuses due to liberal standing rules under the UCL].) It is also apparent that the Legislature, in weighing these costs and benefits in drafting the CLRA, set a low but nonetheless palpable threshold of damage, and did not want the costs of a lawsuit to be incurred when no damage could yet be demonstrated. We therefore conclude that the Court of Appeal was correct in holding that plaintiffs' complaint does not sufficiently allege a cause of action for injunctive relief under the CLRA.
B. Is Declaratory Relief Available Pursuant to Code of Civil Procedure Section 1060
Plaintiffs contend that the trial court erred in granting a demurrer with respect to their declaratory relief action, seeking a court judgment declaring the arbitration and other remedial provisions in question unconscionable and unlawful. As explained below, we conclude the court did not err.
The pertinent statute, Code of Civil Procedure section 1060 provides: "Any person interested under a written instrument, excluding a will or a trust, or under a contract, or who desires a declaration of his or her rights or duties with respect to another, or in respect to, in, over or upon property, or with respect to the location of the natural channel of a watercourse, may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract. He or she may ask for a declaration of rights or duties, either alone or with other relief; and the court may make a binding declaration of these rights or duties, whether or not further relief is or could be
Code of Civil Procedure section 1060, which provides that a court "may make a binding declaration" (italics added) of a litigant's rights or duties, must be read together with section 1061, which states: "The court may refuse to [grant declaratory relief] in any case where its declaration or determination is not necessary or proper at the time under all the circumstances." (Code Civ. Proc., § 1061.) "The trial court's decision to entertain an action for declaratory relief is reviewable for abuse of discretion. [Citation.]" (Filarsky v. Superior Court (2002) 28 Cal.4th 419, 433 [121 Cal.Rptr.2d 844, 49 P.3d 194].) This discretion is not boundless: "Where . . . a case is properly before the trial court, under a complaint which is legally sufficient and sets forth facts and circumstances showing that a declaratory adjudication is entirely appropriate, the trial court may not properly refuse to assume jurisdiction . . . ." (Columbia Pictures Corp. v. DeToth (1945) 26 Cal.2d 753, 762 [161 P.2d 217].)
It is true that whereas the cases cited above involved situations in which substantive contractual rights are in dispute, in the present case, the controversy is primarily over the enforceability of certain remedies should a future dispute about substantive rights arise. But it is not necessarily true that this distinction is critical in all cases. We have recognized that contractual provisions that severely restrict ordinarily available remedies may undermine substantive rights. (See Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1076-1077 [130 Cal.Rptr.2d 892, 63 P.3d 979] [arbitrations of unwaivable rights must possess certain minimal safeguards so that these rights may be vindicated].) Courts have granted declaratory relief for parties aggrieved by contracts with unlawfully restrictive remedies. In Baker Pacific Corp. v. Suttles (1990) 220 Cal.App.3d 1148 [269 Cal.Rptr. 709] (Suttles), a release from future liability that asbestos removal employees were required to sign as a condition of employment, challenged by an employee who had refused to sign the release, was declared void.
In the present case, plaintiffs have not with any particularity alleged that the resolution of the declaratory relief action concerning contractual remedies would, at this point, have any practical consequences. No dispute has arisen that would cause these remedial provisions to come into play, and plaintiffs do not allege that the continuation of the contractual relationship depends on the resolution of these questions. We therefore conclude the trial court did not abuse its discretion in sustaining a demurrer to plaintiffs' declaratory relief action.
The judgment of the Court of Appeal is affirmed.
George, C. J., Kennard, J., Baxter, J., Werdegar, J., Chin, J., and Corrigan, J., concurred.
Plaintiffs also cite Ting v. AT&T (2002) 319 F.3d 1126, 1147-1152, in which the Ninth Circuit affirmed the district court's granting injunctive relief under the CLRA invalidating on unconscionability grounds portions of an arbitration clause in a customer service agreement. Ting does not discuss the CLRA standing issue and therefore does not support plaintiffs' position.