Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of dismissal of the Superior Court of San Diego County, Super. Ct. No. GIC 857383. Joan M. Lewis, Judge.
McINTYRE, P.J.
KMS Courier, Inc. and Intra-County Business Mail, Inc. (collectively, the Plaintiffs) appeal a judgment of dismissal entered after the court sustained a demurrer without leave to amend as to their causes of action against McKesson Corporation and Amerisource Bergen Corp. (collectively, the Customer Defendants) for unfair business practices and unfair competition. They contend that the court erred in holding their allegations that the Customer Defendants illegally solicited third parties to engage in unfair business practices were insufficient to support these causes of action. We disagree and affirm.
FACTUAL AND PROCEDURAL BACKGROUND
In accordance with the standards for reviewing a trial court decision sustaining a demurrer without leave to amend, the following factual recitation is based on the allegations of the operative pleading, the Plaintiffs' third amended complaint (see Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126).
The Plaintiffs are employee-based courier service providers that do business throughout California. A number of the Plaintiffs' competitors illegally classify their hourly employees as independent contractors so that they can avoid the need to provide workers' compensation and unemployment benefits for those employees, thus reducing their costs of business and allowing them to bid for courier work on significantly more favorable terms than the Plaintiffs can offer to prospective customers. The Customer Defendants hire these competitors to deliver their pharmaceutical products, with knowledge of the competitors' illegal conduct and with the intent to harm competition in the California courier industry so as to reduce their own costs.
In November 2005, the Plaintiffs filed this action against a number of its competitors and the Customer Defendants, asserting causes of action for violations of the Unfair Practices Act (Bus. & Prof. Code, §§ 17000 et seq.), the Cartwright Act (Bus. & Prof. Code, §§ 16700 et seq.) and the Unfair Competition Law (Bus. & Prof. Code, §§ 17200 et seq. (the UCL)). (All further statutory references are to the Business and Professions Code.) The Customer Defendants challenged the Plaintiffs' claims against them by demurrer; the court ultimately sustained their demurrers to the claims asserted in the Plaintiffs' third amended complaint without leave to amend and entered a judgment of dismissal in their favor. The Plaintiffs appeal.
DISCUSSION
The Unfair Practices Act makes it unlawful for any person to sell any service at less than the cost thereof, or to use any service as a "loss leader" (i.e., one sold in such a way as to have the effect of "divert[ing] trade from or otherwise injure competitors" (§ 17030, subd. (c)), for the purpose of injuring its competitors or destroying competition. (§§ 17024, 17043, 17044.) The statutory scheme also makes it unlawful for any manufacturer, wholesaler or distributor to solicit a violation of its provisions or to participate or collude with another person in such a violation. (§§ 17047, 17048.) Conduct that violates the Unfair Practices Act will also constitute a violation of the UCL. (§ 17200; Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 950; Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180-184.)
The question presented here is whether the Plaintiffs' allegations that the Customer Defendants contract with their competitors with knowledge of the competitors' illegal conduct and with the intent to harm competition in the California courier industry are sufficient to establish the Customer Defendants' solicitation of the competitors' wrongful conduct. (Their opening brief does not challenge the trial court's concurrent conclusions that their allegations were insufficient to state a claim for unfair business practices or unfair competition based on wrongful participation or collusion in violation of section 17048 (see Harris v. Capitol Records Distributing Corp. (1966) 64 Cal.2d 454, 462) and a claim for violations of the Cartwright Act. We decline to consider their arguments to this effect raised for the first time in their reply brief. (See, e.g., Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 763-765.)) We agree with the trial court's conclusion that the allegations do not state a claim for wrongful solicitation in violation of section 17047.
The essence of the Plaintiffs' third amended complaint is that the Customer Defendants violated section 17047 by declining to renew their existing courier service contracts with the Plaintiffs and instead contracting with the Plaintiffs' competitors for such services "with the common purpose and intent of injuring . . . lawfully operating courier companies and injuring competition." The difficulty with the Plaintiffs' argument, however, is that these and other allegations of the third amended complaint establish that the Customer Defendants did not solicit the Plaintiffs' competitors to engage in the unlawful practices of which the Plaintiffs' complain (i.e., hiring drivers as independent contractors rather than employees and/or the preparation of bids based on the use of such drivers); rather, they merely accepted bids from competitors who had implemented such practices after being informed of such practices by the Plaintiffs.
Standing alone, the Customer Defendants' requests for bids from, and entrance into service contracts with, the Plaintiffs' competitors do not constitute solicitations of a violation of the Act. (See, e.g., People v. York (1998) 60 Cal.App.4th 1499, 1503 [recognizing that solicitation for purposes of the Pen. Code requires an offer or invitation to commit a crime]; Aetna Bldg. Maintenance Co. v. West (1952) 39 Cal.2d 198, 203-204 [holding that a former employee's conduct in informing his prior customers of his job change and in responding to their invitations to continue to do business with them did not constitute solicitation, which requires a personal petition to act].)
Although the Plaintiffs point out that the Unfair Practices Act is to be liberally construed to promote its purposes (Bus. & Prof. Code, § 17002; ABC International Traders, Inc. v. Matsushita (1997) 14 Cal.4th 1247, 1256), such a liberal interpretation cannot be used to read out the statutory requirement of a solicitation. Absent allegations that the Customer Defendants specifically requested the Plaintiffs' competitors to characterize their drivers as independent contractors rather than employees in creating bids for them, no claim for violation of section 17047 is stated, nor is a claim for violations of the UCL. (See generally Emery v. Visa International Service Ass'n (2002) 95 Cal.App.4th 952, 962.)
Finally, the Plaintiffs contend in passing that the trial court abused its discretion in denying them leave to amend. However, they do not proffer any basis on which they could amend and in fact their reply brief essentially concedes that there are no more specific facts that can be pled in support of their claim for solicitation in violation of section 17047. As there is no apparent basis on which the Plaintiffs might amend their solicitation allegations to state viable claims for unfair practices and unfair competition based on solicitation, the trial court did not abuse its discretion in sustaining the Customer Defendants' demurrers to those causes of action without leave to amend. (Hendy v. Losse (1991) 54 Cal.3d 723, 742-743.)
DISPOSITION
The judgment of dismissal is affirmed. The Customer Defendants are awarded their costs of appeal.
WE CONCUR: O'ROURKE, J., AARON, J.