Summary
applying choice of law provision that stated "[i]f you have a dispute and your dispute involves an event (or a ticket for an event) that is located in the United States, then the dispute will be governed by the laws of California" to out-of-state plaintiff's claim for misrepresentation
Summary of this case from Plastic Surgery Assocs. v. Cynosure, Inc.Opinion
NOT TO BE PUBLISHED
ORIGINAL PROCEEDING. Petition for writ of mandate and/or peremptory or alternative writ. Kenneth R. Freeman, Judge. Petition granted. No. BC304565
Adorno Yoss Alvarado & Smith, William M. Hensley, Robert J. Stein III, Marc D. Alexander, Claire M. Schmidt, Valerie K. Brennan; Much Shelist Denenberg Ament & Rubenstein and Steven P. Blonder for Petitioners.
No appearance for Respondent.
Greenberg Traurig, Frank E. Merideth, Jr., Jeff E. Scott, and Gregory A. Nylen for Real Party in Interest.
DOI TODD, Acting P. J.
Petitioners challenge by writ of mandate the trial court’s denial of their motion to certify a nationwide class of individuals who purchased tickets through Ticketmaster’s Web site. Petitioners allege the ticket buyers paid certain charges which Ticketmaster misled them to believe were pass-through costs rather than a source of profit for Ticketmaster. Petitioners seek damages on behalf of the putative class pursuant to California’s Unfair Competition Law and False Advertising Law. The trial court found that petitioners had failed to establish the court’s jurisdiction over the claims of the out-of-state plaintiffs. We find that Ticketmaster’s requirement that each purchaser agree that any dispute be resolved by courts located in California and governed by California law establishes sufficient contact to permit the court’s jurisdiction here, and grant the petition.
BACKGROUND
Petitioners Curt Schlesinger, a resident of Illinois, and Peter LoRe, a resident of New York, are the named plaintiffs in a putative class action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) (UCL) and the False Advertising Law (Bus. & Prof. Code, § 17500 et seq.) (FAL) filed against real party Ticketmaster. Ticketmaster, a Delaware corporation, has its headquarters and principal place of business in Los Angeles. The original complaint was filed in the Superior Court of Los Angeles County.
The Operative Complaint
The operative third amended complaint alleges the following:
In July 2003, Schlesinger purchased four tickets from Ticketmaster over the Internet for a concert scheduled to take place in Illinois. In addition to the base price for the tickets, Schlesinger paid a “Building/Facility Charge, ” a “Convenience Charge, ” and an “Order Processing Charge.” As Schlesinger was finalizing his order, the Ticketmaster Web site prompted him to select a delivery method for his tickets. Schlesinger had the option of choosing standard U.S. Mail, which carried no additional charge, or various “UPS Delivery” options, which carried charges ranging from $14.50 to $25 depending on the speed of delivery. Schlesinger opted for two-day “UPS Delivery” for the cost of $19.50.
In March 2003, LoRe purchased eight tickets from Ticketmaster over the Internet for a concert scheduled to take place in New Jersey. In addition to the base price for the tickets, LoRe paid a “Building/Facility Charge, ” a “Convenience Charge, ” and an “Order Processing Charge.” To the best of LoRe’s recollection, LoRe elected to have his tickets delivered by “UPS Delivery” for a cost of $14.50.
Petitioners allege that the “Order Processing Charge” and the “UPS Delivery” fee are sources of profit for Ticketmaster. At the time Schlesinger and LoRe made their respective purchases, they believed that the “Order Processing Charge” and the “UPS Delivery” fee were merely “pass-through” costs (i.e., costs passed through to the consumer), and that Ticketmaster was not profiting from charging the two fees. Had Schlesinger and LoRe known that the “Order Processing Charge” and the “UPS Delivery” fee were sources of profit for Ticketmaster, they would have not purchased the tickets or would have elected a different delivery method.
The third amended complaint alleges four causes of action: (1) Ticketmaster violated the UCL by misleading its customers into believing that the “Order Processing Charge” and the “UPS Delivery” fee charged on its Web site were pass-through costs when in fact both fees are sources of profit for Ticketmaster; (2) Ticketmaster violated the FAL by disseminating advertising that misleads customers into believing the “Order Processing Charge” is a pass-through cost; (3) the “Order Processing Charge” and the “UPS Delivery” fee are unconscionable and in violation of the California Consumer Legal Remedies Act (Civ. Code, § 1750 et seq.); and (4) Ticketmaster violated the UCL by making the “Order Processing Charge” mandatory and by not permitting customers to use an alternate delivery system.
Petitioners moved to certify a nationwide class of all individuals who purchased tickets through Ticketmaster’s Web site and paid an “Order Processing Charge” and/or “UPS Delivery” fee from October 21, 1999, onward. Petitioners based their motion for certification of a nationwide class on the following use term, to which all customers must agree before completing their purchases on Ticketmaster’s Web site:
“If you have a dispute and your dispute involves an event (or a ticket for an event) that is located in the United States, then the dispute will be governed by the laws of the State of California without regard to its conflict of law provisions and you consent to personal jurisdiction, and agree to bring all actions, exclusively in state and federal courts located in Los Angeles County, California.... If you have a dispute regarding the Site but not regarding an event (and not regarding a ticket for an event), then... if you are accessing the Site from the United States or any country other than Canada, then the dispute will be governed by the laws of the State of California without regard to its conflict of law provisions and you consent to personal jurisdiction, and agree to bring all actions, exclusively in state and federal courts located in Los Angeles County, California.”
Ticketmaster’s Opposition
Ticketmaster opposed certification of a nationwide class, arguing that the UCL and the FAL do not apply to claims by non-California residents, and cited the following evidence in support of its argument:
When a customer first visits Ticketmaster’s Web site, the Web site’s “traffic cop” software initially directs the customer to a server in Chicago or Los Angeles, regardless of where the customer initially accesses the Web site. Once the customer is routed to a server in Chicago or Los Angeles, the customer is then directed to an additional server depending on whether he or she seeks information about a particular event. After a customer decides to obtain information regarding a particular event, he or she must enter his or her address and agree to move forward in the process. Once this occurs, Ticketmaster displays a page containing ticket inventory, prices, and delivery fees. Prior to 2005, data regarding ticket inventory, prices, and delivery fees were stored in regional data centers located in Illinois, New York, Michigan, Florida, and California. Since 2005, such data has been stored in regional data centers located in Illinois or California.
Once a ticket purchase transaction has been processed through Ticketmaster’s Web site, the actual tickets are printed and shipped to the customer via a fulfillment center in West Virginia. Ticketmaster operated fulfillment centers in California, Colorado, Florida, and Virginia, but Ticketmaster closed these centers in 1998, 2000, 2002, and 2005 respectively.
Once a customer enters his or her credit card information and finalizes the purchase over Ticketmaster’s Web site, the credit card information is sent to credit card processors via the same regional centers that process Ticketmaster’s data regarding ticket inventory, prices, and delivery fees. The credit card processors send authorization codes back to Ticketmaster and Ticketmaster stores these codes in the regional data centers referenced above.
The Trial Court’s Order
On February 5, 2010, the superior court granted petitioners’ motion for class certification as to the first and second causes of action only, and certified a class consisting of all California residents who purchased tickets through Ticketmaster’s Web site from October 21, 1999 through February 5, 2010, and a subclass of those individuals who purchased UPS delivery with their tickets. The superior court appointed LoRe as a representative of the class, and Schlesinger as a representative of the class and subclass. The superior court denied certification of a nationwide class, stating as follows:
“The court is not going to go outside of California. So the class must include only California residen[ts], non-residen[ts] are not included. Plaintiffs bear the burden of proof as to whether the court has jurisdiction over the out-of-state class members whose claims are based on conduct that did not occur in California. Here, plaintiffs have not presented sufficient evidence on this jurisdiction in question. And Ticketmaster has raised the specter of a factual attack on the court’s jurisdiction. While it is not a strong position, the plaintiff does have the burden. So I am only certifying for California.”
Neither side was satisfied with the superior court’s ruling. On March 8, 2010, petitioners filed a motion for reconsideration of the superior court’s order, arguing that a nationwide class was proper given the choice-of-law and forum selection provision agreed to by Ticketmaster and putative class members throughout the country. Ticketmaster challenged the superior court’s certification order by filing a petition for writ of mandate on March 18, 2010. Ticketmaster argued that Schlesinger and LoRe did not have standing to sue, and that the statewide class certified by the superior court did not meet the ascertainability or predominance requirements for certification.
On April 20, 2010, the superior court denied petitioners’ motion for reconsideration. This court summarily denied Ticketmaster’s petition for writ of mandate on April 30, 2010.
On June 4, 2010, petitioners filed the present petition for writ of mandate, challenging: (1) the portion of the superior court’s February 5, 2010 order denying nationwide class certification as to the first and second causes of action; and (2) the April 20, 2010 order denying petitioner’s motion for reconsideration. After considering Ticketmaster’s preliminary opposition to the petition, this court issued an alternative writ of mandate directing the superior court to set aside the portion of its certification order refusing to certify a nationwide class, or show cause why this court should not issue a peremptory writ of mandate ordering it to do so. The superior court elected not to set aside the portion of the certification order at issue, and this court set the matter for argument and received additional briefing.
DISCUSSION
I. Standard of Review
“‘Because trial courts are ideally situated to evaluate the efficiencies and practicalities of permitting group action, they are afforded great discretion in granting or denying certification.... [I]n the absence of other error, a trial court ruling supported by substantial evidence generally will not be disturbed “unless (1) improper criteria were used [citation]; or (2) erroneous legal assumptions were made [citation].”’” (In re Tobacco II Cases (2009) 46 Cal.4th 298, 311 (Tobacco II).) An appellate court reviewing a class certification ruling considers the trial court’s rationale, not only its result. “Erroneous legal assumptions or improper criteria may require reversal ‘even though there may be substantial evidence to support the court’s order.’ [Citation.] Thus, we must determine whether the trial court engaged in a correct legal analysis. [Citation.] Accordingly, we will analyze the reasons given by the superior court in denying class certification. Any valid pertinent reason stated will be sufficient to uphold the order.” (Caro v. Procter & Gamble Co. (1993) 18 Cal.App.4th 644, 655–656.) “‘Where a certification order turns on inferences to be drawn from the facts, “‘the reviewing court has no authority to substitute its decision for that of the trial court.’”’ [Citation.]” (In re Vioxx Class Cases (2009) 180 Cal.App.4th 116, 128.)
II. Timeliness
As a threshold matter, Ticketmaster argues that the present petition is untimely and should be summarily denied without reaching its merits. “Under the doctrine of laches a writ may be denied where a party unreasonably delays in filing the petition and there is prejudice to the real party in interest.” (H.D. Arnaiz, Ltd. v. County of San Joaquin (2002) 96 Cal.App.4th 1357, 1368.) Here, we need not decide whether petitioners unreasonably delayed in filing their petition because Ticketmaster has failed to articulate any prejudice that it has suffered as a result of the alleged delay. (Ibid. [court need not reach issue of unreasonable delay if party seeking denial of writ based on timeliness fails to demonstrate prejudice].)
III. Nationwide Certification
“Class actions have often been the vehicle through which UCL actions have been brought.” (Tobacco II, supra, 46 Cal.4th at p. 312.) “Class certification requires proof (1) of a sufficiently numerous, ascertainable class, (2) of a well-defined community of interest, and (3) that certification will provide substantial benefits to litigants and the courts, i.e., that proceeding as a class is superior to other methods.” (Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069, 1089 (Fireside).) “In turn, the ‘community of interest requirement embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class.’” (Ibid.) “The burden is on the party seeking certification to establish the existence of both an ascertainable class and well-defined community of interest among the class members.” (Washington Mutual Bank v. Superior Court (2001) 24 Cal.4th 906, 913.)
In Phillips Petroleum Co. v. Shutts (1985) 472 U.S. 797 (Phillips), the U.S. Supreme Court identified two factors that a court must consider in determining whether inclusion of non-resident class members comports with due process: (1) Is the exercise of personal jurisdiction over the claims of non-resident class members constitutional? (2) Is the application of forum law to the claims of non-resident class members constitutional? (Id. at pp. 811–813, 822–823.)
In Phillips, the Court held that a forum state may constitutionally exercise personal jurisdiction over the claims of non-resident class members so long as “minimal procedural due process protection” exists, i.e., the non-resident class members have adequate representation by the named plaintiffs, adequate notice, the opportunity to be heard, and the opportunity to opt out of the class. (Phillips, supra, 472 U.S. at pp. 811–813.) The Court also held that a forum state may constitutionally apply its substantive law to the claims of non-resident class members only if the forum state has “‘significant contact or aggregation of contacts’ to the claims asserted by each member of the plaintiff class, contacts ‘creating state interests, ’ in order to ensure that the choice of [forum] is not arbitrary or unfair.” (Id. at pp. 822–823.)
The Court rejected the argument that out-of-state plaintiffs, like out-of-state defendants, must have sufficient “minimum contacts” (see Internat. Shoe Co. v. Washington (1945) 326 U.S. 310) with the forum state in order for a state court to exercise personal jurisdiction over the out-of-state plaintiffs. The Court reasoned that the “burdens placed by a [forum] State upon an absent class-action plaintiff are not of the same order or magnitude as those it places upon an absent defendant.” (Phillips, supra, 472 U.S. at p. 808.) Thus, only “minimal procedural due process protection” in the form of adequate representation, notice, the opportunity to be heard, and the opportunity to opt out are required. (Ibid.)
We note that although the trial court here used the phrase “jurisdiction” in its ruling, the issue of personal jurisdiction, i.e., the first factor set forth in Phillips, was not at issue here. There was no argument by either side that there was an absence of adequate representation for non-resident class members, or adequate notice to non-resident class members, or of the opportunity for non-resident class members to be heard or to opt out of the proceedings. Rather, the dispute between the parties is whether application of the law of the forum, i.e., California, to the claims of non-resident class members comports with due process (the second Phillips factor). Thus, the issue before us is whether California has “‘significant contact or aggregation of contacts’ to the claims asserted by each member of the plaintiff class, contacts ‘creating state interests, ’ in order to ensure that the choice of [forum law] is not arbitrary or unfair.” (Phillips, supra, 472 U.S. at pp. 822–823.)
Ticketmaster argues that it would be arbitrary and unfair to apply California law to claims of out-of-state class members who never went through an Internet server located in California and whose tickets were processed, shipped, and paid for outside of California. Ticketmaster cites Norwest Mortgage Inc. v. Superior Court (1999) 72 Cal.App.4th 214 (Norwest), in support of its position.
In Norwest, the defendant Norwest was a mortgage company incorporated in California with a principal place of business in Iowa, and offices and borrowers throughout the country. (Norwest, supra, 72 Cal.App.4th at p. 217.) Norwest required its borrowers to insure their homes against physical hazards. If a borrower failed to insure his or her home, Norwest purchased forced placement insurance (FPI) on behalf of the borrower and charged the borrower premiums. All decisions regarding the FPI program were made by Norwest employees in Iowa, and Norwest serviced the FPI program in centers located in various states, not including California. (Id. at p. 218.) The lending contract between Norwest and its borrowers provided that contractual disputes were governed by the substantive law of the state in which the borrower lived. (Id. at pp. 220–221.)
Two Norwest borrowers who were California residents filed a putative class action against Norwest, alleging that Norwest violated the UCL by overcharging its borrowers for FPI. (Norwest, supra, 72 Cal.App.4th at pp. 217–218.) The superior court certified a nationwide class of all Norwest borrowers who paid FPI premiums during a certain four-year period. The Court of Appeal issued a writ of mandate directing the superior court to vacate its certification order. In doing so, the appellate court identified three categories of putative class members: (I) borrowers who lived in California, regardless of where their FPI was purchased; (II) borrowers who did not live in California, but whose FPI was purchased in California; and (III) borrowers who did not live in California, who purchased FPI outside of California. (Id. at p. 222.)
The Court of Appeal held that the superior court abused its discretion by certifying a nationwide class for two reasons: First, Category III members, non-California residents who suffered an injury outside of California, could not assert UCL claims because nothing in the statutory language or legislative history of the UCL suggested that the UCL “encompass[ed] claims for injuries suffered by non-California residents caused by conduct occurring outside of California[.]” (Norwest, supra, 72 Cal.App.4th at p. 223.) Second, the Court of Appeal held that it would be unconstitutional under Phillips, supra, 472 U.S. 797, to apply California law to the claims of out-of-state plaintiffs because California had an insufficient aggregation of contacts with the claims asserted by the out-of-state plaintiffs. The court found that the only contact between the claims of Category III members and California was Norwest’s state of incorporation. And, because Norwest’s headquarters and principal place of business, the place of injury for Category III members, and the place the injury-producing conduct occurred were all outside the State of California, application of the UCL to the claims of Class III members would “be arbitrary and unfair and transgress due process limitations.” (Norwest, supra, at p. 227, fns. omitted.)
There are critical differences between the facts in Norwest and those here. First, Ticketmaster has its headquarters and principal place of business in California. Second, and more significantly, Ticketmaster required each Web site customer to agree that only California law would apply to any disputes, and that any disputes had to be litigated in a state or federal court located in California. We are satisfied that this choice-of-law and forum selection clause provides the “‘significant contact or aggregation of contacts’” (Phillips, supra, 472 U.S. at pp. 822–823) that renders application of California law to the claims of non-resident class members to comport with due process. (See Nedlloyd Lines B.V. v. Superior Court (1992) 3 Cal.4th 459, 461 [“California decisions and the Restatement Second of Conflict of Laws... reflect strong policy considerations favoring the enforcement of freely negotiated choice-of-law clauses”]; Smith, Valentino & Smith, Inc. v. Superior Court (1976) 17 Cal.3d 491, 495–496 [“No satisfying reason of public policy has been suggested why enforcement should be denied a forum selection clause appearing in a contract entered into freely and voluntarily by parties who have negotiated at arm’s length”].)
Ticketmaster seeks to minimize the importance of the choice-of-law and forum selection clause agreed to by the parties and argues that although it required its customers throughout the country to agree to a California choice-of-law and forum selection clause, “California statutes cannot be given extraterritorial effect by contract.” It is Ticketmaster’s position that although out-of-state customers were required to agree to the application of California law to resolve any disputes, out-of-state customers whose transactions were not processed by servers located in California should not be able to sue under California law.
But we note that Adam Sussman, director of systems development and architect for Ticketmaster online, testified that the engineering team for Ticketmaster online is located in Los Angeles; all data from the regional ticketing systems is located in Los Angeles and maintained by an operations team located in Los Angeles.
In support of this argument, Ticketmaster relies on five federal cases which hold that a statute cannot be applied extraterritorially regardless of what the parties may have agreed. In Taylor v. 1-800-GOT-JUNK?, LLC (W.D. Wash. 2009) 632 F.Supp.2d 1048, 1052, the court held that Washington’s Franchise Investment Protection Act did not apply to claims made by out-of-state franchisees because the “plain language” of the statute limited application of the statute to conduct occurring in Washington. In Fred Briggs Distributing Co. v. California Cooler, Inc. (9th Cir. Aug. 6, 1993, No. 92-35016) 1993 WL 306157, pp.*1–*2, the court held that California’s Franchise Relations Act did not apply to an out-of-state franchisee because the statute was expressly limited to franchisees domiciled or operated within California. In Peugot Motors v. Easter Auto Distributors (4th Cir. 1989) 892 F.2d 355, 358, the court held that New York’s Franchised Motor Vehicle Act did not apply to an out-of-state vehicle distributor because it contained “explicit geographic limitations.” And in Cromeens, Holloman, Sibert, Inc. v. AB Volvo (7th Cir. 2003) 349 F.3d 376, 385 and Highway Equipment Co. v. Caterpillar Inc. (6th Cir. 1990) 908 F.2d, 60, 62–63, the courts held that the Illinois Franchise Disclosure Act (IFDA) did not apply extraterritorially because “by its own terms, the IFDA applies only to franchises located within the State of Illinois.”
But the cases upon which Ticketmaster relies are inapposite because no such express geographic restriction is contained in the UCL. The UCL broadly prohibits “any unlawful, unfair or fraudulent business act or practice[.]” (Bus. & Prof. Code, § 17200.) As such, we see no reason why the UCL should not be applied to an out-of-state plaintiff’s claim through a contractual choice of law and forum selection provision imposed by Ticketmaster on its customers. (See Gravquick A/S v. Trimble Navigation Intern. Ltd. (9th Cir. 2003) 323 F.3d 1219, 1223 [“The CEDA (California Equipment Dealers Act) contains no express geographical limitations as to its application. It does not state that it applies only to dealers located in California[.] Therefore, the CEDA can be applied to an out-of-state dealer through a choice of law provision in a contract”].)
The FAL provides that it is “unlawful for any person, firm, corporation or association, ... with intent... to perform services..., to make or disseminate or cause to be made or disseminated before the public in this state, or to make or disseminate or to cause to be made or disseminated from this state before the public in any state, ... including over the Internet, any statement, concerning... those services... which is untrue or misleading[.]” (Bus. & Prof. Code, § 17500, italics added.) Although the FAL expressly limits its coverage to misleading statements made or disseminated from this state, it nevertheless recognizes the illegality of making false statements to “the public in any state.” (Bus. & Prof. Code, § 17500, italics added.) This reflects the Legislature’s intent that the FAL provides extraterritorial protection from false claims made in California.
In light of the foregoing, we reject Ticketmaster’s argument that a nonresident cannot state a claim pursuant to the UCL and FAL. Because we find that a non-resident can state a claim under the UCL and FAL, we reject Ticketmaster’s claim that out-of-state customers should not be part of the putative class. Ticketmaster set the terms by requiring all of its customers, regardless of their state of residence, to agree not only that California law would apply to their claims, but also that suit could only be brought in a court located within California.
IV. Manageability
Ticketmaster also contends that the superior court “correctly determined that a nationwide class is not manageable here due to the individual fact inquiries associated with determining whether the UCL and FAL could be applied to each class member’s claims[.]” But as we construe the superior court’s ruling, the superior court declined to certify a nationwide class because it concluded that petitioners had not established jurisdiction over out-of-state plaintiffs. The court made no finding that a nationwide class would be sufficiently unmanageable to defeat certification. Thus, we decline to address this issue.
DISPOSITION
The alternative writ is discharged. Let a peremptory writ of mandate issue directing the superior court to set aside and vacate its order of February 5, 2010 denying petitioners’ motion to certify a nationwide class, and to enter a new order granting petitioners’ motion to certify a nationwide class as to the first and second causes of action only. Petitioners are to recover the costs of this petition.
We concur: ASHMANN-GERST, J., CHAVEZ, J.