Circle Click Media LLC v. Regus Management Group LLC et al

Filing 59

ORDER by Judge Samuel Conti denying without prejudice #29 motion to dismiss for lack of personal jurisdiction; granting in part and denying in part #31 motion to dismiss for failure to state a claim. (sclc1, COURT STAFF) (Filed on 1/3/2013)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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For the Northern District of California

United States District Court

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CIRCLE CLICK MEDIA LLC, METRO
TALENT, LLC, CTNY INSURANCE GROUP
LLC, on behalf of themselves and
all others similarly situated,

)
)
)
)
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Plaintiffs,
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)
v.
)
)
REGUS MANAGEMENT GROUP LLC, REGUS )
BUSINESS CENTRE LLC, REGUS PLC, HQ )
GLOBAL WORKPLACES LLC, and DOES 1 )
through 50,
)
)
Defendants.
)
)

Case No. 12-04000 SC
ORDER RE: (1) REGUS PLC'S
MOTION TO DISMISS FOR LACK
OF PERSONAL JURISDICTION
AND (2) DEFENDANTS' MOTION
TO DISMISS FOR FAILURE TO
STATE A CLAIM

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I.

INTRODUCTION

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Plaintiffs Circle Click Media LLC ("Circle Click"), Metro

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Talent, LLC ("Metro Talent"), and CTNY Insurance Group LLC ("CTNY")

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(collectively, "Plaintiffs") bring this putative class action

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against Regus Management Group LLC ("RMG"), Regus Business Centre

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LLC ("RBC"), Regus plc, and HQ Global Workplaces LLC ("HQ Global")

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(collectively "Defendants").

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("FAC")).

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dismiss for lack of personal jurisdiction pursuant to Federal Rule

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of Civil Procedure 12(b)(1); and (2) Defendants' motion to dismiss

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for failure to state a claim pursuant to Federal Rule of Civil

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Procedure 12(b)(6).

ECF No. 24 (First Amended Complaint

Now before the Court is: (1) Regus plc's motion to

ECF Nos. 29 ("12(b)(1) MTD"); 31 ("12(b)(6)

The motions are fully briefed1 and appropriate for

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MTD").

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resolution without oral argument.

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Regus plc's 12(b)(1) motion is DENIED WITHOUT PREJUDICE pending

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jurisdictional discovery by Plaintiffs.

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12(b)(6) motion is GRANTED in part and DENIED in part.

For the reasons set forth below,

Further, Defendants'

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II.

The following facts are taken from Plaintiffs' FAC.

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BACKGROUND

Defendants are in the business of leasing commercial office space

United States District Court

For the Northern District of California

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throughout California and New York.

FAC ¶ 1.

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is a foreign public limited company incorporated and registered in

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Jersey, Channel Islands, and is the parent company of Defendants

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RMG, RBC, and HQ Global.

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four defendants are alter egos of each other and generally do not

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distinguish between them in the FAC.

Id. ¶¶ 1, 14.

Defendant Regus plc

Plaintiffs allege that all

See id. ¶¶ 1, 21

In 2011, Plaintiffs entered into identical office agreements

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with Defendants (collectively, the "Office Agreement(s)") for

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commercial office space in California and New York.

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65.

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over the monthly payments indicated by their agreements.

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For example, Plaintiffs allege that Defendants routinely assessed

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Circle Click for charges relating to kitchen amenities, various

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telecommunication services, "business continuity service," taxes,

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and penalties -- fees which were not disclosed in the Office

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Agreement or the fine print and which bore no reasonable

Id. ¶¶ 43, 52,

Plaintiffs allege they were assessed charges by Defendants
Id. ¶ 71.

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ECF Nos. 39 ("Opp'n to 12(b)(6) MTD"); 40 ("Opp'n to 12(b)(1)
MTD"), 44 ("Reply ISO 12(b)(1) MTD"), 45 ("Reply ISO 12(b)(6)
MTD"). The Court reminds Plaintiffs that Civil Local Rule 7-4
requires parties to include a table of contents and a table of
authorities in all briefs exceeding ten pages.

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relationship to the services purportedly rendered by Defendants.

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Id. ¶ 48.

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Plaintiffs allege that, in light of Defendants' billing

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practices, its advertising is false and misleading.

See id. ¶ 73.

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Plaintiffs specifically point to advertisements posted to

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Defendants' website from 2003 through 2012.

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represented that customers "could save up to 78 % [sic] compared to

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traditional office costs," that Defendants' one-page contract

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"takes just 10 minutes to complete," and that Defendants' services

These advertisements

United States District Court

For the Northern District of California

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were "[s]imple, easy[,] and flexible."

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also point to a broadcast commercial by Defendants, wherein an

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actress states:

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Id. ¶¶ 23-31.

Plaintiffs

I don't have a lease so I don't have to budget for stuff
like phones, IT guys, and artwork for the lobby.
Instead, I pay one low monthly rate that gives me a
beautiful lobby that impresses my clients, a friendly
receptionist, a fully furnished office, a place to meet,
and a place to brainstorm with my fellow new way workers.
We wonder why more people don't realize that the new way
to work is the best way to work.

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Id. ¶ 31.
Plaintiffs filed the instant action in state court in May 2012

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and Defendants subsequently removed.

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which was filed after removal, Plaintiffs seek to represent a class

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of all persons who paid for Defendants' office space in California

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and New York and were assessed charges by Defendants over the

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monthly payments indicated in the Office Agreement or any similar

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agreement.

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the California class, which is represented by Circle Click and

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Metro Talent: (1) violation of California Business and Professions

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Code section 17200 (the California Unfair Competition Law ("UCL"));

FAC ¶ 71.

ECF No. 1.

In their FAC,

Plaintiffs assert six counts on behalf of

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(2) violation of California Business and Professions Code section

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17500 (the California False Advertising Law ("FAL"); (3)

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"concealment/suppression"; (4) & (5) negligent and intentional

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misrepresentation; and (6) unjust enrichment.

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assert the following claims on behalf of the New York class, which

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is represented by CTNY: (7) & (8) violation of New York State

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General Business Law ("NYSGBL") sections 349 and 350; and (9)

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unjust enrichment.

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obtained revenues, injunctive relief, and special and general

United States District Court

For the Northern District of California

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Plaintiffs also

Plaintiffs seek restitution of wrongfully

damages, among other things.

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III. DISCUSSION

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A.

Regus plc's 12(b)(1) Motion

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Regus plc argues that it should be dismissed from this suit

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because it is a foreign entity that operates outside of California.

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12(b)(1) MTD at 4.

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specific jurisdiction is proper due to Regus plc's false

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advertising in California and that the other Defendants' contacts

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with California can be imputed to Regus plc under an agency and

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alter ego analysis.

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also argue that, if the Court finds that Plaintiffs have failed to

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make a sufficient showing on these claims, it should grant

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Plaintiffs an opportunity to take jurisdictional discovery.

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16.

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i.

Plaintiffs respond that the exercise of

Opp'n to 12(b)(1) MTD at 9-15.

Plaintiffs

Id. at

Legal Standard

Plaintiffs bear the burden of showing that the Court has

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personal jurisdiction over Regus plc.

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Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006).

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See Pebble Beach Co. v.
"[T]his demonstration

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requires that the plaintiff make only a prima facie showing of

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jurisdictional facts to withstand the motion to dismiss."

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(quotations omitted).

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favor of the plaintiff . . . ."

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plaintiff cannot simply rest on the bare allegations of its

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complaint, but uncontroverted allegations in the complaint must be

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taken as true."

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1218, 1223 (9th Cir. 2011) (quotations omitted).

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California's long-arm statute is coextensive with federal due

Id.

"[T]he court resolves all disputed facts in
Id. (quotations omitted).

"The

Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d
Since

United States District Court

For the Northern District of California

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process requirements, Cal. Civ. Proc. Code § 410.10, the personal

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jurisdiction analysis under state and federal law are the same.

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ii.

Specific Jurisdiction

The Ninth Circuit has established a three-prong analysis for
assessing claims of specific jurisdiction:
(1) The non-resident defendant must purposefully
direct his activities or consummate some transaction
with the forum or resident thereof; or perform some
act by which he purposefully avails himself of the
privilege of conducting activities in the forum,
thereby invoking the benefits and protections of its
laws;
(2) the claim must be one which arises out of or
relates to the defendant's forum-related activities;
and
(3) the exercise of jurisdiction must comport with
fair play and substantial justice, i.e. it must be
reasonable.

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Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th

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Cir. 2004).

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two prongs and, if it does, the burden then shifts to the defendant

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to show why the exercise of personal jurisdiction would be

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unreasonable.

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The plaintiff bears the burden of satisfying the first

Id.

As to the first prong, the parties agree that the Court should

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apply the purposeful direction analysis enunciated by the Supreme

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Court in Calder v. Jones, 465 U.S. 783 (1984).

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Opp'n to 12(b)(1) MTD at 10.

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must have (1) committed an intentional act, which was (2) expressly

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aimed at the forum state, and (3) caused harm, the brunt of which

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is suffered and which the defendant knows is likely to be suffered

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in the forum state."

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Calder, 465 U.S. at 783).

12(b)(1) MTD at 7,

"To satisfy this test the defendant

Pebble Beach, 453 F.3d at 1156 (citing

Plaintiffs argue that the "expressly aimed" condition is met

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United States District Court

For the Northern District of California

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here because of Defendants' website, regus.com.

Opp'n to 12(b)(1)

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MTD at 10.

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jurisdiction where "a website advertiser [does] nothing other than

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register a domain name and post an essentially passive website."

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Pebble Beach, 453 F.3d at 1157 (quotations omitted).

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hand, personal jurisdiction may be appropriate where the defendant

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operates an interactive website, depending on the "level of

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interactivity and commercial nature of the exchange of information

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that occurs on the Web site."

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130 F.3d 414, 418 (9th Cir. 1997).

The Ninth Circuit has held that there is no personal

On the other

Cybersell, Inc. v. Cybersell, Inc.,

Plaintiffs contend that regus.com is highly interactive and

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designed to target California consumers.

Opp'n to 12(b)(1) MTD at

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10.

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directories for thirty-six California cities and counties.

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10-11.

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website interface with RMG, not Regus plc.

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Defendants rely on the declaration of Tim Regan, the company

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secretary for Regus plc., who declares: "Communications and

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business that are completed on the www.regus.com website by

They point out that the website includes sub-domain
Id. at

Defendants counter that the interactive features on the

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12(b)(1) MTD at 8.

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California customers occur with [RMG].

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this website and the contact information on this website direct the

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California customer to [RMG]."

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Since the Regan Declaration controverts the FAC, the Court must

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look past its bare allegations of purposeful direction.2

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regus.com website cannot support a finding of purposeful direction

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or the exercise of personal jurisdiction.

ECF No. 30 ("Regan Decl.") ¶ 18.

Thus, the

Neither can the "unsolicited email" produced by Plaintiffs.

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The interactive features on

ECF No. 41 ("Ward Decl.") Ex. B.

The email is a general

United States District Court

For the Northern District of California

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advertisement from "[e-mail]" which was sent to

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"[e-mail]" on May 25, 2012.

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of the email refers to Regus plc and its registered office in the

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Channel Islands.

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reference to California, does not demonstrate that Regus plc

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expressly aimed its activities at California.

Id.

Id.

The signature line

This general advertisement, which makes no

Further, Plaintiffs'

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Plaintiffs object to the Regan Declaration on a number of
grounds. First, they argue that Mr. Regan lacks the requisite
personal knowledge and that his declaration is based on hearsay.
Opp'n to 12(b)(1) MTD at 5. Plaintiffs point to the first
paragraph of the declaration, in which Mr. Regan states: "The
following facts are based upon my personal knowledge or are based
upon information received from persons upon whom I rely in the
normal course of business and/or the business records of Regus
plc." Id. (quoting Regan Decl. ¶ 1). Contrary to Plaintiffs'
contention, Mr. Regan does not lack the requisite personal
knowledge merely because he may have reached an understanding about
some of Regus plc's operations based on his review of business
records or information gathered from staff. See Great Am. Assur.
Co. v. Liberty Surplus Ins. Corp., 669 F. Supp. 2d 1084, 1089 (N.D.
Cal. 2009) ("Personal knowledge includes opinions and inferences
grounded in observations and experience."). Further, Mr. Regan's
declaration is not hearsay because it is based on Mr. Regan's own
understanding and observations and contains no out-of-court
statements. Plaintiffs also object to Mr. Regan's statements
concerning regus.com on the ground that they are vague and
ambiguous and constitute inadmissible legal conclusions because
they interpret the legal significance of online interaction through
the Regus website. Opp'n to 12(b)(1) MTD at 8. This argument is
unavailing. The paragraphs targeted by Plaintiffs contain
straightforward statements of fact, not legal conclusions.

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injuries could not be related to this email since it was sent after

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Plaintiffs filed the instant action.

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Accordingly, the Court finds that Plaintiffs have failed to

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meet their burden of showing that the exercise of specific

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jurisdiction would be appropriate.
iii. Agency and Alter Ego Analysis

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Generally, the existence of a parent-subsidiary relationship

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"is not sufficient to establish personal jurisdiction over the

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parent on the basis of the subsidiaries' minimum contacts with the

United States District Court

For the Northern District of California

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forum."

Doe v. Unocal Corp., 248 F.3d 915, 925 (9th Cir. 2001).

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However, "if the parent and subsidiary are not really separate

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entities [i.e., alter egos], or one acts as an agent of the other,

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the local subsidiary's contacts with the forum may be imputed to

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the foreign parent corporation."

Id. at 926 (quotations omitted).

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To satisfy the alter ego exception to the general rule, "the

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plaintiff must make out a prima facie case (1) that there is such

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unity of interest and ownership that the separate personalities [of

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the two entities] no longer exist and (2) that failure to disregard

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[their separate identities] would result in fraud or injustice."

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Id. (quotations omitted).

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subsidiary functions as the parent corporation's representative in

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that it performs services that are sufficiently important to the

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foreign corporation that if it did not have a representative to

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perform them, the corporation's own officials would undertake to

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perform substantially similar services."

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omitted).

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The agency exception applies where "the

Id. at 928 (quotations

The Court finds that Plaintiffs have proffered insufficient
facts to support the application of either exception here.

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Plaintiffs argue that the exceptions apply because Regus plc, RMG,

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and RBC share a website, trademark, and logo.

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12(b)(1) MTD at 14-15.

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suggest that those facts are sufficient to attribute RMG and RBC

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contacts to Regus plc.

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plc uses the other Defendants as marketing conduits; however, it

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offers no other facts concerning the connection between these

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different entities.

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exerts over the other Defendants or whether they share revenues,

See Opp'n to

However, they cite no authority which would

Plaintiffs also baldly assert that Regus

It is unclear how much control Regus plc

United States District Court

For the Northern District of California

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customers, or staff.

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with any evidence concerning the functional relationship between

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Defendants.

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In short, Plaintiffs have yet to come forward

Accordingly, the Court declines to impute RMG and RBC's
contacts with California to Regus plc at this time.
iv.

Jurisdictional Discovery

The district court has discretion to allow a plaintiff to

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conduct jurisdictional discovery.

Wells Fargo & Co. v. Wells Fargo

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Exp. Co., 556 F.2d 406, 430 n.24 (9th Cir. 1977).

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such discovery should ordinarily be granted "where pertinent facts

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bearing on the question of jurisdiction are controverted . . . or

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where a more satisfactory showing of the facts is necessary."

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(quotations omitted).

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discovery "[w]here a plaintiff's claim of personal jurisdiction

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appears to be both attenuated and based on bare allegations in the

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face of specific denials made by the defendants . . . ."

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Beach, 453 F.3d at 1160 (quotations omitted).

The Court finds that

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jurisdictional discovery is appropriate here.

Defendants argue

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that Plaintiffs have failed to substantiate their agency and alter

Requests for

Id.

However, a district court need not permit

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Pebble

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ego theories, but they have not denied Plaintiffs' allegations.

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See Reply ISO 12(b)(1) MTD.

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additional evidence pertinent to the assessment of personal

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jurisdiction.

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Accordingly, discovery may uncover

For the foregoing reasons, the Court DENIES Regus Plc's motion

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to dismiss for lack of personal jurisdiction WITHOUT PREJUDICE and

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GRANTS Plaintiffs leave to conduct jurisdictional discovery to

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collect evidence relevant to their alter ego and agency theories of

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personal jurisdiction.

After discovery has been completed, Regus

United States District Court

For the Northern District of California

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plc may again move to dismiss for lack of personal jurisdiction

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pursuant to Federal Rule of Civil Procedure 12(b)(1).

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B.

i.

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Defendants' Rule 12(b)(6) Motion
Legal Standard

A motion to dismiss under Federal Rule of Civil Procedure

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12(b)(6) "tests the legal sufficiency of a claim."

Navarro v.

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Block, 250 F.3d 729, 732 (9th Cir. 2001).

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on the lack of a cognizable legal theory or the absence of

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sufficient facts alleged under a cognizable legal theory."

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Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.

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1988).

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should assume their veracity and then determine whether they

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plausibly give rise to an entitlement to relief."

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Iqbal, 556 U.S. 662, 664 (2009).

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must accept as true all of the allegations contained in a complaint

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is inapplicable to legal conclusions.

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elements of a cause of action, supported by mere conclusory

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statements, do not suffice."

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v. Twombly, 550 U.S. 544, 555 (2007)).

"Dismissal can be based

"When there are well-pleaded factual allegations, a court

Ashcroft v.

However, "the tenet that a court

Threadbare recitals of the

Id. at 663. (citing Bell Atl. Corp.

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The allegations made in a

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complaint must be both "sufficiently detailed to give fair notice

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to the opposing party of the nature of the claim so that the party

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may effectively defend against it" and "sufficiently plausible"

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such that "it is not unfair to require the opposing party to be

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subjected to the expense of discovery."

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1191, 1204 (9th Cir. 2011).

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ii.

Starr v. Baca, 633 F.3d

Group Pleading

Defendants first argue that RBC, Regus plc, and HQ Global

United States District Court

should be dismissed from the case since Plaintiffs fail to allege

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For the Northern District of California

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any facts indicating that they had any involvement in the matters

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that form the basis of Plaintiffs' claims.

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Relying on Swartz v. KPMG LLP, 476 F.3d 756 (9th Cir. 2007),

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Defendants contend that Plaintiffs have engaged in impermissible

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group pleading.

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the context of a fraud suit involving multiple defendants, a

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plaintiff must, at a minimum, 'identif[y] the role of [each]

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defendant[] in the alleged fraudulent scheme.'"

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(quotations omitted) (alterations in the original).

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argue that, although the FAC names four distinct defendants, it

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makes no effort to articulate each defendant's role in the supposed

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fraud, misrepresentations, or concealment.

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Id.

12(b)(6) MTD at 7.

In Swartz, the Ninth Circuit held that "[i]n

The Court is not persuaded.

476 F.3d at 765
Defendants

12(b)(6) MTD at 7.

As an initial matter, the

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prohibition against group pleading only applies in cases of fraud,

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see Swartz 476 F.3d at 765, and, in this case, only a fraction of

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Plaintiffs' claims sound in fraud.

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Rule of Civil Procedure 8 also bars Plaintiffs' claims, since it

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requires Plaintiffs to set forth which claims are alleged against

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which defendants.

Defendants argue that Federal

Reply ISO 12(b)(6) MTD at 3.

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However, Rule 8

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pleading standards do not prevent a plaintiff from "pleading facts

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alleged upon information and belief where the facts are peculiarly

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within the possession and control of the defendant . . . ."

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Records, LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir. 2010) (quotations

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omitted).

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information and belief, that Defendants are alter egos of each

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other.

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relationships is in the sole possession of Defendants, Plaintiffs

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are entitled to discovery on the matter.

Such is the case here.

FAC ¶ 21.

Arista

Plaintiffs have pled, upon

As information concerning Defendants' corporate

This same reasoning

United States District Court

For the Northern District of California

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applies to Plaintiffs' fraud claims.

See Moore v. Kayport Package

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Exp., Inc., 885 F.2d 531, 540 (9th Cir. 1989) ("Instances of

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corporate fraud may also make it difficult to attribute particular

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fraudulent conduct to each defendant as an individual.").
Defendants argue that Plaintiffs have failed to plead

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sufficient facts to support their alter ego allegations.

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4.

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make[] no distinction between entities when using the Regus logo in

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connection with marketing," that "[Defendants] describe[] [their]

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own operations to actual tenants as if such operations are

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conducted by a single entity," and that "[Defendants] represent[]

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to [their] investors [that they are] a unified entity," among other

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things.

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altogether.

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allegation that Regus Management Group LLC, Regus Business Centre

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LLC, Regus plc, and HQ Global are alter egos of one another.

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iii. Count I: UCL Claims for Unlawful, Unfair, and

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The Court disagrees.

FAC ¶ 21.

Reply at

Plaintiffs allege that "[Defendants]

Defendants appear to ignore these allegations

In sum, the Court finds plausible Plaintiffs'

Fraudulent Business Practices
Plaintiffs' first claim for relief is brought under the

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California UCL, which prohibits business practices that are (1)

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unlawful, (2) unfair, or (3) fraudulent.

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17200.

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UCL.

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predicate violations of sections 1950.8, 1671(b), 1572, 1709, and

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1710 of the California Civil Code.

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unfairness prong of the UCL, Plaintiffs target Defendants' alleged

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practice of "assessing charges above the monthly payment indicated

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in the Office Agreement."

Cal. Bus. Prof. Code §

Plaintiffs allege violations of all three prongs of the

With respect to the unlawful prong, Plaintiffs allege

FAC ¶¶ 85-87.

Id. ¶ 84.

As to the

Finally, with respect to

United States District Court

For the Northern District of California

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fraud, Plaintiffs allege that "Defendants' . . . failure to clearly

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and conspicuously disclose [their] scheme, practice, and intent to

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assess additional undisclosed fees deceives consumers, customers,

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and/or the public."3

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Plaintiffs' claims under all three prongs of the UCL.

Id. ¶ 89.

Unlawful Practices.

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Defendants move to dismiss

Defendants argue that Plaintiffs cannot

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state a claim for unlawful practices under the UCL because they

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have not alleged facts establishing predicate violations of the

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borrowed statutes, California Civil Code sections 1950.8, 1671(b),

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1572, 1709, and 1710.

12(b)(6) MTD at 17-19.

Civil Code section 1950.8 "applies only to commercial leases

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and nonresidential tenancies of real property" and makes it

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unlawful to require payment "as a condition of initiating,

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continuing, or renewing a lease or rental agreement, unless the

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amount of payment is stated in the written lease or rental

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agreement."

Cal. Civ. Code § 1950.8(a)-(b).

Plaintiffs allege

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Plaintiffs also allege that Defendants are liable for fraud under
the UCL because they engaged in false advertising. FAC ¶ 88. This
UCL claim is identical to Plaintiffs' FAL claim. Compare id. ¶ 88
with id. ¶ 92. Accordingly, it is addressed in Section III.B.iv
infra.

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that Defendants violated section 1950.8 by "requir[ing] the payment

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of monies as a condition of continuing the lease without providing

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for the amounts of said monies in the Office Agreement or Fine

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Print[.]"

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inapplicable here because the Office Agreement executed by

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Plaintiffs is not a lease.

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Agreement provides:

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United States District Court

Defendants argue that section 1950.8 is

12(b)(6) MTD at 17-18.

The Office

This agreement is the commercial equivalent of an
agreement for accommodation(s) in a hotel. The whole of
the Center remains in Regus' possession and control. THE
CLIENT ACCEPTS THAT THIS AGREEMENT CREATES NO TENANCY
INTEREST, LEASEHOLD ESTATE, OR OTHER REAL PROPERTY
INTEREST IN THE CLENT'S FAVOUR WITH RESPECT TO THE
ACCOMODATIONS.

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For the Northern District of California

FAC ¶ 85.

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ECF No. 34 Ex. B ("Office Agreement") § 1.1.

Plaintiffs respond

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that the Office Agreement shares all the characteristics of a lease

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since it "grants Plaintiffs the right to enter and possess the

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designated premises for a fixed consideration (one monthly fee) and

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period of time (duration of months)."

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The Court may not accept Plaintiffs' argument without ignoring the

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express terms of the Office Agreement.

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contention, the Office Agreement did not grant them the right to

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possess the premises.

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"remains in Regus' possession and control[.]"

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1.1.

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"CREATES NO TENANCY INTERST."

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claim is DISMISSED WITH PREJUDICE as it pertains to California

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Civil Code section 1950.8.

Opp'n to 12(b)(6) MTD at 21.

Contrary to Plaintiffs'

In fact, it expressly states the property
Office Agreement §

Moreover, the Office Agreement expressly provides that it
Id.

Accordingly, Plaintiffs' UCL

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Section 1671(b) states: "[A] provision in a contract

27

liquidating the damages for the breach of the contract is valid

28

unless the party seeking to invalidate the provision establishes

14

1

that the provision was unreasonable under the circumstances

2

existing at the time the contract was made."

3

1671(b).

4

section 1671(b) by "charging penalties based on a percentage of the

5

entire alleged unpaid principal balance, plus a fixed fee" since

6

such penalties "do[] not bear a reasonable nexus to the amount of

7

damages suffered by Regus."

8

Plaintiffs lack standing to bring this claim since they have not

9

alleged that they paid such a penalty or the amount of the penalty.

Cal. Civ. Code §

Plaintiffs allege that Defendants violated

FAC ¶ 86.

Defendants argue that

United States District Court

For the Northern District of California

10

12(b)(6) MTD at 18.

Defendants misconstrue the FAC.

11

pleading could be clearer, Plaintiffs appear to be referring to the

12

penalty allegedly assessed against Circle Click which amounted to

13

"$25 plus 5% of the amount due on the overdue balances under $1,000

14

or $50 plus 5% of the amount due on the overdue balances of $1000

15

or greater."

16

paid the penalty.

17

Plaintiff Circle Click to suffer harm in the amount of the unfair

18

and unreasonable fees paid by Circle Click to Regus.").

19

Accordingly, Plaintiffs' UCL unlawfulness claim remains undisturbed

20

as to the alleged predicate violation of section 1671(b).

FAC ¶ 48(l).

While the

Moreover, Plaintiffs allege that they

Id. ¶ 51 ("Regus'[s] charges have caused

21

Plaintiffs claim that Defendants violated Civil Code sections

22

1572, 1709, and 1710 by routinely assessing charges not adequately

23

disclosed or indicated in the Office Agreement.

24

Sections 1572 and 1710 define the terms "actual fraud" and

25

"deceit," respectively, and section 1709 provides: "One who

26

willfully deceives another with intent to induce him to alter his

27

position to his injury or risk, is liable for any damage which he

28

thereby suffers."

Id. ¶ 87.

These claims fail for the same reasons as

15

1

Plaintiffs' claims for "concealment/suppression" and negligent and

2

intentional misrepresentation.

3

Accordingly, Plaintiffs UCL unlawfulness claim is DISMISSED with

4

leave to amend to the extent that it is predicated on violations of

5

Civil Code sections 1572, 1709, 1710.
Unfair Practices.

6

See Section III.B.v infra.

California courts have enunciated multiple

7

standards for evaluating a claim for unfair practices under the

8

UCL.

9

Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone

In this case, the parties point to the tests set forth in

United States District Court

For the Northern District of California

10

Co., 20 Cal. 4th 163 (1999) and Camacho v. Automobile Club of

11

Southern California, 142 Cal. App. 4th 1394, 1401 (2006).

12

the Cel-Tech standard, an unfair business practice is "conduct that

13

threatens an incipient violation of an antitrust law, or violates

14

the policy or spirit of one of those laws because its effects are

15

comparable to or the same as a violation of the law, or otherwise

16

significantly threatens or harms competition."

17

Under the Camacho standard, a plaintiff may establish unfairness by

18

showing that the consumer injury (1) is substantial; (2) not

19

outweighed by any countervailing benefits to consumers or

20

competition; and (3) is one that consumers themselves could not

21

reasonably have avoided.

22

Under

20 Cal. 4th at 187.

142 Cal. App. 4th at 1403.

Plaintiffs have failed to meet either standard.

With respect

23

to the Cel-Tech standard, Plaintiffs have not attempted to identify

24

any law or public policy which might be offended by Defendants'

25

alleged conduct.

26

that Defendants' "systematic practice of non-disclosure" does not

27

serve any legitimate business purpose of utility.

28

12(b)(6) MTD at 23.

As to the Camacho standard, Plaintiffs assert

Opp'n to

However, they have not explained why their

16

1

alleged injury is substantial or why they could not have avoided

2

the injury themselves.

3

appears that the fees about which Plaintiffs complain were in fact

4

disclosed in the Office Agreement and other documentation provided

5

by Defendants.

6
7
8
9

As set forth in Section III.B.v infra, it

Accordingly, Plaintiffs' claim for unfair business practices
under the UCL is DISMISSED with leave to amend.
Fraudulent Practices.

Plaintiffs' claim for fraudulent

practices under the UCL fails for the same reasons as their claims

United States District Court

For the Northern District of California

10

for "concealment/suppression" and intentional and negligent

11

misrepresentation: the Office Agreement disclosed the fees that

12

Defendants allegedly concealed.

13

Plaintiffs point out, "[u]nlike a common law fraud claim, a UCL

14

fraud claim requires no proof that the plaintiff was actually

15

deceived.

16

likelihood of confounding an appreciable number of reasonably

17

prudent purchasers exercising ordinary care."

18

DaimlerChrysler Corp., 534 F.3d 1017, 1025-26 (9th Cir. 2008)

19

(quotations and internal citations omitted).

20

have failed to explain how Defendants' practices were likely to

21

deceive reasonably prudent purchasers when Defendants disclosed

22

that they would charge the additional fees which are the focus of

23

Plaintiffs' action.

24

fraudulent practices is DISMISSED with leave to amend.

25
26
27
28

See Section III.B.v, infra.

As

Instead, the plaintiff must produce evidence showing a

iv.

Clemens v.

However, Plaintiffs

Accordingly, Plaintiffs' UCL claim for

Counts I & II: UCL and FAL Claims for False
Advertising

Plaintiffs allege that Defendants engaged in false advertising
in violation of the UCL and FAL through "advertising displayed on

17

1

the Regus Website, www.craigslist.com, representations of

2

'furnished' offices, and representations of 'simple one page' lease

3

agreements, which fail to mention the amounts of additional charges

4

that will be assessed by Regus."

5

UCL prohibits "unfair, deceptive, untrue or misleading

6

advertising," Cal. Bus. & Prof. Code § 17200, and the FAL makes it

7

unlawful to induce the public to enter into any obligation through

8

the dissemination of "untrue or misleading" statements.

9

& Prof. Code § 17500.

United States District Court

For the Northern District of California

10

FAC ¶ 92; see also id. ¶ 88.

The

Cal. Bus.

Defendants move to dismiss Plaintiffs' false advertising

11

claims on at least two grounds: (1) Plaintiffs have pled

12

insufficient facts to establish that they have standing; and (2)

13

Plaintiffs' claims lack the required particularity.

14

at 9, 12.

12(b)(1) MTD

Both arguments have merit.

15

With respect to standing, a private person may only bring an

16

action under the UCL and FAL if he or she has "suffered injury in

17

fact and has lost money or property as a result of the unfair

18

competition."

19

Supreme Court has interpreted section 17204 to "impose[] an actual

20

reliance requirement on plaintiffs prosecuting a private

21

enforcement action under the UCL[] . . . ."

22

Cases, 46 Cal. 4th 298, 326 (2009).

23

Plaintiffs lack standing because they do not allege that they saw

24

or relied upon the allegedly false and misleading advertising.

25

12(b)(1) MTD at 9.

26

allegations are unnecessary to establish actual reliance.

27

12(b)(6) MTD at 8.

Cal. Bus. & Prof. Code § 17204.

The California

In re Tobacco II

Defendants contend that

Plaintiffs respond that, under Tobacco II, such

28

18

Opp'n to

Tobacco II involved false advertising claims against tobacco

1
2

companies.

3

contention that the plaintiffs lacked standing under the UCL

4

because they had not relied on the tobacco companies'

5

advertisements, the California Supreme Court stated:

6

8
9
10

United States District Court

Addressing the tobacco company's

[W]hile a plaintiff must allege that the defendant's
misrepresentations were an immediate cause of the
injury-causing conduct, the plaintiff is not required to
allege that those misrepresentations were the sole or
even the decisive cause of the injury-producing conduct.
Furthermore, where, as here, a plaintiff alleges
exposure to a long-term advertising campaign, the
plaintiff is not required to plead with an unrealistic
degree of specificity that the plaintiff relied on
particular advertisements or statements. Finally, an
allegation of reliance is not defeated merely because
there was alternative information available to the
consumer-plaintiff.

7

For the Northern District of California

46 Cal. 4th at 306.

11
12
13

Id. at 328.

14

that a plaintiff must show reliance to establish standing under the

15

UCL.

16

individualized reliance on specific representations where

17

Defendants have engaged in a long-term advertising campaign.

18

this case, Plaintiffs have failed to allege any reliance

19

whatsoever.

20

advertisements described in the FAC or received similar information

21

from any other advertising.

22

concerning reliance, the Court cannot conclude that Plaintiffs'

23

decision to use Defendants' services was influenced or reinforced

24

by Defendants' advertising.

25

allege sufficient facts to establish standing.

26

Thus, Tobacco II did not eliminate the requirement

It merely held that a Plaintiff need not demonstrate

In

It is unclear whether they saw any of the

In the absence of any allegations

Accordingly, Plaintiffs have failed to

Defendants also argue that the FAC fails to explain why the

27

targeted advertisements were misrepresentations.

28

at 14.

Again, Defendants are correct.

19

12(b)(6) at MTD

Among other things, the

1

targeted advertisements make the following claims: "[s]ave money";

2

"[f]lexibility for your business"; "get down to business

3

instantly"; "match our office rental options to your business

4

needs"; "our solutions are designed to fit within your budget";

5

"[s]imple, easy and flexible"; "fully-furnished"; "all-inclusive";

6

and "one monthly fee"; and "one low monthly rate."

7

None of these advertising claims represent that Defendants will

8

refrain from charging customers additional fees, so it is unclear

9

how they relate to Plaintiffs' action.

FAC ¶¶ 25-31.

The FAC does nothing to

United States District Court

For the Northern District of California

10

clarify the matter.

11

claims amount to non-actionable puffery since they are vague and

12

highly subjective.

13

1399 (E.D. Cal. 1994).

14

Further, many of Defendants' advertising

See Haskell v. Time, Inc., 857 F. Supp. 1392,

Plaintiffs argue that, taken together, Defendants'

15

advertisements deceived them into believing that "[Defendants']

16

'fully furnished' and 'all-inclusive offices' have 'one monthly

17

fee.'"

18

identified in the FAC that mentions "one monthly fee" was posted in

19

2004, about seven years before Plaintiffs executed their Office

20

Agreements.

21

changed since that time.

22

targeted in the FAC refer to a "single monthly invoice," which

23

could include multiple fees.

24

altogether clear from the 2004 advertisement that the additional

25

services targeted in the FAC would be included in one monthly fee.

26

The advertisement states: "With Regus executive suites you get a

27

complete, professional executive office environment included in one

28

monthly []fee.

Opp'n to 12(b)(6) MTD.

FAC ¶ 26.

However, the only advertisement

Defendants' business practices may have
In fact, the more recent advertisements

Id. ¶ 31.

Further, it is not

You'll also get professional receptionists, state-

20

1

of-the-art telecom and IT services, kitchen areas and cyber cafés."

2

Id. ¶ 31.

3

Accordingly, Plaintiffs' false advertising claims under the

4

UCL and FAL are DISMISSED with leave to amend.

5

complaint should do more than merely list advertisements that

6

Defendants have broadcast in the last decade.

7

how Plaintiffs relied on the advertisements and why the

8

advertisements are false and misleading.

9

United States District Court

For the Northern District of California

10
11

v.

Plaintiffs' amended

It should explain

Courts III-V: Concealment/Suppression and Negligent
and Intentional Misrepresentation

The gravamen of Plaintiffs' claims for

12

"concealment/suppression" (Count III), negligent misrepresentation

13

(Count IV), and intentional misrepresentation (Count V) is that

14

Defendants failed to disclose or failed to adequately disclose

15

various fees assessed against Plaintiffs.

16

Plaintiffs' concealment/suppression claim, Plaintiffs allege that

17

Defendants actively concealed the amounts of additional fees "by

18

not stating the amounts in the Office Agreement or Fine Print, by

19

using extremely small font, and by failing to provide adequate

20

disclosures that are clear and conspicuous."

21

in their misrepresentation claims, Plaintiffs allege that

22

Defendants falsely represented that Plaintiffs' total monthly

23

payments would be the amounts stated in the Office Agreement.

24

¶¶ 106, 107, 113.

With respect to

FAC ¶ 30.

Likewise,

Id.

25

Defendants argue that they disclosed that additional fees

26

would be charged, pointing out that the Office Agreement, which is

27

referenced in but not attached to the FAC, represents that the

28

stated monthly office fees "exclud[e] tax and exclud[e] services."

21

1

12(b)(1) MTD at 15.

2

in the "Terms and Conditions," which are incorporated by reference

3

into the Office Agreement.

4

seriously respond to this argument, except to suggest that

5

Defendants' disclosures were not conspicuous enough because they

6

were made in five-point font or in the fine print.

7

12(b)(6) MTD at 17.

8

suggesting what size font Defendants were required to use or that a

9

disclosure in an agreement must be conspicuous to be effective.

United States District Court

For the Northern District of California

10

Defendants also point to various disclosures

See id. at 4.

Plaintiffs do not

See Opp'n to

However, Plaintiffs cite no authority

Under California law, "[t]he adequacy of a disclaimer in the

11

context of an action for fraud is judged by reference to the

12

plaintiff's knowledge and experience[.]"

13

Ins. Co. of Am., 171 Cal. App. 4th 912, 921 (2009).

14

generally denied where the plaintiff's reliance on the defendant's

15

misrepresentation is "manifestly unreasonable" in light of the

16

plaintiff's intelligence and information.

17

negotiate a contract at arm's length, "it is not reasonable to fail

18

to read a contract before signing it."

19

N.A., 691 F.3d 1152, 1163 (9th Cir. 2012).

20

appears to be the case here.

21

Broberg v. Guardian Life

Id.

Recovery is

Where the parties

Davis v. HSBC Bank Nevada,
Based on the FAC, that

Accordingly, the Court GRANTS Defendants' motion to dismiss

22

with respect to Counts III, IV, and V, and GRANTS Plaintiffs leave

23

to amend those claims.

24

specifically allege what was not disclosed in the agreements they

25

signed with Defendants and/or what Defendants misrepresented to

26

them about their monthly fees and why it was reasonable for

27

Plaintiffs to rely on those misrepresentations despite the language

28

of the agreements.

Plaintiffs' amended complaint should

22

1
2

vi.

Counts VII & VIII: NYSGBL Sections 349 and 350

Defendants argue that CTNY lacks standing to bring causes of

3

action under NYSGBL sections 349 and 350 because Plaintiffs have

4

not alleged a consumer-oriented harm.

5

unlawful "deceptive acts or practices" and "false advertising" in

6

the conduct of "any business, trade or commerce."

7

Law §§ 349(a), 350.

8

general, but also provides that "any person" who has been injured

9

by actions prohibited by the law may bring an action "in his own

Sections 349 and 350 declare

N.Y. Gen. Bus.

Section 349 authorizes suits by the attorney

United States District Court

For the Northern District of California

10

name to enjoin such unlawful act" or "to recover his actual damages

11

or fifty dollars, whichever is greater."

12

Id. § 349(b), (h).

Section 349 "was intended to empower consumers; to even the

13

playing field in their disputes with better funded and superiorly

14

situated fraudulent businesses.

15

action to recover damages for breach of contract between parties to

16

an arm's length contract."

17

N.Y.S.2d 769, 774 (N.Y. Sup. Ct. 1995).

18

matter, a plaintiff bringing a claim under section 349 must charge

19

the defendant with conduct that is consumer-oriented.

20

Laborers' Local 214 Pension Fund v. Marine Midland Bank, N.A., 85

21

N.Y.2d 20, 25 (N.Y. 1995).

22

advertising which is consumer-oriented.

23

v. Yellow Book USA, Inc., 309 F. Supp. 2d 401, 405 (E.D.N.Y. 2004).

24

It was not intended to supplant an

Teller v. Bill Hayes, Ltd., 630
Thus, as a threshold

Oswego

Likewise, section 350 only pertains to
Verizon Directories Corp.

To establish that the defendant's conduct is consumer-

25

oriented, the plaintiff "must demonstrate that the acts or

26

practices have a broader impact on consumers at large.

27

contract disputes, unique to the parties, for example, would not

28

fall within the ambit of the statute."

23

Private

Oswego, 85 N.Y.2d at 25.

1

Further, to avoid "the potential for a tidal wave of litigation

2

against businesses that was not intended by the Legislature," New

3

York courts have adopted an objective definition of deceptive acts

4

and practices, which limits actionable conduct to that which is

5

"likely to mislead a reasonable consumer acting reasonably under

6

the circumstances."

7

Id. at 26.

A review of the case law in this area further illuminates the

8

standard for finding consumer-oriented conduct.

9

court found consumer-oriented conduct where a pension fund opened a

In Oswego, the

United States District Court

For the Northern District of California

10

savings account with a bank that was acting as the fund's

11

investment advisor on the ground that the bank "dealt with

12

plaintiffs' representative as any customer entering the bank to

13

open a savings account, furnishing the Funds with standard

14

documents presented customers upon the opening of accounts."

15

N.Y.2d at 26-27.

16

York v. Feldman, 210 F. Supp. 2d 294 (S.D.N.Y. 2002), where the

17

state of New York alleged that the defendant engaged in a scheme to

18

manipulate public stamp auctions.

19

parties injured by the alleged scheme "included, among others,

20

unsophisticated individual sellers, such as the elderly and one-

21

time participants."

22

no consumer-oriented conduct was found in Cruz v. NYNEX Information

23

Resources, 263 A.D.2d 285 (N.Y. Sup. Ct.), where a group of

24

businesses filed suit in connection with advertisements they had

25

placed in the Yellow Pages.

26

transactions at issue were "modest in value," "repeated regularly

27

with numerous parties," and "involve[d] parties with a large

28

disparity in economic power and sophistication," plaintiffs had

85

Consumer-oriented conduct was also found in New

The court reasoned that the

Feldman, 210 F. Supp. 2d at 301.

In contrast,

The court reasoned that although the

24

1

failed to show how the alleged misconduct might either directly or

2

potentially affect consumers since "advertisement space in the

3

Yellow Pages is, by definition, a commodity available to businesses

4

only . . . ."

5

Cruz, 263 A.D.2d at 291.

The Court finds that this case is more like Cruz than Oswego

6

or Feldman.

7

presented with a standardized contract, Plaintiffs have made no

8

showing that Defendants' alleged misconduct has the potential to

9

affect consumers at large.

While CTNY was treated like a consumer in that it was

All three Plaintiffs are businesses and

United States District Court

For the Northern District of California

10

their claims relate to Defendants' practices in marketing and

11

managing commercial office space, a commodity which is only

12

available to businesses.

13

practices are sufficiently consumer-oriented because they affect

14

all consumers of office space in New York, be they entrepreneurs or

15

individuals seeking to lease a single office or start a company, or

16

a small business leasing multiple office spaces."

17

12(b)(6) MTD at 14.

18

Plaintiffs would only be interested in commercial office space for

19

business purposes.

20

that their suit will benefit New York consumers.

21
22

Plaintiffs argue that "Defendants'

Opp'n to

However, all of the parties listed by

As such, Plaintiffs cannot credibly contend

Accordingly, Plaintiffs' claims under NYSGBL Sections 349 and
350 are DISMISSED WITH PREJUDICE.

23

vii. Counts VI & IX: Unjust Enrichment

24

Plaintiffs bring two claims for unjust enrichment, one under

25

California law (Count VI) and the other under New York law (Count

26

IX).

27

Plaintiffs allege that Defendants were unjustly enriched as a

28

result of their wrongful conduct and that it would be against

The two claims are practically identical.

25

In both,

1

equity and good conscience to permit Defendants to retain the ill-

2

gotten benefits.

3

dismiss both claims.

4

FAC ¶¶ 122-23, 141-42.

Defendants move to

As to Count VI, Defendants argue that recent authority

action under California law.

7

Reinalt-Thomas Corp., 11-CV-03548-LHK, 2012 WL 1438812 (N.D. Cal.

8

Apr. 25, 2012).

9

Having reviewed numerous discussions, this Court is persuaded by,

10

United States District Court

suggests that unjust enrichment is not an independent cause of

6

For the Northern District of California

5

and adopts the reasoning of, the cases which hold that claims for

11

restitution or unjust enrichment may survive the pleading stage

12

when pled as an alternative avenue of relief, though the claims, as

13

alternatives, may not afford relief if other claims do.

14

Vicuna v. Alexia Foods, Inc., C 11-6119 PJH, 2012 WL 1497507, at *3

15

(N.D. Cal. Apr. 27, 2012); Larsen v. Trader Joe's Co., C 11-05188

16

SI, 2012 WL 5458396, at *7 (N.D. Cal. June 14, 2012).

17

Count VI is DISMISSED with leave to amend.

18

their complaint to plead this claim in the alternative.

19

MTD at 20-21 (citing Williamson v.

However, not all courts agree on this issue.

E.g.,

Accordingly,

Plaintiffs may amend

With respect to Count IX, Defendants argue that Plaintiffs

20

cannot recover on a theory of unjust enrichment under New York law

21

because the parties executed an agreement governing the subject

22

matter of the dispute.

23

California law, "[t]he theory of unjust enrichment lies as a quasi-

24

contract claim."

Goldman v. Metro. Life Ins. Co., 5 N.Y.3d 561,

25

572 (N.Y. 2005).

Some New York courts have reasoned that, because

26

unjust enrichment creates an obligation in the absence of an

27

agreement, a claim for unjust enrichment cannot be sustained if a

28

valid contract governs the relevant subject matter.

MTD at 21.

26

Under New York law, as under

Id.

Other

1

courts have held that New York law permits alternative pleading of

2

breach of contract and unjust enrichment claims. See Vertex Constr.

3

Corp. v. T.F.J. Fitness L.L.C., 0-CV-683 (CBA) (ALC), 2011 U.S.

4

Dist. LEXIS 135453, 11, 2011 WL 5884209, at *11 (E.D.N.Y. Nov. 23,

5

2011).

6

Under Goldman, claims for unjust enrichment may only be dismissed

7

where the subject matter of the dispute is clearly governed by

8

contract.

9

Office Agreements at issue here remains unclear and is subject to

Defendants' argument fails under both lines of cases.

As discussed in Section III.B.v supra, the scope of the

United States District Court

For the Northern District of California

10

dispute.

11

unjust enrichment are disfavored "because it is difficult to

12

determine the validity or scope of the contract at the pleading

13

stage."

14

Accordingly, Defendants' motion to dismiss Count IX is DENIED.

Likewise, under Vertex, motions to dismiss claims for

2011 WL 5884209, at *11 (quotations omitted).

15
16
17

IV.

CONCLUSION
For the foregoing reasons, Defendant Regus plc's Rule 12(b)(1)

18

motion to dismiss for lack of personal jurisdiction is DENIED

19

WITHOUT PREJUDICE.

20

LLC, Metro Talent, LLC, and CTNY Insurance Group LLC leave to

21

conduct jurisdictional discovery.

22

Regus plc may again move to dismiss pursuant to Rule 12(b)(1).

23

Court also GRANTS in part and DENIES in part Defendants Regus

24

Management Group LLC, Regus Business Centre LLC, Regus plc, and HQ

25

Global Workplaces LLC's 12(b)(6) motion to dismiss for failure to

26

state a claim.

The Court GRANTS Plaintiffs Circle Click Media

27
28

27

Once that discovery is complete,
The

1

•

Count I is DISMISSED WITH PREJUDICE to the extent that it is

2

predicated on a violation of California Civil Code section

3

1950.8.

4

•

Count I remains undisturbed to the extent that it is

5

predicated on a violation of California Civil Code section

6

1671(b).

7

•

Count I is DISMISSED with leave to amend to the extent that it

8

is predicated on California Civil Code sections 1572, 1709,

9

and 1710, and Defendants' allegedly unfair and fraudulent

United States District Court

For the Northern District of California

10
11

business practices.
•

Counts I and II are DISMISSED with leave to amend to the

12

extent that they are predicated on Defendants' allegedly false

13

and misleading advertising.

14

•

Counts III through VI are DISMISSED with leave to amend.

15

•

Counts VII and VIII are DISMISSED WITH PREJUDICE.

16

•

Count IX shall remain undisturbed.

17

Plaintiffs shall file an amended complaint within thirty (30) days

18

of the signature date of this Order.

19

in the dismissal with prejudice of the claims which the Court has

20

granted Plaintiffs leave to amend.

Failure to do so may result

21
22

IT IS SO ORDERED.

23
24
25

Dated: January 3, 2013
UNITED STATES DISTRICT JUDGE

26
27
28

28