Ehret v. Uber Technologies, Inc.

Filing 64

ORDER by Judge Edward M. Chen granting in part and denying in part 44 Defendant's Motion to Dismiss (emclc2, COURT STAFF) (Filed on 9/17/2014)

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1 2 3 4 5 UNITED STATES DISTRICT COURT 6 NORTHERN DISTRICT OF CALIFORNIA 7 8 CAREN EHRET, 9 Plaintiff, ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS v. 11 For the Northern District of California United States District Court 10 No. C-14-0113 EMC UBER TECHNOLOGIES, INC., 12 Defendant. ___________________________________/ (Docket No. 44) 13 14 15 I. INTRODUCTION Plaintiff Caren Ehret seeks to represent a nationwide class of customers who have hired 16 passenger car service drivers through Defendant Uber Technologies, Inc.’s (“Uber”) mobile phone 17 application. She alleges that Uber charges a 20% fee above the metered fare for each ride that it 18 misrepresents as a “gratuity” that is automatically added “for the driver.” In reality, Plaintiff alleges 19 that a substantial portion of this “gratuity” is retained by Uber as an additional revenue source. 20 Plaintiff asserts claims under the California Unfair Competition Law, Consumer Legal Remedies 21 Act, and for breach of contract. Pending before the Court is Uber’s motion to dismiss all of 22 Plaintiff’s claims. For the following reasons, the Court GRANTS in part and DENIES in part 23 Uber’s motion. 24 II. FACTUAL BACKGROUND 25 Uber provides a mobile phone application that permits consumers to “summon, arrange and 26 pay for taxi cab rides and other transportation services electronically via their mobile phone.” First 27 Amended Complaint (“FAC”) ¶ 10 (Docket No. 40). Consumers provide payment through the Uber 28 app through credit card information provided by the consumers. Id. Plaintiff alleges that on its 1 website and in its application, Uber represents ‘Hassle-free Payments” by stating: “We automatically 2 charge your credit card the metered fare + 20% gratuity.” Id. ¶ 11. Uber allegedly further 3 represents that the “20 % gratuity is automatically added for the driver.” Id. Finally, when rides are 4 arranged through the Uber app, “the text of the app represents to those consumers that a 20% 5 gratuity will be automatically added to the metered fare.” Id. 6 Contrary to its representations, Uber allegedly fails to remit the full amount of the “gratuity” 7 charge to its drivers. Id. ¶ 13. Rather, it “keeps a substantial portion of this additional charge for 8 itself as its own additional revenue and profit on each ride arranged and paid for by consumers.” Id. 9 Plaintiff contends that Uber’s “gratuity” representations are false, misleading, and likely to deceive members of the public insofar as the term “gratuity” suggests a sum paid to the driver that “is 11 For the Northern District of California United States District Court 10 distinct and different from the actual fair.” Id. ¶ 14. Plaintiff further alleges that by continually 12 misrepresenting the “gratuity” in its advertisements and then keeping a substantial portion of the 13 gratuity, Uber “effectively increases the ‘metered fare’ and/or is charging an undisclosed fee. This 14 is false advertising.” Id. 15 On September 9, 2012, Plaintiff utilized Uber’s app to arrange for a taxi cab ride in Chicago, 16 Illinois. Id. ¶ 15. Plaintiff alleges that she was misled into “paying sums greater than the ‘metered 17 fare’ for taxi cab rides based upon Uber’s misrepresentations that all of the additional 20% charge 18 over and above the ‘metered fare’ was a ‘gratuity.’” Id. ¶ 16. Accordingly, “but for” Uber’s 19 misrepresentations, Plaintiff alleges she “would not have agreed to or paid Uber the full amount that 20 Uber charged her and that she paid to Uber.” Id. 21 Plaintiff asserts five causes of action on behalf of a class. First, she alleges that the conduct 22 alleged constitutes an unfair business practice in violation of California’s Unfair Competition Law 23 (“UCL”), Cal. Bus. & Prof. Code § 17200. Id. ¶¶ 25-30. Second, she alleges that the conduct 24 constitutes an unlawful business practice in violation of the UCL insofar as the conduct in question 25 violates California Civil Code §§ 1572, 1709, 1710, and 1750 and California Business and 26 Professions Code § 17500. Id. ¶¶ 31-36. Third, Plaintiff contends that Uber’s actions constitute a 27 fraudulent business practice in violation of the UCL. Id. ¶¶ 37-41. Fourth, Plaintiff alleges a 28 violation of the Consumers Legal Remedies Act (“CLRA”), Cal. Civ. Code § 1750, et seq. Id. 2 1 ¶¶ 42-59. Finally, Plaintiff contends that Uber breached its contract with her and the class by failing 2 to remit the full amount of the collected gratuity to the drivers. Id. ¶¶ 60-65. Uber has moved to 3 dismiss all of Plaintiffs asserted claims. 4 5 III. DISCUSSION Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss based on the 6 failure to state a claim upon which relief may be granted. See Fed .R. Civ. P. 12(b)(6). A motion to 7 dismiss based on Rule 12(b)(6) challenges the legal sufficiency of the claims alleged. See Parks 8 Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). In considering such a motion, a court 9 must take all allegations of material fact as true and construe them in the light most favorable to the nonmoving party, although “conclusory allegations of law and unwarranted inferences are 11 For the Northern District of California United States District Court 10 insufficient to avoid a Rule 12(b)(6) dismissal.” Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 12 2009). While “a complaint need not contain detailed factual allegations . . . it must plead ‘enough 13 facts to state a claim to relief that is plausible on its face.’ “ Id. “A claim has facial plausibility 14 when the plaintiff pleads factual content that allows the court to draw the reasonable inference that 15 the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662 (2009); see also 16 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). “The plausibility standard is not akin to a 17 ‘probability requirement,’ but it asks for more than sheer possibility that a defendant acted 18 unlawfully.” Iqbal, 129 S.Ct. at 1949. 19 Insofar as Plaintiff’s claims sound in fraud, her complaint must meet the heightened pleading 20 standard of Federal Rule of Civil Procedure 9(b). See Kearns v. Ford Motor Co., 567 F.3d 1120, 21 1125 (9th Cir. 2009). Rule 9(b) provides: “In alleging fraud or mistake, a party must state with 22 particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other 23 conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b). To satisfy Rule 9(b), 24 the “complaint must ‘identify the who, what, when, where, and how of the misconduct charged, as 25 well as what is false or misleading about the purportedly fraudulent statement, and why it is false.’” 26 Salameh v. Tarsadia Hotel, 726 F.3d 1124, 1133 (9th Cir. 2013) (quoting Cafasso, U.S. ex rel. v. 27 Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011)). This encompasses the 28 circumstances surrounding reliance. See Kearns, 567 F.3d at 1125 (holding that the complaint did 3 1 not meet the standard of Rule 9(b) partly because the plaintiff failed to specify when he was exposed 2 to the allegedly fraudulent advertisements, which ones he found material, and on which ones he 3 relied). 4 A. 5 Plaintiff Has Pled Sufficient Detail Under Rule 9(b) To begin, the Court finds that Plaintiff has pleaded her UCL cause of action with sufficient 6 particularity to satisfy Fed. R. Civ. P. 9(b). In her FAC, Plaintiff alleges that on September 9, 2012, 7 she used Uber’s App to arrange and pay for taxi cab rides in Chicago, IL, and paid 20% over the 8 metered fare “in reliance upon Uber’s representation that the 20% charge was a ‘gratuity.’” FAC ¶ 9 15. She further alleged that on its website and in its application, Uber advertises a “Hassle-free Payment” which automatically charges the consumer the metered fair and 20% gratuity.” Id. ¶ 11. 11 For the Northern District of California United States District Court 10 She further alleges that”[b]ut for Uber’s misrepresentations Plaintiff would not have agreed to or 12 paid Uber the full amount Uber charged her.” FAC ¶ 16. Despite these allegations, Uber contends 13 that Plaintiff has failed to allege when Uber made the alleged representations, when Plaintiff 14 allegedly saw or heard the statement in question, whether she saw it on the website or in the 15 application, and whether she “specifically relied on it.” Docket No. 44, at 6. 16 The Court finds that Plaintiff’s allegations are sufficiently specific as to when and where 17 Uber made the alleged misrepresentations. While the FAC does not expressly allege when and 18 where Plaintiff saw the statements, it does allege that on September 9, 2012 she used the App and 19 paid the 20% additional charge in reliance on Uber’s representation that it was a “gratuity.” FAC ¶ 20 15. The inference is that she knew there was a “20% gratuity” charge and that the source of her 21 knowledge was the App and/or website, if not precisely on September 9, 2012, sometime before 22 then. Plaintiff has specified the statements on which she allegedly relied. The Court declines to 23 require Plaintiff to allege the precise web pages viewed and the precise date she viewed the 24 representation. See Bronson v. Johnson & Johnson, Inc., C 12-04184 CRB, 2013 WL 5731817 25 (N.D. Cal. Oct. 22, 2013) (“Defendants contend[] that Plaintiffs fail to allege ‘which pages of the 26 website’ were reviewed, ‘when’ they were viewed, . . . . But Kearns [v. Ford Moto Co., 567 F.3d 27 1120 (9th Cir. 2009)] did not require such specific allegations.”). To so require would be unrealistic 28 and needlessly impede access to an important remedial statute. See In re Tobacco II Cases, 46 Cal. 4 1 4th 298, 328 (2009) (“[W]here, as here, a plaintiff alleges exposure to a long-term advertising 2 campaign, the plaintiff is not required to plead with an unrealistic degree of specificity that the 3 plaintiff relied on particular advertisements or statements.”). 4 Similarly, the Court finds that Plaintiff has sufficiently alleged that Uber’s 5 misrepresentations were false and misleading and why they were false and misleading. Specifically, 6 it is alleged that Uber has represented that a 20% gratuity charge is added to each metered fair but 7 that Uber keeps a “substantial” sum for itself. FAC ¶ 13, 14. Uber contends that Plaintiff has failed 8 to allege how much is “substantial” and that this allegation is factually incorrect. Nonetheless, the 9 Court concludes that Plaintiff’s allegation is sufficient for purposes of Rule 9(b) and the motion to dismiss stage. The ultimate question under Rule 9(b) is not whether the allegation has been or likely 11 For the Northern District of California United States District Court 10 will be proven, but whether the allegations are “specific enough to give defendants notice of the 12 particular misconduct which is alleged to constitute the fraud charged so that they can defend against 13 the charge and not just deny that they have done anything wrong.” Bly-Magee v. California, 236 14 F.3d 1014, 1019 (9th Cir. 2001) (citation omitted)). The Court concludes that Plaintiff’s allegations 15 have provided Uber with sufficient detail to defend against Plaintiff’s allegations. 16 B. 17 Plaintiff Has Stated a Claim under the UCL and CLRA Uber has moved to dismiss the UCL and CLRA claims on a number of bases. Uber contends 18 that Plaintiffs UCL and CLRA claims fail (1) because the UCL does not apply to non-California 19 residents alleging non-California conduct; and (2) because she has failed to allege standing under 20 either statute. The Court first addresses Uber’s extraterritoriality arguments, then its standing 21 arguments, before addressing the sufficiency of Plaintiff’s allegations. 22 23 24 1. Plaintiff’s Claims Do Not Require Extra-Territorial Application of Either the UCL or the CLRA California’s Supreme Court has made clear that there is a strong presumption against the 25 extra-territorial application of California law. In Sullivan v. Oracle Corp., 51 Cal. 4th 1191 (2011), 26 the court reiterated this long-held rule: 27 28 However far the Legislature’s power may theoretically extend, we presume the Legislature did not intend a statute to be “operative, with respect to occurrences outside the state, . . . unless such intention is 5 1 clearly expressed or reasonably to be inferred from the language of the act or from its purpose, subject matter or history.” 2 (1999)) (internal citation and quotation marks omitted). This presumption against the extra- 5 territorial application has been established in California for almost a century. See N. Alaska Salmon 6 Co. v. Pillsbury, 162 P. 93, 94 (Cal. 1916). In Sullivan, the California Supreme Court made explicit 7 that this presumption applies to the UCL, noting that “[n]either the language of the UCL nor its 8 legislative history provides any basis for concluding the Legislature intended the UCL to operate 9 extraterritorially,” and, therefore, the presumption against extraterritoriality “applies to the UCL in 10 full force.” Id. Simply put, “the UCL does not apply to actions occurring outside of California that 11 For the Northern District of California Id. at 1207 (quoting Diamond Multimedia Systems, Inc. v. Superior Court, 19 Cal. 4th 1036, 1059 4 United States District Court 3 injure non-residents.” Ice Cream Distributors of Evansville, LLC v. Dreyer’s Grand Ice Cream, 12 Inc., C-09-5815 CW, 2010 WL 3619884 (N.D. Cal. Sept. 10, 2010), aff’d, 487 F. App’x 362 (9th 13 Cir. 2012) (internal citation and quotation marks omitted). Courts have assumed the presumption 14 against extraterritoriality applies equally to the CLRA and, based on the reasoning in Sullivan, the 15 Court finds no basis to hold otherwise. See McKinnon v. Dollar Thrifty Auto. Grp., Inc., No. C- 16 12-4457-SC, 2013 WL 791457 (N.D. Cal. Mar. 4, 2013); In re iPhone 4S Consumer Litig., No. C- 17 12-1127-CW, 2013 WL 3829653 (N.D. Cal. July 23, 2013). 18 However, the critical question presented by Plaintiff’s complaint is whether application of 19 the UCL and CLRA in the circumstances alleged actually entails an extraterritorial application of 20 those statutes. Multiple courts – including the California Supreme Court in Sullivan – have 21 permitted the application of California law where the plaintiffs’ claims were based on alleged 22 misrepresentations that were disseminated from California. In Sullivan, the court distinguished the 23 cases of Weshba v. Apple Computer, Inc., 91 Cal. App. 4th 224 (2001) and Clothsrigger, Inc. v. GTA 24 Corp., 191 Cal. App. 3d 605 (1997), by noting that, in those cases, “the unlawful conduct that 25 formed the basis of the out-of-state plaintiffs’ claims (i.e., fraudulent misrepresentations made to 26 induce consumer transactions), and that justified the application of California law to resolve those 27 claims, occurred in California.” Sullivan, 51 Cal. 4th at 1208 n.10. In Weshba, the California Court 28 of Appeals, in the context of Cal. Bus. & Prof. Code § 17500, rejected the argument that 6 1 California’s unfair business law “cannot support nationwide class certification.” Id. at 241. First, 2 the court noted that the defendant (Apple) was a “California corporation” and that the brochures 3 containing the purported misrepresentations “were prepared in and distributed from California.” Id. 4 at 242. A rule permitting application of the UCL or CLRA where the alleged fraudulent activity 5 emanated from California is consistent with the California Supreme Court’s statement in In Re 6 Tobacco II Cases, 46 Cal. 4th 298 (2009) that the UCL’s focus is “on the defendant’s conduct, 7 rather than the plaintiff’s damages, in service of the statute’s larger purpose of protecting the general 8 public against unscrupulous business practices.” Id. at 312. 9 Multiple federal district courts have denied motions to dismiss similar claims to those raised in this action on the basis of alleged extraterritorial application of California law. For example, in In 11 For the Northern District of California United States District Court 10 re iPhone 4S Consumer Litigation, No. C12-1127 CW, 2013 WL 3829653 (N.D. Cal. July 23, 12 2013), plaintiffs asserted, inter alia, UCL and CLRA claims against Apple based on alleged 13 misrepresentations regarding the functionality of the iPhone 4’s “Siri” feature. Id. at *4. Judge 14 Wilken noted that “California courts have concluded that ‘state statutory remedies may be invoked 15 by out-of-state parties when they are harmed by wrongful conduct occurring in California.’” Id. at 16 *7 (quoting Norwest Mortg., Inc. v. Superior Ct., 72 Cal. App. 4th 214, 224-25 (1999)). She noted 17 that the Plaintiffs had alleged that that 18 19 20 their injuries were caused by Apple’s wrongful conduct in false advertising that originated in California. Here, Plaintiffs have alleged that Apple’s purportedly misleading marketing, promotional activities and literature were coordinated at, emanate from and are developed at its California headquarters, and that all “critical decisions” regarding the marketing and advertising were made within the state. 21 22 On this basis, Judge Wilken held that “California’s presumption against the extraterritorial 23 application of its statutes therefore does not bar the claims of the out-of-state Plaintiffs, because this 24 principle is ‘one against an intent to encompass conduct occurring in a foreign jurisdiction in the 25 prohibitions and remedies of a domestic statute.’” Id. (quoting Diamond Multimedia Sys., 19 Cal. 26 4th at 1060 n.20). Numerous cases are in accord. See TRC & Assocs. v. NuScience Corp., No. 2:13- 27 cv-6903-ODW(CWx), 2013 WL 6073004, at *5 (C.D. Cal. Nov. 18, 2013) (“[T]he alleged 28 fraudulent conduct occurred in California. The Complaint is not based solely on a commercial 7 1 transaction outside of California, but is instead based on material misrepresentations originating in 2 California with NuScience, traveling through Florida, and ending up in Ohio with TRC.”); Wang v. 3 OCZ Tech. Group, Inc., 276 F.R.D. 618, 630 (N.D. Cal. 2011) (“Though Wang’s allegations of 4 OCZ’s California-based conduct are general, they provide a sufficient basis at the pleading stage for 5 the invocation of California law. . . . [T]he facts alleged are that the misleading marketing, 6 advertising, and product information are ‘conceived, reviewed, approved, or otherwise controlled 7 from [OCZ’s] headquarters in California.’”); In re Mattel, Inc., 588 F. Supp. 2d 1111, 1119 (C.D. 8 Cal. 2008) (“Plaintiffs have adequately alleged that Mattel and Fisher-Price’s conduct occurred, if at 9 all, in – or had strong connections to – California. Plaintiffs complain of misrepresentations made in reports, company statements, and advertising that are reasonably likely to have come from or been 11 For the Northern District of California United States District Court 10 approved by Mattel corporate headquarters in California.” (citation omitted)). 12 13 14 15 16 17 In the FAC, Plaintiff alleges that Uber is a “Delaware corporation with its headquarters in San Francisco, California.” FAC ¶ 9. It further alleges that: The deceptive practices alleged herein were conceived, reviewed, approved and otherwise controlled from Defendant’s headquarters in San Francisco, California. Furthermore, the misrepresentations and omissions alleged herein were contained on Defendant’s website and mobile phone application, which are maintained in California. When Plaintiff and class members used Defendant’s services those [sic] transactions, including the billing and payment for those services, were processed on Defendant’s servers in San Francisco, California. 18 19 Id. ¶ 6. On the basis of these allegations, the Court finds that Plaintiff has alleged a sufficient nexus 20 between California and the misrepresentations which form the basis of Plaintiff’s claims. 21 Specifically, allegations that the misrepresentations were developed in California, contained on 22 websites and an application that are maintained in California, and that billing and payment of 23 services went through servers located in California distinguish this case from those relied upon by 24 Uber in its reply brief. Compare Cannon v. Wells Fargo N.A., 917 F. Supp. 2d 1025, 1055-56 (N.D. 25 Cal. 2013) (allegations that the defendant was headquartered in California were insufficient to 26 plausibly allege that the advertising in question originated from California); Gustafson v. BAC Home 27 Loans Servicing, LP, No. SACV 11-915-JST (ANx), 2012 WL 4761733, at *6 (C.D. Cal. Apr. 12, 28 2012) (finding the single allegation that “Defendants’ scheme was devised, implemented and 8 1 directed from BAC Home Loans Servicing’s and Balboa’s offices in California” was “too vague to 2 ‘plausibly suggest an entitlement to relief’”); In re Toyota Motor Corp., 785 F. Supp. 2d 883, 917 & 3 n.26 (C.D. Cal. 2011) (noting that “Plaintiffs have not alleged that marketing decisions about the 4 representations each Plaintiff saw in his or her home country were made in California”). 5 Plaintiff has provided sufficient factual allegations from which the Court can plausibly infer 6 that Uber’s alleged gratuity misrepresentations emanated from California. Accordingly, the Court 7 concludes that, for purposes of the motion to dismiss, application of the UCL and CLRA in these 8 circumstances would not constitute extra-territorial application of these statutes and therefore 9 DENIES Uber’s motion on this ground. 2. 11 For the Northern District of California United States District Court 10 Uber contends that Plaintiff’s CLRA and UCL claims fail because Plaintiff has failed to Plaintiff Has Sufficiently Alleged Standing Under the UCL and CLRA 12 allege economic harm. Proposition 64 amended the UCL to require a Plaintiff to demonstrate that 13 she had “lost money or property as a result of [the] unfair competition.” Cal. Bus. & Prof. Code 14 § 17204. Accordingly, standing under the UCL is far narrower than traditional federal standing 15 requirements: “We note UCl’s standing requirements appear to be more stringent than the federal 16 standing requirements. Whereas a federal plaintiff’s ‘injury in fact’ may be intangible and need not 17 involve lost money or property, Proposition 64, in effect, added a requirement that a UCL plaintiff’s 18 ‘injury in fact’ specifically involve ‘lost money or property.’” Troyk v. Farmers Group, Inc., 171 19 Cal. App. 4th 1305, 1348 n.31 (2009). Similarly, a plaintiff will have standing under the CLRA if 20 she “suffers any damage as a result of the use or employment any person of a method, act, or 21 practice declared to be unlawful by Section 1770.” Hinojos v. Kohl’s Corp., 718 F.3d 1098, 1107 22 (9th Cir. 2013) (emphasis in original) (quoting Cal. Civ. Code § 1780(a)). “[A]ny plaintiff who has 23 standing under the UCL’s and FAL’s ‘lost money or property’ requirement will, a fortiori, have 24 suffered ‘any damage’ for purposes of establishing CLRA standing.” Id. at 1108. 25 In Kwisket v. Superior Court, 51 Cal. 4th 310 (2011), the California Supreme Court 26 addressed the UCL’s standing requirement in the context of allegedly misleading advertising. 27 There, plaintiff alleged that Kwikset Corporation produced locksets which were falsely represented 28 9 1 in advertising to have been “Made in U.S.A.” Id. at 316. The Court held that there “are 2 innumerable ways in which economic injury from unfair competition may be shown” such as: 3 4 5 A plaintiff may (1) surrender in a transaction more, or acquire in a transaction less, than he or she otherwise would have; (2) have a present or future property interest diminished; (3) be deprived of money or property to which he or she has a cognizable claim; or (4) be required to enter into a transaction, costing money or property, that would otherwise have been unnecessary. 6 in support of it purport to define or limit the concept of ‘lost money or property’” and that it did not 9 “supply an exhaustive list of the ways in which unfair competition may cause economic harm.” Id. 10 Ultimately, on the facts of Kwikset, the Court found the following allegations sufficient to establish 11 For the Northern District of California Id. at 323. Further, the Court found that”[n]either the text of Proposition 64 nor the ballot arguments 8 United States District Court 7 standing under the UCL: 12 14 (1) Kwikset labeled certain locksets with “Made in U.S.A.” or a similar designation, (2) these representations were false, (3) plaintiffs saw and relied on the labels for their truth in purchasing Kwikset’s locksets, and (4) plaintiffs would not have bought the locksets otherwise. 15 Id. at 328. The Ninth Circuit has noted that “Kwikset emphasized that Proposition 64 was enacted 16 not to eliminate individual consumer suits when the consumer was actually deceived by a 17 misleading advertisement, but rather to stop ‘fishing expeditions’ by consumers and attorneys who 18 may have never even intended to purchase a product that was being falsely advertised.” Hinojos v. 19 Kohl’s Corp., 718 F.3d 1098, 1107 (9th Cir. 2013). 13 20 Plaintiff alleges that, but for Uber’s “gratuity” misrepresentations, “Plaintiff would not have 21 agreed to or paid Uber the full amount that Uber charged her and that she paid to Uber.” FAC ¶ 16. 22 Uber argues this allegation is insufficient to allege that Plaintiff lost money or property for purposes 23 of the UCL. Rather, it argues that Plaintiff received precisely what she bargained for – a “taxi ride 24 at a stated price. Docket No. 44, at 13. Therefore, it contends that “Plaintiff would be in exactly the 25 same position regardless of whether the full 20% charge went to the taxi driver.” Id. at 14. 26 Relatedly, at the hearing, Uber argued that because the 20% fee allegedly misrepresented as a 27 “gratuity” was a mandatory fee that Plaintiff could not have avoided, how Uber chose to distribute 28 the collected fee was a “mere curiosity” to Plaintiff and, therefore, not an economic injury. 10 1 The Court finds that Plaintiff has adequately alleged an economic injury. First, in discussing 2 the “benefit of the bargain” defense upon which Uber relies, the Ninth Circuit has noted that, under 3 Kwikset, the defense is “permissible only if the misrepresentation that the consumer alleges was not 4 ‘material.’” Hinojos, 718 F.3d at 1107. “A misrepresentation is judged to be ‘material’ if a 5 reasonable man would attach importance” or “if the maker of the representation knows or has reason 6 to know that its recipient regards or is likely to regard the matter as important in determining his 7 choice of action, although a reasonable man would not so regard it.” Kwikset, 51 Cal. 4th at 333 8 (internal citations and quotation marks omitted). “[T]he materiality of a misrepresentation is 9 typically an issue of fact, and therefore should not be decided at the motion to dismiss stage.” Hinojos, 718 F.3d at 1107 n.7 (citing In re Steroid Hormone Product Cases, 181 Cal.App.4th 145 11 For the Northern District of California United States District Court 10 (2010)). That is the case here. Cf. Kasky v. Nike, Inc., 27 Cal. 4th 939, 969 (2002) (“For a 12 significant segment of the buying public, labor practices do matter in making consumer choices.”) 13 Second, by alleging that she would not have agreed to the full amount that Uber charged her 14 but for Uber’s purported misrepresentation, Plaintiff has alleged a sufficiently material 15 misrepresentation. Contrary to Uber’s argument, to obtain standing under the UCL, it is not 16 necessary to allege and prove the plaintiff would not have entered the transaction but for the 17 misrepresentation. Such but-for causation is only one of the “innumerable” ways of establishing 18 standing identified in Kwikset, 51 Cal. 4th at 323. Economic injury sufficient to support UCL 19 standing exists where the plaintiff “surrender[ed] in a transaction more, or acquire[d] less than he or 20 she otherwise would have.” Id. As Uber acknowledged, a UCL claim is stated when the plaintiff, 21 as a result of a defendant’s misrepresentation, did not receive what he or she had bargained for. 22 Reply Br., p. 5. This makes sense; materiality for purposes of the UCL is defined not in terms of a 23 “but for” cause, but whether a reasonable person “would attach importance” to it. Kwikset, 51 Cal. 24 4th at 333. Here it is enough that Plaintiff has alleged that but for Uber’s misrepresentations, she 25 would not “have agreed to or paid Uber the full amount that Uber charged her and that she paid to 26 Uber.” FAC ¶ 16. 27 28 Whether Plaintiff had the option of not paying the additional fee (the 20% gratuity) because it was integral to Uber’s charge is immaterial to standing under the UCL. A number of cases are 11 the court interpreted the CLRA’s standing requirements. There, plaintiffs who purchased 3 defendant’s satellite digital radio services alleged that the defendant had misrepresented in its 4 customer agreements that a “royalty fee” would be included in the subscription cost and that this 5 charge would be “limited to the amount necessary to ‘pass through’ its own increased costs.’” Id. at 6 450. Instead, Plaintiffs alleged that the royalty fee charged “exceeded the amount of Defendant’s 7 increase in royalty obligations.” Id. Plaintiffs asserted a claim under the CLRA, and the Southern 8 District of New York found that plaintiffs could proceed with this claim. It held that the “California 9 plaintiffs suffered injury by paying a Royalty Fee that was greater than what it would have been had 10 it been calculated as an actual ‘pass through’ of the fee paid by Defendant. This states a claim under 11 For the Northern District of California instructive on this point. In Blessing v. Sirius XM Radio Inc., 756 F. Supp. 2d 445 (S.D.N.Y. 2010), 2 United States District Court 1 § 1770(a)(5) [of the CLRA].” Id. at 455. Importantly, the court did not suggest the payment of the 12 included “royalty fee” was avoidable by the consumer. 13 Similarly, in Johnson v. Wal-Mart Stores, Inc., 544 F. App’x 697 (9th Cir. 2013), plaintiff 14 alleged that Wal-Mart included a $9 fee every time a customer purchased a car battery and 15 misrepresented the fee was required by California law. In fact, California law did not require the 16 imposition of the fee and Wal-Mart kept the nine dollars for itself. Id. at 697 Plaintiff alleged that 17 “she would not have paid the additional nine dollar fee if she had known that California law did not 18 require her to pay it and that Wal-Mart intended to keep the nine dollars for itself.” Id. The Ninth 19 Circuit found that these factual allegations “permit a reasonable inference that Johnson paid more 20 ‘than she otherwise would have’ if Wal-Mart had not engaged in the alleged misrepresentation.” Id. 21 Uber contends that this case is distinguishable on this basis since the fee was not 22 “mandatory” because the customers could opt to not give Wal-Mart the old battery and avoid the 23 fee. Uber mis-reads Johnson. First, the complaint in that action did not allege that plaintiffs could 24 have avoided the recycling fee by not bringing in an old car battery; rather, it alleged that the fee 25 could only be avoided by bringing in an old car battery. Second, and more significantly, the Ninth 26 Circuit in Johnson did not find significant (or even mention) the fact that recycling fee was 27 somehow avoidable. Rather, it simply stated that it was “reasonable to infer that [plaintiff], if 28 12 1 correctly informed, would not have given Wal-Mart the nine dollar fee in addition to paying 2 seventy-seven dollars for the battery.” Id. 3 These cases are consistent with longstanding rule that under the UCL even a mandatory 4 charge can be deceptive if it is labeled as something it is not. For example, in McKell v. Washington 5 Mutual, Inc., supra, 142 Cal. App. 4th 1457, plaintiff alleged that Washington Mutual had 6 represented in its statements that certain costs of underwriting and wire transfers were included. 7 These fees were “mandatory” insofar as Washington Mutual required home buyers to pay them. 8 Nonetheless, the court found that plaintiff had stated a claim under the UCL’s fraudulent prong: 9 11 For the Northern District of California United States District Court 10 12 13 Looking at these documents, plaintiffs reasonably would conclude that the fees charged were the costs Washington Mutual incurred in providing these services. The fees charged were substantially above Washington Mutual’s costs, however. . . . Washington Mutual’s practice of charging its customers more for services than the actual cost of those services, with no indication to the customers that they were doing so, may constitute a deceptive business practice within the meaning of the UCL, as a reasonable consumer likely would believe that fees charged in connection with a home mortgage loan bore some correlation to services rendered. 14 15 Id. at 1472; see also People v. Dollar Rent-A-Car Sys., Inc., 211 Cal. App. 3d 119, 129 (1989) 16 (holding that the defendant violated the UCL by charging for the “retail cost” of car repairs in excess 17 of actual repair costs). 18 To hold otherwise would result in perverse outcomes. Were the UCL to recognize economic 19 injury only where a consumer proves he or she would not have entered the transaction at all would 20 mean that someone who, for example: (1) bought a computer advertised at a processor speed of 21 2ghz but which actually ran at 1.8ghz; (2) purchased a car advertised as having an engine that ran at 22 250 horsepower when, in fact, it only had 225 horsepower; (3) paid for service in which the seller 23 that falsely represented it included necessary transaction fees; or (4) donated to a charity which 24 falsely representing that a certain percentage of the funds would go to beneficiaries as opposed to 25 overhead, would be left with no remedy under the UCL despite being defrauded by the defendant if 26 she cannot prove she would not have entered the transaction at all. The economic injury 27 requirement of Proposition 64 was not intended to gut the UCL; it was intended to stop drive-by 28 lawsuits and “fishing expeditions” by attorneys representing clients who never intended to purchase 13 1 the product. See Hinojos, 718 F.3d at 1107; see also Kwikset, 51 Cal. 4th at 321 (“While the voters 2 clearly intended to restrict UCL standing, they just as plainly preserved standing for those who had 3 had business dealings with a defendant and had lost money or property as a result of the defendant’s 4 unfair business practices.”). Allowing standing in the case at bar – where a false representation is 5 made to raise the price of a service which the plaintiff would not have agreed to pay had the truth 6 been told, does not frustrate the purpose of Proposition 64; rather, it furthers it.1 7 At the hearing, Uber relied extensively on the California Court of Appeal decision in Searle 8 v. Wyndham International, Inc., 102 Cal. App. 4th 1327 (2002). There, plaintiff alleged that after 9 ordering room service at one of defendant’s hotels, she was assessed a 17% service charge which was, in fact, a gratuity paid to the server. At the same time, the room service bill allegedly contained 11 For the Northern District of California United States District Court 10 a blank line for the customer to add a tip or gratuity. Id. at 1330. Plaintiff alleged that the service 12 charge was deceptive under the UCL as customers were “not advised the service charge is in fact a 13 gratuity paid to the server.” Id. The California Court of Appeal found that plaintiff had failed to 14 state a claim, finding that “[w]hat a hotel does with the revenue it earns – either from the mini-bar, 15 in home movies or its room service charges – is of no direct concern to hotel guests.” Id. at 1334. 16 Rather, the “room service patron[] is given both clear notice the service being offered comes at a 17 hefty premium and the freedom to decline the service. . . . [T]he patron has no legitimate interest in 18 what the hotel does with the service charge.” Id. 19 Searle is readily distinguishable. There, the defendant made no representation about the 20 nature of the service charge or where the collected funds would be distributed. There was no 21 representation made one way or the other regarding whether the “service charge” was actually a 22 gratuity payable to the server. Rather, it was – as Uber repeatedly argued at the hearing – a 23 mandatory charge that was presented to the plaintiff as a charge attendant to ordering room service. 24 In the case at bar, in contrast, it is alleged that Uber expressly represented a 20% charge was added 25 26 1 27 28 Indeed, it is also plausible that had Uber not made the alleged misrepresentation, the total fee it charged would have been less than what it charged with the misrepresentation. In this regard, there is an arguable cause-in-fact in that consumers paid more than they would have but for Uber’s alleged misrepresentation. 14 1 to every metered fare specifically for purposes of paying the driver a gratuity. In short, in Searle, 2 there was no misrepresentation; here, allegedly, there was.2 3 The Court cannot conclude at the motion to dismiss stage that Uber’s representations 4 regarding gratuities is immaterial as a matter of law. Accordingly, Uber’s motion to dismiss 5 Plaintiff’s UCL and CLRA claims for lack of standing is DENIED. 6 3. 7 To state a claim under the UCL’s fraudulent prong based on false advertising or promotional Plaintiff Has Stated a Claim Under the UCL’s Fraudulent and Unfairness Prongs 8 practices “it is necessary only to show that members of the public are likely to be deceived.” In re 9 Tobacco II, 46 Cal. 4th at 312. The standard for finding a likelihood of deception is that of a “reasonable consumer who is neither the most vigilant and suspicious of advertising claims nor the 11 For the Northern District of California United States District Court 10 most unwary and unsophisticated, but instead is ‘the ordinary consumer within the target 12 population.’” Chapman v. Skype Inc., 220 Cal. App. 4th 217, 226 (2013) (quoting Lavie v. Procter 13 & Gamble Co., 105 Cal. App. 4th 496, 509-10 (2003)). As this Court recognized in O’Connor v. 14 Uber Technologies, Inc., No. C-13-3826 EMC, 2013 WL 6354534 (N.D Cal. Dec. 5, 2013), three 15 separate tests have developed to determine if conduct is “unfair” for purposes of the UCL. Id. at 16 *16-17. In this case, both parties apply the test which holds that conduct is “unfair” if it is 17 “immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.” See 18 Plumlee v. Pfizer, Inc., No. 13-cv-0414-LHK, 2014 WL 4275519, at *5 (N.D. Cal. Aug. 29, 2014) 19 (“A business practice violates the unfair prong of the UCL if it is contrary to ‘established public 20 policy or if it is immoral, unethical, oppressive or unscrupulous and causes injury to consumers 21 which outweighs its benefits.’”). 22 23 24 25 26 27 28 2 Uber’s reliance on Aron v. U-Haul Co. of Cal., 143 Cal. App. 4th 796 (2006) for the same proposition is misplaced. In that case, the court found that the challenged refueling fee was as a practical matter unavoidable and unfair. The court did not hold that a UCL claim cannot lie where a challenge fee is avoidable. Other cases cited by Uber in its briefs involve situations in which no misrepresentation affecting the efficacy of the product was found. See, e.g., Tae Hee Lee v. Toyota Motor Sales, U.S.A., Inc., 13-cv-7331, 2014 WL 211462, at *5 (C.D. Cal. Jan. 9, 2014) (“In this case, Plaintiffs have not alleged an actual economic injury because they have not had any negative experiences with the PCS and have not identified any false representations about the automatic precollision braking feature made by Toyota.”). 15 1 2 In addressing similar allegations regarding Uber’s alleged “gratuity” misrepresentations, this Court has previously held: 3 6 The Complaint alleges the following: Uber advertises “on its website and in marketing materials, that gratuity is included and there is no need to tip the drive,” reasonable customers would expect that drivers would receive that gratuity, Uber does not remit the entirety of the gratuity to drivers, and as such, Uber’s statements are “deceptive and misleading.” These allegations make it plausible that a reasonable consumer would likely be deceived to the detriment of drivers. 7 O’Connor, 2013 WL 6354534, at *17. Similarly, here, Plaintiff has alleged that Uber represents that 8 it automatically charges consumer credit card “the metered fare + 20% gratuity” and that this “20% 9 gratuity is automatically added for the driver” while, at the same time, it “keeps a substantial portion 4 5 of this additional charge for itself as its own additional revenue and profit.” FAC ¶ 13. These 11 For the Northern District of California United States District Court 10 allegations are sufficient to plausibly allege that a reasonable consumer would be deceived and, as a 12 result of this deception, they expended more money than they otherwise would have but for the 13 misrepresentation (as discussed above). 14 Similarly, in determining whether a business practice is unfair under the approach adopted 15 by the parties, “California courts balance the ‘impact on the its alleged victim’ against ‘the reasons, 16 justifications, and motives of the alleged wrongdoer.’” Plumlee, 2014 WL 4275519, at *5 (quoting 17 McKell v. Wash. Mut., Inc., 142 Cal. App. 4th 1457, 1473 (2006)). As discussed above, Plaintiff has 18 alleged that Uber adds a fee above its metered fair, misrepresents this fee as a gratuity that is given 19 to the consumers, and keeps a substantial portion of this fee to boost its revenue. The Court cannot 20 conclude at this early stage that the alleged cost of this misrepresentation to Uber’s consumers is 21 justified by Uber’s reasons and motives. See Pirozzi v. Apple, Inc., 966 F. Supp. 2d 909 (N.D. Cal. 22 2013) (“Apple offers nothing in the way of ‘reasons, justifications, or motives,’ or ‘utility of [its[ 23 conduct,’ to weigh against the alleged harm. Thus, ‘the Court cannot say that Apple’s practices are 24 not injurious to consumers, or that any benefit to consumers outweighs the harm.’” (citation 25 omitted)). 26 In arguing that Plaintiff has failed to state a claim under either the fraudulent or unfairness 27 prongs of the UCL, Uber relies almost exclusively on the California Court of Appeal’s decision in 28 Searle, discussed above. Uber appears to contend that Searle stands for the proposition that where a 16 1 charge is mandatory, the consumer has no legitimate interest in what is ultimately done with the 2 funds recouped as a result of that charge. Similarly, it contends that, under Searle, so long as a 3 consumer is not deceived about the total cost of the services it receives from the defendant, the UCL 4 is not offended. Docket No. 44, at 8-9. 5 For the reasons stated above in connection with standing, Uber reads Searle too broadly. 6 The Court finds that Plaintiff has stated a claim under the UCL’s fraudulent and unfairness 7 prongs, and Uber’s motion to dismiss on this ground is DENIED. 8 4. 9 The CLRA prohibits “unfair methods of competition and unfair or deceptive acts or practices Plaintiff Has Stated a Claim Under the CLRA. undertaken by any person in a transaction intended to result or which results in the sale or lease of 11 For the Northern District of California United States District Court 10 goods or services to any consumer.” Cal. Civ. Code § 1770. Plaintiff alleges that Uber violated a 12 number of the CLRA’s provisions. 13 First, Plaintiff alleges that Uber has violated § 1770(a)(5), which makes it unlawful to 14 represent “that goods or services have . . . characteristics . . . which they do not have.” Cal. Civ. 15 Code § 1770(a)(5). Similarly, Plaintiff alleges a violation of § 1770(a)(9) which prohibits 16 “advertising goods or services with intent not to sell them as advertised.” Id. § 1770(a)(9). 17 Plaintiff’s arguments under both sections are similar – that Uber representing that it would collect 18 and automatically remit a 20% gratuity to the driver, “thus allowing the consumer to arrange for a 19 taxi without the necessity fo pulling out his or her wallet and/or exchanging cash with the driver,” 20 Uber has misrepresented a characteristic and benefit of its service. Docket No. 46, at 12. The Court 21 finds Plaintiffs allegations are sufficient to state a claim under § 1770(a)(5). As alleged, Uber 22 represents that its application service remits a 20% gratuity to drivers when, in fact, it does not do 23 so. This is sufficient to allege that Uber’s service was advertised as having a characteristic it did not 24 have. Cf. Blessing, 756 F. Supp. 2d, at 455 (holding that the plaintiffs had stated a claim for 25 violation of sections 1770(a)(5) and 1770(a)(9), where the defendant represented it was charging a 26 “pass through” royalty fee, but where the actual royalty fee was much less). 27 Second, Plaintiffs have alleged that Uber has violated § 1770(a)(14), which prohibits a 28 defendant from “[r]epresenting that a transaction confers or involves rights , remedies, or obligations 17 1 which it does not have or involve, or which are prohibited by law.” Cal. Civ. Code § 1770(a)(14). 2 The Court finds that Plaintiff has sufficiently alleged a violation of this provision. The allegation 3 that Uber represented that the 20% gratuity fee would be remitted to drivers is sufficient to allege 4 the existence of an obligation on the part of Uber – an obligation that Uber misrepresented by using 5 the charged fee as a revenue source. See Blessing, 756 F. Supp. 2d at 455 (finding that plaintiff had 6 stated a claim under § 1770(a)(14) because, the “royalty fee” imposed by the defendant “certainly 7 imposes an ‘obligation’ and the alleged misrepresentation with respect to that fee . . . suggests that 8 the obligation entails covering a ‘pass through’ of increased royalty obligations when in fact it is a 9 source of additional and ‘substantial revenue’”). However, the Court finds that Plaintiff has failed to state a claim under §§ 1770(a)(13) or 11 For the Northern District of California United States District Court 10 1770(a)(16). Section 1770(a)(13) prohibits making “false or misleading statements of fact 12 concerning reasons for, existence of, or amounts of price reductions.” Cal. Civ. Code § 13 1770(a)(13). Plaintiff has failed to state a claim under this section because she has failed to allege 14 that Uber made any representations with regards to a “fee reduction” nor, contrary to her arguments 15 in her opposition, has she alleged that Uber ever represented that its service was a “free or no fee 16 service.” Finally, § 1770(a)(16) makes unlawful “[r]epresenting that the subject of a transaction has 17 been supplied in accordance with a previous representation when it has not.” Id. § 1770(a)(16). 18 Plaintiff asserts that Uber violated § 1770(a)(16) by charging the consumer’s credit card after 19 representing that it would remit the 20% gratuity to the driver. She argues that charging the card is 20 “necessarily” “representing” that Uber would remit the amount according to its prior representation. 21 The Court disagrees. This subsection “appears to target not the initial representation in a 22 transaction, but a subsequent representation which is deceptive.” Blessing, 756 F. Supp. 2d at 455. 23 Here, Plaintiff has not alleged the existence of a representation subsequent to the alleged initial 24 misrepresentation, and the Court concludes that the subsequent charging of the credit card does not 25 constitute a “representation” on the part of Uber. 26 5. 27 “By proscribing ‘any unlawful’ business practice, section 17200 borrows violations of other 28 Plaintiff Has Stated a Claim Under the UCL’s Unlawful Prong laws and treats them as unlawful practices that the unfair competition law makes independently 18 1 actionable.” Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999) 2 (citations and quotation marks omitted). The UCL’s “coverage is sweeping, embracing anything that 3 can properly be called a business practice and that at the same time is forbidden by law.” Id. 4 Because the Court finds that Plaintiff has adequately alleged a violation of the CLRA, she has also 5 sufficiently alleged a violation under the unlawfulness prong of the UCL. 6 6. 7 For the foregoing reasons, the Court finds that Plaintiff has stated a claim under the 8 fraudulent, unfairness, and unlawful prongs of the UCL. Further, Plaintiff has stated a claim under 9 the CLRA to the extent she relies on § 1770(a)(5), (9), (14) but has failed to state a claim under the Summary CLRA to the extent she relies on § 1770(a)(13), (16). Accordingly, Uber’s motion to dismiss is 11 For the Northern District of California United States District Court 10 GRANTED with respect to CLRA claims under § 1770(a)(13) and (16); in all other respects the 12 motion to dismiss is DENIED. 13 C. 14 Plaintiff Has Failed to State a Claim for Breach of Contract Under California law, “[a] cause of action for breach of contract requires proof of the 15 following elements: (1) existence of the contract; (2) plaintiff’s performance or excuse for 16 nonperformance; (3) defendant’s breach; and (4) damages to plaintiff as a result of the breach.” 17 CDF Firefighters v. Maldonado, 158 Cal. App. 4th 1226, 1239 (2008). Where a plaintiff has failed 18 to allege that the defendant’s breach has caused her to suffer any damage, a breach of contract action 19 for damages will not lie. See Low v. LinkedIn Corp., 900 F. Supp. 2d 1010, 1028 (N.D. Cal. 2012) 20 (noting that to state a claim for breach of contract, plaintiff must plead “the contract, plaintiffs’ 21 performance . . . defendant’s breach, and damage to plaintiff therefrom”); see also Bramalea Cal., 22 Inc. v. Reliable Interiors, Inc., 119 Cal. App. 4th 468 (2004) (“A breach of contract is not actionable 23 without damage.”). Further, “[t]o establish contractual damages, a Plaintiff must establish 24 ‘appreciable and actual damage,’” – “[n]ominal damages, speculative harm, or threat of future harm 25 do not suffice to show legally cognizable injury.” Id. 26 Uber argues in its motion, even if the alleged breach in question had not occurred – that is, if 27 Uber had remitted the 20% gratuity as it allegedly promised in its advertisements – Plaintiff (and the 28 class of Uber customers) would be in precisely the same financial position as they are after the 19 1 breach. According to Uber, Plaintiff has not, and cannot, allege that they suffered damages for 2 purposes of a breach of contract action. 3 In contrast to its briefing on the UCL claim, Plaintiff does not respond to the argument that it 4 has suffered cognizable contract damages, even if the parol evidence of the advertisement is 5 considered in interpreting the terms and conditions of the contract. Plaintiff’s failure to respond is 6 understandable. Under common law contract principles, a promisee’s right to enforce a contract 7 term that benefits a third party depends on whether that third party is a “creditor” beneficiary or a 8 “donee” beneficiary. If the beneficiary is a creditor, the promisee can sue for contract damages for 9 the promisor’s failure to benefit the donee. If the beneficiary is a donee, the promisee cannot sue for 11 For the Northern District of California United States District Court 10 such damages. In In re Marriage of Smith & Maescher, 21 Cal. App. 4th 100 (1993), the court addressed a 12 marital separation agreement in which the husband agreed to pay for his children’s undergraduate 13 education. Id. at 104. Eventually, the husband stopped paying the expenses, and the wife filed an 14 action to enforce the separation agreement. The marital separation agreement was governed by 15 Massachusetts law and the court, applying the Restatement (Second) of Contracts held that in that 16 case, the “promisee cannot recover damages which may be suffered by the intended third party 17 beneficiary.” Id. at 107. The court noted that the Restatement differentiates between “creditor” 18 beneficiaries (that is, beneficiaries who receive payments from the promisor of a debt or obligation 19 owed the beneficiary by the promisee) and “donee” beneficiaries who essentially receives a “gift” in 20 the form of the promisor’s obligation to it. Id. at 106. The court then held that if a “promisor does 21 not pay the promisee’s debt to the creditor beneficiary, then the promisee will remain liable to the 22 beneficiary for the full amount of the debt and could directly suffer damages in this full amount. In 23 contrast, if the promisor does not perform its obligation to the donee beneficiary, the promisee will 24 not be liable to the beneficiary for such performance,” and thus will not incur cognizable damages to 25 support a claim for breach of contract against the promisor. Id. at 106. The court did note, a 26 promisee may sue for specific performance. Id. 27 While tips or gratuities may be customary in the service industry, they are not binding 28 obligations on the part of customers. Uber’s failure to remit the 20% gratuity to the drivers does not 20 1 leave Plaintiff or the putative class members liable to the drivers for any debt or amount. 2 Accordingly, the drivers are properly considered donee beneficiaries. See Dateline Builders, Inc. v. 3 City of Santa Rosa, 146 Cal. App. 3d 520, 526 (1983) (“A person is a donee beneficiary only if the 4 promisee’s contractual intent is either to make a gift to him or to confer on him a right against the 5 promisor.” (emphasis added)). Hence, Plaintiff cannot seek damages for breach of contract for 6 Uber’s failure to benefit drivers. Plaintiff has not and, on the basis of the allegations in the FAC, 7 cannot allege that Uber’s alleged breach of the contract caused her to suffer any contract damages.3 8 9 Such a holding is not inconsistent with the Court’s holding above that Plaintiffs’ have suffered an economic injury for purposes of the UCL. Breach of contract actions seeking recovery of damages are focused on placing plaintiffs in the same position they would have been in had 11 For the Northern District of California United States District Court 10 defendants performed their contractual obligations. See, e.g., General Employees Trust Fund v. 12 Victory Bldg. Maint., Inc., No. C06-6654 CW (MEJ), 2007 WL 1288393, at *5 (N.D. Cal. Apr. 11, 13 2007). For the reasons stated above, Plaintiffs are not entitled to any money damages under this test. 14 Plaintiffs UCL claim, by contrast, is not limited to the strictures of the alleged contractual terms its 15 prescriptions are aimed at unlawful or unfair business practices (wherein a violation may be found 16 even if conduct violates no specific law). See Cel-Tech Commc’ns, 20 Cal. 4th at 180 (“In other 17 words, a practice is prohibited as ‘unfair’ or ‘deceptive’ even if not ‘unlawful’ and vice versa.”). 18 Nor is the UCL geared to award traditional contract damages. See In re Tobacco II, 46 Cal. 4th at 19 312 (“‘A UCL action is equitable in nature; damages cannot be recovered. . . . We have stated under 20 the UCL, [p]revailing plaintiffs are generally limited to injunctive relief and restitution.’” (quoting 21 Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134, 1144 (2003)). Under the UCL claim, 22 the operative effect of the 20% gratuity statement is not a contractual promise, but rather an alleged 23 misrepresentation which skewed the transaction and caused Plaintiffs to expend more money than 24 they otherwise would have had the representation not been made. Stated another way, the breach of 25 contract claim looks at the 20% gratuity statement and asks how Plaintiffs can be put in the same 26 27 28 3 Plaintiff does not seek specific performance or assert any common law fraud claims. 21 1 situation they would be in had Defendants performed. The UCL claim looks at the 20% gratuity 2 statement and asks how Plaintiffs would be positioned had the misrepresentation not been made. 3 4 Accordingly, Uber’s motion to dismiss this claim is GRANTED and the claim is dismissed with prejudice.4 5 6 IV. CONCLUSION For the foregoing reasons, Uber’s motion to dismiss Plaintiff’s UCL claims is DENIED. 7 Further, Uber’s motion to dismiss Plaintiff’s CLRA claim is DENIED to the extent Plaintiff’s claim 8 is predicated on Cal. Civ. Code § 1770(a)(5), (9), (14) and GRANTED to the extent the claim is 9 predicated on Cal. Civ. Code § 1770(a)(13), (16). The CLRA claim under these latter provisions is dismissed with prejudice. Finally, Uber’s motion to dismiss is GRANTED to the extent it seeks 11 For the Northern District of California United States District Court 10 dismissal of Plaintiff’s breach of contract claim. That claim is dismissed with prejudice. 12 This order disposes of Docket No. 44. 13 14 IT IS SO ORDERED. 15 16 Dated: September 17, 2014 17 _________________________ EDWARD M. CHEN United States District Judge 18 19 20 21 22 23 24 25 26 27 28 4 The Court notes that in O’Connor v. Uber it dismissed a claim alleging breach of implied contract asserted under a third-party beneficiary theory brought on behalf of the drivers. See O’Connor v. Uber Techs., Inc., No. C13-3826 EMC, 2014 WL 4382880, at *6-8 (N.D. Cal. Sept. 4, 2014). The class in O’Connor chose to rely on an implied-in-fact contract theory that the Court found was barred by an express provision of Uber’s terms and conditions. The plaintiff in O’Connor did not allege, as Plaintiffs do here, that the gratuity-based representations were incorporated by reference into the Terms and Conditions. 22

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