In Buller v. Sutter Health, ___ Cal.App.4th ___ (Mar. 5, 2008), the plaintiff challenged the defendant's failure to disclose its practice of providing discounts, on request, to customers who timely paid their bills in full. This practice was "fraudulent" and "unfair" under the UCL, the plaintiff claimed, because the defendant did not disclose the practice and did nothing that "'would lead a reasonable consumer ... to seek the discount, or discern that the prompt-pay discount is available to all who pay promptly.'" Slip op. at 2. The Court of Appeal (First Appellate District, Division One) held that the trial court correctly sustained the defendant's demurrer to the plaintiff's UCL claim without leave to amend.
The most unfortunate part of this opinion is its discussion of the UCL's "fraudulent" prong. According to the opinion, "it appears settled that 'Absent a duty to disclose, the failure to do so does not support a claim under the fraudulent prong of the UCL.' (Berryman v. Merit Property Management, Inc. (2007) 152 Cal.App.4th 1544, 1557 [62 Cal.Rptr.3d 177] [failure to disclose detailed listings or breakdowns of specific escrow charges comprising transfer or document fees did not violate the UCL].) This is because a consumer is not 'likely to be deceived' by the omission of a fact that was not required to be disclosed in the first place." Slip op. at 5. The opinion goes on to explain that the alleged nondisclosure was not actionable because "[consumers] in [plaintiff's] position are not likely to be operating under the expectation that they are entitled to a discount." Slip op. at 5-6 (citing Daugherty v. American Honda Motor Co., 144 Cal.App.4th 824 (2006); Bardin v. DaimlerChrysler Corp., 136 Cal.App.4th 1255 (2006)).
I would not call it "settled law" that a "duty to disclose" analysis has any place in UCL jurisprudence. The first case to use "duty to disclose" language in discussing a UCL claim is Daugherty, decided on October 31, 2006, less than 18 months ago. What the Buller opinion does not acknowledge is that nondisclosures are actionable if the concealed information would be material to a reasonable consumer. See, e.g., Massachusetts Mutual Life Ins. Co. v. Superior Court, 97 Cal.App.4th 1282, 1292 (2002) (whether the concealed information “should have been disclosed given the characteristics” of the transaction); see also Day v. AT&T Corp., 63 Cal.App.4th 325, 333 (1998) (“failure to disclose other relevant information”); Podolsky v. First Healthcare Corp., 50 Cal.App.4th 632, 651 (1996) (failure to disclose “all the pertinent facts”); Schnall v. Hertz Corp., 78 Cal.App.4th 1144, 1164 (2001) (concealment of information “relevant to the … decision” faced by the consumer). Perhaps the outcome in Buller would have been the same under that standard. Nonetheless, the settled decisions do not use "duty to disclose" terminology.
Incidentally, the Buller opinion applied the pre-Prop. 64 "likely to deceive" formulation of the "fraudulent" prong, rather than requiring proof of actual reliance. Slip op. at 5-6.
The Court then turned to the "unfair" prong, noting the split in authority regarding whether the pre- or post-Cel-Tech formulation applies. The Court resolved the matter thus: "[A]s we have noted in prior opinions, '[t]his court ... has followed the line of authority that ... requires the allegedly unfair business practice be "tethered" to a legislatively declared policy or has some actual or threatened impact on competition.' (Belton v. Comcast Cable Holdings, LLC (2007) 151 Cal.App.4th 1224, 1239–1240 [60 Cal.Rptr.3d 631], citing to Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 853–854 [128 Cal.Rptr.2d 389].)" Slip op. at 10-11. "[Plaintiff] makes no argument on appeal that his allegations are directly connected to any legislatively declared policy or threatened competition [and] has given us no reason to depart from our prior holdings in Belton and Gregory ...." Id. at 11.
The concluding paragraph of the analysis section shows that the Court simply did not think this was a good case:
Finally, we note that it is fairly common for consumers to ask for and receive discounts on products and services. The amount of these discounts may vary depending on many factors. Arguably, requiring a business to state a discount on its initial invoice runs counter to the purpose of having discretionary discounts in the first place. Indeed, taken to their logical conclusion, appellant’s arguments would effectively require a business to disclose all discretionary discounts it might offer. While we sympathize with appellant’s frustration over his failure to benefit from respondents’ discount policy, when viewed from the standpoint of consumers in general we believe respondents’ practice is beneficial rather than harmful, inasmuch as they apparently are not required to offer privately insured patients any discounts whatsoever.
Id. at 11.