New UCL/CLRA decision: Aron v. U-Haul Company

In Aron v. U-Haul Company, ___ Cal.App.4th ___ (Oct. 3, 2006), the plaintiff filed a putative class action alleging that U-Haul violated the UCL and CLRA by: (a) charging a $20 "refueling fee" even though it does not actually refuel its rental trucks, but simply re-rents them with whatever gas the previous customer left in the tank; (b) charging $2 per gallon for "fuel estimated to have been used, but not replaced, by the customer," but relying solely on the trucks' inexact gas gauges to quantify the customer's fuel usage; and (c) failing to reimburse customers who return the rental trucks with more gas than they started out with.

The trial court granted U-Haul's motion for judgment on the pleadings. The Court of Appeal (Second Appellate District, Division Seven) reversed. Its opinion contains the following holdings of note:

1. The Court treated the "injury in fact" requirement as a standing requirement under Mervyn's, rather than as a substantive change: "Because the allegations set forth a basis for a claim of actual economic injury as a result of an unfair and illegal business practice, Aron has standing." Slip op. at 4-5. That is where both Pfizer and Tobacco went astray.

2. The Court interpreted the Cel-Tech "safe harbor" and found that "the power to create and define an exception to the UCL is committed to the Legislature. .... Courts thus may not create 'implied safe harbors.'" Slip op. at 6 (citing Krumme v. Mercury Ins. Co., 123 Cal.App.4th 924, 940 n.5 (2004)). The Court then held that "imposition of a charge for a service [the defendant] does not provide" can constitute an "unfair" practice under the UCL and also violates the CLRA, specifically Civil Code section 1770(a)(4). Slip op. at 8. The Court did not distinguish between the pre- and post-Cel-Tech formulations of unfair.

3. The Court applied the ordinary "likely to deceive" formulation of the UCL's "fraudulent" prong, as well as the "reasonable consumer" standard:

   To state a cause of action under consumer protection statutes designed to protect the public from fraudulent or deceptive representations, the plaintiff must demonstrate that “‘members of the public are likely to be deceived.’ [Citations.]” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 211.) .... We find that Aron has alleged facts sufficient to show that U-Haul’s representations would be misleading to a reasonable consumer because there is no connection between the imposition of a fee or cost and whether the customer has in fact refueled the vehicle. “A perfectly true statement couched in such a manner that it is likely to mislead or deceive the consumer, such as by failure to disclose other relevant information, is actionable.” (Day v. A T & T Corp. (1998) 63 Cal.App.4th 325, 332-333.)

   Slip op. at 9-10. Again, the Court stayed true to Mervyn's by narrowly interpreting the new standing language so as not to alter the substantive law.

4. The Court interpreted the "geographic origin" subdivision of the CLRA, which prohibits "[u]sing deceptive representations or designations of geographic origin in connection with goods or services." Civ. Code §1770(a)(4). The Court held that the words "representations" and "designations" both modify the term "geographic origin," so to state a claim for violation of this subdivision, "a plaintiff must allege facts that show the deception relates to geographic origin." Slip op. at 10-11.

5. The Court held that the alleged misconduct does not amount to an "unconscionable business practice" under the the CLRA. Civ. Code §1770(a)(19). While the conduct may be unfair and unreasonable, it is not "harsh" or "oppressive" and does "not shock the conscience as a matter of law." Slip op. at 11-13.