Case Name: Siciliano v. Apple, Inc.
Case No.: 2013-1-CV-257676

This is a putative class action arising from the automatic renewal of “In-App Subscriptions” for digital content through defendant Apple Inc.’s (“Apple”) “App Store.” According to the allegations of the Second Amended Complaint (“SAC”), consumers enter into transactions for In-App Subscriptions with Apple, and Apple both delivers and charges subscribers for associated content. (SAC, ¶ 21.) However, Apple does so without complying with various provisions of Business & Professions Code sections 17600-17604, which govern automatic renewal and continuous service offers to consumers in California (the “Automatic Renewal Law”).

In order to make purchases from Apple’s online store, consumers are first required to set up an account with Apple’s iTunes service, which includes creating an “Apple ID” and password, providing payment information, and consenting to three legal agreements (collectively, the “Legal Agreements”). (SAC, ¶ 22.) Paragraph 45 of the “MAC App Store, App Store and iBooks Store Terms and Conditions” (the “App Store Legal Agreement”) establishes terms and conditions pertaining to In-App Subscriptions. (Id., ¶ 28.) However, the Legal Agreements fail to state that In-App Subscriptions continue until cancelled or specify the recurring charges associated with automatic renewals as required by the Automatic Renewal Law, and they also fail to display the disclosures that are presented in a clear and conspicuous fashion. (Id., ¶¶ 32-33.)

When consumers later open one of the various software applications (or “Apps”) that offer In-App Subscriptions, Apple makes an automatic renewal offer by displaying a button labeled “subscribe” or “upgrade.” (Id., ¶¶19, 30.) Clicking on this button causes a screen to appear, which subscribers use to enter their desired subscription period, along with their Apple ID and password linked to their payment method. (Id., ¶ 30.) The Legal Agreements are not accessible on the checkout page and are not located anywhere in the App Store, and there is no mechanism that requires subscribers to consent to the Legal Agreements or any other agreement containing automatic renewal terms during the checkout process for In-App Subscriptions. (Id., ¶¶ 32, 35.) This practice violates the Automatic Renewal Law’s requirement that businesses obtain subscribers’ affirmative consent to automatic renewals. (Id., ¶ 37.)

Plaintiffs Frank Siciliano (“Siciliano”) and Kelila Green (“Green”) ordered a one-week free In-App Subscription to Hulu Plus using their Apple TV on October 9, 2013. (Id., ¶8.) One week later on October 16, 2013, defendant Apple charged and continues to charge plaintiffs Siciliano and Green $7.99 each and every month on a recurring basis. (Id.) Plaintiff Melissa Bleak (“Bleak”) purchased a one-year In-App Subscription to Woman’s Health Magazine in February 2013. (Id., ¶ 9.) In or about February 2014, defendant Apple charged plaintiff Bleak in accordance with the payment method associated with her iTunes account. (Id.)

Plaintiffs Siciliano, Green, and Bleak (collectively, “Plaintiffs”) filed this action against Apple on December 13, 2013. (SAC, ¶¶ 8-9.) On August 29, 2014, Plaintiffs filed a first amended complaint (“FAC”), asserting claims for: (1) violation of the Automatic Renewal Law; (2) violations of the Unfair Competition Law (“UCL”) (Bus. & Prof. Code, §§ 17200-17204); (3) injunctive relief and restitution pursuant to Business and Professions Code section 17535 (the False Advertising Law or “FAL”); (4) violation of the Consumer Legal Remedies Act (“CLRA”) (Civ. Code, § 1750 et seq.); and (5) common count for money had and received.

On April 20, 2015, this court issued an order sustaining defendant Apple’s demurrer to the second through fourth causes of action of the FAC and overruling defendant Apple’s demurrer to the first and fifth causes of action of the FAC. On April 30, 2015, Plaintiffs filed this SAC which continues to assert the same five causes of action asserted in the FAC.

On June 26, 2015, defendant Apple filed a demurrer to the second, third, and fourth causes of action in the SAC on the grounds that each cause of action fails to state a claim. (Code Civ. Proc., § 430.10, subd. (e).) On January 3, 2016, the court overruled defendant Apple’s demurrer to the SAC. On January 25, 2016, defendant Apple filed its answer to the SAC.

On March 15, 2016, defendant Apple filed the present motion for judgment on the pleadings as to Plaintiffs’ first cause of action. On April 25, 2016, Plaintiffs filed opposition.

I. Defendant Apple’s Motion for Judgment on the Pleadings as to the First Cause of Action for Violation of the Automatic Renewal Law is GRANTED.

A. Request for Judicial Notice.

In support of its motion for judgment on the pleadings, defendant Apple requests judicial notice of (1) this court’s February 10, 2016 order sustaining defendant’s demurrer in Mayron v. Google, Inc., No. 2015-1-CV-275940; and (2) the Senate Judiciary Committee Report pertaining to Senate Bill No. 340, which was later codified as California Business and Professions Code sections 17600 et seq.

Evidence Code section 452, subdivision (d) states that the court may take judicial notice of “[r]ecords of any court of this state.” This section of the statute has been interpreted to mean that the trial court may take judicial notice of the existence of the court’s own records. Evidence Code section 452 and 453 permit the trial court to “take judicial notice of the existence of judicial opinions and court documents, along with the truth of the results reached—in the documents such as orders, statements of decision, and judgments—but [the court] cannot take judicial notice of the truth of hearsay statements in decisions or court files, including pleadings, affidavits, testimony, or statements of fact.” (People v. Woodell (1998) 17 Cal.4th 448, 455.) Accordingly, defendant Apple’s request for judicial notice of this court’s February 10, 2016 order sustaining defendant’s demurrer in Mayron v. Google, Inc., No. 2015-1-CV-275940 is GRANTED.

Legislative history is a proper subject of judicial notice. (See In re Greg F. (2012) 55 Cal.4th 393, 409, fn. 2.) Accordingly, defendant Apple’s request for judicial notice the Senate Judiciary Committee Report pertaining to Senate Bill No. 340 is GRANTED. (See also Kaufman & Broad Communities, Inc. v. Performance Plastering, Inc. (2005) 133 Cal.App.4th 26, 31-37 [discussing categories of documents that constitute cognizable legislative history for purposes of judicial notice].)

B. Motion for Judgment on the Pleadings.

The first cause of action of Plaintiffs’ SAC is brought pursuant to the Automatic Renewal Law. Defendant Apple contends the Automatic Renewal Law does not create a private right of action and therefore Plaintiffs cannot maintain this cause of action.

“Adoption of a regulatory statute does not automatically create a private right to sue for damages resulting from violations of the statute. Such a private right of action exists only if the language of the statute or its legislative history clearly indicates the Legislature intended to create such a right to sue for damages.” (Vikco Ins. Services, Inc. v. Ohio Indem. Co. (1999) 70 Cal.App.4th 55, 62, emphasis original.) That intent need not necessarily be expressed explicitly, but if not it must be strongly implied. (Farmers Ins. Exchange v. Superior Court (2006) 137 Cal.App.4th 842, 850.)

“The question of whether a regulatory statute creates a private right of action depends on legislative intent. [Citations.] In determining legislative intent, ‘[w]e first examine the words themselves because the statutory language is generally the most reliable indicator of legislative intent. [Citation.] The words of the statute should be given their ordinary and usual meaning and should be construed in their statutory context. [Citations.] These canons generally preclude judicial construction that renders part of the statute “meaningless or inoperative.” ’ ” [Citation.]

(Thornburg v. El Centro Regional Medical Center (2006) 143 Cal.App.4th 198, 204.)

In the first cause of action, Plaintiffs explicitly allege a violation of Business and Professions Code section 17602, subdivision (a)(2) of the Automatic Renewal law which provides, in relevant part:

It shall be unlawful for any business making an automatic renewal or continuous service offer to a consumer in this state to do any of the following: … (2) Charge the consumer’s credit or debit card or the consumer’s account with a third party for an automatic renewal or continuous service without first obtaining the consumer’s affirmative consent to the agreement containing the automatic renewal offer terms or continuous service offer terms.

There is no express provision in section 17602 authorizing a private right of action. Section 17604 states that “all available civil remedies that apply to a violation of this article may be employed.” However, the use of the language “all available” indicates that no new private right of action has been created; rather, a party can rely on civil remedies that already exist. For example, a party could bring an action under the UCL. Indeed, Plaintiffs have asserted a cause of action for violation of the UCL in their second cause of action.

Instead, Plaintiffs’ first cause of action explicitly relies upon section 17603 alleging “Defendant is liable to provide restitution to Plaintiffs[] and Class Members under Cal. Bus. Prof. Code § 17603.” (SAC, ¶43.) Section 17603 states:

In any case in which a business sends any goods, wares, merchandise, or products to a consumer, under a continuous service agreement or automatic renewal of a purchase, without first obtaining the consumer’s affirmative consent as described in Section 17602, the goods, wares, merchandise, or products shall for all purposes be deemed an unconditional gift to the consumer, who may use or dispose of the same in any manner he or she sees fit without any obligation whatsoever on the consumer’s part to the business, including, but not limited to, bearing the cost of, or responsibility for, shipping any goods, wares, merchandise, or products to the business.

In opposition, it is Plaintiffs’ contention that section 17603 creates a private right of action based upon the language that the consumer be allowed to keep the product sent to him as an “unconditional gift.”

A statute may contain “ ‘clear, understandable, unmistakable terms,’ ” which strongly and directly indicate that the Legislature intended to create a private cause of action. (Moradi–Shalal, supra, 46 Cal.3d at p. 295, 250 Cal.Rptr. 116, 758 P.2d 58.) For instance, the statute may expressly state that a person has or is liable for a cause of action for a particular violation. (See, e.g., Civ.Code, § 51.9 [“A person is liable in a cause of action for sexual harassment” when a plaintiff proves certain elements]; Health & Saf.Code, § 1285, subd. (c) [“Any person who is detained in a health facility solely for the nonpayment of a bill has a cause of action against the health facility for the detention”].)

Or, more commonly, a statute may refer to a remedy or means of enforcing its substantive provisions, i.e., by way of an action. [Footnote.] (See, e.g., § 218 [“Nothing in this article shall limit the right of any wage claimant to sue directly or through an assignee for any wages or penalty due him under this article”]; Bus. & Prof.Code, § 17070 [“Any person … may bring an action to enjoin and restrain any violation of this chapter and, in addition thereto, for the recovery of damages”]; id., § 6175.4, subd. (a) [“A client who suffers any damage as the result of a violation of this article by any lawyer may bring an action against that person to recover or obtain one or more of the following remedies”]; Civ.Code, § 1748.7, subd. (d) [“Any person injured by a violation of this section may bring an action for the recovery of damages, equitable relief, and reasonable attorney’s fees and costs”]; see Crusader, supra, 54 Cal.App.4th at p. 136, 62 Cal.Rptr.2d 620 [listing other statutes expressly creating cause of action].)

If, however, a statute does not contain such obvious language, resort to its legislative history is next in order. (Moradi–Shalal, supra, 46 Cal.3d at pp. 300–301, 250 Cal.Rptr. 116, 758 P.2d 58; see Crusader, supra, 54 Cal.App.4th at pp. 133–134, 136, 62 Cal.Rptr.2d 620 [relying on principles of general statutory interpretation].)

(Lu v. Hawaiian Gardens Casino, Inc. (2010) 50 Cal.4th 592, 597 (Lu).)

Unlike the examples given by the California Supreme Court in Lu, it is difficult for this court to find section 17603’s use of the words “unconditional gift” as a clear and unmistakable indication by the Legislature to create a private right of action or make reference to a means of enforcement.

Plaintiffs liken their case to that of Goehring v. Chapman University (2004) 121 Cal.App.4th 353 (Goehring) in which the court held that law students had a private right of action for a law school’s violation of section 6061 which requires written disclosures of facts pertinent to a law school’s unaccredited status. In relevant part, section 6061 states, “If any school does not comply with these requirements, it shall make a full refund of all fees paid by students.” Despite the fact that the statute did not explicitly create a private right of action nor did it refer to a method of enforcement, the Goehring court held, “the Legislature unquestionably intended to bestow students or former students with individual monetary claims, it must have intended to give them private rights of action to pursue such claims. In our view, section 6061’s refund language explicitly denotes a private right of action.” (Goehring, supra, 121 Cal.App.4th at pp. 377 – 378.)

The statutory language in Goehring is much clearer than the statutory language at issue here. Section 17603 allows a consumer to use or dispose of a product which was sent to him/her and already in the consumer’s possession. No further affirmative action is required on the consumer’s part to take advantage of the remedy. In contrast, a law student who parts with money to pay for tuition must unquestionably take some affirmative action to obtain a refund. Plaintiffs counter by arguing that, as alleged in the SAC, they have, in fact, parted with money. [“Defendant charged the Class Members’ payment method for an automatic renewal or continuous service without first obtaining the Class Members’ affirmative consent to the agreement containing the automatic renewal offer terms or service offer terms.” (SAC, ¶42.)] Thus, under the circumstances, Plaintiffs do not passively benefit from the remedy of section 17603 because they have already been charged for the automatic renewal. Plaintiffs can only take advantage of the “unconditional gift” by affirmatively seeking restitution of the monies they were charged.

At best, section 17603 implies a private right of action. As noted above, legislative intent need not necessarily be expressed explicitly, but if not it must be strongly implied. (Farmers Ins. Exchange v. Superior Court (2006) 137 Cal.App.4th 842, 850.) In the absence of clear and explicit language, the court looks to the legislative history. Here, as defendant Apple points out, the Senate Judiciary Committee Report pertaining to Senate Bill No. 340 discussed remedies stating:

Senate Bill 340 would provide that a violation of its provisions would not be a crime, but all applicable civil remedies would be available.

Under the FAA, any person who violates any provision of the FAA is liable for a civil penalty not to exceed $2,500 for each violation that must be assessed and recovered in a civil action by the Attorney General or by any district attorney, county counsel, or city attorney. Under the UCL, a private party may bring a civil action for injunctive relief and/or for restitution of profits that the defendant unfairly obtained from that party. However, the party must have suffered an injury in fact and lost money or property.

(Emphasis added.)

Thus, the legislative history contemplated restitution by means of an existing civil remedy, a cause of action under the UCL. Enactment of this intent is further evidenced by section 17604 which states that “all available civil remedies that apply to a violation of this article may be employed.” In view of this history and in reading sections 17602 through 17604 together, the court agrees with defendant Apple that the legislature did not intend to create a private right of action for restitution based upon section 17603. A private right of action exists, but only pursuant to section 17604.

Defendant Apple’s motion for judgment on the pleadings as to the first cause of action in Plaintiffs’ SAC is GRANTED WITHOUT LEAVE TO AMEND.