California Court Of Appeal Concludes There Is No Private Right Of Action Under The State’s Auto-Renewal Law

On September 11, 2020, the California Court of Appeal issued a decision with two crucial holdings limiting the scope of California’s Automatic Renewal Law (ARL), Business and Professions Code sections 17600, et seq.

In Mayron v. Google LLC, No. H044592, 2020 WL 5494245 (Cal. Ct. App. Sept. 11, 2020), one of the first cases to put the State’s infamous ARL to the test, the Court of Appeal clarified that:

(1) there is no private right of action for a violation of the ARL’s provisions, and

(2) a plaintiff seeking to use an alleged ARL violation as the basis for a claim under the Unfair Competition Law (UCL), Business and Professions Code sections 17200, et seq. is subject to the requirements for standing under the UCL.

More specifically, a plaintiff seeking to repackage an alleged ARL violation under the “unlawful” prong of the UCL must allege an economic injury sufficient to establish standing.

The Lawsuit

Eric Mayron filed his action in Santa Clara Superior Court, seeking to assert claims against Google LLC for violations of the ARL and unfair competition on behalf of a putative class. Mayron alleged that Google failed to provide “clear and conspicuous disclosures,” obtain his affirmative consent to recurring charges, or adequately explain how to cancel with respect to the subscription data plan available through Google Drive (which provides up to 15 GB of data for free and charges $1.99 per month for additional storage up to 100 GB). According to Mayron, each of these alleged failures constitutes a violation of the ARL.

The trial court sustained Google’s demurrer without leave to amend, dismissing Mayron’s ARL claims on the ground that the statute does not create a private right of action, and dismissing the UCL claims for lack of standing, as Mayron had failed to sufficiently allege an “injury.”

On appeal, the Court reviewed and affirmed both of the foregoing determinations.

The ARL Does Not Create A Private Right Of Action

The ARL was enacted in 2009 to “end the practice of ongoing charging of consumer credit or debit cards . . . without the consumers’ explicit consent for ongoing shipments of a product or ongoing deliveries of service.” In furtherance of this purpose, the ARL imposes notice and consent requirements on companies that utilize a subscription model or recurring charges for their business, and provides remedies for violations of these requirements. The ARL does not, however, arm plaintiffs with an independent cause of action to tack onto any lawsuit.

The Court rejected Mayron’s argument that the Legislature intended to create a private right of action by providing for remedies in Section 17604; although such a provision does imply an action to recover the remedies provided for, an intent by the Legislature to create a private right of action must be “clear, understandable, [and] unmistakable,” not merely implied by or consistent with the text of the statute in question. See Lu v. Hawaiian Gardens Casino, Inc., 50 Cal. 4th 592, 596 (2010).

By providing for remedies but declining to explicitly create a right of action, the Legislature meant to require plaintiffs to use existing means, e.g., the UCL, to seek relief. The Court found support for this conclusion in other statutes, where the Legislature had clearly and unmistakably created a right of action. See, e.g., Cal. Lab. Code § 218; Cal. Bus. & Prof. Code § 17070, Cal. Civ. Code § 1748.7. The Court also took judicial notice of the ARL’s legislative history, and observed that the bill’s author had suggested enforcement through the UCL. See also Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1143 (2003) (“Section 17200 ‘borrows’ violations from other laws by making them independently actionable as unfair competitive practices.”).

For a more detailed overview of the ARL’s provisions, click here.

“Standing to sue for unfair competition requires actual injury and causation”

Citing Section 17204, the Court reiterated that the UCL provisions contain an express standing requirement; an action may be brought only “by a person who has suffered injury in fact and has lost money or property as a result of the unfair competition.” See Hall v. Time, Inc., 158 Cal. App. 4th 847, 849 (2008) (“We hold the phrase ‘as a result of’ in the [UCL] imposes a causation requirement; that is, the alleged unfair competition must have caused the plaintiff to lose money or property.”) (Emphasis added).

The Court then walked through a roadmap for future plaintiffs to meet the UCL threshold. For example, Mayron needed to allege that he had ordered increased Google Drive storage (subscribing to the plan) but would not have done so if proper disclosures had been provided, or that he would have cancelled the subscription had it been clearly explained or easier to do so. Without such allegations there was no “causal link” between any payments by Mayron and the alleged violations by Google, even assuming the violations had, in fact, occurred.

“[T]he unconditional gift provision . . . does not confer standing for a section 17200 cause of action”

Mayron then argued that because Google had violated its obligations under the ARL, the storage he received was a “gift” under Section 17603, meaning he had paid for something he didn’t need to and therefore “lost money” due to the violation. While a handful of federal courts appear to have been persuaded by this reasoning, the Court was quick to dismiss it, following simple chronology instead. The right to retain a product (treatment as an unconditional gift) is a consequence of violating the statute, i.e., follows the violation in time, and therefore cannot be a loss caused by the violation. Furthermore, as pointed out by the Court, an “injury” for purposes of Article III standing is much broader than the economic loss required for standing under the UCL. Compare Kwikset Corp. v. Super. Ct., 51 Cal. 4th 310, 317 (2011) with Johnson v. Pluralsight, LLC, 728 F. App’x 674, 676-77 (9th Cir. 2018). The inquiry for UCL standing must relate a plaintiff’s purchase to the defendant’s conduct.

Takeaways

In a previous article, we outlined the possibilities for plaintiffs seeking to exploit California’s numerous consumer protection statutes as fodder for class litigation, especially in the wake of COVID-19. Although the Mayron Court has reaffirmed critical limitations on the use of the ARL for this purpose, membership- and subscription-based businesses must remain vigilant to ensure compliance measures are in place and effective.  

In addition, Mayron raises serious questions concerning the scope of the ARL’s provisions, such as the gift provision. See Cal. Bus. & Prof. Code § 17603. The Court declined to reach the issue of whether the ARL’s “gift” provision applies to intangible goods or mixed goods/services like the data storage plan offered by Google, but this is likely to be another issue at the forefront of future ARL cases.

*Link to case: https://www.courts.ca.gov/opinions/documents/H044592.PDF