Berry v. American Exp. Pub., Inc.

• Decision Date: 31 January 2007
• Docket Number: No. G036848.,G036848.
• Court: California Court of Appeals Court of Appeals
• Parties: Samuel A. BERRY, Plaintiff and Appellant, v. AMERICAN EXPRESS PUBLISHING, INC., et al., Defendants and Respondents.

54 Cal.Rptr.3d 91

147 Cal.App.4th 224

Samuel A. BERRY, Plaintiff and Appellant, v. AMERICAN EXPRESS PUBLISHING, INC., et al., Defendants and Respondents.

No. G036848.

Court of Appeal, Fourth District, Division 3.

January 31, 2007.

Matthew S. Hale, Westminster, for Plaintiff and Appellant.

Stroock & Stroock & Lavan, Julia B. Strickland, Stephen J. Newman, Andrew W. Moritz and Alexandria R. Kachadoorian, Los Angeles, for Defendants and Respondents.

OPINION

ARONSON, J.

Plaintiff Samuel A. Berry appeals a judgment dismissing the action entered after the trial court sustained without leave to amend demurrers to his complaint for injunctive relief based on the California Consumer Legal Remedies Act (CLRA), California Civil Code section 1750 et seq.¹ Berry contends he is entitled to seek injunctive relief under CLRA to enjoin enforcement of an allegedly unconscionable arbitration provision in agreements between cardholders and defendants American Express Travel-Related Services Company, Inc. (AMEX Travel), American Express Centurion Bank, Inc. (AMEX Bank), and American Express' Publishing, Inc. (AMEX Publishing) (collectively, AMEX).

Section 1770, subdivision (a), proscribes specified acts or practices "in a transaction intended to result or which results in the sale or lease of goods or services to any consumer...." After considering CLRA's text and legislative history, we conclude the extension of credit, such as issuing a credit card, separate and apart from the sale or lease of any specific goods or services, does not fall within the scope of the act. Accordingly, the trial court did not err in sustaining AMEX's demurrer. Because Berry failed to demonstrate he could amend his complaint to state a cause of action under CLRA, the trial court did not abuse its discretion in denying leave to amend. We therefore affirm.

I FACTUAL AND PROCEDURAL BACKGROUND

Berry is, and for many years has been, a holder of an American Express card, for which he pays an annual fee. Berry uses the card primarily for his family's personal and household purposes. After Berry obtained the card, AMEX sent him a cardholder agreement which contained a clause calling for the arbitration of all disputes, except for those brought in small claims court, and prohibited the parties from pursuing class action relief.

In the latter part of 2004, Berry began to receive a magazine published by AMEX Publishing entitled "Travel + Leisure." Although Berry had never ordered Travel + Leisure, the October statement for his AMEX card showed a $43 charge for a subscription to the magazine. After calling both AMEX Bank and AMEX Publishing, the subscription was cancelled and the charge removed.

Berry sued AMEX on behalf of himself and others similarly situated, contending AMEX charged them for magazines that were never ordered. After AMEX removed the case to federal court, Berry withdrew all damage claims, causing the federal court to remand the case to state court for failing to meet the amount-in-controversy requirement for federal jurisdiction. (See 28 U.S.C. § 1332.) The trial court then denied AMEX's motion to compel arbitration on Berry's remaining injunctive claims. Following demurrers, Berry amended his complaint to state a single cause of action, which alleged the arbitration clause and class action waiver in the cardholder agreement violated CLRA. Although the amended complaint mentioned AMEX sending magazines to cardholders who did not order them, the only cause of action alleged sought injunctive relief against the arbitration provision.

AMEX filed demurrers to the amended complaint. In opposing the demurrers, Berry did not request leave to amend or demonstrate how he could amend the complaint to state a cause of action. The trial court sustained the demurrers without leave to amend, and dismissed the complaint with prejudice. Berry now appeals.

II STANDARD OF REVIEW

An order sustaining demurrers to class action allegations "is appealable to the extent that it prevents further proceedings as a class action." (Wilner v. Sunset Life Ins. Co. (2000) 78 Cal.App.4th 952, 957, fn. 1, 93 Cal.Rptr.2d 413.) In reviewing a trial court's order sustaining a demurrer, we exercise our independent judgment as to whether a cause of action has been stated as a matter of law. (Montclair Parkowners Assn. v. City of Montclair (1999) 76 Cal.App.4th 784, 790, 90 Cal.Rptr.2d 598.) A trial court's denial of leave to amend, however, is reviewed for abuse of discretion. The appellant bears the burden of proving the trial court abused its discretion by demonstrating how he could amend the complaint to state a cause of action. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349, 134 Cal.Rptr. 375, 556 P.2d 737.)

III DISCUSSION

The Issuance of a Credit Card Is Not a "Transaction Intended to Result or Which Results in the Sale or Lease of Goods or Services to Any Consumer" Under CLRA

Berry's complaint alleges the arbitration clause in AMEX's cardholder agreement is unconscionable, and thus violates section 1770, subdivision (a)(19), which provides, in pertinent part: "The following unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer are unlawful: [¶] ... [¶] Inserting an unconscionable provision in the contract." AMEX contends the statute does not apply because the issuance of a credit card to Berry was not "a transaction intended to result or which results in the sale or lease of goods or services to [a] consumer... ." We agree.

This issue is one of first impression. Accordingly, our duty is to construe CLRA's provisions to discern the Legislature's intent. "The statutory language itself is the most reliable indicator, so we start with the statute's words, assigning them their usual and ordinary meanings, and construing them in context. If the words themselves are not ambiguous, we presume the Legislature meant what it said, and the statute's plain meaning governs. On the other hand, if the language allows more than one reasonable construction, we may look to such aids as the legislative history of the measure and maxims of statutory construction." (Wells v. One2One Learning Foundation (2006) 39 Cal.4th 1164, 1190, 48 Cal.Rptr.3d 108, 141 P.3d 225.)

Section 1761, subdivision (d), provides: "`Consumer' means an individual who seeks or acquires, by purchase or lease, any goods or services for personal, family, or household purposes." The complaint alleges an AMEX card qualifies as a "`good' or `service'" as used in section 1761, subdivision (d). We disagree.²

Section 1761, subdivision (a), provides: "`Goods' means tangible chattels bought or leased for use primarily for personal, family, or household purposes, including certificates or coupons exchangeable for these goods, and including goods that, at the time of the sale or subsequently, are to be so affixed to real property as to become a part of real property, whether or not they are severable from the real property." The extension of credit is not a tangible chattel. True, a plastic credit card is tangible. But the card has no intrinsic value and exists only as indicia of the credit extended to the card holder. Berry's AMEX card is thus not a "good" under CLRA.

We now turn to whether AMEX's issuance of credit constitutes a "service" under CLRA. Section 1761, subdivision (b) provides: "`Services' means work, labor, and services for other than a commercial or business use, including services furnished in connection with the sale or repair of goods." Berry argues that credit furnished by AMEX constitutes "`services furnished in connection with the sale ... of goods'" because the cardholder may use the credit provided to purchase goods. Berry explains: "After all a consumer cannot hire a car, reserve airline tickets, stay in a hotel, or make purchases on the internet without a credit card." A review of CLRA's legislative history, however, does not support the notion that credit, separate and apart from a specific purchase or lease of a good or service, is covered under the act.

CLRA's enactment followed findings by the National Advisory Commission on Civil Disorders, appointed by President Lyndon B. Johnson on July 27, 1967, and chaired by Illinois Governor Otto Kramer (the Kramer Commission). Investigating the causes of recent violence in low-income urban areas, the Kramer Commission found that rioters appeared to focus on stores whose merchants had charged exorbitant prices or sold inferior goods. (Reed, Legislating for the Consumer: An Insider's Analysis of the Consumers Legal Remedies Act (1971) 2 Pacific L.J. 1, 5.) The report recognized that low-income persons were the most common victims of deceptive sales practices, yet the least likely to seek legal help. (Ibid.) Few options and typically poor credit histories induced these consumers to buy goods and services from even the most disreputable merchant. (Id. at p. 6.) The Legislature adopted CLRA to mitigate these social and economic problems. (Id. at p. 7.) CLRA was the product of intense negotiations between consumer and business groups, and represented a compromise between the two. (Id. at p. 8.)

Early drafts of section 1761, subdivision (d), defined "Consumer" as "an individual who seeks or acquires, by purchase or lease, any goods, services, money, or credit for personal, family or household purposes." (Assem. Bill No. 292 (1970 Reg. Sess.) Jan. 21, 1970, italics added.) But the Legislature removed the references to "money" and "credit," before CLRA's enactment, and they do not appear in the current version.

"The evolution of a proposed statute after its original introduction in the Senate or Assembly can offer considerable enlightenment as to legislative intent." (People v. Goodloe (1995) 37 Cal.App.4th 485, 490, 44 Cal.Rptr.2d 15.) Thus, an oftcited canon of statutory construction provides: "'...