Consumer Advocates v. Echostar Satellite

• Decision Date: 05 December 2003
• Docket Number: No. B161491.,B161491.
• Citation: 8 Cal.Rptr.3d 22,113 Cal.App.4th 1351
• Court: California Court of Appeals Court of Appeals
• Parties: CONSUMER ADVOCATES et al., Plaintiffs and Appellants, v. ECHOSTAR SATELLITE CORPORATION et al., Defendants and Appellants.

8 Cal.Rptr.3d 22

113 Cal.App.4th 1351

CONSUMER ADVOCATES et al., Plaintiffs and Appellants, v. ECHOSTAR SATELLITE CORPORATION et al., Defendants and Appellants.

No. B161491.

Court of Appeal, Second District, Division 5.

December 5, 2003.

Certified for Partial Publication.^*

Review Denied March 24, 2004.

Anderson Law Firm and Martin W. Anderson for Plaintiffs and Appellants.

Squire, Sanders & Dempsey and Stephen T. Owens, Los Angeles; T. Wade Welch & Associates, T. Wade Welch, Houston, TX and Rusty Harrison; T. Wade Welch & Associates, Oscar Maldonado, Katy, TX, Tommy W. Harrison, Houston,

TX and Ross W. Wooten, pro hac vice, for Defendants and Respondents.

ARMSTRONG, J.

SUMMARY

This case was brought under the Consumers Legal Remedies Act ("CLRA"), the False Advertising Act, and the Unfair Competition Law ("UCL"). The allegations are that defendants, who provide satellite television service, made the following false or misleading statements in their brochure: that the system provided "crystal clear digital video," "CD-quality" audio, and an on-screen program guide which would allow a consumer to view the schedule "up to 7 days in advance," and that 50 channels would be provided.

Under the CLRA, plaintiffs alleged that defendants violated Civil Code section § 1770, subds. (a)(5), (a)(7), and (a)(9), which concern representations that a good or service has characteristics which it does not have or is of a particular standard or quality when it is not, and advertisement of goods or services with intent not to sell them as advertised. The False Advertising Act claim was that the statements were "untrue or misleading, and which [were] known, or which by the exercise of reasonable care should be known, to be untrue or misleading, ..." (Bus. & Prof.Code, § 17500.) The UCL claims were that the misrepresentations were unlawful in that they violated the CLRA and the False Advertising Act, and that by making the misrepresentations defendants engaged in fraudulent conduct. (Bus. & Prof.Code, § 17200.) Plaintiffs also alleged that the representations constituted an express warranty, which was breached. They sought class certification on all causes of action, defining the class as persons who acquired defendants' 18-inch satellite system in California.

On the cause of action under the CLRA, plaintiffs sought damages, an injunction, and a restitution order. (Civ.Code, § 1780, subd. (a).) Under the False Advertising Act and the UCL, plaintiffs sought an injunction, an accounting of all profits defendants received as a result of the false advertising or unfair competition, restitution and disgorgement of those amounts, and other remedies. (Bus. & Prof.Code, §§ 17203, 17535.)

The case was decided after the trial court granted the defendants' motion for summary judgment and/or summary adjudication. We find that plaintiffs have not established that the trial court erred insofar as the cause of action for breach of warranty is concerned, but also find that there are triable issues of fact on each of the statutory causes of action. More specifically, we find that there are triable issues of fact on whether respondents violated the statues with the representations concerning the number of channels and the program schedule. We thus reverse the judgment. The reversal means that the cross-appeal on fees is moot.

FACTS

Plaintiffs are Consumer Advocates and David Pritikin. More specifically, the named plaintiffs on the CLRA and breach of warranty causes of action were Pritikin (and the class), with Pritikin, Consumer Advocates, and the class as plaintiffs on the remaining causes of action. Defendants are Echostar Satellite Corporation, Dish Network, Echostar Communications Corporation and Echosphere Corporation.

Pritikin bought defendants' 18-inch system in November of 1996 and subscribed to a program package called "America's Top 50." At summary judgment, plaintiffs proposed as undisputed that prior to purchasing defendants' system, Pritikin reviewed a brochure, that many copies of the brochure were available at the store, and that the brochure made the representations described in the complaint. Plaintiffs also incorporated by reference Pritikin's declaration in support of their motion for class certification. A copy of the brochure is attached to that declaration, as are copies of many other of defendants' brochures.

Defendants proposed as undisputed that they provided retailers with a model system so that potential consumers could see a demonstration and that Pritikin viewed such a demonstration before he made his purchase. Plaintiffs did not dispute those facts, but did cite Pritikin's declaration that he looked at the demonstration model for only a few minutes and did not see the problems, which are intermittent, until he installed the system at home.

It was undisputed that the signal consumers received was digital, not analog. It was essentially undisputed, however, that some of the signals to defendants' broadcast center in Wyoming were analog, and were converted to digital by defendants.

Defendants proposed numerous facts concerning the quality of the system and customer satisfaction. In sum, those facts were that qualities and features of the product purchased by consumers conformed to the demonstration model, that the majority of consumers believed that the system delivered crystal clear video and CD quality audio, and that consumers were not likely to be deceived by the brochure. In support of these proposed facts, defendants cited the declarations of consumers, retailers, distributors, its own Executive Vice President, a marketing expert, and an engineer.

The five consumers declared that they viewed the system before buying one, that the systems they bought were comparable to the demonstration models, that they were satisfied with defendants' service, neither saw nor heard significant defects, were not misled or deceived in any way, and believed that the system provided crystal clear digital video and CD quality audio.

The four retailers and four distributors had each sold or distributed thousands of defendants' system. Each declared that he had never received a customer complaint about the lack of crystal clear video or CD quality audio, or the number of channels, or the on-screen program guide, or about the promotional materials. In addition, each retailer declared that customers interested in satellite systems responded to the demonstration model rather than to written promotional material, which was used at the discretion of the retailer.

Defendants' Vice President James DeFranco declared that defendants' written promotional materials are always changing, and that many retailers, particularly in California, rely on demonstrations and their own documents rather than the brochures. He knew of no customer complaint about the program guide or any complaint that the brochures were misleading. To the contrary, independent organizations including Consumer Reports and J.D. Powers & Associates consistently rated defendants' service as the leader in customer satisfaction.

Bruce Elbert, an engineer with experience in satellite television systems and in designing such systems for consumers, declared that a satellite digital system is higher in quality than an analog signal delivered by cable or a local broadcast. Picture quality depended largely on the quality of the monitor the viewer used. The terms "crystal clear video" and "CD quality audio" are not terms defined by the satellite industry and do not represent a specific quantifiable standard. Further, defendants' marketing materials did not indicate that consumers would receive a perfect image or audio signal.

The marketing expert, Bruce Enis, declared that he had reviewed defendants' brochure and the marketing literature on consumer behavior. He noted that the alleged misrepresentations came under the headings "Dish Network: Nothing Else Compares" and "Dish Network. We Just Love Comparisons," and opined that the representations were part of an overall promotional strategy which invited the public to compare defendants' products to other television services. The typical consumer consulted many sources of information before deciding on a pay TV service, including conversations with friends, but the demonstration was the most important determinant of the purchase decision. Enis opined that the brochure did not promise perfection and was not likely to mislead the public.

Plaintiffs made a variety of evidentiary objections to these facts and proposed facts of their own: The picture produced by defendants' system would frequently become grainy or blocky, a phenomenon called "pixelization," or would freeze ("artifacting") or go black ("blackouts"). On certain occasions, the audio and video were out of sync. Defects in the audio "would occur fairly consistently." Pritikin sometimes heard distortions on certain high-pitched sounds, a phenomenon called "sibilance." Due to these problems, he returned and exchanged his unit several times, and when the problems persisted, spoke to and emailed defendants' technical support representatives. They told him that the problems were introduced when defendants converted analog signal to digital, and/or when defendants added channels to the system, and that everyone who received defendants' service had those problems. Questions about pixelization, artifacting, blackouts, sibilance, etc., were the subject of "frequently asked questions" on defendants' web site. Pritikin opined that that the system did not sound like a compact disc on a store-bought CD player.

It was undisputed that Pritikin continued to use defendants' system. Defendants cited Pritikin's deposition testimony that he switched to satellite television from cable due to problems with cable reception, and that defendants' system was better than cable. Based on Enis's and Elbert's declarations, defendants proposed that Pritikin was not a typical dissatisfied...