Freeman v. Time, Inc.

• Decision Date: 13 July 1995
• Docket Number: Nos. 94-55089 and 94-55091,s. 94-55089 and 94-55091
• Citation: 68 F.3d 285
• Parties: 95 Cal. Daily Op. Serv. 7882, 95 Daily Journal D.A.R. 13,545 Michael FREEMAN, Plaintiff-Appellant, v. The TIME, INC., Magazine Company, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 285

68 F.3d 285

95 Cal. Daily Op. Serv. 7882, 95 Daily Journal

D.A.R. 13,545

Michael FREEMAN, Plaintiff-Appellant, v. The TIME, INC., Magazine Company, et al., Defendants-Appellees.

Nos. 94-55089 and 94-55091.

United States Court of Appeals Ninth Circuit.

Submitted July 13, 1995. ^*

Decided Aug. 21, 1995.

Order and Opinion filed Oct. 6, 1995.

Michael D. Freeman, Encino, CA, in pro per for plaintiff-appellant.

Robert C. Vanderet, O'Melveny & Myers, Los Angeles, CA, for defendants-appellees.

Appeals from the United States District Court for the Central District of California.

Before: FARRIS and O'SCANNLAIN, Circuit Judges, and TASHIMA, District Judge. ^**

ORDER

The Memorandum disposition, filed August 21, 1995, is redesignated as an authored Opinion by Judge Tashima.

OPINION

TASHIMA, District Judge:

These are two consolidated appeals from the district court's dismissal of two separate actions alleging that sweepstakes promotional materials were fraudulent and misleading.

FACTS

Plaintiff-appellant Michael Freeman ("Freeman") received two separate mailers for the "Million Dollar Dream Sweepstakes," a promotion of defendant-appellee Time, Inc. ("Time"). ¹ The mailers, personalized by computer, are similar in content and format--both contain statements in large type representing that Freeman won the sweepstakes, qualified by language in smaller type indicating that Freeman would win only if he returned a winning prize number. For example, the Sports Illustrated promotion states "If you return the grand prize winning number, we'll officially announce that MICHAEL FREEMAN HAS WON $1,666,675.00 AND PAYMENT IS SCHEDULED TO BEGIN." It continues, "If you return the grand prize winning entry, we'll say $1,666,675.00 WINNER MICHAEL FREEMAN OF ENCINO, CALIFORNIA IS OUR LARGEST MAJOR PRIZE WINNER!" The promotion provides, "We are now scheduled to begin payment of the third and largest prize--the $1,666,675 listed next to the name MICHAEL FREEMAN! In fact, arrangements have already been made which make it possible to begin payment of the $1,666,675 DIRECTLY to MICHAEL FREEMAN if one of your numbers is the grand prize winner." It concludes that "[i]f you return your entry with the Validation Seal attached and your entry includes the grand prize winning number, MICHAEL FREEMAN IS GUARANTEED TO BE PAID THE ENTIRE $1,666,675.00!"

The mailer includes an "Official Entry Certificate" on which recipient could check a box marked "YES! [Send free gifts and magazine subscription] Also, enter me in the sweepstake and notify me if I'm a winner" or a box marked "NO! [Don't send gifts and subscription] But enter me in the sweepstakes." Separate return envelopes are enclosed for "yes" and "no" entries--printed outside both envelopes is the statement "enter me in the sweepstakes and notify me if I am a millionaire."

The "Million Dollar Dream Sweepstakes Official Rules" provide that random selection of the winner would take place by April 1, 1994 and indicate that "[c]hances of winning are dependent upon the number of entries distributed and received. Distribution of the sweepstakes is estimated not to exceed 900 million." The rules provide an address from which it was possible to obtain a list of major winners, available after August 1994.

Freeman filed a complaint in California Superior Court on April 12, 1993 regarding the Money magazine promotion, alleging six causes of action: (1) common law breach of contract; (2) common law fraud; (3) unfair and misleading business practices in violation of California's Unfair Business Practices Act ("UBPA") (Cal.Bus. & Prof.Code Sec. 17200); (4) untrue and misleading advertising in violation of UBPA (Cal.Bus. & Prof.Code Sec. 17500 et seq.); (5) failure to include an "odds of winning" statement in violation of Cal.Bus. & Prof.Code Sec. 17537.1; and (6) unfair and deceptive practices under the California Consumer Legal Remedies Act (Cal.Civ.Code Sec. 1770). On April 27, 1993, plaintiff filed an action alleging identical causes of action with respect to the Sports Illustrated promotion. Both actions seek monetary damages, restitution and disgorgement of profits, and injunctive relief. Time removed these two actions to federal court on May 26, 1993 and June 4, 1993, respectively.

Shortly after removal, Time moved to dismiss both complaints pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief may be granted. Freeman conceded his fifth cause of action. The district court granted both motions on December 6, 1993 without discussion. ² Plaintiff filed notices of appeal on January 3, 1994. ³ The parties stipulated request to consolidate the two actions was granted on March 23, 1994. The district court had jurisdiction under 28 U.S.C. Secs. 1441(a) & (b) and 1332(a)(1). We have jurisdiction under 28 U.S.C. Sec. 1291.

DISCUSSION

Freeman does not challenge the dismissal of his breach of contract and fraud claims. He argues only that the district court erred in dismissing his third, fourth and sixth causes of action for violations of the UBPA and the California Consumer Legal Remedies Act.

I. Standard of Review

This court reviews de novo a district court's dismissal of an action on the merits for failure to state a claim. Everest & Jennings, Inc. v. American Motorists Ins. Co., 23 F.3d 226, 228 (9th Cir.1994). A complaint should be dismissed when "it appears beyond doubt that the Plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957). Where "[t]here is no dispute or conflict in the evidence.... the finding of the trial court that the advertisements are not in violation of the applicable provisions of the Business and Professions Code amounts to a conclusion of law." State Board of Funeral Directors & Embalmers v. Mortuary in Westminster Memorial Park, 271 Cal.App.2d 638, 642, 76 Cal.Rptr. 832 (1969). Questions of law are reviewed de novo. Fort Vancouver Plywood Co. v. United States, 747 F.2d 547, 552 (9th Cir.1984).

II. Unfair Business Practices Act

The UBPA defines unfair competition to include "unlawful, unfair or fraudulent business practice and unfair, deceptive, untrue or misleading advertising." Cal.Bus. & Prof.Code Sec. 17200. "California's statutory law of unfair competition ... authorizes actions for injunctive relief ... by certain state and local officers and persons acting for the interests of themselves or the general public." Mangini v. R.J. Reynolds Tobacco Co., 7 Cal.4th 1057, 1061, 31 Cal.Rptr.2d 358, 875 P.2d 73 (1994), cert. denied, --- U.S. ----, 115 S.Ct. 577, 130 L.Ed.2d 493 (1994). California law "also authorizes courts to make such orders as 'may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by such unfair competition.' " Bank of the West v. Superior Court, 2 Cal.4th 1254, 1267, 10 Cal.Rptr.2d 538, 833 P.2d 545 (1992) (quoting Bus. & Prof.Code Sec. 17203). The California Legislature considered the goals of deterring future violations and foreclosing retention of ill-gotten gains "so important that it authorized courts to order restitution without individualized proof of deception, reliance, and injury if necessary to prevent the use or employment of an unfair practice." Id.

The UBPA also contains a false advertising provision which prohibits dissemination of any statement concerning real or personal property for sale "which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading." Cal.Bus. & Prof.Code Sec. 17500. Section 17535 authorizes injunctive relief and restitution for violations of the false advertising provision. "Any violation of the false advertising law, moreover, necessarily violates the unfair competition law." Committee on Children's Television, Inc. v. General Foods Corp., 35 Cal.3d 197, 210, 197 Cal.Rptr. 783, 673 P.2d 660 (1983).

A. Likely to be Deceived

"[T]o state a claim under the [UBPA] one need not plead and prove the elements of a tort. Instead, one need only show that 'members of the public are likely to be deceived.' " Bank of the West, 2 Cal.4th at 1267, 10 Cal.Rptr.2d 538, 833 P.2d 545 (quoting Chern v. Bank of America, 15 Cal.3d 866, 876, 127 Cal.Rptr. 110, 544 P.2d 1310 (1976)). Freeman argues that to demonstrate that "members of the public are likely to be deceived" he need show only that some members of the public, such as the elderly, minors or the mentally disadvantaged, are likely to be deceived. Time argues that the court must consider whether "a person of ordinary intelligence" would be misled.

In a virtually identical case involving the same Time promotion, the district court rejected the plaintiff's proposed "unwary consumer" standard in favor of a "reasonable person" standard. Haskell v. Time. Inc., 857 F.Supp. 1392, 1398 (E.D.Cal.1994) (dismissing claims for false or misleading advertising and unfair competition); see also State Board of Funeral Directors, 271 Cal.App.2d at 642, 76 Cal.Rptr. 832 (applying standard of "what a person of ordinary intelligence" would conclude in false advertising case); Audio Fidelity, Inc. v. High Fidelity Recordings, Inc., 283 F.2d 551, 557 (9th Cir.1960) (applying standard of "the eye of the ordinary purchaser" to the interpretation of unfair competition and misleading advertising under California law).

An "ordinary person" standard is not inconsistent with the standard of Bank of the West--to determine whether members of the public are "likely to be deceived" the court must apply some standard. Plaintiff admits that "California courts have looked to interpretations of similar provisions in federal law under the Federal Trade Commission Act." AOB at 13. Haskell noted that "[s]ince 1982 the FTC has interpreted 'deception' in Section 5 of the Federal Trade Commission Act to require a showing of ...