Freeman v. Wal-Mart Stores, Inc.

• Citation: 3 Cal.Rptr.3d 860,111 Cal.App.4th 660
• Decision Date: 25 August 2003
• Docket Number: No. E032585.,E032585.
• Court: California Court of Appeals
• Parties: Michael D. FREEMAN, Plaintiff and Appellant, v. WAL-MART STORES, INC., Defendant and Respondent.

3 Cal.Rptr.3d 860

111 Cal.App.4th 660

Michael D. FREEMAN, Plaintiff and Appellant, v. WAL-MART STORES, INC., Defendant and Respondent.

No. E032585.

Court of Appeal, Fourth District, Division 2.

August 25, 2003.

Review Denied November 12, 2003.

Geller, Stewart & Foley, Michael S. Geller and Richard A. Stewart, Moreno Valley, for Plaintiff and Appellant.

Gibson, Dunn & Crutcher, Richard P. Levy, Los Angeles, and Robert H. Garretson for Defendant and Respondent.

OPINION

GAUT, J.

Plaintiff Michael D. Freeman appeals judgment entered in favor of defendant Wal-Mart Stores, Inc. (Wal-Mart), after the trial court sustained Wal-Mart's demurrer and motion for summary judgment.

This action arises from plaintiff suing Wal-Mart for charging customers a service fee if they do not use their Wal-Mart shopping cards within 24 months. Plaintiff alleges in his complaint that the service fee is unconscionable and thus unlawful under Civil Code section 1770, subdivision (a)(19) of the Consumers Legal Remedies Act.¹ Plaintiff also alleges the service fee violates section 1749.5 and thus constitutes an unfair business practice under Business and Professions Code section 17200.

On appeal plaintiff argues the trial court erred in sustaining Wal-Mart's demurrer as to plaintiffs first cause of action for violation of the Consumers Legal Remedies Act. Plaintiff claims that not only did the trial court err in finding the service fee term was not unconscionable, but in addition, plaintiff should have been given an opportunity to present evidence on the matter.

As to the court's summary judgment ruling, plaintiff contends that the trial court erred in finding that the shopping card does not violate section 1749.5 since it does not contain an expiration date. Section 1749.5 prohibits selling gift certificates that have expiration dates. Plaintiff contends the service fee constituted, in effect, an expiration date because the fee was deducted from the shopping card balance and the card therefore expired once the balance was exhausted by the monthly service fee.

We reject plaintiffs contentions. The trial court appropriately concluded the service fee was not an unconscionable term and thus did not abuse its discretion in sustaining Wal-Mart's demurrer to the first cause of action. The trial court also did not err in granting summary judgment since Wal-Mart shopping cards do not contain expiration dates and therefore do not violate section 1749.5. The judgment is affirmed.

1. Facts and Procedural Background

Plaintiff filed a lawsuit against Wal-Mart alleging the following three causes of action: (1) violation of consumers legal remedies act; (2) unfair business practices; and (3) declaratory relief.

Plaintiff alleges in his complaint that he purchased a $20 Wal-Mart gift card on August 13, 2001. Attached to the complaint is a copy of the front and back of the card. Also attached to the complaint as an exhibit is the purchase receipt for the card. The receipt refers to the purchased item as a "gift card."

The face of the card, which is similar in appearance to a credit card, states "Wal-Mart/Sam's Club Shopping Card." The back of the card states in part: "After 24 months of non-use, a service fee of $1.00 per month will begin to be deducted from the remaining balance of the card." Plaintiff alleges in his complaint that this term is "an effective expiration date" in violation of section 1749.5.

Plaintiff alleges in the first cause of action for violation of the Consumers Legal Remedies Act that "The taking of a 'service fee' constitutes is [sic ] an effective expiration date and as such, constitutes an Unconscionable Contract Term under the CLRA Section 1770(a)(19) Civil Code."

In the second cause of action for unfair business practices, plaintiff alleges, "The taking of a service charge for non-use constitutes an effective expiration date and is illegal under 1749.5 Civil Code.... Taking such `fees' causes a windfall to Wal-Mart Stores and is illegal and therefore, constitutes an unfair business practice as defined by Section 17200 Business & Professions Code."

The third cause of action for declaratory relief seeks a determination as to whether the Wal-Mart shopping cards are gift certificates subject to section 1749.5 and whether the service fee charged for nonuse of the card constitutes "an effective expiration date" under the statute.

Wal-Mart demurred to the complaint in part on the grounds the shopping card is not a gift certificate, does not violate section 1749.5 because the card does not have an expiration date, and the service fee is not an unconscionable term. The trial court sustained Wal-Mart's demurrer to the first cause of action, with 20 days leave to amend, on the ground the card is not unconscionable. The trial court overruled Wal-Mart's demurrer to the remaining two causes of action on the ground it was inappropriate to decide at the demurrer stage whether the card violated section 1749.5. Plaintiff did not amend his complaint.

After answering the complaint, Wal-Mart moved for summary judgment on the ground the sale of Wal-Mart shopping cards does not violate section 1749.5. Plaintiff opposed the motion on the ground the cards are gift certificates with expiration dates in the form of "service fees," and thus violate section 1749.5.

For purposes of the summary judgment motion, plaintiff and Wal-Mart stipulated to the following facts. Wal-Mart sells plastic cards (shopping cards) that the holder can use to pay for purchases made at either Wal-Mart or Sam's West, Inc. (Sam's) stores nationwide. On August 13, 2001, plaintiff requested to purchase a gift card at Sam's. He was sold a card labeled "Shopping Card." A Wal-Mart shopping card initially has a balance of $0. When a customer purchases the card, the amount paid becomes the balance on the card. The customer may use the card to purchase merchandise up to the balance. The balance may be increased by paying an additional sum. Even if the customer uses up the card balance, the customer may subsequently add funds to the balance and continue using the card. If the card is not used for 24 months, a monthly service fee of $1 is deducted from the card balance. A cardholder may cancel the card or obtain a replacement card, such as when it is lost or stolen. Plaintiffs purchase receipt for the card, said "Gift Card." The attendant who receives calls from customers dialing the toll-free number listed on the back of the card, answers, "Gift Card Hotline." The cards are currently labeled "Shopping Cards," but until September 2000, they were labeled "Gift Cards."

The parties also agreed the back of the cards contained certain specified language, including a phone number for balance inquiries and the following language: "After 24 months of non-use, a service fee of $1.00 per month will begin to be deducted from the remaining balance of the card." This was also stated on the card packaging, a copy of which was attached to Wal-Mart's attorney's supporting declaration.

Following oral argument, the trial court granted Wal-Mart summary judgment and executed an order on July 24, 2002, stating that summary judgment was granted on the ground Wal-Mart's shopping cards do not contain an expiration date and thus they do not violate section 1749.5.

Two days after the court signed the summary judgment order, plaintiff served an alternative order granting summary judgment, which the court signed on August 19, 2002. The second order was signed by a different judge than the one who ruled on the summary judgment motion and signed the first summary judgment order. It appears the judge who signed the second order was unaware that an order had already been entered.

2. Summary Judgment

Plaintiff contends the trial court erred in sustaining Wal-Mart's demurrer and granting Wal-Mart's summary judgment motion. The principal issue in this case is whether the trial court erred in ruling as a matter of law that Wal-Mart shopping cards do not violate section 1749.5.

A. Summary Judgment Standard of Review

On appeal from a summary judgment entered in favor of the Wal-Mart, we review the trial court's decision de novo, applying the rule that a defendant is entitled to summary judgment if the record establishes as a matter of law that either plaintiff cannot prevail on any of plaintiffs asserted causes of action or plaintiff cannot establish one or more elements.²

B. Statutory Construction Principles

Plaintiffs second and third causes of action, which were the subject of defendant's summary judgment motion, alleged that the service fee was in effect an expiration date and thus the shopping cards violated section 1749.5, which prohibits gift certificates from having expiration dates. In determining whether plaintiffs contention has merit we must apply section 1749.5 to the instant case.

Our analysis as to whether Wal-Mart's cards violate section 1749.5 starts with the fundamental premise that "the objective of statutory interpretation is to ascertain and effectuate legislative intent. [Citations.] In determining intent, we look first to the words themselves. [Citations.] When the language is clear and unambiguous, there is no need for construction. [Citations.] When the language is susceptible of more than one reasonable interpretation, however, we look to a variety of extrinsic aids, including the ostensible objects to be achieved, the evils to be remedied, the legislative history, public policy, contemporaneous administrative construction, and the statutory scheme of which the statute is a part. [Citations.]' [Citation.] `The meaning of a statute may not be determined from a single word or sentence; the words must be construed in context, and provisions relating to the same subject matter must be harmonized to the extent possible. [Citation.]'"³

C. Construing Section 1749.5

Section 1749.5 provides in relevant part: "(a) On or after January 1, 1997, it is unlawful for any person or...