Wayne v. Staples, Inc.

Decision Date04 January 2006
Docket NumberNo. B178160.,B178160.
Citation37 Cal.Rptr.3d 544,135 Cal.App.4th 466
CourtCalifornia Court of Appeals Court of Appeals
PartiesAlan WAYNE, Plaintiff and Appellant, v. STAPLES, INC., Defendant and Respondent.

The Rossbacher Firm, Henry H. Rossbacher, James S. Cahill and Talin Khachaturian, Los Angeles; Hagens Berman, Amanda L. Horn, Los Angeles, and Craig R. Spiegel, for Plaintiff and Appellant.

Fulbright & Jaworski, Robert W. Fischer, Jr. and Eric A. Herzog, Los Angeles, for Defendant and Respondent.

PERLUSS, P.J.

Alan Wayne appeals from the judgment entered after an order granting summary judgment in favor of Staples, Inc. in this putative class action filed by Wayne alleging that, in selling "declared value coverage" for packages shipped at its retail stores, Staples violated the Consumers Legal Remedies Act, Civil Code section 1750 et seq., by charging an unconscionable price; Business and Professions Code section 17500 et seq. by utilizing a deceptive parcel shipping order form; and Business and Professions Code section 17200 by selling inland marine insurance without a license. Although we affirm the trial court's orders with respect to Wayne's causes of action alleging unconscionable pricing and deceptive marketing, we reverse its ruling that Staples' offer of declared value coverage as part of package shipping transactions is not subject to regulation under the Insurance Code and remand the matter for further proceedings as to the first cause of action for unfair business practices.

FACTUAL AND PROCEDURAL BACKGROUND
1. Staples' Package Shipping Business and the Sale of Declared Value Coverage

The fundamental facts underlying Wayne's complaint are essentially undisputed. Staples, a nationwide retailer of office supplies and services, offers package shipping services to its customers through its agreement to serve as an authorized shipping outlet for United Parcel Service (UPS). Staples expressly disclaims any liability for loss or damage to parcels shipped through its stores. The face page of its parcel shipping order form states, "We assume no liability for the delivery of the parcels accepted for shipment nor for loss or damage by any cause to the parcels or their contents while in transit. In the event of loss or damage to any parcels, we will assist you in filing and processing of claims only."

Staples' shipping customers may protect themselves from the risk of loss or damage to their packages by purchasing insurance through UPS — what Staples calls "declared value coverage" and what is elsewhere identified as "excess value coverage" or "excess value insurance." UPS charges Staples $0.35 per $100 of declared value over $100 for this coverage; however, prior to May 2002 Staples charged its customers $0.70 per $100 of declared value over $100 for the coverage.1 Customers are advised of the total cost for the coverage either orally by a Staples sales associate or in writing through a printed receipt given to customers before they pay for the shipping or the coverage. Although Staples notified its customers it may place a surcharge on the coverage, it did not inform them its standard charge for the coverage included a 100 percent markup or margin.

The back page of Staples' parcel shipping order form refers customers to the UPS service guide for a description of the terms and conditions of the insurance coverage: "You may purchase declared value coverage through the carrier designated on this PSO [(parcel shipping order)] or from an independent company, if available. The declared value terms and conditions for the various carriers can be found in the carriers' service guide. The declared value terms and conditions for the various carriers and any applicable independent company selected by you are available for review at this Staples Center. Upon request, you may receive a photocopy of such terms and conditions. Please note that we may surcharge the cost of this product as an administrative expense, for services such as processing of potential claims and other related services."

UPS's excess value coverage or excess value insurance is provided through an inland marine basic policy from the National Union Fire Insurance Company of Pittsburgh, Pa. (National Union). Customers who purchase the coverage at Staples or at other UPS shipping sites are additional insureds under the policy. In general, offering insurance coverage is an activity requiring a license and regulated by the Insurance Code. (See, e.g., Ins.Code, §§ 1631 ["Unless exempt by the provisions of this article, a person shall not solicit, negotiate, or effect contracts of insurance ... unless the person holds a valid license from the commissioner authorizing the person to act in that capacity."]; 1861.05 [requiring approval of insurance rates and prohibiting excessive or inadequate rates].)

2. Wayne's Class Action Complaint; Staples' Answer and Affirmative Defenses

Wayne, a Staples customer who shipped a package from a Staples store after he had purchased declared value coverage, filed a putative class action complaint on behalf of all California residents who had purchased declared value coverage from Staples alleging Staples and its employees solicit and execute contracts for marine inland insurance offered by UPS and keep 50 percent of the premium collected as commission. In his first cause of action Wayne alleged Staples engages in unfair business practices because it is not licensed to sell insurance, charges an excessive insurance premium and does not comply with procedures and regulations established by the Insurance Commissioner for the sale of insurance. In his second cause of action Wayne alleged Staples' retail price for declared value coverage, then twice the regular premium charged by UPS, is excessive and unconscionable in violation of the Consumer Legal Remedies Act. His third cause of action alleged Staples' parcel shipping order form is deceptive because it fails to properly disclose Staples' 100 percent profit or markup on the sale of declared value coverage. The complaint sought compensatory and punitive damages as well as equitable relief.

In its answer, in addition to denying the material allegations of Wayne's unverified complaint, Staples asserted as an affirmative defense that the contracts between Staples and its shipping customers are not contracts of insurance or subject to regulation as insurance contracts because the principal object or purpose of each agreement is to ship packages, not to shift or assume liability as would be the case with a contract of insurance. Staples also asserted as a further affirmative defense that all damages sought by Wayne on behalf of the putative class were avoidable because each Staples customer had the option not to purchase declared value coverage after being advised of the charge as well as to ship their packages, with or without declared value coverage, through a competing shipping service.

3. The Motion for Resolution of Key Jury Instructions and Motion In Limine

To permit early determination of legal issues central to the case and with the permission of the court, Staples filed a "motion for resolution of key jury instructions and motion in limine," which addressed whether the jury should be instructed on the Insurance Code with respect to Wayne's first cause of action, whether Staples' charge for declared value coverage is unconscionable and whether its parcel shipping order form is deceptive. After discovery, briefing and argument the court ruled in favor of Staples on each question, concluding Wayne's transactions with Staples were not governed by the Insurance Code because "the principal object and purpose of the transactions at issue was shipping a package, not shifting the risk of loss"; Staples' charge for declared value coverage was not unconscionable as a matter of law; and Staples' parcel shipping order form was not misleading to its customers.

4. Staples' Motion for Summary Judgment

Following these rulings Staples filed a motion for summary judgment or in the alternative summary adjudication as to each of the three causes of action asserted by Wayne, reiterating the factual and legal arguments presented in connection with its motion for resolution of key jury instructions and motion in limine. After receipt of opposition and reply papers and oral argument, the trial court granted this motion as well.

As to Wayne's first cause of action alleging unfair business practices, the court held, "Staples is not violating the Insurance Code by offering Declared Value Coverage as part of its package shipping transactions, whether or not Declared Value Coverage constitutes insurance. The undisputed facts indicate that the principal object and purpose of these transactions is the shipment of a package." As to the second cause of action for violation of the Consumers Legal Remedies Act, the court held, "The undisputed facts indicate that Staples' markup on Declared Value Coverage is not unconscionable as a matter of law." As to the third cause of action for untrue and misleading advertising, the court ruled, "The undisputed facts indicate that Staples' parcel shipping order form is not deceptive. Staples' charge for Declared Value Coverage is clearly disclosed at the time of purchase. The full price of Declared Value Coverage is disclosed to the customer before he or she pays for it. The customer can decline to accept the coverage, or decline to ship the package with Staples. Staples' customers are always notified of the charge before they choose to buy the Declared Value Coverage. Furthermore, in connection with the hearing in this case in May 2002, plaintiff argued that the use of the word `may' by Staples was deceptive because, at that point, Staples always did surcharge the cost of UPS Declared Value Coverage. Staples pointed out that its pricing policy could change. In fact, shortly after that hearing, Staples' pricing policy did change. Staples does not currently...

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