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Day v. AT & T Corp. - 63 Cal. App. 4th 325, 74 Cal. Rptr. 2d 55 (1998)

Rule:

An "unfair" practice under Cal. Bus. & Prof. Code § 17200 is one whose harm to the victim outweighs its benefits. In a similar vein, the term "fraudulent" as used in the section does not refer to the common law tort of fraud but only requires a showing members of the public are likely to be deceived. No proof of direct harm from a defendant's unfair business practice need be shown, such that allegations of actual deception, reasonable reliance, and damage are unnecessary. § 17200 has been interpreted broadly to bar all ongoing wrongful business activity, including misleading advertising, in whatever context it presents itself. 

Facts:

Plaintiffs-appellants, which consisted of a group of individuals acting as private attorneys general, brought an action for injunctive relief against defendants-respondents common carriers and retailers who sold telephone services and prepaid phone card retailers to the public. Plaintiffs alleged that defendants engaged in misleading and deceptive advertising in that they failed to disclose that telephone calls made with the prepaid cards would be charged by rounding up to the next full minute. Plaintiffs also sought disgorgement of profits resulting from these practices. The trial court sustained defendants' demurrers and dismissed the action, on the ground the action was barred by the filed rate doctrine, which bars consumer suits for damages arising out of claims involving rates that have been filed by common carriers with the Federal Communications Commission. 

Issue:

Did the trial court err in dismissing plaintiffs' claim for injunctive relief filed to prevent common carriers and retailers who sold prepaid phone cards from allegedly engaging in misleading and deceptive advertising?

Answer:

Yes

Conclusion:

The Court of Appeals reversed the judgment, holding that plaintiffs-appellants claim for injunctive relief stated a cause of action under §§ 17200 and 17500, which are consumer protection statutes meant to protect the public from a wide spectrum of improper conduct in advertising. The Court found that the practices alleged were likely to mislead, confuse, or deceive the public; that the filed rate doctrine did not apply because the complaint did not attack rate practices or seek damages; and that plaintiffs-appellants could not seek disgorgement because any attempt to calculate a monetary amount to be paid to purchasers would result in a refund, in contravention of the filed rate doctrine.

The Court held that the complaint was not preempted by the Federal Communications Act; that the California Public Utilities Commission did not have exclusive jurisdiction; that the doctrine of primary jurisdiction did not compel dismissal or stay of the action; and that plaintiffs were not required to exhaust their administrative remedies. Accordingly, the Court remanded for further proceedings on plaintiffs' claim for injunctive relief.

As for the standard of review on appeal from a judgment of dismissal after a demurrer is sustained without leave to amend, the Court assumes the truth of all properly pleaded facts in the complaint. The Court examines these facts to determine whether the complaint successfully states a cause of action on any available legal theory. If it does, it would be an abuse of discretion to sustain the demurrer, and the Court must reverse on appeal. 

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