ROSENBLUTH INTERNATIONAL, INC., Petitioner, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent; JOSE SERRANO, Real Party in Interest, 101 Cal. App. 4th 1073

Opinion ARMSTRONG, J. Under California’s unfair competition law (UCL) (Bus. & Prof.

Code, § 17200 et seq.), a private plaintiff who has itself suffered no injury may file an action for restitution and/or injunctive relief against a person or business entity alleged to be engaged in any “unlawful, unfair or fraudulent business act or practice . . . .” (§ 17200.) As our courts have liberally construed the UCL, virtually the only limitation on such actions is that the plaintiff must be acting on behalf of “itself, its members or the general public.” (§ 17204.) In this proceeding, we hold that the purported victims in this case, all large Fortune 1000 corporations that have individually negotiated written contracts with the defendant, are not the “general public” for purposes of the UCL.

Facts and Procedural History Plaintiff, Jose Serrano, filed this action on August 23, 2001. Purporting to act on his own behalf and “for the interests of the general public under the Unfair Competition Law,” Serrano alleges that Rosenbluth International, Inc., a travel agency serving large corporate clients, uses fraudulent accounting methods in order to understate significantly the amount of rebates, or “overrides,” that are due to its customers.

As a result, Rosenbluth “is wrongfully taking from its customers millions of dollars that rightfully belong to them.” On February 22, 2002, Rosenbluth filed a motion for

summary judgment, alleging, among other grounds, that Serrano lacked standing as a “competent plaintiff’ to bring the action on behalf of the parties alleged to be injured, because he was not a party to any contract with Rosenbluth. (See Kraus v. Trinity Management Services, Inc. (2000) 23 Cal.4th 116, 138 [96 Cal.Rptr.2d 485, 999 P.2d 718].) In support of the motion, Rosenbluth submitted a declaration from Michael Boult, its vice-president of supplier and customer relations. Mr.

Boult stated that Rosenbluth’s large corporate customers have substantial leverage in negotiating their travel contracts, and only Rosenbluth’s largest corporate customers have the negotiating power to procure contracts with override sharing provisions of the type at issue in this lawsuit. Each contract is individually negotiated, usually over a period of months.

The evidence before respondent court, including Serrano’s responses to Rosenbluth’s statement of undisputed facts, established that Serrano was not a Rosenbluth customer, was not a party to any contract with Rosenbluth, and personally did not suffer any injury as the result of Rosenbluth’s alleged actions. In fact, none of Rosenbluth’s customers are parties to this action. Respondent court denied the motion after a hearing on April 30, 2002.

In so doing, the court stated: “[T]he real issue here, as I see it, is one of equity, whether or not it would be inequitable here to find that the plaintiff cannot bring this action. I have not really seen anything which demonstrates to me that kind of unfairness evident here.” Having conducted the appropriate de novo review of respondent court’s order (Union Bank v.

Superior Court (1995) 31 Cal.App.4th 573, 579 [37 Cal.Rptr.2d 653]), we conclude, as a matter of law, that Serrano lacks standing as a “competent plaintiff ’ to bring this action because he has failed to demonstrate that he filed the action on behalf of “the general public.” Discussion The UCL permits “any person acting for the interests of itself, its members or the general public” (§ 17204) to file an action for restitution and/or injunctive relief (§ 17203) against a person or business entity alleged to be engaged in any “unlawful, unfair or fraudulent business act or practice . . . .” (§ 17200) As interpreted by our Supreme Court, the UCL allows a private plaintiff who himself has suffered no injury to file a lawsuit under the UCL in order to obtain relief for others. (Stop Youth Addiction, Inc. v.

Lucky Stores, Inc. (1998) 17 Cal.4th 553, 561-562 [71 Cal.Rptr.2d 731, 950 P.2d 1086].) The representative plaintiff need only show that members of the general public are likely to be deceived. “Allegations of actual deception, reasonable reliance, and damage are unnecessary.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 211 [197 Cal.Rptr. 783, 673 P.2d 660]; see also Bank of the West v.

Superior Court (1992) 2 Cal.4th 1254, 1266-1267 [10 Cal.Rptr.2d 538, 833 P.2d 545].) “Class actions and representative UCL actions make it economically feasible to sue when individual claims are too small to justify the expense of litigation, and thereby encourage attorneys to undertake private enforcement actions.” (Kraus v. Trinity Management Services, Inc., supra, 23 Cal.4th at p. 126.) Where the UCL action is based on a contract, the representative plaintiff may seek to vindicate the rights of individual consumers who are parties to the contract. (See Prata v.

Superior Court (2001) 91 Cal.App.4th 1128, 1143 [111 Cal.Rptr.2d 296] [creditor falsely advertised credit program as “Same as Cash” without advising consumers that the program required minimum monthly payments]; AICCO, Inc. v. Insurance Co. of North America (2001) 90 Cal.App.4th 579 [109 Cal.Rptr.2d 359] [suit against insurance company alleging improper transfer of policies and assignment of liabilities without consent of policyholders]; Hernandez v.

Atlantic Finance Co. (1980) 105 Cal.App.3d 65 [164 Cal.Rptr. 279] [suit against used car dealership and finance company for violations of the Rees-Levering Automobile Sales Financing Act].) However, a UCL action based on a contract is not appropriate where the public in general is not harmed by the defendant’s alleged unlawful practices. (See South Bay Chevrolet v.

General Motors Acceptance Corp. (1999) 72 Cal.App.4th 861, 888-890 [85 Cal.Rptr.2d 301] [no showing members of the public were likely to be deceived by wholesale security agreement between lender and automotive dealers].) The Prata court drew a fitting distinction between actions brought to assert the claims of individual consumers under

section 17200, which lend themselves well to representative UCL cases, and actions that involve sophisticated business finance issues, which do not. (Prata v. Superior Court, supra, 91 Cal.App.4th at p. 1143.) Where the subject of the action is an unlawful business practice or false advertising that harms individual consumers, the consumer/victims, powerless individually, may welcome the opportunity to have their rights vindicated in a representative action under the UCL. This is not such a case, however.

The alleged victims here are not unwary targets of false advertising (Committee on Children’s Television, Inc. v. General Foods Corp., supra, 35 Cal.3d 197), innocent youths corrupted by lawbreaking retailers (Stop Youth Addiction, Inc. v. Lucky Stores, Inc., supra, 17 Cal.4th 553), aggrieved used car purchasers (Hernandez v. Atlantic Finance Co., supra, 105 Cal.App.3d 65) or a “singularly dense” group of consumers who fall prey to misleading advertising designed to lure them into high-interest loan contracts. (See Beneficial Corp. v.

F.T.C. (3d Cir. 1976) 542 F.2d 611, 618, 37 A.L.R.Fed. 62.) To the contrary, Rosenbluth’s undisputed evidence establishes that its only customers are sophisticated corporations, most in the Fortune 1000, each of which negotiates contracts individually with Rosenbluth and each of which presumably has the resources to seek damages or other relief from Rosenbluth should it choose to do so.

Indeed, Serrano’s effort to act as the self-appointed representative of these alleged victims not only raises significant logistical and constitutional issues, it may well leave the victims worse off than they would be if they filed individual actions against Rosenbluth. The case of Bronco Wine Co. v. Frank A. Logoluso Farms (1989) 214 Cal.App.3d 699 [262 Cal.Rptr. 899] amply illustrates the problem: In Bronco Wine Co., a grape grower (who, unlike Serrano, was actually damaged by the defendant’s acts), filed suit on behalf of itself and other grape growers who had contracts with the defendant winery.

In its cause of action under the UCL, the plaintiff alleged the defendants had committed unlawful business practices that included “wrongfully rejecting and refusing to accept grapes, adopting arbitrary quality standards, applying quality standards unreasonably in order to pay less for accepted grapes than the price agreed to by Bronco, threatening to sue and suing growers who complained of Bronco’s conduct.” (Id. at p. 715.) The plaintiff did not seek to join the nonparty growers in the action, and “[t]the only nonparty grower who appeared as a witness at trial testified he had no objection to the amount received from Bronco for his 1982 grape crop.” (Id. at p. 716.) The Court of Appeal reversed the trial court’s award of restitution damages to the nonparty growers under the UCL.

The court first noted that the judgment raised serious due process concerns: “[N]one of the nonparty growers . . . were ever given notice of these proceedings or an opportunity to be represented by counsel of their own choosing, [¶] Of the 27 nonparty growers who received restitution damages, the contracts of only 20 of these growers were presented into evidence. Other exhibits showed that all recipients of restitution damages did have written contracts with Bronco.” (Bronco Wine Co. v. Frank A.

Logoluso Farms, supra, 214 Cal.App.3d at p. 718.) One such grower had “expressly disavowed any right to restitution”; others had challenged the validity of releases hastily procured by Bronco when it became evident the court would award restitution damages to the nonparty growers. The calculation of the nonparty plaintiffs’ damages also presented some difficulty, because the process of determining the amount of restitution damages did not involve an “automatic calculation” as it might in the case of a form contract.

As in this case, each of the nonparty victims had a separate contract with the defendant, thus each victim’s damages would have to be calculated separately. (Bronco Wine Co. v. Frank A. Logoluso Farms, supra, 214 Cal.App.3d at p. 720.) By purporting to act as their self-appointed representative and asserting claims on their behalf in a UCL action, Serrano could in fact deprive Rosenbluth’s alleged victims of the individual opportunity to seek remedies far more extensive than those available under the UCL, which limits the plaintiffs to injunctive relief and restitution.

If Rosenbluth’s actions are as serious as Serrano alleges, its alleged victims would derive more benefit from individual lawsuits. As the court noted in Bronco Wine Co., a representative action to which the alleged victims are not parties “raises serious fundamental due process considerations.” “[B]ecause a UCL action is one in equity, in any case in which a defendant can demonstrate a potential for harm or show that the action is not one brought by a competent plaintiff for the benefit of injured parties, the court may decline to entertain the action as a representative suit.” (Kraus v.

Trinity Management Services, Inc., supra, 23 Cal.4th at p. 138.) In the present case, Rosenbluth has demonstrated by undisputed evidence that those on behalf of whom Serrano purports to bring the action are not members of the “general public.” Accordingly, Rosenbluth is entitled to

summary judgment as a matter of law. Disposition A peremptory writ shall issue directing respondent court to vacate its order of April 30, 2002, denying the motion of defendant Rosenbluth International, Inc., for

summary judgment, and enter a new and different order granting the motion. Costs of this proceeding are awarded to petitioner Rosenbluth. Grignon, J., concurred. All further statutory references are to the Business and Professions Code unless otherwise indicated. Serrano raised evidentiary objections to portions of Mr. Boult’s declaration. However, Serrano did not obtain rulings on the evidentiary objections at the hearing below. Accordingly, the objections are waived for the purpose of appellate review. (Sharon P. v. Arman, Ltd. (1999) 21 Cal.4th 1181, 1186 [91 Cal.Rptr.2d 35, 989 P.2d 121].)