People ex rel. Gascon v. Homeadvisor, Inc.

49 Cal.App.5th 1073

263 Cal.Rptr.3d 438

The PEOPLE EX REL. George GASCON, as District Attorney, etc., Plaintiff and Respondent,

v.HOMEADVISOR, INC., et al., Defendants and Appellants.

A154960

Court of Appeal, First District, Division 5, California.

Filed May 14, 2020

As Modified June 5, 2020

Certified for Partial Publication.^*

Morgan, Lewis & Bockius, Collie Fitch James, IV, Costa Mesa, Adam D. Teitcher, Meghan Lynn Phillips and Mark A. Feller, Los Angeles, for Defendants and Appellants.

George Gascon, District Attorney, Evan H. Ackiron, Alethea Murray Sargent and Ernst Andrew Halperin, Assistant District Attorneys, for Plaintiff and Respondent.

Jones, P. J.

We consider an order preliminarily enjoining a company from broadcasting television or radio advertisements, or describing itself online, using words and images that were alleged to be "false and misleading" in violation of California’s False Advertising Law (FAL), Business and Professions Code, section 17500 et seq., and the Unfair Competition Law (UCL), id., section 17200 et seq. After holding five hearings, the trial court enjoined HomeAdvisor, Inc., and its parent company, ANGI Homeservices, Inc. (collectively, HomeAdvisor) from broadcasting certain advertisements, but, with the exception of advertisements HomeAdvisor discontinued, it permitted HomeAdvisor to continue broadcasting them for specified lengths of time if accompanied by a disclaimer. HomeAdvisor contends the order is vague, indefinite, overbroad, and unconstitutional. We disagree and affirm.

FACTUAL AND PROCEDURAL HISTORY

In March 2018, the People of the State of California, acting by and through the District Attorney for the City and County of San Francisco (the People) filed a complaint against HomeAdvisor alleging it engaged in conduct in violation of the FAL and the UCL. The complaint alleged many of HomeAdvisor’s advertisements "are false and misleading because they are likely to deceive consumers into believing that all service professionals hired through HomeAdvisor who come into their homes have passed criminal background checks. That is not the case. The only person who undergoes a background check is the owner/principal of an independently-owned business."

The People applied for a temporary restraining order (TRO) and an order to show cause (OSC) why a preliminary injunction should not issue. In support of the application, the People submitted fifteen television advertisements that refer to background checks. The People also submitted thirteen internet advertisements that, for the most part, are modified versions of the television advertisements, but which do not refer to background checks. HomeAdvisor opposed the application. The trial court did not grant the TRO, but issued the OSC.

I. HomeAdvisor’s Advertisements

The evidence supporting the People’s request for injunctive relief included the following television advertisements:

In "Carl," a middle-aged man explains he can’t always be there when his mother needs help: "So when her roof started to leak I went to HomeAdvisor and found the right pro to help. They are background checked."

In "Happy Homeowners," a woman standing with two young children states: "As a single mom, I love that HomeAdvisor does background checks on pros." The words "background checks" appear on the screen, and then the advertisement cuts to a man who says, "Gives me peace of mind."

In "Busy Mom," a mother talks about the difficulty of finding time to do home projects. She states: "But, thankfully, with HomeAdvisor, it’s easy to find a local pro that I can trust—because they’ve been background-checked."

In "TV Ad Featuring Jason Cameron," a television show host tells the viewers, "With HomeAdvisor you know that you’ll get a reliable pro because they must pass criminal and financial background checks before they’re listed." Then a woman says, "As a single mom I have to be careful with who I invite to my home."

In "HomeAdvisor Testimonials," another television show host, Amy Matthews, states: "HomeAdvisor pros pass criminal and financial background checks before they’re listed." In "Pros You Can Trust," the same host states HomeAdvisor "instantly connects you with top-rated pros who have passed criminal and financial background checks." In "HomeAdvisor Testimonials," a woman standing in her bathroom says, "I love the fact that they have been background-checked—that’s a great feeling." In the same advertisement, another woman standing in her kitchen says, "You can feel safe with them coming into your home."

A number of the advertisements feature neighbors or acquaintances discussing the benefits of the service. In "Neighbors," two women discuss how HomeAdvisor connected one of them "with background-checked pros who can help." In "HomeAdvisor Millennial," a man states: "HomeAdvisor matches you with background-checked pros." In "Bar-B-Que," "Jogger," and "Mailboxes," the advertisements state the viewer can "book a background-checked home pro for free."

In "Grateful Dad," a father states HomeAdvisor has "verified reviews of the pros, and they do background checks so you know you can trust them with your home." In "HomeAdvisor App–Free to Use," a homeowner says, "And because pros on HomeAdvisor are background-checked, I feel confident hiring them right when I need them."

In addition to these fifteen television advertisements, the People submitted a declaration averring that HomeAdvisor’s radio advertisements discussed matching homeowners with prescreened and background-checked professionals. HomeAdvisor’s mobile application stated, "Nationwide, we have a network of hundreds of thousands of background-checked pros specializing in more than 500 home renovation projects."

II. HomeAdvisor’s Background-Check Process

Despite these representations, information available on HomeAdvisor’s website explained that HomeAdvisor performs a background check on the "owner/principal" of the businesses that are members of its network. Subparagraph (f) of paragraph 10 of HomeAdvisor’s "Terms and Conditions" stated that HomeAdvisor performs no background check when the businesses are "employees, franchisees, dealers, or independent contractors ... of larger national or corporate accounts."

In opposing the People’s request for injunctive relief, HomeAdvisor provided additional information. According to a senior vice president, "[w]ith only minor exceptions," HomeAdvisor background checks the owner or principal of "every service professional business seeking to become a member of the HomeAdvisor network." HomeAdvisor checks the "owner/principal’s criminal record, sex offender status, civil judgments, and bankruptcies, and verification of the owner/principal’s identity by SSN." HomeAdvisor confirms these businesses "carry any required state-level trade licenses and, as applicable, that the entities are registered in the state where they are doing business." HomeAdvisor discloses this process on the " ‘Screening’ " page of its website, on its "Terms and Conditions" webpage, and on its "Help and FAQ page."

"HomeAdvisor also screens: (1) the license holder if there is a state-level license, and (2) anyone whom the [business] adds to the account for administrative purposes (e.g. , putting the account on hold)." However, if a "franchisee or a dealer is a corporate account," then they are not subject to HomeAdvisor’s background check policy.

According to HomeAdvisor, 75 percent of the businesses listed on its network have "four or fewer total employees." HomeAdvisor admits that extending background checks to "all employees" of the businesses that are part of its network "would impose substantial financial difficulties on HomeAdvisor and would be impossible for HomeAdvisor to administer on an operational level. Given that HomeAdvisor could not confirm the accuracy of employee lists coupled with high turnover and seasonal hiring in the industry, it would be effectively impossible for HomeAdvisor to keep track of compliance."

III. The Hearings on the Motion for a Preliminary Injunction

At the first hearing, on April 12, 2018, the court found HomeAdvisor’s advertisements were misleading, but it also found "the statements on the website cure that misleading nature except that they’re not in the ads themselves and they’re not conspicuous." The court continued: "So if we take the statements from the website, we make them conspicuous, I think everybody’s objective possibly could be realized here: the objective of the People of not having misleading ads and the objective of HomeAdvisor also not to have misleading ads and to be able to retain a large part of the advertising work that they already have done." The court proposed adding a disclaimer to the advertisements.

The court found the advertisements "have a misleading nature in suggesting to the viewer or the hearer that every person who comes into the home through the HomeAdvisor protocol has been screen-checked or background-checked." But the court was concerned to correct the problem in a way "that causes less financial harm to HomeAdvisor." The court suggested the parties work on a stipulated injunction.

At the second hearing on April 18, 2018, the parties discussed their attempts to come to an agreement regarding disclaimer language and its placement. The court indicated the visual disclaimers had to be prominent and the court and the parties discussed whether oral disclaimers were necessary.

At the third hearing, on April 25, 2018, the People proposed the disclaimer should state: " ‘HomeAdvisor background checks business owners but not employees.’ " HomeAdvisor responded that some employees are background-checked; namely, employees "allowed access to manage the HomeAdvisor relationship." But HomeAdvisor acknowledged it was a "limited" number of employees.

At the fourth hearing, on May 8, 2018, the People and HomeAdvisor submitted evidence of proposed modified advertisements with disclaimers. For the disclaimer, HomeAdvisor proposed: " ‘HomeAdvisor background...