People v. Superior Court

34 Cal.App.5th 376

246 Cal.Rptr.3d 128

The PEOPLE, Petitioner,

v.SUPERIOR COURT, of the State of CaliforniaCOUNTY OF LOS ANGELES, Respondent;

J.C. Penney Corporation, Inc., et al., Real Parties in Interest.

No. B292416

Court of Appeal, Second District, Division 4, California.

Filed April 16, 2019

As Modified on Denial of Rehearing May 6, 2019

Lieff Cabraser Heimann & Bernstein, Michael W. Sobol, Roger N. Heller, San Francisco, Katherine C. Lubin, Facundo Bouzat; Michael N. Feuer, City Attorney, Thomas H. Peters, Chief Assistant City Attorney and Michael J. Bostrom, Assistant City Attorney for Petitioner.

Nelson & Fraenkel, Gretchen M. Nelson, Los Angeles, and Gabriel S. Barenfeld for Amicus Curiae on behalf of Petitioner.

Gibson, Dunn & Crutcher, Mark A. Perry ; Christopher Chorba, Bradley J. Hamburger, Lauren M. Blas, Ryan S. Appleby, Los Angeles; Sheppard, Mullin, Richter & Hampton, Moe Keshavarzi, Robert H. Philibosian, Los Angeles, and A. Alexander Kuljis, and Fred R. Puglisi, Los Angeles, for Real Party in Interest, J.C. Penney Corporation, Inc.

Morgan, Lewis & Bockius, Joseph Duffy and Joseph Bias, Los Angeles, for Real Party in Interest, Sears, Roebuck & Co. and Sears Holding Management Corp.

Arnold & Porter Kaye Scholer, James F. Speyer, and Alex Beroukhim, Los Angeles, for Real Party in Interest, Kohl’s Department Stores, Inc.

Steptoe & Johnson, Stephanie A. Sheridan, Anthony J. Anscombe, Meegan B. Brooks ; Macy’s Law Department and Brian Michael Parsons for Real Party in Interest, Macy’s, Inc.

Munger, Tolles & Olson, Mark R. Yohalem and Ariel C. Green, Los Angeles, for Amicus Curiae on behalf of Real Parties in Interest.

No appearance for Respondent.

MANELLA, P. J.

In the underlying actions, petitioner Los Angeles City Attorney, acting in the name of the People of the State of California, asserted claims under, inter alia, Business and Professions Code section 17501 against real parties in interest, alleging that they sold products online by means of misleading, deceptive or untrue statements regarding the former prices of those products. Real parties demurred to the claims, asserting that the statute contravenes free speech rights and is void for vagueness. After the trial court sustained real parties’ demurrer without leave to amend on the ground that the statute was void for vagueness as applied to real parties, petitioner sought relief by mandamus in this court. We conclude that real parties failed to demonstrate any constitutional defect in the statute on demurrer, and thus grant the relief requested.

FACTUAL AND PROCEDURAL BACKGROUND

On October 20, 2017, petitioner filed the first amended complaints in the four underlying actions, which are directed separately against real parties J.C. Penney Corporation, Inc. (J.C. Penney), Kohl’s Department Stores, Inc. (Kohl’s), Macy’s Inc. (Macy’s), and Sears, Roebuck and Co. and Sears Holdings Management Corporation (collectively, Sears).¹ Each complaint asserted a claim under the Unfair Competition Law (UCL) ( Bus. & Prof. Code, § 17200 et seq. ), a claim under the false advertising law (FAL)(Bus. & Prof. Code, § 17500 et seq.), and a claim under Business and Profession Code section 17501, which is a provision of the FAL.² Petitioner sought civil penalties, together with declaratory and injunctive relief.³

According to the complaints, real parties engaged in misleading, deceptive, or false advertising by offering goods for sale online at prices discounted from so-called "reference prices" that purported to reflect real parties’ own former prices, but which did not do so. The complaints assert that each real party "deliberately and artificially sets the false reference prices higher than its actual former sales prices so that customers are deceived into believing that they are getting a bargain when purchasing products."

Real parties demurred to the complaints, contending, inter alia, that the section 17501 claims failed because the statute unconstitutionally limits truthful speech and is void for vagueness. The trial court sustained the demurrer to the section 17501 claims without leave to amend, on the ground that the statute is unconstitutionally vague as applied to real parties. The court denied real parties’ demurrers to the other claims.

On September 4, 2018, the City Attorney filed his petition for writ of mandate, seeking relief from the ruling regarding the section 17501 claims. We issued an order to show cause why that ruling should not be vacated.⁴

DISCUSSION

Petitioner contends the trial court erred in sustaining the demurrer to the section 17501 claims. As explained below, we agree.

Regarding real parties’ challenge to section 17501 as an unconstitutional regulation of free speech, as a preliminary matter we reject petitioner’s contention that the statute targets only false, misleading or deceptive commercial speech (see pt.C.2.b., post ). We agree with real parties that the plain language of the statute restricts protected commercial speech and thus, the statute is subject to the test for constitutional validity set forth in Central Hudson Gas & Elec. v. Public Serv. Comm’n (1980) 447 U.S. 557, 566, 100 S.Ct. 2343, 65 L.Ed.2d 341 ( Central Hudson ). Because the undeveloped record before us is inadequate to apply that test, real parties’ "free speech" challenge necessarily fails on demurrer (see pt.C.2.b., post ).

Regarding real parties’ contention that section 17501 is void for vagueness, we conclude they have offered neither a successful facial challenge -- that is, an attack on the general validity of the statute -- nor a successful challenge based on the statute’s application to them. We reject at the threshold their contention that a specific rule for evaluating facial challenges was abrogated in Johnson v. United States (2015) ––– U.S. –––– [135 S.Ct. 2551], 192 L.Ed.2d 569 ( Johnson ). Under that rule, as set forth in Village of Hoffman Estates v. Flipside, Hoffman Estates, Inc. (1982) 455 U.S. 489, 500, 102 S.Ct. 1186, 71 L.Ed.2d 362 ( Hoffman Estates ) and Holder v. Humanitarian Law Project (2010) 561 U.S. 1, 18, 130 S.Ct. 2705, 177 L.Ed.2d 355 ( Holder ), a facial challenge fails if the statute clearly applies to some or all the challenger’s conduct. We conclude that the rule retains its vitality post- Johnson and is properly employed here (see pt.D.2.a.ii., post ).

Applying that rule, we conclude the facial challenge fails even if the statute’s impact on protected speech triggers a higher standard for clarity, as the statute clearly applies to some of the misconduct alleged in the complaints, and is not inherently unworkable or devoid of guidance to retailers (see pt.D.3.b.i., post ). For the same reasons, we reject the "as-applied" challenge, insofar as it pertains to that alleged misconduct. With respect to the remaining misconduct alleged in the complaints, we conclude the record is insufficient to support a successful "as-applied" challenge on demurrer. (see pt.D.3.b.ii., post ).

A. Standard of Review

"Because a demurrer both tests the legal sufficiency of the complaint and involves the trial court’s discretion, an appellate court employs two separate standards of review on appeal. [Citation.] ... Appellate courts first review the complaint de novo to determine whether [the] complaint alleges facts sufficient to state a cause of action under any legal theory, [citation], or in other words, to determine whether [ ] the trial court erroneously sustained the demurrer as a matter of law. [Citation.]" ( Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 879, 6 Cal.Rptr.2d 151, fn. omitted ( Cantu ).) Moreover, "[i]f another proper ground for sustaining the demurrer exists, this court will still affirm the demurrer[ ] even if the trial court relied on an improper ground...." ( Id . at p. 880, fn. 10, 6 Cal.Rptr.2d 151.)

"When reviewing a demurrer on appeal, appellate courts generally assume that all facts pleaded in the complaint are true. [ Citation.]" (Cantu , supra , 4 Cal.App.4th at p. 877, 6 Cal.Rptr.2d 151, fn. omitted.) We also assume the truth of facts that may be inferred from those pleaded ( Mead v. Sanwa Bank California (1998) 61 Cal.App.4th 561, 564, 71 Cal.Rptr.2d 625 ( Mead )) but disregard unsupported factual conclusions ( id . at p. 568, 71 Cal.Rptr.2d 625 ), as well as legal conclusions ( Schep v. Capital One, N.A. (2017) 12 Cal.App.5th 1331, 1336, 220 Cal.Rptr.3d 408 ( Schep )). Furthermore, "[t]he complaint should be read as containing the judicially noticeable facts, ‘even when the pleading contains an express allegation to the contrary.’ " ( Cantu , supra , 4 Cal.App.4th at p. 877, 6 Cal.Rptr.2d 151, quoting Chavez v. Times-Mirror Co. (1921) 185 Cal. 20, 23, 195 P. 666.) An appellate court may take judicial notice of facts not subject to judicial notice by the trial court. ( Taliaferro v. County of Contra Costa (1960) 182 Cal.App.2d 587, 592, 6 Cal.Rptr. 231.)

"Second, if a trial court sustains a demurrer without leave to amend, appellate courts determine whether ... the plaintiff could amend the complaint to state a cause of action. [ Citation.]" (Cantu, supra, 4 Cal.App.4th at p. 879, fn. 9, 6 Cal.Rptr.2d 151.)

B. Governing Principles

The key issues here concern the constitutionality and interpretation of section 17501, which constitute questions of law we resolve de novo. ( Samples v. Brown (2007) 146 Cal.App.4th 787, 799, 53 Cal.Rptr.3d 216.) Real parties offer both facial and as-applied constitutional challenges to the statute. A facial challenge "considers only the text of the measure itself, not its application to the particular circumstances of an individual." ( Tobe v. City of Santa Ana (1995) 9 Cal.4th 1069, 1084, 40 Cal.Rptr.2d 402, 892 P.2d 1145 ( Tobe ).) In contrast, an as-applied challenge "contemplates analysis of the facts of a particular case or cases to determine the circumstances in which the statute or ordinance has been applied and to consider whether in those particular circumstances the application...