Schwartz v. Visa Intern. Service Ass'n

34 Cal.Rptr.3d 449

132 Cal.App.4th 1452

Adam A. SCHWARTZ, Plaintiff and Respondent, v. VISA INTERNATIONAL SERVICE ASSOCIATION et al., Defendants and Appellants.

No. A105222.

Court of Appeal, First District, Division 2.

September 28, 2005.

Laurence Popofsky, Brian P. Brosnahan, Robert P. Mahnke, Heller, Ehrman, White & McAuliffe LLP, Gary L. Halling, Michael W. Scrarborough, Mona Solouki, Sheppard, Mullin, Richter & Hampton LLP, San Francisco, CA, E. Joshua Rosenkranz, Heller, Ehrman, White & McAuliffe LLP, Jay N. Fastow, Bruce A. Colbath, New York, NY, Timothy M. Maggio, Jacqueline R. Klein, Lord, Bissell & Brook LLP, Los Angeles, CA, for Appellants.

Dennis James Stewart, Hulet, Harper, Stewart, Pamela M. Parker, Frank J. Janecek, Jr., Kevin K. Green, Christopher M. Burke, Lerach, Coughlin, Stoia, Geller Rudman & Robbins LLP, San Diego, CA, Thomas F. Schrag, James S. Baum, Michael L. Schrag, Schrag & Baum, PC, Berkeley, CA, Alan Mayer Caplan, Bushnell, Caplan & Fielding, San Francisco, CA, for Respondent.

HAERLE, Acting P.J.

I. INTRODUCTION

This is an appeal from a judgment entered after a court trial in favor of Adam Schwartz (respondent) against Visa International Service Association, Visa U.S.A. Inc. (collectively Visa) and MasterCard International Incorporated (MasterCard).¹ Respondent's claims at trial were founded exclusively on California Business and Professions Code section 17200 et seq., California's Unfair Competition Law (the UCL).²

Visa and MasterCard (jointly appellants) allege numerous claims of error. We do not reach these claims, however, because we hold that recent amendments to the UCL, which became effective while this appeal was pending, bar the present action and require us to reverse the judgment.

II. STATEMENT OF FACTS

The issue we address requires only a brief summary of the lengthy and complex proceedings below.³

In January 2000, respondent filed this action against appellants on behalf of the general public. Respondent alleged appellants violated the UCL by engaging in unlawful business practices relating to the "provision of currency conversion services in connection with Visa and MasterCard branded credit card transactions made in foreign currencies by U.S. cardholders."

Prior to trial, respondent had alleged state and federal antitrust theories to support his claims. But he withdrew his antitrust and conspiracy allegations, pursuant to a trial court order, after appellants moved to stay this action pending resolution of a federal Multi-District Litigation class action alleging that Visa, MasterCard and several large banks violated the Federal Truth in Lending Act and antitrust laws by failing to disclose currency conversion fees charged to cardholders. Thus, the claims tried to and resolved by the trial court in this case were founded exclusively on the UCL.

The trial court filed its statement of decision on April 7, 2003. It found that several state and federal statutes, including the Areias Credit Card Full Disclosure Act of 1986 (Civ.Code, § 1748.10 et seq.) and the Federal Truth in Lending Act (15 U.S.C. § 1601 et seq.) evidence a "substantial legislative policy that consumers be informed of the costs related to the use of credit cards." The trial court held that appellants violated this policy and engaged in a "deceptive" business practice in violation of the UCL by designing, developing and implementing multi-currency conversion systems which were intended to and do deprive credit card customers of information concerning the cost of currency conversion.

Facts found by the trial court to support its holding included the following: (1) appellants are engaged in the currency conversion business; (2) appellants' practices relating to this business include "the use of a one percent currency conversion fee that was designed, developed, and implemented so that the fee would be concealed from, yet ultimately paid by, cardholders;" (3) this practice causes or is likely to cause substantial injury to consumers and to competition; (4) appellants have control over the contents of cardholder agreements and disclosures that their member banks make to cardholders; (5) appellants have a duty to consumers to disclose their currency conversion fees; (6) appellants breached their duty of disclosure by failing to require member banks to make adequate disclosures of the currency conversion fees in solicitations, cardholder agreements and billing statements.

The trial court awarded respondent injunctive relief and ordered appellants to pay restitution. Appellants were ordered to amend their operating rules, regulations and member agreements to require all U.S. members who issue their respective credit cards and who bill their cardholders a currency conversion fee to make full and effective disclosure of the fee to consumers. The court further ordered appellants to restore the one percent currency conversion fee to all customers who were charged and paid the fee from February 15, 1996, to the present.

Judgment was entered against appellants on October 31, 2003. A motion for new trial was denied on December 18, 2003. Appellants each filed a notice of appeal on December 29, 2003.

III. PROPOSITION 64

On November 2, 2004, California voters approved State Ballot Initiative Proposition 64 which became effective the following day. (Cal. Const., art. II, § 10, subd. (a).) Proposition 64 amended certain provisions of the UCL and the false advertising law. The two amendments relevant to our analysis affect the right of private litigants to prosecute UCL actions.

Before Proposition 64 was passed, an uninjured private party could bring an UCL action on behalf of the "general public," and could obtain remedies for the benefit of non-parties. (Former §§ 17203 & 17204)

Proposition 64 amended the provision in section 17204 of the UCL which pertains to private litigants to read: "Actions for any relief pursuant to this chapter shall be prosecuted exclusively . . . by any person who has suffered injury in fact and has lost money or property as a result of such unfair competition." Section 17203 was also amended, and now reads, in part: "Any person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of Section 17204 and complies with Section 382 of the Code of Civil Procedure. . . ."

On January 21, 2005, appellants filed a motion in this court for leave to file supplemental briefs regarding Proposition 64. This court granted appellants' motion on February 9, 2005, and directed both appellants and respondent to file briefs regarding the applicability of Proposition 64.

IV. DISCUSSION

A. Issue Presented

Respondent brought this action "on behalf of the general public" as a "private attorney general" and sought injunctive and restitutionary relief on behalf of individuals other than himself. Respondent has never alleged that he was injured by appellants' business practices. Indeed, respondent has never had a MasterCard or Visa-branded credit card. Nor has he ever used any credit card to make a purchase in a foreign currency.

As amended by Proposition 64, the UCL now authorizes the filing of an injunctive or restitutionary relief action only by certain public prosecutors and by "any person who has suffered injury in fact and has lost money or property as a result of such unfair competition." (§ 17204.) In addition, the UCL now authorizes a person to pursue a representative action only if he or she meets the class certification requirements of section 382 of the Code of Civil Procedure. (§ 17203.)

Thus, there is no dispute that, if Proposition 64 applies to this case, respondent is not authorized to maintain this UCL action against appellants. What is disputed is whether Proposition 64 applies notwithstanding the fact that it became effective after respondent obtained a judgment in the trial court.⁴ To support his contention that Proposition 64 does not apply here, respondent relies primarily on the rule that a new statute will not be construed to affect pending causes of action absent a clear expression of legislative (or voter) intent. As we will explain, respondent's reliance on this rule is misplaced.

B. Proposition 64 Applies in This Case

Directly relevant to this issue is the statutory repeal rule. That rule states that "a cause of action or remedy dependent on a statute falls with a repeal of the statute, even after the action thereon is pending, in the absence of a saving clause in the repealing statute. [Citations.]" (Callet v. Alioto (1930) 210 Cal. 65, 67-68, 290 P. 438 (Callet).) The repeal of a statute abates all causes of action based on that statute that have not been merged into a final judgment. (Southern Service Co. v. County of Los Angeles (1940) 15 Cal.2d 1, 11-12, 97 P.2d 963 (Southern Service); Governing Board v. Mann (1977) 18 Cal.3d 819, 829, 135 Cal.Rptr. 526, 558 P.2d 1 (Mann); Younger v. Superior Court (1978) 21 Cal.3d 102, 109, 145 Cal.Rptr. 674, 577 P.2d 1014 (Younger) ["an action wholly dependent on statute abates if the statute is repealed without a saving clause before the judgment is final"]; see also Lemon v. Los Angeles Terminal Ry. Co. (1940) 38 Cal.App.2d 659, 671, 102 P.2d 387.)

The statutory repeal rule applies only to the repeal of a cause of action or remedy created by statute. It does not apply to the repeal of a common law rule or a statutory codification of a common law rule. (Callet, supra, 210 Cal. at pp. 67-68, 290 P. 438.) When a statute repeals a cause of action or remedy derived from the common law, courts apply a presumption that, absent a clear expressed intention to the contrary, a new statute will not be construed so as to affect pending causes of action. (Ibid.; see also Evangelatos v. Superior Court (1988) 44 Cal.3d 1188, 1196, 1206-1207, 1218, 246 Cal.Rptr. 629, 753 P.2d 585 (Evangelatos) [Proposition 51, which modified the "common law joint and several liability...