Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Choice of forum in first-filed false advertising claim against wireless carrier had priority, (Nov 25, 2013)

By Linda O’Brien, J.D., LL.M.

In two class action suits against a wireless carrier for allegedly falsely advertising that its cellular service plan allowed unlimited data usage, the choice of forum in the first-filed suit was supported by the plaintiffs’ contacts with state (California) and the presumption of the first-to-file rule, the federal district court in San Francisco has decided (Hansell v. Tracfone Wireless, Inc., November 22, 2013, Chen, E.).Thus, the court denied the defendant’s motion to transfer venue.

Tracfone Wireless, Inc. is the fifth largest wireless carrier in the U.S. and has its headquarters in Florida. Ninety percent of Tracfone’s employees work at the Florida headquarters, including executives responsible for the advertising of cellular service plans and data usage limits. Three consumers, who were residents of California, purchased Tracfone’s “Straight Talk” wireless service plans either at Walmart retail stores or online at Walmart’s website. The service plans were advertised as allowing unlimited data usage. The consumers claimed that, before their service plans had expired, Tracfone reduced the speed of their wireless service (known as “bandwidth throttling”) or terminated the service altogether. When they contacted Tracfone representatives, the consumers only received offers to restored service for additional payment.

The consumers filed a class action complaint on behalf of all persons in the U.S. who purchased an unlimited “Straight Talk” wireless service plan and whose data was throttled or terminated prior to the expiration of the service plan. The consumers claimed that the defendant engaged in unfair and deceptive business practices by falsely advertising cellular phone plans which allowed unlimited data usage when in fact the plans had undisclosed data usage limits. The complaint alleged seven causes of action: breach of contract; breach of the covenant of good faith and fair dealing; unjust enrichment; unconscionability; and violations of California’s Unfair Competition Law (UCL), California’s Consumer Legal Remedies Act (CLRA), and Florida’s Deceptive and Unfair Trade Practices Act. After the consumers filed their complaint, a Florida resident filed a class action complaint based on substantially the same issues. Subsequently, Tracfone filed a motion to transfer venue to Florida.

The court began its analysis by examining the following factors: (1) plaintiffs’ choice of forum; (2) convenience of the parties; (3) convenience of the witnesses; (4) ease of access to the evidence; (5) familiarity of each forum with the applicable law; (6) feasibility of consolidation with other claims; (7) any local interest in the controversy; and (8) the relative court congestion and time of trial in each forum.

In denying the defendant’s motion to transfer, the court determined that the plaintiffs’ choice of forum and the significant contact related to the plaintiffs’ causes of action with California weighed against the transfer. Specifically, the defendant advertised the unlimited service plans in California, and the plaintiffs claimed to have relied on the advertisements in their purchase of the plans. Additionally, under the first-to-file rule, when two courts have concurrent jurisdiction over a dispute involving the same parties and the same issue, the first-filed action has priority.

The court acknowledged that the convenience of the parties and witnesses weighed slightly in favor of transfer, since the plaintiffs’ claims involved Tracfone’s business practices and Tracfone executives responsible for advertising and determining data usage limits would be required to travel to California to testify. However, the factors of ease of access to evidence, familiarity of each form with applicable law, feasibility of consolidation with other claims, any local interest in the controversy, and the relative court congestion and time of trial in each forum were neutral. Since no factor weighted heavily in favor of transfer, the court concluded that the plaintiffs’ choice of forum was supported by their contacts with California and the presumption of the first-to-file rule.

The case is No. C-13-3440.

Attorneys: Daniel Morley Kekoa Hattis (Hattis Law) for David Hansell. Aaron S. Weiss (Carlton Fields) for Tracfone Wireless, Inc.

Companies: Tracfone Wireless, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews