Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—NDCal: Cell phone bill aggregators may be liable for cramming, (Jun 25, 2013)

By Jody Coultas, J.D.

Cellular telephone consumers stated California Unfair Competition Law (UCL) claims against cell phone billing aggregators that were allegedly involved in a scheme to cram the consumers cell phone bills with services they did not agree to, the federal district court in has held (Fields v. Wise Media, LLC, June 21, 2013, Alsup, W.).

The consumers alleged that they received unsolicited text messages from Wise Media, LLC containing information about Wise Media’s subscription plans that offered flirting tips, horoscope updates, celebrity gossip, or weight-loss advice. Regardless of the nature of their response, all recipients were enrolled in the subscription plans. Vendors like Wise Media apply to the local exchange carrier and aggregator to obtain authorization to place charges on consumers’ bills. The aggregator serves as a middleman between the local exchange carrier and vendor by monitoring and processing billing and complaints.

The UCL prohibits acts or practices which are unlawful, unfair, or fraudulent. The statute is written in the disjunctive, so it is violated where a defendant’s conduct violates any of the foregoing prongs.

Unlawful claims. The unlawful conduct claim was premised on violations of Public Utilities Code Section 2890 and California Business and Professions Code Section 17602. Section 2890 regulates charges on telephone bills, while Section 17602 regulates automatic renewal or continuous service offers. The aggregator argued that Section 2890 governed telephone corporations, and did not apply to aggregators. However, there was no authority supporting the alleged exemption. Also, the consumers sufficiently alleged that the aggregator was involved in enrolling and charging consumers for the subscription plans without their consent or knowledge as prohibited by Section 17602. Both laws could serve as a predicate for the UCL unlawful claims, according to the court.

Fraudulent claims. There was sufficient evidence to support the consumers’ UCL fraudulent claims, according to the court. Claims under the fraudulent section of the UCL required the consumers to show that members of the public were likely to be deceived. The aggregator was allegedly involved in a scheme with Wise Media and several other companies whereby it enrolled consumers in subscription plans without their consent and charged for unwanted services. Because the alleged conduct was likely to deceive the public, the consumers stated a claim under the fraudulent prong.

Unfair claims. The consumers failed to state a claim under the unfair prong of the UCL, according to the court. Conduct is unfair when it offends an established public policy that is tethered to specific constitutional, statutory, or regulatory provisions. The consumers failed to allege any specific legal provision to which the aggregator’s conduct was tethered.

Remedies. The aggregator may be liable to make partial, if not complete, restitution to the consumers. Prevailing parties are generally restricted to injunctive relief and restitution under the UCL. Recovery, however, is not conditioned on the plaintiff having made direct payments to a defendant. The plaintiff must have an ownership interest in the money or property sought, and the defendant must have acquired the plaintiff’s money or property by means of unfair competition. The aggregator argued that only Wise Media could make restitution because the complaint identifies Wise Media, and not the aggregator, as the party associated with the cell phone bill charges The scam at issue involved the crammers placing unauthorized charges on consumers’ phone bills and then reaping the benefits once the consumers made their monthly payment to their mobile service provider. The aggregator charged $9.99 per month for the subscription plans and that shared in the revenues as part of the scam. A party cannot be precluded from recovering under the UCL simply because some of the scam money went to one party and the rest to another.

The case is No. C 12-05160 WHA.

Attorneys: Jeffrey Michael Rosenfeld (Kronenberger Rosenfeld, LLP) for Edward Fields. Laura Elizabeth Miller (Durie Tangri LLP) for Wise Media, LLC

Companies: Wise Media, LLC

Cases: ConsumerProtection CaliforniaNews