Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: Hotwire customers state claims over foreign car rentals pricing, (Jul 29, 2013)

By Peter Reap, J.D., LL.M.

Online travel consumer Daniel Shahar, on behalf of a putative class, stated causes of action against travel company Hotwire, Inc., under California’s Consumer Legal Remedies Act (CLRA), Unfair Competition Law (UCL), and False Advertising Law (FAL), the federal district court in San Francisco has decided (Shahar v. Hotwire, Inc., July 25, 2013, White, J.). Thus, Hotwire’s motion to dismiss Shahar’s amended complaint was denied.

Shahar claims that Hotwire violated various California consumer protection statutes by falsely or misleadingly stating the price for car rentals abroad. Hotwire operates an Internet travel website that facilitates car rentals provided by other international companies.

Shahar used Hotwire’s website to rent a car at the Ben Gurion airport in Tel Aviv, Israel. Shahar alleges that his contract with Hotwire set out, among other terms, a daily rental rate ($14), a rental term (5 days), a list of the estimated taxes and fees ($0), and an estimated trip total amount ($70). Shahar alleges that when he picked up the car, the rental agency required him to pay the $70.00 estimated price Hotwire had stated, plus an additional $60.00 for mandatory third-party liability insurance and $20.82 in taxes. In total, Shahar alleges he paid $150.91, rather than $70.00 estimated by Hotwire.

Based on these allegations, Shahar, on behalf of himself and similarly situated persons, filed suit against Hotwire alleging violations of the CLRA, the FAL, the UCL, and for breach of contract by not renting cars at the estimated price. Hotwire moved to dismiss for lack of standing and for failure to state a claim.

Standing. A plaintiff may, however, assert claims for unnamed class members based on products he or she did not purchase if there are substantial similarities in the accused products and similar underlying misrepresentations.

Here, the rental car contract covers Hotwire’s web-based service of facilitating car Rentals, the court noted. Shahar alleges that Hotwire misrepresented the estimated price by intentionally omitting taxes and fees it knew its car rental clients would have to pay. The statements, regardless of the country or the car rented, are the same. Accordingly, Shahar could bring claims on behalf consumers who sought to rent cars abroad using Hotwire’s website, the court ruled.

Breach of contract. To state a claim for breach of contract, a plaintiff must allege (1) a contract, (2) plaintiff’s performance of the contract, (3) defendant’s breach, and (4) resulting damages.

Shahar alleged that he contracted with Hotwire for a car rental that was estimated to cost $70.00. Shahar also alleged that he went to Israel and paid for the car, but that he had to pay $150.91 and was thereby damaged by the difference in cost. By specifying the service contract, the specific terms, his own performance, and the loss of the money he paid for the car, Shahar sufficiently stated a claim for breach of contract, according to the court.

CLRA, UCL, and FAL. The CLRA, UCL, and FAL are consumer protection statutes that prohibit not only advertising which is false, but also advertising which, although true, is either misleading or which has a capacity, likelihood or tendency to deceive or confuse the public. Claims under these statutes are governed by the “reasonable consumer” test, which requires the plaintiff to show that members of the public are likely to be deceived.

The consumer protection issue here relates to the misleading use of the term “estimate.” An estimate is an approximation of something to be done in the future, the court explained. Depending upon specific context, an estimate may be a term of an enforceable contract.

Shahar alleges that Hotwire calculated the total estimated price based on its exclusive and superior knowledge of the base rental rate, taxes, and fees. Taken as true at this procedural stage, this fact tended to establish that Hotwire knew or had reason to know that Shahar would have to pay additional costs in order to rent the car, the court reasoned. Moreover, it established that Hotwire probably knew or had reason to know of the precise amounts in additional taxes and fees, that these costs would be mandatory, and that the cost would be, at a minimum, greater than “$0.00.” Shahar asserts that, despite having this knowledge, Hotwire deliberately omitted information relating to additional taxes and fees and intentionally provided an inaccurate price to lure reasonable customers with favorable but inaccurate terms.

Construing the allegations in the manner most favorably to Shahar, Shahar sufficiently alleged that Hotwire’s affirmative statement pertaining to the total estimated price was false or misleading to a reasonable person, the court determined. First, the estimate was false because Hotwire intentionally omitted significant and mandatory additional charges readily available and which it knew Shahar would have to pay to rent the car. Second, the price quoted for estimated taxes and fees was false because Hotwire knew that these costs would not be $0.00.

Under the totality of the circumstances and taking the allegations as true at this procedural stage, Shahar sufficiently stated causes of action for violation of the CLRA, FAL, and UCL, the court held. Shahar sufficiently alleged that Hotwire, during the class period, likely deceived reasonable consumers by intentionally omitting taxes and fees.

Hotwire contended that reasonable consumers, including Shahar, knew that Hotwire’s estimate was neither a final nor a maximum price. However, Hotwire had exclusive and superior knowledge regarding local taxes and fees, which it allegedly indicated to be zero.

The case is No. 12-cv-06027-JSW.

Attorneys: Cory S Fein (Caddell & Chapman) for Daniel Shahar. Rodney Grant Strickland , Jr. (Wilson Sonsini Goodrich & Rosati) for Hotwire, Inc.

Companies: Hotwire, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews