Opinion
A077075 (City County of S.F. Super. Ct. No. 976455)
Filed June 24, 1998
Trial Court: Superior Court of the City and County of San Francisco
Trial Judge: Honorable David A. Garcia
Christopher P. Witteman for Plaintiffs and Appellants.
Coblentz, Cahen, McCabe Breyer, Richard R. Patch, Susan K. Jamison, Keith Evans-Orville for Defendants and Respondents.
Daniel E. Lungren, Attorney General, Herschel T. Elkins, Senior Assistant Attorney General, Ronald A. Reiter, Deputy Attorney General, Terence Hallinan, District Attorney, City and County of San Francisco, June D. Cravett, Assistant District Attorney for Amici Curiae.
Michael Singsen (Singsen) and Carolyn Cooley (Cooley), on behalf of themselves, the general public, and all others similarly situated filed a complaint against Television Signal Corporation, dba Viacom Cable (TSC) for failing to provide free cable connection and free wiring for cable services to public buildings in the City and County of San Francisco (City) pursuant to a provision in the franchise ordinance. The trial court sustained the demurrer without leave to amend, and Singsen and Cooley challenge this ruling. Additionally, they challenge the trial court's refusal to award them attorneys' fees pursuant to Code of Civil Procedure section 1021.5
We conclude that the trial court erred in sustaining the demurrer against the claim of an unfair business practice pursuant to Business and Professions Code section 17200 (All further unspecified code sections refer to the Business and Professions Code.) We affirm the trial court's dismissal of the causes of action for breach of contract as third party beneficiaries and breach of contract. Further, we vacate the trial court's denial of attorneys' fees.
BACKGROUND
The City and TSC entered into a franchise agreement which was enacted on December 16, 1988 as Ordinance 528-88 (franchise ordinance). The franchise ordinance granted the "right, power, authority, and privilege" to TSC to operate a cable television system in the City "subject to all the terms and conditions of this franchise . . . ." One of the "terms and conditions" of the franchise ordinance was the following: "In order to effectuate public access, Grantee shall provide service to schools, universities, and public buildings at no cost, including free cable connection and subscriber fees."
TSC failed to wire and provide service to schools, universities, and public buildings as required. In December 1994, counsel for Singsen and Cooley contacted the Office of the City Attorney of the City and County of San Francisco (City Attorney) regarding TSC's noncompliance. The City Attorney acknowledged that TSC had not fulfilled its obligations under the franchise ordinance, but it expected to "address this topic within two weeks."
In August 1995, Tele-Communications, Inc. (TCI) announced its plan to acquire the stock of the Viacom subsidiaries which controlled, directly or indirectly, Viacom's cable holdings. This corporate transaction was to result in a change of the ownership of TSC's parent corporation: ownership of the franchise itself would remain with TSC. The City, TSC, and TCI entered into negotiations in October 1995 to amend the franchise ordinance. The negotiations related to a variety of franchise issues, including TSC's wiring of public buildings.
On February 29, 1996, Singsen filed a complaint against TSC for unfair trade practices pursuant to section 17200, breach of contract based on the theory of third party beneficiary, and declaratory relief. Singsen was a member of the City's Telecommunications Policy Committee in the years 1984-1987, consulted with the City Attorney in the drafting of the 1988 franchise ordinance, and is a subscriber of TSC's cable television service.
TSC demurred, and the trial court sustained without leave to amend the demurrer to the claim for unfair business practices, and sustained with leave to amend the demurrer to the third party beneficiary and declaratory relief claims. The trial court instructed Singsen to remedy the complaint in the following manner: "In particular, facts conferring a benefit to the general public including the specific provision of the franchise ordinance alleged to be violated which confers a benefit on the plaintiff as a member of the general public."
Cooley, a nonsubscribing City employee, joined the lawsuit. Singsen and Cooley filed a second amended complaint on July 30, 1996, and alleged causes of action for a third party beneficiary breach of contract, breach of the contract between TSC and Singsen, and declaratory judgment. They sought declaratory relief, an injunction, restitution, and damages.
TSC again filed a demurrer. The trial court sustained the demurrer without leave to amend on August 14, 1996.
In October 1996, the City Attorney and TSC entered into a settlement. The settlement included a release of all claims the City might have against TSC as a result of the nonperformance of the wiring obligations, and a side agreement stating the following: "The City has agreed to cooperate with the company [Television Signal Corporation, now doing business as TCI] in obtaining a dismissal of the Singsen action by including in the Franchise Agreement a provision deleting the previous franchise terms with respect to the obligation to wire public buildings; by defining in the Franchise Amendments the exact extent of the going-forward obligation; by execution of the Mutual Release between Television Signal Corporation and the City concerning past claims; and by indicating its willingness to confirm to the Court, if necessary, the substance of the foregoing agreements."
Singsen and Cooley filed a motion requesting attorneys' fees in the amount of $80,821.34, which the trial court denied on February 13, 1997.
Singsen and Cooley filed a timely notice of appeal and challenge the judgment dismissing the complaint and the denial of their request for attorneys' fees.
DISCUSSION
I. Dismissal of the Complaint A. Standard of Review
The trial court sustained without leave to amend TSC's demurrer to the second amended complaint. When considering an appeal from a judgment of dismissal following the sustaining of a demurrer, we accept the facts pleaded as true. ( American Philatelic Soc. v. Claibourne (1935) 3 Cal.2d 689, 699.) The trial court erred if the pleading states a cause of action under any possible legal theory; it abused its discretion if the face of the pleadings shows a reasonable probability the defects could be cured by a properly amended pleading. ( Service by Medallion, Inc. v. Clorox Co. (1996) 44 Cal.App.4th 1807, 1812; Gami v. Mullikin Medical Center (1993) 18 Cal.App.4th 870, 877.) We find the trial court erred in sustaining the demurrer against the claim for a violation of section 17200 B. Unfair Business Practice
In their original complaint, Singsen and Cooley alleged that TSC violated section 17200 Singsen and Cooley maintain that TSC violated both the law and its contract when it failed to comply with the following term of the franchise ordinance: "In order to effectuate public access, Grantee shall provide service to schools, universities and public buildings at no cost, including free cable connection and subscriber fees."
Section 17200 provides the following: "As used in this chapter, unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice . . . ." The unfair trade practice statutes were designed as a broad and flexible tool to deter ongoing wrongful conduct and remedy past wrongful conduct. ( Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 209-210 ( Children's Television).) However, a "plaintiff alleging unfair business practices under these statutes must state with reasonable particularity the facts supporting the statutory elements of the violation. [Citations.]" ( Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 619.)
TSC argues that section 17203 only authorizes equitable relief, and the only loss to Singsen and Cooley is a loss of psychic enjoyment. Such an action is for damages, not restitution, and section 17203 does not permit recovery for damages. Singsen and Cooley cannot request declaratory relief and an injunction, TSC maintains, because their claims are moot as a result of the newly negotiated amendments to the franchise agreement. TSC also argues they did not suffer any out-of-pocket loss and cannot receive an award of restitution.
Restitution may be ordered pursuant to section 17203 even if the court does not issue an injunction. ( ABC Internat. Traders, Inc. v. Matsushita Electric Corp. (1997) 14 Cal.4th 1247, 1271.) Singsen and Cooley claim they will establish unjust enrichment at trial by showing that TSC profited from failing to wire the public buildings while it collected fees from City subscribers such as Singsen. Although it seems unlikely that Singsen and Cooley will be able to establish grounds for restitution, this is a factual issue and cannot be the basis for a demurrer.
In its brief of amici curiae, the Consumer Law Section of the Attorney General's Office argued that the unfair business claim is moot, because it is based on a repealed ordinance. "`[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. . . .'" ( Cross v. Bonded Adjustment Bureau (1996) 48 Cal.App.4th 266, 275, quoting Callet v. Alioto (1930) 210 Cal. 65, 67-68.) Here, the Attorney General argues the City did not enact a savings provision and the City clearly repealed the entire provision regarding wiring.
The Attorney General's argument, however, is not persuasive. As Singsen and Cooley point out, the franchise ordinance was not repealed, but rather amended. Moreover, even if the statute had been repealed, "`"[w]hen a repealing act embraces provisions of the repealed act, it continues in operation the re-enacted parts without interruption. All rights and liabilities that have accrued under the former act are preserved."' [Citation.]" ( Stacy Witbeck, Inc. v. City and County of San Francisco (1995) 36 Cal.App.4th 1074, 1086.) The new wiring provision merely clarified the original obligation, and Singsen and Cooley may still pursue their claim that TSC violated the original wiring provision.
Singsen and Cooley contend that TSC's failure to comply with the "shall provide service" language of the franchise ordinance is an unlawful act. An unfair business practice claim, is any business practice that is "forbidden" by law. ( Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 113; People v. H H Properties (1984) 154 Cal.App.3d 894, 898). It may therefore be based on the violation of a local ordinance. (See, e.g., Simoneau v. Pacific Electric Ry. Co. (1913) 166 Cal. 264, 269-270 ( Simoneau) [agreement to speed limit in franchise ordinance was relevant to establishing negligence per se]; Hernandez v. Stabach (1983) 145 Cal.App.3d 309, 312, 314-316 ( Hernandez) [violations of local housing and health and safety ordinances were basis for unfair business practice]; People v. Thomas Shelton Powers, M.D., Inc. (1992) 2 Cal.App.4th 330, 336-339 ( Powers) [unfair business practice predicated on violations of San Francisco Subdivision Code regulating sales of moderate income housing units]; Consumers Union of U.S., Inc. v. Alta-Dena Certified Dairy (1992) 4 Cal.App.4th 963, 967 ( Consumers Union) [unfair business practice action based on violation of Alameda County ordinance regulating sale of raw milk]; Hewlett v. Squaw Valley Ski Corp. (1997) 54 Cal.App.4th 499, 532 [violation of a conditional use permit violated the local zoning ordinance and was basis for unfair business practice].)
Section 17204 permits a lawsuit to be brought by "any board . . . or by any person acting for the interests of itself . . . or the general public." (See also Children's Television, supra, 35 Cal.3d at p. 209.) Private plaintiffs may sue even when a regulatory body also has jurisdiction over the defendant. ( Mangini v. R. J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1065.)
No California case has directly addressed the question whether a franchise ordinance may serve as the basis for a claim of an unlawful act under section 17200 However, TSC maintains that courts have consistently found that such ordinances are essentially public contracts. "The granting by City of a cable franchise is a legislative act [citation], and establishes a contractual relationship between City and [the cable operator] [citation]." ( Cox Cable San Diego, Inc. v. City of San Diego (1987) 188 Cal.App.3d 952, 966; see also Simoneau, supra, 166 Cal. at pp. 269-270.) "[T]he power to regulate as a governmental function, and the power to contract for the same end, are quite different things. [The former] requires the consent only of the one body, the [latter] the consent of two." ( Schloss v. City of Indianapolis (Ind. 1990) 553 N.E.2d 1204, 1207-1208.) "We are also of the opinion that a franchise is an agreement between the granting authority and the holder and partakes of the usual incidents of a contract. [Citations.]" ( City of Owensboro v. Top Vision Cable Co. of Ky. (Ky. 1972) 487 S.W.2d 283, 287.)
TSC contends that courts have held that the violation of a municipal ordinance constitutes an unlawful act under section 17200 only when the municipal ordinance had general applicability and was not formulated after negotiating with, and obtaining the consent of, the offending party: In Powers, the defendant violated the city's subdivision code regarding the price for low or moderate incoming housing. ( Powers, supra, 2 Cal.App.4th at p. 339.) Similarly, in Consumers Union, the defendant had not complied with a county ordinance which regulated the sale of raw certified milk products. ( Consumers Union, supra, 4 Cal.App.4th at p. 967.) Finally, in Hernandez, the landlord had violated the local ordinances regarding keeping the premises in a habitable condition. ( Hernandez, supra, 145 Cal.App.3d at p. 312.)
The City's franchise ordinance may only regulate the activity of TSC, but the ordinance still has general applicability in the respect that the local authorities created it for the benefit of the people of San Francisco. A franchise creates "a privilege of public concern" and, as such, is subject to public regulation and control. ( Ocean Park etc. v. Santa Monica (1940) 40 Cal.App.2d 76, 84.) Franchises involve the grant of a special privilege, which only the government can bestow on a private party, to deliver an important public service with some degree of permanence and stability. ( Saathoff v. City of San Diego (1995) 35 Cal.App.4th 697, 703-704.)
"An `unlawful business activity' includes `"anything that can properly be called a business practice and that at the same time is forbidden by law."' [Citation.]" ( People v. McKale (1979) 25 Cal.3d 626, 632.) "The `unlawful' practices prohibited by section 17200 are any practices forbidden by law, be it civil or criminal, federal, state, or municipal, statutory, regulatory, or court-made." ( Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 838-839.)
The Legislature has not indicated that we are to assess the type of law being violated to determine whether it is essentially an ordinance or a contract. Our Supreme Court admonished in Stop Youth Addiction v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 578 that any restrictions on section 17200 claims should come from the Legislature. Unless the Legislature deems it appropriate to narrow the breadth of section 17200, we cannot exclude a franchise ordinance from being the basis of an unlawful practice claim simply because it also has characteristics of a public contract.
We therefore conclude that when a cable operator fails to comply with a provision in a franchise ordinance, such a violation detrimentally impacts the public and may be the basis for a section 17200 claim. By enacting the unfair business practice statutes, "[t]he Legislature `intended . . . to permit tribunals to enjoin wrongful business conduct in whatever context such activity might occur.'" ( People v. McKale, supra, 25 Cal.3d at p. 632.) (Since we conclude that Singsen and Cooley have adequately alleged an unlawful act or practice, we need not address whether they sufficiently stated a claim under the unfair or fraudulent business practice prong of section 17200)
C. Third Party Beneficiaries to the Franchise Agreement
Singsen and Cooley also allege a claim as third party beneficiaries to the contract between the City and TSC. Singsen argues that he is a subscriber; he is interested in receiving public, educational, and governmental (PEG) access programming through his cable system; he is interested in producing programming for the PEG access channels; and he is interested in being able to view such access programming in public buildings. Cooley contends that she is a City employee and her effectiveness and satisfaction at work were limited by TSC's failure to wire public libraries and other public buildings.
Whether the third party is an intended beneficiary or merely an incidental beneficiary to a contract involves the construction of the intention of the parties, gathered from reading the contract as a whole in light of the circumstances under which it was entered. ( Zigas v. Superior Court (1981) 120 Cal.App.3d 827, 837.) A creditor beneficiary status arises when "`performance of the promise will satisfy an actual or supposed or asserted duty of the promisee to the beneficiary. . . .'" ( COAC, Inc. v. Kennedy Engineers (1977) 67 Cal.App.3d 916, 919.) "A person is a donee beneficiary only if the promisee's contractual intent is either to make a gift to him or to confer on him a right against the promisor." ( Dateline Builders, Inc. v. City of Santa Rosa (1983) 146 Cal.App.3d 520, 526.)
Singsen and Cooley contend that they are creditor beneficiaries because the City owed them two legal duties: (1) to provide for the health, safety, and welfare of its inhabitants, and (2) to negotiate favorable provisions for the delivery of cable television services.
"A person cannot be a creditor beneficiary unless the promisor's performance of the contract will discharge some form of legal duty owed to the beneficiary by the promisee." ( Martinez v. Socoma Companies, Inc. (1974) 11 Cal.3d 394, 400 ( Martinez).) TSC argues that the city has the power to provide for the health, safety and welfare of its inhabitants ( Birkenfeld v. City of Berkeley (1976) 17 Cal.3d 129, 159-160), but no court has ever concluded that the possession of such a power creates an enforceable duty. State law grants municipalities the power to negotiate cable franchise agreements (Gov. Code, § 53066), but this power does not impose a duty to do so, or to obtain any particular set of terms in the course of negotiations ( Monarch Cablevision, Inc. v. City Council (1966) 239 Cal.App.2d 206, 211).
Singsen and Cooley also contend they are donee beneficiaries. "Even though a person is not the intended recipient of a gift, he may nevertheless be `a donee beneficiary if it appears from the terms of the promise in view of the accompanying circumstances that the purpose of the promisee in obtaining the promise . . . is . . . to confer upon him a right against the promisor to some performance neither due nor supposed or asserted to be due from the promisee to the beneficiary.' (Rest., Contracts, § 133, subd. (1)(a) (italics supplied); Gourmet Lane, Inc. v. Keller (1963) 222 Cal.App.2d 701, 705 [ 35 Cal.Rptr. 398].) The Government may, of course, deliberately implement a public purpose by including provisions in its contracts which expressly confer on a specified class of third persons a direct right to benefits, or damages in lieu of benefits, against the private contractor. But a governmental intent to confer such a direct right cannot be inferred simply from the fact that the third persons were intended to enjoy the benefits. The Restatement of Contracts makes this clear in dealing specifically with contractual promises to the Government to render services to members of the public: `A promisor bound . . . to a . . . municipality by contract to do an act or render a service to some or all of the members of the public, is subject to no duty under the contract to such members to give compensation for the injurious consequences of performing or attempting to perform it, or of failing to do so, unless, . . . an intention is manifested in the contract, as interpreted in the light of the circumstances surrounding its formation, that the promisor shall compensate members of the public for such injurious consequences . . . .' [Citations.]" ( Martinez, supra, 11 Cal.3d at pp. 401-402.)
Singsen and Cooley argue that cable television subscribers are third party beneficiaries of cable franchise agreements. ( Bush v. Upper Valley Telecable Co. (1974) 96 Idaho 83, 85 [ 524 P.2d 1055, 1057] [television cable service subscriber was a third party beneficiary who could recover damages for violation of rate schedule contained in a franchise contract with the city]; New York Citizens Committee on Cable TV v. Manhattan Cable TV, Inc. (S.D.N.Y. 1986) 651 F. Supp. 802, 815-816 [cable television subscribers' association was a third party beneficiary of franchise agreement to make channel capacity available to unaffiliated pay cable programmers]; Shell v. Schmidt (1954) 126 Cal.App.2d 279, 290 [veterans who purchased homes are third party beneficiaries to the contract between the government and contractor who built the homes]; U.S. v. Pacific Gas and Elec. Co. (N.D.Cal. 1989) 714 F. Supp. 1039, 1051 ["California law allows a third-party beneficiary claim to be brought by a direct beneficiary of a contract between a private party and the government. [Citations.]"]; Zakaria v. Lincoln Property Co. (1986) 185 Cal.App.3d 500, 508 [Housing assistance recipients are third party beneficiaries of the contract between city and apartment owners when the contract provided for owners to accept rental applications for low income units on priority basis from very low income households qualified for housing assistance].) However, as TSC points out, each of the above cases involved a situation in which the terms of the contract clearly intended to grant the particular plaintiffs the right to sue for breach.
Contracts between a third party and a cable television company may result in subscribers being third party beneficiaries, but the "circumstances [must] indicate that the promisee intends to give the beneficiary the benefit of the promised performance." (Rest.2d Contracts, § 302, subd. (1)(b).) Singsen and Cooley contend that the franchise agreement here evinces an intent to make the public a third party beneficiary. Specifically, they cite the following provisions in the agreement: "The system shall further have the capability of two-way transmission modulated broadband video. Two-way capability means that the cable system has the potential to receive a signal at a location on the cable system on a set frequency and to transmit that signal in the upstream direction from that location to the system's headend. Where specific applications of this technology prove economic for the Grantee, the Grantee may install and activate the necessary electronic modules to provide the operational upstream path to the cable system's headend. [¶] At least one municipal and one educational headend shall be provided with the necessary modulators and amplifiers, at no cost to the City, school districts or universities, and shall be installed according to technical standards which fulfill criteria set by the Committee and meeting FCC requirements. A `headend' is defined as the point of origination for upstream transmission of educational and municipal programming to the Grantee's central headend.
"No charge shall be made to the City, school districts or universities for such transmission of programming or for other signals sent from the educational and municipal programming origination points to the home or the public subscriber. Maintenance to insure continuous operation of the modulators, amplifiers, cabling and all other property installed by the Grantee shall be provided at no expense to the City, school districts or universities.
"The Grantee shall provide channels for municipal and educational access, not to exceed two channels of 52 channels, and an additional 10% of any channels in excess of 52 channels. . . . [¶] In order to effectuate public access, Grantee shall provide service to schools, universities and public buildings at no cost, including free cable connection and subscriber fees."
Additionally, Singsen and Cooley quote various sections in the agreement which refer to subscribers and nonsubscribers. They also note that the agreement is made in the name of "the People of the City and County of San Francisco."
All franchise ordinances made by a city are made on behalf of the public, and members of the public are third-party beneficiaries "unless a different intention is manifested." (Rest.2d Contracts, § 313, com. a, at p. 472.) Such a manifestation is present "if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and . . . [¶] . . . the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance." ( Id. at § 302, subd. (1)(b), at pp. 439-440.) The circumstances of this case do not demonstrate such an intention.
Here, Singsen and Cooley cannot allege anything more than they have been denied the right to benefit from the provision in the contract regarding wiring of public buildings. The contract manifests no intent to make TSC liable to the public for its nonperformance. To the contrary, the franchise agreement authorizes the City to sue in its own name for any breaches of the agreement, and is silent on the rights of citizens, public interest groups, or any other parties to enforce its provisions: The contract provides that the "Chief Administrative Officer or designated authority will be empowered to adjust, settle or compromise any controversy regarding bills and the quality of signals or service." Additionally, it provides for arbitration and penalties to be assessed by the City.
The agreement also makes it clear that it is the City which is to benefit from the contract. Thus, for example, its states the following: "No charge shall be made to the City, school districts or universities for such transmission of programming or for other signals sent from the educational and municipal programming origination points to the home or the public subscribers. Maintenance to insure continuous operation of the modulators, amplifiers, cabling and all other property installed by the Grantee shall be provided at no expense to the City, school districts or universities."
Finally, as further evidence of the City's intent not to make individual members of the public incidental beneficiaries, the City enacted an administrative remedy for individual members of the public in July 1996. San Francisco Administrative Code section 11.54(e) provides that the Telecommunications Commission for the City and County of San Francisco has the power to issue "orders to adjust, settle or compromise any controversy between any cable operator . . . and any subscriber regarding the subscriber's bill, signal, services, or any other matter within the City's jurisdiction." If the City had intended for the public members or subscribers to be third party beneficiaries, it would have been unnecessary to provide them with an administrative remedy. Later conduct of the parties to the contract is useful in establishing their intention when the contract was made. ( Crestview Cemetery Assn. v. Dieden (1960) 54 Cal.2d 744, 753.)
We conclude that this agreement was made for the public as a whole, and it did not create any rights in subscribers and nonsubscribers as third party beneficiaries.
D. Breach of Contract
Singsen alleges that the franchise agreement provided the framework within which he entered into an individual contract relationship with TSC. Specifically, he alleged that he "has a contract with VIACOM, which explicitly and/or implicitly incorporates the terms of the Franchise Ordinance relating to the provision of VIACOM's services in the City." He further claims that in breaching the franchise ordinance, "VIACOM has also breached its contract with MICHAEL SINGSEN and all others similarly situated and damaged them as alleged above."
Singsen maintains that he may state a claim for breach of contract if his contract with TSC incorporated the franchise ordinance. ( Spellman v. Securities, Annuities Ins. Services, Inc. (1992) 8 Cal.App.4th 452, 457 ( Spellman).) He claims that he only needs to show that the "terms of the incorporated document must be known or easily available to the contacting parties" ( ibid.).
Mere knowledge of the contract, however, is insufficient. Rather, "[a] contract may validly incorporate by reference the terms of another document if the reference is clear and unequivocal. [Citation.]" ( Spellman, supra, 8 Cal.App.4th at p. 457.) TSC contends that Singsen does not allege that his contract contains such clear and unequivocal language; nor did he attach the contract to the complaint as required.
Since the contract which allegedly incorporates the terms of the franchise agreement is not included in the record or attached to the complaint, the court properly sustained the demurrer against Singsen's claim for breach of contract.
II. Attorneys' Fees
Singsen and Cooley appeal the court's order denying them attorneys' fees pursuant to Code of Civil Procedure section 1021.5 Section 1021.5 provides the court with discretion to award attorneys' fees under the private attorney general doctrine to "a successful party . . . in any action which has resulted in the enforcement of an important right affecting the public interest if: (a) a significant benefit . . . has been conferred on the general public or a large class of persons, (b) the necessity and financial burden of private enforcement . . . are such as to make the award appropriate, and (c) such fees should not in the interest of justice be paid out of the recovery, if any. . . ." We will reverse a ruling on attorneys' fees only upon a showing the trial court abused its discretion. ( Baggett v. Gates (1982) 32 Cal.3d 128, 142-143.)
Although the record supports the trial court's ruling, a more stringent standard is applied when the party seeking attorneys' fees pursuant to Code of Civil Procedure section 1021.5 was unsuccessful in the lawsuit. When unsuccessful in the lawsuit, the party requesting attorneys' fees must prove a "causal connection" between the lawsuit and the relief obtained ( Maria P. v. Riles (1987) 43 Cal.3d 1281, 1290-1291). If Singsen and Cooley prevail on their cause of action for a section 17200 violation, they would not have to meet this more vigorous requirement.
Accordingly, we vacate the order denying attorneys' fees. If Singsen and Cooley prevail on the section 17200 claim and they make the appropriate request, the trial court is to redetermine the issue of attorneys' fees.
DISPOSITION
We affirm the judgment as to the dismissal of the breach of contract and breach of third party beneficiary claims. We reverse the dismissal as to the claim of a violation of section 17200 We vacate the denial of attorneys' fees. The parties are to pay their own costs on appeal.
_________________________ Lambden, J.
I concur:
_________________________ Kline, P. J.
I concur with those parts of the majority's opinion dealing with the issues of breach of contract and third party beneficiary liability. I respectfully dissent, however, as to whether respondent could possibly be liable for restitutionary relief to appellants under Business and Professions Code section 17200 (section 17200). I thus necessarily also dissent from the majority's decision to vacate the trial court's order denying appellants attorneys' fees.
Rashly assuming, of course, that any such relief is even conceivably available here: I have trouble understanding what respondent has acquired that it might possibly be ordered to "return" or "restore." (See Stop Youth Addiction, Inc. v . Lucky Stores, Inc. (1998) 17 Cal.4th 553, 581 (conc. opn. of Baxter, J.) ( Lucky Stores).) The majority does not address this issue.
My basic problem with the majority's analysis concerns its conclusion that an alleged violation of a franchise ordinance (simply a contract entered into by a municipality, after all) can be an "unlawful act" such as to trigger the applicability of section 17200 In holding that it may, I submit the majority is (1) significantly expanding the potential bases of liability under section 17200, (2) doing so without any justification therefor in legal precedent in this State, and (3) ignoring the fact that the provision of the original ordinance upon which such restitutionary liability rests has totally vanished.
First of all, there are, I submit, several legal precedents which, in combination, suggest that the remedy for violation of a governmental contract which takes the form of a municipal ordinance is via contract remedies and not via something as draconian as section 17200 relief. The first of these is Simoneau v. Pacific Electric Ry. Co. (1913) 166 Cal. 264, 270 ( Simoneau), in which our Supreme Court observed that the franchise agreement in question there provided "for no penalty for a violation of its provisions, the only provision being that the city may forfeit the franchise should any of its conditions be violated." Such is also the case here. Thus, the strong implication of Simoneau would seem to be that contract remedies are generally all that is available for the violation of such an ordinance. This, too, is the implication of such cases as Cox Cable San Diego, Inc. v. City of San Diego (1987) 188 Cal.App.3d 952, 966, where the court stated that the grant of a cable TV franchise "is a legislative act [citation], and established a contractual relationship between City and Cox [citation]." (See also Orange County Cable Communications Co. v. City of San Clemente (1976) 59 Cal.App.3d 165, 171-172.)
But the most relevant authority pointing in the opposite direction from that taken by the majority is Samura v. Kaiser Foundation Health Plan, Inc. (1993) 17 Cal.App.4th 1284, 1299-1301 ( Samura). There, the court was faced (as we are here) with an effort to expand section 17200 liability. The plaintiff in that case was trying to use that provision to attack standard third party liability provisions in the defendant's medical services contract. One of his contentions was that the relevant contract provision was inconsistent with the Knox-Keene Health Care Service Plan Act (Health Saf. Code, § 1340 et seq.) and was thus "unlawful" under section 17200 Then Justice William Newsom of Division One of this district and his colleagues disagreed. Although conceding that section 17200 could be used to "enjoin acts which are declared to be unlawful under a statutory enforcement scheme" ( id. at p. 1299), the court went on to note that only one section of the Knox-Keene Act "defines an unlawful act that may be enjoined" ( id. at p. 1300), and that section was not violated by the defendant. As to the many other provisions of the Knox-Keene Act the plaintiff asserted were violated by one or the other provision of the defendant's standard contract, the court held: "It is immaterial whether or not the challenged contract provisions and business practices comply with these portions of the Knox-Keene Act because the statutes do not define unlawful acts that may be enjoined under Business and Professions Code section 17200" ( Id. at p. 1301; emphasis supplied.)
Considered together these authorities mean to me that (1) the laws that are subject to enforcement via section 17200 are those which, to use the Samura terminology, "define unlawful acts" ( Samura, supra, 17 Cal.App.4th at p. 1301) and (2) franchise ordinances are not of that variety of law, but are simply contracts entered into by municipalities the enforcement of which has traditionally been via ordinary contract remedies. I thus dissent from what I believe to the majority's extension of the kinds of laws the violation of which triggers section 17200
Second, and as the majority implicitly concedes, such an extension is not mandated or even suggested by any precedent. There is no language in any decision of our Supreme Court, or even from another Court of Appeals, even hinting at this result. Thus, and as the majority acknowledges, this is effectively an open issue. That being the case, I dissent from expanding liability. It is true, as the majority notes, that in its recent decision in Lucky Stores, supra, 17 Cal.4th at page 578, the Supreme Court noted that it was the responsibility of the Legislature, not the courts, to restrict liability under section 17200 But the court's comment in that regard was in answer to the argument of Lucky Stores that the words "`any person'" in section 17204 meant something less than that. Here, we are not talking about a restriction on statutorily-clear liability, but an effective expansion of it. There is another side to the Lucky Stores coin: it is also the responsibility of the Legislature, not the courts, to expand liability.
Third, and finally, I also dissent from the majority's result for one other reason. The requirement in the original ordinance for the "broad wiring" of schools, etc., was totally wiped out in the amended version. In its place, a far more limited and specific provision regarding the extent of required wiring was adopted. The majority agrees with appellants that the new version was an "amendment" and not a "repeal" of the original ordinance. That may be correct, but the point is distressingly hypertechnical. The "broad wiring" provision of the original ordinance has been totally superseded; it hasn't existed since February 1997. Further, the ordinance as amended contains no savings clause, a fundamental requirement for the preservation of any sort of liability for violations of prior provisions. (See, e.g., Cross v. Bonded Adjustment Bureau (1996) 48 Cal.App.4th 266, 275; Kuykendall v. State Bd. of Equalization (1994) 22 Cal.App.4th 1194, 1214, fn. 27; Los Angeles Unified School Dist. v. State of California (1991) 229 Cal.App.3d 552, 556-557.) Presumably because of this clearly applicable authority, both the Attorney General and the San Francisco District Attorney (in their supplemental briefs on this issue) concede that no possible liability deriving from the original ordinance's "broad wiring" provision can now attach to respondent. I agree, but the majority apparently does not. This result simply baffles me.
______________________________ Haerle, J.