Metropolitan News-Enterprise


Thursday, December 23, 2004


Page 3


C.A.: Law Permits Cell Phone Rebate Conditioned on Contract Extension


By DAVID WATSON, Staff Writer


A cell phone purchase rebate conditioned on buying a service contract does not violate a law barring rebates “contingent on an event to occur subsequent” to the transaction, this district’s Court of Appeal ruled yesterday.

Justice Miriam Vogel, writing for Div. One, said the rebate was legal since the complaining consumer could have purchased the contract before or at the same time the phone was bought. Citing Kramer v. Intuit, Inc. (2004) 121 Cal.App.4th 574, Vogel said there is “nothing unlawful about a rebate offer conditioned on events that can occur before or at the same time as the transaction, notwithstanding that the event could also occur after the transaction is completed.”

Civil Code Sec. 1770(a)(17), part of the Consumer Legal Remedies Act, makes it illegal to represent “that the consumer will receive a rebate, discount, or other economic benefit, if the earning of the benefit is contingent on an event to occur subsequent to the consummation of the transaction.”

Vogel said Los Angeles Superior Court Judge Charles W. McCoy properly granted demurrers sought by cell phone makers Nokia, Inc. and Ericsson, Inc. in suits by two cell phone purchasers.

One purchaser, Anna Clausen, was offered a $59 rebate on a Nokia phone if she executed or extended a service contract with AT&T Wireless. The other, Dylan Pollard, was offered a $50 rebate on an Ericsson phone conditioned on activating AT&T service.

Pollard got the rebate, but Clausen never completed the paperwork and did not. Both sought class actions certification, and the cases were consolidate for appeal after McCoy granted the demurrers.

Vogel said the two plaintiffs were making an “argument in which they essentially redefine ‘rebate’ to mean ‘discount’ so that the rebate must be paid to them at the moment of purchase.” She added:

“As we explain, they are misreading the statute.”

The court in Kramer held that the purpose of the law was to prevent deceptive practices, ruling that a software discount conditioned on buying another product did not violate the statute since the other product could be bought simultaneously or even ahead of time, Vogel noted. Kramer also rejected the idea that sending in a rebate coupon was a subsequent event within the meaning of Sec. 1770(a)(17), pointing out that later legislation expressly recognizes the validity of mail-in rebates.

Vogel declared:

“Quite plainly, the gravamen of the practice prohibited by subdivision (a)(17) of section 1770 is a false and misleading rebate offer that could be accepted only by a subsequent purchase of another product.” Neither of the challenged rebates met that description, she said.

“Clausen suggests there is something wrong with the fact that Nokia’s rebate offer could only be satisfied by a purchase from a third-party service provider (AT&T Wireless) rather than from Nokia, but she does not explain her reasoning or what it is she thinks is wrong (which might be difficult to do since she purchased her Nokia telephone from AT&T Wireless),” Vogel wrote. “Subdivision (a)(17) of section 1770 prohibits a rebate ‘if the earning of the benefit is contingent on an event to occur subsequent to the consummation of the transaction,’ but it says nothing at all about a disclosed concurrent or earlier purchase from another entity—and we see nothing inherently unfair or misleading about the connection in this case. In short, subdivision (a)(17) of section 1770 prohibits bait-and-switch rebate offers that cannot be performed before or at the time of purchase, not a fully disclosed offer that happens to involve a third party.”

Clausen and Pollard were represented on appeal by Shawn Khorrami and Matt C. Bailey of the Law Offices of Shawn Khorrami in Van Nuys. Ericsson was represented by Scott J. Ferrell of Call Jensen & Ferrell in Newport Beach, while Thomas R. Freeman and Eric E. Bronson of Marella, Boxer, Wolpert & Matz in Century City served as local counsel for Nokia.

Presiding Justice Vaino Spencer and Justice Robert M. Mallano concurred in the opinion authored by Vogel.

The case is Pollard v. Ericsson, B170006.


Copyright 2004, Metropolitan News Company