Case: Yabsley v. Cingular Wireless, LLC, Case No. B198827 (Cal. Ct. App. 8/18/2008)

The One Sentence Summary: California Court of Appeal holds that compliance with California Regulations relating to retailer’s tax obligations provides safe harbor against claims by consumer for unfair business practices and false advertising under Business and Professions Code sections 17200 and 17500.

What They Were Fighting About: Defendant Cingular Wireless provided a half price discount for the purchase of a cellular phone if the customer also enrolled in a calling plan package. California Regulation 1585 requires that the sales tax be computed based on the full price of the phone, and the seller can pass on the full tax to the customer if it chooses. Plaintiff alleged that when he purchased a phone and calling plan package from Cingular, Cingular calculated Plaintiff’s tax based on the full price of the phone without informing him that it was doing so. Plaintiff brought a putative class action against Cingular for unfair business practices in violation of California Business and Professions Code section 17200 and misleading advertising in violation of California Business and Professions Code section 17500 arising out Cingular’s failure to disclose the sales tax charged.

Court Holdings:

  • Although California law prohibits “any unlawful, unfair or fraudulent business act or practice,” it does not apply where specific legislation provides a “safe harbor” for the conduct at issue.
  • “California Regulation 1585 has the ‘force and effect’ and the ‘dignity’ of a statute. Therefore, it may, and does, provide a safe harbor to Cingular.”
  • No law required Cingular to disclose the amount of the sales tax charged on a sale prior to the sale. Cingular’s disclosure of the amount of the sale tax in the sale invoice was in compliance with the law because Plaintiff had a right to refuse to enter into the contract after seeing the invoice.