Newman v. Union Oil Co. of California

DAVID NEWMAN, Plaintiff and Respondent, v. UNION OIL COMPANY OF CALIFORNIA, Defendant and Appellant. No. B101317 (Super. Ct. No. BC 111225) California Court of Appeal Second Appellate District Division One Filed May 8, 1997
        APPEAL from a judgment of the Superior Court of Los Angeles County. Bruce E. Mitchell, Temporary Judge. (Pursuant to Cal. Const., art. VI, § 21.) Modified and affirmed.
        Riordan & McKinzie, Kenneth Klein and Gina M. Calvelli for Defendant and Appellant.
        B. Daniel Lynch and Howard Strong for Plaintiff and Respondent.
        Daar & Newman and Jeffery J. Daar as Amici Curiae on behalf of Plaintiff and Respondent.

        Defendant Union Oil Company of California (Unocal) appeals from the issuance of a permanent injunction prohibiting it from using credit card sales forms with pre-printed spaces labeled "DRIVER'S LICENSE NO. (WHEN REQUIRED)[.]" The trial court agreed with plaintiff David Newman that the forms violated Civil Code section 1747.8's prohibition against businesses recording and using preprinted forms with spaces designated for recording driver's license numbers or other "personal identification information" of customers making credit card purchases.
        However, the statute excepts from its prohibitions transactions where the dealer is required by contract to collect and record such information. Unocal's dealers contracts require the recordation of such information if the purchase price is above a specified floor or the credit card has been reported lost or stolen. Thus, we modify the injunction to permit Unocal to use its forms in those situations. As modified, we affirm the order issuing the injunction, holding the trial court correctly found Unocal's forms violated Civil Code section 1747.8 in situations not covered by the contractual requirements.
        Unocal also challenges the trial court's $140,000 award of private attorney general's attorney fees to Newman. (Code Civ. Proc., § 1021.5.) Since Newman vindicated an important right, we hold the trial court properly awarded him such attorney fees under Code of Civil Procedure section 1021.5. However, we hold the trial court abused its discretion in multiplying Newman's attorney fees. We reduce the attorney fees to $70,000 by eliminating the multiplier. Because we narrow the injunction's scope, we further reduce the unmultiplied award to $35,000, and otherwise affirm the order awarding attorney fees. ¹

FACTS AND PROCEDURAL HISTORY         Unocal permits customers to charge purchases at Unocal stations, whether operated by the company or leased to independent contractors who sell Unocal products. Customers may charge their purchases on Unocal or third party (e.g., Visa, Mastercard, American Express) credit cards. Unocal stations may participate in Unocal's credit card program. Unocal requires participating stations to use its form credit card charge forms, regardless of which credit card is used to charge the purchase. Unocal reimburses participating stations for the full amount of approved credit card charges. For charges above a specified amount, or if the card is reported lost or stolen, Unocal requires the operator to check the customer's driver's license number. To insure the license check is made, Unocal requires that the driver's license number be written on the charge slip. The license check is designed to deter and reduce credit card fraud. Millions of such transactions occur at Unocal owned or licensed stations annually. ²
        As relevant, section 1747.8 provides: "(a) Except as provided in subdivision (c), no person, firm, partnership, association, or corporation which accepts credit cards for the transaction of business shall do either of the following: [¶] (1) Request, or require as a condition to accepting the credit card as payment in full or in part for goods or services, the cardholder to write any personal identification information upon the credit card transaction form or otherwise. [¶] (2) Request, or require as a condition to accepting the credit card as payment in full or in part for goods or services, the cardholder to provide personal identification information, which the person, firm, partnership, association, or corporation accepting the credit card writes, causes to be written, or otherwise records upon the credit card transaction form or otherwise. [¶] (3) Utilize, in any credit card transaction, a credit card form which contains preprinted spaces specifically designated for filling in any personal identification information of the cardholder. [¶] (b) For purposes of this section 'personal identification information,' means information concerning the cardholder, other than information set forth on the credit card, and including, but not limited to, the cardholder's address and telephone number." (Emphasis added.)
        Subdivision (c) of section 1747.8 sets out four exceptions to the prohibition contained in subdivision (a), which does not apply when: 1) the credit card is given as a deposit to "secure payment in the event of default, loss, damage, or other similar occurrence[;]" 2) the card is used for "cash advance transactions[;]" 3) the business accepting the credit card for payment is required to collect and record personal identification information by contract or federal law; and 4) the personal identification information is needed for delivery, servicing, or installation of the purchased goods. ³
        Subdivision (d) of section 1747.8 states: "This section does not prohibit any person, firm, partnership, association, or corporation from requiring the cardholder, as a condition to accepting the credit card as payment in full or in part for goods or services, to provide reasonable forms of positive identification, which may include a driver's license or a California state identification card, or where one of these is not available, another form of photo identification, provided that none of the information contained thereon is written or recorded on the credit card transaction form or otherwise. If the cardholder pays for the transaction with a credit card number and does not make the credit card available upon request to verify the number, the cardholder's driver's license number or identification card number may be recorded on the credit card transaction form or otherwise." (Emphasis added.) The final sentence of subdivision (d) was added effective January 1, 1996, and does not apply to our case.
        This case began when Claudia Prada, a legal secretary for one of Newman's lawyers, wrote Unocal and, citing section 1747.8, demanded that it stop using the challenged form or she would sue. Unocal refused, arguing its forms complied with section 1747.8's intent and legislative history. Prada and Newman then initiated this case. After a series of procedural steps not relevant here, only Newman remained as a plaintiff in the relevant second amended complaint, which sought only declaratory and injunctive relief and private attorney general's attorney fees. Newman did not claim to have made a Unocal credit card purchase during which Unocal used the challenged form or demanded or recorded information proscribed by section 1747.8. The trial court granted Newman summary judgment because it found the forms violated section 1747.8. The trial court enjoined Unocal from using any forms with the preprinted space for driver's license information.
        Those violating section 1747.8 may be assessed civil penalties not exceeding $250 for the first, and $1,000 for each later, violation. Such penalties may be sought by anyone paying with a credit card, the Attorney General, or local prosecutors, and are paid to the plaintiff. (§ 1747.8, subd. (e).) The trial court did not award Newman penalties. Plaintiffs successfully seeking to enjoin violations of section 1747.8 may be awarded attorney fees and costs, payable by the defendant. (§ 1747.8, subd. (f).) The trial court found that Newman qualified for an attorney fees award under Code of Civil Procedure section 1021.5 because he vindicated an important right under the consumer protection statutes. Based on its analysis of Newman's expended hours and hourly fees, the trial court reduced Newman's fees request from $237,317 to $70,000, multiplied it by 2 to reflect the risk associated with the contingency fee agreement between Newman and his counsel, and awarded $140,000 in fees. Newman does not challenge the fee reduction. Unocal challenges both the determination that Newman vindicated an important right and thus was entitled to fees, and the use of the multiplier. However, Unocal does not challenge the $70,000 figure's accuracy.

DISCUSSION I. Does section 1747.8 prohibit Unocal's using credit card charge slips with a pre-printed box labeled "DRIVER'S LICENSE NO. (WHEN REQUIRED)[.]"?

        A. Standard of Review
        The trial court granted Newman summary judgment because it found Unocal's challenged credit card charge slips violated section 1747.8. The trial court made a legal ruling, i.e., it interpreted section 1747.8, based on undisputed facts. After examining the facts before the trial judge on a summary judgment motion (Code Civ. Proc., § 437c), we independently determine their effect as a matter of law. (AARTS Productions, Inc. v. Crocker National Bank (1986) 179 Cal.App.3d 1061, 1064-1065.) Where "the facts are undisputed, the issue is one of law and the 'appellate court is free to draw its own conclusions of law from the undisputed facts.' [Citations.]" (Suburban Motors, Inc. v. State Farm Mut. Auto. Ins. Co. (1990) 218 Cal.App.3d 1354, 1359.) The trial court's stated reasons for its ruling do not bind us. We review the ruling, not its rationale. (Barnett v. Delta Lines, Inc. (1982) 137 Cal.App.3d 674, 682.) These principles survived the 1992-1993 amendments to Code of Civil Procedure section 437c. (Union Bank v. Superior Court (1995) 31 Cal.App.4th 573, 579-594.)
        "The interpretation of a statute . . . is a question of law . . . ." (California Teachers Assn. v. San Diego Community College Dist. (1981) 28 Cal.3d 692, 699.) "'Interpretation and applicability of a statute or ordinance is clearly a question of law.' (9 Witkin, Cal. Procedure[, supra,] Appeal, § 242, p. 247.) It is the duty of an appellate court to make the final determination from the undisputed facts and the applicable principles of law. [Citation.]" (Sutco Construction Co. v. Modesto High School Dist. (1989) 208 Cal.App.3d 1220, 1228.) Thus, we decide whether section 1747.8 prohibits Unocal's use of the challenged credit card charge slips de novo as a matter of law.
        Statutory interpretation involves a three step analysis. "First, a court should examine the actual language of the statute. [Citations.] Judges, lawyers and laypeople all have far readier access to the actual laws enacted by the Legislature than the various and sometimes fragmentary documents shedding light on legislative intent. More significantly, it is the language of the statute itself that has successfully braved the legislative gauntlet. It is that language which has been lobbied for, lobbied against, studied, proposed, drafted, restudied, redrafted, voted on in committee, amended, reamended, analyzed, reanalyzed, voted on by two houses of the Legislature, sent to a conference committee, and, after perhaps more lobbying, debate and analysis, finally signed 'into law' by the Governor. The same care and scrutiny does not befall the committee reports, caucus analyses, authors' statements, legislative counsel digests and other documents which make up a statute's 'legislative history.' [¶] In examining the language, the courts should give to the words of the statute their ordinary, everyday meaning [citations] unless, of course, the statute itself specifically defines those words to give them a special meaning [citations]). [¶] If the meaning is without ambiguity, doubt, or uncertainty, then the language controls. [Citations.] . . . [¶] But if the meaning of the words is not clear, courts must take the second step and refer to the legislative history. [Citations.] [¶] The final step--and one which we believe should only be taken when the first two steps have failed to reveal clear meaning--is to apply reason, practicality, and common sense to the language at hand. If possible, the words should be interpreted to make them workable and reasonable [citations]). . . ." (Halbert's Lumber, Inc. v. Lucky Stores, Inc. (1992) 6 Cal.App.4th 1233, 1238-1240.) We apply these undisputed rules to the facts and statute before us.

        B. Analysis
        Neither below nor on appeal did Unocal challenge section 1747.8's constitutionality. Unocal argues section 1747.8 is ambiguous and vague because, according to Unocal, the section if read literally, would preclude all credit card transactions, and does not include driver's license numbers in its subdivision (b) definition of "'personal identification information.'" Having created a statutory ambiguity, Unocal then argues the legislative history and a common sense interpretation of the statute and its intended purpose demonstrate that its challenged forms do not violate section 1747.8's prohibitions. Unocal's contention lacks merit.
        Although enacted in 1990, section 1747.8 is part of Title 1.3 (§§ 1747-1748.7), the "'Song-Beverly Credit Card Act of 1971.'" (§ 1747.) Section 1747.8, subdivision (a) prohibits the seller in a credit card purchase from requesting, writing, or requiring the buyer to write, personal identification information as part of the transaction. Subdivision (a) also prohibits the seller from using a form which designates spaces for recording personal identification information.
        Subdivision (b) defines "'personal identification information' [as] information concerning the cardholder, other than information set forth on the credit card, and including, but not limited to, the cardholder's address and telephone number." (Emphasis added.) The cardholder's name and account number, embossed on the credit card, and any other information on the credit card, such as an issuing financial institution, thus are expressly excluded from the definition of "'personal identification information'" which cannot be requested or recorded as part of the transaction. Moreover, subdivision (b) expressly does not limit "'personal identification information'" to the cardholder's address and telephone number.
        Subdivision (c) lists four circumstances which are excluded from subdivision (a)'s prohibition. In other words, in the four circumstances stated in subdivision (c), the seller may request, write, or require the buyer to write, personal identification information on credit card sales form as part of the transaction, and may use forms designating spaces for recording such information. Thus, the seller could choose to have two types of credit card sales forms. One could have designated spaces for recording personal identification information but could be used only in transactions involving the four circumstances set out in subdivision (c). A second form lacking such designated spaces would have to be used in all other credit card transactions. To avoid having two types of forms, the seller could use only forms lacking designated spaces and simply write the information anywhere on the form if the transaction fell within the subdivision (c) exceptions.
        Making clear that subdivision (a) prohibits only requiring the writing of personal identification information to complete the transaction, subdivision (d) states that the seller may require the buyer to produce photo identification documents, including a driver's license, but may not write or require the buyer to write information from the license unless the buyer cannot produce the credit card itself and is making the purchase using only the account number. Since subdivision (d) expressly prohibits writing driver's license information as part of the transaction unless the buyer is using only the account number, it obviously includes driver's license numbers within the "personal identification information" which cannot be recorded as part of the transaction, unless an express exception applies. Likewise, since driver's license numbers are "personal identification information," sellers cannot use forms with spaces designated for recording driver's license numbers. Subdivision (d) also creates a fifth exception to subdivision (a)'s writing prohibition: in addition to the four subdivision (b) exceptions, the seller may write or require the buyer to write "personal identification information," including driver's license number, when the buyer is using only the account number.
        Unocal attempts to create an "ambiguity" in this straightforward scheme by claiming that the date, time, and location of the transaction is "information concerning the cardholder" which, if it fell within subdivision (a)'s prohibition, could never be recorded. Unocal reaches this conclusion by arguing that transaction date, time, and location, combined with the account number and name, identify the cardholder by demonstrating where he was at a particular time. Unocal concludes that, if transaction date, time, and location are "personal identification information" which can never be recorded, no transaction could be recorded. Since section 1747.8 could not be read as prohibiting recording of all credit card transactions, it must be ambiguous, requiring us to proceed to the second and perhaps third stages of statutory interpretation, a review of legislative history and a common sense review of the statute's language. Unocal concludes these later inquiries will result in our approving use of the challenged forms to reduce fraud.
        The problem with this analysis is its underlying assumption that transaction date, time, and location are "personal identification information" because they help identify the cardholder. In fact, transaction date, time, and location do not help identify the cardholder unless one already knows his name and card number. The name and card number identify the cardholder, not transaction date, time, and location. Without knowing names and account numbers, one could not distinguish the millions of daily charges except to note which retailers had the greatest charge volume. Knowing that something happened at a particular date, time, and place, without more, cannot explain who performed the act. "'Personal identification information,'" also defined as "information concerning the cardholder" (§ 1747.8, subd. (b)), as obviously contemplated in section 1747.8, means information concerning the cardholder which can identify him, including but not limited to address, telephone number, and driver's license number. The statute prevents the seller from obtaining such information, other than the cardholder's name and account number which are printed on the card, unless one of the exceptions applies. Since Unocal's assumption that transaction date, time, and location are "'personal identification information'" (§ 1747.8, subd. (b)) is false, there is no ambiguity causing the absurd result that no credit card transaction could be recorded.
        More fundamentally, Unocal's argument would have us construe section 1747.8 to permit it to use forms whose use is expressly prohibited by that very section. Such a construction would be ludicrous, given that Unocal does not ask us to overturn the statute. Because the statute clearly and facially prohibits Unocal's use of the challenged forms, without ambiguity or absurd result, the trial court properly enjoined the forms' use.
        However, in those limited situations where Unocal's contracts with participating dealers require them to check and record drivers license numbers, i.e., when the purchase price exceeds a specified floor or the card is reported lost or stolen, the transaction expressly falls with the section 1747.8, subdivision (c)(3) exception. Thus, in those limited situations, Unocal may use the challenged forms and record drivers license numbers. In all other situations, the trial court correctly prohibited Unocal from using the forms. ^{4 1  2  3  4} though not necessary to our analysis or holding, we note the parties and amicus curiae submitted a plethora of legislative history and comment regarding the state's entire consumer protection and credit card regulatory schemes. Unocal argues the only legislative intent behind section 1747.8 was to prevent retailers from compiling mailing and telephone advertising lists from customers' addresses and telephone numbers to prevent unsolicited advertising. Unocal argues the Legislature had no other consumer privacy concerns, and also intended to prevent credit card fraud. Newman and amici argue the statute's primary purpose is to protect consumer privacy. They note credit card fraud frequently is committed by employees of retailers who appropriate the credit card information given by the customer for fraudulent use. They also note the fraud potential of unnecessarily accumulating driver's license numbers.
        Because we conclude the statute is facially clear, we need not resolve this debate. We note its resolution requires precisely the sort of balancing of competing interests and factors best suited to legislative debate and to which the judiciary brings no expertise greater than any other interested citizen or interest group. Frankly, we do not know where best to strike the balance between protecting consumer privacy and preventing credit card fraud. The legislature has conducted such a balancing and produced a facially clear statute. If Unocal thinks the legislature should strike a different balance, it should take its argument there.
        We hold the trial court correctly found the use of credit card charge slips with preprinted spaces marked "DRIVER'S LICENSE NO. (WHEN REQUIRED)" violates section 1747.8 except where Unocal's participating dealer contracts require that drivers license numbers be checked and recorded, i.e., where the purchase price exceeds the
floor specified in the contract, or where the card is reported lost or stolen. We modify the injunction to permit Unocal to use the forms and record drivers license numbers where their participating dealer contracts so require. As so modified, we affirm the injunction's prohibition on the use of the forms in all other transactions.

II. The Attorney Fees Award Under Code of Civil Procedure section 1021.5.

        A. Standard of Review
        As relevant, Code of Civil Procedure section 1021.5 provides: "Upon motion, a court may award attorneys' fees to a successful party against one or more opposing parties in any action which has resulted in the enforcement of an important right affecting the public interest if: (a) a significant benefit, whether pecuniary or nonpecuniary, 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 . . . ."
        "[Code of Civil Procedure] Section 1021.5 codifies the 'private attorney general' doctrine for awarding attorney fees. This doctrine 'rests upon the recognition that privately initiated lawsuits are often essential to the effectuation of the fundamental public policies embodied in constitutional or statutory provisions, and that, without some mechanism authorizing the award of attorney fees, private actions to enforce such important public policies will as a practical matter frequently be infeasible.' (Woodland Hills Residents Assn., Inc. v. City Council (1979) 23 Cal.3d 917, 933 . . . .)
        "Where, as here, a plaintiff's action has not produced a monetary recovery, an award of attorney fees is proper under section 1021.5 if (1) the action has resulted in enforcement of an important right affecting the public interest, (2) a significant benefit, whether pecuniary or nonpecuniary, has been conferred on the general public or a large class of persons, and (3) the necessity and financial burden of private enforcement makes the award appropriate. ([Code Civ. Proc., ]§ 1021.5; Woodland Hills Residents Assn., Inc. v. City Council, supra, 23 Cal.3d at pp. 934-935.)
        "The trial court found these elements were met. Its determination may not be disturbed on appeal absent a showing that the court abused its discretion in awarding attorney fees, i.e., the record establishes there is no reasonable basis for the award. [Citations.] 'The pertinent question is whether the grounds given by the court for its [grant] of an award are consistent with the substantive law of [Code of Civil Procedure] section 1021.5 and, if so, whether their application to the facts of this case is within the range of discretion conferred upon the trial courts under [Code of Civil Procedure] section 1021.5, read in light of the purposes and policy of the statute.' [Citation.]" (Feminist Women's Health Center v. Blythe (1995) 32 Cal.App.4th 1641, 1666-1667.)
        Likewise, in setting the amount of fees, the trial court must make "a careful compilation of the time spent and reasonable hourly compensation of each attorney . . . involved in the presentation of the case. . . . Using these figures as a touchstone, the court then [should take] into consideration various relevant factors, of which some militate[] in favor of augmentation and some in favor of diminution. Among these factors [are]: (1) the novelty and difficulty of the questions involved, and the skill displayed in presenting them; (2) the extent to which the nature of the litigation precluded other employment by the attorneys; (3) the contingent nature of the fee award, both from the point of view of eventual victory on the merits and the point of view of establishing eligibility for an award . . . . [¶] The 'experienced trial judge is the best judge of the value of professional services rendered in his court, and while his judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrong.' [Citations.]" (Serrano v. Priest (1977) 20 Cal.3d 25, 48-49.)

        B. Analysis
        The trial court found that enforcement of a statutory consumer right supported an attorney fees award. Unocal does not dispute that general proposition, or the related concept that privacy rights are important public interests. Unocal merely argues that the trial court did not further specify why these particular rights were important enough to justify an attorney fees award. Unocal claims that no consumer ever was hurt by its use of the improper forms, and that the lawsuit amounted to a windfall for Newman's attorneys. We agree with Unocal that enforcement of statutory consumer rights and the constitutional right to privacy are important public rights which justify an attorney fees award. Unocal spends much of its brief, through innuendo, attacking Newman's counsel for pursuing the case, profiting from it and others like it, all to the detriment, not benefit, of consumers. As discussed above, the legislature considered all those arguments and chose to prohibit retailers from using the challenged forms. Unocal should take its contrary arguments to the legislature. Moreover, Unocal never was at the mercy of some unscrupulous plaintiffs' lawyers. Unocal could have gone to court and sought declaratory relief permitting it to use the challenged forms, or discontinued their use upon receipt of the letter and then sought declaratory relief that the forms were proper.
        However, we agree with Unocal that the trial court abused its discretion in multiplying Newman's attorney fees. The trial court specifically found the facts and issues simple and essentially undisputed, and the case duplicative of other suits brought by Newman's attorneys, who were not precluded from taking on other cases. Thus, the trial court should not have used any multiplier in calculating Newman's attorney fees. Accordingly, we reduce the award to an unmultiplied $70,000.
        Moreover, because we agree with Unocal that it may use the forms and write drivers license numbers in those situations required in its participating dealer contracts, Newman has secured only half the victory originally awarded by the trial court. We therefore further modify the award by reducing it by half to $35,000.

DISPOSITION         We affirm the order enjoining Unocal from using the challenged forms except where the purchase price exceeds the floor specified in the participating dealer contracts or where the card is reported lost or stolen. As modified, we affirm the injunction. We modify the attorney fees award to eliminate the multiplier, and further reduce the fee award to $35,000. As modified, we affirm the attorney fees award. The parties are to bear their own costs.

We concur:
        SPENCER, P.J.
        MASTERSON, J.


                1. .         The orders issuing the permanent injunction and awarding fees are appealable. (Code Civ. Proc., § 904.1, subd. (a)(6); California Licensed Foresters Assn. v. State Bd. of Forestry (1994) 30 Cal.App.4th 562, 565, fn. 1.) Unless otherwise noted, all further section references are to the Civil Code.

                1. .         Unocal has stopped using the challenged forms at least since the trial court issued the injunction. Newman presented evidence that other companies stopped using similar forms either before or during litigation. Similar claims against Unocal and other companies, some brought by Newman's attorneys, are pending in various stages of litigation.
                1. .         In its opening brief, Unocal asked us to review the entire statute. Unocal pointed out that, if read literally, section 1747.8, subdivision (c)(3) would except Unocal's use of the forms from subdivision (a)'s prohibitions in those situations specified in the contract, although it did so as part of an argument urging us not to read the statute literally. At oral argument, without objection from Newman, Unocal argued its use of the forms fell within the subdivision (c)(3) exception. While a contention cannot be made for the first time during oral argument (9 Witkin, Cal. Procedure (3d ed. 1985) Appeal, § 547, p. 535), we think Unocal sufficiently raised the issue in its opening brief.
                1. .         We limit our holding permitting the form's use in situations required by the dealer contracts to the particular contract used by Unocal in this record.