Facts

In June 2001, plaintiff Murray, Stok & Company (MS&C), an accounting firm, entered into a written agreement with defendant Recall Secure Destruction Services Inc. (RSDS) for the secure destruction of MS&C's files and other confidential materials. According to the agreement, RSDS was paid to provide a 64-gallon bin at MS&C for regular pick-up. MS&C was invoiced for each bin picked up and destroyed by RSDS. After the destruction of the contents of each bin, RSDS provided a certificate confirming the destruction.
Beginning on March 31, 2003, invoices to MS&C contained an added charge labeled "Security Administration Fee" (SAF). The new fee was $15 per invoice, and did not vary with the volume of material destroyed, the quantity of bins emptied, or any other basis. MS&C paid the invoice total, including the SAF, and continued to do so up until filing the complaint.

MS&C filed suit for deceptive business practices under the Unfair Competition Law and the False Advertising Act.

PLAINTIFF'S CONTENTIONS:
MS&C contended that placing the SAF on the invoices was a deceptive business practice in that the fee appeared to be an ancillary charge for an ancillary service, but was actually a disguised price increase because no ancillary service was provided.

DEFENDANT'S CONTENTIONS:
RSDS countered that because it was fully disclosed and the customer had meaningful choice, the SAF could not violate the UCL or FAA.

Result

After a bifurcated phase I trial on stipulated facts, the court found that the SAF could not be a deceptive business practice because the words "Security Administration Fee" did not indicate a specific service or purpose for the fee, and the amount of the fee was fully disclosed to the customer. Judgment was entered for RSDS.

Other Information

An appeal is pending before the California Court of Appeal. FILING DATE: June 28, 2007.