policy of paying only 85% purchase price for claims under service policy isn’t inherently deceptive/abusive

Shuman v. SquareTrade Inc., 2021 WL 5113176, No.
20-cv-02725-JCS (N.D. Cal. Nov. 3, 2021)

SquareTrade sells service contracts for the protection of
consumer goods. Shuman alleged that it consistently fails to provide consumers
with the full terms and conditions of the contract at the time of purchase and
systematically pays reimbursement in an amount that is less than the purchase
price of the covered item when claims are filed. After UCL claims were
dismissed, Shuman sought to add new plaintiffs.

Standing to seek injunctive relief: new plaintiff Gonzales
alleged that he “felt misled and is not currently inclined to purchase
additional SquareTrade protection plans, but he continues to purchase consumer
products that could be covered by a SquareTrade protection plan, and would
purchase additional SquareTrade protection plans in the future in the event
that SquareTrade’s reimbursement practices were to be reformed to eliminate the
unlawful practices discussed in this complaint.” This was sufficient to
establish standing to seek injunctive relief.

However, he still didn’t allege a violation under either the
“unfair” or the “fraudulent” prongs of the UCL or that he lacked an adequate
remedy at law.

Unfairness is analyzed two different ways: “First, the
‘tethering test’ requires ‘that the public policy which is a predicate to a consumer
unfair competition action under the “unfair” prong of the UCL must be tethered
to specific constitutional, statutory, or regulatory provisions.’ ” “Second,
the ‘balancing test’ asks whether the alleged business practice ‘is immoral,
unethical, oppressive, unscrupulous or substantially injurious to consumers and
requires the court to weigh the utility of the defendant’s conduct against the
gravity of the harm to the alleged victim.’ ”

Plaintiffs alleged that the harm arising from SquareTrade’s
conduct is the systematic underpayment of customer claims by 14.2%. That is, SquareTrade’s
2018 “Fast Cash” program began systematically reimbursing consumers only
approximately 85% of the covered product’s purchase price, “regardless of the
actual value of the product, when it was purchased, or its cost of
replacement.” Plaintiffs argued that SquareTrade’s allegedly secret policy of
underpaying its customers violated the principles undergirding both the
Consumers Legal Remedies Act, and the Song-Beverly Consumer Warranty Act.

But those arguments were premised on the assumption that
Gonzales was entitled to receive the purchase price of the covered item when he
filed a claim, but they didn’t allege any facts showing that this was ever
promised to him or that he was entitled to recover the full purchase price on
any other ground. “Without any such allegations, the ‘harm’ Plaintiffs cite
(underpayment of claims by 14.2%) is not a cognizable harm; nor do any of the
consumer protection laws Plaintiffs cite embody a policy that a product
protection policy must cover the full purchase price of a product.” Likewise,
the allegations didn’t state a claim under the UCL’s fraudulent prong.
Gonzales’s allegations as to what was promised to him with respect to
replacement cost were “so minimal that they do not give rise to a plausible
inference that a reasonable consumer would have been misled.”

In addition, Gonzales didn’t lack an adequate remedy at law
because the restitution he sought was the same as the damages he sought on his
breach of contract claim, namely, reimbursement for the difference between the
purchase price and the amount that was actually paid on the claim. “This is not
an election of remedies issue. The question is not whether or when Plaintiffs
are required to choose between two available inconsistent remedies, it is
whether equitable remedies are available to Plaintiffs at all.”

The unjust enrichment claim also failed for similar reasons.
NY GBL claims by new plaintiff Abbott also failed. Abbott alleged that she was
misled because she saw references to “protection” on a brochure that she didn’t
read and a sales clerk used the word “warranty” in describing the plan. She was
then “surprised and displeased” when SquareTrade paid only 85.8% of the
purchase price of her covered products when she filed claims for coverage. But
“a party does not violate General Business Law § 349 by simply publishing
truthful information and allowing consumers to make their own assumptions about
the nature of the information.” However, the original plaintiff’s unjust
enrichment claim proceeded.


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