WSGR Obtains First-of-Its-Kind Precedent on California’s Automatic Renewal Law

A host of Silicon Valley companies have been targeted by suits claiming that recurring payments the companies receive for services have been obtained in violation of California’s Automatic Renewal Law (ARL), Business and Professions Code Section 17600 et seq. The ARL requires certain clear and conspicuous disclosures when a company provides goods or services that automatically renew or continue until the consumer cancels. At least a dozen lawsuits have been filed against companies like Apple, Blue Apron, Blizzard Entertainment, Dropbox, eBay, Hulu, and LifeLock on behalf of hypothetical classes of victims, with countless more threatened. The suits allege claims under the ARL itself and under California’s Unfair Competition Law (UCL), Cal. Bus. & Prof. Code Section 17200 et seq., and invariably seek refunds of all amounts paid for recurring services by putative class members. To date, there have been no decisions interpreting the substance of the ARL, and without precedent, the targeted companies have regularly settled claims, often for significant amounts.

On February 5, 2016, in a case of first impression—Mayron v. Google Inc.—Santa Clara Superior Court Judge Peter Kirwan ruled as a matter of law that the ARL does not provide for its own private right of action. Wilson Sonsini Goodrich & Rosati was counsel in the case, and a copy of the court’s order can be found here. Judge Kirwan rejected the plaintiff’s argument that Section 17604 of the ARL, which states that “all available civil remedies that apply to a violation of this article may be employed,” supported a standalone claim. He also held that Section 17603, which deems goods sent in violation of the ARL to be unconditional “gifts,” acts as a shield to protect the consumer from having to pay the sender for those goods, but cannot be used as a sword to bring an affirmative claim. Judge Kirwan also dismissed, with leave to amend, the plaintiff’s claim under the UCL that was predicated on a supposed ARL violation. He found that the complaint did not allege facts showing that the plaintiff failed to receive the services for which the plaintiff had paid. The court recognized that the plaintiff lacked standing under the UCL absent allegations that the supposed ARL violation caused him to lose money or property. Together, the court’s holdings should make it significantly harder for plaintiffs to obtain windfall payments from companies based on supposed ARL violations.