Filed 10/4/13
                           CERTIFIED FOR PUBLICATION



             IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                           SECOND APPELLATE DISTRICT

                                     DIVISION THREE



MELISSA CHAPMAN et al.,                             B241398

        Plaintiffs and Appellants,                  (Los Angeles County
                                                    Super. Ct. No. BC462511)
        v.

SKYPE INC.,

        Defendant and Respondent.




        APPEAL from a judgment of the Superior Court of Los Angeles County,

Jane L. Johnson, Judge. Reversed with directions.

        Kawahito Shraga & Westrick, James K. Kawahito; Law Offices of

Geoffrey Stover and Geoffrey Stover for Plaintiffs and Appellants.

        Bingham McCutchen, Michael A. Sherman, J. Warren Rissier, Nima Javaherian

and Robert Brundage for Defendant and Respondent.



                     _______________________________________
       Melissa Chapman, individually and on behalf of others similarly situated, appeals

the dismissal of her class action complaint against Skype Inc. (Skype) after the

sustaining of a demurrer without leave to amend. She alleges that Skype advertises its

voice over Internet protocol calling plans as “Unlimited” when, in fact, the plans are

limited as to the number of minutes per day and month and the number of calls per day.

She contends she has adequately alleged counts for violation of the unfair competition

law (UCL) (Bus. & Prof. Code, § 17200 et seq.), the false advertising law (Bus. & Prof.

Code, § 17500), and the Consumer Legal Remedies Act (CLRA) (Civ. Code,

§ 1750 et seq.), intentional and negligent misrepresentation, and unjust enrichment.

       After a review of the record, we conclude that Chapman has adequately alleged

counts for violation of the UCL, the false advertising law, and the CLRA based on

deceptive advertising. She has failed, however, to allege her counts for intentional and

negligent misrepresentation with sufficient specificity as to actual reliance, but she is

entitled to an opportunity to amend her complaint as to those counts. She also is

entitled to leave to amend her complaint to allege a rescission of the subscription

agreement so as to support her count for unjust enrichment. We therefore will reverse

the judgment with directions.

                  FACTUAL AND PROCEDURAL BACKGROUND

       1.     Factual Background

       Skype provides voice over Internet protocol service that enables its customers to

make calls to telephone numbers throughout the United States and to many foreign

countries. It offers monthly calling plans that it describes as “Unlimited.” For example,

                                             2
Skype offers an “Unlimited World” calling plan that it describes as allowing

“unlimited” calls to 40 countries. It also offers an “Unlimited US & Canada” plan.

       On an Internet page listing its plans, a numerical superscript in the manner of

a footnote designator appears immediately after the word “Unlimited” in the title

“Unlimited US & Canada.” The numerical superscript in the title references a link at

the bottom of the page stating in a much smaller font, mostly in blue text, “A fair usage

policy applies.” This link leads the reader to the terms of the “Fair Usage Policy” on

another page.

       The “Fair Usage Policy” states that the calling plan is limited to 6 hours per day,

10,000 minutes per month and 50 numbers called per day. It states that calls in excess

of these limits will incur the “normal rates and connection fees.” The policy also states

that calls to mobile telephones in 32 out of the 40 countries are not included.

       Chapman purchased a subscription to the “Unlimited US & Canada” calling plan

in December 2010. She believed at the time that there was no limit on either the

number of minutes that she could use or the number of calls that she could make for

a fixed monthly fee. She did not notice the language “fair usage policy” at the bottom

of the Internet page and did not read the policy. She used her calling plan freely and

was charged overage fees when her use exceeded the limits.

       2.       Trial Court Proceedings

       Chapman filed a class action complaint against Skype in May 2011 alleging that

Skype has engaged in deceptive advertising and has misled its customers by labeling as

“Unlimited” calling plans that are limited as to the number of minutes and number of

                                             3
calls. She alleged on her own behalf and on behalf of others similarly situated

throughout the United States counts for (1) unjust enrichment, seeking restitution and

disgorgement; (2) negligent misrepresentation, seeking damages; (3) intentional

misrepresentation, seeking damages; (4) violation of the UCL, seeking restitution,

disgorgement and an injunction; (5) violation of the false advertising law, seeking

restitution and disgorgement; and (6) violation of the CLRA, seeking damages,

restitution, disgorgement and an injunction.

       Skype filed a general demurrer to each count alleged in the complaint. The trial

court stated at the hearing that the term “Unlimited” was qualified by the footnote on

the same Internet page and that Chapman had failed to allege justifiable reliance. The

court sustained the demurrer to each count with leave to amend.

       Chapman filed a first amended complaint in December 2011 alleging the same

six counts and seeking the same relief. She also alleged that she purchased the Skype

subscription individually and not through any business entity and “used the subscription

for both personal and business purposes and is thus a consumer for purposes of the

Consumer Legal Remedies Act.”

       Skype filed a general demurrer to each count alleged in the first amended
          1
complaint. Skype also requested judicial notice of excerpts from its website showing

“the existence of the website, how it is set up and the manner in which it interacts with

customers.” It argued among other things that the website excerpts showed that a
1
       Skype also filed a motion for sanctions under Code of Civil Procedure
section 128.7, which was scheduled for hearing at the same time as the demurrer.


                                               4
subscriber was required to click a box affirming that “I agree to the Skype Terms of

Service” before purchasing any subscription, and that a hyperlink at the underscored

words took users to the terms of service stating that subscriptions are subject to the fair

usage policy, with a hyperlink to the fair usage policy. Skype argued that such

a “clickwrap” agreement is enforceable and that Chapman was bound by the terms of

the fair usage policy.

       Chapman opposed the demurrer and the request for judicial notice. She also

requested judicial notice of a guide and a policy statement by the Federal Trade

Commission (FTC) and a joint policy statement by the FTC and the Federal

Communications Commission.

       The trial court granted the requests for judicial notice and sustained the demurrer

to each count without leave to amend. The court stated with respect to the count for

unjust enrichment that, having agreed to be bound by Skype‟s terms of service,

Chapman was bound by the terms of the fair usage policy. The court stated that the

footnote reference to the fair usage policy was “clearly conspicuous” and, “because

Defendant clearly disclosed the terms of its usage through the use of a superscript

containing terms to which Plaintiff had to agree before she purchased the service, it

cannot be said that defendant was unjustly enriched. Plaintiff clearly received the

benefit of her bargain as she is deemed to have had actual notice of the terms of the

contract she signed. Loeffler v. Wright (1910) 13 Cal.App. 224, 231. This finding

informs the analysis of the discussion of the following causes of action.” The court



                                             5
sustained the demurrer to the counts for negligent and intentional misrepresentation for

the same reasons.

       The trial court concluded with respect to the counts for violation of the UCL and

the false advertising law that Chapman had failed to adequately allege an unfair,

fraudulent or unlawful business act or practice and failed to adequately allege

a violation of the false advertising law. The court stated with respect to the “fraudulent”

prong of the UCL and the false advertising law, “Defendant clearly disclosed the terms

of its usage, and to which Plaintiff had to agree before she purchased the service . . . . ”

       The trial court also stated that Chapman had adequately alleged that she was

a consumer for purposes of the CLRA, but concluded “the service representations were

not unfair or deceptive.” It stated further that Chapman “clearly indicated that

she . . . read and understood the challenged conditions before purchasing the service.

Indeed, since any party signing up for Skype service would have to agree to the Fair

Usage Policy, plaintiffs have not shown that any customer of Skype would likely be

deceived.”

       The trial court entered a judgment dismissing the complaint in April 2012.

Chapman timely appealed the judgment.

                                     CONTENTIONS

       Chapman contends (1) Skype‟s representations of its calling plans as

“Unlimited” are false and deceptive, and the disclosure in its fair usage policy is

inadequate to avoid misleading consumers; (2) she adequately alleges counts for

violation of the UCL, the false advertising law and the CLRA, negligent and intentional

                                              6
misrepresentation, and unjust enrichment based on false and deceptive advertising; and

(3) she is entitled to leave to amend to correct any deficiency.

                                      DISCUSSION

       1.     Standard of Review

       A demurrer tests the legal sufficiency of the factual allegations in a complaint.

We independently review the sustaining of a demurrer and determine de novo whether

the complaint alleges facts sufficient to state a cause of action or discloses a complete

defense. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415.) We assume

the truth of the properly pleaded factual allegations, facts that reasonably can be inferred

from those expressly pleaded and matters of which judicial notice has been taken.

(Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) We construe the

pleading in a reasonable manner and read the allegations in context. (Ibid.) We must

affirm the judgment if the sustaining of a general demurrer was proper on any of the

grounds stated in the demurrer, regardless of the trial court‟s stated reasons. (Aubry v.

Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.)

       It is an abuse of discretion to sustain a demurrer without leave to amend if there

is a reasonable probability that the defect can be cured by amendment. (Schifando v.

City of Los Angeles, supra, 31 Cal.4th at p. 1082.) The burden is on the plaintiff to

demonstrate how the complaint can be amended to state a valid cause of action. (Ibid.)

The plaintiff can make that showing for the first time on appeal. (Careau & Co. v.

Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1386. (Careau))



                                             7
       2.     Chapman Adequately Alleges Counts for Violation of the UCL
              and the False Advertising Law Based on Deceptive Advertising

              a.     The UCL and the False Advertising Law

       The UCL prohibits “any unlawful, unfair or fraudulent business act or practice

and unfair, deceptive, untrue or misleading advertising,” and any act prohibited by the

false advertising law. (Bus. & Prof. Code, § 17200.) The false advertising law

generally prohibits advertising that contains “any statement . . . which is untrue or

misleading, and which is known, or should be known, to be untrue or misleading . . . . ”

(Id., § 17500.) The remedies available to a private plaintiff under the UCL and the false

advertising law include injunctive relief and restitution. (Id., §§ 17203, 17535; Kasky v.

Nike, Inc. (2002) 27 Cal.4th 939, 950 (Kasky).)

       The UCL and the false advertising law “prohibit not only advertising which is

false, but also advertising which[,] although true, is either actually misleading or which

has a capacity, likelihood or tendency to deceive or confuse the public.‟ [Citation.]

Thus, to state a claim under either the UCL or the false advertising law, based on false

advertising or promotional practices, „it is necessary only to show that “members of the

public are likely to be deceived.” ‟ [Citations.]” (Kasky, supra, 27 Cal.4th at p. 951.)

This is determined by considering a reasonable consumer who is neither the most

vigilant and suspicious of advertising claims nor the most unwary and unsophisticated,

but instead is “the ordinary consumer within the target population.” (Lavie v. Procter &

Gamble Co. (2003) 105 Cal.App.4th 496, 509-510.) “ „Likely to deceive‟ implies more

than a mere possibility that the advertisement might conceivably be misunderstood by


                                             8
some few consumers viewing it in an unreasonable manner. Rather, the phrase

indicates that the ad is such that it is probable that a significant portion of the general

consuming public or of targeted consumers, acting reasonably in the circumstances,

could be misled.” (Id. at p. 508.)

       The question whether consumers are likely to be deceived is a question of fact

that can be decided on a demurrer only if the facts alleged in the complaint, and facts

judicially noticed, compel the conclusion as a matter of law that consumers are not

likely to be deceived. (People v. McKale (1979) 25 Cal.3d 626, 635; Klein v.

Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1380-1381 (Klein); Morgan v.

AT&T Wireless Services, Inc. (2009) 177 Cal.App.4th 1235, 1257.)

              b.      Chapman Adequately Alleges Deceptive Advertising

       Chapman contends Skype‟s representations of its calling plans as “Unlimited”

are false and deceptive, and the disclosure in its fair usage policy is inadequate to avoid

misleading consumers. She argues that its use of the word “Unlimited” together with

a disclaimer in the fair usage policy contradicting that express claim is deceptive as

a matter of law. We need not decide whether Skype‟s use of the word “Unlimited”

constitutes a false statement for these purposes because the UCL and the false

advertising law prohibit deceptive advertising even if it is not actually false. (Kasky,

supra, 27 Cal.4th at p. 951.) We also need not decide whether Skype‟s use of the word

“Unlimited” in this context is deceptive as a matter of law, but only whether the trier of

fact reasonably could conclude that consumers are likely to be deceived. (Ibid.)



                                              9
       We conclude that the answer is yes. The trier of fact reasonably could conclude

based on the facts alleged in the complaint and those judicially noticed that consumers

are likely to believe that Skype‟s “Unlimited US & Canada” (italics added) calling plan

offers unlimited calling within the United States and Canada for a fixed monthly fee,

and that they will fail to notice the disclosure to the contrary in the fair usage policy.

Again, the facts alleged and those judicially noticed are that a numerical superscript

appears immediately after the word “Unlimited” in the title of the plan, which refers to

a footnote at the bottom of the same Internet page stating in a much smaller font mostly

in blue text, “A fair usage policy applies.” The words “A fair usage policy” are linked

to a separate page where limits on the “Unlimited” plan are set forth. A reasonable

interpretation of the words “fair usage policy” is that they suggest a policy to protect

against misuse of the service provided. They do not necessarily suggest to an ordinary

consumer that the “Unlimited” plan is actually limited as to the number of minutes and

number of calls. Those words therefore do not necessarily, and as a matter of law, alert

a reasonable consumer to the need to follow the link to learn the details of those limits.

       We believe on this record that whether a reasonable consumer would read the

“Fair Usage Policy” and discover the limits on the “Unlimited” calling plan is

a question of fact. We thus cannot conclude as a matter of law that those limits are so

conspicuous and apparent that consumers are not likely to be deceived. (Klein, supra,

202 Cal.App.4th at p. 1381.) Moreover, the fact that Skype ultimately discloses the

limits in its “Fair Usage Policy” does not excuse its practice of labeling the plan

“Unlimited” in its initial dealings with potential customers. (Chern v. Bank of America

                                             10
(1976) 15 Cal.3d 866, 876.) We therefore conclude that Chapman adequately alleges

deceptive advertising and that the sustaining of the demurrer to her counts for violation
                                                                    2
of the UCL and the false advertising law on this basis was error.

              c.     Chapman Adequately Alleges Actual Reliance

       Skype also argues that Chapman fails to allege facts showing that she “suffered

injury in fact and has lost money or property as a result of” the alleged violation

(Bus. & Prof. Code, §§ 17204, 17535, italics added) for purposes of the UCL and the

false advertising law and “suffer[ed] any damage as a result of” the alleged violation

(Civ. Code, § 1780, italics added) for purposes of the CLRA. To satisfy these

requirements at the pleading stage a plaintiff must allege facts showing that he or she

suffered an economic injury caused by the alleged violation. (Kwikset Corp. v. Superior

Court (2011) 51 Cal.4th 310, 322, 326 (Kwikset).) Because “reliance is the causal

mechanism of fraud” (In re Tobacco II Cases (2009) 46 Cal.4th 298, 326), this requires

pleading facts showing actual reliance, that is, that the plaintiff suffered economic injury

as a result of his or her reliance on the truth and accuracy of the defendant‟s

representations. (Kwikset, supra, at pp. 326-327 & fn. 10.)

       Kwikset, supra, 51 Cal.4th 310, involved allegations of false advertising in

violation of the UCL and the false advertising law. The plaintiffs alleged that they

would not have purchased the product if not for the false representation that it was


2
       In light of our conclusion, we need not decide whether Chapman adequately
alleges an “unfair” business act or practice under Business and Professions Code
section 17200.


                                            11
“Made in U.S.A.” (Id. at pp. 327-328.) Kwikset concluded that this “but for” allegation

was sufficient to allege both causation and economic injury as required under Business

and Professions Code section 17204. (Id. at p. 330.) Contrary to Skype‟s argument,

however, Kwikset did not hold or suggest that an allegation that the plaintiff would not

have purchased the product if not for the false representation was the only way to satisfy

the causation requirement.

       Kwikset, supra, 51 Cal.4th 310, stated that the California Supreme Court in

In re Tobacco II Cases, supra, 46 Cal.4th 298, “held that a plaintiff „proceeding on

a claim of misrepresentation as the basis for his or her UCL action must demonstrate

actual reliance on the allegedly deceptive or misleading statements, in accordance with

well-settled principles regarding the element of reliance in ordinary fraud actions‟ ([In

re Tobacco II Cases, supra,] at p. 306). Consequently, „a plaintiff must show that the

misrepresentation was an immediate cause of the injury-producing conduct . . . . ‟ (In re

Tobacco II Cases, at p. 326.) However, a plaintiff is not required to allege that [the

challenged] misrepresentations were the sole or even the decisive cause of the

injury-producing conduct.‟ (Id. at p. 328.)” (Kwikset, supra, at pp. 326-327.)

       In re Tobacco II Cases, supra, 46 Cal.4th 298, explained: “While a plaintiff

must show that the misrepresentation was an immediate cause of the injury-producing

conduct, the plaintiff need not demonstrate it was the only cause. „ “It is

not . . . necessary that [the plaintiff‟s] reliance upon the truth of the fraudulent

misrepresentation be the sole or even the predominant or decisive factor in influencing

his conduct. . . . It is enough that the representation has played a substantial part, and so

                                              12
has been a substantial factor, in influencing his decision.” [Citation.] [¶] Moreover,

a presumption, or at least an inference, of reliance arises wherever there is a showing

that a misrepresentation was material. [Citations.] A misrepresentation is judged to be

“material” if “a reasonable man would attach importance to its existence or

nonexistence in determining his choice of action in the transaction in question”

[citations], and as such materiality is generally a question of fact unless the “fact

misrepresented is so obviously unimportant that the jury could not reasonably find that

a reasonable man would have been influenced by it.” [Citation.]‟ (Engalla v.

Permanente Medical Group, Inc.(1997) 15 Cal.4th 951, 976–977 [64 Cal.Rptr.2d 843,

938 P.2d 903].)” (Id. at pp. 326-327, italics added.)

       Thus, actual reliance, or causation, is inferred from the misrepresentation of
               3
a material fact. (In re Tobacco II Cases, supra, 46 Cal.4th at p. 327.) To satisfy the

requirement of pleading actual reliance, or causation, in connection with false

advertising for purposes of the UCL and the false advertising law, a plaintiff need only

allege a misrepresentation of a material fact. The materiality of a misrepresentation is

generally a question of fact unless the misrepresentation was so obviously unimportant

that the trier of fact could not reasonably conclude that a reasonable person would have

been influenced by it. (Ibid.) In our view, the materiality of Skype‟s alleged

representation that the calling plans were “Unlimited” is a question of fact that cannot

be decided as a question of law on this record. We therefore conclude that by alleging

3
      We use the term “misrepresentation” in this context to refer to both a false
misrepresentation and a representation that is likely to deceive a reasonable person.

                                             13
a material misrepresentation Chapman adequately alleges actual reliance for purposes of
                                         4
the UCL and the false advertising law.

       3.     Chapman Adequately Alleges a Count for Violation of the CLRA

       The CLRA prohibits specified “unfair methods of competition and unfair or

deceptive acts or practices” in connection with the sale or lease of goods or services to

a consumer (Civ. Code, § 1770, subd. (a)), including misrepresenting the characteristics,

uses or benefits of goods or services, and advertising goods or services with the intent

not to sell them as advertised. (Id., subd. (a)(5), (9).) A consumer who suffers damage

as a result of a prohibited act or practice can sue for damages, restitution, and an

injunction, but before suing for damages must first notify the defendant of the alleged

violation and allow the defendant an opportunity to remedy it. (Id., §§ 1780, subd. (a),

1782.) Civil Code section 1760 states that the CLRA “shall be liberally construed and

applied to promote its underlying purposes, which are to protect consumers against

unfair and deceptive business practices and to provide efficient and economical

procedures to secure such protection.”

       Chapman contends Skype misrepresented its calling plan as “Unlimited” when in

fact it was limited as to the number of minutes and number of calls. The standard for

determining whether a defendant misrepresented the characteristics, uses or benefits of

goods and services under Civil Code section 1770, subdivision (a)(5) is the same as that

for determining whether there was false advertising under the UCL and the false
4
        Our conclusion is the same with respect to the count for violation of the CLRA
for the same reasons.


                                             14
advertising law. (Klein v. Chevron U.S.A., Inc., supra, 202 Cal.App.4th at p. 1382; see

Kasky, supra, 27 Cal.4th at p. 951.) Thus, the question is whether the representation

was likely to deceive consumers. (Klein, supra, at p. 1382.)

       We conclude that whether a reasonable consumer is likely to be deceived by the

representation that the calling plan is “Unlimited” is a question of fact for the reasons

we have stated. We therefore conclude that Chapman adequately alleges deceptive

advertising for purposes of the CLRA and that the sustaining of the demurrer on this

basis was error.

       4.     Chapman Is Entitled to Leave to Amend her Complaint as to the Counts
              for Negligent and Intentional Misrepresentation

              a.     Chapman Adequately Alleges a Misrepresentation

       The essential elements of a count for intentional misrepresentation are

(1) a misrepresentation; (2) knowledge of falsity; (3) intent to induce reliance; (4) actual

and justifiable reliance; and (5) resulting damage. (Lazar v. Superior Court (1996)

12 Cal.4th 631, 638; Mirkin v. Wasserman (1993) 5 Cal.4th 1082, 1088-1089 & fn. 2.)

The essential elements of a count for negligent misrepresentation are the same except

that it does not require knowledge of falsity, but instead requires a misrepresentation of

fact by a person who has no reasonable grounds for believing it to be true. (Civ. Code,

§ 1710, subd. 2; Gagne v. Bertran (1954) 43 Cal.2d 481, 488; West v. JPMorgan Chase

Bank, N.A. (2013) 214 Cal.App.4th 780, 792.) Each element of a fraud count must be

pleaded with particularity so as to apprise the defendant of the specific grounds for the

charge and enable the court to determine whether there is any basis for the cause of


                                            15
action, although less specificity is required if the defendant would likely have greater

knowledge of the facts than the plaintiff. (Committee on Children’s Television, Inc. v.

General Foods Corp. (1983) 35 Cal.3d 197, 216-217.)

       Skype challenges the first and fourth elements. Chapman alleges that Skype

represented that its calling plans were “Unlimited,” when in fact they were limited as to

the number of minutes and number of calls. She alleges that she relied on this

representation and believed at the time that she initially purchased a subscription that

the plan was unlimited, and that she suffered damage when she incurred additional fees

for calls that should have been included in the advertised monthly fee.

       In our view, Chapman adequately alleges a misrepresentation of fact based on

Skype‟s use of the word “Unlimited” to describe calling plans that were not unlimited.

Whether Skype disclosed the limits in a manner that would avoid any deception goes

mainly to the issue of justifiable reliance. This is a question of fact. (Alliance

Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239.) On this record, we cannot

conclude that the limits disclosed in the fair usage policy were so conspicuous and

apparent as to compel the conclusion as a matter of law that Chapman‟s reliance on the

representation that the plan was “Unlimited” was unjustified.

              b.     Chapman Is Entitled to Leave to Amend to Allege Actual Reliance

       Skype argues that Chapman fails to allege with the required specificity that she

would not have purchased a subscription if she had known that the calling plan was

limited, and the fact that she twice renewed her subscription after learning of the limits

shows that she did not actually rely on its characterization of the plan as “Unlimited.”

                                             16
To allege actual reliance on misrepresentations with the required specificity for a fraud

count, “ „[t]he plaintiff must plead that he believed the representations to be true . . . and

that in reliance thereon (or induced thereby) he entered into the transaction. [Citation.]‟

[Citation.]” (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1063.) Chapman requests

leave to amend her complaint to allege that she would not have purchased a subscription

if she had known that the calling plan was limited, and is entitled to leave to so amend.

(Careau, supra, 222 Cal.App.3d at p. 1386.)

       We reject the argument that Chapman cannot satisfy the element of actual

reliance. She does not allege in her complaint that she renewed her subscription, and

that purported fact is not judicially noticeable. Skype relies instead on evidence

submitted in support of its motion for sanctions, but such evidence cannot be considered

in ruling on a demurrer. (See 5 Witkin, California Procedure (5th ed. 2008) Pleading

§ 946, pp. 360-361.) We express no opinion as to whether her purported renewals

compel the conclusion that Chapman would have purchased a subscription even if she

had known of the limits.

       Skype also argues that Chapman could not have justifiably relied on any

misrepresentation about the terms of her subscription after being afforded a reasonable

opportunity to read the subscription agreement, citing Rosenthal v. Great Western

Financial Securities Corp. (1996) 14 Cal.4th 394 (Rosenthal). We disagree. The

California Supreme Court in Rosenthal held that a party claiming fraud in the execution

of a contract must prove that he or she had no reasonable opportunity to learn the

character or the essential terms of the document he or she was signing. (Id. at p. 423.)

                                             17
A party cannot establish fraud in the execution if he or she failed to read the contract

despite having had a reasonable opportunity to do so. (Ibid.) Rosenthal stated that

statements assuring the plaintiffs that the written agreements were unimportant, “even if

falsely and fraudulently made, do not void a written contract, because it is generally

unreasonable, in reliance on such assurances, to neglect to read a written agreement

before signing it.” (Id. at p. 424.)

       Rosenthal distinguished fraud in the execution, where the promisor does not

know what he or she is signing or does not intend to enter into a contract at all,

rendering the contract void, from fraud in the inducement, where the promisor knows

what he or she is signing but his or her consent is induced by fraud, rendering the

contract voidable. (Rosenthal, supra, 14 Cal.4th at p. 415.) Rosenthal also

distinguished cases holding that a plaintiff may obtain equitable relief from the terms of

a contract that was procured through fraud in the inducement despite his or her
                                                                                         5
negligence in failing to read the contract or otherwise failing to discover the facts.

(Id. at pp. 421-423.) Although the failure to read a contract precludes a claim of fraud

in the execution, so as to render the contract completely void (id. at p. 423), it does not

necessarily preclude equitable relief from the contract terms based on

a misrepresentation. (Van Meter v. Bent Construction Co. (1956) 46 Cal.2d 588, 595


5
        Rosenthal expressed no opinion as to the validity of the rule allowing equitable
relief from the terms of a contract based on fraud in the inducement despite the
plaintiff‟s negligence, but held only that the rule is inapplicable when the plaintiff
alleges that the contract is void for fraud in the execution. (Rosenthal, supra, 14 Cal.4th
at p. 423.)


                                             18
[stating that the plaintiff‟s reliance on the defendant‟s misrepresentation does not

preclude the reformation of a contract “unless plaintiff‟s conduct, in the light of his

intelligence and information, is preposterous or irrational”]; California Trust Co. v.

Cohn (1932) 214 Cal. 619, 627 [stating that the reformation of a contract is proper if the

plaintiff‟s failure to read the contract was induced by the defendant‟s misrepresentation

and fraud].)

       Chapman does not allege fraud in the execution or contend the contract is void,
                                                      6
so Rosenthal, supra, 14 Cal.4th 394, is not on point. Moreover, she did not rely on

assurances that the contract was unimportant and entirely fail to read the contract, as in

Rosenthal, but instead read and relied on a representation in the subscription agreement

that the plan was “Unlimited.” We conclude that Chapman‟s failure to read the entire

subscription agreement does not necessarily preclude her justifiable reliance on

a representation in the subscription agreement that the plan was “Unlimited,” for

purposes of negligent and intentional misrepresentation.

       As we have discussed, we cannot, on this record, conclude as a matter of law that

the limits disclosed in the fair usage policy were so conspicuous and apparent that

Chapman‟s reliance on the representation that the plan was “Unlimited” necessarily was

unjustified.
6
        Just as Rosenthal, supra, 14 Cal.4th at page 423, held that the rule allowing
equitable relief from the terms of a contract based on fraud in the inducement is
inapplicable when the plaintiff alleges that the contract is void for fraud in the
execution, we conclude that the rule from Rosenthal is inapplicable and does not
preclude justifiable reliance when a party seeks damages for fraud and does not allege
that the contract is void for fraud in the execution.


                                             19
       5.     Chapman Is Entitled to Leave to Amend her Complaint
              as to the Count for Unjust Enrichment

       “Unjust enrichment is synonymous with restitution. [Citation.]” (Durell v.

Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1370 (Durell).) A person is required

to make restitution if the failure to do so would result in unjust enrichment. (First

Nationwide Savings v. Perry (1992) 11 Cal.App.4th 1657, 1662-1663.) Restitution of

the benefits conferred under a contract may be awarded if the contract is rescinded or

determined to be unenforceable. (Durell, supra, at p. 1370; see 1 Witkin, Summary of

Cal. Law (10th ed. 2005) Contracts, § 1042, pp. 1132-1133.) Restitution based on

unjust enrichment is not available, however, if an enforceable express contract

determines the parties‟ rights and obligations. (Durell, supra, at p. 1370.)

       A party alleging that she was fraudulently induced to enter into a contract may

either rescind the contract, offer to restore any benefits received, and seek restitution or
                                                                 7
retain the benefits of the contract and seek damages for fraud. (Denevi v. LGCC, LLC

(2004) 121 Cal.App.4th 1211, 1220; see 5 Witkin, Summary of Cal. Law (10th ed.

2005) Torts, §§ 827-828, pp. 1200-1201.) A rescission requires prompt notice to the

other party to the contract and an offer to restore any consideration received. (Civ.

Code, § 1691.) “When notice of rescission has not otherwise been given or an offer to

restore the benefits received under the contract has not otherwise been made, the service


7
       A plaintiff ordinarily may pursue inconsistent remedies in her complaint and
need not make an election of remedies at the pleading stage. (Roam v. Koop (1974)
41 Cal.App.3d 1035, 1039.) Skype does not contend the election of remedies doctrine
precludes any count alleged in the complaint, so we need not consider the issue.


                                             20
of a pleading in an action or proceeding that seeks relief based on rescission shall be

deemed to be such notice or offer or both.” (Ibid.)

       Chapman alleges in her count for unjust enrichment that Skype falsely

represented that the calling plans were “Unlimited” and that it would be inequitable for

Skype to retain the subscription fees and overage charges paid. She does not allege that

the subscription agreement is unenforceable or that she rescinds the agreement. Her

failure to do so compels the conclusion that the sustaining of the demurrer was proper

based on the existence of an enforceable express contract. Chapman argues on appeal,

however, that she is entitled to a rescission based on fraud. We construe her argument

as a request for leave to amend her complaint to expressly allege, in the alternative to

her counts for intentional and negligent misrepresentation, that she rescinds the

subscription agreement, seeks restitution, and offers to restore the consideration

received. We conclude that she is entitled to leave to so amend her complaint.

(Careau, supra, 222 Cal.App.3d at p. 1386.)




                                            21
                                     DISPOSITION

       The judgment is reversed with directions to the trial court to vacate its order

sustaining the demurrer to all counts without leave to amend and enter a new order

(1) sustaining the demurrer to the first, second, and third counts with leave to amend,

and (2) overruling the demurrer to the fourth through sixth counts. Chapman shall

recover her costs on appeal.



       CERTIFIED FOR PUBLICATION




                                                                       CROSKEY, J.

WE CONCUR:




       KLEIN, P. J.




       ALDRICH, J.




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