Candelore v. Tinder, Inc.

The trial court sustained Tinder's demurrer without leave to amend. With respect to the Unruh Act claim, the court ruled (1) there is "no basis in the published decisions for applying the Unruh Act to age-based pricing differentials"; (2) "Tinder's rationale that customers age 30 and younger have less capacity to pay for premium services" demonstrates "the differential is not 'arbitrary, invidious or unreasonable' within the meaning of the Act"; and (3) Tinder's alleged pricing furthers the " 'public policies' " of "(a) increased access to services for the general public and (b) profit maximization by the vendor, a legitimate goal in our capitalistic economy." As for the UCL claims, the court ruled (1) Candelore's failure to allege an Unruh Act violation defeats his " 'unlawful' " prong claim; and (2) the alleged business practice is not " 'unfair' " under the UCL because "it is entirely proper for Tinder to charge alternative prices in the pursuit of profit maximization" and "the rationale for this price distinction (quoted by plaintiff in the Complaint ...) is a sufficient business reason for doing so."

The trial court entered judgment for Tinder, from which Candelore appeals.

DISCUSSION

1. Overview of the Unruh Act

"Enacted in 1959, the Unruh Act secures equal access to public accommodations and prohibits discrimination by business establishments. Its predecessor, our state's first public accommodations statute, became law in 1897." ( Harris, supra, 52 Cal.3d at p. 1150, 278 Cal.Rptr. 614 , 805 P.2d 873 .) "The 1897 act was patterned in part after the National Civil Rights Act of 1875 ( 18 Stat. 335 , ch. 114, §§ 1-2) which guaranteed to all persons within United States jurisdiction 'the full and equal enjoyment of the accommodations, advantages, facilities, and privileges of inns, public conveyances on land or water, theaters, and other places of public amusement ....' " ( Harris, at p. 1150, fn. 3, 278 Cal.Rptr. 614 , 805 P.2d 873 .) After the United States Supreme Court invalidated the federal act, many states, including California, responded by enacting their own statutes assuring access to public accommodations on a nondiscriminatory basis. ( Id. at pp. 1150-1151, fn. 3, 278 Cal.Rptr. 614 , 805 P.2d 873 ., citing Civil Rights Cases (1883) 109 U.S. 3 , 3 S.Ct. 18 , 27 L.Ed. 835 .)

The Unruh Act provides that "[a]ll persons within the jurisdiction of this state are free and equal, and no matter what their sex, race, color, religion, ancestry,

Thus, while not all discrimination is prohibited (see Harris, supra, 52 Cal.3d at pp. 1160-1161, 278 Cal.Rptr. 614 , 805 P.2d 873 ), there is no dispute that, as relevant here, the Unruh Act proscribes arbitrary discrimination based on an individual's age-a personal characteristic similar to the classifications enumerated in the Act. (See Marina Point, supra, 30 Cal.3d at p. 730, 180 Cal.Rptr. 496 , 640 P.2d 115 ; Pizarro v. Lamb's Players Theatre (2006) 135 Cal.App.4th 1171 , 1174, 37 Cal.Rptr.3d 859 ( Pizarro ) ["Age discrimination may violate the Act if used as an arbitrary class-based generalization"]; see also Harris, at p. 1153, 278 Cal.Rptr. 614 , 805 P.2d 873 ["the Legislature affirmed that section 51 prohibits age discrimination in the sale or rental of housing"]; Koebke, supra, 36 Cal.4th at p. 842, 31 Cal.Rptr.3d 565 , 115 P.3d 1212 ["the phrase 'personal characteristic' in Harris , ... encompasse[s] both the categories enumerated in the Act and those categories added to the Act by judicial construction" prior to the Harris opinion].)

The Act applies not merely in situations where businesses exclude individuals altogether, but also "where unequal treatment is the result of a

Our Supreme Court's decision in Marina Point is controlling. There, the Supreme Court was asked to address whether, under the Unruh Act, an apartment complex owner could lawfully refuse to rent its apartments to a family solely because the family included a minor child. ( Marina Point, supra, 30 Cal.3d at p. 724, 180 Cal.Rptr. 496 , 640 P.2d 115 .) In the landlord's action to eject one such family, the municipal court found that " '[c]hildren are rowdier, noisier, more mischievous and more boisterous than adults,' and upheld the landlord's policy of excluding all families with minor children." ( Ibid . ) Based on this finding, the landlord defended the policy on appeal, claiming it was permitted "to achieve its legitimate interest in a quiet and peaceful residential atmosphere by excluding all minors from its housing accommodations, thus providing its adult tenants with a 'child free' environment." ( Id . at p. 725, 180 Cal.Rptr. 496 , 640 P.2d 115 .) The Supreme Court disagreed.

The Supreme Court concluded the landlord's blanket exclusion of families with minor children contravened "the individual nature of the

Consistent with Marina Point , we conclude Tinder's alleged discriminatory pricing model cannot be justified by a generalization about the relative incomes and budget limitations of the two implicated age groups. We turn now to whether the public policies cited by the trial court compelled the finding that Tinder's alleged discrimination was justified, as a matter of law.

3. The Complaint's Allegations Do Not Compel the Finding that Public Policy Justifies Tinder's Age-based Classification

In sustaining the demurrer, the trial court concluded Tinder's alleged age-based pricing model was justified by " 'public policies' " that promote "(a) increased access to services for the general public and (b) profit maximization by the vendor, a legitimate goal in our capitalistic economy." Similar justifications were rejected by the Supreme Court in Koire when advanced by the bar owner in defense of its Ladies' Nights discounts. Further, while our Supreme Court recognized in Harris that vendors may pursue legitimate business interests by making economic distinctions among customers, it held such distinctions were permissible because they employed criteria that could conceivably be met by any customer, regardless of the customer's personal characteristics. ( Harris, supra, 52 Cal.3d at p. 1163, 278 Cal.Rptr. 614 , 805 P.2d 873 .) The Supreme Court's holdings in Koire and Harris control our resolution of this issue.

As for profit maximization, we have no quarrel with the trial court's conclusion that it can be an acceptable business objective and can be advanced by price discrimination. As anyone who has attended an auction can attest, individuals may and often do value goods and services differently. Some are willing and able to pay a higher price than others for the same product. And, as any student of elementary microeconomics knows, sellers of goods and services could (at least theoretically) maximize profits if they could engage in price discrimination by charging higher prices to those consumers willing to pay them, and lower prices to the rest. For example, a seller might offer several versions of its product, with different features, trim, branding, etc., each at a different price, in an effort to increase overall profits. Or a seller might seek to attract bargain hunters by offering temporary price reductions during a sale or other promotion. But the quest for profit maximization can never serve as an excuse for prohibited discrimination among potential customers.

Recognizing that a business's interest in maximizing profits is insufficient to justify discrimination based on an individual's personal characteristics does not preclude a business like Tinder from employing rational economic distinctions to broaden its user base and increase profitability. (See Harris, supra, 52 Cal.3d at p. 1163, 278 Cal.Rptr. 614 , 805 P.2d 873 .) But, as Koire and Harris teach, those distinctions must be drawn in such a way that they could conceivably be met by any customer, regardless of the customer's age or other personal characteristics. (See Koire, supra, 40 Cal.3d at p. 36, 219 Cal.Rptr. 133 , 707 P.2d 195 ; Harris, at p. 1163, 278 Cal.Rptr. 614 , 805 P.2d 873 .) For instance, Tinder could establish different membership levels for its Tinder Plus service that would allow more budget constrained customers, regardless of age, to access certain premium features at a lower price, while offering additional features to those less budget conscious users who are willing to pay more. Tinder could also offer discounts for purchasing several months of Tinder Plus in advance that would likewise allow budget constrained users cheaper access to its premium features, without arbitrarily discriminating against older users on the basis of age. "The key," as our Supreme Court put it in Koire , "is that the discounts must be 'applicable alike to persons of every sex, color, race, [and age, etc.]' ( § 51 ), instead of being contingent on some arbitrary, class-based generalization." ( Koire, at p. 36, 219 Cal.Rptr. 133 , 707 P.2d 195 ; accord Harris, at p. 1163, 278 Cal.Rptr. 614 , 805 P.2d 873 ["discounts based on quantity, advance reservations, time of purchase or other conditions 'which any patron could satisfy' [are] 'clearly permissible' "].)

As alleged, Tinder's pricing model discriminates against users age 30 and over, and the complaint's allegations do not compel the finding that this discrimination is justified by a strong public policy in favor of such

Further, in view of our conclusion that Tinder's alleged discriminatory pricing model violates the public policy embodied in the Unruh Act, the UCL's "unfair" prong provides an independent basis for relief on the facts alleged. The standard for finding an "unfair" practice in a consumer action is " 'intentionally broad, thus allowing courts maximum discretion to prohibit new schemes to defraud. [Citation.] The test of whether a business practice is unfair "involves an examination of [that practice's] impact on its alleged victim, balanced against the reasons, justifications and motives of the alleged wrongdoer. In brief, the court must weigh the utility of the defendant's conduct against the gravity of the harm to the alleged victim .... [Citations.]" ... [A]n "unfair" business practice occurs when that practice "offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers." [Citation.]' " (

But, as discussed below, the Unruh Act provides broad protection against arbitrary age-based price discrimination. No matter what Tinder's market research may have shown about the younger users' relative income and willingness to pay for the service, as a group, as compared to the older cohort, some individuals will not fit the mold. Some older consumers will be "more budget constrained" and less willing to pay than some in the younger group. We conclude the discriminatory pricing model, as alleged, violates the Unruh Act and the UCL to the extent it employs an arbitrary, class-based, generalization about older users' incomes as a basis for charging them more than younger users. Because nothing in the complaint suggests there is a strong public policy that justifies the alleged discriminatory pricing, the trial court erred in sustaining the demurrer. Accordingly, we swipe left, and reverse.

STANDARD OF REVIEW

This appeal followed a judgment of dismissal after the trial court sustained Tinder's demurrer without leave to amend. "The purpose of a demurrer is to test the sufficiency of a complaint by raising questions of law." ( Sargoy v. Resolution Trust Corp. (1992) 8 Cal.App.4th 1039 , 1041, 10 Cal.Rptr.2d 889 ( Sargoy ).) The court is to accept as true all allegations of fact contained in the complaint. ( Id . at pp. 1041-1042, 10 Cal.Rptr.2d 889 ) When a demurrer is sustained, the reviewing court must determine whether the complaint alleges sufficient facts to state a cause of action, adopting a liberal construction of the pleading and drawing all reasonable inferences in favor of the asserted claims. ( Harris v. Capital Growth Investors XIV (1991) 52 Cal.3d 1142 , 1170, fn. 16, 278 Cal.Rptr. 614 , 805 P.2d 873 ( Harris ).)

FACTS AND PROCEDURAL BACKGROUND

In addition to the factual allegations set forth in the Introduction to this opinion, Candelore's complaint included the following excerpt from a news report on the website TakePart, offering Tinder's justification for its age-based pricing:

"The logic Tinder executives supplied for the age-related pricing? It benefits their bottom line. 'During our testing we've learned, not surprisingly, that younger users are just as excited about Tinder Plus, but are more budget constrained, and need a lower price to pull the trigger,' Tinder's vice president of corporate communications, Rosette Pambakian, told TakePart in an email. [¶] 'We've priced Tinder Plus based on a combination of factors, including what we've learned through our testing, and we've found that these price points were adopted very well by certain age demographics,' Pambakian wrote."

Although its text identifies particular kinds of discrimination-such as sex, race, and national origin-this list is "illustrative, rather than restrictive," and the Unruh Act's proscription against arbitrary discrimination extends beyond these

2. Tinder's Alleged Pricing Model Uses a Personal Characteristic to Discriminate Against Older Customers Based on a Generalization About Income

Candelore asserts Tinder's alleged pricing model violates the Unruh Act because it discriminates against customers who are age 30 and over by requiring them to pay more than twice as much as younger customers to access Tinder Plus. In response, Tinder maintains this allegation is insufficient to state a claim for arbitrary age discrimination, because its pricing model rationally treats "youth [as] a reasonable proxy for economic disadvantage." (Italics added.) By Tinder's account, it is "self-evident that people under 30 face financial challenges," and this "common knowledge provides a reasonable and non-arbitrary basis for Tinder to offer a discount to people under 30." The trial court likewise reasoned that Tinder's age-based pricing model was "not 'arbitrary, invidious or unreasonable' within the meaning of the Act" because the complaint admitted "Tinder's rationale" was based on market research showing "customers age 30 and younger have less capacity to pay for premium

Having concluded the "potential misbehavior of children as a class [did] not justify [the landlord's] exclusionary practice," the Marina Point court turned to whether the policy might "nonetheless be sustained as reasonable on the ground that the presence of children basically does not accord with the nature of [the landlord's] business enterprise and of the facilities provided." ( Marina Point, supra, 30 Cal.3d at p. 741, 180 Cal.Rptr. 496 , 640 P.2d 115 .) With respect to this issue, the court rejected the landlord's effort to analogize the restriction

Our decision to break with Koire 's dictum is bolstered by the fact that discounts for children and seniors are independently justified by compelling "social policy considerations as evidenced by legislative enactments ." ( Koire, supra, 40 Cal.3d at p. 38, 219 Cal.Rptr. 133 , 707 P.2d 195 , italics added.) In Koire , the court remarked that while it "need not determine the validity of any specific age-based discount, especially without the benefit of briefing on the issue from parties actually affected by the practice," there were "several important and distinguishing features" that differentiated such practices from the sex-based discounts under review. ( Id. at p. 37, 219 Cal.Rptr. 133 , 707 P.2d 195 .) Among those distinguishing features, the Koire court emphasized that "[n]umerous statutes in California provide for differential treatment of children and adults," "state and federal legislation ha[d] been enacted to address the special needs of our elderly citizens," and "the Legislature ha[d] specifically provided for certain price discounts for senior citizens." ( Id . at pp. 37-38, 219 Cal.Rptr. 133 , 707 P.2d 195 , citing, e.g., Civ. Code, § 1556 [limitation on minors' capacity to contract]; 42 U.S.C. § 1381 et seq. [supplemental security income for seniors]; Welf. & Inst. Code, § 12050 et seq. [senior security benefits]; former Veh. Code, § 13001 [reduced transit fares for seniors]; Ed. Code, § 89330 [waiver of fees at California State University campuses for seniors].) Indeed, although the court identified the limited earning capacities of children and seniors as an additional justification for differential treatment, that consideration too was driven by statutory enactments reflecting the Legislature's judgment to limit work opportunities for these age demographics. ( Koire, at pp. 37-38, 219 Cal.Rptr. 133 , 707 P.2d 195 , citing, e.g., Lab. Code, §§ 1285 et seq., 1290 & 1391 [establishing conditions and sanctions for employing minors]; Gov. Code, § 75000 et seq. [the Judges' Retirement Law].)

Although past cases have followed the Koire dictum in citing generalized assumptions about income disparity as grounds to uphold age-based price discounts, in most of those cases the discounts were independently

In Koire , the Supreme Court rejected the argument that increasing patronage

"In Marina Point , this court held that the fact that a business enterprise was ' "proceed[ing] from a motive of rational self-interest" ' did not justify discrimination. [Citation.] This court noted that 'an entrepreneur may pursue many discriminatory practices "from a motive of rational self-interest," e.g., economic gain, which would unquestionably violate the Unruh Act. For example, an entrepreneur may find it economically advantageous to exclude all homosexuals, or alternatively all nonhomosexuals, from his restaurant or hotel, but such a "rational" economic motive would not, of course, validate the practice.' [Citation.] It would be no less a violation of the Act for an entrepreneur to charge all homosexuals, or all nonhomosexuals, reduced rates in his or her restaurant or hotel in order to encourage one group's patronage and, thereby, increase profits. The same reasoning is applicable here, where reduced rates were offered to women and not men."

( Koire, supra, 40 Cal.3d at p. 32, 219 Cal.Rptr. 133 , 707 P.2d 195 .) And, the same reasoning is likewise applicable here, where Tinder allegedly offers reduced

4. The Complaint States a Claim for Violation of the UCL

The UCL prohibits, and provides civil remedies for, "unfair competition," which includes "any unlawful, unfair or fraudulent business act or practice." ( Bus. & Prof. Code, § 17200.) Its purpose " 'is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.' [Citations.] In service of that purpose, the Legislature framed the UCL's substantive provisions in ' "broad sweeping language" ' [citations] and provided 'courts with broad equitable powers to remedy violations' [citation]." ( Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310 , 320, 120 Cal.Rptr.3d 741 , 246 P.3d 877 .)

The UCL's "unlawful" prong "borrows violations of other laws ... and makes those unlawful practices actionable under the UCL." ( Lazar, supra, 69 Cal.App.4th at p. 1505, 82 Cal.Rptr.2d 368 .) " '[V]irtually any law or regulation-federal or state, statutory or common law-can serve as [a] predicate for [an] ... "unlawful" [prong] violation.' " ( Paulus v. Bob Lynch Ford, Inc . (2006) 139 Cal.App.4th 659 , 681, 43 Cal.Rptr.3d 148 .) Because we

As discussed, the Unruh Act protects "all persons" from status-based discriminatory business practices that operate to deprive innocent individuals of "full and equal accommodations, advantages, facilities, privileges, or services in all business establishments of every kind whatsoever." ( § 51, subd. (b) ; Marina Point, supra, 30 Cal.3d at p. 740, 180 Cal.Rptr. 496 , 640 P.2d 115 .) Insofar as the complaint sufficiently alleges a violation of the Act and the public policy it embodies, a claim for violation of the UCL has also been stated.

DISPOSITION

The judgment is reversed. Candelore is entitled to his costs.

We concur:

EDMON, P.J.

LAVIN, J.