Opinion ID: 810054
Heading Depth: 4
Heading Rank: 2

Heading: Unilateral Contract

Text: [3] We reach a different conclusion as to the plaintiffs’ theory that RJR made an offer to enter into a unilateral contract. In contrast to a bilateral contract, a unilateral contract involves the exchange of a promise for a performance. See 1 It is, of course, possible for a consumer rewards program to involve a bilateral contract. Frequent flyer programs, for example, may be governed by membership agreements that impose contractual duties on both sides of the bargain, exposing airlines and travelers alike to potential contractual liability. See, e.g., Ginsberg v. Northwest, Inc., 653 F.3d 1033, 1035, 1040 (9th Cir. 2011); Am. Airlines, Inc. v. Am. Coupon Exch., Inc., 721 F. Supp. 61, 63 (S.D.N.Y. 1989). Here, however, the plaintiffs have not alleged an offer or contract involving reciprocal duties, and therefore they have not alleged a bilateral contract. 12296 SATERIALE v. R.J. REYNOLDS TOBACCO CO. Harris v. Time, Inc., 237 Cal. Rptr. 584, 587 (Ct. App. 1987). The offer is accepted by rendering a performance rather than providing a promise. See Restatement § 45 cmt. a. “Typical illustrations are found in offers of rewards or prizes . . . .” Id. [4] RJR argues that its C-Notes, whether read in isolation or in combination with the catalogs, were not offers, but invitations to make an offer. RJR relies on the common law’s general rule that “[a]dvertisements of goods by display, sign, handbill, newspaper, radio or television are not ordinarily intended or understood as offers to sell.” Id. § 26 cmt. b. RJR emphasizes that two judicial decisions have applied this general rule to customer rewards programs similar to the Camel Cash program, see Leonard v. Pepsico, Inc., 88 F. Supp. 2d 116, 122-27 (S.D.N.Y. 1999); Alligood v. Procter & Gamble Co., 594 N.E.2d 668, 668-70 (Ohio Ct. App. 1991) (per curiam), and urges us to apply the rule here as well. We decline to do so. First, it is not clear that the common law rule upon which RJR relies applies under California law. See Donovan, 27 P.3d at 710 (stating that “[t]his court has not previously applied the common law rules upon which defendant relies, including the rule that advertisements generally constitute invitations to negotiate rather than offers,” observing that “such rules . . . have been criticized on the ground that they are inconsistent with the reasonable expectations of consumers and lead to haphazard results,” citing Melvin Aron Eisenberg, Expression Rules in Contract Law and Problems of Offer and Acceptance, 82 Cal. L. Rev. 1127, 1166-72 (1994), and concluding that “[i]n the present case . . . we need not consider the viability of the black-letter rule regarding the interpretation of advertisements”). [5] Second, even assuming California law incorporates the common law rule, that rule includes an exception for offers of a reward, including offers of a reward for the redemption of coupons. As a leading contract law treatise explains, SATERIALE v. R.J. REYNOLDS TOBACCO CO. 12297 It is very common, where one desires to induce many people to action, to offer a reward for such action by general publication in some form. A statement that plausibly makes an offer of this kind must be reasonably interpreted according to its terms and the surrounding circumstances. If the statement, properly interpreted, calls for the performance or commencement of performance of specific acts, action in accordance with such an interpretation will close a contract or make the offer irrevocable. There are many cases of an offer of a reward for the cap- ture of a person charged with crime, for desired information, for the return of a lost article, for the winning of a contest, or for the redemption of cou- pons. In addition, advertisements placed by buyers inviting sellers to ship goods without prior communication are clear cases of offers. The contracts so made are almost always unilateral. Corbin on Contracts (hereinafter Corbin) § 2.4 (2012) (emphasis added) (footnotes omitted). RJR does not discuss this exception, relying instead on Leonard and Alligood. Several courts, however, have applied the exception to customer rewards programs. See, e.g., Payne v. Lautz Bros., 166 N.Y.S. 844, 845-46, 848 (N.Y. City Ct. 1916) (reward coupons included with packages of soap wrappers), aff’d without opinion, 168 N.Y.S. 369 (N.Y. Sup.), aff’d without opinion, 171 N.Y.S. 1094 (N.Y. App. Div. 1918), cited with approval in Corbin § 2.4 n.14; Reynolds v. Philip Morris U.S.A., Inc., No. 05-cv-1876 (S.D. Cal. June 5, 2007) (order denying defendant’s motion for summary judgment) (reward points obtained by purchasing Marlboro cigarettes), rev’d on other grounds, 332 F. App’x 397 (9th Cir. June 2, 2009); Wolens v. Am. Airlines, Inc., 626 N.E.2d 205, 208 (Ill. 1993) (reward miles awarded for flying on American Airlines), rev’d on other grounds, 513 U.S. 219 (1995).2 2 Payne found an enforceable unilateral contract where the defendant advertised that it would give a round-trip train ticket to consumers who 12298 SATERIALE v. R.J. REYNOLDS TOBACCO CO. [6] Like these courts, we see no justification for applying the general common law rule, rather than the common law exception, to circumstances such as those presented here. The common law rule that advertisements ordinarily do not constitute offers arose to address a specific problem — the potential for over-acceptance — not applicable here. Professor Farnsworth explains that an offer ordinarily does not exist when a proposal for a limited quantity has been sent to more persons than its maker could accommodate. . . . Otherwise, supposing a shopkeeper were sold out of a particular class of goods, thousands of members of the public might crowd into the shop and demand to be served, and each one would have a right of action against the proprietor for not performing his contract. A customer would not usually have reason to believe that the shopkeeper intended exposure to the risk of a multitude of acceptances resulting in a number of contracts exceeding the shopkeeper’s inventory. E. Allan Farnsworth, Contracts (hereinafter Farnsworth) § 3.10, at 134 (4th ed. 2004) (footnote and internal quotation marks omitted). This problem arises in the case of ordinary collected 25 coupons from the defendant’s soap packages and redeemed them for the train tickets (or other merchandise in the defendant’s rewards catalogs) at the defendant’s stores. See 166 N.Y.S. at 844-48. In Reynolds, the court held that a genuine issue of material fact existed regarding whether the plaintiff accepted an offer to enter into a unilateral contract by purchasing Marlboro cigarettes, clipping Marlboro Miles certificates, saving the certificates and eventually mailing a sufficient number of certificates to Philip Morris to exchange for products. See Reynolds v. Philip Morris U.S.A., supra, at 8. In Wolens, the Illinois Supreme Court recognized a contractual relationship between American Airlines and members of its frequent flyer program, stating, “When a member earns frequent flyer miles by flying on American or by doing business with American affiliates, a contractual relationship is formed which vests the frequent flyer with the right to earn specific travel awards.” 626 N.E.2d at 208. SATERIALE v. R.J. REYNOLDS TOBACCO CO. 12299 advertisements for the sale of goods or services, but not here. First, RJR’s ostensible purpose in promoting the Camel Cash program was not to sell a limited inventory, but to induce as many consumers as possible to purchase Camel cigarettes. Second, RJR could not have been trapped into a situation in which acceptances exceeded inventory. RJR alone decided how many C-Notes to distribute, so it exercised absolute control over the number of acceptances. As Farnsworth explains, “if the very nature of a proposal restricts its maker’s potential liability to a reasonable number of people, there is no reason why it cannot be an offer.” Id. at 135. [7] For these reasons, we find no reason to presume that RJR’s communications did not constitute an offer merely because they were addressed to the general public in the form of advertisements. The operative question under California law, therefore, is simply “whether the advertiser, in clear and positive terms, promised to render performance in exchange for something requested by the advertiser, and whether the recipient of the advertisement reasonably might have concluded that by acting in accordance with the request a contract would be formed.” Donovan, 27 P.3d at 710. Construing the complaint in the light most favorable to the plaintiffs, and drawing all reasonable inferences from the complaint in the plaintiffs’ favor, see Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009); Doe v. United States, 419 F.3d 1058, 1062 (9th Cir. 2005), we conclude that the plaintiffs have adequately alleged the existence of an offer to enter into a unilateral contract, whereby RJR promised to provide rewards to customers who purchased Camel cigarettes, saved Camel Cash certificates and redeemed their certificates in accordance with the catalogs’ terms. We reach this conclusion in light of the totality of the circumstances surrounding RJR’s communications to consumers: the repeated use of the word “offer” in the C-Notes; the absence of any language disclaiming the intent to be bound; the inclusion of specific restrictions in the C-Notes (“Offer 12300 SATERIALE v. R.J. REYNOLDS TOBACCO CO. restricted to smokers 21 years of age or older”; “Offer good only in the USA, and void where restricted or prohibited by law”; “Check catalog for expiration date”; “Limit 5 requests for a catalog per household”); the formal enrollment process, through which consumers submitted registration forms and RJR issued enrollment numbers; and the substantial reliance expected from consumers.3 Donovan explains that under the common law “advertisements have been held to constitute offers where they invite the performance of a specific act without further communication and leave nothing for negotiation.” 27 P.3d at 710. These requirements are satisfied here. RJR’s alleged offer invited the performance of specific acts (saving C-Notes and redeeming them for rewards in accordance with the catalog) without further communication, and leaving nothing for negotiation. RJR properly emphasizes that the alleged offer left aspects of RJR’s performance to RJR’s discretion. The offer did not specify when future catalogs would be issued, what rewards merchandise they would include, what quantities of merchandise would be available or how many C-Notes would be required to exchange for particular items. The plaintiffs, how- 3 The plaintiffs’ substantial reliance distinguishes this case from cases involving garden-variety advertisements. To take advantage of the Camel Cash program, consumers were expected to purchase Camel cigarettes and accumulate Camel Cash certificates for a period of weeks, months or even years. See Compl. ¶ 29 (alleging that “[t]he number of Camel Cash certificates needed to obtain merchandise . . . varied from as little as one hundred to many thousands,” and noting that RJR “further encouraged plaintiffs and other Class members to collect their Camel Cash (as opposed to redeeming them as soon as possible) because merchandise listed in defendant’s catalogs for redemption by a greater number of coupons was disproportionately more valuable than the merchandise which could be redeemed by fewer coupons”). Citing an offer for a reward as an example, Corbin explains that “a proposal is likely to be deemed to be an offer if it is foreseeable that the addressee of the proposal will rely upon it.” Corbin § 2.2. This is so because a member of the public is unlikely to undertake substantial reliance in the absence of a binding commitment from the offeror — i.e., on the mere chance that the offeror will perform. SATERIALE v. R.J. REYNOLDS TOBACCO CO. 12301 ever, do not allege that these were essential terms. See Compl. ¶ 31 (“[I]t was not a contract to obtain a specific item or good, such as a ‘Joe Camel’ jacket or ashtray.”). Instead, they allege a contract the essence of which was their general right to redeem their Camel Cash certificates, during the life of the program, for whatever rewards merchandise RJR made available, with RJR’s discretion limited only by the implied duty of good faith performance. The presence of discretion thus does not preclude the existence of an offer.4