Court Opinion

ID: 3050132
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:30:02.018209+00
Date Added: 2024-06-11T11:49:22.817157
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

PAUL LOZANO, on behalf of himself            
and all others similarly situated
and as a private attorney general
on behalf of the members of the
general public residing within the                 Nos. 05-56466
State of California,                                    05-56511
                  Plaintiff-Appellee-
                    Cross Appellant,
                                                     D.C. No.
                                                  CV-02-00090-AHS
                 v.                                  OPINION
AT&T WIRELESS SERVICES, INC., a
Delaware Corporation,
               Defendant-Appellant-
                     Cross Appellee.
                                             
         Appeal from the United States District Court
            for the Central District of California
          William J. Rea, District Judge, Presiding*

                     Argued and Submitted
               June 4, 2007—Pasadena, California

                     Filed September 20, 2007

 Before: Cynthia Holcomb Hall and Consuelo M. Callahan,
  Circuit Judges, and James L. Robart,** District Judge.

                     Opinion by Judge Robart

  *After this appeal was filed, the Honorable Alicemarie H. Stotler
replaced the late Honorable William J. Rea as presiding judge in this case.
  **The Honorable James L. Robart, United States District Judge for the
Western District of Washington, sitting by designation.

                                  12745
                 LOZANO v. AT&T WIRELESS              12749

                        COUNSEL

J. Paul Gignac (argued) and Katherine Donoven, Arias,
Ozzello & Gignac, LLP, Santa Barbara, California, and Peter
Bezek and Robert A. Curtis, Foley Bezek Behle & Curtis,
LLP, Santa Barbara, California, for the plaintiff-appellee-
cross appellant.

James C. Grant (argued) and Kelly Twiss Noonan, Stokes
Lawrence, P.S., Seattle, Washington, and Mark E. Weber and
Gabriel J. Pasette, Gibson, Dunn & Crutcher, LLP, Los Ange-
les, California, for the defendant-appellant-cross appellee.
12750                  LOZANO v. AT&T WIRELESS
                                 OPINION

ROBART, District Judge:

   This opinion addresses cross-appeals of the district court’s
order denying in part, and granting in part, Paul Lozano’s
class certification motion. Lozano appeals the district court’s
denial of a nationwide class for his Federal Communications
Act (“FCA”) and declaratory relief claims. Lozano also
appeals the court’s denial of a California subclass on these
claims, as well as his breach of contract claim. AT&T Wire-
less Services, Inc. (“AWS”) appeals the district court’s certifi-
cation of a California subclass for Lozano’s state law claims.
We have jurisdiction to hear this appeal pursuant to Rule 23(f)
of the Federal Rules of Civil Procedure and 28 U.S.C.
§ 1292(e). For the reasons stated, we affirm in part and
reverse in part.

                            I.   Background

   Lozano is a customer of AWS and brought this putative
class action based on AWS’s disclosures relating to its billing
practices for cellular services.1 On October 4, 2004, Lozano
filed a Second Amended Complaint in the district court. In his
complaint, Lozano asserts claims under the FCA, the Declara-
tory Judgment Act (“DJA”), California contract law, the Cali-
fornia Consumer Legal Remedies Act (“CLRA”), and
California Unfair Competition Law (“UCL”). Lozano bases
these claims on allegations that AWS billed its customers for
cellular telephone calls during a billing period other than the
billing period in which the calls were made, a practice termed
“out-of-cycle billing.” Lozano contends that by doing this,
AWS assessed charges for cellular telephone calls that would
  1
    Lozano brought this suit against AWS, AT&T Wireless Services of
California, and Santa Barbara Cellular Systems. Only AWS sought a peti-
tion for interlocutory review of the district court’s order on class certifica-
tion.
                   LOZANO v. AT&T WIRELESS                 12751
not have been assessed if the calls had been billed during the
billing period in which the calls were made. AWS, according
to Lozano, did not fully and adequately disclose its billing
practice to its customers at the time they entered into contracts
with AWS.

A.   Out-of-Cycle Billing

   Out-of-cycle billing occurs when the local calling area for
a customer’s plan includes areas that are not covered by
AWS’s cellular network. When a customer places or receives
a call in an area not covered by AWS’s network, the call is
routed through another wireless carrier, and the call is termed
a “roaming call.” Due to the nature of the routing process,
AWS does not immediately learn of the roaming call, and
consequently, does not immediately charge the call against
the customer’s allotted minutes. Occasionally, AWS will
learn of the roaming call only after the customer’s monthly
billing cycle has ended. When this occurs, AWS bills the cus-
tomer for the roaming call in the next billing cycle, which
may put the customer over the allotted minutes for that cycle.
For example, a roaming call made in the August billing cycle
may be billed in the September invoice because of the late
receipt of information from the other carrier. Assuming the
customer had already reached his or her allowable minutes for
September, and had not for August, the August roaming call
could result in an overage fee on the September invoice.
According to AWS, out-of-cycle billing occurs infrequently,
and when it does occur, it is just as likely to result in a reduc-
tion in fees as opposed to an increase. That is, under the above
scenario, the customer could benefit from out-of-cycle billing
by avoiding an overage fee in August if she used all her min-
utes in August, but not September.

   In or about May 2001, Lozano contracted with AWS to
receive cellular telephone service for one year. Lozano’s cel-
lular plan with AWS provided him with a minimum of 400
“free anytime minutes” and 1,000 “night and weekend min-
12752               LOZANO v. AT&T WIRELESS
utes” per month. As part of a promotional offer, AWS gave
Lozano an additional 200 free anytime minutes. Based on the
information AWS provided, Lozano believed that he would
not be charged for cellular calls unless he exceeded 600 any-
time minutes or 1,000 night and weekend minutes in one bill-
ing cycle.

   When Lozano received his September 18, 2001 invoice
from AWS, however, he was surprised to discover that his
September invoice included calls that were made during the
previous billing cycle. The addition of these extra minutes
caused his September usage to exceed the “free” minutes set
forth in his contract with AWS. Because he exceeded his
allotted usage, AWS charged Lozano an overage fee for the
calls that it billed from the previous cycle.

   Lozano called AWS to inquire as to why there were calls
from the previous billing cycle on his current invoice. An
AWS representative explained to him that roaming cellular
telephone calls are billed to its customers based on the date
that AWS receives the information regarding the call, not on
the date the call was actually made. The AWS representative
offered to reimburse Lozano for the overage charges, but
would not do so unless he agreed to sign-up for another year
of service with AWS. Lozano declined the offer. On October
25, 2001, after Lozano lodged additional complaints with
AWS, it issued him a credit for the charges he incurred as a
result of out-of-cycle billing. The AWS representative who
issued the credit wrote in the customer notes that it “was a
ONE TIME COURTESY CR[EDIT] for delayed billing . . . .”
The representative informed Lozano that out-of-cycle billing
could happen again. Lozano filed the instant suit a few weeks
later, and the credit appeared on Lozano’s November invoice
from AWS.2
  2
   In its preceding order on summary judgment, the district court found
that AWS reimbursed Lozano only after realizing that Lozano was insti-
gating legal proceedings against it.
                   LOZANO v. AT&T WIRELESS                 12753
   AWS contends it fully discloses the implications of out-of-
cycle billing in its Welcome Guide, which customers receive
when they sign-up for service. Lozano does not dispute that
he received a copy of the Welcome Guide when he purchased
his service from AWS. Indeed, Lozano admits that the AWS
salesperson “paged through” the Welcome Guide with
Lozano, and gave him the opportunity to ask any questions.
Lozano instead contends that these disclosures are not ade-
quate to inform the consumer of AWS’s out-of-cycle billing
practices.

B.   Arbitration Agreement

   The Welcome Guide Lozano received also contains an arbi-
tration agreement that prohibits class actions:

     Any dispute or claim arising out of or relating to this
     Agreement or to any product or service provided in
     connection with this Agreement (whether based in
     contract, tort, statute, fraud, misrepresentation or any
     other legal theory) will be resolved by binding arbi-
     tration . . . . [Y]ou and we both waive any claims for
     punitive damages and any right to pursue claims on
     a class or representative basis.

Shortly after Lozano filed this putative class action lawsuit,
AWS moved to compel arbitration.

   The district court initially granted AWS’s motion to compel
arbitration. AWS then filed for a writ of mandamus with this
court. We denied the writ, but instructed the district court to
reconsider its ruling in light of Ting v. AT&T, decided after
the district court’s order compelling arbitration. 319 F.3d
1126, 1150 (9th Cir. 2003) (finding class action waivers in
arbitration agreements to be unconscionable when contained
in adhesion contracts). On August 18, 2003, after reconsider-
ing its order in light of Ting, the district court vacated the
order compelling arbitration. In so doing, the district court
12754                LOZANO v. AT&T WIRELESS
relied both on Ting, and the subsequent case of Ingle v. Cir-
cuit City Stores, Inc., 328 F.3d 1165, 1176 n.15 (9th Cir.
2003) (holding that “an essentially unilateral bar on class-
wide arbitration is substantively unconscionable”). The dis-
trict court held that the limitation on class action relief con-
tained in AWS’s Welcome Guide was both procedurally and
substantively unconscionable and therefore unenforceable
under California law.3

C.    Lozano’s Injury

   The district court considered AWS’s motion for summary
judgment before Lozano sought class certification. In its sum-
mary judgment order, the district court addressed whether
Lozano had any legally cognizable injuries, in order to deter-
mine whether he had standing to bring his claims. AWS
argued that because it had reimbursed Lozano for the out-of-
cycle overage fees in October 2001, and he did not bring suit
until November 2001, he could not show injury. The district
court disagreed. While recognizing that AWS’s reimburse-
ment to Lozano before suit raised concerns regarding
Lozano’s ability to meet an essential element of his claims,
i.e., damages, the district court nevertheless concluded that (1)
AWS could not avoid a class action by reimbursing the poten-
tial representative prior to filing suit; and (2) Lozano suffered
damages based on a so-called “reservation” injury, and that
AWS’s use of out-of-cycle billing continued to injure Lozano.
The “reservation” injury, as described by the district court,
relates to those AWS customers who are aware of out-of-
cycle billing, and in turn, reserve a certain percentage of min-
utes each month to compensate for any late-charged roaming
calls from the previous billing cycle. The customer is thereby
denied the full use of his or her allotted minutes each month.
On these bases, the district court found that Lozano suffi-
  3
    AWS appealed the district court’s order denying arbitration, but volun-
tarily dismissed this appeal when we accepted the parties’ petitions for
interlocutory review of the district court’s class certification order.
                      LOZANO v. AT&T WIRELESS                        12755
ciently alleged the presence of an injury, and had standing to
bring these claims.4

D.     Class Certification

   The district court next considered Lozano’s motion for
class certification. In his motion, Lozano requested that the
court certify two classes: (a) one national class for claims
based on FCA violations, declaratory relief, and breach of
contract; and (b) another California subclass based on
Lozano’s state-law claims brought pursuant to the CLRA and
UCL. Lozano termed the first class as “the Class” and the
subclass as “the California Subclass.”

     Lozano’s proposed definition for the Class included:

       all residents of the United States of America who
       initiated cellular telephone service with AT&T Wire-
       less on or after March 1, 1999 and who at any time
       between March 1, 1999 and the date of filing the
       Second Amended Complaint in this action have been
       charged by AT&T Wireless for cellular telephone
       calls during a billing period other than the billing
       period in which the calls were made.

Lozano proposed an identical subclass for his state claims,
except that this definition only included residents of the State
of California.
  4
    Lozano does not attack the actual practice of out-of-cycle billing, pre-
sumably because section 332 of the FCA would preempt such a claim. See
47 U.S.C. § 332(c)(3)(A) (prohibiting states from regulating the entry of
or the rates charged by any commercial mobile service or any private
mobile service). Here, in order for Lozano to maintain his UCL claim,
while avoiding FCA preemption, his claim must be tied to the unfairness
of AWS’s disclosures regarding its billing practices, and not to the prac-
tices themselves.
12756                  LOZANO v. AT&T WIRELESS
   The district court declined to certify a national class for
Lozano’s FCA and derivative DJA claims because to do so
would require a state-by-state analysis of conscionability
jurisprudence with respect to the enforceability of class action
waivers. The court also denied Lozano’s request for class
action status for his breach of contract claim. The district
court certified a California class action for Lozano’s CLRA
claim, based on AWS’s inclusion of an unconscionable term
in its agreement, i.e., the class action waiver; the district court
declined to certify a class for Lozano’s other theories of liabil-
ity pursuant to the CLRA. Finally, the district court certified
a class action on two theories of liability under the UCL; one
claim based on a violation of the CLRA (the “derivative UCL
claim”) and a second claim based on the “unfairness” prong
of the UCL.

                      II.   Standards of Review

   Class certifications are governed by Federal Rule of Civil
Procedure 23. As the party seeking class certification, Lozano
bears the burden of demonstrating that he has met each of the
four requirements of Rule 23(a) and at least one of the
requirements of Rule 23(b).5 See Zinser v. Accufix Research
Inst., Inc., 253 F.3d 1180, 1186 (9th Cir. 2001). We review
the district court’s decision regarding class certification for
abuse of discretion. See Valentino v. Carter-Wallace, Inc., 97
  5
    The Federal Rules of Civil Procedure allow class certification if the
proponent shows: (1) the class is so numerous that joinder of all members
is impracticable, (2) there are questions of law or fact common to the
class, (3) the claims or defenses of the representative parties are typical of
the claims or defenses of the class, and (4) the representative parties will
fairly and adequately protect the interests of the class. Fed. R. Civ. P.
23(a). Additionally, the class action proponent must meet one of the
requirements set forth in Rule 23(b). Here, the district court’s class certifi-
cation order is based primarily on its analysis of the additional require-
ment found in Rule 23(b)(3); that is, whether questions of law or fact
“common to the members of the class predominate over any questions
affecting only individual members and that class action is superior to other
available methods.” Fed. R. Civ. P. 23(b)(3).
                  LOZANO v. AT&T WIRELESS                  12757
F.3d 1227, 1234 (9th Cir. 1996). The district court abuses its
discretion if its certification order is premised on impermissi-
ble legal criteria. See Moore v. Hughes Helicopters, Inc., 708
F.2d 475, 479 (9th Cir. 1983). Finally, while we review the
district court’s factual findings under the clearly erroneous
standard, Husain v. Olympic Airways, 316 F.3d 829, 835 (9th
Cir. 2002), we review the district court’s determination of
standing and mootness de novo. See Kootenai Tribe of Idaho
v. Veneman, 313 F.3d 1094, 1111 n.11 (9th Cir. 2002) (stand-
ing); Nat’l Audubon Soc., Inc. v. Davis, 307 F.3d 835, 850
(9th Cir. 2002) (mootness).

                       III.   Discussion

A.   Arbitration of FCA Claims

   Lozano first contends that the district court erred by finding
predominance of individual claims based on differing state
laws on whether class action waivers are unconscionable. The
district court, according to Lozano, should not have consid-
ered the variances in state law on this issue because, as a mat-
ter of federal law, no claim can be subject to arbitration under
the FCA. Lozano contends that the FCA’s plain language pre-
cludes adjudication by arbitration. Whether the FCA permits
adjudication by binding arbitration is a question of law that
we review de novo. See S.E.C. v. Gemstar-TV Guide Intern.,
Inc., 401 F.3d 1031, 1044 (9th Cir. 2005).

   [1] The Federal Arbitration Act (“FAA”) provides that a
written agreement to arbitrate a controversy shall be “valid,
irrevocable, and enforceable, save upon such grounds as exist
at law or in equity for the revocation of any contract.” 9
U.S.C. § 2. The FAA sets forth a liberal federal policy favor-
ing arbitration and reverses years of hostility by the courts
towards arbitration agreements. Moses H. Cone Mem. Hosp.
v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). Contractual
arbitration agreements are equally applicable to statutory
claims as to other types of common law claims. See Mitsu-
12758                LOZANO v. AT&T WIRELESS
bishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S.
614, 627 (1985). Indeed, the Mitsubishi Court went so far as
to state that, absent the sort of “fraud or overwhelming eco-
nomic power that would provide grounds for the revocation
of any contract,” the FAA “provides no basis for disfavoring
agreements to arbitrate statutory claims by skewing the other-
wise hospitable inquiry into arbitrability.” Id. (citations and
internal quotation marks omitted).

   This does not mean that all statutory rights are suitable for
arbitration. There are some statutes where Congress has
evinced an intent to preclude arbitration of claims. The burden
is on the party opposing arbitration, however, to show that
Congress intended to preclude arbitration of the statutory
claims involved. See Shearson/Am. Express Inc. v. McMahon,
482 U.S. 220, 227 (1987); Nghiem v. NEC Elect., Inc., 25
F.3d 1437, 1441 (9th Cir. 1994). Lozano attempts to meet this
burden by arguing that Congress, by limiting fora to the Fed-
eral Communications Commission (“FCC”) and federal dis-
trict courts, evidenced an intent to preclude other fora,
including arbitration. As additional support, Lozano points to
this court’s decision in AT&T Corp. v. Coeur d’Alene Tribe,
295 F.3d 899 (9th Cir. 2002), as controlling authority on the
issue.

  The district court rejected both of Lozano’s arguments.
Relying on the standard set forth in Mitsubishi, the district
court found no evidence of a congressional intent to prohibit
arbitration of FCA claims.6 The district court also found our
holding in Coeur d’Alene Tribe to be confined to the adjudi-
cation of claims in the tribal forum. We agree.
  6
   At least two other federal courts have implicitly recognized the right
of parties to agree to arbitrate their FCA claims. See Penberthy v. AT&T
Wireless Servs., 354 F. Supp. 2d 1323, 1328 (M.D. Fla. 2005); In re Univ.
Serv. Fund Tele. Billing Prac. Lit., 300 F. Supp. 2d 1107, 1134 (D. Kan.
2003).
                  LOZANO v. AT&T WIRELESS                  12759
  1.   Congressional Intent

   [2] If congressional intent to bar arbitration exists in the
FCA, it must be found in the text of the statute, its legislative
history, or “an inherent” conflict between arbitration and the
FCA’s underlying purpose. Gilmer v. Interstate/Johnson Lane
Corp., 500 U.S. 20, 26 (1991). Lozano argues that because
important public policy considerations are litigated in FCA
claims, Congress intended to limit the adjudication of these
claims to the FCC and the federal district courts, and to the
exclusion of an arbitral forum. Lozano also argues that, due
to the inherent inequality in unequal bargaining power
between telecommunications providers and consumers, Con-
gress intended to preclude providers from keeping consumers
out of a judicial forum. While we recognize these as impor-
tant public policy considerations, the United States Supreme
Court has rejected these same arguments in other statutory
contexts, in light of the strong public policy favoring arbitra-
tion.

   [3] For example, the Supreme Court in McMahon evinced
a strong desire to permit arbitration of statutory claims by
upholding an arbitration agreement that encompassed federal
claims arising under the Securities Exchange Act of 1934, and
the Racketeer Influenced and Corrupt Organizations
(“RICO”) statutes. 482 U.S. at 242. The Court found RICO
claims arbitrable even in the face of RICO’s strong public
policy considerations. See id. (“The special incentives neces-
sary to encourage civil enforcement actions against organized
crime do not support nonarbitrability of run-of-the-mill civil
RICO claims brought against legitimate enterprises.”); see
also Mitsubishi, 473 U.S. at 632 (reasoning that arbitral tribu-
nals are readily capable of handling the factual and legal com-
plexities of antitrust claims); Gilmer, 500 U.S. at 35 (holding
that employment claims brought pursuant to the Age Discrim-
ination in Employment Act of 1967 are subject to mandatory
arbitration); Green Tree Fin’l Corp.-Alabama v. Randolph,
531 U.S. 79, 90 (2000) (holding claims brought under the
12760             LOZANO v. AT&T WIRELESS
Truth in Lending Act, a statute designed to “further important
social policies,” are arbitrable). Accordingly, we conclude
that, even considering the important public policy concerns
associated with FCA claims, these claims are arbitrable absent
evidence of congressional intent to the contrary.

   [4] Lozano also argues that, based on the inequality in bar-
gaining power between consumers and communications com-
panies, FCA claims should not be arbitrable. The Supreme
Court has likewise rejected this argument. In Gilmer, the
Court held that “[m]ere inequality in bargaining power . . . is
not sufficient reason to hold that arbitration agreements are
never enforceable in the employment context. Relationships
between securities dealers and investors, for example, may
involve unequal bargaining power, but we nevertheless held
in Rodriguez de Quijas and McMahon that agreements to
arbitrate in that context are enforceable.” 500 U.S. at 33 (cit-
ing Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490
U.S. 477, 484 (1989) and McMahon, 482 U.S. at 230)). Nei-
ther the public policy considerations in the FCA, nor the
inequality of bargaining power between the parties, is suffi-
cient to show congressional intent to preclude arbitration.

  2.    Coeur d’Alene Tribe

   Lozano next argues that, pursuant to our decision in Coeur
d’Alene Tribe, FCA claims are not subject to mandatory arbi-
tration. Although, in Coeur d’Alene Tribe, we discussed the
limited fora for adjudication of FCA claims, we did not con-
sider the appropriateness of arbitration as a possible forum.

   [5] The issue in Coeur d’Alene Tribe was whether tribal
courts had jurisdiction to adjudicate claims brought pursuant
to the FCA. 295 F.3d at 904. Relying on section 207 of the
FCA, we determined that the tribal court did not have juris-
diction to adjudicate these claims based on the plain language
of section 207:
                   LOZANO v. AT&T WIRELESS                12761
     Any person claiming to be damaged by any common
     carrier subject to the provisions of this chapter may
     either make complaint to the Commission as herein-
     after provided for, or may bring suit for the recovery
     of the damages for which such common carrier may
     be liable under the provisions of this chapter, in any
     district court of the United States of competent juris-
     diction; but such person shall not have the right to
     pursue both such remedies.

47 U.S.C. § 207. In Coeur d’Alene Tribe, we held that, by
restricting jurisdiction to the FCC and the federal district
court, Congress intended to leave no room for “adjudication
in any other forum — be it state, tribal, or otherwise.” 295
F.3d at 905. Lozano argues that the arbitral forum is therefore
precluded.

   [6] In Coeur d’Alene Tribe, this court did not determine
whether the same statutory language barred the arbitral forum,
which as stated above, requires that we find a strong showing
of congressional intent. We do not. The fact that Congress
drafted the amendments to the FCA to include the designation
of fora for the adjudication of its claims, without more, does
not establish congressional intent. For example, the jurisdic-
tional language for suits pursuant to the Sherman Act, 15
U.S.C. § 1, et seq., has similar language to the FCA. Compare
47 U.S.C. § 207 (FCA) (“may bring suit . . . in any district
court of the United States of competent jurisdiction”) with 15
U.S.C. § 15(a) (Sherman Act) (“may sue therefor in any dis-
trict court of the United States”). Faced with this similar lan-
guage, the Court in Mitsubishi held that claims under the
Sherman Act are subject to arbitration. 473 U.S. at 640. We
likewise hold that FCA claims may be subject to agreements
to arbitrate.

B.   Differing State Laws on Class Action Waivers

   Lozano next contends that the district court abused its dis-
cretion by going beyond the factors enumerated in Rule
12762             LOZANO v. AT&T WIRELESS
23(b)(3) and seizing on AWS’s premature argument that if a
class is certified, and it seeks to compel arbitration, predomi-
nance is defeated. Lozano argues that the district court erred
in resting its finding of predominance of individual issues on
speculation as to AWS’s future litigation strategy. In the alter-
native, Lozano contends that determining whether the class
action waiver in this case is unconscionable for all fifty states
is not impractical and should not destroy predominance.

   [7] The district court properly considered the effect of
AWS’s intent to seek to arbitrate the class action claims. As
discussed above, while the district court found the class action
waiver to be unconscionable under California law, it also rec-
ognized that the waiver may not be unconscionable under
other states’ laws. The district court therefore determined that
predominance was defeated because AWS’s intent to seek
arbitration of the class would necessitate a state-by-state
review of contract conscionability jurisprudence. While
Lozano argues that the district court’s analysis of AWS’s
future intent was an abuse of discretion, we find the district
court’s practical consideration of future events reasonable. In
fact, in In re Hotel Telephone Charges, this court expressed
dissatisfaction over the district court’s unwillingness to
address the impact of future individual questions in its analy-
sis of predominance. 500 F.2d 86, 90 (9th Cir. 1974)
(“However difficult it may have been for the District Court to
decide whether common questions predominate over individ-
ual questions, it should not have sidestepped this preliminary
requirement of the Rule by merely stating that the problem of
individual questions ‘lies far beyond the horizon in the realm
of speculation.’ ”). Moreover, the law on predominance
requires the district court to consider variations in state law
when a class action involves multiple jurisdictions. Id. In
Blackie v. Barrack, for example, we held that the trial court
properly considered the “future course of the litigation” in
determining whether class certification was appropriate. 524
F.2d 891, 900-01 (9th Cir. 1975) (“[T]he district judge is nec-
essarily bound to some degree of speculation by the uncertain
                   LOZANO v. AT&T WIRELESS                 12763
state of the record on which he must rule.”) (citations and
quotations omitted).

   [8] Furthermore, the fact that AWS intended to compel
arbitration was not speculative. By the time the district court
decided Lozano’s class certification motion, AWS had
already moved to compel arbitration of Lozano’s claims, and
appealed the district court’s denial of that motion. Finally,
with respect to his second claim of error, that the district court
should have determined whether the class action waiver in
this case would be enforceable for each state, we note that
Lozano offers no explanation of how the district court was to
conduct this analysis and how practical such analysis would
be in this context. Thus, although he suggests that the district
court should be required to engage in this analysis, he makes
no attempt to do so himself. Nevertheless, we reject the notion
that the district court was obligated to conduct a comprehen-
sive survey of every state’s law on this issue.

   [9] Based on our conclusion that the district court did not
abuse its discretion in considering AWS’s intent to move to
compel arbitration of the class, and that it was not required to
conduct a state-by-state analysis of this issue, we find that the
district court did not abuse its discretion by declining to cer-
tify a class on this basis.

C.   DJA Claim

   Lozano also claims the district court erred when it held that
Lozano’s DJA claim could not be certified as a class because
it was “parasitic” of Lozano’s FCA claim. Although the dis-
trict court did not specifically articulate its decision regarding
class certification of the DJA claim, its ultimate conclusion is
sound. If the certification of a potential nationwide class
would require a state-by-state legal analysis of the arbitration
agreement, and its accompanying class action waiver, then the
same predominance analysis applies with equal force to pre-
clude Lozano’s DJA claim. Lozano does not contend that his
12764              LOZANO v. AT&T WIRELESS
DJA claim is exempt from the arbitration agreement, or that
his DJA claim requires a separate analysis. Lozano simply,
and unconvincingly, contends that the district court failed to
articulate its reasoning for denying class certification of the
DJA claim. Counsel for Lozano conceded as much at oral
argument, agreeing that the DJA claim is “parasitic” of the
FCA claim, but requested a separate analysis of the claim
under Rule 23(b)(2). As discussed infra, however, we find
that the district court did not abuse its discretion in declining
to certify a class under Rule 23(b)(2) for Lozano’s FCA
claims.

  1.    Rule 23(b)(2) Injunctive Relief

   [10] Lozano argues that the district court failed to address
his request for Rule 23(b)(2) injunctive relief. This is incor-
rect. The district court addressed Lozano’s request for injunc-
tive relief pursuant to Rule 23(b)(2) and held that, based on
the type of relief requested by Lozano in his Second Amended
Complaint, Lozano was seeking primarily monetary damages,
which defeats class certification under Rule 23(b)(2). See In
re Paxil Litig., 218 F.R.D. 242, 247 (C.D. Cal. 2003) (finding
a proposed class that is aimed at obtaining monetary relief to
be inappropriate for certification under Rule 23(b)(2)); see
also Molski v. Gleich, 318 F.3d 937, 950 (9th Cir. 2003)
(focusing on the intent of the plaintiffs in bringing the suit).
Here, the district court determined that Lozano sought primar-
ily monetary damages, and thus, Rule 23(b)(2) certification
was not appropriate. Indeed, even on appeal, Lozano does not
contend that he is seeking primarily injunctive relief. Because
the district court did not abuse its discretion in declining to
certify a class pursuant to this provision, we affirm.

  2.    California Subclass for FCA and DJA Claims

  At a minimum, Lozano claims that the district court should
have considered certifying a California subclass for his FCA
and DJA claims. Lozano contends that a smaller California
                  LOZANO v. AT&T WIRELESS                  12765
class would not be barred by issues of predominance. Lozano
never requested that the district court consider a California
subclass for these claims. Importantly, in requesting certifica-
tion, Lozano distinguished his breach of contract claim by
requesting that a nationwide Class, or alternatively, a Califor-
nia Subclass, be certified on this claim. Lozano did not make
a similar, alternative request with respect to the FCA and DJA
claim.

   [11] The district court did not err in failing to consider
whether Lozano could bring his FCA and DJA claims as part
of the California Subclass because Lozano never requested it.
See Mpoyo v. Litton Electro-Optical Sys., 430 F.3d 985, 988
(9th Cir. 2005); Cruz v. Am. Airlines, Inc., 356 F.3d 320, 329
(D.C. Cir. 2004) (holding that its decision rests on its “well-
established discretion not to consider claims that litigants fail
to raise sufficiently below and on which district courts do not
pass”); see also Hawkins v. Comparet-Cassani, 251 F.3d
1230, 1238 (9th Cir. 2001) (holding that plaintiff bears the
burden of constructing and proposing subclass, not the district
court) (quotations and citations omitted). We therefore reject
Lozano’s appeal on this issue.

D.   CLRA Claim

   [12] The CLRA makes it unlawful to use “unfair methods
of competition and unfair or deceptive acts or practices” in the
sale of goods or services to a consumer. Cal. Civ. Code
§ 1770. The district court certified a class action based on
AWS’s inclusion of an unconscionable class action waiver in
an arbitration agreement pursuant to section 1770(a)(19) of
the CLRA (“subsection (a)(19)”). Id. at § 1770(a)(19) (stating
that the inclusion of an unconscionable provision in a contract
is an unlawful business practice). The district court certified
this class pursuant to a theory that was neither pled, nor prop-
erly considered by the district court when granting class certi-
fication. Accordingly, we reverse this district court’s order
certifying a California class for Lozano’s CLRA claim.
12766              LOZANO v. AT&T WIRELESS
   [13] In his complaint, Lozano asserts allegations under sub-
section (a)(19), but none relate to class action waivers.
Instead, Lozano alleges that “[b]y engaging in the practice of
out-of-cycle billing while making inadequate and incomplete
disclosures to consumers . . . Defendants have violated, and
continue to violate, the CLRA in at least the following
respects: . . . (d) in violation of section 1770(a)(19) of the
CLRA, Defendants have inserted an unconscionable provision
in a contract.” Thus, there is little doubt that Lozano’s subsec-
tion (a)(19) claim, as originally pled, was tied entirely to
AWS’s failure to adequately disclose its billing practices and
not the class action waivers. After the district court held
AWS’s class action waiver to be unconscionable pursuant to
Ting and Ingle, however, Lozano argued that his subsection
(a)(19) claim included the unconscionable class action waiver.

   [14] The district court rigorously analyzed the Rule 23(a)
factors in considering whether to certify a class based on
AWS’s practice of out-of-cycle billing and its disclosures
relating to this practice. The district court did not analyze
Lozano’s CLRA claim based on the unconscionability of the
class action waiver against any of the four prerequisites for
class action litigation: numerosity, commonality, typicality,
and adequacy of representation. See Staton v. Boeing Co., 327
F.3d 938, 953 (9th Cir. 2003). The only class action factor the
court considered was whether Rule 23(b)(3)’s predominance
of class issues was satisfied. Because a class may be certified
only if the district court is satisfied “after a rigorous analysis”
that the prerequisites of Rule 23(a) have been met, we reverse
the district court’s decision to certify a class action based on
the unconscionability of AWS’s class action waiver. See
Chamberlan v. Ford Motor Co., 402 F.3d 952, 961 (9th Cir.
2005) (citing Gen. Tel. Co. of the S.W. v. Falcon, 457 U.S.
147, 161 (1982)).

   The district court’s failure to analyze the Rule 23(a) factors
in determining whether to grant class certification based on
Lozano’s unconscionability claim also resulted in its certify-
                       LOZANO v. AT&T WIRELESS                          12767
ing a theory with no definable class. As stated above, the dis-
trict court adopted a class definition for the California
Subclass based solely on out-of-cycle billing.

   [15] The class the district court certified under subsection
(a)(19) is wholly unrelated to this definition. Any class certi-
fied under subsection (a)(19) necessitates a class definition
that includes individuals who sought to bring class actions in
California, but were precluded from doing so because of the
class action waiver in AWS’s arbitration agreement, and suf-
fered some resulting damage. See Wilens v. TD Waterhouse
Group, Inc., 15 Cal. Rptr. 3d 271, 276-77 (Cal. Ct. App.
2003) (holding a court may not presume damages based on
the mere insertion of an unconscionable clause in a contract).
The new class would be unrecognizable from the class defini-
tion adopted by the district court. The district court’s failure
to analyze Lozano’s section (a)(19) claim, and resulting fail-
ure to identify a class based on a violation of this section, was
manifest error. Accordingly, based on all the above reasons,
we reverse the district court on this issue.7

E.    UCL Claim

   The district court granted class certification for Lozano’s
UCL claim based on his theory that AWS’s written disclo-
sures were inadequate to inform AWS customers about the
possibility of out-of-cycle billing. AWS claims the district
court erred by granting Lozano’s motion for class certification
for his UCL claim because (1) Lozano has no damages and
therefore lacks standing; (2) Lozano’s damages, if any, are
not typical of the class; and (3) individual issues predominate
over class issues.
  7
    The district court also certified a class pursuant to the UCL based
solely on Lozano’s claim that AWS violated the CLRA. The above analy-
sis applies with equal force to the district court’s certification of the deriv-
ative UCL claim.
12768              LOZANO v. AT&T WIRELESS
   [16] The UCL is a broad remedial statute that permits an
individual to challenge wrongful business conduct “in what-
ever context such activity might occur.” Cel-Tech Commc’ns,
Inc. v. Los Angeles Cellular Tele. Co., 83 Cal. Rptr. 2d 548,
561 (1999) (citation omitted). It prohibits “unfair competi-
tion,” which it broadly defined as including “any unlawful,
unfair or fraudulent business act or practice and unfair, decep-
tive, untrue or misleading advertising . . . .” Cal. Bus. & Prof.
Code § 17200. Because the statute is written in the disjunc-
tive, it is violated where a defendant’s act or practice is (1)
unlawful, (2) unfair, (3) fraudulent, or (4) in violation of sec-
tion 17500 (false or misleading advertisements). Cel-Tech, 83
Cal. Rptr. 2d at 565. Each prong of the UCL is a separate and
distinct theory of liability; thus, the “unfair” practices prong
offers an independent basis for relief. South Bay Chevrolet v.
Gen. Motors Acceptance Corp., 85 Cal. Rptr. 2d 301, 316-317
(Cal. Ct. App. 1999) (citation and quotation omitted). Lozano
asserts that AWS’s conduct was “unfair” because it did not
fully and adequately disclose its billing practices at the time
customers contracted with it to obtain cellular services.

  1.    Standing

   AWS argues that Lozano lacks standing under the UCL
because he suffered no damages from out-of-cycle billing.
When Lozano filed this action, any person could assert a UCL
claim on behalf of the general public regardless of whether
they suffered an actual injury. Cal. Bus. & Prof. Code
§ 17204 (2003). Thus, as originally drafted, the UCL gave
any person authority to assert a UCL claim on behalf of the
public as a private attorney general. In 2001, Lozano filed this
putative class action both as a private attorney general and as
an injured plaintiff.

   After filing this lawsuit, but before the district court granted
class certification, the voters of California enacted Proposition
64, which eliminated private attorney general standing for
UCL claims. Cal. Bus. & Prof. Code § 17204. After Proposi-
                   LOZANO v. AT&T WIRELESS                 12769
tion 64, a person asserting an unfair competition claim must
allege that (1) he or she “suffered injury in fact,” and (2) “lost
money or property as a result of such unfair competition.” Id.
While Proposition 64 did not expressly declare that the new
standing requirements applied to cases pending at the time of
its enactment, in July 2006, the California Supreme Court
answered the question in the affirmative. See Californians for
Disability Rights v. Mervyn’s, LLC, 46 Cal. Rptr. 3d 57, 64
(Cal. 2006) (“For a lawsuit properly to be allowed to continue
standing must exist at all times until judgment is entered and
not just on the date the complaint is filed.”).

   The district court did not consider Lozano’s standing as a
private attorney general, but focused instead on whether his
claimed injuries were such that he had standing to bring a
UCL claim as an injured plaintiff. The district court, incorpo-
rating its findings from its summary judgment order, found
that Lozano had sufficient evidence of actual injury as a result
of AWS’s inadequate disclosures — the reimbursement of
which the district found to be an attempt to avoid suit —
together with an injury it termed the “reservation” injury.
Thus, we must determine whether the type of injury articu-
lated by the district court is sufficient to establish Lozano’s
standing pursuant to section 17204, as amended by Proposi-
tion 64.

   The parties do not dispute that Lozano suffered pecuniary
loss as a result of his alleged unawareness of AWS’s out-of-
cycle billing practices. Shortly after contracting with AWS for
cellular service, Lozano received an invoice stating that he
had been charged fees as a result of out-of-cycle minutes from
his previous invoice. The record also supports a finding that,
during the course of his contract with AWS, AWS would
occasionally charge Lozano an overage fee based on out-of-
cycle billing. AWS contends, however, that these charges
were offset by the benefits Lozano received from out-of-cycle
billing. In considering these claims of error, we must address
the effect of AWS’s reimbursement to Lozano for his out-of-
12770             LOZANO v. AT&T WIRELESS
cycle charges prior to his filing suit, and the effect of the
claimed offset of benefits Lozano received during the same
time.

   With respect to the former issue regarding the effect of
AWS’s reimbursement prior to suit, the district court found
that AWS reimbursed Lozano only after realizing that Lozano
“was instigating legal proceedings” against it. Based on this
factual finding, which we review for clear error, the district
court concluded that it was not divested of its power to hear
the case. In so concluding, the district court relied on United
States v. W.T. Grant, where the Supreme Court held that “the
voluntary cessation of allegedly illegal conduct does not
deprive the tribunal of power to hear and determine the case,”
unless there is no reasonable expectation that the wrong will
be repeated; otherwise, the “defendant is free to return to his
old ways.” 345 U.S. 629, 632 (1953) (citations and quotations
omitted); see also DeFunis v. Odegaard, 416 U.S. 312, 318
(1974). The district court found that it did not need to specu-
late as to whether AWS would return “to its old ways”
because AWS’s position was that its practice of out-of-cycle
billing was legal and adequately disclosed to its customers.

   While we agree with the district court’s ultimate decision
regarding the justiciability of Lozano’s claim, we analyze the
claim differently to address issue of both standing and moot-
ness. As stated above, the district court relied on W.T. Grant
and DeFunis to support its finding that Lozano’s injuries,
capable of being repeated, were justiciable. Both cases are
based on mootness, i.e., plaintiff had standing when he or she
filed suit but due to a changed circumstance his or her claim
became moot. Here, AWS argues that Lozano did not have
standing to bring this action in the first instance. While some
courts have characterized mootness simply as “the doctrine of
standing set in a time frame,” see Arizonans for Official
English v. Arizona, 520 U.S. 43, 68 n.22 (1997), a careful
analysis should distinguish the two doctrines.
                       LOZANO v. AT&T WIRELESS                          12771
   In determining mootness, the defendant bears the burden of
showing that its voluntary compliance moots a case by con-
vincing the court that “it is absolutely clear the allegedly
wrongful behavior could not reasonably be expected to
recur.” Friends of the Earth, 528 U.S. at 190 (citation omit-
ted). By contrast, in determining standing issues the court
considers whether the plaintiff has demonstrated that, “if
unchecked by the litigation, the defendant’s allegedly wrong-
ful behavior will likely occur or continue, and that the threat-
ened injury is certainly impending.” Id. (internal quotation
marks and citations omitted). Thus, Lozano bears the initial
affirmative burden of showing that AWS’s conduct is likely
to continue and that the threatened injury is certainly impend-
ing. Conversely, to establish mootness, AWS must convince
the court that its conduct is not reasonably expected to recur.

   [17] Based on the facts before us, we find that Lozano,
when faced with the realistic threat that AWS would continue
to charge him for out-of-cycle calls, had standing to bring this
claim. Likewise, there is nothing in the record that supports
a finding that Lozano’s claim is now moot. We base our deci-
sion on the following: (1) Lozano continues to be a customer
of AWS’s cellular service, subject to AWS’s out-of-cycle bill-
ing practices; (2) after this suit was filed, Lozano suffered
another overage charge as a result of out-of-cycle billing;8 and
(3) if the disclosures were inadequate, then Lozano may show
that as a result of the inadequacies of the disclosures, he did
not receive the full benefit of his contract with AWS. This lat-
ter injury is what the district court defined as the “reservation”
injury. That is, Lozano contracted for 400 free “anytime”
minutes. Yet, due to out-cycle-billing, he reserved, and there-
fore lost, a certain number of those minutes each billing
period to account for the late-billed roaming calls.
  8
    Whether this overage charge was offset by benefits Lozano received as
a result of out-of-cycle billing is a determination better left to a fact-finder
during the merits portion of the lawsuit.
12772                LOZANO v. AT&T WIRELESS
   [18] The next question we address is whether these injuries
are recoverable under the UCL. The only types of relief avail-
able under the UCL actions are injunctive and restorative.
Cal. Bus. & Prof. Code § 17203; see also Cel-Tech, 83 Cal.
Rptr. 2d at 560. While restoring Lozano’s overage payments,
if any, fits squarely within the restorative context of the UCL,
we question whether restoring Lozano’s “reserved” minutes
falls into this category. Restitution in the UCL context, how-
ever, includes restoring money or property that was not neces-
sarily in the plaintiff’s possession. The California Supreme
Court has “stated that the concept of restoration or restitution,
as used in the UCL, is not limited only to the return of money
or property that was once in the possession of that person.
Instead, restitution is broad enough to allow a plaintiff to
recover money or property in which he or she has a vested
interest.” See Juarez v. Arcadia Fin., Ltd., 61 Cal. Rptr. 3d
382, 400 (Cal. Ct. App. 2007) (citing Korea Supply Co. v.
Lockheed Martin Corp., 131 Cal. Rptr. 2d 29, 42 (2003)).
Here, Lozano has a vested interest in 400 free anytime min-
utes. Due to out-of-cycle billing, however, Lozano found it
necessary to reserve, and therefore lose, a certain number of
those minutes each billing period. Accordingly, we find that
Lozano has properly stated an injury that he did not receive
the full value of his contract with AWS due to its alleged fail-
ure to disclose out-of-cycle billing, and that this injury is
redressable under the UCL. See Daghlian v. DeVry Univ.,
Inc., 461 F. Supp. 2d 1121, 1155 (C.D. Cal. 2006) (accepting
plaintiff’s theory that he suffered injury under the UCL
because he paid thousands of dollars of tuition to defendant
university and “did not receive what he had bargained for”
due to its alleged unfair business practices).

  2.    Typicality

   AWS next contends that, even if Lozano could show injury,
his injury is not typical of the class, and he therefore is an
inadequate class representative. AWS bases its contentions on
the fact that Lozano was reimbursed for his out-of-cycle bill-
                  LOZANO v. AT&T WIRELESS                  12773
ing charges, he benefitted overall from out-of-cycle billing
over the course of his contract with AWS, and his claimed
damages for “reserving” minutes is unique to him.

   Under Rule 23(a)(3), it is not necessary that all class mem-
bers suffer the same injury as the class representative. See
Negrete v. Allianz Life Ins. Co. of N. Am., 238 F.R.D. 482,
488 n.8 (C.D. Cal. 2006) (citing Rosario v. Livaditis, 963 F.2d
1013, 1017 (7th Cir. 1992) (further citations omitted)); see
also Simpson v. Fireman’s Fund Ins. Co., 231 F.R.D. 391,
396 (N.D. Cal. 2005) (“In determining whether typicality is
met, the focus should be ‘on the defendants’ conduct and
plaintiff’s legal theory,’ not the injury caused to the plain-
tiff.”) (quoting Rosario, 963 F.2d at 1018).

   [19] We agree with the district court that Lozano’s injuries
are typical of the class. The class definition includes all Cali-
fornia customers that AWS charged for calls made during a
billing period other than the billing period in which the calls
were made. Given AWS’s policy of offering a one-time reim-
bursement to customers who complain when they receive an
invoice containing charges for out-of-cycle calls, along with
an explanation of out-of-cycle billing, it does not strain the
parameters of typicality to presume that many of these cus-
tomers will thereafter reserve minutes to account for AWS’s
billing practice. Thus, the class is likely to include customers
who were charged for overage fees, as well as customers who,
after learning of out-of-cycle billing, reserved their minutes.
We therefore do not find that the district court erred in hold-
ing Lozano’s claims typical of the class.

  3.   Predominance of Common Issues

   AWS argues that because all of Lozano’s claims involve
some proof of individual knowledge and expectations, all
should fail under Rule 23(b)(3) because individual issues
would necessarily predominate over common issues. The dis-
trict court itself found that individual issues predominated in
12774              LOZANO v. AT&T WIRELESS
Lozano’s breach of contract and CLRA claims, but found that
common issues predominated in the UCL claim.

   In its order on class certification, the district court found
that Lozano’s breach of contract and CLRA claims required
an individualized analysis of awareness and knowledge of
AWS’s out-of-cycle billing practices, such that the predomi-
nance prong of Rule 23(b)(3) was not met. AWS now argues
that the district court’s finding, that predominance was not
fatal to class certification of Lozano’s UCL claim, is inconsis-
tent with its findings with respect to the breach of contract
and CLRA claims. First, we examine the basis of the district
court’s decisions not to certify on those claims and then turn
to considering how the UCL claim does, or does not, differ.

   Though Lozano requested certification on four separate
theories under the CLRA, the district court denied certifica-
tion on the first three theories, which were based on fraudu-
lent or misleading representations, and granted certification
on the fourth, relating to insertion of an unconscionable arbi-
tration clause. In denying certification on the first three theo-
ries, the district court relied on the analysis of “materiality”
in Caro v. Proctor & Gamble, 22 Cal. Rptr. 2d 419 (Cal. Ct.
App. 1993). There, the California Court of Appeals concluded
that individual issues predominated in the plaintiff’s CLRA
class action based on orange juice labeling. Id. at 432-33.
Because the CLRA requires that any misrepresentations be
material, the court found that it would have to determine
whether each customer in the class thought the orange juice
was “fresh” as advertised, or whether the customer had read
the side of the carton disclosing that the juice came from con-
centrate. Id. Similarly, the district court in this case found that
it would have to conduct an individualized review as to each
class member’s awareness and knowledge of out-of-cycle
billing and AWS’s disclosures to determine whether its repre-
sentations were material under the CLRA.

   With respect to Lozano’s breach of contract claim, the dis-
trict court held that it would have to ascertain each individu-
                  LOZANO v. AT&T WIRELESS                  12775
al’s expectations about the contract, and determine whether
those expectations were reasonable. Thus, the district court
found that individual issues predominated over the class
issues with respect to Lozano’s breach of contract claim. The
district court specifically noted, however, that its decision
would be different had Lozano based his contract claim on a
theory about the uniformity of AWS’s disclosures about out-
of-cycle billing, rather than about reasonable expectations.

   The legal analysis required under the UCL resembles, but
remains distinct from, both the CLRA’s materiality inquiry
and the common law’s emphasis on reasonable expectations.
Construing Lozano’s theory to be based on AWS’s uniform
written disclosures to its customers, the district court consid-
ered the weight individualized proof would play under the test
prescribed by South Bay. This test involves balancing the
harm to the consumer against the utility of the defendant’s
practice. See South Bay, 85 Cal. Rptr. 2d at 315. The district
court held that “the possibility of some slightly different indi-
vidual circumstances” would not destroy the predominance of
common issues in light of the legal standard. AWS argues that
the district court erred because the UCL in fact does require
consideration of individual issues.

   California’s unfair competition law, as it applies to con-
sumer suits, is currently in flux. In 1999, the California
Supreme Court rejected the balancing test in South Bay in
suits involving unfairness to the defendant’s competitors. See
Cel-Tech, 83 Cal. Rptr. 2d 548. The court held that this bal-
ancing test was “too amorphous” and “provide[d] too little
guidance to courts and businesses.” Id. at 567. The court then
held that unfairness must “be tethered to some legislatively
declared policy or proof of some actual or threatened impact
on competition.” Id. at 565. This holding, however, was lim-
ited to actions based on unfairness to competitors. Id. at n.12.

  The California courts have not yet determined how to
define “unfair” in the consumer action context after Cel-Tech.
12776             LOZANO v. AT&T WIRELESS
In the First District Court of Appeals, the court extended the
Cel-Tech definition to consumer cases. See Gregory v. Albert-
son’s, Inc.,128 Cal. Rptr. 2d 389 (Cal. Ct. App. 2002). The
Fourth District Court of Appeals initially proposed a test
along the lines of Cel-Tech but later avoided the question by
dismissing the claim under both the old and the new standard.
See Bardin v. Daimlerchrysler Corp., 39 Cal. Rptr. 3d 634,
636 (Cal. Ct. App. 2006); Scripps Clinic v. Superior Court,
134 Cal. Rptr. 2d 101 (Cal. Ct. App. 2003). The Second Dis-
trict Court of Appeals has issued two conflicting decisions,
one applying the old balancing test, see McKell v. Washington
Mut., Inc., 49 Cal. Rptr. 3d 227, 238 (Cal. Ct. App. 2006), and
another, issued during the same week, holding that Cel-Tech
overruled all prior definitions of unfairness and created a new
test, see Camacho v. Automobile Club of Southern California,
48 Cal. Rptr. 3d 770, 776 (Cal. Ct. App. 2006). In Camacho,
the court chose to apply the three-pronged test contained in
the Federal Trade Commission Act, 15 U.S.C. § 45(a). See id.
at 776.

   While we agree with the Fourth District that Cel-Tech
effectively rejects the balancing approach, we do not agree
that the FTC test is appropriate in this circumstance. Though
the California Supreme Court did reference FTC’s section 5
as a source of “guidance,” that discussion clearly revolves
around anti-competitive conduct, rather than anti-consumer
conduct. See Cel-Tech, 83 Cal. Rptr. 2d at 565 (“As the issue
before us in this case arises out of a claim of unfair competi-
tion between direct competitors, the relevant jurisprudence
would be that arising under section 5’s prohibition against
“unfair methods of competition.”). Accordingly, we decline to
apply the FTC standard in the absence of a clear holding from
the California Supreme Court.

   [20] The remaining options, then, are to apply Cel-Tech
directly to this case and require that the unfairness be tied to
a “legislatively declared” policy, see Scripps Clinic, 134 Cal.
Rptr. 2d 101, or to adhere to the former balancing test under
                  LOZANO v. AT&T WIRELESS                12777
South Bay. These options, however, are not mutually exclu-
sive. In Schnall v. Hertz Corp., 93 Cal. Rptr. 2d 439 (Cal. Ct.
App. 2000), the appellate court in the First District reversed
the dismissal of a complaint in an unfair competition case
where the alleged unfairness was both tethered to a legisla-
tively declared policy and the plaintiff could prove facts
showing that the harm was not outweighed by the utility.
Because adopting one standard does not necessitate rejection
of the other, we hold that, no matter the status of Cel-Tech,
the district court did not apply the wrong legal standard by
relying on the balancing test from South Bay. In the absence
of further clarification by the California Supreme Court, we
endorse the district court’s approach to the law as if it still
contained a balancing test.

   AWS argues that, under South Bay, though, individualized
circumstances matter in the determination of whether a prac-
tice is unfair. We agree that evidence about individual knowl-
edge and expectations may help the court determine the extent
of the harm for the purposes of the UCL’s balancing test. In
South Bay, the appellate court rejected a car dealership’s
claim that the manufacturer’s financing arm used an unfair
method of calculating interest. The court found that “substan-
tial evidence indicated South Bay entered into the disputed
loan agreements knowing, understanding, agreeing and
expecting that GMAC would use the [allegedly unfair]
method to calculate interest.” See South Bay, 85 Cal. Rptr. at
316. Based on this record, and in light of the fact that this
method was widely used and even expected in contracts with
other dealerships, the court found that practice was not unfair
as to South Bay Chevrolet itself.

   [21] The district court in this case took individual circum-
stances into account but ultimately determined that South Bay
was distinguishable. The district court found that Lozano’s
claim was based on uniform disclosures made by AWS to all
its consumers, whereas the disclosures in South Bay varied
from dealer to dealer. Therefore, the individual circumstances
12778             LOZANO v. AT&T WIRELESS
regarding how these disclosures were read or received would
not destroy predominance, in the district court’s view. Though
we might have decided the issue differently, our review is
“limited to assuring that the district court’s determination has
a basis in reason.” Gonzales v. Free Speech Coalition, 408
F.3d 613, 618 (9th Cir. 2005) (citation omitted). The district
court gave full consideration to AWS’s argument and did not
abuse its discretion in determining that individual circum-
stances would not defeat the predominance of common issues.
We accordingly affirm its certification of the class.

   [22] Finally, we find no basis for AWS’s contention that
the district court failed to consider the effect of affirmative
defenses on class treatment. Our review of the district court’s
order reveals that it properly considered each of AWS’s
defenses in determining whether to certify a class.

                       CONCLUSION

   We reverse the district court’s order granting class certifi-
cation of Lozano’s CLRA claim based on the inclusion of an
unconscionable clause in the agreement. Similarly, we reverse
the district court’s certification of Lozano’s UCL claim based
on unlawful conduct, as it is dependent on Lozano’s CLRA
claim. We otherwise affirm the district court’s order on class
certification. Each party shall bear its own costs on appeal.
See Fed. R. App. P. 39(a)(4)

  AFFIRMED in part, REVERSED in part.