People v. JTH Tax, Inc. (212 Cal. App. 4th 1219, 2013)

Opinion

LAMBDEN, J.

Defendant JTH Tax, Inc., doing business as Liberty Tax Service (Liberty), appeals from a judgment issued after a bench trial awarding plaintiff, the People, approximately $1,169,000 in civil penalties, ordering Liberty to pay approximately $135,000 in restitution, and permanently enjoining Liberty in several ways for violating state and federal lending, unfair competition, consumer protection, and false advertising laws. Liberty argues that the trial court made errors of law and/or fact in determining that a “handling fee” charged for certain bank products was an undisclosed finance charge under the federal Truth in Lending Act (15 U.S.C. § 1601 et seq.; TILA); Liberty’s cross-collection practices regarding past loan debts owed by customers were improper; Liberty was vicariously liable for its franchisees’ advertising; certain civil penalties for advertising violations should be paid by Liberty; and a permanent injunction regarding certain of Liberty’s practices going forward was necessary and appropriate.

We disagree with each of Liberty’s arguments. We find the trial court’s analyses and findings to be thoughtful and well calibrated regarding the circumstances before it, and affirm the judgment.

BACKGROUND

Liberty, a Delaware corporation with headquarters in Virginia Beach, Virginia, provides certain tax preparation and related loan services throughout the United States. As of the time of trial, Liberty had more than 2,000 franchised and company-owned stores throughout the United States, including 195 franchised stores in California (along with two company-owned stores in 2005 and 2006), all of which do business as “Liberty Tax Service.” Liberty offered tax preparation services, efiling, “refund anticipation loans” (RAL) and “electronic refund checks” (ERC).

In February 2007, the Attorney General filed a complaint against Liberty in the Superior Court of the City and County of San Francisco alleging that Liberty had violated California’s unfair competition law (UCL), Business and Professions Code section 17200 et seq., and California’s false advertising law (FAL), Business and Professions Code section 17500 et seq. The lawsuit claimed there were misleading or deceptive statements in print and television advertising by Liberty and its franchisees regarding Liberty’s RAL’s and ERC’s and inadequate disclosures to customers in Liberty’s RAL and ERC applications regarding debt collection, certain costs and interest on the extension of credit, the time it takes to receive money under refund options offered, and other matters. The remedies the People sought included injunctive relief, civil penalties, and an order of restitution.

The Trial Court’s Rulings

After a nine-day bench trial, the trial court issued a 49-page statement of decision. Many of the facts found by the court are not disputed. Liberty’s RAL’s were short-term loans provided by lender banks with which Liberty contracted. It was primarily Liberty, rather than the lender banks, that advertised and promoted the RAL’s, offered them to customers, provided customers with multipage loan applications, filled out the applications, and obtained the customer’s signatures. Liberty also delivered the RAL applications to the lender bank and distributed the loan proceeds to most of its customers.

If approved, an RAL was usually disbursed by the lender bank in one or two days, secured by a customer’s anticipated tax refund and issued by a third-party bank. The loan amount was based on the anticipated refund minus all transaction-related charges and fees, including a finance charge and tax preparation fees, as well as a “handling fee” charged for the lender bank’s establishment of a temporary, special purpose account into which the customer’s tax refund was deposited directly by the Internal Revenue Service (IRS). The customer could not redirect a refund once the IRS was given notice of this special purpose account. The bank repaid its loan out of any tax refund subsequently deposited into the account by the IRS. The customer was responsible for repaying the full amount of the loan, regardless of the size of the actual tax refund deposited into the account.

An ERC application also authorized the lender bank to set up a temporary, special purpose account to receive the customer’s tax refund directly from the IRS. When the IRS deposited the tax refund into the account, the bank deducted the tax return preparation fees, the handling fee, and any other applicable charges, and paid any remainder to the customer.

Liberty benefitted substantially from its sales of RAL’s and ERC’s. In 2007, it earned more than $11.6 million in revenue from their sales, 17.5 percent of its total revenues nationwide. RAL’s and ERC’s accounted for 22 percent of Liberty’s California revenues in 2007, up from 8.28 percent in 2005. From 2002 to 2005, Liberty received 65 percent of the revenues on RAL’s and ERC’s issued to Liberty customers by First Bank of Delaware (FBOD). From 2006 to 2008, it received a flat amount for each RAL and ERC from Santa Barbara Bank & Trust (SBBT), then the exclusive supplier of these products in California.

Liberty also benefitted from sales of RAL’s and ERC’s because these products made its tax preparation services more affordable. Liberty had a high percentage of lower income customers and many of its customers could not afford to pay for tax preparation out of pocket. As Liberty’s sale documents indicate, the key selling point for RAL’s and ERC’s was that the customer did not pay any costs up front. Liberty’s chief financial officer testified, “Well, if we didn’t offer bank products, customers—a lot of customers wouldn’t come in our doors.”

Liberty’s loan programs were an important focus of its marketing efforts. As we will discuss, its advertisements and those of its franchisees featured promises of speedy cash in order to attract customers.

The court found against Liberty in three relevant areas. First, it concluded that the handling fee charged to ERC customers, typically $24 to $30.95 depending on the year, was an undisclosed finance charge in violation of the TELA (15 U.S.C. § 1601 et seq.), because an ERC was a form of credit that allowed customers to delay payment for tax preparation services. The court also found Liberty’s failure to disclose this finance charge violated California’s UCL and FAL. It ordered Liberty to pay $240,500 in civil penalties, disclose any fee incident to the extension of credit as a finance charge, and state the cost of such fees as an annual percentage rate.

Second, the trial court concluded that Liberty’s employment of “cross-collection” practices in the course of selling RAL’s and ERC’s to collect applicants’ tax refund loan debts from prior transactions, including non-Liberty transactions, was deceptive, unfair, and violated both federal and state laws. The court imposed $118,000 in civil penalties, ordered Liberty to pay $135,886 in restitution to affected customers, and permanently enjoined certain aspects of Liberty’s practices.

Third, the trial court found Liberty liable for certain print and television advertisements that were “likely to deceive” within the meaning of California’s UCL and FAL. These included advertisements created or approved by Liberty and those placed by California franchisees, the latter because, the court found, the franchisees acted as Liberty’s agents in doing so. The trial court ordered Liberty to pay civil penalties of $753,199 for advertisements it created or approved and an additional $50,000 for advertisements by its franchisees.

The trial court also permanently enjoined Liberty from “disseminating or causing to be disseminated any [advertisement that directly or indirectly represents [an RAL] as a client’s actual refund,” and from failing, in any advertisement that mentions refund loans, to state “conspicuously” that the product is a loan, as well as the name of, and fee or interest that will be charged by, the lending institution. Under the injunction, Liberty is required to monitor its employees and franchisees to ensure they refrain from engaging in false advertising, to warn, then fine, and then terminate those who commit violations, and to promptly notify the Attorney General’s office of violations. The court maintained jurisdiction over the case and indicated that the parties could apply to it at any time for “such further orders and directions as may be necessary or appropriate for the construction or carrying out” of the court’s judgment, “for modification or termination of any injunctive provision,” and “for punishment of any violation” of the judgment.

Liberty filed a timely notice of appeal.

We have also reviewed and considered several additional filings in this appeal. We have reviewed and considered the amicus curiae brief filed by the International Franchise Association in support of Liberty, the amicus curiae brief filed by the National Consumer Law Center (NCLC) and National Association of Consumer Advocates (NACA) in support of the People, and the parties’ filings in response to these briefs.

We have taken under submission Liberty’s motion for judicial notice, filed on August 9, 2010. We hereby grant this motion pursuant to Evidence Code section 452, subdivision (c).

We have also taken under submission two motions to strike by the People. We discuss our rulings regarding the first, a motion to strike portions of Liberty’s reply brief, in the discussion, post. Regarding the People’s motion to strike portions of Liberty’s response to the amicus curiae brief filed by the NCLC and NACA, the motion is denied. However, we conclude the arguments by Liberty that the People seek to strike are unpersuasive for the reasons stated in the People’s motion, including because they are raised for the first time in response to the amicus curiae brief, and/or because they are not particularly relevant in light of the rulings we make herein.

Finally, we have reviewed and considered the case law and arguments referred to in letters submitted to us by the parties.

DISCUSSION

Liberty argues the trial court erred in ruling that Liberty’s ERC handling fee was an undisclosed finance charge in violation of the TILA, that its cross-collection practices violated federal and state law, and that it was vicariously liable under agency law for its franchisees’ deceptive advertising. Liberty also challenges the court’s method of calculating certain of the civil penalties the court imposed for Liberty’s advertising violations under the UCL and FAL. Finally, Liberty argues the trial court abused its discretion in ordering certain permanent injunctive relief. We now review each of these arguments.

I. The ERC Handling Fee

Under the TILA and the related regulations, a finance charge is “the cost of consumer credit as a dollar amount. It includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit. It does not include any charge of a type payable in a comparable cash transaction.” (12 C.F.R. § 226.4(a) (2012); accord, 15 U.S.C. § 1605(a).) Liberty argues the trial court erred by concluding the ERC handling fee was a finance charge subject to the TILA because its customers pay it to a bank, not Liberty, for setting up a temporary refund account, and also pay the same fee in comparable cash transactions. We conclude the court did not err.

A. The Proceedings Below

The court concluded the ERC handling fee was a finance charge because a Liberty customer must pay it “in order to defer payment for tax preparation fees” via purchase of an ERC, citing Berryhill v. Rich Plan of Pensacola (5th Cir. 1978) 578 F.2d 1092, 1099 (Berryhill). The court also found the handling fee was shared between Liberty and the relevant bank.

Liberty argued the handling fee was not a finance charge for three reasons, each of which the trial court rejected. First, Liberty relied on the fact that the fee was charged through the lender bank, not Liberty. The court concluded the details of how the charge was imposed were irrelevant, as was held in Yazzie v. Ray Vicker’s Special Cars, Inc. (D.N.M. 1998) 12 F.Supp.2d 1230, 1232.

Second, Liberty argued the fee was charged in comparable cash transactions and, therefore, was not a finance charge. The court found only four out of 60,000 California customers who purchased ERC’s between 2002 and 2007 paid up front for tax services. Relying on Carney v. Worthmore Furniture, Inc. (4th Cir. 1977) 561 F.2d 1100 (Carney), the court concluded these were “ ‘insignificant exceptions’ to what is, for all practical purposes, a credit sale business” and, therefore, Liberty could not rely on the “comparable cash transaction” defense.

Finally, Liberty argued the fee was not a finance charge because it was not “interest.” The court concluded this was irrelevant.

B. Analysis

1. Payment to the Bank for Setting Up a Special Account

Liberty first argues the trial court erred as a matter of law because the fee was paid to a bank for the costs of opening a temporary account and, therefore, was not a finance charge at all under the TILA, citing Hahn v. Hank’s Ambulance Service, Inc. (11th Cir. 1986) 787 F.2d 543 (Hahn).

Liberty presents this issue as a question of statutory interpretation based on undisputed facts, which we review de novo. (Bruns v. E-Commerce Exchange, Inc. (2011) 51 Cal.4th 717, 724 [122 Cal.Rptr.3d 331, 248 P.3d 1185] [“Statutory interpretation is a question of law that we review de novo.”].) The Hahn court held an ambulance company’s $5 charge to customers who did not pay for services when rendered was “ ‘[a] small flat charge for the bookkeeping cost of processing delayed payment in no way geared to the amount of the bill,’ ” and, therefore, “ ‘simply does not implicate [the TELA].’ ” (Hahn, supra, 787 F.2d at p. 544.) Liberty argues its fee and the fee reviewed in Hahn are similar because both involve the administrative cost of processing a transaction.

Liberty’s argument is unpersuasive because the $5 charge reviewed in Hahn did not grant a customer the right to defer payment of a debt. (Hahn, supra, 787 F.2d at p. 544.) To the contrary, it was assessed “in light of the customer’s failure to pay the company at the time the service is performed, in accordance with customary policy,” which the court found was more in the nature of a late payment that was exempt from the TELA. (Hahn, at p. 544.) In the present case, the handling fee was a condition to customers receiving Liberty’s tax services on credit. Liberty does not establish why the fee’s application to administrative aspects related to the extension of this credit matters, and we are not aware of any reason why it should.

Liberty also argues the fee was not a finance charge because it did not vary based on when Liberty received payment for tax preparation services. It cites no legal authority for this proposition, however, and nothing in the TILA’s definition of a finance charge provides support for this position. (12 C.F.R. § 226.4(a) (2012).) Therefore, this argument is unpersuasive as well.

In short, Liberty does not establish that the trial court erred in concluding that the ERC handling fee was a finance charge under the TILA.

2. Liberty’s “Comparable Cash Transactions” Argument

Liberty next argues that, even if the ERC handling fee qualified as a finance charge under the TILA, it is also payable in a comparable cash transaction and, therefore, exempt from TILA regulation. (15 U.S.C. § 1605(a); 12 C.F.R. § 226.4(a) (2012).) The People argue the court correctly rejected this argument pursuant to Carney, supra, 561 F.2d 1100 because virtually all of Liberty’s ERC business was credit sales. We agree with the People.

As Liberty points out, the purpose of the TILA “is to enable consumers to decide whether or from whom to obtain credit, and a charge that does not affect the cost... of credit relative ... to cash is irrelevant to that purpose.” (Hoffman v. Grossinger Motor Corp. (7th Cir. 2000) 218 F.3d 680, 681.) Thus, courts have repeatedly found credit fees are not finance charges when the same charge is applied in comparable cash transactions, as in the cases cited by Liberty. (See Basile v. H &R Block, Inc. (E.D.Pa. 1995) 897 F.Supp. 194, 198; Alston v. Crown Auto, Inc. (4th Cir. 2000) 224 F.3d 332, 334; Hodges v. Koons Buick Pontiac GMC, Inc. (E.D.Va. 2001) 180 F.Supp.2d 786, 793; White v. Diamond Motors, Inc. (M.D.La. 1997) 962 F.Supp. 867, 871.) However, none of these cases is persuasive in light of Carney, supra, 561 F.2d 1100 and Berryhill, supra, 578 F.2d 1092, because these two cases discuss circumstances that are most analogous to those in the present case.

In Carney, Worthmore sold Carney a food freezer in a consumer credit transaction. (Carney, supra, 561 F.2d at p. 1102.) As part of the transaction, Carney was required to purchase a freezer service policy costing $50, which was added to the sale price of the freezer and included in the amount financed, but not disclosed as part of the finance charge disclosed by Worthmore pursuant to the TILA. (Carney, at p. 1102.) The policy’s cost was a fixed sum based on the type of appliance and not on the length of the credit repayment period. (Ibid.) At least 98 percent of Worthmore’s appliance business involved credit sales subject to the TELA, but Worthmore made cash sales of major appliances in which buyers were also required to purchase the freezer service policy. (Carney, at p. 1102.)

The appellate court affirmed the district court’s conclusion that the cost of the freezer service policy should have been disclosed as part of the finance .charge Worthmore disclosed pursuant to the TELA. The court rejected Worthmore’s argument that the service policy was not “an incident to the extension of credit” as meant in title 15 United States Code section 1605 because identical charges were levied in each cash transaction. (Carney, supra, 561 F.2d at pp. 1102-1103.) The court found the alleged cash transactions were “insignificant exceptions to what is apparently a credit sales business” and, therefore, “the naked claim that the service policy charge is imposed on cash customers is insufficient to acquit it as not incident to the extension of credit.” (Id. at p. 1103.) The court concluded the freezer service policy charge “was inextricably intertwined with Worthmore’s interest as a creditor” and, therefore, was a finance charge under the TILA. (Carney, at p. 1103.)

Similarly, in Berryhill, Rich Plan sold frozen food in quantity to home consumers either on credit or for cash, but an “overwhelming proportion” of its sales was on credit. (Berryhill, supra, 578 F.2d at pp. 1094-1095.) To purchase food for six months on credit under a food plan contract, Rich Plan required the Berryhills to also enter into a food and freezer service agreement that entitled them to various benefits, including an additional three-year insurance plan for loss of food due to the freezer’s mechanical breakdown or power failure, up to $300. (Id. at p. 1095.) The service agreement, which was the most profitable element of the transaction for Worthmore, was not disclosed as part of the finance charge on the food plan contract. (Id. at p. 1096.)

The district court found the failure to disclose the service plan as a finance charge violated the TELA. (Berryhill, supra, 578 F.2d at p. 1096.) On appeal, Rich Plan argued the service agreement was of a nature and sufficiently independent from the food plan contract so as not to be a charge imposed as “ ‘an incident to or as a condition for the extension of credit’ ” (id. at p. 1097) and, therefore, was not a part of the finance charge under the TELA. The appellate court disagreed because purchase of the service contract was a condition, and incidental to the extension of credit under the food plan contract. (Berryhill, at pp. 1097-1098.)

Rich Plan also argued that the service plan was not a finance charge because it was also required of cash customers. The Berryhill court rejected this argument based on Carney, supra, 561 F.2d at 1103, because the number of cash sales was “insignificant” and evidence indicated virtually all sales were made on credit. (Berryhill, supra, 578 F.2d at p. 1099.) Rich Plan attempted to distinguish its transactions from those considered in Carney because its service agreement’s payments and benefits extended for a period longer than the payments for the initial food order. The court failed to see the significance because “[t]he important question is whether the seller refuses to extend credit until the customer agrees to another charge. The details of the manner in which the charge is imposed are irrelevant.” (Berryhill, at p. 1099.)

Similarly to Carney and Berryhill, there was substantial evidence to support the trial court’s conclusion that the ERC handling fee was not charged in “comparable cash transactions” so as to remove it from regulation as a “finance charge” under the TILA. Liberty engaged in 60,125 ERC transactions with customers from 2002 to 2007. Only four customers paid in cash during this time. The trial court correctly concluded that these four cash transactions were “insignificant exceptions” to what was, for all practical purposes “a credit sale business.” (See Carney, supra, 561 F.2d at p. 1103.)

Liberty also asks that we consider the evidence submitted below that there were 2,699 additional California customers during this same time period who “paid” their tax preparation fees via a Liberty coupon that enabled them to obtain these services at no cost, other than the ERC handling fee. Liberty argues these customers did not seek an extension of credit from Liberty because they paid nothing for their tax preparation. This too is unpersuasive because these were not “comparable cash transactions”; indeed, they were not cash transactions at all. If anything, they resemble a credit transaction because the customer obtained tax preparation services without making any payment, provided that they paid the handling fee.

In any event, these coupon customers amounted to approximately four percent of Liberty’s 60,125 ERC customers. Given this very small percentage and that these coupon transactions did not involve an exchange of cash, the trial court could reasonably conclude these coupon transactions were at most incidental exceptions to what amounted to a credit sales business.

In its reply brief, Liberty argues for the first time that it also engaged in comparable cash transactions with 46,222 RAL customers because, upon the bank’s approval of these customers’ RAL applications, Liberty was paid for tax preparation fees and the bank deducted its handling fee from the RAL given to the customer. Therefore, Liberty contends, a very sizeable amount of its business involved cash transactions.

In their motion, the People, relying on Westcon Construction Corp. v. County of Sacramento (2007) 152 Cal.App.4th 183, 194-195 [61 Cal.Rptr.3d 89], argue that we should strike or disregard these portions of Liberty’s reply brief as waived because Liberty’s RAL contention is based on a new and unfounded factual theory that was not presented in the trial court below.

We agree with the People that we should disregard Liberty’s tardy RAL argument for two reasons. First, Liberty’s argument that the RAL’s are “comparable cash transactions” is made for the first time in its reply brief. “Points raised in the reply brief for the first time will not be considered, unless good reason is shown for failure to present them before. To withhold a point until the closing brief deprives the respondent of the opportunity to answer it or requires the effort and delay of an additional brief by permission.” (Campos v. Anderson (1997) 57 Cal.App.4th 784, 794, fn. 3 [67 Cal.Rptr.2d 350]; see Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764 [60 Cal.Rptr.2d 770] [“ ‘[p]oints raised for the first time in a reply brief will ordinarily not be considered’ ”].) Liberty contends that it sufficiently preserves its argument in its opening brief by twice referring to its franchisees receiving payment for their services from the banks “up front,” in one instance specifically referring to RAL’s. This is hardly sufficient. Liberty did not argue RAL’s were comparable cash transactions until its reply brief. Therefore, we disregard its RAL argument.

Furthermore, we agree with the People that Liberty has waived this appellate argument by failing to raise it first in the trial court below. (Westcon Construction Corp. v. County of Sacramento, supra, 152 Cal.App.4th at pp. 194-195.) Contrary to Liberty’s assertion that it is merely presenting a new legal theory based on undisputed facts, there is evidence in the record indicating that Liberty was not paid its fee by the banks in RAL transactions until after tax preparation services were rendered, suggesting these transactions were more in the nature of credit sales. In other words, the argument rests on disputed facts.

In short, we conclude Liberty’s “comparable cash transactions” argument lacks merit.

II. Liberty’s Cross-collection Practices

Liberty next argues the trial court erred in concluding Liberty’s cross-collection practices violated the state Rosenthal Fair Debt Collection Practices Act (Civ. Code, § 1788 et seq.) and the federal Fair Debt Collection Practices Act (15 U.S.C. § 1692 et seq.; collectively, FDCPA) and California’s Consumers Legal Remedies Act (Civ. Code, § 1750 et seq.; CLRA), requiring reversal on this issue. The People disagree, and also argue that we should affirm based on the trial court’s determinations that Liberty violated the “fraudulent” and “unfair” prongs of the UCL and, for certain of its cross-collection practices, the prohibition against deceptive advertising in the PAL. The People argue that Liberty does not challenge these determinations in its opening brief, thereby waiving any challenge to these dispositive rulings. We agree that Liberty has waived these claims and affirm on that basis.

A. The Proceedings Below

In its statement of decision, the trial court detailed Liberty’s contracts with FBOD and SBBT, the banks it primarily used in California for its loan products, which contracts obligated Liberty to assist FBOD and SBBT in collecting past RAL debts.

Regarding FBOD, which Liberty made its largest supplier of RAL and ERC products in California from 2002 to 2005, Liberty’s “first job was ‘bringing the consumer [to] the bank.’ ” The relevant RAL and ERC applications authorized collection of prior RAL debts. Liberty advertised the loans, solicited loan applications from customers in their offices, filled out the applications, and obtained customers’ signatures on them. Once the applications were submitted, Liberty processed them through an automated underwriting system containing a cross-collection file compiled by Liberty on FBOD’s behalf. This file listed customers who purportedly owed prior RAL debt, whether to FBOD or other banks. Liberty also assisted FBOD in mailing debt validation notices to RAL customers who were denied a loan because of owing a prior RAL debt. Pursuant to its contract with FBOD, Liberty received 65 percent of all debts collected from its California customers.

SBBT was Liberty’s major supplier of RAL’s and ERC’s in California for a three-year period from 2006 through 2008. Liberty brought customers to SBBT by advertising the bank’s RAL product in California. Liberty solicited loan applications from individual customers and obtained their signatures on RAL and ERC applications that authorized cross-collection. Liberty transmitted the applications to SBBT, which deducted any past RAL debts owed by the customers from their refund proceeds.

The court found that Liberty’s RAL and ERC applications in California since 2002 included “ ‘authorizations’ to collect any unpaid refund loan debts from past years out of the customer’s refund proceeds,” whether owed to Liberty or other RAL lenders, and, the court noted, whether the past debt was “ ‘stale’ or otherwise uncollectible.” The court concluded under both the “least sophisticated consumer” and “reasonable consumer” standards that Liberty customers were “unlikely” to recall the details of such debts, particularly those “incurred far in the past and perhaps in connection with a loan issued by a different lender and/or obtained through a different tax preparer.”

Importantly, the court found that neither Liberty nor the banks informed customers before “inducing them to ‘authorize’ cross-collection whether they [were] believed to owe a past debt or not.” Thus, the trial court concluded, “before the customer has been given meaningful notice about the existence of a debt, the customer has lost control of the refund and, as a result, his or her right to effectively dispute the debt. ... By seizing control of taxpayers’ refunds before providing them any meaningful notice that they are believed to owe a debt, even a stale and possibly uncollectible debt, the collection scheme at issue is deceptive, unfair, and frustrates the fundamental purpose of the state and federal FDCPA.”

The trial court further found that the applications Liberty used did not “clearly and effectively communicate the fact that the bank is acting as a debt collector and that any information obtained may be used for that purpose.” Customers were not screened for a past debt until after they “ ‘authorized’ ” cross-collection, but the SBBT applications stated only that SBBT “ ‘may’ be acting as a debt collector.” (Italics added.) The 2002 FBOD application did not contain statements required by the FDCPA. FBOD applications used from 2003 to 2005 did not clearly and effectively communicate the cross-collection authorization, which appeared on the second or third pages of lengthy and complex contracts that on their face had nothing to do with debt collection, making it unlikely that applicants would read and understand the significance of the information.

The court rejected Liberty’s contention that applicants with prior RAL debt were unlikely to be deceived, citing “the fundamental problem with the scheme, which is that consumers are not told whether they owe a debt before being induced to irrevocably authorize cross-collection, even of stale debts they may not recall, and/or debts they may not legitimately owe.” The court found Liberty had attempted to collect “an extant debt” through debt collection regarding 118 of its customers, all between 2002 and 2005.

The court concluded that Liberty’s cross-collection practices violated several laws. First, “Liberty’s and the banks’ efforts to collect applicants’ past debts were deceptive” pursuant to the FDCPA. Second, “[t]he scheme independently is ‘fraudulent’ and ‘unfair’ within the meaning of the UCL.” Third, Liberty aided and abetted SBBT in violation of Civil Code section 1770, subdivision (a)(14) (part of California’s CLRA), and by extension the UCL, by obtaining purported authorizations to pursue “ ‘stale’ debts that ordinarily could not be recovered as a matter of law due to the passage of time” without first disclosing the purported debt. Also, the applications did not satisfy the legal requirement that the debt “must be revived in writing, in the form of an express promise to pay or an unconditional acknowledgment of the indebtedness, signed by the debtor, and communicated to the creditor or his agent or representative.” Fourth, Liberty’s cross-collection practices regarding the collection of “stale” debts via SBBT’s application were deceptive and, therefore, violated California’s FAL.

The trial court ordered Liberty to pay $118,000 in civil penalties for its cross-collection practices pursuant to California’s UCL and FAL, based on the number of debts actually collected, 118, and the doubling of the number of violations because the conduct involved violated both the UCL and FAL. The court found the violations to be serious, to have a serious impact on consumers, and to be persistent and long-standing. Accordingly, it set a base penalty of $500 for each violation.

Pursuant to its equitable powers and its powers under the UCL and FAL, the trial court also permanently enjoined Liberty from participating in, or facilitating, any program to collect past RAL debts that does not make appropriate disclosures to alleged debtors before they commit to any relevant authorization, as well as any program that attempts to obtain a customer’s authorization to collect “stale” debts as part of offering RAL’s or ERC’s unless the customer revives the debt in the manner required by law.

B. Analysis

Liberty argues in its opening brief that the trial court erred in ruling that its cross-collection practices violated the FDCPA and the CLRA. In its opening brief, Liberty does not meaningfully challenge the court’s rulings that Liberty’s cross-collection practices violated the “fraudulent” and “unfair” prongs of California’s UCL and FAL.

The People argue that Liberty has waived its appellate claim by failing to address the trial court’s rulings that Liberty’s cross-collection practices independently violated the UCL and FAL. The People further argue in their motion to strike portions of JTH’s reply brief that we strike or disregard Liberty’s substantive arguments in its reply brief about the trial court’s UCL ruling.

We grant the People’s motion on the ground that Liberty’s reply brief arguments are tardily made without good reason for doing so being shown and, therefore, should be disregarded. (Campos v. Anderson, supra, 57 Cal.App.4th at p. 794, fn. 3; Reichardt v. Hoffman, supra, 52 Cal.App.4th at p. 764.) We affirm the court’s ruling based on Liberty’s waiver, given Liberty’s failure to meaningfully address the court’s UCL and FAL rulings in its opening brief.

California’s UCL provides that “unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by [the FAL].” (§ 17200.) The UCL authorizes a court to order against any person who has engaged in unfair competition injunctive relief and civil penalties not to exceed $2,500 for each violation, which penalties may be cumulative of others. (§§ 17203-17206.)

The UCL’s “scope is broad” and it governs “ 1 “ ‘anything that can properly be called a business practice and that at the same time is forbidden by law.’ ” ’ ” (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180 [83 Cal.Rptr.2d 548, 973 P.2d 527] (Cel-Tech).) Furthermore, its reference to “ ‘any unlawful, unfair or fraudulent’ practice (italics added) makes clear that a practice may be deemed unfair even if not specifically proscribed by some other law. ‘. . . [S]ection 17200 is written in the disjunctive, it establishes three varieties of unfair competition— acts or practices which are unlawful, or unfair, or fraudulent. “In other words, a practice is prohibited as ‘unfair’ or ‘deceptive’ even if not ‘unlawful’ and vice versa.” ’ ” (Cel-Tech, at p. 180.)

In its statement of decision, the trial court ruled that Liberty’s cross-collection practices violated the FDCPA. However, the court also stated as independent bases for its rulings that Liberty’s failure to sufficiently disclose its cross-collection practices to its customers violated the “fraudulent” and “unfair” provisions of the UCL. The court’s findings supported these independent bases. It concluded Liberty’s failure to disclose certain information about cross-collection was deceptive, including its failure to notify applicants before accepting their application that they had purported past RAL debts, including “stale” debts, to any lender participating in its cross-collection database that could be deducted from any tax refund deposited into the bank’s special account. The trial court found that Liberty, by not giving meaningful notice to its customers before gaining control of their refunds, engaged in a scheme that was deceptive and unfair to a “reasonable consumer,” the standard under which UCL claims are considered. (See, e.g., Hill v. Roll Internat. Corp. (2011) 195 Cal.App.4th 1295, 1304 [128 Cal.Rptr.3d 109].)

Similarly, the trial court found that certain aspects of Liberty’s disclosures, or lack thereof, about cross-collection regarding the SBBT applications were “deceptive” and, therefore, violated California’s FAL, which prohibits misleading or deceptive advertising. (§ 17500; see, e.g., Sevidal v. Target Corp. (2010) 189 Cal.App.4th 905, 923 [117 Cal.Rptr.3d 66].) The court’s discussion of Liberty’s practices regarding these applications supported this independent basis for finding Liberty liable.

Despite these independent bases for the trial court’s rulings about Liberty’s cross-collection practices, Liberty does not address them in its opening brief, other than to state that the court’s “fraudulent” and “unfair” UCL rulings were “not correct.” Instead, Liberty argues that the court erred by ruling it was liable under the FDCPA and CLRA.

As the People argue, Liberty’s failure to address all bases for the court’s ruling constitutes a waiver of its appellate claim. Liberty, as appellant, has the burden of persuasion; “[o]ne cannot simply say the court erred, and leave it up to the appellate court to figure out why.” (Niko v. Foreman (2006) 144 Cal.App.4th 344, 368 [50 Cal.Rptr.3d 398].) “ ‘[E]very brief should contain a legal argument with citation of authorities on the points made. If none is furnished on a particular point, the court may treat it as waived, and pass it without consideration.’ ” (People v. Stanley (1995) 10 Cal.4th 764, 793 [42 Cal.Rptr.2d 543, 897 P.2d 481].) When a trial court states multiple grounds for its ruling and appellant addresses only some of them, we need not address appellant’s arguments because “one good reason is sufficient to sustain the order from which the appeal was taken.” (Sutter Health Uninsured Pricing Cases (2009) 171 Cal.App.4th 495, 513 [89 Cal.Rptr.3d 615].)

In its reply brief, Liberty argues it did not need to address the “fraudulent” and “unfair” prongs of the UCL because the trial court “offered no elaboration beyond its extended discussion of the [FDCPA and CLRA] statutes. Liberty’s 15-page discussion [in its opening brief] parallels the trial court’s discussion and addresses each of specific reasons the court stated for its conclusions.”

Liberty’s argument is unpersuasive. It contends its conduct did not violate the FDCPA and the CLRA, but does not explain why this should bear on our consideration of whether its undisputed conduct also violated the “fraudulent” and “unfair” prongs of the UCL, or the prohibition against deceptive advertising in the FAL. These would be different claims of legal error under a different statutory framework. For example, as we have mentioned, these two prongs of the UCL do not require a finding of unlawful activity and are part of a broad statutory framework. Liberty’s claims of legal error under the FDCPA and the CLRA do not address these other, independent legal bases for the court’s ruling. It is not our role to speculate how they might apply.

Accordingly, we conclude that Liberty’s failure to address the court’s independent UCL and FAL bases for its rulings about Liberty’s cross-collection practices is a waiver of any appellate claims regarding them, and affirm based on them. Given our conclusion, we do not need to, and do not, address Liberty’s FDCPA and CLRA arguments.

III. Liberty’s Liability for Franchisee Advertising

Liberty next argues the trial court erred for three reasons in finding Liberty liable under agency theory for its California franchisees’ misleading advertising, for which Liberty was required to pay $50,000 in civil penalties under the UCL and FAL and ordered to take remedial steps under the court’s permanent injunction. According to Liberty, the franchisor-franchisee relationship requires a higher level of control than that considered by the court, Liberty was not liable under agency theory because it acted only to protect its trademark and goodwill, and it should be excepted from liability in any event because it was ignorant of the illegal advertising, did everything it could to stop it, and refused to accept its benefits. We conclude each of these arguments lack merit.

A. The Proceedings Below

The trial court found Liberty liable under agency theory for its California franchisees’ advertising that violated the UCL, FAL, and section 22253, subdivision (a). The court determined that under California law, a franchisee could be an agent of a franchisor, depending on the extent of the principal’s right of control. “It is generally understood,” the trial court wrote in its statement of decision, “that franchisors are often caught between the Scylla of failing to exercise sufficient control to protect their marks, and the Charybdis of exercising so much control they are vicariously liable for the torts of the franchisees or other licensees.”

According to the trial court, at the core of the issue is the franchisor controls included in the statutory definition of the franchise relationship. Parties to a franchise agreement contract so that the franchisee markets its goods or services “under a marketing plan or system prescribed in substantial part by a franchisor” and, using this plan or system, substantially associates its business to the franchisor’s trademark, service mark, trade name, logotype, advertising or other commercial symbol. (Corp. Code, § 31005, subd. (a)(1)—(3).) Thus, the court concluded, its inquiry “must focus on the extent to which the control reserved to the franchisor plainly exceeds that required to police the mark, which is control so pervasive that it amounts to complete or substantial control over the daily activities of the franchisee’s business.”

The trial court rejected Liberty’s argument, based on People v. Toomey (1985) 157 Cal.App.3d 1, 14 [203 Cal.Rptr. 642] (Toomey), that “vicarious liability” is not available in an action for unfair business practices. The court closely examined the reasoning of Toomey and concluded that it did not stand for the proposition that principal-agency liability is unavailable for an unfair business practices case, but merely disallowed only “reverse vicarious liability,” meaning “officers and directors are not automatically (vicariously) liable for the acts of the company that employs them.” Because this was not an issue in the present case, the court concluded Toomey did not bar its finding that Liberty was liable under agency theory.

In determining there was a principal-agency relationship between Liberty and its franchisees, the trial court focused on Liberty’s operations manual, which, the People contended, showed Liberty had a right of control far in excess of what it needed to police its mark. The court found that, while many of the mandatory restrictions stated in the manual “appealed] designed to police [Liberty’s] trademarks and the goodwill associated with those,” a number of them went beyond this goal. Specifically, the court found, Liberty required franchisees to offer RAL’s and ERC’s via banks mandated by Liberty; prohibited franchisees from offering products and services without Liberty’s permission; mandated franchisees’ minimum operating hours, computers to be used, and day-to-day tasks such as how to open the store and when to clean the bathrooms; reserved the right to intervene in disputes with customers, including the right to pay refunds directly to customers and bill the franchisees for them; required franchisees to commit to maintaining Liberty’s prescribed filing system and the setup for the tax return processing center; and controlled franchisee pricing by controlling the discounts franchisees could offer at different times of the year. The court concluded that “Liberty’s right of control extends not only to the products and services franchisees may offer, but also to the manner and means by which its franchisees prepare tax returns, offer RAL’s and ERC’s, and interact with customers, and extends beyond that needed to protect its marks.”

The court also emphasized what it found was Liberty’s “particularly extensive” right of control over franchisee advertising, which Liberty used to not only protect its marks, “but also to dictate business strategy to franchisees.” The court found Liberty controlled discounts in part because it thought “early season customers are not as price sensitive as late season customers” and controlled the products and services franchisees could advertise in part because “it believes that certain advertising is a waste of time and money.” It found Liberty’s operation manuals provided detailed advertising instructions, breaking the year into tiers, mandating extensive preapproval, setting out a “host” of marketing and advertising methods, and providing samples of copies. Thus, Liberty was “literally providing a detailed, step-by-step guide for every aspect of marketing and advertising.” The provisions were expressed as imperatives and general rules.

Also, the court found, Liberty “retained] an open-ended right to modify the operations manual without consent of the franchisees. This right of essentially complete control over franchisee operations, and specifically advertising operations, exceeded] what Liberty reasonably need[ed] to protect its trademark and goodwill.” The court concluded this was substantial evidence showing Liberty’s franchisees were its agents, at the least for the purposes of advertising.

The trial court found that more than 100 illegal ads by Liberty franchisees ran in Pennysaver publications throughout California in 2007 and 2008. Specifically, it found that 43 ads falsely promised “most refunds in one day” or a variation on that theme, including four specifically approved by Liberty, and 67 ads violated section 22253.1, subdivision (a) by omitting the mandatory bank name and lender fee disclosures. It concluded that Liberty was liable as a principal for its agent-franchisees’ illegal advertising.

B. Analysis

1. The Franchisor-franchisee Relationship

Liberty argues that the trial court erred in concluding that agency theory applied to its franchisor-franchisee relationships because the franchisor-franchisee relationship is “fundamentally different than the typical employer-employee relationship; and vicarious liability, developed as early common law to address ancient master-servant relationships, is a bad fit in the modem franchise context.” It points out that franchisees are separate business entities that enter into arm’s-length contracts with franchisors and (after noting that Liberty’s California franchisees “operate as small business owners more than 3,000 miles from Liberty’s Virginia headquarters”) argues that some courts have declined to impose vicarious liability on one business entity for another’s actions simply because they are in a commercial relationship with each other in recognition of “the realities of such remote business relationships.”

Liberty also argues that “[c]ourts have recognized . . . that the right to control inherent in most aspects of a franchisor-franchisee relationship does not amount to ‘actual control’ for liability purposes.” According to Liberty, courts have “narrowed the ‘control’ test in the franchisor context to require that a franchisor exercise actual control over the day-to-day operations of the franchisee, not merely have a right to control over ‘uniformity and the standardization of products and services.’ ” (Italics added.)

Liberty relies primarily on case law from other jurisdictions for its argument, while largely ignoring the most significant in California. Liberty does quote the language in Toomey, addressed by the trial court, that being “[t]he concept of vicarious liability has no application to actions brought under the unfair business practices act.” (Toomey; supra, 157 Cal.App.3d at p. 14.) However, it does not rely on Toomey to argue that it is not subject to agency theory under California law.

Liberty also cites Emery v. Visa Internat. Service Assn. (2002) 95 Cal.App.4th 952 [116 Cal.Rptr.2d 25] (Emery) to argue that courts have declined to impose vicarious liability in the face of the realities of remote business relationships. Emery involved an action against certain Visa defendants by the plaintiff, acting as a private attorney general (id. at p. 955), for unfair business practices and deceptive advertising related to foreign lottery solicitations; the plaintiff sued while acknowledging Visa had nothing to do with the creation or mailing of the solicitations, which allowed payments by Visa bank cards. (Id. at p. 954.) The trial court granted summary judgment to Visa, rejecting, among other things, the plaintiffs theories that Visa’s advertising, licensing of its logo, and utilization of its payment system created an actual or ostensible agency relationship with its merchants, or agency by ratification. (Id. at pp. 954, 959.)

In discussing the plaintiff’s agency theories, the Emery court stated that it did not need to go further than to “remind plaintiff that his unfair practices claim under [the UCL] cannot be predicated on vicarious liability,” quoting the language from Toomey that we have quoted herein. (Emery, supra, 95 Cal.App.4th at p. 960.) The appellate court also found the undisputed facts did not show any agreement or control by Visa that would establish an agency relationship. (Id. at pp. 960-961.)

Although the Emery court concluded that the plaintiff could not proceed on agency theories because vicarious liability is not available under California’s unfair business practices law, Liberty does not rely on Emery for this proposition either.

Nonetheless, Liberty argues we should apply its strict construction of agency theory to franchise relationships to conclude that it “[did] not exercise the type of day-to-day operational control that would be consistent with cases imposing franchisor vicarious liability.” It contends that its franchisees are solely responsible for training, hiring, firing, and supervising their employees, outfitting their offices with computer equipment, supplies and furniture, complying with all laws, and are free to operate as many offices as they choose. They can select among marketing methods, “are free to design their own advertising, subject to Liberty’s approval, and select which publications to use,” control “all of the discretionary elements outlined in the advertising and marketing sections” of the operations manual, and are free to decide how much they want to spend for marketing.

Liberty’s legal and factual arguments are unpersuasive in light of the California law that it largely ignores. As the People argue and the trial court concluded, in California “[t]he general rule is where a franchise agreement gives the franchisor the right of complete or substantial control over the franchisee, an agency relationship exists. (2 Witkin, Summary of Cal. Law (9th ed. 1987) Agency and Employment, § 6, pp. 24-25.) ‘[I]t is the right to control the means and manner in which the result is achieved that is significant in determining whether a principal-agency relationship exists.’ [Citation.] ‘In the field of franchise agreements, the question of whether the franchisee is an independent contractor or an agent is ordinarily one of fact, depending on whether the franchisor exercises complete or substantial control over the franchisee.’ ” (Cislaw v. Southland Corp. (1992) 4 Cal.App.4th 1284, 1288 [6 Cal.Rptr.2d 386] (Cislaw); accord, Kaplan v. Coldwell Banker Residential Affiliates, Inc. (1997) 59 Cal.App.4th 741, 745 [69 Cal.Rptr.2d 640] (Kaplan).) “ ‘The significant test of an agency relationship is the principal’s right to control the activities of the agent. [Citations.] It is not essential that the right of control be exercised or that there be actual supervision of the work of the agent; the existence of the right establishes the relationship.’ ” (McCollum v. Friendly Hills Travel Center (1985) 172 Cal.App.3d 83, 91 [217 Cal.Rptr. 919].)

Also, as the People point out, our Supreme Court has held, without the limitations urged by Liberty in the present case, that “section 17500 [(the FAL)] incorporates the concept of principal-agent liability . . . .” (Ford Dealers Assn. v. Department of Motor Vehicles (1982) 32 Cal.3d 347, 361 [185 Cal.Rptr. 453, 650 P.2d 328] (Ford Dealers).) Since violations of the UCL “include any . . . unfair, deceptive, untrue or misleading advertising and any act prohibited by [the FAL]” (§ 17200), Ford Dealers establishes that persons can be found liable for misleading advertising and unfair business practices Under normal agency theory. To the extent that Toomey, supra, 157 Cal.App.3d 1, or Emery, supra, 95 Cal.App.4th 952 hold otherwise, which defendant implies without stating outright in the course of arguing its limiting theories, these cases are mistaken.

It is clear that, as the trial court recognized, we must be mindful that we are applying agency theory in the context of the franchisor-franchisee relationship. A franchisee, by definition, operates a business “under a marketing plan or system prescribed in substantial part by a franchisor,” which operation “is substantially associated with the franchisor’s trademark, service mark, trade name, logotype, advertising or other commercial symbol designating the franchisor . . . .” (Corp. Code, § 31005, subd. (a)(1), (2).) Accordingly, “the franchisor’s interest in the reputation of its entire [marketing] system allows it to exercise certain controls over the enterprise without running the risk of transforming its independent contractor franchise into an agent.” (Cislaw, supra, 4 Cal.App.4th at p. 1292, quoted, in Kaplan, supra, 59 Cal.App.4th at p. 745.) Thus, a franchisor may exercise a right of control over such activities as advertising to protect its marks and goodwill.

However, it is equally clear that the franchisor’s unique interests do not eliminate or alter the application of agency theory if the franchisor exercises a right of control that goes beyond its interests in its marks and goodwill. It is a question of fact as to whether, as the court considered in Cislaw, the franchisor retains “ ‘the right to control the means and manner in which the result is achieved’ ” and exercises “ ‘complete or substantial control over the franchisee.’ ” (Cislaw, supra, 4 Cal.App.4th at p. 1288.) This is precisely the standard applied by the trial court. Therefore, Liberty’s argument that the court applied the wrong legal standard to determine that it was liable for its franchisees’ misleading advertising lacks merit.

2. Substantial Evidence of Liberty’s Vicarious Liability

Liberty next argues that, in any event, the trial court erred in finding it vicariously liable for its franchisees’ illegal advertising under agency theory because it did not have a sufficient right of control over its franchisees’ activities. We conclude substantial evidence supports the trial court’s findings and, therefore, it did not err.

“Substantial evidence” is “evidence ... ‘of ponderable legal significance, . . . reasonable in nature, credible, and of solid value.’ ” (Bowers v. Bernards (1984) 150 Cal.App.3d 870, 873 [197 Cal.Rptr. 925].) “When a . . . factual determination is attacked on the ground that there is no substantial evidence to sustain it, the power of an appellate court begins and ends with the determination as to whether, on the entire record, there is substantial evidence, contradicted or uncontradicted, which will support the determination . . . .” (Id. at pp. 873-874.) “Even in cases where the evidence is undisputed or uncontradicted, if two or more different inferences can reasonably be drawn from the evidence this court is without power to substitute its own inferences or deductions for those of the trier of fact, which must resolve such conflicting inferences in the absence of. a rule of law specifying the inference to be drawn. We must accept as true all evidence and all reasonable inferences from the evidence tending to establish the correctness of the trial court’s findings and decision, resolving every conflict in favor of the judgment.” (Howard v. Owens Corning (1999) 72 Cal.App.4th 621, 631 [85 Cal.Rptr.2d 386].) “We may not reweigh the evidence . . . .” (Ghilotti Construction Co. v. City of Richmond (1996) 45 Cal.App.4th 897, 903 [53 Cal.Rptr.2d 389].)

The trial court included in its statement of decision findings regarding Liberty’s overall control over franchisee operations and activities, including via directions in Liberty’s operations manuals regarding the offering of RAL’s and ERC’s, operating hours, equipment and office systems to be used, and day-to-day tasks, as well as Liberty’s retention of the right to intervene in franchisee disputes with customers. The parties debate the purpose and nature of many of these controls.

We need not address all of the factual issues raised by the trial court and the parties regarding Liberty’s control over franchisee activities in this particular circumstance. Even were we to conclude that, as Liberty argues, some aspects of its control over franchisee operations and activities were necessary to protect its marks and goodwill, there is substantial evidence, cited by the court in its statement of decision, that Liberty retained the right to control, and in fact did seek to control, its franchisees’ advertising and other marketing activities beyond that necessary to protect its marks and goodwill.

Liberty “does not dispute that it attempts to exercise substantial control over its franchisees’ advertising.” It contends, however, that it does so in order to protect its goodwill, trademark and public image, and notes that, as we have indicated, as a franchisor, its interest in the reputation of its entire system allows it to exercise certain controls over the enterprise without running the risk of transforming its franchisees into its agents. (Cislaw, supra, 4 Cal.App.4th at p. 1292.) It further contends that its “sole objective is to ‘police the mark,’ i.e., to tailor an image for public consumption and promote consistency as a way of strengthening the franchisor’s brand.” Liberty points out that advertising by its nature uses the franchisor’s trademark and “if not controlled, can destroy the franchisor’s goodwill in its marks,” and quotes from a treatise on franchises pointing out that “ ‘the franchisor has a vested interest in making sure that they are used properly so that... the franchisor’s trademark rights are not impaired or the trademark displayed in a tasteless manner.’ (Keating, Franchising Advisor (1987) pp. 39-40.)” Liberty also contends that each of the examples cited by the trial court and the People to support the court’s agency finding was related to efforts to protect Liberty’s trademarks and goodwill.

Liberty’s arguments and contentions are unpersuasive under our substantial evidence standard of review. As we have noted, as the People point out, and as the trial court recognized in its statement of decision, “ ‘[t]he significant test of an agency relationship is the principal’s right to control the activities of the agent. [Citations.] It is not essential that the right of control be exercised or that there be actual supervision of the work of the agent; the existence of the right establishes the relationship.’ ” (McCollum v. Friendly Hills Travel Center, supra, 172 Cal.App.3d at p. 91; see Nichols v. Arthur Murray, Inc. (1967) 248 Cal.App.2d 610, 613 [56 Cal.Rptr. 728] [“In determining whether an agency relationship exists between parties to a business enterprise, which is the subject of an agreement between them, the right to control is an important factor.”].) Whether or not some