## Facts

- Brawn of California, Inc. sold clothing by catalog and online and shipped orders from its warehouse using a common carrier.
- Order forms required customers to pay the product price, a shipping/delivery fee, and a flat $1.48 “insurance fee.”
- The order form stated: “INSURANCE: Items Lost or Damaged in Transit Replaced Free.”
- Brawn calculated the fee based on its expected cost to replace items lost or damaged in transit and, in practice, replaced such items without additional charge to customers.
- Brawn carried separate insurance covering goods only until pickup by the carrier; it did not cover transit losses.
- Jacq Wilson paid the insurance fee on two orders in February 2002 and filed a putative class action shortly thereafter.
- Wilson alleged the fee was deceptive and unlawful under the Unfair Competition Law (Bus. & Prof. Code § 17200 et seq.) and False Advertising Law (Bus. & Prof. Code § 17500 et seq.) because, under the California Commercial Code, Brawn allegedly already bore transit risk of loss.
- The trial court agreed with Wilson’s premise, entered judgment for plaintiffs, and awarded attorney’s fees and litigation expenses.
- Brawn appealed.

## Issues

1. Under the California Commercial Code, were the transactions shipment contracts (risk passes to buyer upon delivery to the carrier) or destination contracts/sales on approval (risk remains with seller until delivery/acceptance)?
2. If Brawn was not legally obligated to bear transit loss, did charging and describing the $1.48 “insurance fee” constitute an unfair or deceptive practice or false advertising under the UCL and FAL?

## Decision

- The Court of Appeal reversed the judgment and the related fee and expense awards.
- The court held the contracts were shipment contracts under Cal. Com. Code § 2509, so risk of loss passed to the buyer when the goods were duly delivered to the carrier, absent a contrary agreement.
- The court rejected the argument that the transactions were “sales on approval.”
- Because Brawn was not already required to cover transit losses, the insurance fee purchased a real contractual benefit (replacement of items lost or damaged in transit) and was not deceptive or false.

## Legal Principles

- Under Cal. Com. Code § 2509, when a contract authorizes shipment by carrier and does not require delivery at a particular destination, risk of loss shifts to the buyer upon the seller’s delivery of conforming goods to the carrier, unless the parties otherwise agree.
- A “sale on approval” requires delivery primarily for the buyer’s use with acceptance as a condition to passage of risk/title; routine retail return policies do not, by themselves, establish a sale on approval.
- UCL/FAL liability for a fee-based representation requires a materially misleading implication; a charge is not deceptive where the seller is not already legally obligated to provide the claimed protection for free and the seller provides the promised benefit.

## Conclusion

The court concluded that Brawn’s catalog and online orders were shipment contracts placing transit risk on buyers, so Brawn’s separate charge for replacing items lost or damaged in transit provided value and did not support UCL or FAL liability; the trial court’s contrary judgment and related fee awards were reversed.


Wilson v. Brawn of Cal., Inc., 132 Cal. App. 4th 549, 33 Cal. Rptr. 3d 769 (Ct. App. 2005)