We have been following and reporting on Pom Wonderful’s multiple challenges to competitor's advertising (see here and here, including their record for surviving the 12(b)(6) hurdle. A recent opinion dampened Pom's more recent winning streak. The decision marks another trial court’s views on what it takes to establish standing under California’s Unfair Competition Law and False Advertising Law after the passage of the voter initiative known as Proposition 64 -- an issue that will soon be addressed by the California Supreme Court.
In POM Wonderful LLC v. Welch Foods, Inc., Judge Matz, of the Central District of California, granted Welch’s motion for judgment on the pleadings. Pom alleged that Welch’s purported false statements regarding the amount of pomegranate juice in its “White Grape Pomegranate” juice blend deprived Pom of “business and goodwill,” injured its “relationship with existing and prospective customers,” and “resulted in increased sales” of Welch’s products “while hindering the sales of” Pom’s products. Judge Matz concluded that Pom had no standing to maintain a claim under California’s Unfair Competition Law (UCL) or California’s False Advertising Law (FAL). Proposition 64 amended these statutes to require a private party suing under them to show that it has suffered “injury in fact and lost money or property as a result of” UCL or FAL violations. The Court found that to establish “lost money or property” Pom had to plead and prove entitlement to restitution. It went on to hold that “Pom has not alleged a loss that would entitle it to restitution” because “Pom does not allege that Welch is in possession of money or property which Pom possessed, nor has Pom pointed to any money that it has been required to expend as a result of Welch’s unfair business practices or false advertising.” Rather, as in the seminal California Supreme Court case, Korea Supply Co. v. Lockheed Martin Corp., Pom “seeks to recover ‘nonrestitutional disgorgement of profits’ that are nothing more than a ‘contingent expectancy of a payment from a third party’ -- in this case, consumers.” In so holding, Judge Matz pointed to a decision in a nearly identical case, Pom Wonderful, LLC v. Tropicana Products, Inc.et al., where Judge Fischer reached a similar conclusion.
The Pom v. Welch Foods opinion contrasts with an earlier decision we reported on reported on here, in which Judge Otero, also of the Central District of California, rejected Coke’s argument that Pom lacked standing to pursue its UCL and FAL claims. There, Judge Otero reasoned that restitution under the UCL is proper if the plaintiff has lost money or property in which it has a “vested interest,” and Pom had a “vested interest” in profits derived from Coke’s allegedly unlawfully increased market share. As such, Pom had standing to bring its UCL and FAL claims.
The Pom decisions are examples of the continuing debate about what is required to show standing under the UCL. Welch Foods sides with those courts that have held that a plaintiff has lost “money or property” -- and therefore has standing to sue under the UCL -- only if he or she can show entitlement to restitution, i.e., the return of money that defendant took directly from plaintiff by means of the UCL violation. Other cases take a broader view of what constitutes “lost money or property.” In fact, this precise issue is before the California Supreme in the Kwikset case. The resolution of Kwikset may influence Pom’s claims against Welch Foods and other competitors. For instance, if the Kwikset Court defines “lost money or property” to include lost revenues caused by a competitor’s UCL violation, Pom may be able to establish standing. For now, however, the POM v. Welch Foods suggests that, at least in Judge Matz’s courtroom, a plaintiff will not be able to satisfy the “lost money or property” requirement by simply alleging a loss in market share based on the conduct of a competitor.
- James Speyer and Rachel Chanin
