On January 27, the Supreme Court of California issued its long-awaited opinion in Kwikset Corporation v. Superior Court, addressing a key standing issue under California’s Unfair Competition Law (UCL) and False Advertising Law (FAL). The issue concerns the meaning of the statutory requirement that a plaintiff must have “lost money or property” as a result of a UCL or FAL violation to have standing to sue. In a ruling that will dramatically expand the ability of plaintiffs to sue companies doing business in California, the Court held that in cases based on claimed product label misrepresentation, all a plaintiff needs to allege to satisfy the “lost money or property” requirement -- and thereby gain standing -- is that he or she would not have bought the product absent the claimed misrepresentation.
In Kwikset, the plaintiff consumer alleged that defendant’s sale of locksets with “Made in the USA” labels violated the UCL and FAL because the products contained a small percentage of foreign-made parts. The plaintiff argued that he met the “lost money or property” standing requirement because he spent money to purchase locksets in reliance on defendant's alleged misrepresentations. The defendant argued that plaintiff did not “lose” any money or property because he received a product equal in value to the amount he paid for it.
The California Supreme Court agreed with the plaintiff. It held that when a consumer buys a product in reliance on a misrepresentation about the product, she automatically satisfies the “lost money or property” requirement -- regardless of whether she received a product worth what she paid. The Court held that the “lost money or property” requirement is satisfied by a showing of “economic injury,” and that economic injury may be shown -- at least in a product label misrepresentation case -- by the mere expenditure of money to buy the product.
While the Court’s ruling will make it more difficult for manufacturers and retailers to dispose of UCL or FAL cases on standing grounds, the decision also contains some heartening news for defendants with respect to another major battleground in these cases: whether plaintiffs uninjured by a UCL or FAL violation may obtain monetary relief. Although it may seem strange that this should even be an issue, many plaintiffs have argued that certain UCL statutory language, along with dicta in the Supreme Court’s 2009 decision in In re Tobacco II Cases, allows restitution (the only monetary relief available under these statutes) without proof that a plaintiff was actually injured due to a UCL or FAL violation. (Click here for a discussion of this issue)
The Court, however, stated that “a restitution order against a defendant . . . requires both that money or property have been lost by a plaintiff, on the one hand, and that it have been acquired by a defendant, on the other,” citing one specific sentence in Kraus v. Trinity Management Services. That sentence states that “when we refer to orders for restitution, we mean orders compelling a defendant to return money obtained through an unfair business practice to those persons in interest from whom the property was taken.” This re-affirmation of Kraus -- which may have been the result of an amicus brief submitted in Kwikset by business groups -- should help defeat the efforts of the California plaintiff’s bar to extract money from corporations for uninjured consumers.
For a more detailed discussion of this opinion, click here.