In a case alleging that a lockset manufacturer violated consumer protection laws by falsely labeling its products as “Made in the U.S.A.,” the California Supreme Court has determined that the plaintiff has standing to bring the action despite the enactment of Proposition 64, which placed some limitations on those who can file unfair competition and false advertising lawsuits. Kwikset Corp. v. Super. Ct., No. S171845 (Cal., decided January 27, 2011). The court held, “[P]laintiffs who can truthfully allege they were deceived by a product’s label into spending money to purchase the product, and would not have purchased it otherwise, have ‘lost money or property’ within the meaning of Proposition 64 and have standing to sue.”

The plaintiff prevailed after a bench trial, and the trial court ordered the company to cease labeling any lockset intended for sale in the state as “All American Made” or “Made in the USA,” if the lockset “contains any article, unit, or part that is made, manufactured, or produced outside of the United States.” The court also ordered the defendant to notify its California retailers and distributors about the “falsely labeled products” to give them the opportunity to return the inventory for a refund or replacement. The court denied the plaintiff’s request for restitution on behalf of a class of consumers.

Both parties appealed, and while the appeal was pending, California voters approved Proposition 64. The plaintiff was allowed to amend his complaint to plead standing, since the law was made applicable to all false advertising actions pending when it was adopted. He added several plaintiffs and alleged that each had “purchased several Kwikset locksets in California that were represented as ‘Made in the U.S.A.’ or [contained] similar designations,” that each was induced to purchase and did purchase the locksets relying on this misrepresentation and “would not have purchased them if they had not been so misrepresented.” While the trial court determined that the plaintiffs had adequately alleged standing, an intermediate appellate court reversed, explaining that the plaintiffs had adequately alleged injury but had not alleged any loss of money or property, a Proposition 64 requirement designed to eliminate standing for those who have not engaged in any business dealings with would-be defendants.

According to the state supreme court, Proposition 64 did not define or limit the concept of “lost money or property,” thus the traditional ways of showing economic injury from unfair competition have not changed. They include showing that a plaintiff (i) surrendered in a transaction more, or acquired in a transaction less, than she would otherwise have; (ii) had a present or future property interest diminished; (iii) was deprived of money or property to which she has a cognizable claim, or (iv) was required to enter into a transaction, costing money or property, that would have otherwise been unnecessary. The only change Proposition 64 made, said the court, was to require that a private plaintiff filing suit establish that she has personally suffered such harm.

Noting that “labels matter,” and for some plaintiffs, “processes and places of origin matter,” the court said that simply alleging reliance on a product label and that the plaintiff would not have purchased the product but for the misrepresentation are sufficient to allege causation and economic injury. Two dissenting justices complained that the majority was making it easier for plaintiffs to achieve standing under the unfair competition law, thus disregarding “the express language of the amendment.”