In Kwikset Corp. v. Benson, 2011 WL 240278 (Cal. Jan. 27, 2011), plaintiff brought a representative action under California unfair competition and deceptive advertising laws, alleging Kwikset falsely marketed and sold locksets labeled as “Made in U.S.A.” that actually contained foreign-made parts or were manufactured abroad. Plaintiff alleged he purchased Kwikset locksets that he would not have bought had they not been falsely labeled as “Made in U.S.A.”
Plaintiff asserted claims under California’s unfair competition law, Cal. Bus. & Prof. Code §17200 and false advertising laws, Cal. Bus. & Prof. Code §17500. As originally enacted, the unfair competition law granted standing to “any person acting for the interests of itself, its member or the general public.” This broad “private attorney general” standing, which did not require the plaintiff to have had any dealings with the defendant whatsoever, was perceived to be subject to abuse. To address this problem the electorate adopted Proposition 64 to amend the unfair competition law and the false advertising statute to limit standing to any “person who has suffered injury in fact and has lost money or property” as a result of unfair competition.
Proposition 64 passed while the Kwikset case was pending, and the plaintiff was given the opportunity to amend his complaint to address the new standing requirements. Plaintiff amended the complaint, adding new plaintiffs and alleging plaintiffs purchased several Kwikset locksets in California that were falsely represented as “Made in U.S.A.” Plaintiffs alleged they saw and relied upon the misrepresentations in deciding to purchase the locksets and would not have purchased them had the origin not been misrepresented. Plaintiffs alleged they were injured because they purchased products they did not want and lost the money they paid for the locksets.
Kwikset demurred to the amended complaint, arguing plaintiff did not have standing. The trial court overruled the demurrer, finding plaintiffs had suffered injury and lost money, and therefore had standing, because they were induced to buy products they did not want. The court of appeal reversed, holding that plaintiffs had been injured, but had not lost money or property. The court of appeal reasoned that plaintiffs had spent money, but did not “lose” any money because they received locksets in return, which plaintiffs did not allege were overpriced or defective.
The California Supreme Court reversed, agreeing with the trial court that plaintiffs had standing. To satisfy the narrowed standing requirement Proposition 64 imposed, a plaintiff must now “(1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.” 2011 WL 240278 at *5. The court observed that the quantity of money or property lost necessary to establish standing was not great. “If a party has alleged or proven a personal, individualized loss of money or property in any nontrivial amount, he or she has also alleged or proven injury in fact.” Id. at *7.
If a plaintiff can establish loss of money or property, proposition 64 next requires plaintiff to show that the loss came “as the result of” the unfair competition or false advertising. In the case of an alleged misrepresentation, the plaintiff is not required to allege the misrepresentation was the sole or decisive cause of injury. Rather, the plaintiff must prove only that he actually relied on the deceptive statements.
Turning to plaintiffs’ allegations in Kwikset, the court held that plaintiffs adequately alleged standing. To the court, the analysis was straightforward. “Simply stated: labels matter. The marketing industry is based on the premise that labels matter, that consumers will choose one product over another similar product based on its label and various tangible and intangible qualities they may come to associate with a particular source.” 2011 WL 240278 at *9. For some consumers, a label that states “Made in the U.S.A.” matters. “For each consumer who relies on the truth and accuracy of a label and is deceived by misrepresentations into making a purchase, the economic harm is the same: the consumer has purchased a product that he or she paid more for than he or she otherwise might have been willing to pay if the product had been labeled accurately. This economic harm -- the loss of real dollars from a consumer's pocket -- is the same” even if the court believes the mislabeled product functions perfectly. Id. at *10. Plaintiffs allegedly paid more for the locksets than they would have paid had they been correctly labeled. They were out-of pocket money as a direct result of the mislabeling and therefore had standing.
To hold otherwise, the court explained, “would render standing under the UCL and false advertising law substantially more difficult to establish than standing to assert common law deceit. As Kwikset's counsel properly acknowledged at oral argument, a consumer who purchased a product in reliance on an alleged misrepresentation would under the common law have standing to sue for fraud, misrepresentation, and rescission without having first to prove, as Kwikset argues the UCL and false advertising law now require, that the product received was worth less than the money paid for it. While Proposition 64 clearly was intended to abolish the portions of the UCL and false advertising law that made suing under them easier than under other comparable statutory and common law torts, it was not intended to make their standing requirements comparatively more onerous.” 2011 WL 240278 at *14.
Kwikset is an important decision construing California’s major consumer protection statutes. The court of appeal’s decision would have significantly restricted consumer standing, barring some plaintiffs from suing even though they were deceived in direct dealings with the defendant. Even in reversing, however, the California Supreme Court acknowledged that Proposition 64 had significantly limited standing from the previous “private attorney general” days.