Opinion
This case arises from Kwikset Corporation’s (Kwikset) manufacturing of locksets it labeled as “Made in U.S.A.” James Benson brought suit under the unfair competition and false advertising laws to challenge the labels’ veracity. After a bench trial, the trial court entered judgment for Benson.
While the case was pending on appeal, the electorate enacted Proposition 64 (Gen. Elec. (Nov. 2, 2004)), which called into question Benson’s standing to challenge Kwikset’s country of origin representations. Benson then filed an amended complaint in which he alleged he purchased Kwikset’s locksets and would not have done so but for the “Made in U.S.A.” labeling. The Court of Appeal concluded this allegation was insufficient to establish standing because it did not satisfy Proposition 64’s requirement that a plaintiff have “lost money or property.” (See Prop. 64, §§ 3, 5.)
Factual and Procedural Background
In 2000, plaintiff James Benson filed a representative action against defendant Kwikset, alleging Kwikset falsely marketed and sold locksets labeled as “Made in U.S.A.” that in fact contained foreign-made parts or involved foreign manufacture. The original complaint contained four counts, three asserting violations of the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.) for unlawful, unfair, and fraudulent business practices, and a fourth brought under the false advertising law (Bus. & Prof.. Code, § 17500 et seq.). The UCL count for unlawful business practices alleged Kwikset’s marketing violated both specific state and federal statutes regulating country of origin labeling (see Bus. & Prof. Code, § 17533.7; Civ. Code, § 1770, subd. (a)(4); 15 U.S.C. § 45a) and general statutes governing false advertising (Bus. & Prof. Code, § 17500 et seq.; Civ. Code, § 1770, subd. (a)(5), (7), (9), (16); 15 U.S.C. § 45). Benson sought both injunctive relief and restitution.
After a bench trial, the trial court entered judgment for Benson. It concluded Kwikset had violated Business and Professions Code section 17533.7
The trial court’s subsequent judgment enjoined Kwikset “from labeling any lockset intended for sale in the State of California ‘All American Made,’ or ‘Made in USA,’ or similar unqualified language, if such lockset contains any article, unit, or part that is made, manufactured, or produced outside of the United States.” The trial court further ordered Kwikset to notify its California retailers and distributors of the falsely labeled products and afford them the opportunity to return improperly labeled inventory for either a monetary refund or replacement with properly labeled items. However, the trial court denied Benson’s request for restitution to consumers, the end purchasers of the locksets. It concluded restitution “would likely be very expensive to administer, and the balance of equities weighs heavily against such a program” where the violations had ceased
Both sides appealed. In November 2004, while the appeals were pending, the electorate approved Proposition 64, substantially revising the UCL’s and false advertising law’s standing provisions for private individuals. (See Bus. & Prof. Code, §§ 17204, 17535.)
Thereafter, the Court of Appeal affirmed the trial court’s decision on the underlying merits (Benson v. Kwikset Corp., supra, 152 Cal.App.4th at pp. 1267-1284) but vacated the judgment in light of questions concerning Benson’s standing. Because Benson filed this action before passage of
Benson sought and obtained leave to add additional plaintiffs (A1 Snook, Christina Grecco, and Chris Wilson) and eventually filed what is now the operative complaint, the second amended complaint for equitable relief. The amended complaint alleges each plaintiff “purchased several Kwikset locksets in California that were represented as ‘Made in U.S.A.’ or [contained] similar designations.” When purchasing the locksets each plaintiff “saw and read Defendants’ misrepresentations . . . and relied on such misrepresentations in deciding to purchase . . . them. [Each plaintiff] was induced to purchase and did purchase Defendants’ locksets due to the false representation that they were ‘Made in U.S.A.’ and would not have purchased them if they had not been so misrepresented. In purchasing Defendants’ locksets, [each plaintiff] was provided with products falsely advertised as ‘Made in U.S.A.,’ deceiving [him or her] and causing [him or her] to buy products [he or she] did not want. Defendants’ ‘Made in U.S.A.’ misrepresentations caused [each plaintiff] to spend and lose the money [he or she] paid for the locksets. [Each plaintiff] has suffered injury and loss of money as a result of Defendants’ conduct. . . The second amended complaint retains the four UCL and false advertising law claims from the original complaint but, consistent with the terms of the trial court’s 2002 judgment, seeks only injunctive relief, not restitution.
Kwikset demurred, but the trial court overruled the demurrer. It held plaintiffs had adequately alleged standing: “Because the plaintiffs allege they relied upon the alleged misrepresentations on the product packaging and were induced to buy products they did not want and (under the rules of liberal interpretation) suggested] the products were unsatisfactory to them, the demurrer lacks merit.” The complaint’s allegation that Kwikset’s “alleged deception caused the plaintiffs ‘to buy products [they] did not want’ ” was “a sufficient statement the plaintiffs suffered injury in fact and lost money or property as a result of the alleged fraud and deception.”
Kwikset sought and obtained writ relief. In an opinion directing the trial court to sustain Kwikset’s demurrer and enter a judgment dismissing the action, the Court of Appeal explained that while plaintiffs had adequately alleged injury in fact, they had not alleged any loss of money or property. (See §"§ 17204 [a private plaintiff must show “lost money or property”], 17535
We granted review to further explicate the UCL’s and false advertising law’s standing requirements in light of Proposition 64, in particular, the proposition’s added “lost money or property” requirement. (§§ 17204, 17535; see Prop. 64, §§ 3, 5.)
Discussion
I. The UCL, the False Advertising Law, and Proposition 64
The UCL prohibits, and provides civil remedies for, unfair competition, which it defines as “any unlawful, unfair or fraudulent business act or practice.” (§ 17200.) Its purpose “is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.” (Kasky v. Nike, Inc. (2002)
While the substantive reach of these statutes remains expansive, the electorate has materially curtailed the universe of those who may enforce their provisions. As we recently explained: “In 2004, the electorate substantially revised the UCL’s standing requirement; where once private suits could be brought by ‘any person acting for the interests of itself, its members or the general public’ (former § 17204, as amended by Stats. 1993, ch. 926, § 2, p. 5198), now private standing is limited to any ‘person who has suffered
“ We interpret voter initiatives using the same principles that govern construction of legislative enactments. (Professional Engineers in California Government v. Kempton (2007)
As we have said, “Proposition 64 accomplishes its goals in relatively few words.” (Californians for Disability Rights v. Mervyn’s, LLC, supra,
As we shall explain, a party who has lost money or property generally has suffered injury in fact. Consequently, the plain language of these clauses suggests a simple test: To satisfy the narrower standing requirements imposed by Proposition 64, a party 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. We explore these elements in turn.
II. Standing Under Section 17204 A. Injury in Fact
“Injury in fact” is a legal term of art. A long line of United States Supreme Court cases has identified injury in fact as one of the three “ ‘irreducible minimum’ ” requirements for federal standing under article III, section 2 of the United States Constitution, and has accorded the phrase a well-settled meaning. (Northeastern Fla. Chapter, Associated Gen. Contractors of America v. Jacksonville (1993)
Under federal law, injury in fact is “an invasion of a legally protected interest which is (a) concrete and particularized, [citations]; and (b) ‘actual or imminent, not “conjectural” or “hypothetical,” ’ [citation].” (Lujan v. Defenders of Wildlife, supra,
As we shall discuss, proof of injury in fact will in many instances overlap with proof of the next element of standing, to have “lost money or property.” (§§ 17204, 17535.) Accordingly, litigants and courts may profitably consider whether injury in fact has been shown in conjunction with the allegations and proof of having lost money or property, to which we now turn.
B. “Lost Money or Property”: Economic Injury
Proposition 64 requires that a plaintiff have “lost money or property” to have standing to sue. The plain import of this is that a plaintiff now must demonstrate some form of economic injury. (Peterson v. Cellco Partnership (2008)
There are innumerable ways in which economic injury from unfair competition may be shown. A plaintiff may (1) surrender in a transaction more, or acquire in a transaction less, than he or she otherwise would have; (2) have a present or future property interest diminished; (3) be deprived of money or property to which he or she has a cognizable claim; or (4) be required to enter into a transaction, costing money or property, that would otherwise have been unnecessary. (See, e.g., Hall v. Time Inc., supra, 158 Cal.App.4th at pp. 854—855 [cataloguing some of the various forms of economic injury].) Neither the text of Proposition 64 nor the ballot arguments in support of it purport to define or limit the concept of “lost money or property,” nor can or need we supply an exhaustive list of the ways in which unfair competition may cause economic harm. It suffices to say that, in sharp contrast to the state of the law before passage of Proposition 64, a private plaintiff filing suit now must establish that he or she has personally suffered such harm.
Notably, lost money or property—economic injury—is itself a classic form of injury in fact. (See, e.g., Friends of Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., supra, 528 U.S. at pp. 183-184 [economic harm is among the bases for injury in fact]; Troyk v. Farmers Group, Inc. (2009) 171
While the economic injury requirement is qualitatively more restrictive than federal injury in fact, embracing as it does fewer kinds of injuries, nothing in the text of Proposition 64 or its supporting arguments suggests the requirement was intended to be quantitatively more difficult to satisfy. Rather, we may infer from the text of Proposition 64 that the quantum of lost money or property necessary to show standing is only so much as would suffice to establish injury in fact; if more were needed, the drafters could and would have so specified. (Cf. Prop. 64, § 1, subd. (e) [“It is the intent of the California voters in enacting this act to prohibit private attorneys from filing lawsuits for unfair competition where they have no client who has been injured in fact under the standing requirements of the United States Constitution.”].) In turn, federal courts have reiterated that injury in fact is not a substantial or insurmountable hurdle; as then Judge Alito put it; “Injury-in-fact is not Mount Everest.” (Danvers Motor Co., Inc. v. Ford Motor Co., supra,
Thus, in Clayworth v. Pfizer, Inc., supra, 49 Cal.4th at pages 788-789, we found standing where the plaintiffs alleged they had paid an overcharge— more than they otherwise would have—because of an alleged price-fixing cartel. In Fireside Bank v. Superior Court (2007)
We offer a further observation concerning the order in which the elements of standing are best considered. Because, as noted, economic injury is itself a form of injury in fact, proof of lost money or property will largely overlap with proof of injury in fact.
Proposition 64 requires that a plaintiff’s economic injury come “as a result of’ the unfair competition or a violation of the false advertising law. (§§ 17204, 17535.) “The phrase ‘as a result of’ in its plain and ordinary sense means ‘caused by’ and requires a showing of a causal connection or reliance on the alleged misrepresentation.” (Hall v. Time Inc., supra,
This case, like In re Tobacco II Cases, “is based on a fraud theory involving false advertising and misrepresentations to consumers.” (In re Tobacco II Cases, supra,
Thus, for example, in Hale v. Sharp Healthcare, supra, 183 Cal.App.4th at pages 1385-1386, the Court of Appeal found the complaint adequate where from its allegations one could infer the plaintiff had relied on a defendant’s representation that it would charge its “ ‘ “regular rates.” ’ ” In contrast, in Durell v. Sharp Healthcare, supra, 183 Cal.App.4th at pages 1363-1364, the plaintiff failed to allege any reliance on representations about rates; accordingly, a demurrer to a UCL claim challenging those representations was properly sustained. (See also Hall v. Time Inc., supra,
III. Application of Section 17204 to Plaintiffs
We apply these principles to plaintiffs’ pleadings. “[E]ach element [of standing] must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation. [Citations.] At the pleading stage, general factual allegations of injury resulting from the defendant’s conduct may suffice, for on a motion to dismiss we ‘presum[e] that general allegations embrace those specific facts that are necessary to support the claim.’ ” (Lujan v. Defenders of Wildlife, supra,
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. (E.g., FTC v. Proctor & Gamble Co. (1967)
To some consumers, processes and places of origin matter. (See Kysar, Preferences for Processes: The Process/Product Distinction and the Regulation of Consumer Choice (2004) 118 Harv. L.Rev. 525, 529 [“[C]onsumer preferences may be heavily influenced by information regarding the manner in which goods are produced.”]; ibid. [Although the circumstances of production “generally do not bear on the functioning, performance, or safety of the product, they nevertheless can, and often do, influence the willingness of consumers to purchase the product.”].)
In particular, to some consumers, the “Made in U.S.A.” label matters. A range of motivations may fuel this preference, from the desire to support domestic jobs, to beliefs about quality, to concerns about overseas environmental or labor conditions, to simple patriotism. The Legislature has recognized the materiality of this representation by specifically outlawing deceptive and fraudulent “Made in America” representations. (§ 17533.7; see also Civ. Code, § 1770, subd. (a)(4) [prohibiting deceptive representations of geographic origin].) The object of section 17533.7 “is to protect consumers from being misled when they purchase products in the belief that they are advancing the interests of the United States and its industries and workers. (Sen. Holmdahl, sponsor of [Sen. Bill No. 1004 (1961 Reg. Sess.)] [which became § 17533.7] . . . , letter to Governor Brown, May 23, 1961) [‘There are many Americans who feel that American-made articles are of higher quality, and who rely on the “Made in U.S.A.” label’].)” (Colgan v. Leatherman Tool Group, Inc. (2006)
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 whether or not a court might objectively view the products as functionally equivalent. A counterfeit Rolex might be proven to tell the time as accurately as a genuine Rolex and in other ways be functionally equivalent, but we do not doubt the consumer (as well as the company that was deprived of a sale) has been economically harmed by the
A consumer who relies on a product label and challenges a misrepresentation contained therein can satisfy the standing requirement of section 17204 by alleging, as plaintiffs have here, that he or she would not have bought the product but for the misrepresentation.
Were we to conclude otherwise, we would bring to an end private consumer enforcement of bans on many label misrepresentations, contrary to the apparent intent of Proposition 64. (See Prop. 64, § 1, subd. (d) [preserving in part the right of private individuals to sue].) That public prosecutors can still sue is of limited solace, given the significant role we have recognized private consumer enforcement plays for many categories of unfair business practices. (In re Tobacco II Cases, supra,
The Court of Appeal offered three interrelated reasons for concluding plaintiffs had not lost money or property within the meaning of section 17204: they failed to allege any overcharge or functional defects in the locksets; they received the benefit of their bargain; and they were ineligible for restitution. Kwikset echoes these arguments in its briefs, and the dissenting opinion takes them up as well. We consider each in turn.
The Court of Appeal reasoned that plaintiffs could not show economic injury because, while they had spent money, they “received locksets in return.” (See also dis. opn., post, at p. 339.) Plaintiffs did not allege the locksets were defective, overpriced, or of inferior quality. In the Court of Appeal’s and dissent’s eyes, cognizable economic harm is confined to these sorts of objective “functional” differences.
We discern two textual difficulties with this view. First, while the alternate allegations of loss the Court of Appeal posited and the dissent demands might well satisfy the economic injury requirement, nothing in the open-ended phrase “lost money or property” supports limiting the types of qualifying losses to functional defects of these sorts and excluding the real economic harm that arises from purchasing mislabeled products in reliance on the truth and accuracy of their labels. Second, the economic injuries the Court of Appeal would require in order to allow one to sue for misrepresentation are in many instances wholly unrelated to any alleged misrepresentation. An allegation that Kwikset’s products are of inferior quality, for example, even if it might demonstrate lost money or property, would not demonstrate lost money or property “as a result of’ unfair competition or false advertising
Next, at the core of both the Court of Appeal’s ruling and Kwikset’s and the dissent’s position is that plaintiffs should not be accorded standing because they received the benefit of their bargain. Kwikset argues, and the Court of Appeal agreed, that consumers who receive a fully functioning product have received the benefit of their bargain, even if the product label contains misrepresentations that may have been relied upon by a particular class of consumers. (See also Peterson v. Cellco Partnership, supra,
Whether or not a party who actually received the benefit of his or her bargain may lack standing, in this case, under the allegations of the complaint, plaintiffs did not. (Cf. Troyk v. Farmers Group, Inc., supra,
The argument that a consumer in plaintiffs’ position has received the benefit of the bargain notwithstanding any misrepresentation may rest on one of two unstated predicates: that either (1) the misrepresentation at issue should be deemed not a material part of the bargain, or (2) even if the consumer does not value what he or she received as much as what he or she paid, the marketplace would, and its valuation should be dispositive.
“A misrepresentation is judged to be ‘material’ if ‘a reasonable man would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question’ . . . .” (Engalla v. Permanente
Under the second implicit line of reasoning, a consumer who has acquired a mislabeled product has lost no money or property if the marketplace would continue to value the product as highly as the amount the consumer paid for it, whether or not he or she would do so.
First, it assumes there is a functioning aftermarket for resale that would allow a plaintiff to liquidate the good in question by reselling it to those for whom the misrepresentation is immaterial. This plainly is not so in many instances. While there are certainly consumers for whom the kosher, halal or organic quality of food is immaterial, there is no functioning aftermarket that would permit easy resale of, for example, perishable foodstuffs and small-ticket consumer goods. A gallon of nonorganic “organic” milk cannot be resold. A consumer who has purchased products mislabeled in this fashion cannot recoup his or her purchase price.
Second, it assumes a consumer has no qualms—religious, ethical, or otherwise—that would preclude his or her partaking in resale of the mislabeled product, or at least none that the law should respect.
Fourth, it ignores that the law generally disregards such “pass-on” sales. (See Clayworth v. Pfizer, Inc., supra, 49 Cal.4th at pp. 768-769.) Kwikset’s argument, that a deceived buyer has lost nothing because he or she has the value of the item still possessed, can be viewed as a pass-on defense in disguise: the buyer has an item that, through a presumed functioning aftermarket, he or she could convert back into an equivalent amount of money, recouping through the subsequent sale any perceived loss. But in the eyes of the law, a buyer forced to pay more than he or she would have is harmed at the moment of purchase, and further inquiry into such subsequent transactions, actual or hypothesized,
In its benefit of the bargain argument, Kwikset relies as well on two real property fraud cases, each of which recites the rule that damages for fraud in the sale of property are measured principally by the difference in the actual value of what was parted with and what was received (the “out-of-pocket loss” rule). (See Gagne v. Bertran (1954)
Nothing in the text or history of Proposition 64 suggests the electorate intended to borrow this rule, developed in the context of a remedy (damages)
Finally, the Court of Appeal rested its holding in part on a line of cases that have read the “lost money or property” requirement as confining standing under section 17204 “ ‘to individuals who suffer losses . . . that are eligible for restitution.’ ” (Quoting Buckland v. Threshold Enterprises, Ltd., supra,
As we recently have noted, however, the standards for establishing standing under section 17204 and eligibility for restitution under section 17203 are
Moreover, to interpret standing as dependent on eligibility for restitution would narrow section 17204 in a way unsupported by its text. Restitution under section 17203 is confined to restoration of any interest in “money or property, real or personal, which may have been acquired by means of such unfair competition.” (Italics added.) A restitution order against a defendant thus 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. (See Kraus v. Trinity Management Services, Inc., supra, 23 Cal.4th at pp. 126-127.) But the economic injury that an unfair business practice occasions may often involve a loss by the plaintiff without any corresponding gain by the defendant, such as, for example, a diminishment in the value of some asset a plaintiff possesses. (See Overstock.com, Inc. v. Gradient Analytics, Inc. (2007)
This leads to a larger point: To make standing under section 17204 dependent on eligibility for restitution under section 17203 would turn the remedial scheme of the UCL on its head. Injunctions are “the primary form of relief available under the UCL to protect consumers from unfair business practices,” while restitution is a type of “ancillary relief.” (In re Tobacco II Cases, supra,
Accordingly, we hold ineligibility for restitution is not a basis for denying standing under section 17204 and disapprove those cases that have concluded otherwise. (See Silvaco Data Systems v. Intel Corp., supra,
Disposition
For the foregoing reasons, we reverse the Court of Appeal’s judgment and remand this case for further proceedings consistent with this opinion.
Kennard, Acting C. J., Baxter, J., Moreno, J., and George, J.,
I respectfully dissent.
In 2004, voters passed Proposition 64, which substantially changed the standing requirements for a private plaintiff to sue under the unfair competition law (UCL) (see Bus. & Prof. Code, § 17200 et seq.).
A. Meaning of “Lost Money or Property”
As relevant here, in the wake of Proposition 64, section 17204 now provides that a private plaintiff may bring a UCL action if he or she “has suffered injury in fact and has lost money or property as a result of the unfair competition.” (§ 17204, as amended by Prop. 64, § 3, italics added.) The amendment clearly sets out two requirements to establish standing. (See Peterson v. Cellco Partnership (2008)
Several Courts of Appeal have defined a loss for purposes of section 17204 as “ ‘[a]n undesirable outcome of a risk; the disappearance or diminution of value, usu. in an unexpected or relatively unpredictable way.’ ” (Hall, supra,
Despite finding section 17204’s meaning to be “plain” (maj. opn., ante, at pp. 322, 336), the majority does not actually attempt to define what “lost money or property” means except to find that it now requires a UCL private plaintiff to “demonstrate some form of economic injury.” (Maj. opn., ante, at p. 323 [citing cases]; cf. id. at p. 331 [“open-ended phrase Tost money or property’ ”].) Throughout its opinion, the majority refers to “economic injury” as shorthand for the statutory requirement. (Id. at pp. 323, 325, 330, 331, 336.) However, the Court of Appeal cases on which the majority relies do not support this conclusion. In discussing economic injury, each of these cases was referring to the requirement of “injury in fact” and not, as the majority suggests, to “lost money or property.” (See Peterson, supra, 164
The majority later correctly recognizes that economic injury is a type of injury in fact. (See maj. opn., ante, at pp. 323, 325.) However, this observation does little to clarify what the statute actually means. By failing to expressly define “lost money or property” and by instead equating it with economic injury, the majority effectively collapses the two separate requirements of section 17204 into one. This is far more than what the majority acknowledges it is doing, namely, recognizing the overlap between the proof of the “injury in fact” and “lost money or property” elements. (See maj. opn., ante, at p. 325.) Rather, the majority’s conclusion that “[a]t this stage, these plaintiffs need only allege economic injury arising from reliance on Kwikset’s misrepresentations” (id. at p. 327), effectively renders one of the two statutory requirements “ ‘redundant and a nullity.’ ” (Buckland v. Threshold Enterprises, Ltd. (2007)
In this case, plaintiffs alleged that “ ‘Defendants’ “Made in U.S.A.” misrepresentations caused [each plaintiff] to spend and lose the money [he or she] paid for the locksets.’ ” (Maj. opn., ante, at p. 319.) The majority claims that the economic harm suffered in this context is “the loss of real dollars from a consumer’s pocket. . . .” (Id. at p. 329.) Plaintiffs, however, received the locksets in return, which were not alleged to be overpriced or otherwise defective. Aside from paying the purchase price of the locksets, plaintiffs have not alleged they actually “lost” any money or property. (See Peterson, supra,
In that regard, the cases the majority relies on (see maj. opn., ante, at p. 325) are readily distinguishable. In each, the UCL plaintiff did not simply
B. Subjective Motivations
In order to bolster its conclusion that plaintiffs have “lost money” (or in its view, suffered “economic injury”) under section 17204, the majority focuses on plaintiffs’ subjective motivations, noting that “to some consumers, the ‘Made in U.S.A.’ label matters” (maj. opn., ante, at p. 329), and that in purchasing a mislabeled product, a consumer may have “valued the money he or she parted with more than the product as it actually is.” (Id. at p. 330.) The majority concludes “that because of the misrepresentation the consumer (allegedly) was made to part with more money than he or she otherwise would have been willing to expend, i.e., that the consumer paid more than he or she actually valued the product. That increment, the extra money paid, is economic injury and affords the consumer standing to sue.” (Id. at p. 330.) I disagree on several grounds.
First, “there is no statutory basis, at least in terms of the Proposition 64 amendment, to differentiate UCL actions based on the subjective motivation of the plaintiff; the differentiation is between instances where there is actual loss of property versus no such loss.” (Medina v. Safe-Guard Products, Internat., Inc. (2008)
Second, it is unclear what constitutes the “extra money paid” in this context (maj. opn., ante, at p. 330, italics added), where plaintiffs simply paid the purchase price for the mislabeled but otherwise fully functional locksets. Of course, the majority presents striking examples of products for which a consumer would have overpaid because of certain misrepresentations. For instance, the majority maintains that a consumer who buys a counterfeit Rolex watch believing it to be a genuine Rolex (though both watches may accurately tell time), “has been economically harmed by the substitution in a manner sufficient to create standing to sue.” (Id. at pp. 329-330.) It also asserts that consumers who purchase mislabeled kosher, halal, or organic foods would satisfy the UCL’s new standing requirements. (See maj. opn., ante, at pp. 328-329, 332.) One can hardly dispute that these genuine products have greater value placed on them than on their mislabeled counterparts,
C. Intent Behind Proposition 64
The text of the amendment, as the majority recognizes, is “the first and best indicator of intent.” (People v. Mentch (2008)
I believe the majority misperceives the intent of Proposition 64 by focusing too heavily on the genesis of the initiative, i.e., misuse of certain UCL lawsuits by some attorneys, while giving the language of the amendment
In clearly stating to voters what the measure does, the “Official Title and Summary” prepared by the Attorney General explained that Proposition 64 “[ljimits individual’s right to sue by allowing private enforcement of unfair business competition laws only if that individual was actually injured by, and suffered financial/property loss because of, an unfair business practice.” (Voter Information Guide, Gen. Elec. (Nov. 2, 2004) official title and summary of Prop. 64, p. 38, italics added.) The Legislative Analyst confirmed that the measure prohibits a private person from bringing a UCL action “unless the person has suffered injury and lost money or property.” (Voter Information Guide, supra, analysis of Prop. 64 by Legis. Analyst, p. 38, italics added.) Although the majority quotes certain language from the Findings and Declarations of Purpose that does not cover the precise nature of the present action, this does not in any way negate the broader language of the amendment itself nor the summary and analysis discussed above.
Indeed, to the extent the majority contends there is nothing to suggest that voters were concerned about frivolous lawsuits apart from those brought by unaffected plaintiffs (see maj. opn., ante, at p. 335, fn. 21), we need look no further than the present case. Proponents of Proposition 64 included the underlying action on their Web site as an example of a “shakedown” lawsuit.
D. Private Enforcement Actions
The majority also suggests that a contrary interpretation of section 17204 would sound the death knell for private enforcement actions based on label misrepresentations. (Maj. opn., ante, at pp. 330-331.) I disagree. Plaintiffs here did not allege that these mislabeled locksets were overpriced or defective, but simply alleged that they would not have bought the locksets but for the mislabeling. This, however, is not the kind of economic loss required by Proposition 64. In other situations where plaintiffs do allege that a mislabeled product was overpriced, and that they did in fact lose money, they would have standing to bring a private action under the UCL. Moreover, as the majority points out (maj. opn., ante, at p. 320), the UCL’s purpose “is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.” (Kasky v. Nike, Inc. (2002)
E. Conclusion
A consumer who purchases a product based on a defendant’s misrepresentation may very well achieve standing under the UCL’s new requirements. But the consumer must allege that he or she suffered an injury in fact and lost
I respectfully dissent.
Corrigan, J., concurred.
Notes
Business and Professions Code section 17533.7 provides: “It is unlawM for any person, firm, corporation or association to sell or offer for sale in this State any merchandise on which merchandise or on its container there appears the words ‘Made in U.S.A.’ ‘Made in America,’ ‘U.S.A.’ or similar words when the merchandise or any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States.”
Civil Code section 1770, subdivision (a)(4) prohibits “[u]sing deceptive representations or designations of geographic origin in connection with [the sale or lease of] goods or services.”
In response to the filing of this lawsuit, Kwikset decided to discontinue its country of origin labels. As well, the Federal Trade Commission (FTC) launched an unrelated investigation into Kwikset’s use of country of origin labeling on its products, and Kwikset ultimately entered into a consent order with the FTC legally restricting its use of such labels. (Benson v. Kwikset Corp. (2007)
All further unlabeled statutory references are to the Business and Professions Code.
There are sound reasons to be cautious in borrowing federal standing concepts, bom of perceived constitutional necessity, and extending them to state court actions where no similar concerns apply. (See generally Jasmine Networks, Inc. v. Superior Court (2009)
See Friends of Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., supra, 528 U.S. at pages 183-184 (recreational and aesthetic harms may also support injury in fact); Lujan v. Defenders of Wildlife, supra,
“ ‘The basic idea that comes out in numerous cases is that an identifiable trifle is enough for standing to fight out a question of principle; the trifle is the basis for standing and the principle supplies the motivation.’ ” (United. States v. SCRAP, supra,
The dissent contends that by recognizing the potential for overlap in the proof of the separate elements, injury in fact and lost money or property, we have conflated the two elements themselves (dis. opn., post, at pp. 339, 343) and, as a result, made it easier for a plaintiff 'to establish standing {id. at pp. 338, 343). Not at all. We simply state the obvious: that proof of lost money or property will generally satisfy the element of injury in fact. Nowhere do we suggest the converse: that proof of injury in fact will necessarily satisfy the element of lost money or property.
While plaintiffs also allege unlawful conduct, in that Kwikset violated Business and Professions Code sections 17500 and 17533.7 and Civil Code section 1770, subdivision (a)(4), these statutory provisions simply codify prohibitions against certain specific types of misrepresentations. The theory of the case is that Kwikset engaged in misrepresentations and deceived consumers. Thus, our remarks in In re Tobacco II Cases, supra,
“Reliance” as used in the ordinary fraud context has always been understood to mean reliance on a statement for its truth and accuracy. (E.g., Spreckels v. Gorrill (1907)
Kwikset contends these allegations are untrue, at least as to James Benson if not the other more recently added plaintiffs. At the demurrer stage, however, we must take the allegations as true. (Avila v. Citrus Community College Dist. (2006)
The analogy between trademark designations, which have been protected since medieval times (Diamond, The Historical Development of Trademarks (1975) 65 Trademark Rep. 265, 277-280), and process or source designations such as those at issue in this case is actually quite close. (See Kysar, Preferences for Processes: The Process/Product Distinction and the Regulation of Consumer Choice, supra, 118 Harv. L.Rev. at p. 611 [noting that in certain respects “process representations by manufacturers function quite similarly to trademarks, logos, brands, and other conventional product emblems that typically do not affect the compositional features of the product, but that nevertheless exert great influence over consumer decisionmaking.”].)
See generally United Nations General Assembly Resolution No. 55/56 (Dec. 1, 2000) (recognizing the problem of “conflict diamonds” and supporting an international certification
The dissenting opinion objects to having a plaintiff’s subjective motivations in making a purchase play any role in deciding standing. (Dis. opn., post, at pp. 340-342.) Of course, such considerations are a routine part of common law deceit actions: we will allow one party who subjectively relied on a particular deception in entering a transaction to sue, while simultaneously precluding another who subjectively did not so rely from suing. To consider them in the context of a statutory deceit action thus is wholly unremarkable.
Because the issue here is only the threshold matter of standing, not whether and how much to award in restitution, a specific measure of the amount of this loss is not required. It suffices that a plaintiff can allege an “ ‘identifiable trifle’ ” (United States v. SCRAP, supra,
Notably, the public prosecutors who have appeared in this action, amicus curiae the California District Attorneys Association, support plaintiffs’ construction of the standing requirement and express many of the same concerns noted in the text about the consequences of the Court of Appeal’s reading of the statute.
Notably, the United States government certainly does. (See 41 U.S.C. § 10a [requiring federal agencies generally to purchase goods made in the U.S.].)
This line of reasoning appears to lie at the heart of the dissent’s position: the dissenting opinion essentially argues that we should read into the text of Proposition 64 a requirement that overpayments induced by fraud are only cognizable and a basis for standing if they can be measured according to some independent, objective market. Aside from the absence of a textual basis for such a limitation, this approach is flawed for reasons we detail hereafter. (See post, at pp. 333-334.)
Here there is no evidence of any resale. Accordingly, plaintiffs are still out the money they paid and have in its place only a product they value at less than what they paid.
Kwikset’s implicit argument is that the materiality of a representation must be proven by reference to a market that charges more for products that carry a particular label. The implications of this argument are significant. In any market with generally parallel pricing (whether through conscious parallelism or otherwise), where competitors use representations about features principally to increase market share rather than to charge a premium, any deception in such representations would no longer be privately enforceable by consumers. We do not see expressed in Proposition 64 any intent to deregulate the commercial speech marketplace of ideas to this extent.
Proposition 64’s Findings and Declarations of Purpose (Voter Information Guide, Gen. Elec. (Nov. 2, 2004) p. 109) expressed concern that the UCL and false advertising law were being “misused by some private attorneys” (Prop. 64, § 1, subd. (b)) to file suits on behalf of “clients who [had] not used the defendant’s product or service, viewed the defendant’s advertising, or had any other business dealing with the defendant” (id., subd. (b)(3)) and had not “been injured in fact” (id., subd. (b)(2)) as a way of “generating attorney’s fees without creating a corresponding public benefit” (id., subd. (b)(1)). In short, voters focused on curbing shakedown suits by parties who had never engaged in any transactions with would-be defendants. (See In re Tobacco II Cases, supra, 46 Cal.4th at pp. 316-317.) No corresponding concern was expressed about suits by those who had had business dealings with a given defendant, and nothing suggests the voters contemplated eliminating statutory standing for consumers actually deceived by a defendant’s representations. (See Clayworth v. Pfizer, Inc., supra,
Compare, for example, the language of section 17204 with the language of Civil Code section 1780, subdivision (a), which includes in the standing requirements under the Consumers Legal Remedies Act (CLRA) that a consumer be able to prove damages. (See Meyer v. Sprint Spectrum L.P., supra,
Retired Chief Justice of California, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
While the voters made identical changes to the standing provision of the false advertising law (Bus. & Prof. Code, § 17535, as amended by Prop. 64, § 5; see maj. opn., ante, at pp. 318, 321), my focus is on the UCL. Further undesignated statutory references are to the Business and Professions Code.
The majority asserts that the economic injury need only be in a “nontrivial amount” (maj. opn., ante, at p. 325) or an “ ‘ “identifiable trifle” ’ ” to establish standing at this pleading stage (id. at pp. 324, 325 & fn. 7, 330, fn. 15). But this characterization goes to injury in fact (see
Generally speaking, a counterfeit Rolex watch, which is inferior in quality with substandard parts, is clearly overpriced, and a consumer has actually lost money in that transaction by buying what he or she thought was a real Rolex. Likewise, both kosher and halal foods are more expensive than their conventional counterparts because the former require special handling and adherence to special customs. Similarly, organic foods are also typically more expensive because they are grown, handled, and processed differently than conventional foods.
(See the following materials archived at UCLA Online Campaign Literature Collection: Californians to Stop Shakedown Lawsuits, Yes on 64 <http://digital.library.ucla.edu/websites/ 2004_996_013/facts_examples.html> [as of Jan. 27, 2011]; ElectionWatchdog.org, No on 64 [compiling links to anti-Prop. 64 articles] <http://digital.library.ucla.edu/websites/ 2004_996_01 l/index.htm> [as of Jan. 27, 2011]; Avalos, Prop. 64 draws strong arguments, Contra Costa Times (Oct. 25, 2004) <http://digital.library.ucla.edu/websites/2004_996_011/ nw/nw000155.php.htm> [as of Jan. 27, 2011].)
(.Measure would curb shakedown lawsuits, The San Diego Union-Tribune (Oct. 6, 2004) <http://www.signonsandiego.com/uniontrib/20041006/news_Izled6top.html> [as of Jan. 27, 2011].)
(Hinch, Lawsuit cited as 'frivolous’ defended; Filer says Prop. 64 proponents are misleading voters about case, Orange County Register (Oct. 28, 2004) <http://digital.library.ucla.edu/ websites/2004_996_011/nw/nw000158.php.htm> [as of Jan. 27, 2011].)