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Kwikset v. Superior Court: Victory, Made in California

By Deepak Gupta

by Ted Mermin

  In a closely watched case, the California Supreme Court on Thursday issued a decision preserving the broad availability of the state?s principal consumer protection laws in cases involving mislabeled goods.

The question at issue in Kwikset v. Superior Court (Benson) was whether a consumer who has bought a product that was mislabeled -- a ?union-made? shirt that was in fact manufactured in a sweatshop, ?organic? produce that was grown with pesticides, or (as in this case) a ?Made in the USA? lockset that had actually been partly manufactured in Taiwan and Mexico -- may bring suit under the Unfair Competition Law (UCL) and the False Advertising Law (FAL). 

Proposition 64, passed by referendum in 2004, inserted in both laws a requirement that a private plaintiff have ?lost money or property.?  But what if the product the customer received was perfectly functional even if it wasn't what the customer had ordered?  Was there still a loss of money or property?  The Court of Appeal thought not: since the item received was of equal value, plaintiffs had not ?lost money? and therefore could not bring a claim under the UCL or FAL.
 
  The California Supreme Court, however, disagreed. 
 
The Supreme Court held that neither the language nor the logic of Prop 64 precluded suits by consumers who did not get what they paid for. ?Plaintiffs 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.?  It doesn't matter that to some other people, or by some objective measure, the mislabeled product is worth as much as the one the consumer expected.  What matters is the consumer?s subjective valuation.

 
The Court recognized (and held that the UCL and FAL recognize) the reality of consumer decisionmaking, including the importance some consumers place on knowing the process by which products are made.  ?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.?
 
The Court then went further and formally disapproved three court of appeal cases that had held that restitution must be available in any UCL or FAL case brought by a private party.  Injunctive relief, the Court held, is the primary relief contemplated by those laws, and nothing in Prop 64 changed that.

In sum, instead of a court of appeal opinion further restricting the type and number of cases that can be brought under California's consumer protection laws, we now have a Supreme Court opinion that preserves and even expands the laws' scope.
 
Finally, there's even a CL&P blog connection:  To illustrate its conclusions, the Court relied heavily on sources, examples (e.g., Rolex watches, halal meat, ?conflict diamonds,? the lack of a secondary market in perishable goods), and analysis drawn from an amicus brief written by Public Good and filed on behalf of nine consumer groups, including Public Citizen. (The brief is available here.)   

It was -- it is -- a very good decision.

Full post as published by CL&P Blog on January 31, 2011 (boomark / email).