Consumers Could Not Establish California Unfair Competition Claim Absent Injury, Causation

This posting was written by Jody Coultas, Editor of CCH State Unfair Trade Practices Law.

A group of consumers could not maintain a California Unfair Competition Law claim against a retailer for false advertising because they failed to allege an injury in fact and causation, a California appellate court ruled.

The retailer ran advertisements that prominently stated the price for a single unit of the products for sale, when those products could be purchased only in multi-unit sets. The consumers alleged this constituted false advertising in violation of the Unfair Competition Law (UCL).

While the initial case was pending, California voters passed Proposition 64, legislation that changed the standards for standing under the UCL. Proposition 64 required plaintiffs in UCL actions to present evidence of actual harm resulting from the unfair competition or deceptive acts.

California courts held that Proposition 64 applied to pending cases. Thus, the complaining consumer had to show that he suffered injury in fact and lost money or property as a result of the unfair competition. Since the original consumer plaintiff did not allege any injuries, the lower court allowed the addition of plaintiffs who alleged injuries and losses as a result of the advertising.

Injury Requirement

Although the additional consumer plaintiffs alleged injuries caused by the advertising, the appellate court found that they failed to present sufficient facts to support those allegations. Rather than identifying specific injuries and losses, the consumers merely stated that such injuries occurred.

In order to have standing under the UCL, the consumers needed to identify the products they purchased or how the purchases injured them. The consumers failed to present evidence that the purchased products were defective, overpriced, or unwanted, according to the court.

The consumers also failed to state a cause of action because they did not allege a quantifiable injury that could be remedied by restitution. The UCL authorized the court to grant successful consumer plaintiffs restitution rather than damages. In this instance, the alleged injuries resulted from the inconvenience and cost of gasoline used in traveling to the retailer’s store. These allegations did not constitute a request for restitution. The court explained that restitution awards act to return money wrongfully taken from an injured party in order to restore the status quo.

Causation

In order to state a UCL claim, the consumers had to present evidence that the alleged injuries were caused by the retailer’s false advertising. While the consumers described the advertisements and the alleged injuries, they failed to allege that the advertisements actually caused the injuries.

The consumers did not show that they entered into a transaction for the advertised products because of the advertisements. They failed to allege that they relied on the advertisements in any way.

At the time of the purchases, the consumers knew the actual prices of the products and still went ahead with the transactions. Thus, the alleged false advertising did not injure the consumers in any way, according to the appellate court. Absent injury, the consumers did not state a claim against the retailer under the UCL.

The decision is Erickson v. Fry’s Electronics, Inc., filed November 25, California Court of Appeal, Fourth Appellate District. The opinion will appear at CCH State Unfair Trade Practices Law ¶31,715.