Monday, February 14, 2011

Purchase in Reliance on False Label Is “Loss of Money” in California

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

Consumers 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” and have standing to sue under the California Unfair Competition Law (UCL) and False Advertising Law (FAL), as amended in 2004 by Proposition 64, the California Supreme Court has ruled.

“Made in U.S.A.”

According to the complaint at issue, a manufacturer of locksets falsely labeled them with “Made in U.S.A.” or a similar designation, the plaintiffs saw and relied on the labels in purchasing the locksets, and the plaintiffs would not have bought the locksets otherwise. The purchasers sought injunctive relief.

The court reversed and remanded for further proceedings a California appellate court’s decision that the purchasers lacked standing to sue under the UCL and FAL because they failed to allege any loss of money or property (CCH Advertising Law Guide ¶63,328).

Proposition 64

Before the California electorate enacted Proposition 64, private suits under the UCL and FAL could be brought by “any person acting for the interests of itself, its members or the general public.” Now private standing to sue is limited to any “person who has suffered injury in fact and has lost money or property” as a result of unfair competition or false advertising.

While the voters clearly intended to restrict standing, they just as plainly preserved standing for those who had had business dealings with a defendant and had lost money or property as a result of the defendant’s unfair business practices, according to the court.

Reliance on Misrepresentation

A consumer who relies on a product label and challenges a misrepresentation contained therein can satisfy the standing requirement in a suit for injunctive relief by alleging, as the plaintiffs have here, that he or she would not have bought the product but for the misrepresentation, the court held.

The purchasers allegedly selected the manufacturer’s locksets to purchase in part because they were “Made in U.S.A.”; they would not have purchased them otherwise; and, it may be inferred, they value what they actually received less than either the money they parted with or working locksets that actually were made in the United States, the court reasoned. They bargained for locksets that were made in the United States; they got ones that were not.

The same points may be made generally with regard to consumers who purchase products in reliance on misrepresentations, the court added.

The observant Jew who purchases food represented to be, but not in fact, kosher; the Muslim who purchases food represented to be, but not in fact, halal; the parent who purchases food for his or her child represented to be, but not in fact, organic, has in each instance not received the benefit of his or her bargain.

The January 27 decision in Kwikset Corp. v. Superior Court of Orange County will be reported at CCH Advertising Law Guide ¶64,151.

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