Consumer class action cases under California’s Unfair Competition Law (UCL or Bus. & Prof. Code 17200 et seq.) were limited by statewide voter adoption of Proposition 64 in 2004.  Prop 64 changed the UCL plaintiffs’ standing requirement from allowing a “private attorney general” meaning anyone acting on behalf of the general public, into the actual-injury standing requirement that the plaintiff can only be a “person who has suffered injury in fact and has lost money or property” as the result of false advertising, business misrepresentation or other “unfair competition”.  Prop 64 was intended in part to negate “shakedown lawsuits” by people who were unharmed by whatever it was they were suing about.  The California Supreme Court has now partially re-diluted the plaintiff standing requirements for such UCL consumer class actions, holding that “plaintiffs who can truthfully allege they were deceived by a product label into spending money to purchase the product, and would not have purchased it otherwise”, have “lost money or property” sufficient to bring a consumer class action, even if there is no malfunction, injury or other loss.

The sympathetic view of the Supreme Court’s decision, based on the facts of the case, is that if a consumer buys a perfectly functional padlock labeled “Made in USA”, but would not have purchased the same lock without that label, they really have been duped and should be able to get their money back, and moreover can make a class action out of it for anyone else who would not have bought the padlock without the mislabeling.  The less sympathetic view is that the Supreme Court’s decision opens the floodgates for mendacious plaintiffs to bring class action litigation based only on allegations that a product label mattered to them subjectively, even though there is no personal injury, damage to property, economic loss, or other measurable harm or consequence.  Also the Supreme Court appears blind to the litigation burden it may be permitting, in its holding that standing is only conferred on plaintiffs’ “who can truthfully allege” they were deceived by a product label.  Unfortunately, a major lever for shakedown litigation is that a plaintiff’s allegations must be expensively defended as if they are truthful, until some advanced stage of the litigation process when actual evidence about the plaintiff’s truthfulness has been both investigated (as in discovery) and presented to the court for decision (whether by motion or trial).

A third view perhaps would be to read this decision as making sense only under its unique “Made in USA” facts and specific “product label” holding (recognizing also that for many consumer products it has become impossible to say meaningfully that they are made only in one place).  (Kwikset Corp. v. Superior Court, Cal. Supreme Court No. S171845, January 27, 2011.)

Linked Attorney(s)