CA Supreme Court confirms consumers can sue for false advertising

Posted on Jan 26th, 2011

On January 26, 2011, the California Supreme Court confirmed that consumers have standing to bring lawsuits alleging retailers have engaged in false advertising or false labeling of products.

In Kwikset Corporation v. The Superior Court of Orange County, plaintiff James Benson alleged that Kwikset falsely advertised and labeled that its locksets were “Made in the U.S.A.”, when in fact this was not the case. Plaintiff 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, in 2004 the California electorate enacted Proposition 64, which requires plaintiffs to allege they lost money or property as a result of a defendant’s deceptive practices. 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.”  The California Supreme Court reversed.

The California Supreme Court held that when a consumer 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.”

The Court continued: “We conclude Proposition 64 should be read in light of its apparent purposes, i.e., to eliminate standing for those who have not engaged in any business dealings with would-be defendants and thereby strip such unaffected parties of the ability to file ‘shakedown lawsuits,’ while preserving for actual victims of deception and other acts of unfair competition the ability to sue and enjoin such practices. Accordingly, 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.”