California Supreme Court Further Clarifies Pleading Requirements For Standing Under The UCL In The Wake Of Proposition 64

 
FREE EXCERPT

In Kwikset Corp. v. Superior Court of Orange County (Benson), ___ Cal. Rptr. 3d ___, No. S171845, 2011 WL 240278 (Jan. 27, 2011), the Supreme Court of California held that consumers who allege that a product's allegedly deceptive labeling caused them to purchase the product, and that they would not have purchased the product but for the labeling, have properly alleged "lost money or property" within the meaning of Proposition 64, and thus have standing to sue under the California Unfair Competition Law (UCL). Nonetheless, the court emphasized the need for consumers to demonstrate both (i) that there is a connection between the labeling and a consumer's individual purchase decision, and (ii) that the consumer actually lost money or property as a result. All in all, although it announces a liberal pleading standard, the decision may provide defendants with good arguments against class certification.

Background

In November 2004, California voters approved Proposition 64, which altered standing rules for plaintiffs seeking to bring claims under the UCL (Cal. Bus. & Prof. Code § 17,200 et seq.). Before the enactment of Proposition 64, any private individual could file a UCL lawsuit on behalf of the general public, even if the person had not suffered any injury. Proposition 64 amended the UCL to require that a private plaintiff must have personally incurred "injury in fact," and that he or she must have "lost money or property" as a result of unfair competition or business practices in order to bring suit for violations of the UCL. See generally, Californians for Disability Rights v. Mervyn's, LLC, 39 Cal. 4th 223, 227–228 (2006).

In May 2009, the Supreme Court of California held that under the UCL—as amended by Proposition 64—only the named class representative of a putative class action alleging fraudulent misrepresentation was required to establish actual reliance, causation, and injury; absent class members were not required to affirmatively demonstrate these factors in order to properly plead a claim under Proposition 64. In re Tobacco II Cases, 46 Cal. 4th 298, 312–329 (2009). Thus, under Tobacco II, only the putative class representative is required to meet Proposition 64's threshold standing requirements of having suffered "injury in fact" and having "lost money or property as a result" of the defendant's allegedly unfair competition. Left unanswered by Tobacco II was the question of what "injury in fact" must be pled and proved in a...

To continue reading

FREE SIGN UP