California Supreme Court Holds That Diminished Subjective Value Satisfies Proposition 64 Standing Limitations For Unfair Competition and False Advertising Actions

Originally published February 3, 2011

Keywords: California Supreme Court, consumers, deceptive label advertising, UCL, FAL

The California Supreme Court has held that consumers who allege that their subjective motivation for purchasing a product or service was affected by a deceptive label or advertising — whether or not the alleged misrepresentation affected the market value of the product — have standing to sue under California's Unfair Competition Law (UCL), Cal. Bus. & Prof. Code § 17200 et seq., and the closely related False Advertising Law (FAL), id. § 17500 et seq. The decision in Kwikset Corp. v. Superior Court of Orange County (Benson), No. S171845, 2011 WL 240278 (Cal. Jan. 27, 2011), further dilutes the standing limitations imposed by Proposition 64, which requires private plaintiffs to have "lost money or property" in order to sue under the UCL and FAL.

Although (for unique procedural reasons) Kwikset is not a class action, the decision is likely to deepen the disarray in the lower courts over UCL and FAL class certification in the wake of the Tobacco II Cases, 46 Cal.4th 298 (2009), which held that the Proposition 64 standing requirements apply only to named plaintiffs, not absent class members. (For more information about Tobacco II, please see this article by Mayer Brown lawyers.)

Plaintiff James Benson filed an action on behalf of the "general public" under now-repealed provisions of the UCL and FAL, alleging that the "Made in USA" labels on Kwikset Corporation's locksets were deceptive because the locksets contained foreign-made parts. Benson won at trial. While the appeal from that judgment was pending, California voters enacted Proposition 64, which restricted standing under the UCL and FAL to private individuals who "ha[ve] suffered injury in fact and ha[ve] lost money or property as a result of" a challenged practice.

The court of appeal vacated the judgment but affirmed the determination on the merits, ordering that the judgment be reinstated on remand if Benson could demonstrate standing under the new standards. Benson amended his complaint to allege that he (and some newly added individual plaintiffs) would not have bought Kwikset locksets but for the "Made in the USA" label.

In response to the amended complaint, Kwikset argued that, because the plaintiffs did not allege that the locksets they purchased were overpriced or defective, they lacked standing under Proposition 64. That is, the frustration of the plaintiffs'...