Consumers who have been sold falsely labeled goods are covered by California’s core consumer protection laws.
The Issue: Consumers who purchased locks advertised as “Made in the USA” sued the manufacturer after they discovered that the locks contained foreign-made parts or were assembled abroad. The manufacturer argued – and the court of appeal agreed – that a cheated customer could not bring an action under California’s Unfair Competition Law and False Advertising Law, as amended by ballot initiative in 2004, unless she had lost money in the transaction, and that a customer did not lose money as long as she received a working product. It did not matter, according to this argument, that the customer had bought the product precisely because it was advertised (falsely) as American-made. The California Supreme Court granted review to answer the following question: Does a plaintiff’s allegation that he purchased a product in reliance on the product label’s misrepresentation about how the product was made satisfy the requirement for standing under the Unfair Competition Law that the plaintiff allege a loss of money or property?
Why It Matters: For decades, California’s Unfair Competition Law has provided broad protection to consumers against deceptive and misleading advertising and unfair and unlawful business practices. The Court of Appeal’s interpretation of the 2004 amendments would have severely curtailed that protection by limiting actionable consumer complaints to the price, quality, and function of the item purchased. In today’s market, however, many consumers also care about how a product was produced: that it was organically grown, not genetically modified, dolphin-safe, cage-free, not produced under sweatshop conditions, produced by union labor, produced in an environmentally responsible manner, or kosher or halal, to list just a few examples. The Court of Appeal’s decision would give advertisers carte blanche to make false claims about such matters without fear of legal consequence. Not only would such a legal regime leave victimized consumers without recourse, but it would also undermine socially responsible businesses such as organic farms by making it more difficult for them to distinguish their products in the marketplace.
Public Good’s Contribution: Public Good filed a brief in the California Supreme Court in defense of customers’ right to sue when they purchase products that are falsely advertised. Public Good argued that a customer has lost money if he has paid money for a product that differs from the advertised product in ways that matter to the customer, even if the product functions satisfactorily. The court of appeal’s unjustifiably narrow interpretation of the law ran contrary to the intent of the voters. The thrust of the amendments to the relevant laws was to ensure that a lawsuit could be brought only by a party actually injured by the misconduct, and not—as before—by any concerned citizen acting as “private attorney general.” The amendments were not intended to limit the remedies available to injured parties.
Amici joining Public Good: Public Good’s brief was filed on behalf of itself and a host of leading national and California consumer protection organizations: Public Citizen, National Association of Consumer Advocates, National Consumer Law Center, Consumer Action, Consumer Watchdog, CalPIRG, Consumers for Auto Reliability and Safety, and Consumer Federation of California.
Outcome: In a big victory for consumers, the California Supreme Court reversed the court of appeal decision, holding that consumers may still sue when the product they receive, or the process by which it is produced, is not as advertised. The Court went further, formally disapproving three court of appeal cases relied on by defendants. The Court’s opinion (and the Justices’ questions at oral argument) not only closely followed Public Good’s reasoning, but also drew heavily on sources and examples (e.g., Rolex watches, halal meat, ‘conflict diamonds,’ the lack of a secondary market in consumer goods) drawn from Public Good’s brief. The decision, which has already been cited over 1000 times, has stemmed what had become a tide of cases in which unfair competition claims were dismissed for lack of standing. In May 2013 the Ninth Circuit relied centrally on this California decision in ruling for consumer plaintiffs in Hinojos v. Kohl’s Corp., holding that the Kwikset precedent had wide applicability.
171 Cal.App.4th 645 (2009), reversed, 51 Cal.4th 310 (2011).