KWIKSET CORPORATION v. THE SUPERIOR COURT OF ORANGE COUNTY

51 Cal. 4th 310

246 P.3d 877

120 Cal. Rptr. 3d 741

KWIKSET CORPORATION et al., Petitioners, v. THE SUPERIOR COURT OF ORANGE COUNTY, Respondent; JAMES BENSON et al., Real Parties in Interest.

S171845

SUPREME COURT OF CALIFORNIA

January 27, 2011, Filed

Jones, Bell, Abbott, Fleming & Fitzgerald, Michael J. Abbott , Fredrick A. Rafeedie and William M. Turner for Petitioners.

Fred J. Hiestand for The Civil Justice Association of California as Amicus Curiae on behalf of Petitioners.

Debra J. LaFetra and Timothy Sandefur for Pacific Legal Foundation as Amicus Curiae on behalf of Petitioners.

Arnold & Porter, Trenton H. Norris , Angel A. Garganta , Ronald C. Redcay and James F. Speyer for California Manufacturers & Technology Association, California Bankers Association, American Herbal Products Association, VeriSign, Inc., and BP West Coast Products LLC as Amici Curiae on behalf of Petitioners.

Robie & Matthai, James R. Robie , Kyle Kveton and Steven S. Fleischman for Association of Southern California Defense Counsel and Natural Balance Pet Foods, Inc., as Amici Curiae on behalf of Petitioners.

No appearance for Respondent.

Soltan & Associates, Venus Soltan; Coughlin Stoia Geller Rudman & Robbins, Robbins Geller Rudman & Dowd, Timothy G. Blood, Pamela M. Parker, Kevin K. Green; Cuneo Gilbert & LaDuca, Jonathan W. Cuneo and Michael G. Lenett for Real Parties in Interest.

Berman DeValerio, Joseph J. Tabacco, Jr., Kevin Shelley, Nicole Lavallee and Matthew D. Pearson for California Teamsters Public Affairs Council, California Nurses Association and Service Employees International Union as Amici Curiae on behalf of Real Parties in Interest.

Seth E. Mermin, Thomas Bennigson; The Sturdevant Law Firm, James C. Sturdevant and Monique Olivier for Public Good, 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 as Amici Curiae on behalf of Real Parties in Interest.

The Arkin Law Firm and Sharon J. Arkin for Consumer Attorneys of California as Amicus Curiae on behalf of Real Parties in Interest.

Blecher & Collins, Maxwell M. Blecher and Jennifer S. Elkayam for Agudath Israel of America as Amicus Curiae on behalf of Real Parties in Interest.

Michael Wall and Jonathan Wiener for Environment California, Natural Resources Defense Council, Inc., and Sierra Club as Amici Curiae on behalf of Real Parties in Interest.

W. Scott Thorpe for California District Attorneys Association as Amicus Curiae.

Opinion by Werdegar, J., with Kennard, Acting C. J., Baxter, Moreno, JJ., and George, J., concurring. Dissenting opinion by Chin, J., with Corrigan, J., concurring.

OPINION BY: Werdegar

WERDEGAR, J.—This case arises from Kwikset Corporation's (Kwikset) manufacturing of locksets it labeled as “Made in U.S.A.” 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, the electorate enacted Proposition 64 (Gen. Elec. (Nov. 2, 2004)), which called into question Benson's standing to challenge Kwikset's country of origin representations. 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.” (See Prop. 64, §§ 3, 5.)

(1) We granted review to address the standing requirements of the unfair competition and false advertising laws in the wake of Proposition 64. 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. (Voter Information Guide, Gen. Elec. (Nov. 2, 2004) argument in favor of Prop. 64, p. 40; see also Prop. 64, § 1.) 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. Because plaintiffs here have so alleged, we reverse.

FACTUAL AND PROCEDURAL BACKGROUND

In 2000, plaintiff James Benson filed a representative action against defendant Kwikset, alleging Kwikset falsely marketed and sold locksets labeled as “Made in U.S.A.” that in fact contained foreign-made parts or involved foreign manufacture. The original complaint contained four counts, three asserting violations of the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.) for unlawful, unfair, and fraudulent business practices, and a fourth brought under the false advertising law (Bus. & Prof. Code, § 17500 et seq.). The UCL count for unlawful business practices alleged Kwikset's marketing violated both specific state and federal statutes regulating country of origin labeling (see Bus. & Prof. Code, § 17533.7; Civ. Code, § 1770, subd. (a)(4); 15 U.S.C. § 45a) and general statutes governing false advertising (Bus. & Prof. Code, § 17500 et seq.; Civ. Code, § 1770, subd. (a)(5), (7), (9), (16); 15 U.S.C. § 45). Benson sought both injunctive relief and restitution.

After a bench trial, the trial court entered judgment for Benson. It concluded Kwikset had violated Business and Professions Code section 17533.7 and Civil Code section 1770, subdivision (a)(4) between 1996 and 2000 by placing “Made in U.S.A.” or similar labels on more than two dozen products that either contained screws or pins made in Taiwan or involved latch subassembly performed in Mexico. Based on these violations, the trial court concluded Kwikset had engaged in unlawful, unfair, and deceptive business practices under Business and Professions Code section 17200 and false advertising under Business and Professions Code section 17500 and found for Benson on each of his four causes of action.

The trial court's subsequent judgment enjoined Kwikset “from labeling any lockset intended for sale in the State of California ‘All American Made,’ or ‘Made in USA,’ or similar unqualified language, if such lockset contains any article, unit, or part that is made, manufactured, or produced outside of the United States.” The trial court further ordered Kwikset to notify its California retailers and distributors of the falsely labeled products and afford them the opportunity to return improperly labeled inventory for either a monetary refund or replacement with properly labeled items. However, the trial court denied Benson's request for restitution to consumers, the end purchasers of the locksets. It concluded restitution “would likely be very expensive to administer, and the balance of equities weighs heavily against such a program” where the violations had ceased and “the misrepresentations, even to those for whom the ‘Made in USA’ designation is an extremely important consideration, were not so deceptive or false as to warrant a return and/or refund program or other restitutionary relief to those who have been using their locksets without other complaint.”

Both sides appealed. In November 2004, while the appeals were pending, the electorate approved Proposition 64, substantially revising the UCL's and false advertising law's standing provisions for private individuals. (See Bus. & Prof. Code, §§ 17204, 17535.) We held these amendments applied to pending cases (Californians for Disability Rights v. Mervyn's, LLC (2006) 39 Cal.4th 223, 232–233 [46 Cal. Rptr.3d 57, 138 P.3d 207]), but that a party who had filed suit on behalf of the general public before Proposition 64's enactment should be given the opportunity to allege and prove facts satisfying the new standing requirements (Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242–243 [46 Cal. Rptr.3d 66, 138 P.3d 214]).

Thereafter, the Court of Appeal affirmed the trial court's decision on the underlying merits (Benson v. Kwikset Corp., supra, 152 Cal.App.4th at pp. 1267–1284) but vacated the judgment in light of questions concerning Benson's standing. Because Benson filed this action before passage of Proposition 64, he had neither pleaded nor proven standing sufficient to meet the newly enacted requirements. In accordance with Branick v. Downey Savings & Loan Assn., supra, 39 Cal.4th 235, the Court of Appeal remanded the case to the trial court to afford Benson the opportunity to do so, directing the trial court to reenter its original judgment if Benson could demonstrate standing and to dismiss the action if he could not. (Benson, at pp. 1264, 1284.)

Benson sought and obtained leave to add additional plaintiffs (Al Snook, Christina Grecco, and Chris Wilson) and eventually filed what is now the operative complaint, the second amended complaint for equitable relief. The amended complaint alleges each plaintiff “purchased several Kwikset locksets in California that were represented as ‘Made in U.S.A.’ or [contained] similar designations.” When purchasing the locksets each plaintiff “saw and read Defendants' misrepresentations … and relied on such misrepresentations in deciding to purchase … them. [Each plaintiff] was induced to purchase and did purchase Defendants' locksets due to the false representation that they were ‘Made in U.S.A.’ and would not have purchased them if they had not been so misrepresented. In purchasing Defendants' locksets, [each plaintiff] was provided with products falsely advertised as ‘Made in U.S.A.,’ deceiving [him or her] and causing [him or her] to buy...