The long saga of In re Tobacco Cases II recently produced yet another appellate opinion addressing California’s Unfair Competition Law (“UCL”), False Advertising Law (“FAL”), and the remedies they provide. This time, in In re Tobacco Cases II, 240 Cal. App. 4th 779 (Sept. 28, 2015) (“Tobacco II”), the appellate court considered what “restitution” under the UCL actually means, and how to appropriately calculate it. In doing so, the court provided much needed guidance on these issues and (assuming the decision is affirmed) largely eliminated the “full refund” theory of restitutionary recovery in all but the most extreme UCL and FAL actions.
Although the Tobacco II case has a “tortuous procedural history” (as described by the court of appeal), the central focus of this opinion was the plaintiffs’ claim (as class representatives) that Philip Morris (the maker of Marlboro branded cigarettes) falsely advertised its products when it used the term “lights” and “lowered tar and nicotine” to market its Marlboro Lights cigarettes. Tobacco II, 240 Cal. App. 4th at 784. The plaintiffs claimed that, by using these phrases, the defendant falsely advertised that Marlboro Lights were “less unhealthful” than regular Marlboro cigarettes when, in fact, they were no less dangerous than “full-flavored cigarettes.” Id. After conducting a trial, the judge denied the plaintiffs’ restitution claims because the plaintiffs failed to present the evidence necessary to establish the “difference between what they paid for Marlboro Lights and the value they actually received.” Id. The plaintiffs appealed this decision (as well as other issues relating to the ultimate judgment in the case).
The primary issue on appeal concerned the plaintiffs’ argument that the trial court erred, as a matter of law, in ruling that the only measure of restitution available under a UCL and FAL case is the measure set forth in the case In re Vioxx Class Cases, 180 Cal. App. 4th 116 (2009) (“Vioxx”), namely that plaintiffs are entitled to recover the difference between the price paid for the falsely advertised product and the actual value received. Tobacco II, 240 Cal. App. 4th at 784, 787. More specifically, the plaintiffs argued that the value received by consumers was “immaterial” because the trial court had discretion to order Philip Morris to “make a full refund of their expenditures on Marlboro Lights, or its profits thereon, solely for the purpose of deterrence.” Id. at 791.
In considering the plaintiffs’ argument, the court first examined Vioxx, which noted that “The difference between what the plaintiff paid and the value of what the plaintiff received is a proper measure of restitution…In order to recover under this measure, there must be evidence of the actual value of what the plaintiff received.” Tobacco II, 240 Cal. App. 4th at 791, citing Vioxx, 180 Cal. App. 4th at 131. The plaintiffs argued that the use of the indefinite article “a” meant that other valid measures of restitution could exist beyond the one identified in Vioxx. On this singular point, the court agreed. Tobacco II, 240 Cal. App. 4th at 792. However, the rest of the opinion demonstrated why the plaintiffs’ remaining arguments failed under existing California law.
Although the court agreed that Vioxx does not preclude the possibility of other measures of restitution, the court held that “It remains…that plaintiffs had the burden of proving entitlement to an alternative measure of restitution proper under all the circumstances” and that it was supported by substantial evidence. Id. at 792. The plaintiffs’ full refund theory could not satisfy this test because restitution must focus on what the plaintiffs lost, not what the defendants gained. Id. at 794. Here, because the plaintiffs undeniably obtained some value from purchasing the Marlboro Lights (i.e., they received the cigarettes they wanted to smoke), the appropriate measure of restitution was the same one set forth in Vioxx: the difference between the value the plaintiffs received and what they paid. Since the plaintiffs failed to prove (through admissible evidence) the difference in the price paid and the value received by the consumers, restitution could not be ordered and the trial court correctly denied plaintiffs’ prayer for restitution. Id. at 794-95.
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