KWIKSET CORPORATION v. SUPERIOR COURT OF ORANGE
COUNTY









Filed 1/27/11



IN THE SUPREME COURT OF CALIFORNIA



KWIKSET CORPORATION et al., )
)
Petitioners, )
) S171845
v. )
) Ct.App. 4/3 G040675
THE SUPERIOR COURT OF ORANGE )
COUNTY, ) Orange County
) Super. Ct. No. 00CC01275
Respondent; )
)
JAMES BENSON et al., )
)
Real Parties in Interest. )
__________________________________ )

STORY CONTINUE FROM PART II….

Moreover, to interpret standing as dependent on eligibility for restitution would narrow section 17204 in a way unsupported by its text. Restitution under section 17203 is confined to restoration of any interest in “money or property, real or personal, which may have been acquired by means of such unfair competition.” (Italics added.) A restitution order against a defendant thus requires both that money or property have been lost by a plaintiff, on the one hand, and that it have been acquired by a defendant, on the other. (See Kraus v. Trinity Management Services, Inc., supra, 23 Cal.4th at pp. 126-127.) But the economic injury that an unfair business practice occasions may often involve a loss by the plaintiff without any corresponding gain by the defendant, such as, for example, a diminishment in the value of some asset a plaintiff possesses. (See Overstock.com, Inc. v. Gradient Analytics, Inc. (2007) 151 Cal.App.4th 688, 716 [a plaintiff who alleged that a defendant’s defamatory statements diminished its assets and reduced its market capitalization adequately alleged UCL standing]; Huntingdon Life Sciences, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (2005) 129 Cal.App.4th 1228, 1240, 1262 [a plaintiff whose home and car were vandalized by defendant animal rights protesters adequately alleged lost property under Prop. 64].) Such injuries satisfy the plain meaning of section 17204’s “lost money or property” requirement, qualify as injury in fact, and would permit a plaintiff to seek an injunction against the offending business practice even in the absence of any basis for restitution. (See Clayworth v. Pfizer, Inc., supra, 49 Cal.4th at pp. 789-790 [parties may seek an injunction under the UCL whether or not restitution is also available]; ABC Internat. Traders, Inc. v. Matsushita Electric Corp., supra, 14 Cal.4th at p. 1268 [§ 17203 “contains . . . no language of condition linking injunctive and restitutionary relief”].)
This leads to a larger point: To make standing under section 17204 dependent on eligibility for restitution under section 17203 would turn the remedial scheme of the UCL on its head. Injunctions are “the primary form of relief available under the UCL to protect consumers from unfair business practices,” while restitution is a type of “ancillary relief.” (In re Tobacco II Cases, supra, 46 Cal.4th at p. 319.) As the availability of an injunction depends on standing to sue, if standing to sue depends on eligibility for restitution, then injunctive relief—the primary form of relief under the UCL—has been rendered dependent on the availability of a mere ancillary form of relief. As we have recognized, “Proposition 64 did not amend the remedies provision of section 17203.” (In re Tobacco II Cases, at p. 319.) We have no reason to believe it sub silentio dramatically changed the relative availability of the remedies contained in section 17203.
Accordingly, we hold ineligibility for restitution is not a basis for denying standing under section 17204 and disapprove those cases that have concluded otherwise. (See Silvaco Data Systems v. Intel Corp., supra, 184 Cal.App.4th 210, 245; Citizens of Humanity, LLC v. Costco Wholesale Corp., supra, 171 Cal.App.4th 1, 22; Buckland v. Threshold Enterprises, Ltd., supra, 155 Cal.App.4th 798, 817.)

Disposition
For the foregoing reasons, we reverse the Court of Appeal’s judgment and remand this case for further proceedings consistent with this opinion.
Werdegar, J.
We Concur:
Kennard, Acting C. J.
Baxter, J.
Moreno, J.
George, J.^*

DISSENTING OPINION BY CHIN, J.


I respectfully dissent.
In 2004, voters passed Proposition 64, which substantially changed the standing requirements for a private plaintiff to sue under the unfair competition law (UCL) (see Bus. & Prof. Code, § 17200 et seq.).^[1] “The voters’ intent in passing Proposition 64 and enacting the changes to the standing rules in Business and Professions Code section 17204 was unequivocally to narrow the category of persons who could sue businesses under the UCL.” (Hall v. Time Inc. (2008) 158 Cal.App.4th 847, 853 (Hall).) To have standing under the UCL, a plaintiff must have suffered “injury in fact” and have “lost money or property” as a result of an unfair business practice. (§ 17204, as amended by Prop. 64, as approved by voters, Gen. Elec. (Nov. 2, 2004) § 3 (Proposition 64); see also § 17203.) In direct contravention of the electorate’s intent, the majority disregards the express language of the amendment and makes it easier for a plaintiff to achieve standing under the UCL.

A. Meaning of “Lost Money or Property”

As relevant here, in the wake of Proposition 64 section 17204 now provides that a private plaintiff may bring a UCL action if he or she “has suffered injury in fact and has lost money or property as a result of such unfair competition.” (§ 17204, as amended by Prop. 64, § 3, italics added.) The amendment clearly sets out two requirements to establish standing. (See Peterson v. Cellco Partnership (2008) 164 Cal.App.4th 1583, 1590 (Peterson) [“private plaintiff must make a twofold showing”].) As the majority correctly points out, the crux of the issue here is the meaning of “lost money or property.” (Maj. opn., ante, at p. 8.)
Several Courts of Appeal have defined a loss for purposes of section 17204 as “ ‘[a]n undesirable outcome of a risk; the disappearance or diminution of value, usu. in an unexpected or relatively unpredictable way.’ ” (Hall, supra, 158 Cal.App.4th at p. 853, quoting Black’s Law Dict. (8th ed. 2004) p. 963; see Peterson, supra, 164 Cal.App.4th at p. 1592.) In other words, a person has not “lost” money simply when the money is “ ‘no longer in [his or her] possession’ ” because “this proposed definition encompasses every purchase or transaction where a person pays with money.” (Peterson, supra, 164 Cal.App.4th at p. 1592.)
Despite finding section 17204’s meaning to be “plain” (maj. opn., ante, at pp. 9, 31), the majority does not actually attempt to define what “lost money or property” means except to find that it now requires a UCL private plaintiff to “demonstrate some form of economic injury.” (Maj. opn., ante, at p. 11 [citing cases]; cf. id. at p. 23 [“open-ended phrase ‘lost money or property’ ”].) Throughout its opinion, the majority refers to “economic injury” as shorthand for the statutory requirement. (Id. at pp. 11, 14, 21, 23, 31.) However, the Court of Appeal cases on which the majority relies do not support this conclusion. In discussing economic injury, each of these cases was referring to the requirement of “injury in fact” and not, as the majority suggests, to “lost money or property.” (See Peterson, supra, 164 Cal.App.4th at pp. 1591-1592 [by failing to allege “they suffered actual economic injury,” plaintiffs failed to allege facts showing “injury in fact”]; Hall, supra, 158 Cal.App.4th at pp. 854-855 [listing examples constituting “injury in fact”]; Aron v. U-Haul Co. of California (2006) 143 Cal.App.4th 796, 802 (Aron) [plaintiff has claim for actual economic injury by alleging “ ‘injury in fact’ in that he suffered economic loss”]; see also Animal Legal Defense Fund v. Mendes (2008) 160 Cal.App.4th 136, 147 [language that plaintiffs “have suffered ‘injury in fact and [have] lost money or property’ ” “discloses a clear requirement that injury must be economic”].) Thus, although the majority catalogues the “innumerable ways” in which economic injury may be shown (maj. opn., ante, at p. 11), this does not shed light on the meaning of “lost money or property” under section 17204.
The majority later correctly recognizes that economic injury is a type of injury in fact. (See maj. opn., ante, at pp. 11, 14.) However, this observation does little to clarify what the statute actually means. By failing to expressly define “lost money or property” and instead equating it with economic injury, the majority effectively collapses the two separate requirements of section 17204 into one. This is far more than what the majority acknowledges it is doing, namely, recognizing the overlap between the proof of the “injury in fact” and “lost money or property” elements. (See id. at p. 14.) Rather, the majority’s conclusion that “[a]t this stage, these plaintiffs need only allege economic injury arising from reliance on Kwikset’s misrepresentations” (id. at p. 17), effectively renders one of the two statutory requirements “ ‘redundant and a nullity.’ ” (Buckland v. Threshold Enterprises, Ltd. (2007) 155 Cal.App.4th 798, 817.) “We must take the language . . . , as it was passed into law, and must, if possible without doing violence to the language and spirit of the law, interpret it so as to harmonize and give effect to all its provisions.” (People v. Garcia (1999) 21 Cal.4th 1, 14.)
In this case, plaintiffs alleged that “Defendants’ ‘Made in U.S.A.’ misrepresentations caused [each plaintiff] to spend and lose the money [he or she] paid for the locksets.” (Maj. opn., ante, at p. 5.) The majority claims that the economic harm suffered in this context is “the loss of real dollars from a consumer’s pocket . . . .” (Id. at p. 20.) Plaintiffs, however, received the locksets in return, which were not alleged to be overpriced or otherwise defective. Aside from paying the purchase price of the locksets, plaintiffs have not alleged they actually “lost” any money or property. (See Peterson, supra, 164 Cal.App.4th at p. 1592; ante, at p. 2.)
In that regard, the cases the majority relies on (see maj. opn., ante, at pp. 13-14) are readily distinguishable. In each, the UCL plaintiff did not simply purchase a product or service as a result of an alleged unfair business practice, but suffered an actual measurable loss in the transaction. (Clayworth v. Pfizer, Inc. (2010) 49 Cal.4th 758, 788 [plaintiffs “lost money: the overcharges they paid”]; Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069, 1090 [plaintiff was deprived of a “fair opportunity to redeem the financed vehicle, followed by an unlawful demand for payment”]; Aron, supra, 143 Cal.App.4th at pp. 802-803 [plaintiff had standing where he paid more to refuel rental truck than required under contract]; see also Troyk v. Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1348 [plaintiff’s “alleged payment of money in addition to the premium stated in his insurance sufficiently alleges lost money” (italics added & omitted)].)

B. Subjective Motivations

In order to bolster its conclusion that plaintiffs have “lost money” (or in its view, suffered “economic injury” under section 17204, the majority focuses on the plaintiffs’ subjective motivations, noting that “to some consumers, the ‘Made in U.S.A.’ label matters” (maj. opn., ante, at p. 20), and that in purchasing a mislabeled product, a consumer may have “valued the money he or she parted with more than the product as it actually is.” (Id. at p. 21.) The majority concludes “that because of the misrepresentation, the consumer (allegedly) was made to part with more money than he or she otherwise would have been willing to expend, i.e., that the consumer paid more than he or she actually valued the product. That increment, the extra money paid, is economic injury and affords the consumer standing to sue.” (Id. at pp. 21-22.) I disagree on several grounds.
First, “there is no statutory basis, at least in terms of the Proposition 64 amendment, to differentiate UCL actions based on the subjective motivation of the plaintiff; the differentiation is between instances where there is actual loss of property versus no such loss.” (Medina v. Safe-guard Products, International, Inc. (2008) 164 Cal.App.4th 105, 115, fn. 11 (Medina).) Whatever value the consumer may subjectively assign to the product (as the majority points out, ante, at p. 20, the preference to buy U.S.-made products may stem “from the desire to support domestic jobs, to beliefs about quality, to concerns about overseas environmental or labor conditions, to simple patriotism”, plaintiffs have failed to allege that their personal preference is reflected in any cost differential between the mislabeled and correctly labeled products.^[2] Contrary to the majority’s suggestion, my concern is not directed towards whether or not a party subjectively, or actually, relies on a particular deception, which may be relevant in a common law deceit action. (Maj. opn., ante, at p. 21, fn. 14; see id. at p. 16 [“ ‘reliance is the causal mechanism of fraud’ ”].) Rather, under the majority’s holding, it is enough for a private plaintiff to simply allege, “I would not have bought the product but for the misrepresentation,” to establish not only causation but also an injury cognizable under section 17204. (Id. at p. 21.) An allegation that merely identifies the party’s subjective motivation clearly does not track the language of the section.
Second, it is unclear what constitutes the “extra money paid” in this context (maj. opn., ante, at p. 22, italics added), where plaintiffs simply paid the purchase price for the mislabeled but otherwise fully functional locksets. Of course, the majority presents striking examples of products for which a consumer would have overpaid because of certain misrepresentations. For instance, the majority maintains that a consumer who buys a counterfeit Rolex watch believing it to be a genuine Rolex (though both watches may accurately tell time), “has been economically harmed by the substitution in a manner sufficient to create standing to sue.” (Id. at p. 21.) It also asserts that consumers who purchase mislabeled kosher, halal, or organic foods would satisfy the UCL’s new standing requirements. (See id. at pp. 19, 24-25.) One can hardly dispute that these genuine products have greater value placed on them than on their mislabeled counterparts,^[3] and consumers who buy the latter may allege and prove they actually paid (and therefore, lost) extra money based on the mislabeling. Yet even these examples, though extreme, obscure the breadth of the majority’s holding, which in fact does not require that plaintiffs allege any price differential. Under the majority’s holding, a consumer may satisfy the UCL’s new standing requirements merely by alleging that “he or she would not have bought the product but for the misrepresentation. That assertion is sufficient to allege causation — the purchase would not have been made but for the misrepresentation. It is also sufficient to allege economic injury.” (Maj. opn., ante, at p. 21, fn. omitted.) This is simply too low a threshold to meet, and, more importantly, it is not the one contemplated by Proposition 64.
To counter any natural inclination to construe the term “lost money or property” as an additional requirement to “injury in fact,” the majority focuses on what it perceives to be the main purpose of Proposition 64, 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’ . . . .” (Maj. opn., ante, at p. 2; see id. at pp. 7-8, 29, fn. 21.) In other words, because Proposition 64’s materials do not “purport to define or limit the concept of ‘lost money or property,’ . . . [i]t suffices to say that, in sharp contrast to the state of the law before the passage of Proposition 64, a private plaintiff filing suit now must establish that he or she has personally suffered such harm.” (Id. at p. 11.) The issue here, however, is not that a plaintiff must show that he or she personally suffered harm, but that the harm alleged must be an actual measurable loss of money or property.

C. Intent Behind Proposition 64

The text of the amendment, as the majority recognizes, is “the first and best indicator of intent.” (People v. Mentch (2008) 45 Cal.4th 274, 282; see maj. opn., ante, at p. 8.) As discussed above, Proposition 64 amended section 17204 to add two separate requirements to establish standing, i.e., a private plaintiff must have suffered “injury in fact” and “lost money or property as a result of such unfair competition.” (§ 17204, as amended by Prop. 64, § 3.) Instead of interpreting the statutory language, however, the majority focuses on certain language in Proposition 64’s “Findings and Declarations of Purpose” (Voter Information Guide, Gen. Elec. (Nov. 2, 2004) p. 109), which explained to voters that some private attorneys were misusing the UCL by filing “frivolous lawsuits as a means of generating attorney’s fees without creating a corresponding public benefit,” “lawsuits where no client has been injured in fact,” “lawsuits for clients who have not used the defendant’s product or service, viewed the defendant’s advertising, or had any other business dealing with the defendant,” and “lawsuits on behalf of the general public without any accountability to the public and without adequate court supervision.” (Prop. 64, § 1, subd. (b)(1)-(4), italics added.) Based partly on the italicized language, the majority asserts that “[n]o corresponding concern was expressed about suits by those who had had business dealings with a given defendant, and nothing suggests the voters contemplated eliminating statutory standing for consumers actually deceived by a defendant’s representations.” (Maj. opn., ante, at p. 29, fn. 21.)
I believe the majority misperceives the intent of Proposition 64 by focusing too heavily on the genesis of the initiative, i.e., misuse of certain UCL lawsuits by some attorneys, while giving the language of the amendment short shrift. Rather than grapple with the meaning of “lost money or property,” the majority conflates this requirement with “injury in fact,” effectively making it easier for a plaintiff to establish standing through a “simple test” (maj. opn., ante, at p. 9; see ante, at pp. 2-3), and emphasizes there is nothing in the initiative materials prohibiting such a construction. (See maj. opn., ante, at pp. 2, 8, 29, fn. 21.) This cannot be what voters envisioned in passing Proposition 64. (See Medina, supra, 164 Cal.App.4th at p. 115 [“[t]he point of the Proposition 64 amendment was to impose additional requirements on plaintiffs . . .”].)
In clearly stating to voters what the measure does, the “Official Title and Summary” prepared by the Attorney General explained that Proposition 64 “[l]imits individual’s right to sue by allowing private enforcement of unfair business competition laws only if that individual was actually injured by, and suffered financial/property loss because of, an unfair business practice.” (Voter Information Guide, Gen. Elec. (Nov. 2, 2004), official title and summary of Prop. 64, p. 38, italics added.) The Legislative Analyst confirmed that the measure prohibits a private person from bringing a UCL action “unless the person has suffered injury and lost money or property.” (Id., analysis of Prop. 64 by Legis. Analyst, p. 38, italics added.) Although the majority quotes certain language from the Findings and Declarations of Purpose that do not cover the precise nature of the present action, this does not in any way negate the broader language of the amendment itself nor the summary and analysis discussed above.
Indeed, to the extent the majority contends there is nothing to suggest that voters were concerned about frivolous lawsuits apart from those brought by unaffected plaintiffs (see maj. opn., ante, at p. 29, fn. 21), we need look no further than the present case. Proponents of Proposition 64 included the underlying action on their Web site as an example of a “shakedown” lawsuit.^[4] One newspaper editorial explained at the time voters were considering the ballot initiative that “[a] measure on the November ballot, Proposition 64, would do much to curb the shakedown lawsuits to which Justice Sills [dissenting in Benson v. Kwikset Corp.] referred. Such suits affect not only deep-pocket companies like Kwikset but also untold thousands of small businesses in California.” ^[5] Another newspaper article pointed out that Proposition 64’s proponents asserted “Benson’s case is a prime example of the lawsuit abuse they seek to curb.”^[6] While these may not constitute official materials presented to voters, these materials, at the very least, undermine the majority’s assertion that voters were concerned only about suits by parties who had no business dealings with a given defendant and, more importantly, they underscore the question we must answer here—what does “lost money or property” mean in this context‌

D. Private Enforcement Actions

The majority also suggests that a contrary interpretation of section 17204 would sound the death knell for private enforcement actions based on label misrepresentations. (Maj. opn., ante, at pp. 22-23.) I disagree. Plaintiffs here did not allege that these mislabeled locksets were overpriced or defective, but simply alleged that they would not have bought the locksets but for the mislabeling. This, however, is not the kind of economic loss required by Proposition 64. In other situations where plaintiffs do allege that a mislabeled product was overpriced, and that they did in fact lose money, they would have standing to bring a private action under the UCL. Moreover, as the majority points out (id. at p. 7), the UCL’s purpose “is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.” (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 949, italics added.) Although the action here focused on alleged injuries to consumers, Kwikset’s competitors may very well bring suit. A competitor who properly labeled its locksets “Made in U.S.A.” and alleges it was forced to charge higher prices for such locksets, and another who manufactured its locksets outside the United States and alleges it lost customers to Kwikset, could both claim they were at a competitive and economic disadvantage to Kwikset. In each instance, these competitors could allege not only injury in fact, but also economic injury for lost sales and profits due to Kwikset’s misrepresentation.

E. Conclusion

A consumer who purchases a product based on a defendant’s misrepresentation may very well achieve standing under the UCL’s new requirements. But the consumer must allege that he or she suffered an injury in fact and lost money or property in the transaction (see § 17204); the loss must be alleged by more than a simple reference to the price the consumer paid for the product. Plaintiffs here have failed to do that. More importantly, the majority relieves them of this burden. All plaintiffs now have to allege is that they would not have bought the mislabeled product. (Maj. opn., ante, at p. 21.) This cannot be what the electorate intended when it sought “unequivocally to narrow the category of persons who could sue businesses under the UCL.” (Hall, supra, 158 Cal.App.4th at p. 853.) “[I]n the case of a voters’ initiative statute . . . we may not properly interpret the measure in a way that the electorate did not contemplate: the voters should get what they enacted, not more and not less.” (Hodges v. Superior Court (1999) 21 Cal.4th 109, 114.)

I respectfully dissent.
CHIN, J.
I CONCUR:
CORRIGAN, J.

See last page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Kwikset Corporation v. Superior Court
__________________________________________________________________________________

Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XXX 171 Cal.App.4th 645
Rehearing Granted

__________________________________________________________________________________

Opinion No. S171845
Date Filed: January 27, 2011
__________________________________________________________________________________

Court: Superior
County: Orange
Judge: David C. Velasquez

__________________________________________________________________________________

Attorneys for Appellant:

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. La Fetra 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 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.









Page 2 – S171845 – counsel continued

Seth E. Mermin, Thomas Bennigson, Colin L. Ward; 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 Amici Curiae.







Counsel who argued in Supreme Court (not intended for publication with opinion):

Fredrick A. Rafeedie
Jones, Bell, Abbott, Fleming & Fitzgerald
601 South Figueroa Street, Twenty-Seventh Floor
Los Angeles, CA 90017-5759
(213) 485-1555

Jonathan W. Cuneo
Cuneo Gilbert & LaDuca
507 C Street, N.E.
Washington, DC 20002
(202) 789-3960






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