OBRIEN, v. CAMISASCA AUTOMOTIVE MANUFACTURING, INC.,

Filed 3/27/08

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION THREE

APPEAL from a judgment of the Superior Court of Los Angeles County, Carolyn B. Kuhl, Judge. Affirmed.

The Rossbacher Firm, Henry H. Rossbacher, James S. Cahill and Talin Khachaturian Tenley for Plaintiff and Appellant.

Law Offices of Barry P. King and Barry P. King; Jones, Bell, Abbott, Fleming & Fitzgerald L.L.P. and Fredrick A. Rafeedie for Camisasca Automotive Manufacturing, Inc., Defendant and Respondent.

Jeffer, Mangels, Butler & Marmaro LLP, Stanley M. Gibson and Matthew D. Hinks for Volkswagen of America, Inc., Defendant and Respondent.

INTRODUCTION

Plaintiff Lawrence OBrien brought this putative class action lawsuit against defendants Camisasca Automotive Manufacturing, Inc. and Volkswagen of America, Inc. (Volkswagen), alleging defendants violated the Unfair Competition Law (Bus. & Prof. Code[1] (the UCL)), the False Advertising Law (the FAL),[2] and the Consumers Legal Remedies Act (the CLRA)[3] by falsely representing that the license plate frames defendants offered for sale were Made in USA. The trial court granted defendants motions for summary judgment on the ground that OBrien did not have standing under Proposition 64s amendments to the UCL and the FAL. The amendments authorize a lawsuit under those statutes only by a person who has suffered injury in fact and has lost money or property as a result of a violation of these acts.

The undisputed facts are that OBrien did not see any country of origin representation with respect to the license plate frame before he purchased it, with the result any injury in fact OBrien may have suffered was not as a result of an unfair business practice or false advertising. Accordingly, we hold, as a matter of law, that OBrien has no standing. We also hold that the trial court did not abuse its discretion, after ruling on the summary judgment motions, in denying plaintiffs leave to amend the complaint to name a plaintiff with standing. Plaintiffs failed to justify the long delay before suggesting they could amend, and have yet to move to amend or to submit an amended complaint showing how they could cure the standing deficiency. Accordingly, we affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

1. OBrien purchases a license plate frame and agrees to be lead plaintiff in the class action lawsuit.

Camisasca is the sole authorized manufacturer of genuine Audi license plate frames authorized by Volkswagen. These license plate frames are available for purchase through Camisascas catalogue and internet site. In addition to various types of Audi license plate frames, the catalogue advertised clothing, key fobs, and wheel frames, among other things. As a recent lessee of an Audi automobile, OBrien received an accessories catalogue of Audi products in the mail.

In perusing the catalogue, OBrien did not directly see a Made in USA representation associated with the license plate frame he bought. There was nothing on the catalogue page depicting the license plate frames to indicate that the frame was either Made in USA or not Made in USA. OBrien stated, [i]n going through the catalog, looking at various items, it was clear that some items were imported in the description. It would say imported. Those items that  and other items didnt have that designation. So I assumed thats made in the U.S. []  The license plate description did not have an imported designation in the description field, so I took that as being made in the U.S.A. (Italics added.) OBrien testified that looking at the catalog, it was apparent that it was not imported, made in the U.S.A., and considering the price, I figured it was going to be a sturdy plate.

Nor did OBrien see a Made in USA representation on the website, audiusa.com, from which he ordered the license plate frame. Other than to look at the catalogue and the website, OBrien conducted no research into the frame he chose before he purchased it.

OBrien purchased an Audi license plate frame from Camisasca. OBrien acknowledged in his deposition that he saw no Made in U.S.A. designation in relation to the license plate frame before his purchase: Q. And then [in] purchasing that frame, am I correct that you had not seen the words, Made in the U.S.A. in relation to that frame anywhere? []  A. Correct.

After purchasing the license plate frame, but before receiving it in the mail, OBrien met with Henry Rossbacher, his attorney in this case. Rossbacher came to OBrien to tell him about a new case regarding license plates and not being manufactured in the U.S. when they said they were. OBrien agreed to become a plaintiff in the lawsuit weeks before he received the license plate frame at issue.

The first time OBrien saw the words Made in U.S.A. was weeks after purchasing the frame when he received it in the mail. The designation was stamped on the back of the packaging containing the frame. Rather than to put the license plate frame on his car, OBrien took it to his attorney.[4] OBrien never sought a refund from Audi because, he explained, at this point I had agreed to be a plaintiff in the case . . . .

2. The class action commences.[5]

On January 21, 2005, OBrien sent a certified letter to Camisasca notifying it of alleged acts or practices declared to be unlawful by the CLRA by Using deceptive representations or designations of geographic origin in connection with goods or services. . . .  Advertising goods or services with intent not to sell them as advertised. (Civ. Code, 1770, subd. (a)(4) & (9).)

Eighteen days later, on February 8, 2005, three months after Proposition 64 was approved by the voters of California, OBrien filed this class action on behalf of all residents of the United States who purchased Volkswagen and Audi license plate frames from catalogues, internet, and automobile dealerships. OBrien alleged that he purchased a license plate frame that Camisasca and Volkswagen misrepresented as Made in USA. He alleged specifically that Camisasca represented that the license plate frames sold by Volkswagen, through Audi, are Made in USA and Fabriqu aux tats-Unis where such frames and parts are entirely or substantially made or produced outside of the United States of foreign steel and materials that are then imported into the United States. These misrepresentations, he alleged, fraudulently induced him to purchase the License Plate Frames at premium prices; prices higher than products not falsely claimed to be Made in USA.  (Italics added.) The complaint alleged that defendants false advertisements and misrepresentations constituted deceptive and untruthful advertising and marketing that induced thousands of consumers to purchase the license plate frames based on the expectation that the frames were made in the United States. He alleged that these misrepresentations of national origin violated the UCL, section 17533.7 of the FAL, and the prohibition in CLRA Civil Code section 1770, subdivision (a) against using deceptive representations of geographic origin in misdescribing products.

3. Defendants move to strike the CLRA damages allegation.

Defendants demurred to the complaint on the ground that, pursuant to Proposition 64, OBrien lacked standing and the legal capacity to state a cause of action under the UCL and the FAL. Defendants also moved to strike the CLRA damages allegation in the complaint because OBrien failed to comply with the requirements of Civil Code section 1782, subdivision (a) by failing to notify Camisasca of its alleged CLRA violations 30 days or more before the commencement of the action. The trial court struck the damages allegation from OBriens CLRA claim.

At the request of the trial court to resolve the standing issue at one time rather than seriatim, defendants opted to challenge OBriens standing by way of summary judgment.

At the initial status conference in April 2005, five months after Proposition 64 became effective, the trial court ordered the deposition of OBrien to go forward and ordered OBrien to draft proposed discovery focused on the standing issue.

4. Defendants move for summary judgment on the issue of standing.

Defendants then moved for summary judgment on the sole ground that there was no triable issue of fact that OBrien did not rely on the alleged misrepresentations when purchasing the license plate frame, and so as a matter law, OBrien lacked standing to pursue the action under the FAL, the UCL, and the CLRA.

The facts underlying the motions were derived solely from OBriens complaint and deposition, with the result defendants noted, they were undisputed. Defendants asserted that OBrien testified in his deposition that he suffered no injury arising from any Made in U.S.A. representation because he did not see the allegedly false representation that he claimed induced him to purchase the license plate frame. OBrien did not actually see a country-of-origin designation until several weeks after he made the purchase when he received the product through the mail. Furthermore, Camisasca asserted, by the time OBrien received the license plate frame, he had already agreed to become the plaintiff in this action.

The trial court granted the summary judgment motions and issued a 15-page ruling on August 7, 2006. After the trial court granted the motion but before it entered judgment, OBrien sought a status conference for the purpose of discuss[ing] a timetable for amendment of the complaint. (Italics added.) Finding no actual motion before it other than defendants proposed judgment, the trial court entered judgment effectively foreclosing plaintiffs from amending their complaint to name a plaintiff with standing. OBrien filed his timely appeal.

CONTENTIONS

OBrien contends that the trial court erred in (1) finding OBrien did not have standing to pursue his claims under the FAL and the UCL; (2) striking OBriens damages allegation from his CLRA cause of action; and (3) denying plaintiffs the opportunity to amend the complaint to cure the standing problem.

DISCUSSION

1. Standard of review

Summary judgment is granted when a moving party establishes the right to entry of judgment as a matter of law. (Code Civ. Proc.,  437c, subd. (c).)

As moving party, a defendant or cross-defendant has met his or her burden of showing that a cause of action has no merit if that party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to that cause of action. (Code Civ. Proc.,  437c, subd. (p)(2); see also, Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 853.) Once the moving defendant meets its burden, the burden shifts to the plaintiff to show a triable issue of material fact exists as to that cause of action or defense. (Code Civ. Proc.,  437c, subd. (p)(2).) To meet the responsive burden, the plaintiff must set forth the specific facts show[ing] that a triable issue of one or more material facts exists as to that cause of action or a defense thereto. (Ibid.) Where the plaintiff fails to satisfy this burden, judgment in favor of the defendant shall be granted as a matter of law. [Citation.] (Lopez v. Baca (2002) 98 Cal.App.4th 1008, 1014.)

On appeal, we make an independent assessment of the correctness of the trial courts ruling, applying the same legal standard as the trial court in determining whether there are any genuine issues of material fact or whether the moving party is entitled to judgment as a matter of law. [Citations.] (Iverson v. Muroc Unified School Dist. (1995) 32 Cal.App.4th 218, 222-223.) We review the record de novo, considering all the evidence set forth in the moving and opposition papers except that to which objections have been made and sustained. [Citation.] (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334.)

2. The FAL and UCL

a. Based on the language of Proposition 64, a plaintiff must have relied on the false advertising or unfair business practices to have standing under the FAL and the UCL.

The FAL prohibits consumer deception. Section 17533.7 makes it unlawful for anyone to sell or offer for sale merchandise on which there appears the words Made in U.S.A. or similar words, when the merchandise or any part thereof, has been entirely or substantially made elsewhere.[6] (See Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 950.) Any violation of the FAL necessarily violates the UCL. (Id. at p. 950; Committee on Childrens Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 210.)

The UCL was enacted to protect consumers and competitors from unlawful, unfair, or fraudulent business acts or practices. The UCL accomplished this goal by promoting fair competition in commercial markets for goods and services. (Kasky v. Nike, Inc., supra, 27 Cal.4th at p. 949.)

Over time, the UCL had become the subject of abuse or a kind of legal shakedown scheme: Attorneys form[ed] a front watchdog or consumer organization. They scour[ed] public records on the Internet for what [were] often ridiculously minor violations of some regulation or law by a small business, and sue[d] that business in the name of the front organization. (People ex rel. Lockyer v. Brar (2004) 115 Cal.App.4th 1315, 1317.)

In response, the voters approved initiative measure Proposition 64 in the November 2, 2004, general election. [A]s stated in the measures preamble, the voters found and declared that the UCLs broad grant of standing had encouraged [f]rivolous unfair competition lawsuits [that] clog our courts[,] cost taxpayers and threaten[ ] the survival of small businesses . . . . [Citation.] The former law, the voters determined, had been misused by some private attorneys who [f]ile frivolous lawsuits as a means of generating attorneys fees without creating a corresponding public benefit, [f]ile lawsuits where no client has been injured in fact, [f]ile lawsuits for clients who have not used the defendants product or service, viewed the defendants advertising, or had any other business dealing with the defendant, and [f]ile lawsuits on behalf of the general public without any accountability to the public and without adequate court supervision. [Citation.] [T]he intent of California voters in enacting Proposition 64 was to limit such abuses by prohibit[ing] private attorneys from filing lawsuits for unfair competition where they have no client who has been injured in fact [citation] and by providing that only the California Attorney General and local public officials be authorized to file and prosecute actions on behalf of the general public. [Citation.] (Californians For Disability Rights v. Mervyns, LLC (2006) 39 Cal.4th 223, 228.)

To accomplish its goals, Proposition 64 amended section 17204 concerning standing. The UCL now authorizes lawsuits only by a person  who has suffered injury in fact and has lost money or property as a result of unfair competition.  (Californians For Disability Rights v. Mervyns, LLC, supra, 39 Cal.4th at p. 228, italics added; see also 17203.)[7]

The standing requirements of the FAL were identically amended by Proposition 64. (Californians For Disability Rights v. Mervyns, LLC, supra, 39 Cal.4th at p. 229, fn. 2, citing 17535 & 17536, subd. (c), as amended by Prop. 64,  5, 6.) A plaintiff with standing under the FAL is any person who has suffered injury in fact and has lost money or property as a result of a violation of this chapter.[8]( 17535, as amended by Prop. 64, 5, italics added.)

Published cases interpreting Proposition 64 have held, either explicitly or implicitly, that to have the requisite standing under the UCL and the FAL, the plaintiff must have spent money, lost money or property, or been denied money to which he or she was entitled, due to unfair business practices or false advertising. ( 17204 & 17535; Hall v. Time, Inc. (2008) 158 Cal.App.4th 847, 855 [no standing where, even if plaintiff suffered injury in fact, plaintiff made no causation showing]; Overstock.com, Inc. v. Gradient Analytics, Inc. (2007) 151 Cal.App.4th 688, 716 [standing found where plaintiff pled unlawful action resulted in diminution in assets value]; Aron v. U-Haul Co. of California (2006) 143 Cal.App.4th 796, 802-803 [standing found where plaintiff alleged he suffered economic loss as the result of defendants requirement he purchase excess fuel where there was no accurate measuring device to determine the actual amount required to return the truck at its rental fuel level]; Huntingdon Life Sciences, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (2005) 129 Cal.App.4th 1228, 1262 [standing found where plaintiff suffered damage to her property as the result of animal activists conduct in violation of UCL]; see also Laster v. T-Mobile USA,

Inc. (S.D.Cal. 2005) 407 F.Supp.2d 1181, 1194 [no standing where plaintiffs did not allege they relied on allegedly false or misleading advertising]; Southern Cal. Housing v. Los Feliz Towers Homeow. (C.D.Cal. 2005) 426 F.Supp.2d 1061, 1069 [standing found where plaintiff alleged it lost financial resources and diversion of staff from other cases to investigate claim]; see R & B Auto Center, Inc. v. Farmers Group, Inc. (2006) 140 Cal.App.4th 327, 359-360 [standing found where plaintiff alleged it paid premiums and losses because of misrepresentations].) Based on these cases, after Proposition 64, a plaintiff seeking to bring a representative lawsuit under the UCL and the FAL must show that (1) he or she has suffered actual injury in fact, and (2) such injury occurred as a result of the defendants alleged unfair competition or false advertising. (Laster v. T‑Mobile USA, Inc., supra.) The phrase as a result of in its plain and ordinary sense means caused by and requires a showing of a causal connection or reliance on the alleged misrepresentation. (Hall v. Time, Inc., supra, at p. 855.)

OBrien contends that reliance is not an element of claims brought under sections 17200 or 17500. We are concerned here with whether reliance is an element of standing under Proposition 64.[9]For a private party to have standing under sections 17204 and 17535, Proposition 64 dictates that the plaintiff have suffered injury in fact . . . as a result of an unfair business practice or false advertising. (Italics added.) Parsing this language, it unavoidably implicates causation, that is to say, the unfair business practices or false advertisement must have caused injury in fact to the plaintiff. For a plaintiff to suffer injury in fact . . . as a result of the alleged unfair business practice or false advertising ( 17204 & 17535, italics added), necessarily the plaintiff must have actually relied on the false advertising or unfair business practice, and as a result, suffered injury therefrom. To have standing in this case, a consumer must have relied on a representation that the license plate frame was Made in USA when deciding to buy the frame. Conversely, a consumer who is unaware of, or who did not rely on, a Made in USA label did not suffer any injury in fact as a result of that alleged unfair business practice or false advertising and would have no standing. (Italics added.) It stands to reason that where there was no actual country of origin representation of any kind, there was nothing upon which a consumer could rely.

As it happens, the CLRA employs the same as a result of language. To have standing to assert a claim under the CLRA, a plaintiff must have suffer[ed] any damage as a result of the . . . practice declared to be unlawful.  (Aron v. U‑Haul Co. of California, supra, 143 Cal.App.4th at pp. 802-803, citing Civ. Code,  1780, subd. (a), italics added.) This similar language use in the CLRA only bolsters our conclusion that causation in the form of reliance is an element of standing under Proposition 64 in an action alleging misrepresentation in violation of the UCL or the FAL.

Story Continue As Part II ..

Publication courtesy of California pro bono legal advice.

Analysis and review provided by La Mesa Property line attorney.

San Diego Case Information provided by www.fearnotlaw.com

[1] Business and Professions Code section 17200 et seq. All further statutory references are to the Business and Professions Code, unless otherwise noted.

[2] Section 17500 et seq.

[3] Civil Code section 1750 et seq.

[4] OBrien had no complaints about the quality of the license plate frame. He testified that the frame he received looked good, was nice, and appeared to be new. The license plate frame that he received fit the expectations he had when he placed the order.

[5] We are informed that OBrien has also filed a similar action in federal court.

[6] Section 17533.7 reads in its entirety: It is unlawful for any person, firm, corporation or association to sell or offer for sale in this State any merchandise on which merchandise or on its container there appears the words Made in U.S.A., Made in America, U.S.A., or similar words when the merchandise or any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States.

[7] Proposition 64 also amended section 17203, which authorizes courts to enjoin unfair competition, by adding the qualifying words:  Any person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of Section 17204 and complies with Section 382 of the Code of Civil Procedure, but these limitations do not apply to claims brought under this chapter by the Attorney General, or any district attorney, county counsel, city attorney, or city prosecutor in this state. ( 17203, italics added; Californians For Disability Rights v. Mervyns, LLC, supra, 39 Cal.4th at pp. 228-229.)

[8] Section 17535, as amended by Proposition 64, reads in pertinent part: Actions for injunction under this section may be prosecuted by . . . any person who has suffered injury in fact and has lost money or property as a result of a violation of this chapter. Any person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of this section and complies with Section 382 of the Code of Civil Procedure, but these limitations do not apply to claims brought under this chapter by the Attorney General, or any district attorney, county counsel, city attorney, or city prosecutor in this state. ( 17535, as amended by Prop. 64, 5, approved Nov. 2, 2004, eff. Nov. 3, 2004.)

[9] Thus, while we agree with OBrien that standing and liability . . . are separate legal concepts, we are not addressing reliance as an element of a cause of action under the UCL. As we are only interested in the test of standing, we do not address in any manner whether Proposition 64 had any effect on the substantive elements of a cause of action under the UCL, OBriens insistence to the contrary notwithstanding.