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California: The False Advertising Class Action State

5 Apr, 2011 By: Gregory J. Sater


Two years ago, the California Supreme Court made it a lot easier for plaintiffs’ lawyers to file false advertising cases in the state and, moreover, to file them as class actions. In Tobacco II, the Court held that, although California’s false advertising statute requires each consumer plaintiff to prove that, in deciding to buy the subject product, she actually relied on the allegedly deceptive ad copy, that isn’t a requirement in a class action. In a class action, the court said, only the named plaintiff – and nobody else in the class – needs to prove such reliance.

Now, the state’s highest court has done it again. Despite the fact that California’s false advertising statute requires a consumer plaintiff to prove that she “suffered injury in fact and lost money or property” (two requirements, as written with the word “and”) the court, in a new case called Kwikset, has ruled that a plaintiff can state a claim even if it’s clear that she’ll never be eligible for monetary recovery.

In Kwikset, the plaintiff had purchased a lock labeled “Made in the USA” but later discovered that some of it had been made in another country. Significantly, he did not allege that the lock was overpriced or defective, compared to other locks he could have purchased. The lower court, following existing precedent, rejected the claim on the basis that, on these allegations, this plaintiff may have “suffered an injury in fact,” the first of the two statutory requirements, but he could not prove he had “lost money or property,” the second requirement. The high court, however, reversed the decision, writing:

“Simply put, labels matter. The marketing industry is based on the premise that labels matter … To some consumers, processes and places of origin matter … Whether a diamond is conflict free may matter to the fiancée who wishes not to think of supporting bloodshed and human rights violations each time she looks at the ring on her finger … Two wines might to almost any palate taste indistinguishable, but to serious oenophiles, the difference between one year and the next, between grapes from one valley and another nearby, might be sufficient to carry with it real economic differences in how much they would pay. Non-kosher meat might taste and in every respect be nutritionally identical to kosher meat, but to an observant Jew who keeps kosher, the former would be worthless … The parent who purchases food for his or her child represented to be, but not in fact, organic, has not received the benefit of his or her bargain.”

In a footnote, the court explained that its ruling was limited to a threshold matter in every false advertising case – namely, whether such a plaintiff had standing to sue – and it wasn’t precedent on the issue of “whether and how much to award in restitution” at the end of such a case. Such a plaintiff might only win an injunction, and no money, at the end.

However, in the real world, given the significant legal fees required to defend against a false advertising case, and given the even more significant legal fees required if it’s a class action, and given the usual requirement of having to pay the other side’s legal fees in any settlement, the Supreme Court’s footnote provides little comfort to marketers.

Gregory Sater is a partner at Los Angeles-based Rutter Hobbs & Davidoff. He can be reached at (310) 286-1700, or via E-mail at gsater@rutterhobbs.com.


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