United States: Made In The U.S.A." Decision Threatens Return To The "Wild West" For California Unfair Competition Law Class Actions

California's Unfair Competition Law (Cal. Bus. & Prof. Code § 17200 et seq., the "UCL") is an expansive statute that historically has been popular among plaintiffs' lawyers.  Until recently, private parties could bring "representative," non-class UCL lawsuits even though they had no business dealings with the defendant and despite any showing of actual injury.  But in 2004, California voters responded to high-profile abuses of the UCL by adopting Proposition 64.  This initiative required private plaintiffs to comply with class certification requirements and to demonstrate actual "injury in fact" and "lost money or property as a result of" the alleged unfair competition. 

On January 27, 2011, the Supreme Court of California interpreted these amendments in a way the dissenting justices criticized as "effectively making it easier for a plaintiff to establish standing," despite the electorate's intent to strictly limit a private plaintiff's ability to sue.  Kwikset Corp. v. Superior Court, No. S171845, 2011 Cal. LEXIS 532, at *68 (Chin, J., dissenting) (emphasis in original). 

The 5-2 Kwikset opinion establishes a test for standing that is important to anyone litigating UCL claims, especially in cases predicated on product mislabeling.  Now, "plaintiffs who can truthfully allege that 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."  Id. at *4.  According to the majority, the consumer has "lost money" by paying more for the mislabeled product than he or she subjectively believed it was worth--even if the mislabeled product functioned perfectly and it was no more expensive than functionally equivalent products with accurate labels. 

This alert reviews Kwikset, discusses the potential impact of the decision, and identifies ways defendants may resist plaintiffs' attempts to use this opinion to undo gains achieved after Proposition 64.

I.  Proposition 64 and Prior Litigation in Kwikset

Voters approved Proposition 64 in the November 2004 general election by an impressive margin.  The initiative revised the UCL, and the companion False Advertising Law (Cal. Bus. & Prof. Code § 17500 et seq.), to bring these statutes in line with other states' consumer protection laws and to require actual injury and class certification for representative actions.  As amended, the new standing provisions require private plaintiffs to show an "injury in fact" and "lost money or property as a result" of the alleged unfair competition or false advertising.

Following the passage of Proposition 64, courts grappled with the meaning and impact of the amendments.  In Californians for Disability Rights v. Mervyn's LLC, 39 Cal. 4th 223 (2006), the Supreme Court of California ruled that these amendments applied to pending cases.  Next, the Court determined that Proposition 64 eliminated "representative" actions and required private plaintiffs to satisfy class certification requirements.  Arias v. Superior Court, 46 Cal. 4th 969, 975 (2009); Amalgamated Transit Union v. Superior Court, 46 Cal. 4th 993, 998 (2009).  Shortly thereafter, the Court held that in cases alleging a misrepresentation theory, Proposition 64 required private plaintiffs to establish actual reliance on the allegedly misleading statements but did not require that absent class members also establish standing.  In re Tobacco II Cases, 46 Cal. 4th 298 (2009).

In Kwikset, the primary issue was whether plaintiffs could show that they "lost money or property" due to Kwikset Corporation's alleged misrepresentation that its locksets were "Made in the U.S.A."  Plaintiffs claimed that this statement violated the UCL because the locksets contained some foreign-made pins and screws.  The case had been pending when voters passed Proposition 64, and the trial court had entered judgment in favor of plaintiffs following a bench trial.  Proponents of the initiative cited this case as a "shakedown" lawsuit that the initiative was designed to curb.  An appellate judge in an earlier appeal also warned that sanctioning plaintiffs' claims would create a hostile business environment in which "a single spool of foreign thread is enough to sustain a lawsuit."  Benson v. Kwikset Corp., 126 Cal. App. 4th 887, 933 (2005) (Sills, J., dissenting).

After voters approved Proposition 64, plaintiffs limited their claims to injunctive relief, and added new class representatives who could meet the initiative's standing requirements.  The trial court refused to dismiss the case, but Kwikset sought writ relief.  In a lengthy opinion, the appellate court concluded that while plaintiffs demonstrated adequate injury in fact because they were induced into purchasing a product that was mislabeled in violation of a statute, they could not show "lost money or property."  Despite their frustrated "patriotic desire to buy fully American-made products," plaintiffs received a fully functioning lockset (the "benefit of their bargain"), they did not claim that they paid a premium based on the "Made in the U.S.A." label, and they did not assert that the lockset was defective or inferior to a product containing all-American components.

The Supreme Court of California granted review in June 2009, to address whether plaintiffs' claim that they bought the products in reliance on alleged misrepresentations made on the product's label sufficed to show that they "lost money" and had standing to sue under the UCL.

II.  The Kwikset Majority Eases Private Plaintiffs' Burden To Establish Standing

The Supreme Court of California reversed and held that plaintiffs lost money because they "bargained for locksets that were made in the United States" and "got ones that were not."  The five-justice majority ruled that the "plain language" of Proposition 64 requires that private parties "(1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that the economic injury was the result of, i.e., caused by, the unfair practice or false advertising that is the gravamen of the claim."  2011 Cal. LEXIS 532 at *16.  The Court addressed each of the three principal elements of the UCL's amended standing requirements as follows:

  • "Injury in Fact":  The Court concluded that this term has a "well-settled meaning" under federal law:  "an invasion of a legally protected interest which is (a) concrete and particularized; and (b) actual or imminent, not conjectural or hypothetical."  Id. at *16-17. 
  • "Lost Money or Property":  The majority then concluded that "lost money or property--economic injury--is itself a classic form of injury in fact" and "[i]f a party has alleged or proven a personal, individualized loss of money or property in any nontrivial amount, he or she has also alleged or proven injury in fact."  Id. at *20. 
  • Reliance/Causation:  Reaffirming Tobacco II, the majority held that "a plaintiff must show that the misrepresentation was an immediate cause of the injury producing conduct," but the plaintiff "is not required to allege that the challenged misrepresentations were the sole or even the decisive cause of the injury-producing conduct."  Id. at *27; see also In re Tobacco II Cases, 46 Cal. 4th at 326-28.

The majority concluded that it is irrelevant whether or not a plaintiff received a properly functioning product or paid a premium because of a purported error in a product label.  Instead, a plaintiff who relied on a label when making a purchase will have suffered economic harm by having "paid more for [a product] than he or she otherwise might have been willing to pay if the product had been labeled accurately."  2011 Cal. LEXIS 532 at *35-36.  The majority concluded that any other result "would bring an end to private consumer enforcement of bans on many label misrepresentations, contrary to the apparent intent of Proposition 64."  Id. at *38. 

"Simply stated," Associate Justice Kathryn M. Werdegar wrote, "labels matter," and consumers who purchase a mislabeled product satisfy the Proposition 64 standing requirements.  Id. at *31-32.  A "consumer who relies on a product label and challenges a misrepresentation contained therein can satisfy the standing requirement of [Proposition 64] by alleging, as plaintiffs have here, that he or she would not have bought the product but for the misrepresentation."  Id. at *36-37.  The economic injury may be measured as the difference between what the consumer would have spent had he/she known the truth about the product, and the amount actually spent. 

As has been its practice in other significant UCL decisions, the Court was careful to limit its ruling to the particular case presented--here, the sufficiency of standing allegations as a matter of pleading in a misrepresentation action.  Id. at *27 n.9.  As the majority explained, courts must accept the allegations as true at the demurrer stage, and "[a]t the succeeding stages, it will be plaintiffs' obligation to produce evidence to support, and eventually to prove, their bare standing allegations. . . .  If they cannot, their action will be dismissed."  Id. at *45 n.18. 

Acting Chief Justice Joyce L. Kennard and Associate Justices Marvin R. Baxter, Carlos R. Moreno, and former Chief Justice Ronald M. George (sitting by designation) joined Associate Justice Werdegar's majority opinion.

III.  The Dissenting Opinion Criticizes the Majority's Holding as Dismantling Proposition 64 and Undermining Voter Intent

Associate Justice Ming W. Chin wrote a dissenting opinion (joined by Associate Justice Carol A. Corrigan) that sharply criticized the majority's holding as standing "[i]n direct contravention of the electorate's intent," because it "effectively mak[es] it easier for a plaintiff to establish standing" after Proposition 64.  Id. at *56 (emphasis added).  Justice Chin explained that the majority effectively collapsed the "injury in fact" and "loss of money or property" requirements into a combined "economic injury" element that requires only a showing that private plaintiffs "lost" the "price the consumer paid for the product," and an allegation that plaintiffs "would not have bought the mislabeled product."  Id. at *73.  The dissenting opinion also criticized the majority for using extreme examples such as a counterfeit Rolex watch and food products mislabeled as "kosher," "halal," or "organic."  Id. at *64.

IV.  Potential Impact on Future UCL Litigation

If Justice Chin's warnings are accurate, the Court's ruling may spark a return to the pre-Proposition 64 world of questionable and even frivolous lawsuits that turned California into the "Wild West" of consumer class action litigation.  However, just as the "sky is falling" predictions immediately after Tobacco II proved unwarranted (for the reasons discussed below), the same may very well be true of any initial overreaction to Kwikset.  Looking ahead, businesses facing UCL claims still have strong defenses to liability, and the breadth of Kwikset's impact will ultimately be resolved through litigation in the Courts of Appeal.

1.  Potential Limits On Kwikset Holding.  Despite some broad language in the majority's opinion, Kwikset may be limited to specific types of misrepresentations.  In particular, the "Made in the U.S.A." claim violated specific regulations that restricted the use of this label.  2011 Cal. LEXIS 532 at *5.  As the decision followed a trial, the majority also cited evidence showing many consumers (including the United States Government) have a strong preference for American-made products.  Id. at *44 & n.17.  For other types of claims, it might not be so easy for private plaintiffs to establish that their personal predilections about the importance of intangible and aesthetic values are material and therefore actionable. 

2.  Extension Beyond Misrepresentation Context?  The applicability of Kwikset's holding to other contexts may be more limited.  For example, many courts have held that plaintiffs cannot rely on certain statements about a product, such as "puffery" that a product is "great," "improved," or "better than ever."  Moreover, in cases predicated on an omission (rather than an affirmative misrepresentation), courts have dismissed cases on the ground that a defendant was not obliged to disclose the allegedly concealed fact.  See, e.g., Daugherty v. Am. Honda Motor Co., 144 Cal. App. 4th 824, 835 (2006); Buller v. Sutter Health, 160 Cal. App. 4th 981, 988 n.3 (2008). 

3.  The Increasing Importance Of Reliance.  Post-Kwikset, the focus also may shift from "injury in fact" to reliance ("as a result of . . .").  See, e.g., Durrell v. Sharp Healthcare, 183 Cal. App. 4th 1350, 1364 (2010) (dismissing complaint for failing to claim actual reliance on alleged misrepresentation).  Tobacco II establishes that in misrepresentation cases, plaintiffs must plead and prove "actual reliance . . . in accordance with well-settled principles regarding the element of reliance in ordinary fraud actions."  In re Tobacco II Cases, 46 Cal. 4th at 306. 

4.  Deferred Attacks On Standing At Summary Judgment.  The majority in Kwikset also makes clear that plaintiffs will have to establish the pleaded facts in discovery.  2011 Cal. LEXIS 532 at *45 n.18.  Defendants may respond by shifting their focus to later stages of the litigation.  A thorough investigation and targeted deposition may reveal that the named plaintiff never saw the labeling at issue, that the label was not "material" to the purchase decision, that the plaintiff would have purchased the product despite the alleged labeling error, or that the plaintiff continued to purchase the product after discovering the truth about the alleged misrepresentation. 

5.  Class Certification.  In addition, because much of the Kwikset opinion rests on a plaintiff's subjective valuations, there likely will be many opportunities to challenge class certification on the grounds that the named plaintiffs are not typical of the class (because they have an unusual attachment to the importance of the label), or that the class itself is not reasonably ascertainable.  In particular, the majority opinion in Kwikset acknowledges that while "labels matter," only some consumers are concerned about whether a product is "organic," "kosher," or "Made in the U.S.A."  In such cases, is the proper class all purchasers, or only those for whom the label matters?  And if it is the latter, can that class be appropriately defined and identified?  For a class of label-conscious purchasers, would common issues predominate over their individualized and subjective motivations for wanting to purchase a product based on its particular label, and over the variations in subjective value attached to a product that is, for example, "Made in the U.S.A."? 

While it is true that Tobacco II concluded that only named class representatives, and not absent class members, must satisfy the Proposition 64 standing requirements (In re Tobacco II Cases, 46 Cal. 4th at 324), that majority also held that even if the named plaintiffs establish standing, a trial court still must determine if a proposed class meets California's other requirements for class certification, including ascertainability, typicality, predominance.  Id. at 313.  Consequently, many of the same arguments and much of the same evidence that defendants would use to attack the standing of absent class members may be relevant to the later certification inquiry.  Since the Tobacco II decision, several courts have denied certification on these grounds, which appear to be very strong "class busters" in cases pleaded on a Kwikset theory.  See, e.g., Cohen v. DirecTV, Inc., 178 Cal. App. 4th 966, 981 (2009), rev. denied 2010 Cal. LEXIS 954 (Feb. 10, 2010); Pfizer v. Superior Court, 182 Cal. App. 4th 622, 633 (2010), rev. denied 2010 Cal. LEXIS 6162 (June 17, 2010).

6.  Applicability In Federal Cases.  The Class Actions Fairness Act has moved a significant portion of UCL litigation to federal court.  In addition to the standing provisions as modified by Proposition 64, a federal court also must apply the requirements of Article III.  While the majority concluded that the Proposition 64 standing requirements are more stringent than Article III, 2011 Cal. LEXIS 532 at *20, in practice federal "injury in fact" precedent may provide more ammunition to defendants than KwiksetSee, e.g., Waste Mgmt. of N. Am., Inc. v. Weinberger, 862 F.2d 1393, 1397-98 (9th Cir. 1988) ("[I]t is not enough that a litigant alleges that a violation of federal law has occurred . . . .  Absent injury, a violation of a statute gives rise merely to a generalized grievance but not to standing."); Cronson v. Clark, 810 F.2d 662, 664 (7th Cir. 1987) ("A plaintiff, in order to have standing in a federal court, must show more than a violation of law . . . .").

7.  Remedies.  It is one thing for a plaintiff to allege "lost money," but it is another thing entirely for that plaintiff to obtain a monetary recovery under the UCL.  Accordingly, whether a plaintiff may prove and recover restitution will likely be a key focus of post-Kwikset litigation.  Because it rests on standing grounds, the majority's opinion provides no guidance for how trial courts should assess the difference between what a consumer paid for a mislabeled product, and what the consumer would have been willing to pay for the product had it been labeled accurately.  2011 Cal. LEXIS 532 at *37-38 n.15.  In another "Made in the U.S.A." case, the Court of Appeal held that an award of restitution must be "based on a specific amount found owing," and must be "supported by substantial evidence."  Colgan v. Leatherman Tool Grp., 135 Cal. App. 4th 663, 699 (2006).  If future plaintiffs offer nothing more than subjective beliefs and generalized valuations, courts may reject claims for restitution.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions