Plaintiffs Deceived by False Labeling Claims Have Standing to Sue for Violation of California’s Unfair Competition Law and False Advertising Law

In 2000, a class action lawsuit was filed against Kwikset Corporation alleging that Kwikset falsely labeled certain locksets as "Made in U.S.A," when the product contained foreign-made parts or involved foreign manufacturing. After the trial court entered judgment for the plaintiffs for unfair business practices and false advertising, California enacted Proposition 64, which requires that a plaintiff suing for violations of California unfair competition and false advertising law have "lost money or property" in order to establish standing. Although the plaintiffs alleged that they would not have purchased Kwikset's locksets but for the "Made in U.S.A." labeling, the Court of Appeal concluded that this was not sufficient to establish standing under Proposition 64. The Court of Appeal reasoned that although the plaintiffs spent money on the lockets, the plaintiffs received lockets that were neither overpriced or defective, and therefore did no lose money or property. In January 2011, the California Supreme Court reversed the Court of Appeal's decision, holding that "plaintiffs who can truthfully allege 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."  

TIP: It is important to take great care when developing advertising and labeling claims to ensure the accuracy of those claims. In California, a plaintiff has standing to sue a company for a false statement on a product label without alleging that the product was overpriced, defective, or of inferior quality.