Pfeiffer Thigpen
FitzGibbon & Ziontz LLP

Mar 16 2011

In the recent California Supreme Court case of Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 120 Cal. Rptr. 3d 741, 2011 WL 240278 (January 27, 2011), the Court interpreted Proposition 64 in a manner that expanded the class of persons who can state a claim for false advertising under Business & Professions Code Section 17200 or the False Advertising Law at Section 17500. Specifically, the Court held 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.” To satisfy the narrower standing requirements imposed by Proposition 64, a party must now (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 that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim. In Kwikset the Supreme Court held that an allegedly false “Made in the USA” label on the lock product that caused the plaintiff to purchase it was sufficient to state a claim for false advertising. The practical effect of this decision is that companies must be more careful in their advertising practices and consider (a) appropriate review of advertising claims for accuracy and in particular regarding governmentally-approved labels such as “organic” or “green,” (b) how such claims may be covered by their insurance programs, and (c) whether to develop or improve internal procedures such as audits or compliance programs to minimize the risk of litigation. Please contact any of the litigators at the Firm for more information about these issues.