Wednesday, August 1, 2018
Court of Appeal:
Action May Be Based on False Claim Price Is Discounted
Opinion Says Consumer Has Standing Even if Product He Receives Is As Represented
By a MetNews Staff Writer
A man who claims that he relied in making a purchase on an online retailer’s false representation that a price was a discounted one has standing to sue under California’s consumer protection laws, even though he received exactly what he ordered, this district’s Court of Appeal ruled yesterday.
The opinion by Acting Presiding Justice Laurie D. Zelon of Div. Seven reverses the a judgment of dismissal which followed Los Angeles Superior Court Judge John S. Wiley Jr.’s sustaining of a demurrer filed by to Newegg.com Americas, Inc., a popular online retailer of computer hardware.
Newegg.com claimed that the plaintiff, M. George Hansen, had received the benefit of the bargain, notwithstanding Hansen’s claims that the advertised discounts on the items he ordered were illusory and violated the state’s Unfair Competition Law, Business and Professions Code §17200 et seq. (“UCL”) and False Advertising Law, §17500 et seq. (“FAL”).
Newegg.com had advertised the computer components Hansen purchased with both a crossed-out “list price” and the lower actual price, and indicated the difference as the savings to the consumer. Hansen alleged that the list prices were purely fictitious or misleadingly inflated, and that he would not have bought the items if he had not relied on the advertised discounts.
“The Supreme Court has concluded that to establish standing under California’s UCL and FAL, a consumer need only allege that he or she relied on a misrepresentation when purchasing the product, and that he or she would not have purchased the product but for the representation…Hansen satisfied both of those requirements.”
Supreme Court Decision
The centerpiece of Zelon’s disagreement with Wiley’s ruling was the 2011 California Supreme Court case Kwikset Corp. v. Superior Court. In that opinion, the high court interpreted the standing requirements for a private plaintiff under the UCL and FAL after a 2004 ballot measure, Proposition 64, had limited standing under those laws to plaintiffs who had actually suffered injury and personally lost money.
In Kwikset, the defendant had falsely advertised tools as being “Made in U.S.A.” The plaintiffs in that case did not allege that they had received faulty tools nor that they had gotten less than their money’s worth, but simply alleged that the false claim of origin induced them to purchase from the defendant.
The Supreme 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.”
Newegg.com argued, and Wiley agreed, that the difference between the Kwikset plaintiffs and Hansen was that those plaintiffs had not received what they believed they were purchasing. Hansen did not contest that he received what he ordered.
Reliance on Representation
Zelon rejected that distinction. She wrote:
“Kwikset plainly states that a ‘consumer who relies on a product label and challenges a misrepresentation contained therein can satisfy the standing requirement of section 17204 by alleging, as plaintiffs have here, that he or she would not have bought the product but for the misrepresentation.’…The Court’s decision contains no language limiting that rule to misrepresentations regarding the physical characteristics or ‘attributes’ of a product.
“Nor does the decision suggest, as Newegg posits, that a consumer must allege the product he or she received was worth less than, or not functionally equivalent to, the product as it was advertised. To the contrary, Kwikset held that a consumer’s subjective willingness to pay more for the product than he or she would have been willing to pay in the absence of the misrepresentation is itself a form of economic injury ‘whether or not a court might objectively view the products as functionally equivalent.’”
In addition to alleging that the advertised pricing on Newegg.com violated the UCL and FAL, Hansen also brought suit under the Consumer Legal Remedies Act (Civil Code §1750 et seq.) but the parties agreed that the standing requirements under that law were the same as those for the other two laws.
The case is Hansen v. Newegg.com Americas, Inc., 2018 S.O.S.
Thomas R. Freeman, Ekwan E. Rhow, and David I. Hurwitz of Bird, Marella, Boxer, Wolpert, Nessim, Drooks, Lincenberg & Rho in Century City argued for Newegg.com.
Hansen was represented by Jeffrey R. Krinsk, David J. Harris, and Trenton R. Kashima of Finkelstein & Krinsk in San Diego.
Copyright 2018, Metropolitan News Company