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Kwikset Corp. v. Superior Court of Orange County

February 25, 2009

KWIKSET CORPORATION ET AL., PETITIONERS,
v.
THE SUPERIOR COURT OF ORANGE COUNTY, RESPONDENT; JAMES BENSON ET AL., REAL PARTIES IN INTEREST.



Original proceeding; petition for a writ of mandate to challenge an order of the Superior Court of Orange County, David C. Velasquez, Judge. Petition granted. (Super. Ct. No. 00CC1275).

The opinion of the court was delivered by: Rylaarsdam, J.

CERTIFIED FOR PUBLICATION

OPINION

This petition for a writ of mandate seeks to vacate an order of respondent superior court overruling petitioners‟ demurrer to the second amended complaint in the underlying action, Benson et al. v. Kwikset Corporation et al. (Super. Ct. Orange County, 2002, No. 00CC01275). Petitioners Kwikset Corporation and Black & Decker Corporation contend the real parties in interest failed to allege facts establishing their standing under the unfair competition law (Bus. & Prof. Code, § 17200 et seq.; UCL; all further statutory references are to this code unless otherwise indicated) and the false advertising law (§ 17500; FAL) as required by this court‟s ruling in Benson v. Kwikset Corp. (2007) 152 Cal.App.4th 1254. In addition, petitioners argue the complaint cannot truthfully be amended to overcome the defect.

We conclude the second amended complaint fails to adequately allege real parties suffered economic injury resulting from petitioners‟ use of false country of origin labels on their products. In addition, we conclude real parties have not carried their burden of showing a reasonable possibility of amending the complaint to allege the requisite economic injury. Consequently, we shall direct the trial court to vacate its ruling, enter a new order sustaining the demurrer without leave to amend, and thereafter enter a judgment dismissing the underlying action.

FACTS

1. Background

In 2000, real party James Benson filed this action "on behalf of the general public." The original complaint contained four counts, three of which asserted violations of the UCL for unlawful, unfair, and fraudulent business practices, and a fourth brought under the FAL for false advertising. The counts alleged petitioners violated several state and federal statutes, including section 17533.7 and Civil Code section 1770, subdivision (a)(4) of the Consumers Legal Remedies Act (Civ. Code, § 1750 et seq.; CLRA), by marketing and selling locksets with "Made in U.S.A." or similar labels although the products contained foreign-made parts or involved foreign manufacture. The prayer sought injunctive relief and restitution for "monies wrongfully acquired and retained by [petitioners‟] . . . acts of unfair competition . . . ."

Shortly after Benson filed this lawsuit, petitioners learned about an unrelated investigation by the United States Federal Trade Commission (FTC) concerning the country of origin labeling on their products. In late 2000, petitioners entered into a consent order with the FTC restricting their use of such labels. (Benson v. Kwikset Corp., supra, 152 Cal.App.4th at p. 1265.)

The underlying action proceeded to a court trial in December 2001. Thereafter, the court issued a statement of decision that found petitioners violated the foregoing statutes between 1996 and 2000 by placing "Made in U.S.A." or similar labels on 25 products which contained either screws or pins made in Taiwan or involved latch sub-assembly performed in Mexico. Based on its findings, the court entered a judgment enjoining petitioners "from labeling any lockset intended for sale in the State of California "All American Made,‟ or "Made in USA,‟ or similar unqualified language, if such lockset contains any article, unit, or part that is made, manufactured, or produced outside of the United States."

The trial court also ordered petitioners to notify its California retailers and distributors of the falsely labeled products and afford them the opportunity to return improperly labeled inventory for either a monetary refund or replacement with properly labeled items. But it denied Benson‟s request for restitution "to the ultimate consumers," explaining in its statement of decision that "the misrepresentations, even to those for whom the "Made in USA‟ designation is an extremely important consideration, were not so deceptive or false as to warrant a return and/or refund program or other restitutionary relief to those who have been using their locksets without other complaint."

Both parties appealed from the judgment. While the appeals were pending, the electorate enacted Proposition 64. It amended the UCL and FAL to provide that, except for actions brought by the Attorney General or other public prosecutors, only a "person who has suffered injury in fact and has lost money or property as a result of . . . unfair competition" or false advertising may file suit. (§§ 17204 & 17535.) Subsequently, the Supreme Court declared the amendments apply to cases pending when Proposition 64 became effective (Californians for Disability Rights v. Mervyn's, LLC (2006) 39 Cal.4th 223, 232-233), but a party who had filed suit on behalf of the general public before the amendment should be given the opportunity to allege and prove facts satisfying Proposition 64‟s new standing requirements (Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242-243).

In 2007, by a two-to-one vote, this court upheld the trial court‟s decision on the underlying merits. (Benson v. Kwikset Corp., supra, 152 Cal.App.4th at p. 1284.) But we vacated the judgment and, "[i]n accordance with Branick, . . . remand[ed] the case to the trial court" to allow Benson to plead and prove facts giving him standing under the revised statutes. (Id. at p. 1264.) If Benson "successfully allege[d] and prove[d] his right to relief under the unfair competition law and the false advertising law, as amended by Proposition 64," we directed "the court shall re-enter its original judgment." (Id. at p. 1284.) However, "[i]f [Benson] fail[ed] to plead or prove his right to maintain this lawsuit, the court shall enter a judgment dismissing the action." (Ibid.)

After the remittitur issued, Benson moved to amend the complaint to add real parties Al Snook, Christina Grecco, and Chris Wilson as named plaintiffs in an attempt to comply with this court‟s directions in Benson v. Kwikset Corp., supra, 152 Cal.App.4th 1254. The trial court granted the motion. Petitioners challenged the ruling by a writ petition to this court. The petition was summarily denied.

Petitioners then demurred to the amended complaint. The trial court overruled the demurrer. This ruling led to petitioners‟ second writ petition, the sole basis of which was that real parties could not satisfy the requirements to maintain a class action. This court issued an order denying it as well. A concurring opinion to the order cited this court‟s recent decision in Hall v. Time, Inc. (2008) 158 Cal.App.4th 847 and noted it ...


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