Court Rules That Consumers Can Sue Manufacturers Over Misleading Claims

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The decision resolves a battle between consumers and business over the scope of Proposition 64, a 2004 measure intended to reduce 'shakedown' suits.

Consumers who buy a product as a result of misleading advertising can sue the manufacturer even if the product was not defective, the California Supreme Court decided in a 5-2 ruling Thursday.

Advocates of limiting lawsuits lambasted the ruling and warned that it might lead to clogging of the courts at a time when court funding is being cut.

Consumer representatives countered that their victory would help keep manufacturers honest.

The decision resolved a long battle between California consumers and business over the scope of Proposition 64, the 2004 ballot measure intended to end so-called shakedown lawsuits against business.

The initiative said a person could sue only if he or she suffered an injury and lost money as a result of a firm's misconduct.

The case before the court involved a lawsuit against Orange County-based Kwikset Corp. for putting "Made in U.S.A" labels on locksets.

A trial judge determined the company was selling more than two dozen products under such labels even though they contained foreign-made parts or were assembled overseas.

The company has since discontinued the label.

But an appeals court said three consumers who bought the locksets were barred from suing under Proposition 64 because they suffered no injury or monetary loss.

Justice Kathryn Mickle Werdegar, writing for the majority, said that merely buying a product as a result of a false claim was enough to sue under Proposition 64.

"Simply stated: Labels matter…," Werdegar wrote for the court. "Whether a particular food is kosher or halal may be of enormous consequence to an observant Jew or Muslim. Whether wine is from a particular locale may matter to the oenophile who values subtle regional difference."

In a dissent, Justice Ming W. Chin said that on their website, Proposition 64's backers identified the lawsuit against Kwikset as the kind of "shakedown" suit the measure would prevent.

Chin said that payment for a lockset that was functional and not overpriced did not constitute an injury.

As a result of the ruling, all consumers "now have to allege that they would not have bought the mislabeled product," wrote Chin, joined by Justice Carol A. Corrigan. "This cannot be what the electorate intended" in voting for a measure intended to reduce frivolous lawsuits.

The Civil Justice Assn. of California, a tort reform group, complained that the decision would produce more lawsuits.

"Especially in an era when our courts are already overcrowded and facing severe budget cuts, it's no time to open the floodgates of litigation in cases where no damage resulted," said Kimberly Stone, president of the group.

But consumer activist Harvey Rosenfield said the ruling closed "one of the many loopholes that corporate lawyers have torn open in the state's consumer protection laws."
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