Hansen v. Newegg.com Americas ( 2018 )

Filed 7/31/18
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
M. GEORGE HANSEN et al., B271477
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. BC566698)
v.
NEWEGG.COM AMERICAS, INC.,
Defendant and Respondent.
APPEAL from judgment of the Superior Court of Los
Angeles County, John Shepard Wiley Jr., Judge. Reversed.
Finkelstein & Krinsk, Jeffrey R. Krinsk, David J. Harris
and Trenton R. Kashima, for Plaintiffs and Appellants.
Bird, Marella, Boxer, Wolpert, Nessim, Drooks, Lincenberg
& Rho, Thomas R. Freeman, Ekwan E. Rhow and David I.
Hurwitz, for Defendant and Respondent.
__________________________
Plaintiff M. George Hansen filed false advertising claims
under the unfair competition law (Bus. & Prof. Code, § 17200),
the false advertising law (Bus. & Prof. Code, § 17500 et seq.) and
the Consumers Legal Remedies Act (Civ. Code, § 1750 et seq.)
alleging that electronics retailer Newegg.com used fictitious
former price information in its advertisements that mislead
customers to believe they were receiving merchandise at a
discounted price. Hansen further alleged that he had relied on
fictitious former price information in making two purchases from
Newegg’s website, and that he would not have made the
purchases had he known the former price information was false.
Newegg filed a demurrer arguing that Hansen lacked
standing to pursue his claims because he had not lost “any money
or property” (see Bus. & Prof. Code, §§ 17204, 17535) as a result
of the allegedly false former price representations. More
specifically, Newegg contended that although Hansen alleged he
had spent money in reliance on the false former price
representations, his complaint showed he received the “benefit of
his bargain,” having obtained the product he wanted at the price
it was offered. The trial court agreed, and sustained the
demurrer without leave to amend. We reverse.
FACTUAL BACKGROUND
A. Summary of the Complaint
Plaintiff M. George Hansen filed a class action complaint
against electronics retailer Newegg.com alleging claims under the
unfair competition law (Bus. & Prof. Code, § 172001) (UCL), the
1 Unless otherwise noted, all further statutory citations are
to the Business and Professions Code.
2
false advertising law (§ 17500, et seq.) (FAL) and the Consumer
Legal Remedies Act (Civ. Code, § 1750 et seq.) (CLRA). The
complaint alleged that Newegg’s website advertised fictitious
former price and discount information that was intended to
induce customers to purchase its products: “When advertising
products on its website, Newegg displays the price at which it
offers the product . . . as well as the ‘list’ price. This ‘list’ price is
displayed in gray struck-through typeface (e.g. ‘$2099.99’)
directly above [Newegg’s] offer price. [Newegg] further advertises
that the difference between this ‘list’ price and the offer price is
some form of discount or purported savings (e.g. ‘Save: $200.00
(29%)’). Such presentation induces reasonable consumers into
believing that the ‘list’ price represents either the product’s
normal price on [Newegg’s] website and/or prevailing price in the
market. However, these advertised ‘discounts’ are completely
illusory or grossly overstated. [¶] This is because the ‘list’ price
used to calculate the quantum of reported ‘savings’ is not the
prevailing market price for . . . the same product from one of
Newegg’s competitors or the price charged by Newegg for the
subject item in the recent and normal course of its business.
Rather, the ‘list’ price is the highest price the product has ever
been advertised at, regardless of when that price was advertised,
or is simply a work of fiction. . . . [¶] The reality is that no
discount is provided over Newegg’s everyday pricing. Its
customers are not realizing the savings portrayed or expected by
purchasing these advertised ‘discounted’ products from Newegg.”
Hansen’s complaint further alleged that he had relied on
fictitious former price information when purchasing two
computer components from Newegg’s website: a “Corsair . . . 850-
watt Power Supply” and a “Gigabyte Motherboard.” According to
3
the complaint, the Corsair power supply was advertised as
having a former “list” price of $189.99, and an offer price of
$169.99, resulting in a “$20.00” discount; the Gigabyte
Motherboard was advertised as having a former “list” price of
$159.99, and an offer price of $152.99, resulting in a “$7.00”
discount. Hansen asserted that the true former price of both
products was equal to or less than the offer price, and that he had
therefore received no actual discount. Hansen further asserted
that he would not have purchased the products had he known the
“true nature of [the] discounts.”
The complaint alleged Newegg’s use of false or misleading
former price information violated the UCL (§ 17200) and section
17501 of the FAL, which specifically regulates advertisements
that purport to convey the former price of a product. The
complaint also alleged that Newegg’s conduct violated a provision
of the CLRA prohibiting the use of false or misleading statements
regarding price reductions. (See Civ. Code, § 1770, subd. (a)(13).)
B. Summary of Newegg’s Demurrer
Newegg filed a demurrer arguing that Hansen lacked
“standing to . . . assert any claim under the FAL, UCL or CLRA”
because he had “suffered no loss of money or property as a result
of Newegg’s actions.” According to Newegg, Hansen’s complaint
showed he had received the “products he wanted for the prices he
agreed to pay”; he had not alleged that “the products were
different than what he wanted, were unsatisfactory in any way,
or were worth less than what he paid for them.” Accordingly, he
had suffered no form of “economic injury.”2
2 Newegg’s demurrer also argued that Hansen’s claims failed
on their merits because, as a matter of law, a reasonable
4
Hansen opposed the demurrer, arguing that under the
California Supreme Court’s holding in Kwikset Corp. v. Superior
Court (2011) 51 Cal.4th 310 (Kwikset), a plaintiff may satisfy the
standing requirements of the UCL and FAL by alleging that he or
she was “deceived by a product’s label into spending money to
purchase the product, and would not have purchased it
otherwise.” (Id. at p. 317.) Hansen contended his complaint
satisfied those requirements, alleging that: (1) he had relied on
Newegg’s fictitious former price information when making his
purchases; and (2) he would not have purchased the products but
for the false former price representations.
The trial court agreed with Newegg, concluding that
Hansen had not satisfied “the standing requirement[s]” because
his complaint showed he had received the product that he
ordered “at a price he agreed to pay.” The court explained that
unlike the plaintiffs in Kwikset, who alleged that the products
they purchased had been falsely labeled as “Made in the U.S.A,”
Hansen did not dispute that he had received “[e]xactly what he
ordered.” The court sustained the demurrer without leave to
amend, and subsequently entered judgment dismissing the
matter.
DISCUSSION
A. Standard of Review
“On appeal from a judgment dismissing an action after
sustaining a demurrer without leave to amend, the standard of
review is well settled. The reviewing court gives the complaint a
consumer was not likely to be deceived by its advertising
practices. The trial court did not address this argument in its
ruling, and Newegg has not raised the argument on appeal. We
therefore address only the issue of standing.
5
reasonable interpretation, and treats the demurrer as admitting
all material facts properly pleaded. [Citations.] The court does
not, however, assume the truth of contentions, deductions or
conclusions of law. [Citation.] The judgment must be affirmed ‘if
any one of the several grounds of demurrer is well taken.
[Citations.]’ [Citation.] However, it is error for a trial court to
sustain a demurrer when the plaintiff has stated a cause of action
under any possible legal theory. [Citation.] And it is an abuse of
discretion to sustain a demurrer without leave to amend if the
plaintiff shows there is a reasonable possibility any defect
identified by the defendant can be cured by amendment.
[Citation.]” (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th
962, 966-967.)
B. Summary of Applicable Law
1. Summary of the UCL, FAL and CLRA
The UCL prohibits “unfair competition,” which it defines as
“any unlawful, unfair or fraudulent business act or practice and
unfair, deceptive, untrue or misleading advertising and any act
prohibited by [the FAL].” (§ 17200.) “The UCL’s purpose is to
protect both consumers and competitors by promoting fair
competition in commercial markets for goods and services.”
(Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 949.) “‘In service of
that purpose, the Legislature framed the UCL’s substantive
provisions in ‘“broad, sweeping language”’ [citations] and
provided ‘courts with broad equitable powers to remedy
violations’ [citation].” (Kwikset, supra, 51 Cal.4th at p. 320.)
“The state’s false advertising law (§ 17500 et seq.) is equally
comprehensive within the narrower field of false and misleading
advertising.” (Kwikset, supra, 51 Cal.4th at p. 320.) “‘[A]ny
violation of the false advertising law . . . necessarily violates the
6
UCL.’” (Kasky, supra, 27 Cal.4th at p. 950.) Section 17500
“proscribe[s] ‘“not only advertising which is false, but also
advertising which[,] although true, is either actually misleading
or which has a capacity, likelihood or tendency to deceive or
confuse the public.”’ [Citation.]” (Colgan v. Leatherman Tool
Group, Inc. (2006) 135 Cal.App.4th 663, 679.) Section 17501
specifically limits the use of advertisements that purport to
convey the former price of a product: “No price shall be
advertised as a former price of any advertised thing, unless the
alleged former price was the prevailing market price . . . within
three months next immediately preceding the publication of the
advertisement or unless the date when the alleged former price
did prevail is clearly, exactly and conspicuously stated in the
advertisement.” As used in section 17501, the term “‘former
price’ . . . includes but is not limited to the following words and
phrases when used in connection with advertised prices; ‘formerly
–,’ ‘regularly –,’ ‘usually –,’ ‘originally –,’ ‘reduced from ___,’ ‘was
___ now ___,’ ‘___% off.’” (4 Cal. Code Regs., § 1301.)
“‘The CLRA makes unlawful . . . various “unfair methods of
competition and unfair or deceptive acts or practices undertaken
by any person in a transaction intended to result or which results
in the sale or lease of goods or services to any consumer.”’
[Citation.] . . . . [¶] ‘The CLRA sets forth 27 proscribed acts or
practices. (Civ. Code, § 1770, subd. (a)(1)-(27).)” (Veera v.
Banana Republic, LLC (2016) 6 Cal.App.5th 907, 915 (Veera).)
One of those “proscribed acts” is “[m]aking false or misleading
statements of fact concerning . . . [the] existence of, or amounts
of, price reductions.” (Civ. Code, § 1770, subd. (a)(13).)
7
2. Summary of the statutes’ standing requirements
a. Standing under the UCL and the FAL
In 2004, California passed Proposition 64, which
“materially curtailed the universe of those who may enforce the[]
provisions [of the UCL and the FAL.] . . . [W]here once private
suits could be brought by ‘any person acting for the interests of
itself, its members or the general public’ [citations], now private
standing is limited to any ‘person who has suffered injury in fact
and has lost money or property’ as a result of unfair competition.”
(Kwikset, supra, 51 Cal.4th at pp. 320-321; see also §§ 17204;
17535.) “The intent of this change was to confine standing to
those actually injured by a defendant’s business practices and
curtail the prior practice of filing suits on behalf of ‘“clients who
have not used the defendant’s product or service, viewed the
defendant’s advertising, or had any other business dealings with
the defendant. . . .”’ [Citation.]” (Clayworth v. Pfizer, Inc. (2010)
49 Cal.4th 758, 788.) Although “voters clearly intended to
restrict UCL [and FAL] standing, they just as plainly preserved
standing for those who had had business dealings with a
defendant and had lost money or property as a result of the
defendant’s unfair business practices.” (Ibid.)
“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.” (Kwikset,
supra, 51 Cal.4th at p. 322.) “‘[T]he quantum of lost money or
property necessary to show standing is only so much as would
suffice to establish injury in fact; [which] . . . is not a substantial
8
or insurmountable hurdle. . . . [Citation.]’ [Citation.]” (Veera,
supra, 6 Cal.App.5th at p. 916 [citing and quoting Kwikset, supra,51 Cal.4th at p. 322].) “Because . . . economic injury is itself a
form of injury in fact, proof of lost money or property will largely
overlap with proof of injury in fact. [Citation.] If a party has
alleged or proven a personal, individualized loss of money or
property in any nontrivial amount, he or she has also alleged or
proven injury in fact.” (Kwikset, supra, 51 Cal.4th at p. 322.)
b. Standing under the CLRA
“To have standing to assert a claim under the CLRA, a
plaintiff must have ‘suffer[ed] any damage as a result of the . . .
practice declared to be unlawful.’” (Aron v. U-Haul Co. of
California (2006) 143 Cal.App.4th 796, 802; see also Civil Code,
§ 1780, subd. (a) [“Any consumer who suffers any damage as a
result of the use . . . of a . . . practice declared to be unlawful by
Section 1770 may bring an action . . .”].) Our Supreme Court has
interpreted the CLRA’s “any damage” requirement broadly,
concluding that the “phrase . . . is not synonymous with ‘actual
damages,’ which generally refers to pecuniary damages.” (Meyer
v. Sprint Spectrum L.P. (2009) 45 Cal.4th 634, 640.) Rather, the
consumer must merely “experience some kind of damage,” or
“some type of increased costs” as a result of the unlawful practice.
(Ibid.; Bower v. AT & T Mobility, LLC (2011) 196 Cal.App.4th
1545, 1556 [“A plaintiff bringing a CLRA cause of action must not
only be exposed to an unlawful practice but also have suffered
‘some kind of damage’”].)
For the purposes of this appeal, the parties agree that the
CLRA’s standing requirements are effectively identical to those of
the UCL and FAL, and that we may thus analyze the question of
standing under each statute “concurrently.” (See Veera, supra, 6
9
Cal.App.5th at p. 916 [agreeing to consider question of standing
under the UCL, FAL and CLRA “together” where plaintiff had
“conceded that . . . the requirements of the CLRA are essentially
identical to those of the UCL and FAL”].)
3. Kwikset v. Superior Court
In Kwikset, supra, 51 Cal.4th 310, the California Supreme
Court addressed Proposition 64’s standing requirements in the
context of a false advertising claim alleging that the defendant
had marketed and sold locksets that were “falsely . . . labeled as
‘Made in U.S.A.’” (Id. at p. 317.) The complaint alleged that each
plaintiff “‘was induced to purchase and did purchase
[d]efendants’ locksets due to the false representation that they
were “Made in U.S.A., and would not have purchased them if
they had not been so misrepresented.’” (Id. at p. 319.)
Defendant filed a demurrer arguing that plaintiffs lacked
standing because the allegations in the complaint showed they
had not suffered any form of economic injury. The Court of
Appeal agreed, concluding that while plaintiffs had alleged an
injury in fact, they had not alleged any loss of money or property:
“Plaintiffs spent money to be sure, but . . . they received locksets
in return, locksets they did not allege were overpriced or
defective. Thus, while their ‘patriotic desire to buy fully
American-made products was frustrated,’ that injury was
insufficient to satisfy the standing requirements of sections
17204 and 17535.” (Kwikset, supra, 51 Cal.4th at pp. 320-321.)
The Supreme Court reversed, 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.” (Kwikset,
10
supra, 51 Cal.4th at p. 317.) As stated by the Court: “At [the
pleading] stage, these plaintiffs need only allege economic injury
arising from reliance on [the defendant’s] misrepresentations.
According to the . . . complaint, (1) [defendant] labeled certain
locksets with ‘Made in U.S.A.’ or a similar designation, (2) these
representations were false, (3) plaintiffs saw and relied on the
labels for their truth in purchasing [defendant’s] locksets, and (4)
plaintiffs would not have bought the locksets otherwise. On their
face, these allegations satisfy all parts of the section 17204
standing requirement.” (Id. at pp. 327-328.)
The Court explained that the “marketing industry is based
on the premise that labels matter—that consumers will choose
one product over another similar product based on its label and
various tangible and intangible qualities they may come to
associate with a particular source. . . . [¶] To some consumers,
processes and places of origin matter. [Citations.] . . . [¶] In
particular, to some consumers, the ‘Made in U.S.A.’ label
matters.” (Kwikset, supra, 51 Cal.4th at pp. 328-329 [footnotes
omitted].) The Court noted that the “Legislature ha[d]
recognized the materiality of this [form of] representation by
specifically outlawing deceptive and fraudulent ‘Made in
America’ representations.” (Id. at p. 329 [citing § 17533.7
[prohibiting deceitful representations that a product was “Made
in the U.S.A.”] and Civ. Code, § 1770, subd. (a)(4) [prohibiting
deceptive representations of geographic origin].)
The Court emphasized that under its interpretation of
Proposition 64, “a plaintiff’s subjective motivations in making a
purchase” (Kwikset, supra, 51 Cal.4th at p. 330, fn. 14) are
relevant in determining whether the “loss of money or property”
requirement has been satisfied: “For each consumer who relies
11
on the truth and accuracy of a label and is deceived by
misrepresentations into making a purchase, the economic harm
is the same: the consumer has purchased a product that he or
she paid more for than he or she otherwise might have been
willing to pay if the product had been labeled accurately. This
economic harm—the loss of real dollars from a consumer’s pocket
—is the same whether or not a court might objectively view the
products as functionally equivalent.” (Kwikset, supra, 51 Cal.4th
at pp. 329-330.)
The Court also clarified exactly why a consumer’s
allegation that he or she would not have purchased a product but
for the defendant’s misrepresentation is sufficient to establish
economic injury: “From the original purchasing decision we know
the consumer valued the product as labeled more than the money
he or she parted with; from the complaint’s allegations we know
the consumer valued the money he or she parted with more than
the product as it actually is; and from the combination we know
that because of the misrepresentation the consumer (allegedly)
was made to part with more money than he or she otherwise
would have been willing to expend, i.e., that the consumer paid
more than he or she actually valued the product. That
increment, the extra money paid, is economic injury and affords
the consumer standing to sue.” (Kwikset, supra, at p. 330.)
The Court noted that a contrary conclusion would
effectively “bring to an end private consumer enforcement of bans
on many label misrepresentations. . . . The UCL and false
advertising law are both intended to preserve fair competition
and protect consumers from market distortions. [Citations.]
Contrary to that general purpose, if we were to deny standing to
consumers who have been deceived by label misrepresentations
12
in making purchases, we would impair the ability of consumers to
rely on labels, place those businesses that do not engage in
misrepresentations at a competitive disadvantage, and encourage
the marketplace to dispense with accuracy in favor of deceit.”
(Kwikset, supra, 51 Cal.4th at pp. 330-331.)
The Court also addressed the Court of Appeal’s conclusion
that plaintiffs lacked standing under the UCL because, although
they had spent money, “they ‘received locksets in return[,]’ . . . .
and did not allege the locksets were defective, overpriced, or of
inferior quality.” (Kwikset, supra, 51 Cal.4th at pp. 329-330.)
The Court explained “that nothing in the open-ended phrase ‘lost
money or property’ supports limiting the types of qualifying
losses to functional defects of these sorts and excluding the real
economic harm that arises from purchasing mislabeled products
in reliance on the truth and accuracy of their labels.” (Kwikset,
supra, 51 Cal.4th at p. 331.)
The Court likewise rejected the Court of Appeal’s
“interrelated” conclusion that plaintiffs lacked standing because
“consumers who receive a fully functioning product have received
the benefit of their bargain, even if the product label contains
misrepresentations that may have been relied upon by a
particular class of consumers.” (Kwikset, supra, 51 Cal.4th at
p. 332.) The Court explained that while the “benefit of the
bargain” theory might apply in cases where the alleged
misrepresentation was not material in nature, it was inapplicable
to UCL claims involving a material misrepresentation. According
to the Court, a “‘misrepresentation is judged to be “material” if “a
reasonable man would attach importance to its existence or
nonexistence in determining his choice of action in the
transaction in question”. . . .’ [Citations].” (Id. at pp. 332-333.)
13
The Court concluded that the Legislature’s prohibition on the use
of false or misleading “Made in the U.S.A.” labels demonstrated
that it had concluded such representations are in fact material.3
C. Hansen Has Standing to Pursue His Claims
Hansen argues that under Kwikset, he has satisfied the
UCL and FAL’s standing requirements by alleging that: (1)
Newegg advertised that its products were being offered at a
discount from their former or original price; (2) these
representations were false or misleading; (3) Hansen saw and
relied on the former price representations when purchasing the
products; and (4) he would not have purchased the products but
for the false former price representations. Hansen contends that,
as with the plaintiffs in Kwikset, he has suffered economic injury
by having “paid more for [a product] than he . . . otherwise
[would] have been willing to pay if the product had been labeled
accurately.” (Kwikset, supra, 51 Cal.4th at p. 329.)
Newegg, however, argues that Kwikset is limited to cases in
which the consumer alleges that he or she “pa[id] more for a
product than he or she would have been willing to pay but for a
material misrepresentation about . . . an attribute of that
product.” According to Newegg, a misrepresentation regarding a
product’s former price is “fundamentally different than a
misrepresentation about a product or its attributes. When . . .
consumer[s] pay[] for and receive [products] at the specified price
and those products are what they were represented to be, there is
3 As discussed (see ante at p. 7, post at pp. 19-20), the
Legislature has also specifically prohibited false former price
advertising, as it did false labeling of origin. (See § 17501, Civ.
Code, § 1770, subd. (a).)
14
no disparity in economic value to the consumer and therefore no
economic injury.”
1. Hinojos v. Kohl’s Corporation
We are not aware of any published California state court
decision that has addressed whether a consumer who alleges that
he or she paid more for a product based on false former price or
discount information has standing to sue under the UCL and
FAL. In Hinojos v. Kohl’s Corporation (9th Cir. 2013) 718 F.3d
1098 (Hinojos), however, a unanimous panel of the United States
Court of Appeals for the Ninth Circuit concluded that, under
Kwikset, plaintiffs had standing to pursue such a claim. As in
this case, the plaintiff in Hinojos filed claims under the UCL, the
FAL and the CLRA alleging that a company had used fictitious
former price information on its labels to mislead consumers into
believing they were receiving a substantial discount. The
plaintiff also alleged he “‘would not have purchased [the]
products . . . in the absence of [defendant’s] misrepresentations.’”
(Id. at p. 1102.) The district court dismissed the complaint,
“determining that [the plaintiff] did not have standing under the
UCL or the FAL . . . because [he] had acquired the merchandise
he wanted at the price advertised.” (Ibid.)
The Ninth Circuit reversed, explaining that Kwikset had
identified “precisely what a plaintiff must allege when he wishes
to satisfy the economic injury requirement in a case involving
false advertising: ‘[a] consumer who relies on a product label and
challenges a misrepresentation contained therein can satisfy the
standing requirement of section 17204 by alleging . . . that he or
she would not have bought the product but for the
misrepresentation.’ [Citation.]” (Hinojos, supra, 718 F.3d at
p. 1104 [citing and quoting Kwikset, supra, 51 Cal.4th at p. 330].)
15
The Ninth Circuit concluded the plaintiff had satisfied those
requirements by alleging that “the advertised discounts conveyed
false information about the goods he purchased, i.e., that the
goods he purchased sold at a substantially higher price [from the
defendant] in the recent past and/or in the prevailing market. He
also alleges that he would not have purchased the goods in
question absent this misrepresentation. This is sufficient under
Kwikset.” (Ibid.)
In its analysis, the court rejected two “interrelated”
arguments the defendant had raised regarding the scope of
Kwikset’s holding. First, defendant asserted that Kwikset was
“limited [to] . . . cases involving ‘factual misrepresentations about
the composition, effects, origin, and substance of advertised
products’”; second, the defendant argued that the rationale of
Kwikset did not apply to false discount claims because, in such
cases, “there [is] ‘no difference in value between the product “as
labeled” and the product “as it actually is,” because the products
. . . are one and the same.’” (Hinojos, supra, 718 F.3d at p. 1104.)
The Ninth Circuit explained that both arguments were
predicated on the same assumption: that “when a merchant
misrepresents the ‘regular’ price of his wares, it does not
misrepresent the innate value of those wares so the misled
consumer has suffered no economic injury; he gets the product he
expected at the price he expected.” (Ibid.)
The court concluded, however, that “Kwikset [could not] be
so easily limited,” explaining that just as “a product’s origin or
composition” matters to some consumers, “a product’s ‘regular’ or
‘original’ price matters [to other customers]; it provides important
information about the product’s worth and the prestige that
ownership of that product conveys. [Citations.] Misinformation
16
about a product’s ‘normal’ price is, therefore, significant to many
consumers in the same way as a false product label would be.
[Citation.] That, of course, is why retailers like [the defendant]
have an incentive to advertise false ‘sales.’ It is also why the
California legislature has prohibited them from doing so.”
(Hinojos, supra, 718 F.3d at pp. 1105-1106 [citing § 17501.)4
2. The Ninth Circuit correctly applied California law
We agree with the Ninth Circuit’s conclusion that under
Kwikset, the UCL and FAL’s standing requirements are satisfied
when a consumer has alleged that he or she relied on fictitious
former price information in making a purchase, and would not
have made the purchase but for the misrepresentation. 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.” (Kwikset, supra, 51 Cal.4th at
p. 330.) 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
4 The Ninth Circuit also held that plaintiff had standing to
assert his CLRA claim, concluding that “any plaintiff who has
standing under the UCL’s and FAL’s ‘lost money or property’
requirement will, a fortiori, have suffered ‘any damage’ for
purposes of establishing CLRA standing.” (Hinojos, supra, 718
F.3d at p. 1108.)
17
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.” (Kwikset, supra, 51 Cal.4th at pp. 329-330.)
Moreover, as Hinojos noted, interpreting Kwikset in the
manner Newegg proposes would effectively preclude consumers
from bringing false advertising claims predicated on deceptive
former price and discount information, despite the fact that the
Legislature has specifically prohibited that practice. (§ 17501,
Civ. Code, § 1770, subd. (a).) Kwikset makes clear that
Proposition 64 was not intended to eliminate consumers’ ability
to pursue UCL and FAL claims for misleading advertisements
that induced them to make a purchase they would not have
otherwise made. (Kwikset, supra, 51 Cal.4th at pp. 330-331; see
also (Hinojos, supra, 718 F.3d at p. 1106 [“Kwikset emphasized
that Proposition 64 was enacted not to eliminate individual
consumer suits when the consumer was actually deceived by a
misleading advertisement”].)5
5 Newegg contends that limiting Kwikset in the manner it
has proposed would not preclude all forms of consumer suits
challenging the use of false or misleading former price
information. According to Newegg, this form of claim would still
be available to consumers who can show that they “could have
purchased the product elsewhere for less money absent the
misrepresentation.” Kwikset, however, held that a consumer’s
decision to pay more for a product than he or she would have but
for the misrepresentation is itself a form of economic injury: “[I]n
the eyes of the law, a buyer forced to pay more than he or she
would have is harmed at the moment of purchase, and further
inquiry into such subsequent transactions, actual or
18
Newegg argues there are several reasons why we should
decline to follow Hinojos and hold that Kwikset does not extend to
fictitious former price claims in which the plaintiff has not
challenged any representation related to the product other than
its purported former price. First, Newegg argues that, unlike a
consumer who is willing to pay more for a product that was
manufactured in the United States, a consumer such as Hansen
“cannot rationally claim he was willing to pay more money for the
[product he purchased] because he believed they were discounted
than he would have been willing to pay had he known they were
not discounted.” Newegg appears to contend that, as a matter of
law, a rational consumer would not pay more for a product based
on its advertised former price. Thus, under Newegg’s rationale, it
would be irrational for a consumer to be willing to pay $50 for a
sweater that is advertised as having had an original price of
$100, but be unwilling to pay $50 for that same sweater in the
absence of the advertised discount. According to Newegg, a
rational consumer would not be affected by this discount
information because “the economic value [of the product] is the
same regardless [of] the price’s status as a ‘discount.’”
This argument ignores a simple fact: Our Legislature has
adopted multiple statutes that specifically prohibit the use of
deceptive former price information and misleading statements
regarding the amount of a price reduction. (See § 17501; Civ.
Code, § 1770, subd. (a)(13).) These statutes make clear that,
contrary to Newegg’s assertions, our Legislature has concluded
“reasonable people can and do attach importance to [a product’s
former price] in their purchasing decisions.” (Kwikset, supra, 51
hypothesized, ordinarily is unnecessary.” (Kwikset, supra, 51
Cal.4th at p. 334.)
19
Cal.4th at p. 333 [statutory prohibition on use of deceitful “Made
in U.S.A.” labels shows that reasonable consumers do rely on that
form on information]; see also id. at p. 329 [Legislature’s
prohibition on deceitful Made in the U.S.A. labels demonstrates
“the materiality of this representation”].) As noted in Hinojos,
this conclusion is supported by empirical research showing that
the presence of a higher original price affects consumers’
perceptions “about the product’s worth,” and increases their
willingness to buy the product. (Hinojos, supra, 718 F.3d at
p. 1106.)
Newegg next asserts that Hinojos conflicts with prior
California case law holding that “a consumer who pays the
specified price for a product and receives that product has
obtained the ‘benefit of the bargain and cannot therefore show an
economic injury’ – absent specific allegations such as the product
was different than it was represented to be, unsatisfactory in
some manner, or worth less than the amount paid.” In support,
Newegg cites two decisions, Time v. Hall (2008) 158 Cal.App.4th
847 (Time), and Petersen v. Cellco Partnership (2008) 164
Cal.App.4th 1583 (Petersen), which cites Time and was written by
the same court. In both cases, the court concluded the plaintiffs
lacked standing to pursue UCL claims because their pleadings
demonstrated they had “received the benefit of their bargain,
having obtained the [advertised product] at the bargained for
price.” (Petersen, supra, 164 Cal.App.4th at p. 1591; see also
Time, supra, 158 Cal.App.4th at p. 855 [plaintiff lacked standing
because he had received the advertised product in exchange for
the advertised price, and had not alleged it was “worth less than
what he paid for it”].)
20
These cases, however, were decided before Kwikset, which
held that the “benefit of the bargain” theory has no relevance
when the misrepresentation underlying the UCL claim is
material in nature. (See Kwikset, 51 Cal.4th at pp. 332-333; see
also Hinojos, supra, 718 F.3d at p. 1107 [“‘benefit of the bargain’
rationale was explicitly rejected in Kwikset” for UCL claims that
allege a material misrepresentation].) As explained above, our
Legislature’s decision to prohibit the use of false and misleading
former price information shows that it has deemed such
misrepresentations to be material.6
Finally, Newegg argues that cases from several other
jurisdictions have rejected similar “false discount claims,” and
asserts that Hinojos “is the sole exception.” However, none of the
decisions Newegg cites address claims brought under California’s
UCL or FAL, nor do they involve an application of Kwikset.
Instead, the cases apply other state court’s interpretations of
those state’s false advertising laws.
For example, in Kim v. Carter’s (7th Cir. 2010) 598 F.3d
362 (Kim), which Newegg characterizes as “the leading case” in
6 The same court that decided Time and Peterson—Division
Three of the Fourth District—also wrote the decision that the
Supreme Court reversed in Kwikset. Division Three’s conclusion
that the Kwikset plaintiffs lacked standing to pursue their false
advertising claims appears to have been based on the same
“benefit of the bargain” reasoning that it had previously
employed in Hall and Petersen. (See Kwikset, supra, 51 Cal.4th
at pp. 319-320, 332 [explaining that Court of Appeal found
plaintiffs lacked standing because they had received “the benefit
of their bargain,” namely “locksets that were not [were not
alleged to be] overpriced or defective”].) The Supreme Court
explicitly rejected that analysis.
21
this subject area, plaintiffs filed a complaint under the Illinois
Consumer Fraud and Deceptive Business Practices Act (ICFA)
alleging that defendant had advertised a fictitious “suggested”
price for its products that mislead consumers to believe “they
were realizing significant savings.” (Id. at p. 363.) The Seventh
Circuit explained that to maintain a private action under the
ICFA, a plaintiff must establish that he or she suffered “actual
damages” as a result of the challenged conduct. The Seventh
Circuit further explained that, in the context of false advertising
claims, Illinois state courts had interpreted the “actual damages”
provision to require the consumer to show that defendant’s
conduct “caus[ed] [him or] her to pay ‘more than the actual value
of the property.’” (Id. at p. 365.) Applying that standard, the
Seventh Circuit concluded that plaintiffs’ claim failed because
they had not alleged the products they received were actually
worth less than what they had paid.
Similarly, in Belcastro v. Burberry Limited (S.D.N.Y.
Feb. 23, 2017, No. 16-CV-1080) 2017 WL 744596 (Belcastro), the
plaintiff filed claims under New York and Florida law alleging
that the defendant had used a fictitious retail price in advertising
its clothing. As in this case, plaintiff further alleged he would not
have made the purchase in the absence of the false pricing
information. The district court dismissed the claim, explaining
that New York and Florida law both required plaintiff to show
“the defendant’s deception” had caused him to pay more for the
product than it was actually worth. (See id. at pp. *4-*6.)
The court specifically distinguished Hinojos, noting that
the Ninth Circuit’s decision addressed “standing under [an
unrelated] California statutory cause of action.” (Belcastro,
supra, at p. *5.) The court further explained that Hinojos was of
22
“limited relevance” because, “[u]nder California law, a plaintiff
sufficiently alleges injury based on allegations that the
defendant’s false advertising caused them subjectively to assign a
higher value to the good than they would have otherwise. Simply
alleging that plaintiff would not have made the same purchasing
decision but for the misrepresentation is not adequate under New
York [or Florida] law.” (Ibid.)7
As Belcastro implicitly acknowledges, California law is
different. 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. (Kwikset,
7 The other false discount cases Newegg cites likewise
involve the application of other state courts’ interpretation of
their own false advertising laws. (See e.g., Carters Johnson v.
Jos. A. Bank Clothiers, Inc. (S.D. Ohio, Aug. 19, 2014, No. 2:13-
cv-756) 2014 WL 4129576, *4 [under Ohio’s Consumer Sales
Practices Act, plaintiff was required to plead and prove “actual
damages,” which, under Ohio law, is “measured by calculating
‘the difference between the value of property as it was
represented to be and its actual value at the time of its
purchase’’”]; Shaulis v. Nordstrom (1st Cir. 2017) 865 F.3d 1, 10-
11 [under the Massachusetts Supreme Judicial Court’s
interpretation of the Massachusetts’s false advertising law,
plaintiff’s allegation that she was induced to make a purchase
she would not have made but for the “false sense of value created
by” defendant’s fictitious discount did not qualify as a cognizable
injury].)
23
supra, 51 Cal.4th at p. 317.) Hansen satisfied both of those
requirements.8
DISPOSITION
The trial court’s judgment is reversed. Hansen shall
recover his costs on appeal.
ZELON, Acting P. J.
We concur:
SEGAL, J.
FEUER, J.
8 For purpose of this appeal, Newegg has conceded that if
Hansen has standing to pursue his UCL and FAL claims, he also
has standing to pursue his CLRA claim, which requires only that
plaintiff claim to have suffered “‘some form of damage.’” (Bower,
supra, 196 Cal.App.4th at p. 1556.) Because we conclude Hansen
has adequately alleged “economic injury” for purposes of UCL
standing, we likewise conclude he has standing to pursue his
CLRA claim.
24