Benson v. Kwikset Corp., G030956.

• Decision Date: 10 February 2005
• Docket Number: No. G030956.,G030956.
• Court: California Court of Appeals Court of Appeals
• Parties: James BENSON, Plaintiff and Appellant, v. KWIKSET CORPORATION et al., Defendants and Appellants.

24 Cal.Rptr.3d 683

126 Cal.App.4th 887

James BENSON, Plaintiff and Appellant, v. KWIKSET CORPORATION et al., Defendants and Appellants.

No. G030956.

Court of Appeal, Fourth District, Division 3.

February 10, 2005.

Rehearing Denied February 28, 2005.

Review Granted April 27, 2005.

The Cuneo Law Group, Jonathan W. Cuneo, Michael G. Lenett; Cuneo Waldman & Gilbert, Jonathan W. Cuneo, Michael G. Lenett; Soltan and Associates, Venus Soltan, Costa Mesa; Milberg Weiss Bershad Hynes & Lerach, William S. Lerach, Elizabeth J. Arleo and Kevin K. Green, San Diego, for Plaintiff and Appellant.

Bill Lockyer, Attorney General, Richard M. Frank, Chief Assistant Attorney General, Herschel T. Elkins, Assistant Attorney General, Ronald A. Reiter and Benjamin G. Diehl, Deputy Attorneys General, for California Attorney General as Amicus Curiae on behalf of Plaintiff and Appellant.

Jones, Bell, Abbott, Fleming & Fitzgerald, Michael J. Abbott, Fredrick A. Rafeedie and William M. Turner, Los Angeles, for Defendants and Appellants and for Amicus Curiae Leatherman Tool Group, Inc. on behalf of Defendants and Appellants.

OPINION

RYLAARSDAM, J.

In 2000, plaintiff James Benson, on behalf of the general public, sued defendants Kwikset Corporation, its parent corporation, Black & Decker Corporation (collectively defendants), plus Technolock, S.A de C.V. (Technolock) for restitution and injunctive relief under the unfair competition law (Bus. & Prof.Code, § 17200) and the false advertising law (Bus. & Prof. Code, § 17500; section 17500; all further statutory references are to the Business and Professions Code unless otherwise indicated). Plaintiff alleged defendants violated statutory provisions prohibiting the marketing or sale of merchandise with "Made in U.S.A" or similar labels when the merchandise either contained foreign-made parts or involved foreign manufacture.

After a December 2001 trial, the superior court found defendants had marketed products in packaging that contained misleading country of origin labels. The trial court entered a judgment for plaintiff enjoining defendants' use of inaccurate labels, and also ordering them to allow retailers and distributors to return mislabeled products for either a refund or replacement. As to Technolock, the court entered judgment in its favor.

Subsequently, the court entered an order awarding plaintiff the statutorily authorized costs, plus his attorney fees under Code of Civil Procedure section 1021.5. But the court denied plaintiff's request to include in the fee award certain other litigation expenses that could not be recovered as costs. The court awarded Technolock its costs.

Both parties filed appeals. Defendants' appeal from the judgment challenges the constitutionality and applicability of section 17533.7, which makes it unlawful "to sell or offer for sale ... any merchandise on which ... there appears the words `Made in U.S.A.' ... or similar words when the merchandise or any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States." They also attack the trial court's interpretation of Civil Code section 1770, subdivision (a)(4) (1770(a)(4)), which declares the use of "deceptive representations ... of geographic origin in connection with goods and services" as unlawful. Defendants additionally contend plaintiff failed to present legally adequate extrinsic evidence to establish their labels were likely to mislead the reasonable consumer.

For his part, plaintiff appeals from both the judgment and postjudgment order. On the judgment, he attacks the trial court's declaration that the Federal Trade Commission Act (15 U.S.C. § 45 et seq.) cannot serve as a predicate statute for an unfair competition law claim, and the extent of the restitutionary relief awarded by the trial court. As for the postjudgment costs order, plaintiff argues the trial court erred both in awarding Technolock costs and in denying an award of his own out-of-pocket litigation expenses that were not recoverable as costs.

In our original opinion, filed June 30, 2004, we rejected both parties' claims and affirmed the judgment and the postjudgment order. But after issuing that opinion, we granted a rehearing on our own motion to further consider the question of whether Code of Civil Procedure section 1021.5 may be construed to authorize recovery of expenses other than the prevailing party's attorney fees.

During this time, on November 2, 2004, the electorate approved Proposition 64. This ballot proposition amends both the unfair competition law and the false advertising law in two respects relevant to this case. First, Proposition 64 amended sections 17204 and 17535 to require a private plaintiff seeking to maintain an action for injunctive or restitutionary relief to establish he or she "has suffered injury in fact and has lost money or property." (Prop. 64, §§ 3 & 5.) Second, the ballot proposition amended sections 17203 and 17535 to prohibit a private plaintiff from maintaining the lawsuit as a representative action unless it both satisfies the foregoing standing requirement and "complies with Section 382 of the Code of Civil Procedure...." (Prop. 64, §§ 2 & 5.)

Defendants then filed a motion seeking to vacate the trial court's judgment and enter an order dismissing the action on the ground Proposition 64 eliminated the statutory authority for plaintiff to maintain this action. We conclude the amendments implemented by Proposition 64 apply to this action and order the judgment and postjudgment order vacated. However, because plaintiff asserts he can satisfy the ballot proposition's new requirements, we shall remand the case to the superior court with directions to afford plaintiff an opportunity to amend his complaint to allege facts establishing he has standing and is able to comply with Code of Civil Procedure section 382. If plaintiff can successfully amend the complaint, the trial court shall conduct further proceedings limited to the determination of whether plaintiff can prove he has standing and can maintain this lawsuit as a representative action. In the event plaintiff successfully does so, the original judgment shall be reimposed and the balance of our opinion shall stand as resolution of the issues previously raised by the parties. In the event plaintiff is unable either to successfully amend his complaint or prove he has standing, the court is directed to enter a judgment dismissing the action.

FACTUAL AND PROCEDURAL BACKGROUND

Kwikset manufactures and sells hardware described as locksets, which can include deadbolts, doorknob sets, door lever sets, and door handle sets. It has several plants located throughout the United States, plus one in Mexico. Between 1996 and 2000, Kwikset manufactured and sold 35 different varieties of locksets. Plaintiff presented evidence that defendants' attached labels to these products stating "Made in U.S.A.," "All American Made," or making similar representations. However, some of these products included screws and pins made in Taiwan, a latch assembly that was sub-assembled at defendants' Mexico plant, or both foreign made parts and assembly.

Plaintiff testified a product label stating "Made in the USA" meant to him "that whatever is in that package should be made — the parts, labor, and the whole component should be made in [the] USA." He purchased Kwikset products "[b]ecause they had a reputation for being ... quality product[s], and I was aware they were made in the USA." Based on what he subsequently learned about the manufacture of Kwikset's products, he did not believe its country of origin labels were honest.

Plaintiff also called two other witnesses who had purchased Kwikset products. Both witnesses testified a "Made in U.S.A." or similar label was an important factor in their purchasing decision, they interpreted the label to mean all of the parts and all of the labor used to manufacture the product occurred here, and felt they had been deceived by the country of origin labels on Kwikset's products.

After plaintiff filed this action, Kwikset decided to stop using country of origin labels on its products, completing the process of removing them from products distributed in California by October 2000. In addition, because of a subsequent and unrelated investigation by the United States Federal Trade Commission, defendants entered into a consent order that precludes them from: (1) representing "in any manner ... the extent to which any ... product" distributed in interstate commerce "is made in the United States" unless "all, or virtually all, of the component parts of such product are made in the United States and all, or virtually all, of the labor in manufacturing such product is performed in the United States"; and (2) using "the legend `All American Made,' ... or otherwise represent[ing] that a product is entirely made in the United States unless such product is in fact 100% made in the United States."

After trial in this case, the court issued a 21-page statement of decision. It rejected plaintiff's reliance on the Federal Trade Commission Act, concluding the act did not provide a private right of action. As for section 17533.7, the court recognized it "is an extremely strict statute" but rejected defendants' claim the law was unconstitutional. It construed the section as precluding a "`Made in USA' label where the `merchandise' is entirely or substantially foreign," or "where any `article, unit, or part thereof is entirely or substantially foreign." Applying this construction, the court found certain Kwikset products manufactured between 1996 and 2000, at one point or another bore unlawful country of origin labeling because the products contained either "a screw or pin made `entirely ... outside of the United States,'" or had a "latch assembly that was sub-assembled in Mexico...."

The court also found Civil Code section 1770(a)(4) applied, but since this statute ...