Colgan v. Leatherman Tool Group, Inc., B176953.

Citation135 Cal.App.4th 663,38 Cal.Rptr.3d 36
Decision Date10 January 2006
Docket NumberNo. B176953.,B176953.
CourtCalifornia Court of Appeals
PartiesKen COLGAN et al., Plaintiffs and Respondents, v. LEATHERMAN TOOL GROUP, INC., Defendant and Appellant.

The Rossbacher Firm, Henry H. Rossbacher, James S. Cahill, Talin Khachaturian; Cuneo, Waldman & Gilbert LLP, Jon A. Tostrud; Blecher & Collins, P.C. and Maxwell M. Blecher, Los Angeles, for Plaintiffs and Respondents.

Howard Rice Nemerovski Canady Falk & Rabkin, Jerome B. Falk, Jr., Barbara A. Winters, Robert T. Cruzen, San Francisco; Jones, Bell, Abbott, Fleming & Fitzgerald L.L.P., Michael J. Abbott, Fredrick A. Rafeedie, and William M. Turner, Los Angeles, for Defendant and Appellant.

MOSK, J.

Defendant and appellant Leatherman Tool Group, Inc. (Leatherman) appeals from the trial court's summary adjudication of Leatherman's liability under the False Advertising Law (Bus. & Prof.Code, §§ 17500, 17533.71), the Unfair Competition Law (§ 17200 et seq.), and the Consumer Legal Remedies Act (CLRA) (Civ.Code, § 1750 et seq.) as the result of Leatherman's labeling and advertising its products as "Made in U.S.A.," when parts of those products were manufactured outside the United States. Leatherman also appeals from the judgment of restitution, the mandatory injunction, and the amount of the attorney fees awarded to plaintiffs.

We affirm the summary adjudication that Leatherman violated the False Advertising Law and the CLRA because, as a matter of law, there was sufficient manufacturing of components abroad so as to make Leatherman's representations that its products were made in the United States deceptive. The evidence presented was sufficient, without further extrinsic evidence — such as a consumer survey — to establish that Leatherman's representations were deceptive. We also affirm the summary adjudication that Leatherman violated section 17533.7, and therefore the Unfair Competition Law, by selling products represented as "Made in U.S.A." "when the merchandise or any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States." (§ 17533.7.) That a product may have been designed, processed and assembled in the United States does not preclude the conclusion that a "part" of the product was "substantially made, manufactured or produced" outside the United States. As a matter of law, Leatherman's products were substantially made outside the United States.

We reverse the restitution award because the trial court had no evidence to support its computation of the amount of restitution awarded. Whether or not restitution is an equitable remedy, that remedy still requires substantial evidence to support it. We affirm the statutory penalty of $1,000 under the CLRA. We affirm the injunctive relief, including the mandatory injunction except to the extent the injunctive relief concerns matters related to restitution. We remand the matter to the trial court to eliminate the restitution award, modify the injunction to take into account that there is no need to give notice for the purpose of restitution, and modify the attorney fees award to reflect the absence of any restitution award.

I. BACKGROUND
A. The Parties and the Products

Plaintiffs are representative members of a class of persons in California who purchased Leatherman tools during the class period. Leatherman is a privately held corporation based in Portland, Oregon that manufactures hand-held, multi-component, multi-function tools comprised of components such as screwdrivers, pliers, saws, files, corkscrews, clip plates, locking Ts, and bit holders.2

Leatherman offered for sale and sold 22 tool products in California during the class period and represented on the tool products, on packaging, and in advertising that the tools were made in the United States. Significant working parts of the tools were investment cast,3 fineblanked,4 formed, hardened, cut, forged, polished or machined in various foreign countries. The plier jaws that were investment cast in Mexico had the the letters "USA" stamped onto the jaws themselves.

B. The Lawsuits and Leatherman's Response

In April 2001 and July 2001 plaintiffs filed actions against Leatherman for violations of the False Advertising Law, Unfair Competition Law, and the CLRA. Plaintiffs sought injunctive and equitable relief, including restitution, damages, punitive damages, attorney fees, and costs. The actions were consolidated on November 22, 2002, and class certification was granted on February 4, 2003. The class, as certified by the trial court, consists of two subclasses: the CLRA subclass, comprised of individuals who purchased in California from April 2, 1997 to the time of trial Leatherman tools packaged, advertised or marked as "Made in U.S.A." or "U.S.A." for personal, family or household purposes; and the Unfair Competition Law subclass, comprised of persons who purchased in California from April 2, 1997 to the time of trial, Leatherman tools packaged, advertised or marked as "Made in U.S.A." or "U.S.A."5 Both subclasses alleged violations of the False Advertising Law.

After plaintiffs' lawsuits were filed, Leatherman's management decided to change the representations on Leatherman's tools and packaging. In July 2001, Leatherman's chief executive officer sent an e-mail to employees informing them of management's decision to implement these changes "as soon as reasonably possible in view of the required tooling changes and sell-through of existing inventory." Leatherman stopped stamping the letters "USA" on the plier jaws used in certain of its tools. In September 2001, Leatherman changed the representations on its product packaging to state "Made in U.S.A. of U.S. and foreign components." Leatherman did not, however, make any efforts to retrieve from retailers any of its products that contained unqualified "Made in U.S.A." representations. Leatherman continued to advertise its products with unqualified "Made in U.S.A." representations throughout the trial.

C. Summary Adjudication and Trial

The parties filed cross-motions for summary adjudication on the issue of Leatherman's liability under the False Advertising Law, Unfair Competition Law, and the CLRA. The trial court denied Leatherman's motion and granted plaintiffs' motions for summary adjudication, ruling that Leatherman had violated the False Advertising Law and the Unfair Competition Law and that Leatherman had no defense to the claim for violation of the CLRA.

The case proceeded to a court trial on the remedies. The parties presented oral testimony, including expert testimony; documentary evidence; and Leatherman tools, packaging, and advertising.

Based on evidence of Leatherman's prices and revenue, individual plaintiffs and the CLRA subclass argued that they were entitled to actual damages, measured by the difference between the retail price of the Leatherman tools and the retail price of other, allegedly similar Chinese-made tools sold in California. The individual plaintiffs and the Unfair Competition Law subclass also requested restitution and offered two different formulas for calculating the amount of restitution. One formula was based on the retail purchase prices paid for the 22 allegedly misrepresented Leatherman tools up to an amount equal to Leatherman's total California sales revenues for those tools. The other formula was based on Leatherman's gross profits on the misrepresented products. There was no evidence quantifying the sums received by Leatherman attributable to the "Made in U.S.A." representations. Plaintiffs sought injunctive relief in the form of a prohibitory injunction preventing further sale and distribution in California of tools that were misleadingly designated or advertised as "Made in U.S.A." and a mandatory injunction informing California residents about the misleading packaging and advertising.

1. Damages

At the conclusion of the trial, the trial court found that as a result of Leatherman's deceptive business practices, plaintiffs suffered actual damages.6 To determine the amount of actual damages for a CLRA award,7 the trial court applied a market approach as set forth in Civil Code Section 3343, subdivision (a), which provides in part: "One defrauded in the purchase, sale or exchange of property is entitled to recover the difference between the actual value of that with which the defrauded person parted and the actual value of that which he received, together with any additional damage arising from the particular transaction. . . ." The term "actual value" as used in Civil Code section 3343 means market value. (Nece v. Bennett (1963) 212 Cal.App.2d 494, 497, 28 Cal.Rptr. 117.)

The trial court ultimately concluded that plaintiffs failed to meet their burden of proof in determining the amount of damages to be awarded under the CLRA. The trial court found the sample of retail prices for the Chinese-made tools provided by plaintiffs to be statistically unreliable and inappropriate. The trial court also found that there was no evidence of retail prices for either the Leatherman tools or the foreign-made tools during the years 1997-2002—the class period; the prices for many of the foreign-made and Leatherman tools had been heavily discounted; the foreign-made tools offered by plaintiffs for measuring actual damages were not comparable to the Leatherman tools; and there was no evidence that multi-purpose, foreign-made tools had been sold by other companies in California between 1997 and 2002. Furthermore, the trial court found that evidence presented by Leatherman underestimated the quantity of its tools sold in California.

Because it was unable to determine the amount of actual damages, the trial court awarded $1,000, the statutory minimum, for a violation of the CLRA prescribed by Civil Code section 1780, subdivision (a)(1).8 The trial court stated: "If this Court were able to determine actual damages, this Court...

To continue reading

Request your trial
328 cases
  • KWIKSET CORPORATION v. THE SUPERIOR COURT OF ORANGE COUNTY
    • United States
    • United States Superior Court (California)
    • 27 Enero 2011
    ...... Herbal Products Association, VeriSign, Inc., and BP West Coast Products LLC as Amici Curiae ...4th 324] Troyk v. Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1347 [90 Cal. ... the “Made in U.S.A.” label’].)” ( Colgan v. Leatherman Tool Group, Inc. (2006) 135 ......
  • HLC Properties, Ltd. v. MCA Records, Inc., B191608 (Cal. App. 5/16/2008)
    • United States
    • California Court of Appeals
    • 16 Mayo 2008
    ......Valentin, a royalty auditor for Universal Music Group, stated that the January 2, 1948 agreement superseded prior ...( Colgan v. Leatherman Tool Group, Inc. (2006) 135 Cal.App.4th 663, ......
  • Espejo v. Copley Press, Inc.
    • United States
    • California Court of Appeals
    • 7 Julio 2017
    ........’ " ( Colgan v. Leatherman Tool Group, Inc. (2006) 135 Cal.App.4th 663, ......
  • In re Tobacco Cases II, D065165
    • United States
    • California Court of Appeals
    • 28 Septiembre 2015
    ...... Robinson Calcagnie Robinson Shapiro Davis, Inc., Mark P. Robinson, Jr., Kevin F. Calcagnie, Scot ... States Supreme Court's opinion in Altria Group, Inc. v. Good (2008) 555 U.S. 70 [172 L.Ed.2d ...parties' evidentiary showing." ( Colgan v. Leatherman Tool Group, Inc. (2006) 135 ......
  • Request a trial to view additional results
4 books & journal articles
  • DECEPTION BY DESIGN.
    • United States
    • Harvard Journal of Law & Technology Vol. 34 No. 1, September 2020
    • 22 Septiembre 2020
    ...react; it must show how consumers actually do react") (emphasis in original). (177.) See, e.g., Colgan v. Leatherman Tool Grp., Inc., 38 Cal. Rptr. 3d 36, 46 (Cal. Ct. App. 2006) ("In determining whether a statement is misleading..., the primary evidence in a false advertising case is the a......
  • Combatting Covid Through . . . Consumer Protection? a Multi-jurisdictional Approach to Protecting Public Health Through Enforcement of Consumer Fraud Laws
    • United States
    • California Lawyers Association Competition: Antitrust, UCL and Privacy (CLA) No. 32-1, March 2022
    • Invalid date
    ...under sections 17200 and 17500.").78. Brockey v. Moore, 107 Cal. App. 4th 86 (2003); Colgan v. Leatherman Tool Grp., Inc., 135 Cal. App. 4th 663 (2006).79. See e.g., People v. Conway, 42 Cal. App. 3d 875, 885 (1974); Toomey, 157 Cal. App. 3d at 15 (individual officers liable for false adver......
  • The Ucl-now a Money Back Guarantee?
    • United States
    • California Lawyers Association Competition: Antitrust, UCL and Privacy (CLA) No. 25-1, March 2016
    • Invalid date
    ...Products Co., 99 P.2d 706, 713 (Cal. 2000)).24. Vioxx, 103 Cal. Rptr. 3d at 100-101 (citing Colgan v. Leatherman Tool Group, Inc., 38 Cal. Rptr. 3d 36, 61 (Cal. Ct. App. 2006)).25. Vioxx, 103 Cal. Rptr. 3d at 101 (holding that the issue of a proper comparator was a patient-specific issue in......
  • Golden State Institute 25th Anniversary Retrospective and Prospective Views on California Antitrust and Unfair Competition Law
    • United States
    • California Lawyers Association Competition: Antitrust, UCL and Privacy (CLA) No. 25-1, March 2016
    • Invalid date
    ...(2015).17. 144 Cal. App. 4th 824 (2006).18. Review was denied in Rutledge on November 10, 2015.19. Cal. Bus. & Prof. Code § 17203.20. 135 Cal. App. 4th 663 (2006).21. 180 Cal. App. 4th 116 (2009).22. 46 Cal. 4th 298 (2009).23. 802 F.3d 979 (9th Cir. 2015).24. 214 Cal. App. 4th 544 (2014).25......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT