Thursday, May 31, 2018

Amended 9th Cir. opinion reaffirms deceived consumer's standing to seek injunctive relief

Davidson v. Kimberly–Clark Corp., 889 F.3d 956 (9th Cir. 2018) (amended)

Previous discussion.  Previously misled consumers may properly allege a threat of imminent or actual harm sufficient to confer Article III standing to seek injunctive relief. “A consumer’s inability to rely on a representation made on a package, even if the consumer knows or believes the same representation was false in the past, is an ongoing injury that may justify an order barring the false advertising.” Here, Davidson paid extra for wipes labeled as “flushable” because she believed that flushable wipes would be better for the environment, and more sanitary, than non-flushable wipes. Davidson alleged that she “continues to desire to purchase wipes that are suitable for disposal in a household toilet,” and “would purchase truly flushable wipes manufactured by [Kimberly–Clark] if it were possible to determine prior to purchase if the wipes were suitable to be flushed.”

First, the court of appeals reversed the dismissal of the complaint under Rule 9(b). The district court had concluded that Davidson failed to adequately allege “why” the representation that the wipes were flushable was false. But Davidson didn’t have to allege that she experienced problems with her home plumbing or the relevant water treatment plant.  Her theory was simple: flushable means “suitable for being flushed,” which requires an item to be capable of dispersing within a short amount of time. This definition was supported by multiple allegations in the complaint, including dictionary definitions and Kimberly–Clark’s own statement on its website.

Davidson alleged that the actual wipes she purchased failed to “disperse and disintegrate within seconds or minutes.” For example, Davidson alleged that after using the wipes, she “noticed that each individual wipe felt very sturdy and thick, unlike toilet paper” and that “[s]he also noticed that the wipes did not break up in the toilet bowl like toilet paper but rather remained in one piece.” Her personal experience was supported by additional allegations, including Kimberly–Clark’s own testing.  This was enough.

Similarly, the district court’s conclusion that the complaint failed because Davidson didn’t allege damages to her plumbing, pipes, or septic system was wrong.  “Under California law, the economic injury of paying a premium for a falsely advertised product is sufficient harm to maintain a cause of action.”  Additionally, to the extent that the district court believed that it was important that “plaintiff has not alleged facts showing how she came to believe that the [Scott Wipes] were not flushable,” this was error; Rule 9(b) doesn’t require a plaintiff bringing a consumer fraud claim to allege how she “came to believe” that the product was misrepresented.

As for Article III standing for injunctive relief,

[k]nowledge that the advertisement or label was false in the past does not equate to knowledge that it will remain false in the future. In some cases, the threat of future harm may be the consumer’s plausible allegations that she will be unable to rely on the product’s advertising or labeling in the future, and so will not purchase the product although she would like to. In other cases, the threat of future harm may be the consumer’s plausible allegations that she might purchase the product in the future, despite the fact it was once marred by false advertising or labeling, as she may reasonably, but incorrectly, assume the product was improved.

Although the amended opinion made clear that practical considerations for enforcing state law weren’t vital to its analysis, this holding also preserved the federal-state balance, given that the primary form of relief available under the UCL for unfair business practices is an injunction, and federal courts shouldn’t be used to prevent relief under state law. 

Judge Berzon wrote a thoughtful concurrence, arguing that Lyons v. LA should not be read to impose separate Article III tests for each form of relief sought by a plaintiff. “[D]uplicating the standing analysis in this way does not give effect to the “case or controversy” requirement of Article III. Instead, it appears to be an artifact of the discredited practice of conflating the prerequisites for injunctive relief with the Article III prerequisites for entry into federal court.”  As Judge Berzon pointed out,

Davidson seeks restitution for the premium she paid for a falsely labeled product, and no one doubts that she has standing in federal court to do so. Under California law, if Davidson prevails on her false advertising claim and is entitled to restitution, she is equally entitled to an injunction. No further showing, equitable or otherwise, is needed to trigger her right to injunctive relief. It follows that we have a single dispute—a single case, a single controversy—giving rise to multiple forms of relief.

While conflating entitlement to relief with Article III standing didn’t matter much where the availability of injunctive relief was governed by federal common law, it “adds new elements to the entitlement to state-law relief” and was thus inconsistent with Erie and other federal-state principles. “[A] defendant should not be able to strip a plaintiff of remedies dictated by state law by removing to federal court a case over which there surely is Article III jurisdiction over the liability issues.”

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