The California Court of Appeal has held that Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134 (2003), did not preclude an award of restitution under California’s Unfair Competition Law ("UCL") to plaintiff by defendant Microsoft even though plaintiff paid a retailer, not Microsoft, for the product.  Plaintiff asserted that he had been misled by statements on Microsoft’s packaging into purchasing a Microsoft product. Shersher v. Superior Court, 154 Cal.App.4th 1491, 1494, 65 Cal.Rptr.3d 634 (2007) (plaintiff "alleged that he paid money to a retailer to purchase Microsoft’s product based on false or misleading statements on the product package").  The Court of Appeal, which reviewed the writ at the direction of the California Supreme Court, reversed the Superior Court order granting defendants’ motion to strike plaintiff’s claim for restitution.

The central issue in Shersher was whether Korea Supply had limited the restitution available under the UCL, Cal. Bus. & Prof. Code § 17200, et seq., to plaintiffs who had dealt directly with the defendant.  In Korea Supply, plaintiff alleged that defendants had offered bribes and sexual favors to various officials in order win a contract.  Plaintiff had acted as the agent for a competing bidder that had bid less than the defendants.  Defendants won the contract despite their bid being higher.  Plaintiff sued for "restitution" under the UCL to recover the $30 million commission it would have netted had its client’s bid been accepted.

The Supreme Court in Korea Supply rejected plaintiff’s claim for monetary relief under the UCL:  "Any award that plaintiff would recover from defendants would not be restitutionary as it would not replace any property or money that defendants took directly from plaintiff."  Korea Supply, 29 Cal.4th at 1149 (emphasis added).

The Shersher court did not find the "directly" language in Korea Supply to be controlling:

Nothing in the language of Korea Supply suggests that the Supreme Court intended to preclude consumers from seeking the return of money they paid for a product that turned out to be not as represented.  Rather, the holding of Korea Supply on the issue of restitution is that the remedy that plaintiff seeks must be truly "restitutionary in nature"—that is, it must represent the return of money or property the defendant acquired through its unfair practices.

Shersher, 154 Cal.App.4th at 1498.  "Here, plaintiff and the putative class members clearly had an ownership interest in the restitutionary relief sought because they purchased Microsoft’s product."  Id. at 1499.

The court stated that it based its result on the importance of UCL actions to "the enforcement of consumers’ rights"  (id. at 1496); the "full range of inherent powers" that may be exercised by a court of equity (id. at 1497); and "the plain language of the UCL and the Supreme Court’s mandate that the UCL be interpreted broadly."  Shersher, 154 Cal.App.4th at 1500.

Authored by:

Thomas D. Nevins