New UCL "restitution" decision: Colgan v. Leatherman Tool Group, Inc.

On Tuesday, January 10, 2006, the Court of Appeal issued a new and significant decision on UCL "restitution." Colgan v. Leatherman Tool Group, Inc., ___ Cal.App.4th ___ (Jan. 10, 2006). The decision provides a roadmap for plaintiffs on how to prove restitution in a UCL case.

The defendant manufactured products and sold them to consumers through retail intermediaries. The defendant represented that its products were "Made in U.S.A." when, in fact, "a significant portion of the various parts of the products were manufacturered abroad." Slip op. at 16. The trial court granted summary adjudication on liability in the plaintiff's favor. Then, following a court trial on remedies, it entered judgment for $13 million as "restitution" under the UCL (as well as the CLRA and the False Advertising Act). Slip op. at 7. The trial court also ordered broad-ranging injunctive relief, including a mandatory injunction requiring the defendant to issue a "corrective announcement" about its products, "to publish for twelve weeks in nine national magazines and forty-seven California newspapers notices of its deceptive labeling and advertising practices," and to pay the cost for retailers to return any offending products still in their inventories. Slip op. at 2-3, 9, 40.

The Court of Appeal, after a lengthy discussion, affirmed the order granting summary adjudication in plaintiff's favor on liability. Slip op. at 10-29. Then, it turned to the remedies.

Restitution, it observed, represents "the value of the property at the time of its improper ... disposition." Slip op. at 37 (quoting Rest., Restitution, §151). It determined that "the amount of restitution necessary to restore purchasers to the status quo ante ... would involve the amount attributable to the misleading 'Made in U.S.A.' representations." Id. at 39. Unfortunately, the plaintiff had presented "no evidence" on that point (partly because he had not cross-appealed from the trial court's adverse evidentiary rulings), so the $13 million award had to be reversed. Id. at 38-39. But the Court then went on to provide examples of the kind of evidence that would constitute sufficient proof of the amount of restitution. As one example, evidence could be offered of the property's "exchange value ..., or the amount for which it could be exchanged if there were an open market with a wide opportunity for buyers." Id. at 37 (quoting Rest., Restitution, §151). Other relevant evidence would include retail price, market value, and potential expert testimony on "the dollar value of the consumer impact or the advantage realized by" the defendant as a result of its UCL violations. Id. at 38.

Plaintiffs should take careful note of the evidentiary roadmap the Court of Appeal provides in this case to a UCL restitution award. This is the only detailed decision that I'm aware of that addresses how to measure UCL restitution in an action involving sale of goods. It confirms my own ideas of what restitution should look like in a UCL case like this. It is also a useful decision on UCL injunctive relief, since the Court of Appeal affirmed every aspect of the trial court's broad mandatory injunction except the part that would have required the defendant to "notify class members of the procedures for obtaining restitution"—a remedy the Court determined had not been proven. (Slip op. at 2-3, 9, 40.)

Comments

[John Hurley]

Interesting. The court seems to duck some of the hard and unresolved issues about what factual circumstances can support an award of restitution by focusing on evidentiary issues.

But one thing the court did do was that it duscussed the restitution remedies under the CLRA and UCL as one -- implying that there is no difference between the scope of restitution available under the UCL as opposed to under common law or other statutory causes of action.

[Kimberly]

I noticed that and thought it was interesting. The Court also said that CLRA "damages" can and should be calculated differently from UCL "restitution," and that the two forms of relief could be awarded in such a way as to avoid any inconsistency. (Slip op. at 33-34.)