United States: Ninth Circuit Holds That Previously-Deceived Consumer Has Article III Standing To Seek Injunctive Relief

The Ninth Circuit Court of Appeals recently held that a consumer who brings a false advertising claim may establish Article III standing based on allegations of her inability to rely on the advertising in the future. The Ninth Circuit's ruling resolves a district court split regarding Article III standing to seek injunctive relief and may have a potentially significant impact in actions seeking injunctive relief under California's oft-litigated Consumer Legal Remedies Act ("CLRA"), California Civil Code § 1750, et seq.; False Advertising Law ("FAL"), California Business & Professions Code § 17500, et seq.; and Unfair Competition Law ("UCL"), California Business & Professions Code § 17200, et seq.

In Davidson v. Kimberly-Clark Corp., et al., No. 15- 16173, 2017 WL 4700093 (9th Cir. Oct. 20, 2017), plaintiff Jennifer Davidson ("Davidson") alleged that she paid a premium for wipes manufactured by defendant Kimberly-Clark Corporation ("Kimberly-Clark") and advertised as "flushable" even though they were not flushable. After using the product several times, Davidson became concerned that they were not flushable and stopped using them. Thereafter, she did not purchase the "flushable" wipes again but alleges that she would purchase them in the future "if it were possible to determine prior to purchase if the wipes were suitable to be flushed." Based on these allegations, Davidson brought California state law claims against Kimberly-Clark for common law fraud and violations of the CLRA, FAL and UCL. In addition to restitution, actual, punitive and statutory damages, Davidson sought injunctive relief on her CLRA, FAL and UCL claims.

The district court granted with prejudice Kimberly-Clark's motion to dismiss the First Amended Complaint ("FAC"), holding, among other things, that Davidson lacked standing to seek injunctive relief because she was unlikely to purchase Kimberly-Clark's flushable wipes in the future.¹ The Ninth Circuit reversed, finding that Davidson "properly alleged that she faces a threat of imminent or actual harm by not being able to rely on Kimberly-Clark's labels in the future, and that this harm is sufficient to confer standing to seek injunctive relief." Davidson, 2017 WL 4700093 at *7.

Relying on Summers v. Earth Island Inst., 555 U.S. 488, 493 (2009), the Ninth Circuit reasoned that, to establish Article III standing for injunctive relief, the threat of injury must be "actual and imminent, not conjectural or hypothetical." Id. In other words, the "threatened injury must be certainly impending to constitute injury in fact" and "allegations of possible future injury are not sufficient." Id. (quoting Clapper v. Amnesty Int'l USA, 568 U.S. 398, 409 (2013) (internal quotation marks and alteration omitted)).

The Ninth Circuit rejected the reasoning of several district courts that plaintiffs with knowledge of a defendant's alleged misrepresentations lack standing to seek injunctive relief under the CLRA, FAL and UCL. Those district courts declined to find standing because "plaintiffs who are already aware of the deceptive nature of an advertisement are not likely to be misled into buying the relevant product in the future and, therefore, are not capable of being harmed again in the same way."  See, e.g., Pinon v. Tristar Prods., Inc., No. 1:16-cv- 00331-DAD-SAB, 2016 WL 4548766, at *4 (E.D. Cal. Sept. 1, 2016) (setting forth similar district court opinions); see also Machlan v. Procter & Gamble Co., 77 F. Supp. 3d 954, 957 (N.D. Cal. 2015) (alleging nearly identical facts as those in Davidson). Instead, the Ninth Circuit adopted the reasoning of district courts holding that a plaintiff faces an actual and imminent threat of future injury where the plaintiff may be unable to rely on the defendant's representations in the future, or because the plaintiff may again purchase the mislabeled product. See, e.g., Ries v. Arizona Beverages USA LLC, 287 F.R.D. 523, 527 (N.D. Cal. 2012). The Ninth Circuit explained that "a previously deceived consumer may have standing to seek an injunction against false advertising or labeling, even though the consumer now knows or suspects that the advertising was false at the time of the original purchase, because the consumer may suffer an 'actual and imminent, not conjectural or hypothetical' threat of future harm." Davidson, 2017 WL 4700093 at *9. To hold otherwise, the Ninth Circuit reasoned, would "effectively gut" California's consumer protection laws by allowing defendants to defeat injunctive relief by removing cases from state court and then moving to dismiss for failure to meet Article III's standing requirements. Id.

The Ninth Circuit provided the two examples of allegations sufficient to satisfy Article III standing for injunctive relief: (1) allegations that a consumer 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; and (2) 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. Davidson's allegations fall within the Ninth Circuit's first example because she alleged that she desires to purchase the flushable wipes and intends to purchase them in the future, but she cannot rely on the current representations on the package with any confidence. Accordingly, the Ninth Circuit held that Davidson's allegations "sufficiently identified a certainly impending risk of her being subjected to Kimberly-Clark's allegedly false advertising" and Davidson therefore had standing to pursue injunctive relief. Id. at *10.

The Davidson decision underscores the Ninth Circuit's willingness to broadly interpret Article III  standing and undoubtedly will encourage lawsuits for injunctive relief under California's consumer protection laws, even where the plaintiff's potential future harm is, at best, questionable. The attorneys of Stroock's Financial Services Litigation, Regulation and Enforcement Group are well positioned to answer any questions that you may have about the scope and impact of the Ninth Circuit's ruling as well as related issues.

Footnotes

1 The district court also held that Davidson did not adequately allege (1) damage because she did not suffer any harm due to her use of the wipes; (2) why the representation "flushable" was false; and (3) how she came to believe the wipes were not flushable. The Ninth Circuit easily reversed the district court's ruling in this regard, holding that Davidson sufficiently alleged a basic theory of fraud, namely that "truly flushable products . . . disperse and disintegrate within seconds or minutes," and Kimberly-Clark's flushable wipes do not "disperse and disintegrate within seconds or minutes." Additionally, the Ninth Circuit reasoned that there is no authority requiring consumers to allege how they "came to believe" that the product at issue was misrepresented.

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