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Microsoft Class Action Defense Cases- Shersher v. Superior Court: California Court Holds Plaintiffs May Seek Restitution In False Representation UCL Class Action Against Microsoft Even Without Direct Contract With Company

In Class Action/Representative Action Against Microsoft, Claim for Restitution under California’s Unfair Competition Law (UCL) is Available even Where Plaintiff did not Purchase Falsely-Advertised Product Directly from Microsoft California Court Holds

Plaintiff filed a putative class action in California state court against Microsoft for violations of California’ unfair competition law (UCL) alleging that “wireless routers, adapters, and other similar products manufactured by Microsoft” were advertised as capable of delivering transfer speeds of “11Mbps” and “54 Mbps” but that “these numbers were ‘not based on the actual transmission rates of these wireless products and therefore are … false, deceptive and misleading.’” Shersher v. Superior Court, 154 Cal.App.4th 1491, 1494-95 (Cal.App. 2007). The class action complaint also alleged claims brought in a representative capacity, and contained causes of action for breach of express warranty, violation of the state’s Consumer Legal Remedies Act (CLRA), violation of the UCL, and false advertising, and sought inter alia restitution. Id., at 1495. Defense attorneys moved to strike from the class action complaint the prayer for restitution and any reference to restitution: “The motion was predicated on a single sentence from [Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1149]: ‘Any award that plaintiff would recover from defendants would not be restitutionary as it would not replace any money or property that defendants took directly from plaintiff.’” Id. Defense attorneys argued that the word “directly” precluded a claim for restitution because neither plaintiff nor other members of the putative class action purchased products “directly” from Microsoft, id., at 1495-96. The trial court granted the defense motion, but the Court of Appeal granted plaintiff’s petition for writ of mandate and reversed.

The California appellate court explained that relief under the UCL is limited to injunction and restitution, which in this context means “the return of money to those persons from whom it was taken or who had an ownership interest in it.” Shersher, at 1497, quoting Madrid v. Perot Systems Corp., 130 Cal.App.4th 440, 455 (Cal.App. 2005).

The appellate court summarized its reasoning at page 1494 as follows: “Nothing in Korea Supply conditions the recovery of restitution on the plaintiff having made direct payments to a defendant who is alleged to have engaged in false advertising or unlawful practices under the UCL. The only requirements the UCL and the false advertising law impose on such recovery are that the plaintiff must be a ‘person in interest’ (that is, the plaintiff must have had an ownership interest in the money or property sought to be recovered), and the defendant must have acquired the plaintiff’s money or property ‘by means of … unfair competition’ or some other act prohibited by the UCL or the false advertising law.” Moreover, “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 the 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.” Id., at 1498.

Purchasing a product from a retailer based on false advertisement claims of the manufacturer satisfies this requirement. Sherher, at 1499. Accordingly, the Court of Appeal granted the petition for writ of mandate and reversed the trial court order striking restitutionary relief from the class action complaint, id., at 1501.

NOTE: Under California law, “A ‘representative action’ is an action that is not certified as a class action in which a private person is the plaintiff and seeks disgorgement and/or restitution on behalf of persons other than or in addition to the plaintiff.” Shersher, at 1495 n.3 (citation omitted).

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