In an important new decision, Shersher v. Superior Court, ___ Cal.App.4th ___ (September 10, 2007), the Court of Appeal (Second Appellate District, Division Five) held that the presence of a retail intermediary does not bar a UCL restitution award. The following sentence from Korea Supply had led defendants to argue (and some trial courts to hold) that restitution is not an available remedy in cases involving retail intermediaries because the defendant took no money "directly" from the plaintiff: "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.” Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1132, 1149 (2003) (emphasis added). The Court of Appeal explained in Shersher that this language was not intended to limit the UCL's restitution remedy to cases by "direct" purchasers:
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.
Slip op. at 7. Shersher should finally put an end to this argument in cases involving products sold through retailers. Shersher also distinguished Alch v. Superior Court, Madrid v. Perot Systems, and Feitelberg v. Credit Suisse.
UPDATE: A reader posted a comment asking why Korea Supply uses the word "directly," if it's not intended to limit the scope of UCL "restitution." In fact, no appellate court has held that the word "directly" limits UCL actions to cases not involving retail intermediaries. Nor would such a holding be consistent with Korea Supply. The quoted sentence appears to support such an argument only when taken out of context. As explained in the Shersher decision, Korea Supply involved a claim for what amounted to damages, and did not involve loss of money that was once in the plaintiff's hands. That was the point of the word "directly" in Korea Supply. No money or property had passed "directly" from the plaintiff's pocket to the defendant's (whether through an intermediary or otherwise). Nor had it done so in Alch, Madrid, or Feitelberg. Hence, the plaintiffs in those cases had no UCL restitution claim. The facts of Shersher (and other cases involving manufacturers who misled consumers about their goods, but sold the goods through retailers) are quite different and fall squarely within the definition of "restitution" set forth in Korea Supply. In the Shersher court's words:
The UCL [as interpreted in Korea Supply] ... requires only that the plaintiff must once have had an ownership interest in the money or property acquired by the defendant through unlawful means. Microsoft’s argument is contrary to the plain language of the UCL and the Supreme Court’s mandate that the UCL be interpreted broadly.
Slip op. at 10.