California Supreme Court Denies Review and Depublication of Decision Permitting Restitution by Indirect Purchasers under the UCL

On September 10, 2007, Division 5 of the Second Appellate District (Los Angeles), issued its decision in Shersher v. Superior Court, 154 Cal.App.4th 1491 (2007), in which it held that a plaintiff consumer could obtain "restitutionary" relief under California's Unfair Competition Act (the "UCA") (Cal. Bus. & Prof. Code 17200) from a defendant despite the existence of a retail intermediary in the transaction causing harm to the plaintiff.  Yesterday, the California Supreme Court denied review and depublication of this decision and, therefore, this decision is here to stay.

Prior to this decision, it had been argued by the defense bar that "restitution" under the UCA, was limited to only those amounts that were "directly" given up by the plaintiff an in the possession of the defendant.  This understanding of "restitution" under the UCA was premised upon the California Supreme Court's statement in Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1132, 1149 (2003), that "[a]ny 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.” [Emphasis added.]

The Shersher court, however, essentially held that this language was taken out of context and not intended to limit restitutionary relief under the UCA to "direct" purchasers.  It stated:

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

It remains to be seen what impact this decision will have on what continues to be, at least to some, the "expanding" definition of "restituionary" relief under the UCA.  A copy of the Shersher decision can be found here.