Monday, September 12, 2016

Another court finds that injury from fake "sale" prices is redressable

Le v. Kohls Department Stores, Inc., 160 F. Supp. 3d 1096 (E.D. Wisc. 2016)

Le sued under various state consumer protection statutes (and unjust enrichment), alleging that Kohls falsely advertised “sale” or “discount” prices off of the “regular” or “original” item prices, which were not in fact regular. As a graph from Consumers’ Checkbook/Center for the Study of Services, an independent, nonprofit consumer organization, indicates, “at Kohl’s, the sales often never end”:
CC graph
Le alleged that Kohls’ marketing tactics are economically harmful because they deceive consumers to: (1) buy products that they would not have bought “but for” the illusory “sale”; or (2) pay more for products than they would have paid had they been fully informed of the actual “item price.”

Kohls moved to dismiss, arguing that Le didn’t offer a legally cognizable method of calculating his claimed restitution.  Kohls argued that restitution would require proving a difference between the value of the products Le bought and the price he paid.  He didn’t allege any such difference.

The court, however, concluded that California’s UCL and CLRA didn’t confine restitutionary relief to that available under the price-to-value method.  The appropriate measure of recovery depends on the circumstances.  Furthermore, determining the proper calculation would be inappropriate at the pleading stage, and the court reserved questions about how to factor in the value of the products that Le received.  The measure of his harm, as alleged, was that he bought a product that he paid more for than he would’ve been willing to pay if he’d known the truth, which is a measure the 9th Circuit has endorsed.  Likewise, the court allowed Le’s claims for injunctive relief to continue.  Although he was aware of the alleged scheme, that wasn’t enough, because to use that as a reason to preclude injunctive relief would vitiate the intent of California’s consumer protection law.  Le properly alleged the likelihood of continued harm because he alleged that the pervasive, ongoing scheme made it impossible for any consumer to tell what the true price was.  Given that Le wasn’t complaining about a specific product but a broad practice,

the Court is unclear just exactly what Le would be expected to be “aware” of in order to avoid future harm from Kohls. For example, should Le be “aware” that housewares are deceptively priced, while men’s apparel is not? Should Le be “aware” that Kohls’ holiday sales are more egregiously deceptive than their day-to-day offers? These hypothetical questions underscore the point that discovery is necessary to parse out the salient facts in relation to Le’s claim for relief.

The court also allowed Le to claim on behalf of a multi-state class of consumers, at least under Article III at this point in the case; choice of law issues remained to be decided.  The court acknowledged Kohls’ “prudential” concerns about the effects of this kind of claim—presumably settlement pressure—it pointed out that, via CAFA, Congress “authorize[d] federal judges to resolve big-stakes, multi-state class actions.”

The Wisconsin Deceptive Trade Practices Act claim survived because, though it required statements “made” or “disseminated” in Wisconsin, Le adequately pled that Kohls’ principal place of business was in Wisconsin and that its “acts, practices and policies pertaining to the advertising, marketing, and sale of merchandise...were established and emanated from Wisconsin.” Even if Le “saw” Kohls’ allegedly deceptive statements in California, the ads at issue were “made,” and then “disseminated,” by Kohls from its Wisconsin headquarters.

Unjust enrichment claims also survived in the alternative.

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