Restitution available for false discounts even if goods were ok

Spann v. J.C. Penney Corp., 2015 WL 1526559, No. SA CV 12–0215 (C.D. Cal. Mar. 23, 2015)

 

Spann brought the usual claims against JCP based on purchases she made shopping the sale racks. She believed that she was getting sale items.  Her receipt listed ten items, each with a price; then each price was followed by a line of “Total Discounts,” a negative number; then came a “Discounted Price,” the price minus the “Total Discounts.” At the bottom, the receipt said, “Your Total Savings Today: 135.10.” She testified that she wouldn’t have bought the items at the same prices if she hadn’t believed they were on sale. The size of the sale/discount mattered to her.  She alleged that the price comparisons listed were false.  Spann testified that she “would like to visit” defendant’s stores again but does not “feel like [she] can trust [JCPenney.]” “If the Court issues an injunction ordering [JCPenney] to comply with California’s comparative price advertising law, [she] would likely shop at [JCPenney] again in the near future.”

 

The court first rejected JCP’s argument that Spann wasn’t entitled to restitution, which “under [the UCL, FAL, and CLRA] must be of a measurable amount to restore to the plaintiff what has been acquired by violations of the statutes, and that measurable amount must be supported by evidence.”  JCP argued that restitution must account for benefits received in the transaction.  But the cited case, In re Google Adwords Litigation, 2012 WL 28068 (N.D.Cal. 2012), articulated a rule specifically limited to its “parties and facts,” and was contrary to the weight of California authority anyway.  The difference between what the plaintiff paid and the value of what the plaintiff received can be a measure of restitution, but it’s not the only one. The advantage realized by the defendant can be another.

 

The court accepted, at this stage, three possible alternatives for calculation restitution: (1) “complete restitution, measured by the full purchase price paid”; (2) “restitution based on the false ‘transaction value’ promised by JCPenney”; or (3) “restitution measured by the net profits that JCPenney received from sales of its products based on deceptive price comparisons[.]” Recission with complete restititution could be an appropriate remedy.  Another case involving an unfair practice of adding an insurance premium to the price of purchased vehicles increased the cost of cars sold by approximately $30; in that case, full restitution for all money paid for the cars was inappropriate.  But the statutory objective is to “restor[e] to the victims sums acquired through [defendant’s] unfair practices,” and Spann testified that every dollar she spent was as a result of JCP’s alleged false advertising, which would make a full refund proper.

 

Or, restitution could be calculated using the difference between the amount that plaintiff actually paid to defendant and the amount that plaintiff would have paid had defendant “advertised a truthful discount from the real ‘regular’ price as required by statute.”  JCP argued this was an unwarranted award of expectations (rather than a real interest).  But that conflated the measurement with the nature of Spann’s interest in the money she wanted restored.  JCP accepted Spann’s money in exchange for clothing; her interest in that money was not merely an expectation interest. 

 

JCP also argued that the discount approach didn’t make sense, because then a customer who bought a blouse for its original price of $40 would suffer no injury, but if JCP discounted it by 33%, customers who bought at 26.67% would be harmed.  The bigger the markdown/the lower the price, the more the customer would be “harmed.”  The court found that JCP deliberately ignored the “crux” of the case:

 

[P]laintiff alleges that defendant’s discounts were false, and that customers did not actually save any money at all. What plaintiff proposes, therefore, is “the more you think you save, the more you are harmed.” Or, as plaintiff puts it, “the bigger the lie, the more restitution JCPenney should owe.” The amount plaintiff thought she was saving was a factor in her purchase decisions.

 

Plus, Spann’s expert explained that, at least for some purchases, she paid more than the prevailing market price. She could argue that payment of the “transaction value,” if measurable and supported by evidence, would restore sums acquired through JCP’s unfair pricing practices.

 

Finally, JCP’s net profits from transacting with Spann was a possible alternative.  Disgorgement can be restitutionary or non-restitutionary; only the latter form was unavailable to Spann.

 

JCP also argued that the CLRA claims based on “[a]dvertising goods or services with intent not to sell them as advertised,” and “[m]aking false or misleading statements of fact concerning reasons for, existence of, or amounts of price reductions” sounded in fraud. A fraud plaintiff is “entitled to recover the difference between the actual value of that with which [she] parted and the actual value of that which [she] received,” but JCP argued that there was no evidence of such a difference here.  There were material questions of fact on that, as noted above (evidence that she paid more than the prevailing price).  JCP argued that Spann’s expert failed to account for coupons and discounts, but that just created a fact question.

 

JCP argued that Spann lacked standing to seek injunctive relief because there was no threat of future injury.  The court disagreed (and here, the injury “I don’t know whether this discount is real” really does seem capable of recurring, as opposed to someone who once didn’t know what high fructose corn syrup was). “When determining what constitutes the same type of relief or the same kind of injury, [courts] must be careful not to employ too narrow or technical an approach ... [and] must reject the temptation to parse too finely[.]” Armstrong v. Davis, 275 F.3d 849 (9th Cir. 2001), abrogated on other grounds by Johnson v. California, 543 U.S. 499 (2005). Accordingly, “[w]hen a named plaintiff asserts injuries that have been inflicted upon a class of plaintiffs, [courts] may consider those injuries in the context of the harm asserted by the class as a whole, to determine whether a credible threat that the named plaintiff’s injury will recur has been established.”  So here.

 

Although the alleged scheme temporarily stopped in 2012, Spann alleged that JCP has, since 2013, “experimented with a variety of pricing practices, including a return to false comparative price advertising.” It was undisputed that JCP “restore[d] initial markups ... to support the return to a promotional department strategy and that means initially marking up its goods to sufficient levels to protect margins when the discount or sale is applied.”  And there was a fact issue about whether Spann planned to return to JCP—she had returned there and bought an item since she sued. Her knowledge of the false advertising wasn’t enough to keep her from having standing; otherwise federal courts wouldn’t be able to enjoin false advertising. Plus, JCP acknowledged “that its repeated adjustments to its pricing strategies may create confusion among customers,” which might create a threat of future harm.