Thursday, July 27, 2017

Deceive, inveigle, obfuscate--false discount claims still don't cause cognizable injury

Mulder v. Kohl’s Department Stores, Inc., --- F.3d ----, 2017 WL 3167620, No. 16-1238 (1st Cir. Jul. 26, 2017)

Mulder bought several items that listed both purchase prices and significantly higher “comparison prices.” Mulder alleged that these comparison prices were inflated and invented, and that Kohl’s misled unsuspecting consumers about the quality of its products. The court of appeals affirmed the district court’s grant of a motion to dismiss.  She simply didn’t suffer relevant injury under Massachusetts Chapter 93A.  Even allegations that Mulder was “induced” to travel to a Kohl’s store by false advertising and that she therefore suffered a resulting economic injury in the form of travel expenses wasn’t good enough.  She didn’t explain how deceptive statements on a price tag could have caused her to travel to Kohl’s in the first place, and didn’t identify other deceptive ads with the requisite specificity.

A false sense of value isn’t the requisite identifiable injury, distinct from the claimed deceptive conduct itself, required by Massachusetts law. “[A]bsent allegations of real loss grounded in some objective measure, [an] ‘induced purchase’ theory of injury is simply the ‘per se’ theory of injury in new clothing.”  So too with the “induced travel” theory, which, if accepted, “would render meaningless the SJC’s clear rule against ‘per se’ or ‘deception-as-injury’ claims.”

The same conclusions are also provided in Shaulis v. Nordstrom, Inc., -- F.3d --, 2017 WL 3167619, No. 15-2354 (1st Cir. Jul. 26, 2017). Shaulis argued that the sweater she bought, allegedly due to the price misrepresentation, was “worth nothing at all to [her] since she never would have bought it” absent Nordstrom’s deception. But she received the benefit of her bargain, and didn’t allege that there were flaws in the sweater that made it worth less than what she paid.  Subjective belief in value isn’t a legally cognizable injury under Chapter 93A.

Of possible interest: the court of appeals rejected Shaulis’ analogy to “fake-Rolex hawking” because “falsely advertising a watch as a ‘Rolex’ is a material misstatement about the watch’s quality.”  But this is obviously insufficient as a distinction!  According to Shaulis’ complaint, so was the discount claim—and the court of appeals supposedly accepts her claim that she was materially misled (that is, that she changed her behavior because of the misrepresentation).  Why then is not a factual inquiry required to determine whether the fake Rolex-buyer received the benefit of her bargain?  Arguably there is a drop in resale price once the fakery is revealed—but if the initial price were low enough, that shouldn’t matter.  The point being that the court of appeals carefully distinguishes deception from injury when it comes to the price representations, but not when it comes to the fake Rolex, because trademark is different.

The court of appeals did note that Shaulis might well have inferred greater value from the deceptive price tag, and that Nordstrom could have hoped that consumers would make that inference.  “Indeed, it is presumably just this kind of erroneous inference that Massachusetts seeks to prevent by regulation.”  Still, that doesn’t mean there was injury under Chapter 93A. This essentially means that there is no private cause of action, because without injury there can’t be injunctive relief either, for conduct banned by Massachusetts consumer protection law.  But the AG can still enforce the law.

Shaulis’s common law claims -- for fraud, unjust enrichment, and breach of contract – failed for basically the same reasons.

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