Monday, October 16, 2017

Consumer's ability to trust future representations provides standing to seek injunctive relief

Delman v. J. Crew Group, Inc., 2017 WL 3048657, No. 16-9219 (C.D. Cal. May 15, 2017)

This is another factory outlet false advertising case. The J. Crew Factory Website sells clothing and other items at what appears to be a significant discount. It used two prices for each item: the “Valued At” price and “Your Price.” A reasonable consumer would allegedly believe, falsely, (1) that the Valued At price was the original price of an item sold at one of J. Crew’s higher priced stores and/or (2) that the item is similar to one sold by other merchants at or near the Valued At price. Instead, while the items resemble those sold at non-outlet J. Crew stores, they’re of inferior quality and were never offered, at a J. Crew store or anywhere else, for sale at the Valued At price. “Despite the promise of a discount implicit in the comparison between the Valued At and Your Price sales prices, J. Crew is in fact selling the goods available on the Factory Website at full price.” 

J. Crew maintained in a previous lawsuit that the Valued At price represented the price at which other retailers offered the same or similar goods. Delman hired an expert who investigated to see whether the same or similar goods were available for purchase from other retailers at or around the Valued At price, but did not find comparable goods available at the Valued At price.  Instead, many (if not all) of the goods could be bought at or below the Your Price price.

The court found that Delman’s allegations satisfied Rule 9(b), both as to the implied discount-from-regular-J. Crew claim and the “Valued At means prevailing market price for a similar item” theory. J. Crew argued that her decision to plead two theories of deception made her allegations fatally vague, but “there is no reason why a pricing scheme that is purposely ambiguous could not also be deceptive or misleading.”  If a reasonable consumer could interpret the Valued At price to mean one of multiple, mutually exclusive things, all of which are untrue, that states a claim. 

Nor were the theories so implausible that no reasonable consumer could be misled.  J. Crew argued that “value” could only reasonably be interpreted to mean the defendants’ subjective opinion of the worth of the goods, based on dictionary definitions.  But the dictionary wasn’t the end of the matter, when the issue was “how a reasonable consumer would interpret the phrase ‘Valued At’ in the context of the specific commercial interaction that Plaintiff has challenged.” In context, “the great esteem in which J. Crew holds its wares” was not the only interpretation a reasonable consumer could give the term. As the court pointed out, the Valued At price was located right next to the Your Price sales price, and was struck out.  “Why place the two prices next to one another if they are not meant to be compared? And why strike out the Valued At price, if not to suggest to the purchaser that he or she is getting a bargain of some sort?”  This “visual language,” the court wisely noted, “could easily be understood to mean that the Valued At price refers to a real, objective price, which the Factory Website has discounted for the benefit of its customers.”

Plaintiff did fail to provide proper notice as required to bring a breach of contract claim in California, and also had to wait to bring a CLRA claim given the notice requirement of the CLRA.

J. Crew argued that Delman suffered no damages, because she received the goods that she paid for at the agreed-upon price.  But courts have rejected this argument under California law.  “[A] bargain hunter is, in fact, economically harmed when the seller inflates the perceived value of its products” (citing Hinojos v. Kohl’s Corp., 718 F.3d 1098 (9th Cir. 2013)).

Finally, J. Crew argued that Delman lacked standing to seek injunctive relief because she no longer risked being deceived by J. Crew’s deceptive pricing. However, Delman alleged that she would purchase more apparel from J. Crew if it were to cease making its false representations.  The issue wasn’t whether policy concerns for the enforcement of California law could trump Article III, but rather that Delman alleged irreparable injury in the future: she couldn’t ascertain, from J. Crew’s pricing scheme, the true value of the items she’d like to buy, and thus she can’t trust its bargain claims.  This continued inability to trust was a sufficient likelihood of future injury to confer Article III standing.

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