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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