Tuesday, December 26, 2017

"prevailing price" consumer protection rule isn't unconstitutionally vague

Haley v. Macy’s, Inc., 2017 WL 6539825, No. 15-cv-06033 (N.D. Cal. Dec. 21, 2017)

Haley brought a typical putative class action, with the usual California claims, alleging that Macy’s mislabeled its merchandise with false or inflated “original” or “regular” prices to induce customers to purchase “on sale” merchandise based on a perceived bargain.  The court found that Haley had alleged Article III injury in fact.

Macy’s argued that several named plaintiffs couldn’t have been deceived because they had knowledge of Macy’s pricing practices before they bought.  One plaintiff worked at a Michael Kors boutique in Macy’s, and another had a close relationship with her.  At the time of the first plaintiff’s employment, Michael Kors was involved in an unrelated false advertising case. But that employment history didn’t “establish or even suggest that she had knowledge of any pricing practices.” Any inference of knowledge due to online friendship was even more attenuated.  Likewise, the fact that Haley bought an ornament from Macy’s four days before suing was “suggestive,” but didn’t establish knowledge of Macy’s pricing practices.  Nor did one plaintiff’s documentation of her purchase suggest that she was anticipating litigation.  “Consumers may research and document their purchases and compare with other items without anticipating litigation or having knowledge of the pricing practices at issue in this case.”  [The judge must know someone like my spouse.]

Among other things, Macy’s also argued that plaintiffs didn’t offer a factual basis for their allegations that Macy’s didn’t sell the products at the original or regular prices and that other merchants did not sell merchandise of like grade and quality at Macy’s advertised prices. The court found that the complaint was sufficient.  It cited “an exemplar coffee maker that was advertised with a regular price of $149.99, but which all sellers on Amazon.com and the manufacturer’s website offered for significantly lower prices.” Other named plaintiffs noted that the products they purchased continued to be on sale at the discounted, rather than original price, months after purchase. Macy’s pricing policy for its online merchandise also stated that “regular” and “original” prices “may not be based on actual sales of the item.” This was enough at this early stage of the litigation.

Finally, Macy’s argued that California Business & Professions Code § 17501 is unconstitutionally vague in stating: “No price shall be advertised as a former price of any advertised thing, unless the alleged former price was the prevailing market price ...within three months next immediately preceding the publication of the advertisement or unless the date when the alleged former price did prevail is clearly, exactly and conspicuously stated in the advertisement.” The statute defines “prevailing market price” as the “worth or value” at “wholesale if the offer is at wholesale, retail if the offer is at retail, at the time of publication of such advertisement in the locality wherein the advertisement is published.” The court found that this language was sufficient to provide fair warning of what is proscribed, given the context of the FAL more generally and its aim of preventing “unfair, deceptive, untrue, or misleading advertising.” The OED defines “prevailing” as “[p]redominant in extent or amount” and “most widely occurring or accepted.” That wasn’t unconstitutionally vague. 

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