Oregon SCt rules on "ascertainable loss" in false discount case

Clark v. Eddie Bauer LLC, 371 Or. 177, --- P.3d ----, SC S069438 (Jun. 29, 2023)

Under Oregon’s Unlawful Trade Practices Act (UTPA), a person who suffers an “ascertainable loss of money or property” as a result of another person’s violation of the UTPA may maintain a private action against that person. The Ninth Circuit certified to the state supreme court the question whether a consumer can suffer an “ascertainable loss” under the UTPA when she buys items at an outlet store that have been advertised as being sold at a substantial discount but that have never been sold at that or any other location at the “list,” or non-sale price, and when she would not have purchased at that price but for the false advertising of a sale price. The state supreme court answered yes, that was an ascertainable loss.

Under the facts as stated in the certification order, more than 90 percent of the products offered at Eddie Bauer outlet stores are manufactured solely for sale at the outlet stores and are not sold elsewhere:

Defendants advertise clothing at the Eddie Bauer Outlet stores as being sold at a substantial discount, typically between 40 percent and 70 percent off. However, with limited exceptions, the clothing is never sold—at the outlet stores or anywhere else—at the “list” price, i.e., the price shown on each product’s original tag; the clothing sold at the outlet stores is only ever sold at “discounted” prices.

State law bars, among other things, false or misleading representations of fact concerning the reasons for, existence of, or amounts of price reductions and advertising price comparisons without conspicuously identifying the origin of the price the seller is comparing to the current price. The plaintiff alleged that she wouldn’t have made her purchases if she’d known that the goods weren’t in fact being sold at a discount.

Defendants argued that plaintiff had received exactly the products that she believed she was buying, and that their value at the time of sale was at least what plaintiff had paid. They noted that plaintiff had not alleged, for example, that the Fleece Zip [she bought] was worth less than the $19.99 sale price or that it did not possess the features or quality that plaintiff had expected it to have.

Thus, they argued, there was no ascertainable loss. The district court granted defendants’ motion to dismiss on the ground that the complaint didn’t allege that defendants had made false representations about the character or quality of the garments that plaintiff bought, which the district court understood to be essential under the state supreme court’s decision in Pearson v. Philip Morris, Inc., 361 P.3d 3 (2015). On appeal, plaintiff noted that many of the provisions of the consumer protection law prohibit deception in ways that do not relate to the quality or characteristics of a product, and argued that she’d suffered an ascertainable loss in various ways, including price inflation from the putative bargain.

“Ascertainable loss” means, generally, “any determinable loss,” even a loss that cannot be measured exactly. Only economic losses may be recovered, although even if “[t]he private loss … may be so small that the common law likely would reject it as grounds for relief, yet it will support an action under the statute.” And, given the legislature’s consumer-protection concerns, it was appropriate to take a broad view of “ascertainable loss.”

The court here addressed only the theory that the plaintiff wouldn’t have purchased at the price that she actually paid had she known the truth, not other theories of injury (such as that the overall market price was inflated by the even higher reference prices).

“[P]laintiff only was required to allege that, as a result of any practice prohibited under the UTPA, she suffered an ascertainable loss—that is, a loss capable of being observed or determined, however small.” Where the product was not what was bargained for, it doesn’t matter that there’s no outside, objective measure of market value.

In plaintiff’s case, what she wanted was items of clothing whose selling price had, at some earlier time, been what defendants’ false price list-ings indicated. What she received, on the other hand, was merchandise that had never been offered for sale at those prices. Thus, whether or not those items ever sold at those higher price points, and whether or not defendants’ alleged pricing scheme can be viewed as representing that the items previously had retail or market values equivalent to the prices shown on their product tags, plaintiff paid money to defendants for articles of clothing that she would not have bought had she known their true price history. The money that plaintiff is out as a result is her “loss.”…

As the Connecticut Supreme Court observed in discussing that state’s statute, it should not matter that a person unlawfully led to believe that she was buying one thing ultimately received another thing of equal or even greater value. Hinchliffe, 184 Conn at 614, 440 A2d at 814 (“To the consumer who wishes to purchase an energy saving subcompact, for example, it is no answer to say that he should be satisfied with a more valuable gas guzzler.”).

The alternative holding would leave citizens without a remedy where the legislature declared a practice unlawful and provided for a private remedy, and we don’t live in a world of perfect efficiency where the plaintiff could resell the product without transaction costs for exactly the price she paid.  Thus, the court rejected the idea that “a person does not suffer an ascertainable loss so long as she receives something of equal or greater value than the money she was deceived into giving up for it.”

Although other courts interpreting other laws have reached the opposite conclusion, reasoning that deception alone can’t be injury, that’s not what’s going on. The injury is loss of money the consumer would have retained if the defendant had not unlawfully deceived her (as opposed to a situation where she saw the allegedly fake sale price, believed it and thus was deceived, but still didn’t buy, where there would be no loss).