discovery rule applies to false "reference price" allegations at outlet stores

Clark v. Eddie Bauer LLC, --- F.Supp.3d ----, 2025 WL 814924, No. 2:20-cv-01106-RAJ (W.D. Wash. Mar. 12, 2025)

A good choice for publication given that the opinion addresses (and rejects) some arguments I haven't seen before. Clark sued Eddie Bauer under Oregon’s Unlawful Trade Practices Act for using purportedly false and misleading tagged list prices, aka reference prices, on the garments sold at Eddie Bauer’s outlet stores. A previous district court decision found the claim time-barred, even though Eddie Bauer’s policy change of using the phrase “comparable value” on its sales tags for garments as opposed to a reference price based on the garment’s claimed fictitious full retail price violated the UTPA, “as Eddie Bauer must provide the origin of any such reference price.” On appeal, the Ninth Circuit certified a question to the Oregon Supreme Court: whether a consumer suffers an ascertainable loss under the UTPA when the consumer purchased a product that she would not have purchased at that price but for a violation of the UTPA if the violation arises “from a representation about the product’s price, comparative price, or price history, but not about the character or quality of the product itself.” That court said yes, recognizing Clark’s “purchase price theory,” holding that “when a person acts in response to the deception by spending money that the person would not otherwise have spent, the person has been injured to the extent of the purchase price as a result of that deception.” Clark v. Eddie Bauer, LLC, 532 P.3d 880 (2023).

The Ninth Circuit subsequently accepted Clark’s standing and ruled that she could seek injunctive relief against Eddie Bauer’s ongoing falsely discounted prices, despite the new use of the term “comparable value.” It also held that monetary damages for past harms was not an adequate legal remedy for Clark’s future harm and granted Clark leave to amend her complaint is appropriate so she can explain the circumstances associated with her discovery of Eddie Bauer’s advertising scheme. The amended complaint described Clark’s “unearthing of the advertising scheme in 2020 after finding the law firm’s website describing Eddie Bauer’s unlawful practices.” (In a footnote, the court declined Eddie Bauer’s invitation to impute counsel’s knowledge of the scheme to Clark herself.)

The court agreed that, for purposes of a motion to dismiss, Clark had pled that the discovery rule applied to toll her claim. Oregon’s UTPA provides that a party must commence a lawsuit “within one year after the discovery of the unlawful method, act, or practice.” The statute of limitations begins to run when the plaintiff “knows or should have known of the allegedly unlawful conduct.” And it is an objective standard: “how a reasonable person of ordinary prudence would have acted in the same or a similar situation.”

In Oregon, a plaintiff must have had sufficient knowledge to “excite attention and put a party upon his guard or call for an inquiry notice.” In addition, “it must also appear that a reasonably diligent inquiry would disclose the fraud.” “Application of the discovery rule presents a factual question for determination by a jury unless the only conclusion that a jury could reach is that the plaintiff knew or should have known the critical facts at a specified time and did not file suit within the requisite time thereafter.”

Eddie Bauer argued that Clark knew or should have known of her case well over one year before she sued in July 2020 because “her experience using the products that she bought ... provided enough information for her to conclude before July 2019 that she had been misled as to the value of the items she purchased.” They also posit that when she bought the items, she knew the reference prices, and she “apparently used the products sufficiently to gauge their quality and value.”

The court found this to be nonsense: As Clark argued, “[t]he only way for a person to know that Eddie Bauer’s advertised discounts were false is for the person to know Eddie Bauer’s true historical selling prices for the products he or she purchased.” “The Court struggles to find a correlation between a consumer wearing an item of clothing and the same consumer somehow knowing the item’s regular selling price or worth merely because she wears it.” It is not the case that, “when a reasonable consumer wears an item, she learns facts that trigger suspicion of a discrepancy between a garment’s ticketed price and its regular selling price.”

Nor did it appear from the face of the complaint that Clark had a duty to conduct an investigation. She had no obligation to uncover a pricing scheme “by talking to her fellow consumers, to whom she has no relation.” Nor did the court accept that she could simply have asked Eddie Bauer for price information:

First, Plaintiff had no idea Eddie Bauer was engaging in an unfair trade practice at the time. Second, there is no evidence to show that its employees would know or have access to this information. These two considerations also do not factor in the employee’s state of mind, as an employee might be suspicious of such questions and feel obligated to protect her employer.

A person sometimes cannot discover a false advertising scheme “because, by design, its very nature is hidden and impossible for an ordinary consumer to discover.”

What about the argument that “Comparable Value” in an outlet context isn’t deceptive? It was plausibly reasonable for consumers to interpret that to mean “Eddie Bauer’s price for the identical item.” “Under Oregon’s UTPA, Eddie Bauer has an obligation to provide the origin of a reference price. It has not done so.”

As for standing to seek injunctive relief, the Ninth Circuit explained that Clark “will be harmed if, in the future, she is left to guess as to whether Eddie Bauer is providing a legitimate sale or not, and whether products are actually worth the amount that Eddie Bauer is representing.”