Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Claim that outlet store price tags inflated value of merchandise proceeds, (May 3, 2016)

By Michael Menzhuber, J.D., LL.M.

A claim that price tags on merchandise sold in Columbia Outlet Stores misled consumers by inflating the value of the merchandise adequately alleged violations of the California Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumers Legal Remedies Act (CLRA), according to the federal district court in Oakland, California (Stathakos v. Columbia Sportswear Company, May 2, 2016, Rogers, Y.).

After entering a Columbia Outlet Store, Jeanne and Nicolas Stathakos noticed that the merchandise was advertised with price tags denoting a higher price (reference price) and a much lower price (sales price). The plaintiffs purchased a pair of women’s shorts based on their belief that the reference price of the item, which was significantly higher than the sales price, was the true former price of the item, as sold at a mainline Columbia store or other non-outlet retailer.

The plaintiffs subsequently brought a putative class action which alleged that Columbia Sportswear Company and Columbia Sportswear USA Corporation engaged in deceptive and misleading labeling and marketing because it never intended to sell its merchandise at the reference price, thus inflating the concept of savings. The plaintiffs’ claims against Columbia alleged violations under California’s UCL, FAL, and CLRA.

Columbia filed a motion to dismiss for failure to meet the plausibility requirement under Federal Rule of Civil Procedure 8 and the particularity standard under Federal Rule of Civil Procedure 9(b).

The court determined that the complaint met the heightened pleading standard for fraud under Rule 9(b) because the plaintiffs alleged detailed information regarding their claims, including: (1) the date the plaintiffs purchased items from the Columbia Outlet Store; (2) the number of items that they bought; (3) the location of the store; (4) the sales price and reference price for one of the items; and (5) that such items were manufactured for exclusive sale at Columbia Outlet Stores.

The plaintiffs were not required to conduct a pre-suit investigation supporting their conclusion that the reference prices were not former, original, or regular prices since the information was not within their personal knowledge. Further, they alleged that there should have been no reference price, since the products were exclusively sold at Columbia Outlet Stores instead of that the reference price should be lower. Finally, the court found that it was facially plausible that the plaintiffs and other reasonable consumers would understand the reference prices to refer to former prices for the same product rather than comparable prices for similar products.

The case is No. 15-cv-04543-YGR.

Attorneys: Jeffrey M. Ostrow (Kopelowitz Ostrow, PC) for Jeanne Stathakos P. Craig Cardon (Sheppard, Mullin, Richter & Hampton LLP) for Columbia Sportswear Co.

Companies: Columbia Sportswear Co.

Cases: Advertising StateUnfairTradePractices CaliforniaNews