Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—E.D. Wis.: Claims against Kohl’s ‘marked-down’ pricing allowed to proceed, (Feb 9, 2016)

By Edward L. Puzzo, J.D.

A California resident was entitled to bring California, Wisconsin and multi-state class action unfair trade practice claims against Kohl’s Department Stores based on allegations that its “marked-down” pricing scheme was deceptive, the federal district court in Milwaukee has ruled (Le v. Kohl's Department Stores, Inc., February 8, 2016, Stadtmueller, J.).

Victor Le, on behalf of a putative class, brought claims against Kohl’s Department Stores under Wisconsin’s Deceptive Trade Practices Act (WDTPA), California’s Unfair Competition Law (UCL), and California’s Consumers Legal Remedies Act (CLRA), based upon its practice of advertising items for sale at prices purportedly marked-down from original prices. Le alleged that this advertising was deceptive because Kohl’s had never actually sold the items at the so-called original prices. Le claims that, as a result of Kohl’s marketing tactics, (1) he bought products that he would not have bought “but for” Kohl’s illusory “sales”; and/or (2) he paid more for products than he would have paid had he been fully informed of the actual “item prices” for that merchandise.

Monetary damages under UCL, CLRA. Le, a California resident, brought a claim for monetary damages under the UCL and CLRA. Kohl’s moved to dismiss on the ground that Le did not allege that he purchased products from Kohl’s at prices that exceeded the product’' values—a price-to-value method of calculating damages—and thus did not plead a cognizable claim for restitution.

The court agreed with Le that California law did not require the use of the price-to-value method and that multiple ways of calculating restitution were allowed. Further, the court stated at this juncture in the litigation, it was premature to determine which method of restitution, which must be supported by substantial evidence, was the proper one to apply to the facts of this case. Le’s failure to plead that he purchased Kohl’s products at a price greater than their value was not fatal to his claim, the court ruled.

Injunctive relief under UCL. Le also sought injunctive relief under the UCL. Kohl’s responded that Le lacked Article III standing to bring such a claim because, being aware of the allegedly deceptive price comparison scheme, he was unlikely to be victimized by it again. But Le replied that a plaintiff must know that the defendant’s advertising scheme is deceptive in order to sue; and, under Kohl’s’ theory, as soon as plaintiffs became aware of such unlawful conduct, they would automatically lose standing to seek an injunction. Consequently, Kohl’s theory, if accepted, would make injunctive relief under the UCL impossible to obtain, the plaintiff argued.

The court concluded that Le, alleging that the advertising scheme was “company-wide, pervasive and continuous,” had sufficiently pleaded a significant likelihood of recurring economic injury for standing purposes. The pleading raised plaintiff’s fear that the misleading marketing scheme would likely continue to cause economic harm to consumers in the future and sufficed to establish Article III standing. His mere awareness of the pricing scheme did not strip Le of standing, the court ruled.

Multi-state claims. Le also alleged that Kohl’s conduct violated the consumer protection laws of 40 states and the District of Columbia. Kohl’s responded that the claims must be dismissed because Le lacked constitutional standing to sue under the laws of states in which he did not reside and had suffered no injury.

Regarding standing in class actions, the court cited Morrison v. YTB Int’l, Inc., 649 F.3d 533 (7th Cir. 2011) in support of the conclusion that Le did have constitutional standing to pursue his claim on behalf of a multi-state class of consumers, regardless of the fact that he did not live or sustain injury in more than one state. Whether he can adequately represent individuals from other states will be decided during the class certification inquiry, the court ruled.

WDTPA claim. Kohl’s also challenged Le’s right to bring an action under the Wisconsin Deceptive Trade Practices Act (WDTPA), as he was a California resident who had shopped at a Kohl’s retail location in California. The court noted that, while actionable statements under the WDTPA must be “made” in Wisconsin, Kohl’s, a Wisconsin company, “made” or caused to exist the advertising practices complained of. The court therefore declined to dismiss Le’s WDTPA claim.

The case is Civil Action No. 15-CV-1171-JPS.

Attorneys: E. Kirk Wood (Wood Law Firm LLC) for Victor Le. Alex Beroukhim (Arnold & Porter LLP) and John L. Kirtley (Godfrey & Kahn SC) for Kohl’s Corporation and Kohl’s Department Stores, Inc.

Companies: Kohl’s Department Stores, Inc.; Kohl’s Corporation

Cases: StateUnfairTradePractices Advertising ConsumerProtection WisconsinNews