Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—S.D. Cal.: Claims of false sale prices partially survive motion to dismiss, (May 13, 2015)

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

Consumer claims that a retail clothing store made false claims about its sale prices partially survived the retailer’s motion to dismiss. The federal district court in San Diego ruled that the consumers sufficiently stated a claim for restitution, but that the consumers lacked standing to receive injunctive relief (Lucas v. Jos. A. Bank Clothiers, Inc., May 8, 2015, Burns, L.).

Background. David Lucas and Eric Salerno each purchased suits from Jos. A. Bank Clothiers, Inc., a retail clothier. Lucas purchased one suit at the “regular” price and received two additional suits for “free.” Salerno’s suit purchase was advertised as the “lowest price of the year”--$197 for the first suit and $47 for the second suit. The consumers contended that Jos. A Bank misrepresented the “regular price” of its clothing and that they relied on the misrepresentations when making their purchases.

In their complaint, the consumers alleged: (1) violations of the “unfair prong” of California’s Unfair Competition Law (UCL); (2) violations of the “fraudulent prong” of the UCL; (3) violations of the “unlawful” prong of the UCL; and (4) violations of California’s Consumers Legal Remedies Act (CLRA). They sought restitution and injunctive relief, on behalf of themselves and a specific plaintiff class, for the alleged UCL violations and injunctive relief for the alleged CLRA violations. Jos. A Bank filed a motion for a judgment on the pleadings to dismiss the complaint on the grounds that the individuals failed to establish entitlement to a remedy.

Entitlement to restitution. The retailer argued that the consumers were not entitled to restitution because they alleged no facts showing that the amount that they paid for the suits exceeded the actual value of what they received. The court disagreed. Although it was unclear to the court whether the consumers would be able to establish any quantifiable restitutionary damages, they did allege that Jos. A. Bank’s misrepresentations increased demand for their products, resulting in an increase in price and, but for those misrepresentations, they would not have purchased the clothing at the prices that they paid. According to the court, this was sufficient to establish that it was plausible that the amounts paid by the consumers to Jos. A Bank exceeded the value of what they received. Therefore, according to the court, the individuals sufficiently stated a claim for restitution.

Standing for Injunctive Relief. The court did, however, agree with the retailer that the individuals lacked standing under Article III of the U.S. Constitution to obtain injunctive relief because, since they were aware of the alleged pricing practices, they were not likely to be harmed by those practices in the future.

The consumers offered a public policy argument that no plaintiff would ever have standing to seek injunctive relief if the plaintiff had knowledge of deceptive advertising. The court acknowledged there was some case support for the argument but reasoned that the creation of public policy exception did not square with the mandate of the Article III standing requirement.

The consumers also attempted to establish standing by alleging that, if product labels and marketing promotions accurately reflected former prices and discounts, they would purchase Jos. A. Bank products in the future. The court, however, disagreed. Citing Gest v. Bradbury, 443 F.3d 1177 (2006), the court noted that “an interest in purchasing a product in the future, without more, is not sufficient to establish standing if the plaintiffs are not realistically threatened by a repetition of the violation.”

The court noted that, “where state-created interests are at issue, federal courts look to state law to define the ‘injury’ a plaintiff may assert to meet the Article III requirements.” The consumers’ alleged injury was defined by the UCL and CLRA and, under those statutes, reliance on the alleged misrepresentations, and a resulting injury, is required. The court found that, because any future purchases from Jos. A. Bank would be done so with the knowledge that the “former prices” were inflated 100 percent of the time, the individuals could always disregard the “former prices,” in which case they would be left with the same information as if the court had entered an injunction. Consequently, the court determined that the individuals did not allege an injury that was curable by an injunction.

The case is No. 14-cv-1631-LAB (JLB)

Attorneys: Daniel Frech (Spangenberg Shibley & Liber LLP), and Hassan Ali Zavareei (Tycko & Zavareei LLP) for David M. Lucas. E. Alex Beroukhim (Arnold & Porter LLP) for Jos. A. Bank Clothiers, Inc.

Companies: Jos. A. Bank Clothiers, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews