The cost of a deceptive-pricing consumer class action against Kohl's Department Stores: a $6.15 million settlement agreement, which was granted preliminary approval from a California federal court judge.
Steven Russell and Donna Caffey sued the national retailer, alleging that they purchased products from Kohl's on 15 and over 10 occasions, respectively. The items featured two prices: a selling price and a significantly higher price represented to be the item's "regular" or "original" price. According to the complaint, Kohl's led consumers to believe that they were receiving a substantial discount by simultaneously displaying the two prices.
However, the plaintiffs claimed that the higher amount was a false price and not the true regular or original price for Kohl's merchandise, nor was it the prevailing market retail price within the three months immediately preceding its advertisement, as required by California law.
U.S. District Court Judge R. Gary Klausner denied Kohl's motion to dismiss the suit and granted the plaintiffs' motion for class certification, albeit only as to a class seeking injunctive relief. The parties then reached a deal, composed of both monetary and injunctive relief.
Kohl's agreed to provide a total of $6.15 million, divided among settlement administration costs not to exceed $1 million, reasonable attorneys' fees and costs not to exceed 25 percent of the total or $1.53 million, two class representative payments of $7,500, and roughly $3,597,500 to be disbursed to the class.
Class members are defined as individuals who purchased one or more items from one of the 116 Kohl's stores in California between June 11, 2011, and the present at a purported discount of at least 30 percent off the "original" or "regular" price. Each class member will receive a gift card credit, estimated to be worth $20. The gift cards are fully transferrable and have no expiration date.
As for injunctive relief, the defendant agreed to changes in its price-comparison advertising policies and promised to "enhance and expand programs designed to promote legal compliance including enhanced pricing compliance computer systems and pricing compliance training for employees in the relevant buying office."
Judge Klausner granted preliminary approval to the deal, finding that all requirements under both Federal Rule of Civil Procedure 23(a) and (b)(3) were satisfied. "After careful review of argument and evidence in support of the amount requested, the court finds that preliminary approval of the class settlement is appropriate," he wrote.
To read the order in Russell v. Kohl's Department Stores, Inc., click here.
Why it matters: Many retailers are facing suits that challenge their pricing for markdowns (including Columbia Sportswear Company and J. Crew). The deal in the Kohl's litigation is slightly higher than the agreement reached by Michael Kors in a similar suit, where the retailer agreed to pay $4.9 million.