Retailers have been under siege, particularly in California, by putative class actions involving allegations of “false or misleading” advertising practices. Generally, the crux of the allegations is that retailers are inducing customers to make purchases by overstating or fabricating the amount that a customer will save by purchasing an item. In the past two years, at least 32 class actions have been filed regarding such allegations.
On November 10, 2015, the plaintiff in Spann v. JC Penney Corp., Inc., No. 8:12-cv-00215 (C.D. Cal) filed an unopposed motion for preliminary approval of class settlement. The proposed settlement terms call for JCPenney to pay $50 million for the benefit of the class members, including attorneys’ fees and costs of administration. The settlement also requires JCPenney to change its pricing practices and implement training and auditing programs to ensure JCPenney “complies with California’s price comparison advertising laws.”
Spann involves allegations that JCPenney engaged in a “pervasive false advertising scheme” in which it advertised “sale” prices that were substantially lower than comparative “regular” or “original” prices for JCPenney’s private and exclusive branded apparel and accessories. The comparison prices, however, were allegedly false and deceptive because JCPenney hardly, if ever, offered or sold the merchandise at the “regular” and “original” prices. The plaintiff filed suit seeking restitution and injunctive relief under California’s Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 et seq. (“UCL”), False Advertising Law, Cal. Bus. & Prof. Code §§ 17500 et seq. (“FAL”), and Consumer Legal Remedies Act, Cal. Civ. Code §§ 1750 et seq. (“CLRA”). The Spann court denied JCPenney’s motion to dismiss and its motion for summary judgment. The court granted the plaintiff’s motion for class certification on May 18, 2015.
The settlement class is defined as follows:
[A]ll persons who, while in the State of California and between November 5, 2010 and January 31, 2012, and between January 1, 2013 through December 31, 2014, purchased from JCPenney one or more private or exclusive branded items of apparel or accessories at a discount of at least 30% off of the stated “original” or “regular” price, and who have not received a full refund or credit for their purchases.
The $50 million settlement amount will be made available to class members who submit a valid claim form. Class members can elect to receive payment in either cash or store credit, both of which have equal value. The amount of a class member’s settlement payment is determined by a point system, which is tied to the amount of money a claimant spent on qualifying purchases at JC Penney during the class period. The parties estimate that the class size is approximately 8 million to 11 million members. The plaintiff’s counsel is to receive an attorneys’ fees award of $13,500,000 under the settlement. The settlement agreement expressly disclaims any reversion to JCPenney; proceeds from any uncashed checks will be distributed to the National Consumer Law Center.
The settlement in JCPenney follows settlements involving similar claims against Ascena Retail Group and Michael Kors. Retail sale pricing litigation asserting such claims is on the rise and shows no signs of abating, as plaintiffs’ lawyers are advertising ongoing investigations into various retailers’ pricing strategies for evidence of “false or misleading” pricing.