A pricing litigation resurgence is upon us. More than ten new suits have been filed in April and May 2019 alone—many more than in all of 2018—and some of the new suits are pursuing novel theories and statutory damages.
Moreover, on May 30, 2019, the Ninth Circuit issued a decision reversing and remanding one of the handful of pricing cases that had been dismissed with prejudice at the pleadings stage. While the case law still appears to favor retailers at the summary judgment and class certification stages, plaintiffs are reentering the field with more gusto.
In June 2018, the Ninth Circuit issued what we hoped would be a nail in the coffin of pricing litigation.
In Chowning v. Kohl's, the Ninth Circuit stated in clear terms that "The proper calculation of restitution in this case is price paid versus value received." There, the court explained that because the plaintiff admitted to receiving value from the clothing items she purchased, she would only be entitled to restitution if she could prove that she paid more than the items were actually worth. Plaintiff failed to meet her burden—despite hiring multiple experts, she did not provide any evidence as to the actual value of the items she received. The court specifically rejected the "full refund," profit disgorgement and "actual discount" restitutionary models proposed by plaintiff, because none of these models would measure the plaintiff’s actual loss.
The Chowning decision came on the heels of several retailer-friendly decisions all coming to the same conclusion: that unless a plaintiff can show that she paid more than an item is actually worth, monetary relief is unavailable. In addition to Kohl's, Columbia Sportswear and Ross also won at summary judgment on this basis. (Separately, we were pleased to win on summary judgment in another pricing case, where the court decided as a matter of law that our client’s pricing was not deceptive—the only pricing case to date where this has happened.)
But Chowning wasn't the end of the road that retailers had expected. In the months following the Ninth Circuit's decision, Columbia settled the plaintiffs' injunctive relief claim (which remained after the court granted judgment in favor of the retailer as to monetary relief), and after contesting the plaintiffs' request for attorneys' fees, ultimately was ordered to pay $683,411.79 in fees. Ross then settled its case—which it had won at the trial court, but which the plaintiffs appealed—for $4,854,000.
No other cases since Chowning have reached summary judgment or class certification, and it remains to be seen whether any plaintiffs will be able to circumvent the Ninth Circuit's decision. Most retailers enmeshed in this litigation have opted for quick settlements, rather than investing the time and money fighting class certification or moving for summary judgment.
Chowning has not deterred plaintiffs from filing pricing suits.
Very few new pricing suits were filed in the months leading up to Chowning, or in the several months after the decision was issued. However, there have already been 15 new pricing class actions filed in 2019, mostly in California. The majority of these have been filed in the last two months, and we expect that more are on the way.
Most of the new suits involve allegations that retailers deceive consumers by perpetually offering percent-off discounts in their outlet stores, thereby making the ticketed prices fictitious. These suits also include allegations that outlet retailers deceive consumers by selling outlet-exclusive merchandise that was never offered at the retailers' full-priced stores, let alone at the outlet store's ticketed price.
Additionally, a budding wave of suits has targeted the subject lines on retailers' marketing emails. Numerous states have laws that prohibit false or deceptive marketing emails, and which provide statutory penalties for violations. In Aguilar v. Carter's, the plaintiff alleged that the subject line in Carter's marketing emails—for example, "50-70% OFF EVERYTHING"—are deceptive because (a) the website is perpetually on-sale, such that the email does not actually offer a 50-70% discount, and (b) there are exclusions from the sale, rendering the word "everything" deceptive. Aguilar is brought pursuant to Washington's Commercial Electronic Mail Act (CEMA), which prohibits businesses from sending emails that "[c]ontain false or misleading information in the subject line." The plaintiff also purports to allege a per se violation of the Washington Consumer Protection Act based on the alleged CEMA violation, and seeks statutory damages of $500 per class member per email, in addition to treble damages.
For retailers looking to fight, the Ninth Circuit's Nunez decision gives plaintiffs ammunition.
One of retailers' best arguments at the pleadings stage has historically been that the plaintiff failed to allege sufficient factual support for his or her claims, and thus failed to satisfy the heightened pleading standard set forth in Rule 9(b) of the Federal Rules of Civil Procedure. Courts have taken widely divergent approaches in deciding what Rule 9 requires, and, up until May 30th, the Ninth Circuit has only addressed the issue in two unpublished decisions—each in cases involving "Compare At" pricing—with arguably contradictory outcomes. In one of these two suits (defended by the authors), the Ninth Circuit affirmed the lower court's decision granting our client's motion to dismiss with prejudice; in the other case, the Ninth Circuit reversed the district court's decision granting the retailer's motion to dismiss.
On May 30, 2019, the Ninth Circuit in Nunez v. Saks reversed the district court's decision dismissing the pricing case against Saks with prejudice. The plaintiff alleged that he purchased a pair of Saks Fifth Avenue branded shoes at a Saks Off Fifth store, and that he would not have purchased the shoes but for his reliance on the allegedly fictitious inflated "Market Price" on the shoes' price tag. The court held that the plaintiff had adequately alleged the "who, what, when, where, why, and how" of Saks' conduct, as required to satisfy Rule 9:
Nunez alleges he purchased a pair of Saks Fifth Avenue branded shoes at an Off Fifth store in San Diego, California (the Where) on July 15, 2015 (the When). He further alleges that Saks (the Who) used a uniform pricing scheme for its price tags for Saks Fifth Avenue branded clothing (the What) sold exclusively at Off Fifth stores. These price tags include a fictious [sic] "Market Price" alongside a "You Pay" price at which the product is sold, but the products are never in fact offered for sale or sold at the "Market Price" (the How). Nunez also alleges that the "Market Price" is likely to mislead a reasonable consumer into believing he is purchasing a discounted product.
There are a few alleviating aspects of the court’s three-page decision. First, it is unpublished. Second, while the language above is focused on Rule 9(b), the court expressly avoided deciding whether the plaintiff had stated a claim.
Third, the court held that the plaintiff lacked standing to seek injunctive relief, explaining: "Nunez alleges that he may shop at Off Fifth in the future, but he has not alleged any intent to purchase a Saks Fifth Avenue branded product in the future. Absent such an allegation, Nunez has failed to allege that he may suffer an actual and imminent, not conjectural or hypothetical threat of future harm, as is required to establish Article III standing." This aspect of the decision helps restrict Davidson v. Kimberly-Clark Corp., in which the Ninth Circuit last year held that a plaintiff may have standing to seek injunctive relief even where he is not at risk of being received in the future.
Finally, while too much weight should not be given to judges' comments at oral argument, Judge Andrew Hurwitz did make one statement that appears to bode well for retailers who use language such as "Comparable Value" on their price tags: "I suppose if [the tag had] said ['Compare At'] maybe you'd need more particularity in your complaint because you’d have to do some comparisons [to satisfy Rule 9]." This commentary evokes the Federal Trade Commission's Guides Against Deceptive Pricing, which say that "comparable value comparisons," which the FTC defines as being comparisons to "merchandise of like grade and quality … comparable or competing merchandise," can "serve a useful and legitimate purpose." Courts have disagreed as to whether "Compare At" (referenced by Judge Hurwitz) could deceive reasonable consumers when it refers to non-identical merchandise. The FTC's guidance identifies "Comparable Value" as a way to clearly tell consumers that a given reference price refers to non-identical merchandise.
Given the constantly- and rapidly-changing landscape in pricing litigation, coupled with the central role that prices must always play in the increasingly competitive retail industry and the potentially high cost to settle these cases, retailers should consult counsel experienced in this area to make sure they are protected. Steptoe's retail team has defended more than 30 pricing cases—more than any other firm in the country—with unmatched results.