More outlet cases: traditional price claims survive; value claims are harder

Two cases:
Dennis v. Ralph Lauren Corp., 2017 WL 3732103, No. 16cv1056
(S.D. Cal. Aug. 29, 2017)
Plaintiff stated a consumer protection claim by alleging
that Polo Ralph Lauren’s clothing sold at factory stores uses a price tag which
represents two prices to the consumer, the “Value Was” price, and the “Our
Price” price,” conveying to the consumer that the clothing previously sold at
the “Value Was” price, when in fact that was never the prevailing market price,
at the factory store or otherwise. 
Comment: I don’t see the sense in trying to use “Value” to evade falsity
about prices; among other things, if you distinguish “Value” from market price,
“Value Was” suggests that the “value”
has now diminished.
Marino v. Coach, Inc., 2017 WL 3731954, No. 16-CV-1122
(S.D.N.Y. Aug. 28, 2017)
Plaintiffs alleged that Coach misled consumers into
believing that products sold at Coach outlet and factory stores were deeply
discounted, when, in fact, the goods are manufactured exclusively for Coach
Factory stores and are not being sold at a discounted price at all. They
brought claims for fraud, breach of express warranty, unjust enrichment, and
violations of at least twenty state consumer protection statutes.
Coach allegedly manufactures certain goods exclusively for
sale in Coach Factory stores, identified by a style number beginning with “F,”
whereas mainline or retail products have five-digit style numbers with no
letters. Coach Factory goods are marketed with an “MFSRP” or “Manufacturer’s
Suggested Retail Price,” which is allegedly “illusory” because Coach Factory
goods are never actually sold for the MFSRP.  Coach apparently agreed that the MFSRPs were
intended to give an impression of quality. According Coach’s own declaration,
disclaimers posted in Coach Factory stores state that the MFSRPs are “an
indication of value based on the quality of the material used, our commitment
to craftsmanship and the high standards demanded by Coach.”  (Uh-hunh. 
I thought modern economics indicated that price reflects value in an
efficient marketplace.) Plaintiffs allegedly purchased accessories – wristlets,
sunglasses, and a handbag – and paid prices ranging between 40% and 70% less
than the purported MFSRPs.  These labels
allegedly created a false impression of the existence of a discount, as well as
a false impression of quality, enhanced by comparison to Coach retail products
and prices given that at least some of Coach’s factory-only products are
designed to appear similar to Coach goods sold in retail stores. For example,
the CAC includes a side-by-side comparison of the Coach Factory “Phoebe”
handbag is visually similar to the “Edie” bag sold in Coach retail stores. The
Phoebe bag is sold in Coach Factory stores with a hangtag showing an MFSRP of
$395, while the Edie bag is sold in retail stores for $325. Consumers viewing
the two similar bags allegedly base their expectations for the quality of the
Phoebe bag on its similarity to the Edie, but the Phoebe bag is actually of
lesser quality, made from “fabric remnants” rather than a larger, more
desirable, single piece of fabric.
Coach challenged plaintiffs’ standing under Spokeo, Inc. v.
Robins, __ U.S. __, 136 S. Ct. 1540 (2016), arguing that the plaintiffs
alleged, at best, bare procedural violations that didn’t amount to cognizable
injury under Article III. Nope. Plaintiffs alleged that they wouldn’t have
bought the products without the allegedly false advertising; that’s a concrete
injury in fact.  However, they didn’t
have standing to seek injunctive relief. 
Coach also argued that plaintiffs lacked standing to bring claims on
behalf of a multi-state subclass because they didn’t personally possess claims
under the consumer protection laws of any other state. That depended on what
law applies to the absent class members’ claims and whether the injury
recognized by those laws was sufficiently similar to plaintiffs’ injury that
class treatment is appropriate, so the court deferred consideration of this
until certification.
The court analyzed the consumer protection claims under Rule
9(b); plaintiffs didn’t disagree that Rule 9(b) applied.  The court found that the “how” and “why” of
the fraud was in part inadequately alleged. The straightforward theory of
deception was that MFSRPs were deceptive because consumers understand them to
represent former prices, but they don’t; that was adequately pleaded.  The “more nuanced” theory of deception was
that Coach designs outlet-only goods that appear similar to retail products and
tags the outlet-only products with MFSRPs that are similar to the prices of the
retail goods, causing consumers to believe they are buying products of similar
quality to the similar retail products. 
The court found that the complaint didn’t adequately allege the “how” or
“why” of this product-confusion theory. Plaintiffs didn’t allege that they
bought the Phoebe bag, or identify any Coach mainline products – or family of
products – to which plaintiffs believed the outlet goods that they purchased
were similar. To proceed on this theory, plaintiffs would have to identify the
retail goods that are deceptively similar to the outlet goods that the
Plaintiffs actually purchased.
Under New York’s consumer protection law, it isn’t enough to
allege that one wouldn’t have bought an item but for the appearance of a discount;
that’s not injury under New York law, or Massachusetts law.  It is sufficient injury under California law.  Assuming that New Hampshire followed the East
Coast model, it was still possible that the New Hampshire plaintiff could amend
her complaint to allege injury distinguishable from such “ephemeral” injury, if
the MFSRP’s caused her to believe that she was purchasing a product of higher
quality than she received.  It wasn’t
enough if she merely believed she was getting a bargain.
The New Hampshire plaintiff also plausibly alleged that the
MFSRPs were misleading. Coach argued that disclaimers in its stores explain
that the MFSRPs are intended to be indicators of “value.” “Whether, in the face
of such disclaimers, a reasonable consumer could nonetheless believe that the
MFSRPs are former prices is an issue of fact to be resolved at a later stage of
this litigation, as is the significance of Coach’s disclaimers.” Further, unlike
“compare at” advertising, MFSRPs – “Manufacturer’s Suggested Retail Prices” –
allude directly to a price for the item, “which makes it more plausible that a
reasonable consumer could believe that the MFSRP on the hangtag represents a
former price.”
The express warranty claim failed, because at best  the MFSRPs were “implicit” warranties of a
former price. They also weren’t warranties of product quality, because an
inference that the Coach Factory products are of better quality than they actually
are was “too vague and general to be actionable as an express warranty of
anything related to the actual goods.”

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