Rebecca Tushnet

Sihler v. Fulfillment Lab, Inc, No. 20cv1528-LL-DDL, 2023 WL
4335735 (S.D. Cal. Jun. 23, 2023)

Common sense is a big part of advertising law, as implemented
by the reasonable consumer. It can be hard to distinguish one case from another
in its formal characteristics. Here, the view of a reasonable consumer is
established by empirical evidence of deceptions and complaints, the court says—though
is it really making a normative judgment?

Defendants allegedly use fake celebrity and magazine
endorsements, as well as misrepresentations about price and limited
availability, to induce consumers into buying “keto” weight-loss pills. As
described:

Consumers click on ads that appear
to be news articles with false celebrity endorsements of the Keto Products.
This ad takes them to a landing page for the product with more
misrepresentations. When they click on the purchase button, they are presented
with several purchase offers including “Buy 3 Bottles, Get 2 Free.” Consumers
are warned that supplies are limited or that the special offer will expire soon.
These landing pages are allegedly inaccessible to anyone who does not view the
advertisements or are deleted after a few weeks or months to avoid detection.
After consumers complete their purchase, they are allegedly overcharged for the
full price of all five bottles of product instead of the discounted “Buy 3
Bottles, Get 2 Free.” When consumers dispute the charge with their bank or
credit card company, Defendants allegedly present investigators with a “false
front” website for the Keto Products that includes the actual purchase prices
of the different options, no false advertising, and an easy-to-find “terms and
conditions” hyperlink. Defendants allegedly use the false front websites to
deceive the bank and credit card companies into believing that consumers
purchased Keto Products from those websites rather than the landing pages.

Plaintiffs brought both California statutory claims and RICO
claims; the court certified a nationwide RICO class and a California subclass.

If you want a sense of how this is going to go, defendants
contested numerosity because there was only shipping data, not data on how many
different consumers bought and used products. With tens of thousands of
shipments, and sales of about $93 million in two and a half years, the court
found numerosity. (They also argued that there was no typicality because a
named plaintiff described viewing a website promoting “Buy 3 bottles, Get 2
free” but the website examples submitted instead promote “Buy 3, Get 2 Free.”
The court disagreed.)

Commonality of deception on a classwide basis:  Under California law, no individualized proof
of deception, reliance, or injury is required if the conduct would deceive a
reasonable, ordinary consumer in the target population. Defendants argued that
there was no evidence of deception of reasonable consumers other than named
plaintiffs’ own declarations, but the court disagreed:

Plaintiffs provided examples of
webpages with the same allegedly false and misleading endorsements and pricing
information similar to what they viewed and relied on. They also submitted instructions for Keto
Products call center employees that describe three standard buying packages,
which match the package options and unit prices on the webpages that Plaintiffs
viewed and in the examples that they provided. The
only other buying packages described in the instructions are for unadvertised
special promotional packages. The call center instructions also describe
typical calls, which include complaints of being overcharged in the same manner
that Plaintiffs describe: that they believed they would be charged the listed
price for two or three bottles and receive one or two bottles free, but were
instead charged the listed price for all bottles received.

Along with a witness who testified to the lack of change in
ads over time, plaintiffs showed that they and absent class members viewed the
same or substantially similar endorsements and pricing information.

Would this be likely to mislead a reasonable consumer?

The three package options are
advertised as follows: (1) text reads “Buy 3 Get 2 Free!” followed by
“$39.74/bottle” with a depiction of a group of three bottles next to a group of
two bottles with a plus sign between them; (2) text reads “Buy 2 Get 1 Free!”
followed by “$49.97/bottle” with a depiction of a group of two bottles next to
one bottle with a plus sign between them, and (3) text reads “Buy 1 Bottle”
followed by “$69.99/bottle.”

Are those additional bottles “free”?

Defendant argued that a reasonable consumer would understand
that they’d be charged $39.74 for each of 5 bottles if they bought five. It’s
obvious to an ordinary English speaker that you wouldn’t offer that deal that
way (you’d say “buy 5 at $39.74 each!” etc.) if you wanted it understood. The
FTC’s guides on the use of “Free” would also count against this, if considered.

The court found the same declarations, webpage examples, and
call center scripts to be sufficient evidence that a reasonable consumer is
likely to be misled. (E.g., a standard script for “I was overcharged” that begins when a caller says words to the effect of “I thought it was $39.74 x 3 bottles which would be $119.22.”) Here, the “ambiguity” in the pricing information supported
misleadingness—compare the treatment of “ambiguity” in cases that reject
consumer claims. Would this work if there were fine print disclosures “resolving”
the ambiguity? My suspicion is that it wouldn’t—and shouldn’t—because a
substantial number of reasonable consumers would have no reason to think that “free”
was ambiguous. But how, otherwise, are we to tell what counts as “correctable
ambiguous” and “misleadingly ambiguous”? As the court points out, “even a
perfectly true statement couched in such a manner that it is likely to mislead
or deceive the consumer, such as by failure to disclose other relevant
information, is actionable under [the FAL].” I tend to think the “correctable
ambiguity, thus plaintiffs lose” cases downplay misleadingness without a good
theory.

And since misleadingness is an objective test, it’s capable
of classwide resolution. The rest (including predominance) follows, including certification
on the RICO claims of all things.

from Blogger http://tushnet.blogspot.com/2023/07/ambiguity-could-be-deceptive-where-buy.html

Clark v. Eddie Bauer LLC, 371 Or. 177, — P.3d —-, SC
S069438 (Jun. 29, 2023)

Under Oregon’s Unlawful Trade Practices Act (UTPA), a person
who suffers an “ascertainable loss of money or property” as a result of another
person’s violation of the UTPA may maintain a private action against that
person. The Ninth Circuit certified to the state supreme court the question
whether a consumer can suffer an “ascertainable loss” under the UTPA when she
buys items at an outlet store that have been advertised as being sold at a
substantial discount but that have never been sold at that or any other
location at the “list,” or non-sale price, and when she would not have
purchased at that price but for the false advertising of a sale price. The state
supreme court answered yes, that was an ascertainable loss.

Under the facts as stated in the certification order, more
than 90 percent of the products offered at Eddie Bauer outlet stores are
manufactured solely for sale at the outlet stores and are not sold elsewhere:

Defendants advertise clothing at
the Eddie Bauer Outlet stores as being sold at a substantial discount, typically
between 40 percent and 70 percent off. However, with limited exceptions, the
clothing is never sold—at the outlet stores or anywhere else—at the “list”
price, i.e., the price shown on each product’s original tag; the clothing sold
at the outlet stores is only ever sold at “discounted” prices.

State law bars, among other things, false or misleading
representations of fact concerning the reasons for, existence of, or amounts of
price reductions and advertising price comparisons without conspicuously
identifying the origin of the price the seller is comparing to the current
price. The plaintiff alleged that she wouldn’t have made her purchases if she’d
known that the goods weren’t in fact being sold at a discount.

Defendants argued that plaintiff
had received exactly the products that she believed she was buying, and that
their value at the time of sale was at least what plaintiff had paid. They
noted that plaintiff had not alleged, for example, that the Fleece Zip [she
bought] was worth less than the $19.99 sale price or that it did not possess
the features or quality that plaintiff had expected it to have.

Thus, they argued, there was no ascertainable loss. The
district court granted defendants’ motion to dismiss on the ground that the
complaint didn’t allege that defendants had made false representations about
the character or quality of the garments that plaintiff bought, which the
district court understood to be essential under the state supreme court’s
decision in Pearson v. Philip Morris, Inc., 361 P.3d 3 (2015). On appeal,
plaintiff noted that many of the provisions of the consumer protection law prohibit
deception in ways that do not relate to the quality or characteristics of a
product, and argued that she’d suffered an ascertainable loss in various ways,
including price inflation from the putative bargain.

“Ascertainable loss” means, generally, “any determinable
loss,” even a loss that cannot be measured exactly. Only economic losses may be
recovered, although even if “[t]he private loss … may be so small that the
common law likely would reject it as grounds for relief, yet it will support an
action under the statute.” And, given the legislature’s consumer-protection
concerns, it was appropriate to take a broad view of “ascertainable loss.”

The court here addressed only the theory that the plaintiff
wouldn’t have purchased at the price that she actually paid had she known the
truth, not other theories of injury (such as that the overall market price was
inflated by the even higher reference prices).

“[P]laintiff only was required to allege that, as a result
of any practice prohibited under the UTPA, she suffered an ascertainable
loss—that is, a loss capable of being observed or determined, however small.”
Where the product was not what was bargained for, it doesn’t matter that there’s
no outside, objective measure of market value.

In plaintiff’s case, what she
wanted was items of clothing whose selling price had, at some earlier time,
been what defendants’ false price list-ings indicated. What she received, on
the other hand, was merchandise that had never been offered for sale at those
prices. Thus, whether or not those items ever sold at those higher price
points, and whether or not defendants’ alleged pricing scheme can be viewed as
representing that the items previously had retail or market values equivalent
to the prices shown on their product tags, plaintiff paid money to defendants
for articles of clothing that she would not have bought had she known their
true price history. The money that plaintiff is out as a result is her “loss.”…

As the Connecticut Supreme Court
observed in discussing that state’s statute, it should not matter that a person
unlawfully led to believe that she was buying one thing ultimately received
another thing of equal or even greater value. Hinchliffe, 184 Conn at 614, 440
A2d at 814 (“To the consumer who wishes to purchase an energy saving
subcompact, for example, it is no answer to say that he should be satisfied
with a more valuable gas guzzler.”).

The alternative holding would leave citizens without a
remedy where the legislature declared a practice unlawful and provided for a
private remedy, and we don’t live in a world of perfect efficiency where the
plaintiff could resell the product without transaction costs for exactly the
price she paid.  Thus, the court rejected
the idea that “a person does not suffer an ascertainable loss so long as she
receives something of equal or greater value than the money she was deceived
into giving up for it.”

Although other courts interpreting other laws have reached
the opposite conclusion, reasoning that deception alone can’t be injury, that’s
not what’s going on. The injury is loss of money the consumer would have
retained if the defendant had not unlawfully deceived her (as opposed to a situation
where she saw the allegedly fake sale price, believed it and thus was deceived,
but still didn’t buy, where there would be no loss).  

from Blogger http://tushnet.blogspot.com/2023/07/oregon-sct-rules-on-ascertainable-loss.html