Metropolitan News-Enterprise

 

Friday, December 16, 2016

 

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Consumers’ Action Against Banana Republic Reinstated

Willhite Says Cause of Action Might Exist Even if Consumer, at the Time of Paying, Realizes That the Item Is Not Discounted; Bigelow Dissents

 

By a MetNews Staff Writer

 

The Court of Appeal for this district yesterday reinstated a potential class action against Banana Republic, LLC, for allegedly posting signs in its stores advertising a 40 percent off sale, without revealing until customers were at the cash register that there was a discount only on selected items.

The opinion, by Acting Presiding Justice Thomas Willhite of Div. Four, drew a dissent from Tricia Bigelow, the presiding justice of Div. Eight, sitting on assignment as a member of Div. Four.

While Willhite relied principally on the authority of Medrazo v. Honda of North Hollywood, an opinion he wrote in 2012, Bigelow drew support from the California Supreme Court’s 2011 opinion in Kwikset Corp. v. Superior Court.

Willhite expresses the view that where a customer is deluded into thinking that all merchandise is marked down, picks out an item, learns before paying that the item is full-priced, but is swept up by the “momentum to buy” and makes the purchase, a cause of action lies. Bigelow that where the purchaser knows when making payment that there is no discount, there is no loss incurred, and no basis for a lawsuit.

The case pitted against each other two former members of this district’s Court of Appeal, with Margaret M. Grignon, who sat on Div. Five, among the lawyers for the consumers, and Miriam A. Vogel, formerly a member of Div. One, serving as one of the two lawyers representing Banana Republic.

Wiley’s Ruling

Yesterday’s decision reverses a summary judgment which Los Angeles Superior Court Judge John Shepard Wiley Jr. awarded Banana Republic. Wiley found the three plaintiffs did not meet the standing requirement under Proposition 64, enacted by voters in 2004.

That measure—designed to thwart extortive conduct such as that exhibited by the Trevor Law Group (since dissolved) in inducing persons to pay money to stave off a threatened action under the Unfair Competition Law—added the requirement that a private action be maintained only by a “person who has suffered injury in fact and has lost money or property” as a result of the wrongful practice.

(It was acknowledged by the plaintiffs that standing requirements under the Consumer Legal Remedies Act were virtually the same.)

Wiley reasoned that the plaintiffs, at the time they made payment at the cash register, knew the actual price and willingly proffered payment, meaning they suffered no loss.

Prior Decision Cited

In rejecting that reasoning, Willhite said that his opinion in Medrazo is “instructive on the issue whether plaintiffs suffered economic harm.” There, the plaintiff did not learn the full purchase price of a motorcycle until she signed a contract, there having been a failure to specify dealer-added charges on a tag affixed to the machine, as required by the Vehicle Code.

Willhite quoted his opinion as saying that “[T]his evidence is sufficient to establish that she suffered a concrete, particularized, and actual invasion of an interest legally protected by” the Vehicle Code.”

The plaintiffs suing Banana Republic stated causes of action under the Unfair Competition Law, the False Advertising Law, and the Consumer Legal Remedies Act. Willhite wrote:

“These provisions are designed in part to protect consumers such as plaintiffs by requiring businesses to disclose the actual prices of items offered for sale, and prohibiting businesses from using false and deceptive advertising to lure consumers to shop. In short, plaintiffs had a legally protected interest in knowing from the outset, when they started to shop, the true prices of the items they chose to buy. Assuming plaintiffs’ version of Banana Republic’s advertising occurred, there is a triable issue whether that legally protected interest was violated in the same way as the legally protected interest of the plaintiff in Medrazo, who had a right to know dealer-added charges as stated on a required hanger tag when deciding to buy a motorcycle.”

Triable Issue

Willhite said there is a triable issue of fact as to whether the plaintiffs would have wound up buying items at Banana Republic had a 40 percent off sale not been advertised. He noted that one plaintiff was lured into the store by the sign out front, intending to buy eight outfits for her daughter; learned after waiting in line that the outfits were not discounted; and bought the one her daughter was wearing to avoid the embarrassment of her daughter returning the fitting room and removing it.

Two other plaintiffs, a husband and wife, purchased one item, a sweater, after learning the apparel was not on sale, he said, quoting the husband as explaining that “we had invested all that time and effort, and just to leave with nothing would be a complete and utter waste of energy and time.”

They did not purchase other items they had brought to the cash register.

“On these facts, the question of reliance and causation does not rest as a matter of law on whether plaintiffs knew the actual price of the items they purchased at the moment money was exchanged,” Willhite said. “To isolate that point in time as solely determinative of reliance and causation ignores the true nature of those elements. If the reliance on the misleading advertising was a substantial factor in causing plaintiff’s decision to buy, the requirements of reliance and causation are met.”

Embarrassment, Frustration

He continued:

“Here, in plaintiffs’ version of events, the advertising led them to enter the store, to shop, to select items, to decide to purchase them, and to stand in line to make the purchases. Their reliance on the advertising informed their decision to buy, which culminated in the embarrassment and frustration they felt when, as the items were being rung up, they learned that discount did not apply. And it was the temporal proximity of that chain of events, and the pressure the events brought to bear on plaintiffs’ judgment, that played a substantial role in leading them to purchase the items they did, even though they knew the discount did not apply. On this reasoning, there is a triable issue whether plaintiffs’ reliance on the allegedly misleading advertising was a cause, though not the only cause, of their economic harm.”

Willhite said it would be an unsatisfactory result “if the consumer is influenced by the momentum to buy created by the false advertising, and therefore buys at the inflated price” and is denied standing to sue.

Joining in his opinion was Justice Nora Manella.

Bigelow’s Dissent

Bigelow dissented, citing Kwikset Corp., a case also pointed to by Willhite. Willhite, however, found its dictates satisfied; Bigelow differed.

She noted that the case interprets Proposition 64 as requiring that a plaintiff under the Unfair Competition Law or the False Advertising Law show an “injury in fact” involving “lost money or property” and that where there have been false representations or fraud, “actual reliance on the allegedly deceptive or misleading statements.”

The jurist wrote:

“The only legally cognizable economic injury the plaintiffs in this case allege they suffered was the money they spent on full-priced clothes. Whether or not the store window signs were ambiguous or misleading, it is undisputed that before the plaintiffs incurred any economic injury, they learned the clothes they had selected were not 40 percent off. They then changed their purchase decisions, choosing to buy only some of the items they had selected, fully aware they were not discounted.

“On these undisputed facts, the plaintiffs cannot establish they would not have purchased the items they bought absent the misleading signs, or that because of the misrepresentation they parted with more money than they otherwise would have, or that they believed the 40 percent off representation to be true and in reliance thereon entered into the purchase.”

Draws Distinction

Bigelow said that if a customer made a purchase thinking the price was 40 percent less than usual, reliance on a misrepresentation could be shown. By contrast, a plaintiff could not make such a showing “if, before executing the sale, she knew the representation of a 40 percent discount to be false.”

She found applicable the “long-standing principle” that “[e[vidence a plaintiff knows the defendant’s representation is false, before the injury-producing conduct occurs, rebuts a presumption of reliance.”

Bigelow commented:

“The majority opinion repeatedly states the plaintiffs raised a triable issue of fact on actual reliance because, even though they learned the 40 percent discount did not apply to their items, their embarrassment and frustration led to them feeling pressured to buy clothes at full price anyway. I am aware of no legal authority supporting the proposition that a plaintiff’s embarrassment or frustration is relevant to a determination of reliance when the plaintiff knows the true facts before consummating the transaction that causes the injury. Similarly, I see the majority’s ‘momentum to buy’ theory as both a departure from well-settled principles regarding reliance in ordinary fraud actions and as a dilution of the Prop. 64 requirement that the plaintiff suffer economic injury as a result of the defendant’s improper conduct.”

Foresees ‘Exhaustive Litigation’

She added:

“I expect the court’s decision will invite exhaustive litigation as parties attempt to work out just how little ‘momentum to buy’ is required to establish actual reliance. Rather than opening the door to suits that veer ever farther away from establishing actual reliance, this court should adopt the bright line rule that if the plaintiff learns the ‘truth’ about an item’s price before executing a purchase, he or she cannot establish actual reliance on a misleading price advertisement.”

The case is Veera v. Banana Republic, 2016 S.O.S. 6428.

Grignon was joined by her daughter, Anne M. Grignon, in arguing for reversal. They were teamed with William M. Turner and Asha Dhillon of Jones, Bell, Abbott, Fleming & Fitzgerald.

Vogel’s co-counsel was David F. McDowell. They are with the law firm of Morrison & Foerster.

 

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