Tuesday, June 19, 2018
Summary Judgment for Kohl’s in Action for Restitution Properly Granted
Panel Says Relief, in Action Under UCL, Is Dependent on Showing That Item Purchased Was Worth Less Than the Purchase Price; Disgorgement Unavailable
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday affirmed summary judgment in favor of Kohl’s Department Stores, Inc. in a putative action seeking restitution based on alleged flimflamming in the sales of clothing.
Plaintiff Wendy Chowning claimed that after she purchased a dress that was “on sale” at a Kohl’s store, she learned of a scheme under which a supposed “original” sales tag is affixed to garments at the same time as the tag showing a lower price, creating an illusion of the price having been reduced. She brought an action under California’s Unfair Competition Law.
District Court Judge R. Gary Klausner was initially inclined to dismiss Chowning’s action as duplicative of a putative class action filed earlier by one Steven Russell. However, he decided to let Chowning’s action proceed because, in addition to seeking injunctive relief, as Russell did, she was asking for restitution.
After finding, on summary judgment, that restitutionary relief was unavailable, the judge dismissed Chowning’s action.
(On Oct. 13, 2016, Klausner approved a settlement of Russell’s class action, which included $1.5 million in attorney fees plus costs, and $5,000 to Russell and a named co-plaintiff as an “enhancement payment.”)
Yesterday, summary judgment against Chowning was affirmed in a memorandum opinion.
“The proper calculation of restitution in this case is price paid versus value received,” the opinion says, adding:
“Here, Chowning admits that she received value. Therefore, the appropriate calculation for restitution is the price Chowning paid for the articles versus the value of the articles she received.”
Summary judgment was appropriate, the opinion says, because Chowning failed to show that the dress she bought was worth less than what she paid. She would be entitled to a full refund, it notes, only if she could prove the dress was of no value.
Disgorgement is permitted in a UCL action, the opinion says, but only in the amount of the plaintiff’s loss, not based on the defendant’s profit.
The three-judge panel rejected Chowning’s contention that there was entitlement to restitution in the amount of a “transaction discount.” The opinion explains, in a footnote:
“This method argues that the appropriate measure of restitution would be to take the percentage discount implied on the tag (original price versus discount price), apply that percentage discount to the prevailing market price for the item, and then award the difference between that amount and the amount the plaintiff paid.”
The opinion says:
“First, this measure would effectively seek damages sounding in contract, not equity.”
An action under the UCL, it points out, is equitable, and while it permits restitution, it does not allow an award of damages.
“Second,” it continues, “Chowning’s argument for this form of restitution is based on standing cases….Standing and the calculation of restitution have different standards.”
The case is Chowning v. Kohl’s Department Stores, No. 16-56272.
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