Marino v. Coach, Inc.

Citation: 264 F. Supp. 3d 558Docket: 16-CV-1122 (VEC); 16-CV-3773 (VEC); 16-CV-3677 (VEC); 16-CV-5320 (VEC)

Court: District Court, S.D. New York; August 28, 2017; Federal District Court

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Four plaintiffs allege that Coach, Inc. employs deceptive marketing practices at its outlet stores, misleading consumers into believing that products are significantly discounted. They assert that the goods sold at Coach Factory stores are exclusively manufactured for those locations and do not reflect true discounts. The plaintiffs bring ten claims, including fraud, breach of express warranty, and unjust enrichment, invoking at least twenty state consumer protection laws. Coach has moved to dismiss, arguing that the plaintiffs lack standing, inadequately plead their claims, and fail to demonstrate essential elements such as cognizable injury, material misstatements, or intent to deceive.

The court partially grants and partially denies Coach's motion. It dismisses the claim for injunctive relief with prejudice and dismisses Marino's claim under New Hampshire’s consumer protection law, along with common law fraud, unjust enrichment, and breach of express warranty claims, without prejudice. The motion is denied in other respects. The background details Coach's operation of 204 outlet stores and the specific products purchased by each plaintiff, highlighting the disparity between the Manufacturer’s Suggested Retail Prices (MFSRPs) and the actual prices paid, which were significantly lower. Each plaintiff provides examples of specific purchases made between summer 2014 and December 2015, detailing the advertised MFSRPs and the prices paid.

Plaintiffs claim that the Manufacturer's Suggested Retail Prices (MFSRPs) for Coach Factory products are misleadingly presented as previous sale prices, creating a false impression of discounts and quality. They argue that consumers perceive substantial savings based on these fictitious MFSRPs, which do not reflect actual sales prices. This misrepresentation is said to influence consumers' expectations regarding product quality, particularly when comparing Coach Factory items to higher-priced retail products. An example provided involves the Coach Factory "Phoebe" handbag, which is marketed with an MFSRP of $395, misleading consumers into believing it is comparable in quality to the retail "Edie" bag priced at $325, despite the Phoebe being of inferior quality due to its construction from fabric remnants.

Plaintiffs pursue ten causes of action, including common law fraud and unjust enrichment under New York law, claims under California's Unfair Competition Law and False Advertising Law, a violation of New Hampshire's Consumer Protection Act, and consumer protection violations across 18 other states. Coach has moved to dismiss the case, raising issues of constitutional standing. To establish subject matter jurisdiction, plaintiffs must demonstrate an injury in fact, a causal link to the alleged misconduct, and a likelihood of redress from a favorable ruling. The court must accept uncontroverted facts as true while having the authority to resolve disputed jurisdictional facts using evidence beyond the pleadings. Plaintiffs bear the burden of proving by a preponderance of evidence that jurisdiction exists.

Coach contends that Plaintiffs lack "injury in fact" for standing under Article III, arguing that their claims only reflect procedural violations and that they no longer face an imminent risk of deception due to their awareness of the purported deceptive practices. However, the court finds that Plaintiffs have sufficiently alleged an injury, as their claims indicate they made purchases based on misleading representations, which resulted in financial detriment. This aligns with similar rulings in outlet-pricing cases, where courts upheld that financial loss from reliance on false advertising constitutes a concrete injury.

Conversely, regarding the request for injunctive relief, the court notes that Plaintiffs must demonstrate a likelihood of future harm, which they fail to do since they have not expressed an intention to purchase from Coach in the future and cannot be misled again now that they are aware of the deceptive practices. The court references the Second Circuit's decision in Nicosia v. Amazon.com, where the plaintiff lacked standing for injunctive relief due to an absence of a real threat of future injury. Although there are cases allowing injunctive relief based on public policy, the court emphasizes that such decisions do not establish Article III standing for federal court claims. Plaintiffs are permitted to seek state court remedies for injunctive relief, but their federal claims are limited to past injuries without a basis for future harm.

Plaintiffs lack standing for injunctive relief due to the absence of any actual or imminent risk of future injury. Regarding class standing, Coach contends that Plaintiffs cannot assert claims on behalf of the Multi-State Subclass, as they do not have personal claims under the consumer protection laws of other states. The Circuit courts are split on whether a named plaintiff can pursue claims under laws of states where they did not suffer injury. However, a growing consensus suggests delaying standing consideration until after class certification, as it may influence the standing analysis. The determination of Plaintiffs' standing to represent the Multi-State Subclass will depend on the applicable laws and the similarity of injuries.

To survive a motion to dismiss, Plaintiffs must present sufficient facts for a plausible claim. Claims involving fraud are subject to a heightened pleading standard under Rule 9(b), which requires detailed allegations about the fraudulent circumstances. Coach argues that the Consolidated Amended Complaint (CAC) lacks specific details regarding Plaintiffs’ purchases, such as exact prices and dates. However, the Court finds that the CAC provides adequate detail, including style numbers and relevant purchase information, allowing Coach to defend against the claims. Coach's claim that Plaintiffs inadequately allege the "how" and "why" of the fraud is partially valid. Plaintiffs assert that the Manufacturers’ Suggested Retail Prices (MFSRPs) are misleading because they are perceived as former prices, and the CAC sufficiently articulates the deceptive nature and rationale behind these claims.

Plaintiffs claim that Coach markets outlet-only products designed to resemble retail items, tagging them with similar Manufacturer’s Suggested Retail Prices (MFSRPs), leading consumers to mistakenly perceive the outlet goods as comparable in quality to retail products. However, the Consolidated Amended Complaint (CAC) fails to specify how this confusion occurs, lacking details on the retail goods that the Plaintiffs believed matched the outlet items they purchased. Notably, Plaintiffs did not purchase the specific outlet items cited as examples, such as the "Phoebe" handbag or certain wristlets.

In relation to Plaintiff Marino’s claims under New Hampshire’s Consumer Protection Act, Coach argues she has not proven actual injury since she received a wristlet valued at the price she paid. Coach contends that the CAC does not claim that MFSRPs were presented as former prices and that a reasonable consumer would not interpret them that way. The court references its prior decision in Belcastro v. Burberry Ltd., emphasizing that claims of injury must extend beyond mere disappointment over perceived discounts. If Marino can amend her complaint to assert that the MFSRPs misled her into believing she was purchasing a higher-quality item than she received, she may establish a valid claim of injury. The court finds that Marino has made a plausible case that the MFSRPs are misleading, contrary to Coach's assertion that consumers would not be misled.

Coach's disclaimers in stores clarify that Manufacturer's Suggested Retail Prices (MFSRPs) are indicators of "value," leading to a factual question about whether a reasonable consumer could interpret them as former prices. This issue, along with the relevance of Coach's disclaimers, will be resolved later in the litigation. The Court notes that Coach's reliance on cases related to "compare at" advertising is misplaced, as MFSRPs directly suggest a price for the items, potentially leading consumers to believe they represent prior prices. Marino has sufficiently alleged misrepresentation, and the Court rejects Coach's claims that the Consolidated Amended Complaint (CAC) fails to allege intent. Plaintiffs assert that Coach is aware that its products will not be sold at MFSRPs, which consumers believe represent former prices. The CAC includes facts indicating Coach’s control over its merchandise sales, allowing the claims to proceed without further detail at this stage. 

Regarding Plaintiffs' California claims for consumer protection, false advertising, and unfair business practices, the Court dismisses Coach's argument that the claims lack a material misrepresentation or intent. Coach also argues that restitution cannot be recovered under California law because Plaintiffs do not allege they paid more than the true value of the products. However, California law permits restitution to restore money acquired through unfair competition, and the Court affirms that Plaintiffs can pursue this claim. They will need to demonstrate a method for calculating restitution later, but not in response to the motion to dismiss.

For common law fraud under New York law, Plaintiffs must demonstrate a material misrepresentation, knowledge of falsity, intent to defraud, reasonable reliance, and damages. Coach contends that the CAC lacks these elements, but the Court has already addressed similar arguments regarding New Hampshire law. Plaintiffs must specify how they were misled about the retail goods compared to outlet-only products to establish a specific injury. 

In asserting a claim for unjust enrichment in New York, Plaintiffs need to show that Coach was enriched at their expense and that equity demands the return of what is sought. Coach's motion to dismiss is based on the argument that Plaintiffs have not demonstrated an actual injury.

Coach contends that the Plaintiffs' purchases represent contractual agreements, under which, according to New York law, a party cannot claim unjust enrichment. The requirement of "actual injury" applicable to fraud claims is assumed to also apply to unjust enrichment claims. To establish a claim for unjust enrichment, Plaintiffs must demonstrate that the benefit received—specifically, Coach Factory products—was not what they bargained for. If Plaintiffs claim they expected retail-quality goods, this argument is inadequately stated as previously discussed. However, the Court dismisses Coach's assertion that the purchases bar a claim for unjust enrichment, allowing Plaintiffs to plead unjust enrichment as an alternative, even if recovery may ultimately be unattainable.

Regarding the express warranty claim, Coach seeks dismissal on the grounds that Plaintiffs failed to identify any express misrepresentation about the products. Coach argues that the Manufacturer’s Suggested Retail Prices (MSRPs) only imply a former price and do not constitute express warranties. The Court concurs, defining express warranties under California law as contractual terms that describe the goods' title, character, quality, identity, or condition. Plaintiffs' assertion that MSRPs serve as express warranties of product quality is based on vague generalizations about consumer behavior and does not constitute a concrete express warranty.

In conclusion, the Court partially grants and partially denies Coach's motion to dismiss. The claim for injunctive relief is dismissed with prejudice, Marino's New Hampshire Consumer Protection Act claim is dismissed without prejudice, and the claims for common law fraud, unjust enrichment, and breach of express warranty are also dismissed without prejudice. Plaintiffs are permitted to amend their complaint to address the identified deficiencies by September 18, 2017. A status conference is scheduled for September 29, 2017, with related deadlines for a joint pre-conference letter and case management plan due by September 21, 2017. The Court directs the Clerk to close several specified motions across multiple cases.

Coach asserts that its Manufacturer's Suggested Retail Prices (MFSRPs) are designed to convey a perception of quality, supported by disclaimers in Coach Factory stores indicating that MFSRPs reflect the quality of materials, craftsmanship, and standards upheld by the brand. The plaintiffs contend that consumers link higher prices with superior quality and seek injunctive relief for all claims, emphasizing that the question of Article III standing for such relief is a matter of federal law. 

Plaintiffs acknowledge the applicability of Rule 9(b) to their common law fraud claims and those under California and New Hampshire consumer protection laws. Coach's disclaimers are argued to substantiate the plaintiffs' claims. Although the elements for a claim under New Hampshire's Consumer Protection Act (CPA) are not explicitly identified by either party, they agree that material misrepresentation, intent, and injury are required. Both parties draw parallels between the New Hampshire CPA and Massachusetts consumer protection law, with New Hampshire courts often looking to Massachusetts for interpretative guidance.

The plaintiffs’ argument that MFSRPs misled them into believing they were receiving a bargain is likened to a previously rejected theory of illusory injury in other cases, which is deemed insufficient under New York law but potentially viable under California law. Coach contends that plaintiffs have not sufficiently asserted a claim under the unlawful prong of California's Unfair Competition Law (UCL) due to a lack of a predicate statute violation, although the court finds that they have adequately alleged a claim under the fraud prong of the UCL.

Coach's arguments made in footnotes regarding claims under the California FAL and the similarity of laws across California, New York, and New Hampshire are not fully considered by the court, particularly as the plaintiffs rely on the disclaimers as an express warranty regarding product quality, a claim not explicitly made in their consolidated amended complaint (CAC).