Court: District Court, C.D. California; February 22, 2018; Federal District Court
Defendant Stein Mart, Inc. filed a Motion for Summary Judgment against Plaintiffs Marilyn Sperling and Jerred Schuh on January 8, 2018, which the court heard on February 16, 2018. The court also addressed Plaintiffs' Motion for Class Certification, filed on December 15, 2017. The court granted Stein Mart's Motion for Summary Judgment and denied the Plaintiffs' Motion for Class Certification.
The case focuses on Stein Mart's practice of displaying comparative reference prices on price tags, where "Compare At" prices appear higher than "Our Price" prices. Plaintiffs claim they were misled by these prices when purchasing products. Stein Mart's Fair Pricing Policy, displayed at cash registers and online, states that "Compare At" prices are based on input from suppliers and reflect expected retail prices. The policy clarifies that these prices may not represent initial prices at all full-price retailers.
The undisputed facts include that Stein Mart aims to sell merchandise at lower prices compared to department stores and boutiques. Sperling purchased three products, including Yellow Box sandals and a Revelation suitcase, but did not provide evidence of the specific model or comparative pricing from other retailers. Stein Mart, however, presented evidence showing that the sandals were sold by other retailers at $59.95 or more, and maintained that its "Compare At" prices were based on suggested retail prices provided by suppliers.
Sperling purchased Ava pants from Stein Mart, which are sold under the exclusive Peck brand, for $53.99, with a "Compare At" price of $78.00. Although the pants are exclusive to Stein Mart, they are also available from other retailers under different private labels, all identical in substance. The manufacturer indicated that these pants are typically priced between $115 and $138 at other retailers. Schuh bought a Kenneth Cole suit, marked with a "Compare At" price of $320 for approximately $160, based on the manufacturer's MSRP, and an Alan Flusser shirt, also exclusive to Stein Mart, which shares design similarities with shirts sold under other brand names. Schuh expressed a preference for the Alan Flusser brand.
The litigation began when Sperling filed a complaint against Stein Mart on July 15, 2015. After multiple amendments and a motion to dismiss, the Court allowed the case to proceed. On May 2, 2017, the plaintiffs, including Schuh, filed a Fourth Amended Consolidated Class Action Complaint alleging violations of California's Unfair Competition Law, False Advertising Law, and Consumers Legal Remedies Act. Stein Mart later served requests for admission to the plaintiffs, questioning their claims and the damages incurred. Stein Mart's counsel noted issues with the delivery of these requests, leading to delayed responses. Stein Mart now seeks summary judgment, asserting that its pricing practices are not deceptive and that the plaintiffs are not entitled to relief.
Plaintiffs are seeking to certify a class consisting of individuals who, between July 15, 2011, and the present, purchased items from Stein Mart in California that featured a "Compare At" price higher than the sale price, and who have not received refunds or credits for those purchases. The legal standard for summary judgment requires that judgment be granted when there are no genuine issues of material fact, based on pleadings, discovery materials, and affidavits. The moving party must identify elements of the claim and evidence showing the absence of material fact issues, while the nonmoving party must provide specific facts to demonstrate a genuine dispute. The court must make reasonable inferences in favor of the nonmoving party, but unsupported inferences cannot be drawn. Additionally, Stein Mart contends that Schuh has legally admitted certain matters by failing to respond to requests for admission within the required 30-day period, which, if not addressed through a motion, cannot be contested by contrary testimony. Schuh was served with these requests on October 26, 2017, and had an additional three days to respond due to the method of service.
Schuh was obligated to respond to requests for admission by November 28, 2017, but he did not submit his responses until December 18, 2017. Nathan claims his firm did not receive the requests until November 15, 2017, and that a courtesy email from Stein Mart's counsel went to his junk folder, preventing him from seeing it. However, the proof of service indicates the requests were served on October 26, 2017, implying that Nathan was aware he needed to respond promptly. Schuh's failure to respond within 30 days results in the requests being deemed admitted under Fed. R. Civ. P. 36(a)(3). The Court finds no good cause to allow Schuh to withdraw these admissions but does not address this issue since no motion to withdraw has been filed. Consequently, Schuh has admitted to reading Stein Mart's Fair Pricing Policy prior to purchasing certain items and not relying on the "Compare At" prices.
The plaintiffs allege that Stein Mart's "Compare At" pricing violates California's FAL, CLRA, and UCL. The FAL prohibits disseminating misleading statements that a business knows or should know are false. It applies to advertising that is false or has the capacity to deceive. The CLRA prohibits unfair competition methods in consumer sales and specifically targets false advertising practices. The UCL prohibits unlawful, unfair, or fraudulent business acts and makes violations of the FAL and CLRA independently actionable. The Court concludes that the plaintiffs have adequately alleged violations of the FAL and CLRA, which also supports their UCL claims.
To establish a claim under the FAL, UCL, or CLRA, a plaintiff must demonstrate that the defendant's misrepresentations are likely to deceive a reasonable consumer, as per Williams v. Gerber Products Co. A plaintiff must indicate how a statement is false or misleading, even if the statement is technically true. The reasonable consumer test has been applied in cases involving comparative reference prices, categorized as "exclusive product" and "non-exclusive product" cases.
In exclusive product cases, where an outlet sells a product version not available in traditional retail stores, courts typically allow plaintiffs to proceed with their claims. Examples include Branca v. Nordstrom, where a plaintiff claimed items at Nordstrom Rack were misleadingly compared to full-price Nordstrom products. Similarly, Stathakos v. Columbia Sportswear and Rubenstein v. Neiman Marcus upheld claims based on exclusive pricing practices.
Conversely, in non-exclusive product cases, where multiple retailers sell the same product, courts often dismiss claims unless the plaintiff shows that the comparative price is misleading. In DSW, the court found that the plaintiff did not adequately allege deception regarding manufacturer’s suggested retail prices (MSRPs). Jacobo v. Ross Stores highlighted the need for plaintiffs to provide evidence of competing prices, while Haley v. Macy's differentiated from exclusive cases, noting that comparisons were misleading if the products were not sold outside discount stores.
The plaintiff is not required to demonstrate that no other retailers sold the item at the comparative reference price but must present evidence from which a rational trier of fact could conclude that this price was inaccurate. In *Haley v. Macy's, Inc.*, the court emphasized that the plaintiff adequately alleged deception by showing an example of a coffee maker advertised at $149.99, while lower prices were available on Amazon and the manufacturer's website. In *DSW*, the retailer displayed "Compare at" prices significantly higher than their selling prices, leading the plaintiff to claim violations of the FAL, CLRA, and UCL due to misleading pricing. However, the complaint lacked facts indicating that these comparative prices were inflated or inaccurate, resulting in dismissal without prejudice. On appeal, the Ninth Circuit affirmed the dismissal, stating the plaintiff failed to show the manufacturer's suggested retail price was an unfair comparator at the time of purchase. The differences between exclusive and non-exclusive product cases are crucial: in exclusive cases, products sold at outlets were not available at traditional retail prices, making the use of full retail items as price comparators deceptive. In contrast, for non-exclusive products, which are sold by various retailers with provided MSRPs, the comparative reference prices are not inherently misleading unless evidence shows otherwise. The plaintiff's claims involve non-exclusive products, and the "Compare At" prices reflected the suppliers' MSRPs, meaning they were not deceptive by default.
Plaintiffs must provide evidence that the "Compare At" prices for products sold by multiple retailers, including Yellow Box sandals, Revelation suitcase, and Kenneth Cole suit, were misleading. They are not required to demonstrate that no other retailer sold the products at the "Compare At" prices but must present some evidence to suggest the prices were incorrect. Plaintiffs failed to do so, lacking evidence of other retailers' pricing for these items, thus failing to create a factual dispute regarding the alleged deception of the "Compare At" prices.
In contrast, for products under Stein Mart-exclusive brands, while the use of "Compare At" prices appears similar to certain exclusive product cases, the evidence shows that the prices were not misleading. Specifically, the Peck Ava pants purchased by Sperling were also sold by other retailers under their own private labels, thus establishing that comparable items were available elsewhere. Stein Mart presented evidence that these pants were sold for over $115, exceeding the "Compare At" price, which confirms that the pricing was neither false nor misleading.
Likewise, for the Alan Flusser shirt purchased by Schuh, other retailers sold similar shirts under different brand names. Schuh did not provide evidence to prove that the "Compare At" price was misleading, despite asserting that the brand name influenced his purchase. However, his acknowledgment of Stein Mart's Fair Pricing Policy, which defines the "Compare At" price in relation to original or comparable items, undermines his claim of deception.
Ultimately, Plaintiffs did not present sufficient facts for a jury to conclude that Stein Mart’s comparative reference pricing was deceptive, leading to the dismissal of their claims under the FAL, CLRA, and UCL.
Plaintiffs' UCL claim against Stein Mart hinges on alleged noncompliance with the FTC Pricing Guides, despite lacking evidence of deceptive reference pricing. The court clarified that the FTC Act does not allow private actions and the California UCL does not recognize FTC claims as actionable. However, the Ninth Circuit has indicated that violations of the FTC Act may support a UCL claim. Plaintiffs must demonstrate actual injury resulting from unfair practices, which they failed to do, as Stein Mart's actions were not found likely to deceive a reasonable consumer. Consequently, the court determined that liability under the UCL requires proof of deception, which Plaintiffs did not provide, leading to Stein Mart being granted summary judgment.
Additionally, since summary judgment was granted to Stein Mart, Plaintiffs' motion for class certification was deemed moot. The court ordered Stein Mart to submit a Proposed Judgment within 14 days. The parties disputed certain factual assertions but failed to present evidence that would create genuine disputes of fact, and most objections to evidence were overruled as moot. The court suggested that even without specific admissions, Stein Mart’s pricing was not deceptive as a matter of law, especially when comparing items that are essentially identical except for branding.
