Kohl's Must Defend Claim It Falsely Advertised Sale
(CN) - Consumers have standing to sue Kohl's Department Stores for allegedly falsely advertising goods as on sale, when they were routinely sold at that price, the 9th Circuit ruled.
Antonio Hinojos bought a Samsonite suitcase from Kohl's advertised as 50 percent off its "original" price of $299.99. He also bought a number of shirts that were marked down between 32 and 40 percent from their "original" prices.
But in reality, the items were not on special sale, and Kohl's routinely sold them at the advertised "sale" price.
Hinojos claims that he "would not have purchased [these] products at Kohl's in the absence of Kohl's misrepresentations."
The district court dismissed Hinojos' class action, finding that he had not lost money as a result of Kohl's alleged false advertising, because he acquired the items he wanted.
But the 9th Circuit reversed the decision Tuesday, based on its reading of the California Supreme Court's ruling in Kwikset Corp. v. Superior Court.
"Hinojos has done everything Kwikset requires to allege an economic injury under the UCL [Unfair Competition Law] and FAL [False Advertising Law]. He alleges that the advertised discounts conveyed false information about the goods he purchased, i.e., that the goods he purchased sold at a substantially higher price at Kohl's in the recent past and/or in the prevailing market. He also alleges that he would not have purchased the goods in question absent this misrepresentation,'" Judge Stephen Reinhardt said, writing for the three-judge panel.
The lowers court's ruling limited Kwikset only to cases involving "factual misrepresentations about the composition, effects, original, and substance of advertised product."
But, "Kwikset cannot be so easily limited," the 21-page circuit opinion said.
"In fact, the deceived bargain hunter suffers a more obvious economic injury as a result of false advertising than the Kwikset consumer who was duped into buying foreign-made goods, because the bargain hunter's expectations about the product he just purchased is precisely that it has a higher perceived value and therefore has a higher resale value," Reinhardt said.
Under the district court's read of precedent, advertisements such as "not available in stores," "available for a limited time only," "the same model of shoe worn by LeBron James," and "more doctors recommend our product that any other brand," would not be examples of false advertising, the 9th Circuit said.
"Here, Hinojos specifically and plausibly alleges that Kohl's falsely markets its products at reduced prices precisely because consumers such as himself reasonably regard price reductions as material information when making purchasing decisions," Reinhardt said.
The court also rejected Kohl's motion to certify the matter to the California Supreme Court, especially as it did so after oral argument, when it gathered that the judges were not favorable to its position. "Kohl's conduct regarding certification violated both our rule against belated certification requests and our long-standing prohibition against a party's use of procedural motions to avoid having its appeal decided by a panel it perceives as unfavorable," the court said.