Ninth Circuit Revives False Ad Claims Against Neiman Marcus

PASADENA, Calif. (CN) — The Ninth Circuit ruled Tuesday that Neiman Marcus will have to answer accusations that it tricks customers into believing it sells the same upscale clothing at its Last Call outlets that it does at its flagship stores.

A three-judge panel remanded the putative class action to U.S. District Court in Los Angeles, finding that lead plaintiff Linda Rubenstein plausibly alleged claims under California’s False Advertising Law, Consumer Legal Remedies Act and Unfair Competition Law.

“Rubenstein’s complaint alleges ‘enough fact[s] to raise a reasonable expectation that discovery will reveal evidence’ to support her FAL, CLRA, and UCL claims,” the panel wrote in a 6-page memorandum.

Rubenstein sued Neiman Marcus in Los Angeles Superior Court in August 2014, claiming it attaches “Compared To” price tags to the clothing it sells at its Last Call stores to make customers believe they are buying authentic Neiman Marcus clothing once sold at a its retail stores.

In reality, Rubenstein said, the clothing sold at Last Call is of inferior quality, and is never sold at Neiman Marcus’s retail stores.

U.S. District Judge S. James Otero dismissed Rubenstein’s suit in December 2014, with leave to amend, for failure to state a claim and failure to allege fraud with particularity.

But the Ninth Circuit found Tuesday that Rubenstein had plausibly alleged each of her claims, and had in fact pleaded with particularity.

“Rubenstein has satisfied Rule 9(b)’s particularity requirement by pleading the ‘who, what, when, where, and how’ of Neiman Marcus’s alleged misconduct,” the court wrote in the unsigned, unpublished memorandum. “Here, the particular facts as to whether the Compared To prices are fictitious are likely only known to Neiman Marcus. Without an opportunity to conduct any discovery, Rubenstein cannot reasonably be expected to have detailed personal knowledge of Neiman Marcus’s internal pricing policies or procedures for its Last Call stores. Because Rubenstein need not specifically plead facts to which she cannot ‘reasonably be expected to have access,’ her allegations regarding the fictitious nature of the Compared To prices may properly be based on personal information and belief at this stage of the litigation.”

The panel found that Rubenstein had sufficiently alleged her false advertising and unfair business practices claims by showing that Neiman Marcus may have made misleading statements about its Last Call merchandise and discounts.

And it said that Rubenstein had sufficiently alleged her unfair competition claim by showing that neither Neiman Marcus nor nearby retailers sold comparable products at the “Compared To” price at the time that she made her purchases at Last Call.

Joshua Fields, an attorney with Kirtland & Packard in El Segundo representing Rubenstein, expressed satisfaction with the ruling in an email Wednesday.

“While the decision was not issued by the panel for publication, we are hopeful that its well-reasoned holding and significance on the important reference pricing issue will be closely considered by both other consumers and retailers alike,” he said. “The plaintiff looks forward to having her day in court to present her claims that Neiman Marcus’s “Compare At” reference pricing at its Last Call stores was deceptive.

Ninth Circuit Judges Richard Tallman and N. Randy Smith, and U.S. District Judge Stephen Murphy III, sitting by designation from the Eastern District of Michigan, sat on the panel.

Neiman Marcus is represented by Kevin Asfour with K&L Gates in Los Angeles. He did not return a request seeking comment Wednesday.