2018-00236714-CU-BT
Jacob Stout vs. Macy’s West Stores, Inc.
Nature of Proceeding: Hearing on Demurrer to the 2nd Amended Complaint
Filed By: Brooks, Meegan
Defendant Macy’s West Stores, Inc.’s (Macy’s) demurrer to the second amended complaint (SAC) is OVERRULED.
Macy’s request for judicial notice of a photograph attached as an exhibit to Plaintiff Jacob Stout’s (Stout) prior pleadings is GRANTED.
Overview
Stout alleges in the SAC that Macy’s misled him into believing that shorts he wished to purchase were on sale, when they were not. Macy’s allegedly placed two clothing racks next to one another and displayed a “40% off” sign on one of the racks such that a reasonable consumer would have believed the merchandise on both racks was on sale. When he purchased shorts on the rack furthest from the on-sale sign, he learned that he would have to pay the full price, which he paid. Stout alleges that other shoppers were similarly misled. He also alleges that after he complained about the misleading advertising, Macy’s removed all full-price items from the misleading two-rack configuration.
With respect to his resulting losses, Stout alleges that he was “embarrassed and based on need for expedience and avoiding further inconvenience to take any further steps and left the store having paid full price[.]” (SAC, ¶ 13.) He also alleges “economic harm and consequential damages, inconvenience, attorney’s fees and costs…wasted time” and “emotional distress.” (Id., ¶¶ 20-21.) The SAC against Macy’s contains causes of action for false advertising under B&P Code § 17500 et seq. (the “FAL”), violation of the Consumer Legal Remedies Act (CLRA) [CC § 1750 et seq.] and unfair competition under B&P Code § 17200 et seq. (the “UCL”). Macy’s demurs on grounds the allegations fail to state any valid cause of action. Stout opposes.
The court sustained Macy’s demurrer to the first amended complaint (FAC) and granted leave to amend. The SAC does not contain the common law causes of action for negligence and fraud that the FAC contained.
Discussion
The demurrer is OVERRULED.
When it sustained Macy’s demurrer to the FAC, the court concluded that Stout had failed to allege the requisite resulting harm. (See B&P Code § 17204; Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 228; Hansen v. Newegg.com Americas, Inc. (2018) 25 Cal.App.5th 714, 724.) The court reasoned that, because Stout purchased the shorts after Macy’s informed him he was required to pay full price, Macy’s did not cause him to suffer any loss. To reach this conclusion, the court distinguished Stout’s allegations from the facts in Veera v. Banana Republic, LLC (2016) 6 Cal.App.5th 907.
Veera involved a shopper (among others) who entered a store after noticing an on-sale sign in the store’s window. (Veera, pp. 911-912.) The sign did not indicate that the sale was limited to certain items. (Id., p. 911.) Like Stout, the shopper in Veera waited in line to purchase items she believed were part of the sale. (Id. p. 912.) When she arrived at the register, the shopper learned–contrary to what the on-sale sign suggested–that the sale only applied to certain items. (Id.) And like Stout, the shopper in Veera became embarrassed. (Id. pp. 912-913.) The trial court granted the store’s summary judgment motion on the ground that the evidence did not support an inference that the shopper had sustained any economic injury conferring standing under the CLRA, the FAL or the UCL. (Id., p. 913.)
The Court of Appeal reversed because the shopper possessed a statutorily protected interest in knowing from the outset the true prices of items she might buy. (Veera, p. 918.) The Veera court decided the evidence supported an inference that one of the causes of the shopper’s loss–the amount paid in excess of the advertised discount– was the store’s misleading advertising. (Id., pp. 919-920.) The court explained:
On these facts, the question of reliance and causation does not rest as a matter of law on whether plaintiffs knew the actual price of the items they purchased at the moment money was exchanged. To isolate that point in time as solely determinative of reliance and causation ignores the true nature of those elements. If the reliance on the misleading advertising was a substantial factor in causing plaintiff’s decision to buy, the requirements of reliance and causation are met. [Citation.] Here, in plaintiffs’ version of events, the advertising led them to enter the store, to shop, to select items, to decide to purchase them, and to stand in line to make the purchases. Their reliance on the advertising informed their decision to buy, which culminated in the embarrassment and frustration they felt when, as the items were being rung up, they learned that the discount did not apply. And it was the temporal proximity of that chain of events, and the pressure the events brought to bear on plaintiffs’ judgment, that played a substantial role in leading them to purchase the items they did, even though they knew the discount did not apply. On this reasoning, there is a triable issue whether plaintiffs’ reliance on the allegedly misleading advertising was a cause, though not the only cause, of their economic harm.
The court continued:
We also find it pertinent to consider the implication of a contrary result. Plaintiffs’ evidence portrays, in essence, a type of “bait and switch” advertising. [Citations.] In such a scheme, one of the dangers is that the consumer will rely on the deceptive advertising to decide to buy merchandise. Then, when the deception is revealed, the consumer, now invested in the decision to buy and swept up in the momentum of events, nonetheless buys at the inflated price, despite his or her better judgment.
If such a scheme is unsuccessful-that is, if the consumer is able to resist the influence of the momentum to buy created by the chain of events flowing from the false advertising-the consumer has no standing to bring a private action under Proposition 64, because the consumer has
suffered no economic injury. That result is consistent with the purpose of Proposition 64, which was intended to curb “use [of the UCL] by unscrupulous lawyers who exploited the generous standing requirement
… to file ‘shakedown’ suits to extort money from small businesses.” [Citation.] […]
But under [Defendant] Banana Republic’s theory, if the scheme is successful-that is, if the consumer is influenced by the momentum to buy created by the false advertising, and therefore buys at the inflated price-the consumer, as a matter of law, also has no standing, because just before money changed hands, when the deception was finally revealed, the consumer learned the full price of the item bought. Under this theory, only in the very rare case when the advertiser surreptitiously charges an inflated price, which the consumer does not realize he has paid until after money has changed hands, does the consumer have standing to bring a private action. This result seems at odds with the intent of Proposition 64, which “did not propose to curb the broad remedial purpose of the UCL or the use of class actions to effect that purpose, but targeted only the specific abuse described above.” [Citation.]
(Veera, pp. 919-920.)
When this court sustained Macy’s demurrer to the FAC, it distinguished Veera as a case in which advertising lured a shopper into a store, whereas Stout’s case involves advertising that purportedly misled a shopper already inside the store. In opposition to the current demurrer, Stout asks the court to reconsider the materiality of that distinction. After further consideration, the court agrees with Stout that Veera applies to Stout’s statutory causes of action and commands an order overruling the demurrer. The court emphasizes that it is a tribunal of inferior jurisdiction bound follow California appellate decisions, such as Veera, that are published. The California Supreme Court denied review in Veera, and Veera is the law in California. That one justice dissented in Veera does not alter the decision’s binding effect.
The court rejects Macy’s argument that, as a matter of law, no reasonable consumer could have been misled by the dual-rack configuration and advertising about which Stout complains. Whether a reasonable consumer would have believed that Macy’s on-sale sign applied to merchandise on two racks pushed together, and whether the sign and configuration were “deceptive” under the applicable statutes, present factual issues that may not be decided on demurrer. (See Paduano v. American Honda Motor Co., Inc. (2009) 169 Cal.App.4th 1453, 1469 [“Whether a practice is deceptive, fraudulent, or unfair is generally a question of fact which requires ‘consideration and weighing of evidence from both sides’”].) At this juncture, the court must construe the allegations in Stout’s favor.
That Stout may have had the option to use a price-checker machine inside Macy’s store to check the price of the shorts he decided to purchase does not alter the outcome either. At most, the availability of a price-checker creates a factual issue as to the reasonableness of Stout’s reliance on Macy’s on-sale sign. Again, however, the court may not resolve factual issues on demurrer.
Macy’s argues that B&P Code § 12024.2(a)(2) codifies a commonsense rule that it is objectively unreasonable to conclude that a sale extends to items other than those on the rack to which the discount applies. Subdivision 12024.2(a)(2) provides that “[i]t is unlawful for any person, at the time of sale of a commodity, to…[c]harge an amount greater than the lowest price posted on the commodity itself or on a shelf tag that corresponds to the commodity… .” The suggestion appear to be that the “shelf tag” corresponding to the shorts Stout purchased is the on-sale sign attached to a rack other than the one holding the shorts. But this is merely another way of arguing that Stout could not have concluded reasonably that the sign applied to merchandise on two racks pushed together. As previously indicated, the court cannot resolve this issue on demurrer.
Finally, the court notes Stout’s request in opposition for leave to file a third amended complaint (TAC) to add a request for damages, injunctive relief, fees and costs under the CLRA cause of action. The proposed TAC contains other, minor revisions.
Although it appears Stout was entitled to add a request for CLRA damages without leave of court, (see CC § 1782(d)), the proposed TAC contains additional revisions, and thus Stout must file a motion for leave to amend pursuant to CRC 3.1324.
Nothing, however, bars the parties from lodging a stipulation and order allowing the proposed TAC to be filed without a motion.
Disposition
The demurrer is overruled.
Macy’s is directed to file and serve its answer to the SAC no later than 1/22/19.
The minute order is effective immediately. No formal order pursuant to CRC 3.1312 or further notice is required.