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California Lawsuit Claims Fraud, Negligence Against Business for Alleged Pricing Scheme

moneyBusinesses that sell goods and services to the general public must take care regarding how they advertise their products and themselves in order to avoid possible claims under state and federal consumer laws prohibiting false or misleading statements and other “unfair business practices.” Consumers may be able to assert claims in court for both intentional and negligent violations of these laws, as demonstrated by a lawsuit filed recently in a California federal court, Rose v. Zara USA, Inc., No. 2:16-cv-06229, complaint (C.D. Cal., Aug. 19, 2016). The plaintiff alleges that the defendant, a clothing retailer organized in New York and based in Europe, deceived consumers by listing prices in euros but charging customers “arbitrarily inflated amounts” in dollars. Id. at 9.

Most business torts, much like tort law pertaining to personal injuries, can be broadly divided into two categories:  intentional torts and negligence. Intentional torts typically require proof that a defendant acted willfully or intentionally. In some cases, a plaintiff must also prove that the defendant intended the harm to occur. Consumer protection statutes do not necessarily require a plaintiff to prove intent, but they may permit additional damages if a plaintiff can prove that a defendant acted willfully.

A claim for negligence does not require proof that a defendant had any particular mental state. It focuses instead on duties of care owed by a defendant. A plaintiff must establish four elements in order to prevail on a negligence claim:  (1) the defendant owed a duty of care to the plaintiff, or to the general public; (2) the defendant breached this duty; (3) the breach proximately caused the plaintiff’s harm; and (4) the plaintiff suffered measurable damages as a result.

A similar doctrine, negligence per se, applies when a defendant violates a law designed for the protection of the public, such as a consumer law against false or misleading advertising. A defendant in this situation is presumed to owe and to have breached a duty of care, meaning that the plaintiff can skip to proving causation.

The defendant in Rose markets and sells clothing online and through retail locations. According to the plaintiff’s complaint, the company began with a single store in Spain in 1975, but it has grown to have “more than 2,100 stores in 88 countries.” Rose, complaint at 2. The plaintiff alleges that the defendant engages in “a classic bait and switch” to defraud American consumers. Id.

The defendant lists all prices, including on price tags in U.S. stores, in euros (€), the currency of the European Union, while customers only see the price in U.S. dollars ($) once they are checking out at the register. The average exchange rate over the past year is approximately $1.11 to €1, but the defendant allegedly inflates its dollar prices, resulting in customers overpaying for the defendant’s products. The lawsuit, a putative federal class action, asserts five causes of action:  negligence; negligence per se; unfair business practices under California law, Cal. Bus. & Prof. Code §§ 17200, 17500 et seq.; unjust enrichment; and fraud in the form of intentional misrepresentation and concealment of fact.

For the past 40 years, business litigation attorney James G. Schwartz has represented the rights and interests of Bay Area businesses and business owners. To schedule a free and confidential consultation with a knowledgeable and experienced business advocate, contact us today online or at (925) 463-1073.

More Blog Posts:

Media Company Faces Massive Judgment in Tort Lawsuit, Resulting in Bankruptcy, Pleasanton Business & Commercial Law Blog, August 15, 2016

California Appellate Court Affirms Injunction in Business’ Trespass Lawsuit Against Labor Union, Pleasanton Business & Commercial Law Blog, July 15, 2016

California Court Grants Preliminary Injunctions in FTC Case Alleging Violations of Federal Consumer Protection Law, Pleasanton Business & Commercial Law Blog, December 15, 2015

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