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California Court Allows False Advertising Lawsuit to Proceed

Banana RepublicThree plaintiffs filed a putative class action against a retail clothing company, alleging that it induced them to enter store locations with misleading advertisements of a storewide sale. The defendant sought summary judgment, partly on the ground that the plaintiffs lacked standing to sue because they had not established actionable economic injuries. The trial court ruled in the defendant’s favor. The appellate court reversed this ruling, finding that the plaintiffs had demonstrated a triable issue of fact as to whether they suffered injuries-in-fact. SV v. Banana Republic, LLC, No. B270796, slip op. (Cal. App. 2nd, Dec. 15, 2016).

The lawsuit asserts causes of action under three California statutes. The Unfair Competition Law (UCL) prohibits “unfair, deceptive, untrue or misleading advertising.” Cal. Bus. & Prof. Code § 17200. The False Advertising Law (FAL) broadly prohibits the advertising of goods or services using “any statement…which is untrue or misleading, and which is known, or which…should be known, to be untrue or misleading.” Cal. Bus. & Prof. Code § 17500. The Consumers Legal Remedies Act (CLRA) prohibits “unfair or deceptive acts or practices” connected with the sale of goods or services. Cal. Civ. Code § 1770(a). The plaintiffs in SV alleged three CLRA violations involving false advertising of goods, false or misleading statements regarding “price reductions,” and misrepresenting the nature of a transaction. Id. at §§ 1770(a)(9), (13), (14).

In order to establish standing under any of these statutes, a plaintiff must demonstrate that they have “suffered injury in fact and…lost money or property” because of the defendant’s unlawful act. SV, slip op. at 10, quoting Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 321 (2011), Cal. Bus. & Prof. Code § 17204. With regard to the amount of damages a plaintiff must show, the court notes that an “injury in fact is not a substantial or insurmountable hurdle.” SV at 10, Kwikset at 324. All three statutes allow restitution and injunctive relief. The UCL and the FAL limit any other kind of damages, but the CLRA expressly includes compensatory and punitive damages as available remedies.

The three lead plaintiffs each allege that they decided to enter store locations operated by the defendant because “[t]hey saw red signs containing the words ‘sale’ and ‘40 percent off’ in the windows.” SV at 6. Each plaintiff spent time trying on clothes before making their selections and going to the checkout counter. At that point, they learned that the items they had selected were not included in the “40 percent off” sale. They allege that “the signs did not state that the discount applied only to certain items.” Id.

In order to prevail on a summary judgment motion, the defendant had to show that no “triable issue as to any material fact” existed on the question of injury-in-fact. Cal. Code Civ. Proc., § 437c(c). The trial court granted the motion, holding that “‘lost shopping time’ was not ‘money or property’ as required to confer standing.” Id. at 7. The appellate court disagreed, finding that the plaintiffs had “raised a triable issue” as to whether their lost time constituted loss of “money or property sufficient to qualify as injury in fact.” Id. at 19.

Business litigation attorney James G. Schwartz has represented Bay Area businesses and business owners in litigation and transactional matters for more than 40 years. Contact us online or at (925) 463-1073 today to schedule a free and confidential consultation with a skilled and experienced business advocate.

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Photo credit: Joe Mabel [GFDL or CC BY-SA 4.0], via Wikimedia Commons.