Ninth Circuit Moves Misleading Pricing Suit Forward

A misleading pricing suit against Neiman Marcus was given new life by the U.S. Court of Appeals for the Ninth Circuit when the panel reversed the dismissal of the complaint.

According to plaintiff Linda Rubenstein, the national retail chain duped consumers by using price tags listing a price “Compared To” a fake higher price—a move to make individuals think they were getting a bargain at the company’s Last Call outlet stores. A district court dismissed her claims based on California’s False Advertising Law (FAL), its Consumer Legal Remedies Act (CLRA) and Unfair Competition Law (UCL), as well as the Federal Trade Commission’s Guides Against Deceptive Pricing.

Rubenstein appealed, and the federal appellate panel reversed and remanded in an unpublished memorandum.

Whether a business practice is deceptive is usually a question of fact that is not an appropriate basis for a motion to dismiss, the Ninth Circuit emphasized. As the court noted, where, “as here, the reasonable consumer test applies to a plaintiff’s underlying claims, it is a ‘rare situation in which granting a motion to dismiss is appropriate.’”

The plaintiff’s complaint alleged sufficient facts to raise a reasonable expectation that discovery would reveal evidence to support her FAL, CLRA and UCL claims, the court said. “First, Rubenstein alleges a plausible FAL claim on the basis that Neiman Marcus made statements ‘concerning any circumstance or matter of fact connected with’ the sale of its Last Call products that were ‘untrue or misleading’ or ‘which by the exercise of reasonable care should [have been known] to be untrue or misleading,’” the panel wrote.

She also stated a plausible CLRA claim by alleging that the defendant “made ‘false or misleading statements of fact concerning reasons for, existence of, or amounts of, price reductions,’” the court said. “And, although the FTC Guides do not provide a private civil right of action, ‘[v]irtually any state, federal or local law can serve as the predicate for an action under [the UCL].’” Therefore, Rubenstein’s allegations that neither Neiman Marcus nor other merchants in the vicinity sold comparable products at the “Compared To” prices at the time of her purchase were sufficient to state a claim under the UCL.

In summary, the Ninth Circuit found that Rubenstein satisfied the particular requirement by pleading the “who, what, when, where and how” of Neiman Marcus’s alleged misconduct. “Rubenstein alleges that she purchased products with Compared To price tags in a Last Call store in Camarillo, [CA] (the ‘Where’), on July 21, 2014 (the ‘When’),” the panel said. “She further alleges that Neiman Marcus (the ‘Who’), through its use of those Compared To price tags (the ‘What’), misled consumers into believing that the Compared To prices were charged by either Neiman Marcus or other merchants in the vicinity for comparable products (the ‘How’).”

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,” and she could not be expected to plead facts to which she did not have access, the court concluded.

To read the memorandum in Rubenstein v. The Neiman Marcus Group, click here.

Why it matters: The panel’s memorandum opinion emphasized that a motion to dismiss will rarely be granted where the reasonable consumer test applies to a plaintiff’s underlying claims and the issue of whether a business practice is deceptive is a question of fact.