Deceptive Pricing Suit Costs Neiman Marcus $2.9M

Advertising Law

After the U.S. Court of Appeals for the Ninth Circuit breathed new life into a deceptive pricing class action, Neiman Marcus agreed to pay almost $3 million to settle the case.

Linda Rubenstein alleged the national retail chain duped consumers by using tags listing a price “Compared To” a fake higher price in an attempt to make individuals think they were getting a bargain at the company’s Last Call outlet stores. A district court dismissed her claims under California’s False Advertising Law, Unfair Competition Law, and Consumer Legal Remedies Act.

But last year, the Ninth Circuit reversed, emphasizing that whether a business practice is deceptive is usually a question of fact that is not an appropriate basis for a motion to dismiss.

The parties then reached a deal. The agreement requires Neiman Marcus to make policy changes and establish a settlement fund for a class of consumers who made purchases in California stores dating back to August 7, 2010.

Going forward, the defendant promised to post in-store and online disclosures about its “Compared To” pricing if such prices are used, and provide employee training on its pricing policies.

The gross settlement amount of $2.9 million will cover administration fees and expenses not to exceed $400,000, class counsel fees and litigation expenses not to exceed $870,000 plus costs, and a class representative payment to Rubenstein not to exceed $5,000. Class members—estimated to be “hundreds of thousands” of individuals—will receive a share of the remaining at least $1.625 million based on a points system. Points are determined by the purchase price (including tax) of all qualifying purchases with additional points available with proof of purchase.

“In light of litigation uncertainties, the proposed settlement offer’s value is adequate,” according to the memorandum in support of the motion for preliminary approval of the deal. While the plaintiff advocated for a purchase price minus depreciation model of damages, Neiman Marcus argued that applicable damages could be determined only from the price class members paid for the products measured against the value they received. This total was zero, according to the defendant, because customers chose to purchase the items at precisely the price paid.

Given the unsettled area of law with regard to deceptive pricing suits, the parties elected to settle for what the memorandum characterized as “valuable consideration.”

To read the memorandum in support of the motion for preliminary approval of the settlement in Rubenstein v. The Neiman Marcus Group LLC, click here.

Why it matters: Deceptive-pricing consumer class actions remain popular with plaintiffs’ attorneys. Neiman Marcus’s $2.9 million payout is slightly less than that of other retailers facing similar actions, such as Michael Kors’s $4.9 million deal and Kohl’s Department Stores’ 2016 agreement to pay $6.15 million.



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