VALERIE CAPRONI, United States District Judge:
Outlet malls dot the landscape attracting bargain seekers and tour busses. They have also attracted the attention of disgruntled shoppers and plaintiffs' attorneys who claim the outlets are not what they appear. Plaintiffs are four such shoppers. In this particular case they allege that Coach, Inc. ("Coach") uses deceptive marketing tactics to mislead consumers into believing that products sold at Coach outlet and factory stores (together "Coach Factory" stores and products) are deeply discounted, when, in fact, the goods are manufactured exclusively for Coach Factory stores and are not being sold at a discounted price at all. Plaintiffs bring ten statutory and common law claims on behalf of consumers nationwide for fraud, breach of express warranty, and unjust enrichment and violations of at least twenty state consumer protection statutes.
Taking an "everything but the kitchen-sink" approach, Coach has moved to dismiss on the grounds that Plaintiffs lack constitutional standing and class standing to assert claims on behalf of a nationwide class; that their claims are inadequately pleaded under Federal Rule of Civil Procedure 9(b); and that Plaintiffs have not alleged necessary elements of each of their causes of action, namely a cognizable injury, a material misstatement, or Coach's intent to deceive. For the reasons that follow, Coach's motion to dismiss is GRANTED IN PART and DENIED IN PART. Coach's motion to dismiss Plaintiffs' claim for injunctive relief is GRANTED WITH PREJUDICE. Coach's motion to dismiss Plaintiff Marino's claim under New Hampshire's consumer protection law and Plaintiffs' claims for common law fraud, unjust enrichment, and breach of express warranty are DISMISSED WITHOUT PREJUDICE. Coach's motion to dismiss is otherwise denied.
Coach is a large retailer of luxury accessories. See Consol. Am. Compl. (Dkt. 37)
Each of the four named plaintiffs visited Coach Factory stores between the "summer of 2014" and December 5, 2015. CAC ¶¶ 19-23. They allege that they purchased accessories — wristlets, sunglasses, and a handbag — and paid prices ranging between 40% and 70% less than the purported MFSRPs. CAC ¶¶ 19-23. Specifically, during the "summer of 2014," plaintiff
Plaintiffs allege that they understood the MFSRPs to be prices at which the Coach Factory goods were previously offered for sale. CAC ¶¶ 10, 16 (Plaintiffs "believed that the price tags attached to the products purchased at [Coach Factory stores] signified a former price at which the products were sold in the marketplace."). The CAC alleges that the MFSRPs are fictitious and intended to entice bargain-hunters with the appearance of a discount. CAC ¶¶ 58-60. Consumers like Plaintiffs, who believe the MFSRPs represent former prices, think they have scored a substantial discount. CAC ¶ 14. In truth, however, Coach Factory items are never sold or intended to be sold for the MFSRP. CAC ¶¶ 6, 40, 53.
According to Plaintiffs, the MFSRPs also create a "false impression of quality." CAC ¶ 40. Consumers base their expectations for the quality of Coach Factory products on their MFSRPs, rather than on the lower, actual prices at which the products are offered for sale.
For example, the CAC includes a side-by-side comparison of the Coach Factory "Phoebe" handbag (style number F35723) and the visually similar "Edie" bag sold in Coach retail stores (style number 36464). CAC ¶¶ 42, 46-49. The Phoebe bag is sold in Coach Factory stores with a hangtag showing an MFSRP of $395, while the Edie bag is sold in retail stores for $325. CAC ¶¶ 48. According to Plaintiffs, consumers viewing the two similar bags base their expectations for the quality of the Phoebe bag on its similarity to the Edie. But, Plaintiffs explain, the Phoebe bag is actually of lesser quality; unlike the Edie,
Plaintiffs bring ten causes of action in total. On behalf of a nationwide class, Plaintiffs assert claims for common law fraud, breach of express warranty, and unjust enrichment under New York law. On behalf of a subclass of California consumers, Plaintiffs assert claims under California's Unfair Competition Law (the "UCL"), Cal. Bus. & Prof. Code § 17200 et seq., California's False Advertising Law (the "FAL"), Cal. Bus. & Prof Code § 17500 et seq., and California's Consumers Legal Remedies Act (the "CLRA"), Cal. Civ. Code § 1750 et seq. On behalf of a subclass of New Hampshire consumers, Plaintiffs bring a claim for violations of New Hampshire's Consumer Protection Act, N.H. Rev. Stat. Ann. § 358-A:1 et seq. And, on behalf of a "multi-state" class of consumers (the "Multi-State Subclass"), plaintiffs allege violations of the consumer protection statutes of 18 other states.
Coach has moved to dismiss.
"Determining the existence of subject matter jurisdiction is a threshold inquiry and a claim is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it." Morrison v. Nat'l Austl. Bank Ltd., 547 F.3d 167, 170 (2d Cir. 2008) (quoting Arar v. Ashcroft, 532 F.3d 157, 168 (2d Cir. 2008)). Article III requires a plaintiff to establish an injury in fact, a causal connection between the injury and the conduct complained of, and that the injury will likely be redressed by a favorable decision. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). "In resolving a motion to dismiss under Rule 12(b)(1), the district court must take all uncontroverted facts in the complaint (or petition) as true, and draw all reasonable inferences in favor of the party asserting jurisdiction." Tandon v. Captain's Cove Marina of Bridgeport, Inc., 752 F.3d 239, 243 (2d Cir. 2014). "But `where jurisdictional facts are placed in dispute, the court has the power and obligation to decide issues of fact by reference to evidence outside the pleadings, such as affidavits.'" Id. (quoting APWU v. Potter, 343 F.3d 619, 627 (2d Cir. 2003)). "A plaintiff has the burden of showing by a preponderance of the evidence that subject matter jurisdiction exists." Lunney v. United States, 319 F.3d 550, 554 (2d Cir. 2003).
Relying on Spokeo, Inc. v. Robins, ___ U.S. ___, 136 S.Ct. 1540, 194 L.Ed.2d 635 (2016), Coach argues that Plaintiffs have not pleaded an "injury in fact." According to Coach, the CAC alleges, at best, bare procedural violations that do not amount to cognizable injury under Article III. See Spokeo, Inc., 136 S.Ct. at 1549-50 (reversing and remanding for the lower courts to consider in the first instance whether plaintiff alleged a procedural violation that "entail[ed] a degree of risk sufficient to meet the concreteness requirement" of Article III). Coach also argues that Plaintiffs do not have standing to seek injunctive relief because they are now aware of Coach's deceptive practices and therefore face no "actual or imminent" risk of being deceived in the future. See Summers v. Earth Island Inst., 555 U.S. 488, 496, 129 S.Ct. 1142, 173 L.Ed.2d 1 (2009) (quoting Lujan, 504 U.S. at 564, 112 S.Ct. 2130).
Coach's "injury-in-fact" argument has been rejected in similar outlet-pricing
While Plaintiffs satisfy Article III's requirement of an "injury in fact," they do not satisfy Article III's requirements to seek injunctive relief. A plaintiff seeking injunctive relief cannot rely on past injury; in order to satisfy Article III's injury requirement the plaintiff must allege a likelihood of future harm. Harty v. Simon Property Grp., L.P., 428 Fed.Appx. 69, 71 (2d Cir. 2011) (citing City of Los Angeles v. Lyons, 461 U.S. 95, 105, 103 S.Ct. 1660, 75 L.Ed.2d 675 (1983)). "The named plaintiffs in a class action must themselves have standing to seek injunctive relief." Spiro v. Healthport Tech., LLC, 73 F.Supp.3d 259, 271 (S.D.N.Y. 2014) (quoting Dodge v. Cnty. of Orange, 103 Fed.Appx. 688, 690 (2d Cir. 2004)). Plaintiffs have not alleged that they intend to purchase products from Coach Factory stores in the future. Even if they had, now that they know that the MFSRPs are not former prices, they cannot be misled. Rather, Plaintiffs' claim for injunctive relief is based entirely on their past injuries and the potential that other consumers might be deceived in the future.
The Second Circuit's recent decision in Nicosia v. Amazon.com, 834 F.3d 220 (2d Cir. 2016), is dispositive.
Courts that have permitted plaintiffs to seek injunctive relief under similar circumstances have done so for public policy reasons. See Henderson v. Gruma Corp., No. CV 10-04173 AHM (AJWX), 2011 WL 1362188, at *8 (C.D. Cal. Apr. 11, 2011) (preventing plaintiffs from seeking injunctive relief would "surely thwart the objective of California's consumer protection laws"); Belfiore v. Procter & Gamble, Co., 94 F.Supp.3d 440, 445 (E.D.N.Y. 2015) (citing Henderson and holding that "[p]ublic policy, as well as precedent" suggest that plaintiffs may seek injunctive relief).
However well intentioned those decisions, they appear to confuse whether a plaintiff has Article III standing to sue in federal court with whether the purposes of the state law would be furthered by permitting plaintiffs to seek injunctive relief. See Campion v. Old Republic Home Prot. Co., 861 F.Supp.2d 1139, 1149 (S.D. Cal. 2012); Taylor v. Nike Inc., No. 16-cv-00661-MO, 2017 WL 663056, at *2-3 (D. Or. Feb. 17, 2017). To the extent seeking injunctive relief is important to Plaintiffs to protect other would-be bargain seekers, they are free to pursue their claim in state court. For that reason, it is simply not true that a holding that plaintiffs lack standing to seek injunctive relief in federal court "eviscerates" the injunctive relief provisions of state law. Koehler v. Litehouse, Inc., No. CV 12-04055 SI, 2012 WL 6217635, at *6 (N.D. Cal. Dec. 13, 2012). Injunctive relief remains available to similarly situated plaintiffs in state court. See Cattie v. Wal-Mart Stores, Inc., 504 F.Supp.2d 939, 951-52 (S.D. Cal. 2007) ("If this Court lacks jurisdiction to enjoin Defendants..., consumers in Plaintiff's position may yet be able to split their claim and seek injunctive relief in state court.").
The Court finds that Plaintiffs lack standing to seek injunctive relief because they do not allege any actual or imminent risk of future injury.
Assuming Plaintiffs have standing to sue for their individual injuries, Coach argues that they have no standing to bring claims on behalf of the Multi-State Subclass because Plaintiffs do not personally possess claims under the consumer protection laws of any other state and therefore do not have class standing to pursue such claims on behalf of absent class members. See Mem. at 8. "[C]ourts in this Circuit are divided on the precise question at issue here: whether a named plaintiff in a putative class action can assert claims under state laws other than those of the states where they themselves suffered injury." Morrow, 2017 WL 363001, at *5 (collecting cases). Nonetheless there is a "growing consensus" that it is appropriate to defer consideration of standing until after class certification if class certification may affect the Court's standing analysis. Kaatz v. Hyland's Inc., No. 16-CV-237 (VB), 2016 WL 3676697, at *4 (S.D.N.Y. July 6, 2016) (quoting Winfield v. Citibank, N.A., 842 F.Supp.2d 560, 574 (S.D.N.Y. 2012)). Whether Plaintiffs have standing to bring
To survive a motion to dismiss under Rule 12(b)(6), Plaintiffs must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A heightened pleading standard applies to claims sounding in fraud: "In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed. R. Civ. P. 9(b). To plead the circumstances constituting fraud with particularity, the complaint must "(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent." Lerner v. Fleet Bank, N.A., 459 F.3d 273, 290 (2d Cir. 2006) (quoting Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir. 1993)). To plead malice, intent, or knowledge "generally" means that "`the general `short and plain statement of the claim' mandate in Rule 8(a) ... should control the second sentence of Rule 9(b).'" Ashcroft v. Iqbal, 556 U.S. 662, 687, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting C. Wright & A. Miller, 5A Federal Practice and Procedure § 1301, at 291 (3d ed. 2004)).
Coach argues that the CAC fails to satisfy Rule 9(b) in two ways.
The Court finds that Plaintiffs have alleged their purchases in sufficient detail to satisfy Rule 9(b). Each of the four named Plaintiffs alleges the critical facts necessary for Coach to defend against their claims, including the style number for each item purchased, the location at which the item was purchased, the approximate date of the purchase, the advertised
Coach's argument that the "how" and "why" of the fraud are inadequately alleged has more merit. There are two theories of deception in this case. Plaintiffs' more straightforward theory of deception is that MFSRPs — "Manufacturers' Suggested Retail Prices" — are deceptive because consumers understand them to represent former prices. The CAC alleges clearly the "how" of this fraud: consumers believe the MFSRPs are former prices; and the "why" of this fraud: the MFSRPs are fake because Coach never sells these items for those prices. See CAC ¶¶ 5-6, 10, 15-16. This theory is adequately pleaded.
Plaintiffs' more nuanced theory of deception is that Coach designs outlet-only goods that appear similar to retail products and tags the outlet-only products with MFSRPs that are similar to the prices of the retail goods. CAC ¶¶ 40-54. Consumers see the similar outlet-goods, with similar MFSRPs, and believe they are buying products of similar quality to the similar retail products.
Plaintiff Marino's statutory claim arises under New Hampshire law. New Hampshire's Consumer Protect Act ("CPA") prohibits, inter alia, "representing that goods or services are of a particular standard, quality or grade, ... if they are of another" and "making false or misleading statements of fact concerning the reasons for, existence of, or amounts of price reductions." N.H. Rev. Stat. Ann. § 358-A:2 (VII and XI). Relying on cases interpreting Massachusetts's similar consumer protection law,
This Court has had occasion to address Coach's injury argument recently. In Belcastro v. Burberry Ltd., the Court considered whether a consumer who alleges that she would not have purchased an item but for the appearance of a discount alleges plausibly injury under New York's consumer protection statute. No. 16-CV-1080 (VEC), 2017 WL 744596 (S.D.N.Y. Feb. 23, 2017). The Court explained that New York law has been interpreted to require an injury beyond subjective disappointment in not receiving a bargain. See Id. at *4. Massachusetts law has been interpreted similarly. See Shaulis v. Nordstrom Inc., 120 F.Supp.3d 40, 51-52 (D. Mass. 2015). Consumers who allege only that they would not have purchased an item but for a false markdown do not suffer an actual injury because they do not allege that they overpaid for the product or that they were misled as to the intrinsic qualities of the product. As the Shaulis court explained in connection with that plaintiff's purchase of a sweater:
Id. at 51-52. The Shaulis decision was affirmed recently by the First Circuit. See Shaulis v. Nordstrom, Inc., 865 F.3d 1, (1st Cir. 2017).
Assuming Marino is able to amend her complaint as discussed supra, she may be able to allege injury that is distinguishable from the ephemeral injury alleged in Shaulis and Belcastro. Unlike in those cases, Marino alleges that Coach's MFSRP caused her to believe that she was purchasing an item of higher quality than she allegedly received. The CAC alleges that the MFSRPs "create[] a false impression of quality and value," in part because "higher end versions of outlet items sell at Coach's mainline stores for a list price less than the MFRSP on display at the outlet." CAC ¶ 40. Consumers, like Marino, viewing the MFSRPs, may believe that they are purchasing an item that is of the same or similar quality as visually similar products sold in Coach retail stores. If Plaintiffs can make such allegations, they may be able to connect Coach's alleged misrepresentation to an injury they suffered relative to being misled about the quality of the product.
The Court also finds that Marino has plausibly alleged that the MFSRPs are misleading. Relying chiefly on an out-of-circuit opinion that has since been reversed on appeal, Coach argues that a reasonable consumer could not be misled into believing that the MFSRPs are former prices. See Mem. at 22 (citing to Rubenstein v. The Neiman Marcus Grp. LLC, Case No. CV 14-07155 SJO, 2015 WL 12552038 (C.D. Cal. May 12, 2015), rev'd 687 Fed.Appx. 564 (9th Cir. 2017). In support of this argument, Coach notes that disclaimers in its stores explain that the MFSRPs are intended to be indicators of "value." Mem. at 23. Whether, in the face of such disclaimers, a reasonable consumer could nonetheless believe that the MFSRPs are former prices is an issue of fact to be resolved at a later stage of this litigation, as is the significance of Coach's disclaimers. See Rubenstein, 687 Fed. Appx. at 567 (reversing district court's dismissal and explaining that "[w]here, as here, the reasonable consumer test applies..., it is a `rare situation in which granting a motion to dismiss is appropriate.'" (quoting Williams v. Gerber Prods. Co., 552 F.3d 934, 939 (9th Cir. 2008))). Additionally, and as Plaintiffs note, Coach's argument in this regard relies heavily on cases involving so-called "compare at" advertising, not MFSRPs. See, e.g., Rubenstein, 2015 WL 12552038, at *5; Branca v. Nordstrom, Inc., No. 14cv2062-MMA, 2015 WL 1841231 at *7 (S.D. Cal. Mar. 20, 2015) (dismissing without prejudice claim that consumer believed that "compare at" tags represented former prices and relying on Rubenstein); Jacobo v. Ross Stores, Inc., No. CV-15-04701-MWF, 2016 WL 3482041, at *4-5 (C.D. Cal. Feb. 23, 2016). Unlike
The Court also rejects Coach's argument that the CAC does not plausibly allege intent. According to Plaintiffs, Coach markets products with MFSRPs knowing that the merchandise will never be sold for the MFSRP and that consumers believe that the MFSRPs represent former prices. See CAC ¶¶ 41, 59, 67. The CAC supports this allegation with facts tending to show that Coach has control over the sales of Coach Factory merchandise and that Coach Factory merchandise is sold exclusively at Coach Factory stores. See CAC ¶¶ 58-59. At this stage, Plaintiffs are not required to allege anything more. See Branca v. Nordstrom, Inc., No. 14cv2062-MMA, 2015 WL 10436858, at *8 (S.D. Cal. Oct. 9, 2015) (rejecting argument that plaintiff inadequately alleged intent, where consumer alleged that retailer intended consumers to believe that "compare at" prices were former prices).
Plaintiffs assert claims under California's consumer protection, false advertising, and unfair business practices statutes. For the reasons already given, the Court rejects Coach's argument that Plaintiffs' California claims fail because they have not alleged a material misrepresentation, intent, or that a reasonable consumer would find the MFSRPs misleading. These arguments are repackaged versions of the same arguments the Court has rejected in connection with Marino's New Hampshire CPA claims. In addition to these arguments, Coach contends that Plaintiffs may not recover restitution under California law because they do not allege that they paid more than the true value of the Coach Factory products.
California law provides for restitution "as may be necessary to restore any person ... any money or property ..., which may have been acquired by means of [] unfair competition." Cal. Bus. & Prof. Code § 17203. The FAL and CLRA also provide for restitution. See Spann v. J.C. Penney Corp., No SA CV 12-0215 FMO, 2015 WL 1526559, at *3 (C.D. Cal. Mar. 23, 2015). As the Spann court explained, restitution under California law may be calculated in terms of "either the dollar value of the consumer impact or the advantage realized by defendant...." Id. at *5. Thus, the fact that Plaintiffs may have purchased items that are worth what they paid does not mean that they cannot state a claim for restitution. Plaintiffs will have the burden of proving a viable method to calculate restitution at a later stage of the litigation, but they need not do so in response to a motion to dismiss.
In order to state a claim for fraud under New York law, Plaintiffs must allege "(a) a material misrepresentation or omission of fact; (b) defendant's knowledge of the falsity of the statement; (c) intent to defraud; (d) reasonable reliance by the plaintiff; and (e) damage to the plaintiff." Silvercreek Mgmt., Inc. v. Citigroup, Inc., 248 F.Supp.3d 428, 2017 WL 1207836, at *4 (S.D.N.Y. Mar. 31, 2017). Coach argues that the CAC does not allege a material misstatement, intent, reasonable reliance, or injury. Mem. at 28-29. The Court has already addressed these arguments in connection with Marino's claim under New Hampshire law. Like New Hampshire law, New York law requires an injury in terms of the price or quality of the product. See Belcastro, 2017 WL 744596 at *4. In order to allege such an injury with particularity, Plaintiffs must amend their complaint to allege to what retail goods they confused the outlet-only products they purchased. See supra at 568-69. The Court otherwise rejects Coach's arguments that the CAC does not allege a material misstatement, intent, and reliance for the reasons already given.
In order to state a claim for unjust enrichment under New York law, a plaintiff must allege that: "`(1) defendant was enriched, (2) at plaintiff's expense, and (3) equity and good conscience militate against permitting defendant to retain what plaintiff is seeking to recover.'" Coach, Inc. v. Horizon Trading USA, Inc., 908 F.Supp.2d 426, 436 (S.D.N.Y. 2012) (quoting Perfect Pearl Co. v. Majestic Pearl & Stone, Inc., 887 F.Supp.2d 519, 544 (S.D.N.Y. 2012)). Coach moves to dismiss on the well-worn grounds that Plaintiffs have not alleged an actual injury. Alternatively, Coach argues that Plaintiffs' purchases constitute contractual agreements and, under New York law, a party to a binding contract may not recover for unjust enrichment. See Goldstein v. CIBC World Mkts. Corp., 6 A.D.3d 295, 776 N.Y.S.2d 12, 14 (1st Dep't 2004). The parties assume that the "actual injury" requirement applicable to fraud claims under New York law also applies to unjust enrichment claims. Compare Mem. at 29; Opp'n at 32. In order to state a claim for unjust enrichment, a plaintiff must allege that the benefit he or she received — here the Coach Factory products — was not what was bargained for. See Smith v. Chase Manhattan Bank, USA, N.A., 293 A.D.2d 598, 741 N.Y.S.2d 100, 102-03 (2d Dep't 2002). To the extent Plaintiffs' theory is that they bargained for retail-quality goods, this claim is inadequately pleaded for the reasons already discussed supra. Assuming Plaintiffs can amend their complaint to cure this deficiency, the Court rejects Coach's argument that Plaintiffs' purchases preclude a claim for unjust enrichment. While Plaintiffs ultimately may not be able to recover on an unjust enrichment theory, New York law permits a plaintiff to plead unjust enrichment in the alternative. See Loheac P.C. v. Children's Corner Learning Center, 51 A.D.3d 476, 857 N.Y.S.2d 143 (1st Dep't 2008) (plaintiff may allege breach of contract and unjust enrichment alternatively).
Finally, Coach moves to dismiss Plaintiffs' express warranty claim. Coach argues that Plaintiffs have not alleged any express misrepresentation about the goods. As Coach puts it, at best, the MFSRPs are "implicit" warranties of a former price. Mem. at 30. The Court agrees. Under California law, an express warranty "is a contractual term relating to the title, character, quality, identity or condition of the sold goods." Blennis v. Hewlett-Packard
Coach's motion to dismiss is DENIED IN PART and GRANTED IN PART. Plaintiffs' claim for injunctive relief is DISMISSED WITH PREJUDICE. Marino's claim under the New Hampshire CPA is DISMISSED WITHOUT PREJUDICE. Plaintiffs' claims for common law fraud, unjust enrichment, and breach of express warranty are DISMISSED WITHOUT PREJUDICE. The motion to dismiss is otherwise denied in all respects.
Should Plaintiffs choose to amend to cure the deficiencies in the CAC identified supra, their second consolidated amended complaint is due by
The Clerk of the Court is respectfully directed to close the following open motions: in case no. 16-cv-1122, docket entries 40 and 54; in case no. 16-cv-3773, docket entries 29 and 40; in case no. 16-cv-3677,