Ninth Circuit Limits Monetary Recovery in False Advertising Class Actions
On June 18, 2018, the Ninth Circuit held that monetary relief under California's consumer protection statutes is limited to the difference between the price the consumer paid and the fair market value of the item received (price/value differential).1 This is a significant decision that will make it more difficult for plaintiffs to avoid summary judgment or obtain class certification in false advertising cases in California.
The Facts in Chowning
Plaintiff, who was seeking to certify a class of California consumers, claimed that Kohl's advertised goods at "sale" prices that were heavily discounted from the "regular" or "original" prices, and that these "regular" or "original" prices were fictitious. She claimed that she relied on these alleged fictitious prices to buy merchandise she would not have bought otherwise. On the basis of these allegations, she sued under California's consumer protection statutes (the Unfair Competition Law, the False Advertising Law, and the Consumer Legal Remedies Act), and sought restitution in the form of either a full refund, the value of the alleged discount, or disgorgement of profits. These alleged measures of restitution had previously been approved by a district court in the similar case of Spann v. JC Penney Corp., leading to a $50 million class settlement.2
Kohl's argued on summary judgment that, even assuming plaintiff could prove that false advertising induced her to buy the products, she could recover only if she could prove a price/value differential—that she paid more than the market value of the products. Kohl's further argued that because plaintiff had no competent evidence of market value, summary judgment was appropriate. The trial court granted summary judgment, and plaintiff appealed.
The Ninth Circuit's Ruling
The Ninth Circuit affirmed. The court held that "the appropriate calculation for restitution is the price Chowning paid for the articles versus the value of the articles she received," and that Chowning could not recover restitution because she "introduced no competent evidence regarding the value of the articles of clothing of similar style, quality, etc."3 The Ninth Circuit went on to reject all three of plaintiff's proposed alternative measures of restitution as legally impermissible.
While Chowning was not certified for publication, it still may be cited in courts within the Ninth Circuit.4 It resolves the division in the district courts on the appropriate measure of recovery in false advertising cases, and puts to rest any argument that measures of recovery other than price/value differential are permissible.
The decision should make it more difficult for plaintiffs to survive summary judgment of claims seeking monetary relief. It should also make certification of a monetary relief class less likely in actions involving a large number of different products. This is because Chowning requires a showing of the fair market value of each of the items at issue, and that requires, among other things, "evidence regarding the value of articles of [products] of similar style, quality, etc." Because the fair market value of each item at issue would have to be evaluated in the context of "similar" competing products, individualized issues would likely overwhelm common issues, making it difficult for plaintiffs to advance a theory that would clear the predominance hurdle of FRCP 23(b)(3).
*The authors represented Kohl’s in the Chowning action.
© Arnold & Porter Kaye Scholer LLP 2018 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.