Issue By: Elizabeth I. Stewart

Veera et. al. v. Banana Republic, LLC

COURT OF APPEAL, SECOND APPELLATE DISTRICT (December 15, 2016)

The Unfair Competition Law (Bus. & Prof. Code, §17200 et seq.) (“UCL”) and the False Advertising Law (Bus. & Prof. Code §17500 et seq.) (“FAL”) prohibit not only advertising which is false, but also advertising which, although true, is either actually misleading or has a capacity, likelihood or tendency to deceive or confuse the public. In this case, plaintiffs filed a putative class action against Banana Republic alleging that signs in advertising a 40 percent off sale were false and misleading because they did not disclose that the discount applied only to certain items.

The Plaintiffs in Veera alleged that they were lured to shop at Banana Republic stores by window signs advertising a discount of 40 percent off purchases, with no apparent limit, and that they would not have entered the store but for the advertised discount. They alleged that after spending time shopping in the store, selecting various items and waiting in line, it was not until they got to the register that they were informed by the clerks that some or all of the items they selected were not included in the 40 percent off sale. They ultimately purchased some of their selected items after being informed by a store clerk at the cash register that none of the items they wished to purchase were on sale to avoid losing the time they spent shopping and to avoid embarrassment. They alleged that they had been damaged in the amount they overpaid for the items they bought and that Banana Republic’s deceptive advertising violated the FAL, UCL, and the Consumer Legal Remedies Act (Civ. Code §1750 et. Seq.) (“CLRA”.)

Banana Republic moved for summary judgment, arguing that the signs were not misleading and that plaintiffs could not establish that they suffered injury as a result of the allegedly misleading advertising, since they were told the actual price of the items before they agreed to pay. In support, they also offered deposition testimony that there were no 40 percent off promotions at the time one of the plaintiffs alleged they shopped, and they produced signs which may have had some limitation on them for the second period (the record was unclear on the limitation, and not all signs had it). The trial court granted Banana Republic’s motion for summary judgment concluding that plaintiffs lacked standing because they failed to raise a triable issue whether they suffered injury in fact or economic injury. The court concluded that “lost shopping time” did not amount to an injury in fact to confer standing required to bring a private action under the UCL, FAL or CLRA. Plaintiffs appealed.

The appellate court reversed, holding that plaintiffs raised a triable issue as to whether they lost “money or property” sufficient to qualify as injury in fact (i.e., economic injury), and whether that injury was the result of the unfair business practice or false advertising. The appellate court found plaintiffs presented evidence that they suffered an economic injury and that plaintiffs’ reliance on the alleged misleading advertising was a cause, though not the only cause, of their economic injury.

In reaching its decision, the court found its prior decision in Medrazo v. Honda of North Hollywood (2012) 205 Cal.App.4th 1, instructive on the issues of injury in fact. The Plaintiff in Medrazo asserted claims under the UCL and CLRA arising from the dealership’s failure to display a hanger tag disclosing the total cost of the motorcycle she purchased. In granting the defendant’s motion for judgment, the trial court concluded that plaintiff was not misled and suffered no injuries because she was informed of the dealer-added charges before she signed the purchase contract. The appellate court reversed. The court found that the plaintiff presented evidence that there was no hanger tag showing the dealer-added charges and she was not informed of the charges until she was presented with the sales contract, which was in violation of the Vehicle Code. Consequently, the dealer could not legally sell the motorcycle without the properly posted costs. The Medrazo court also concluded that the plaintiff presented evidence of an economic injury as she made the first two months’ payments and owed more than $12,000 on the motorcycle.

The court in Veera also found that the plaintiffs had a legally protected interest in knowing from the outset the true prices of the items they chose to buy. The court found that the UCL, FAL and CLRA are designed to protect consumers such as plaintiffs by requiring businesses to disclose the actual prices of items offered for sale and by prohibiting businesses from using false and deceptive advertising to lure consumers to shop. The court concluded that plaintiffs presented evidence raising a triable issue since they bought certain items at full price even though (assuming plaintiffs’ version of facts), Banana Republic sold them in violation of the UCL, FAL and CLRA. The court found the economic harm plaintiffs suffered was the difference between the advertised price they should have been charged and the full price they actually paid.

The court also found that the plaintiffs presented sufficient evidence to raise a triable issue of fact whether their reliance on the allegedly deceptive advertising resulted in their economic loss. The court held that it is enough to show that they would not have engaged in the injury-producing conduct in the absence of the misrepresentation. Here, in plaintiffs’ version of events, the advertising was a factor in their decision to enter the store, shop, and select items to purchase. Accordingly, the appellate court found plaintiffs had standing to bring their claim against Banana Republic.

COMMENT

Under this decision, a merchant cannot escape liability under the UCL, FAL or CLRA based on the consumer’s decision to purchase after being advised of the true price. If the advertising process is deemed deceptive or misleading, a consumer may bring a cause of action for violation of the UCL, FAL or CLRA even when they purchase an item after learning of the deceptive practice.

For a copy of the complete decision, see: Veera v. Banana Republic

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