Court supports Nordstrom Rack, Kohl's in false advertising cases

An appeals court has affirmed decisions in two separate but similar false advertising cases where consumers sued Nordstrom Rack and Kohl's claiming that the "compare at" prices were fictional and misleading to customers.

The trial court found there was no injury to the consumers

Two separate consumers sued the retailers alleging the "compare at" prices were inflated on the price tags to suggest they were getting more of a discount than the product was actually worth.

Both cases were originally filed in Massachusetts and removed to federal court on procedural grounds. The consumers were both represented by the same attorney. Since their cases were substantially similar, the appeals court joined them for oral argument.

The 1st Circuit Court of Appeals has affirmed that the retailers' price tags were not deceptive. Based on the court decisions, the customers will not recover financially and the retailers' "compare at" pricing strategy will continue unchanged.

The cases date back to purchases made in 2014. The Kohl's consumer, Ellen Mulder, accused the retailer of fraud, breach of contract and unjust enrichment by enticing her to purchase product through an aggressive "compare at" price. Similarly, Judith Shaulis sued Nordstrom Rack saying she was "enticed by the idea" proposed on the price tag that said she was going to save 77% on a sweater she purchased in Boston.

While the customers claimed that "but for Nordstrom's [and Kohl's] deception, [they] would never have purchased the" items, the trial court disagreed and found the customers did not actually "plead a legally cognizable injury" under Massachusetts' Consumer Protection Act (CPA).

Interestingly, the trial court found that Nordstrom's pricing scheme was an unfair or deceptive practice under the CPA. It also found the pricing strategy caused Shaulis identifiable harm in the form of being "directly induced to make a purchase she would not have made, absent the supposedly unfair or deceptive practice of Nordstrom."

Despite those findings, the trial court found there was no injury to the consumers because their "subjective belief that [they] did not receive a good value, without more, is not enough to establish [a CPA injury]."

Earlier this week, the First Circuit applied the same legal analysis to the Kohl's case and affirmed both decisions in favor of the retailers.


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