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Ninth Circuit Court Dismisses “Phantom Markdown” Suit against Saks

On March 22, the U.S. District Court for the Southern District of California dismissed a putative class action against Saks Inc. alleging that Saks advertised “phantom markdowns” of Saks-branded products. The Plaintiff alleged that he purchased a pair of men’s shoes “valued” by Saks at $145 but sold at a discounted price of $79.99. The plaintiff claimed that he only bought the shoes because he believed he was receiving a significant value and that Saks’s $145 market price was false and misleading.

The Plaintiff filed a complaint on behalf of a putative nationwide class of all persons who purchased Saks-branded products while in California. The plaintiff alleged claims for violation of: (1) False Advertising Law; (2) California’s Unfair Competition Law (“UCL”); (3) California Consumer Legal Remedies Act (“CLRA”); and (4) Federal Trade Commission Act.

On February 15, Saks filed a motion to dismiss on the grounds that the plaintiff failed to meet the requirements of Rules 8, 9(b), and 12(b)(6) of the Federal Rules of Civil Procedure. Saks also argued that the plaintiff lacked standing under Rule 12(b)(1) to bring any claims for products that he himself did not purchase, or to sue for injunctive and declaratory relief.

With respect to standing, the court found that the plaintiff broadly alleged a misleading and deceptive pricing scheme that applies uniformly to all products and advertisements. But the plaintiff failed to allege exposure to misleading advertising or other factual allegations in support of his contentions. The plaintiff did not allege that he was exposed to any advertisements for the shoes he purchased—he merely considered the shoes’ price tag, which included a market price and sale price. The court concluded that the plaintiff could not expand the scope of his claims to include products he did not purchase or advertisements he did not rely upon, including products purchased or advertisements relied upon by members of the putative class. The court thus held that the plaintiff lacked standing to represent the class.

Saks also argued that the defendant failed to plead his fraud claims with specificity as required by Rule 9(b). The court agreed, finding that the plaintiff did not allege the specific content of the allegedly misleading advertisements, which specific representations were false, or which information was missing from any representations.

The court ultimately granted Saks’s motion to dismiss without prejudice, allowing the plaintiff to file an amended complaint within 30 days.

© 2017 Proskauer Rose LLP.


About this Author

Jacquelyn Ferry, Proskauer, class action lawyer, unfair competition attorney

Jacquelyn Ferry is an associate in the Litigation Department. She represents a broad range of clients in antitrust, contract, class action, unfair competition and other complex commercial litigation at both the state and federal level. 

Prior to joining Proskauer, Jacquelyn was a judicial extern for the Honorable George H. Wu in the United States District Court for the Central District of California.