Knapp v. Art.com, Inc.

          ORDER DENYING MOTION TO DISMISS AND STRIKE Re: Dkt. No. 19

          WILLIAM H. ORRICK UNITED STATES DISTRICT JUDGE

         INTRODUCTION

         Plaintiff James Knapp brings this putative class action against defendant Art.com, Inc. (“Art.com”), accusing it of violating California’s consumer protection laws by conducting “perpetual sales” that deceive consumers into believing that they are receiving significant bargains on Art.com’s merchandise, when in fact they are not. Art.com moves to dismiss or strike certain portions of Knapp’s first amended complaint (“FAC”). Knapp has not plausibly alleged that Art.com’s advertising falls within the scope of 15 U.S.C. § 52(a), and his claim based on that statute is DISMISSED WITH LEAVE TO AMEND. In all other respects, Art.com’s motion is DENIED.

         BACKGROUND

         I. FACTUAL BACKGROUND

         Art.com is a California corporation headquartered in Emeryville, California. FAC ¶ 6 (Dkt. No. 6). It owns and operates several online commerce websites selling posters and other home décor products, including www.art.com, www.posters.com, and www.allposters.com. Id. ¶¶ 1-2.

         On October 11, 2015, Knapp was browsing www.art.com in search of a piece of framed artwork. Id. ¶ 61. He saw an item he liked but was “not immediately prepared to purchase [it], ” until he saw that there was a 40% off sale ending at midnight that day. Id. “Enticed by the idea of saving 40% off his purchase, ” Knapp decided to purchase the item. Id. In placing his order, he entered an optional coupon code, which triggered the 40 percent discount off the non-sale price of $172.99. Id. at fig. 16.

         The next day, shortly after midnight, the sale at www.art.com “automatically renewed, ” although this time at a discount of 45 percent instead of 40 percent. Id. ¶ 62. Knapp states that he “was induced to purchase the product at ‘40% off’ because he believed that the sale was ending that day, ” and that he “would not have purchased the product if it were not for the ‘40% off sale’ advertised on the www.art.com website.” Id. He also states that “[h]ad [he] waited until just after midnight - when the sale that induced him to make the purchase ended - he could have gotten ‘45% off’ the product he purchased.” Id.

         Knapp accuses Art.com of conducting “perpetual sales” on www.art.com, as well as www.posters.com and www.allposters.com (collectively, the “accused websites”). Id. ¶ 31. He alleges that the sales (1) are “automatically generate[d]” such that they run back-to-back with “zero lag time between the end of one sales and the beginning of another, ” (2) consistently offer discounts ranging from 30 to 50 percent; and (3) are “prominently advertise[d]” on each of the accused websites with language such as “40% OFF EVERYTHING* ENDS TODAY” or “45% OFF ALL ORDERS* - TODAY ONLY.” Id. ¶¶ 38, 48-49. He also notes that in connection with each sale, the accused websites provide a six-character coupon code which consumers “enter at the time of checkout in order to take advantage of the purported sale.” Id. ¶ 34. Knapp contends that Art.com’s sales are “designed to falsely induce consumers to purchase their products under the mistaken belief that they are getting a significant bargain, ” and that the sales “deceive consumers into believing they are being offered a discount from Art.com’s regular prices when, in fact, they are not.” Id. ¶¶ 31, 38.^[1]

         II. PROCEDURAL BACKGROUND

         Knapp filed his original complaint on February 16, 2016 and his FAC on March 23, 2016. Dkt. Nos. 1, 6. He asserts four causes of action against Art.com: (1) violation of California’s False Advertising Law (“FAL”), Cal. Bus. & Prof. Code § 17500 et seq.; (2) violation of the unfair and unlawful prongs of California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200 et seq.; (3) violation of California’s Consumer Legal Remedies Act (“CLRA”), Cal. Civ. Code § 1750 et seq.; and (4) unjust enrichment and common law restitution. FAC ¶¶ 77-112. He seeks to represent a class defined as

All natural persons located within the United States who purchased any product online from Art.com through the e-commerce websites, www.art.com, www.posters.com, and/or www.allposters.com, at any time beginning four (4) years prior to the filing of this action on February 16, 2016, and ending at the time this action settles or proceeds to final judgment.

Id. ¶ 65.

         Art.com filed its motion to dismiss and strike on May 2, 2016. Dkt. No. 19 (“Mot.”). Art.com does not seek to dismiss or strike Knapp’s FAC in its entirety. Art.com’s arguments are limited to (1) the first cause of action for violation of the FAL, and (2) certain aspects of the second cause of action for violation of the UCL. See, e.g., Mot. at 1-4. I heard argument from the parties on June 8, 2016. Dkt. No. 29.

         LEGAL STANDARD

         I. RULE 12(b)(6): MOTION TO DISMISS FOR FAILURE ...