Rael v. Dooney & Bourke, Inc.

          ORDER GRANTING DEFENDANT’S MOTION TO DISMISS WITH LEAVE TO AMEND

          JEFFREY T. MILLER, United States District Judge.

         This order addresses Defendant Dooney & Bourke, Inc.’s (“D&B”) motion to dismiss Plaintiff’s first amended class action complaint, filed on June 10, 2016. (Doc. No. 17). Plaintiff opposed the motion on July 5, 2016. (Doc. No. 23). Defendant replied on July 11, 2016. (Doc. No. 26). The court held oral argument on July 18, 2016. For the reasons set forth below, the court grants Defendant’s motion to dismiss with leave to amend.

         BACKGROUND

         This case concerns allegations that Defendant D&B is engaged in false discount pricing by offering outlet store merchandise at purported discounts from fabricated “original” prices. Plaintiff Monica Rael (“Rael”), on behalf of herself and others similarly situated, asserts causes of action for (1) violations of California’s Unfair Competition Laws (“UCL”), California Business & Professions Code § 17200 et seq.; (2) violation of California’s False Advertising Laws (“FAL”), California Business & Professions Code § 17500, et seq.; (3) violation of California Consumer Legal Remedies Act (“CLRA”), California Civil Code § 1750, et seq.; (4) violation of the consumer protection laws on behalf of classes of states with similar laws; and (5) negligent misrepresentation.

         Plaintiff alleges as follows: during the class period, ^[1] Defendant continually misled consumers by advertising bags and fashion accessories at discounted, “savings” prices. (Doc. No. 9, ¶ 2). Defendant would compare the “sale” prices to false “original” or “market” prices, which were misrepresented as the “original” or “market” retail prices from which the “savings” were discounted. (Id.). The advertised discounts were nothing more than mere phantom markdowns because the represented market prices were artificially inflated and were never the original prices for bags and fashion accessories sold at Defendant’s retail factory outlet stores. (Id.).

         Defendant conveys its deceptive pricing scheme to consumers through promotional materials, in-store displays, and print advertisements. (Id. ¶ 6). Defendant states on its sales receipt, provided to customers only after they have engaged in a purchase, the following: “All items sold in this store are over-runs, discounted, or irregular. As a result, the prices are reduced.” (Id. ¶ 3). The “market” or “original” prices were never offered for sale in the outlet stores, for outlet quality products, and were not the prevailing marketing retail prices at the outlet stores within the three months immediately preceding the publication of the advertised former prices, as required by California law. (Id. ¶ 4). Defendant did not inform Plaintiff or members of the proposed class that the products sold at its outlet stores were of lesser quality or value than merchandise Defendant sells through other channels and retailers. ( Id. ¶ 5).

         On or around December 2, 2015, Plaintiff saw a handbag at a D&B factory store, which was advertised at “40% off.” (Id. ¶ 16). Believing she was receiving a significant value by purchasing the handbag for $136.80 that was originally priced at approximately $228.00, she decided to buy it. The “original” or “market” price of the handbag and the corresponding price “discounts” were false and misleading, as the prevailing retail price for the handbag in D&B retail outlet stores during the three months immediately prior to Plaintiff’s purchase was not $228.00. (Id. ¶ 17). Plaintiff would not have purchased the handbag without the misrepresentations made by Defendant. (Id. ¶ 18).

         Plaintiff alleges that this court has jurisdiction pursuant to the Class Action Fairness Act, 28 U.S.C. § 1332(d)(2), as she is a California resident, D&B is a Connecticut corporation headquartered in Connecticut, and the amount in controversy exceeds $5, 000, 000. (Id. ¶¶ 10, 13–14). Plaintiff seeks damages, restitution and disgorgement of all profits, unjust enrichment, declaratory and injunctive relief, an order requiring Defendant to engage in a corrective advertising campaign, and attorneys’ fees and costs. (Id. ¶ 82).

         LEGAL STANDARD

         A motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) challenges the legal sufficiency of the pleadings. To overcome such a motion, the complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Facts merely consistent with a defendant’s liability are insufficient to survive a motion to dismiss because they establish only that the allegations are possible rather than plausible. See id. at 678–79. The court should grant relief under Rule 12(b)(6) if the complaint lacks either a cognizable legal theory or facts sufficient to support a cognizable legal theory. See Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990).

         The heightened pleading standard of Rule 9(b) applies to Plaintiffs’ claims. See Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009) (“Rule 9(b)'s particularity requirement applies to these state-law causes of action [i.e., CLRA and UCL claims].”). Rule 9(b) requires a plaintiff alleging fraud to “state with particularity the circumstances constituting fraud.” Fed.R.Civ.P. 9(b); see Nursing Home Pension Fund, Local 144 v. Oracle Corp., 380 F.3d 1226, 1230 (9th Cir. 2004). “It is not enough . . . to simply claim that [an advertisement] is false-[the plaintiff] must allege facts showing why it is false.” Davidson v. Kimberly- Clark Corp., 76 F.Supp.3d 964, 974 (N.D. Cal. 2014) (emphasis in original).

         When ruling on a motion to dismiss, the court must take all allegations as true and construe them in the light most favorable to the plaintiff. See Metlzer Inv. GMBH v. Corinthian Colls., Inc., 540 F.3d 1049, 1061 (9th Cir. 2008). “Review is limited to the complaint, materials incorporated into the complaint by reference, and matters of which the court may take judicial notice.” Id.

         Federal Rule of Civil Procedure 15 provides that courts should freely grant leave to amend when justice requires it. Accordingly, when a court dismisses a complaint for failure to state a claim, “leave to amend should be granted unless the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency.” DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 ...