Wisconsin District Court Analyzing Restitution Under California Law

In an earlier post, we wrote about the Ninth Circuit’s Pulaski decision, which analyzed restitution under California law among other topics.  A new and thorough opinion from U.S. District Judge J.P. Stadtmueller in Le v. Kohls Dept. Stores, Inc., No. 15-cv-1171 (E.D. Wi. Feb. 8, 2016), expands further on those principles.

The Le case arises from allegations that Kohls Department Stores engages in a continuous marketing campaign that falsely advertises that its products are sold at far higher priced by other merchants.  Mr. Le sought restitution under California’s CLRA and UCL statutes and sought to enjoin the misleading advertising going forward.

Kohls moved to dismiss the restitution claim on the grounds “that the only legally cognizable method of calculating Le’s restitution is through the price-to-value method,” which requires showing the delta between price paid and value received.  Le responded that while it was premature at the pleading stage to sayprecisely how restitution should be calculated, other options existed — full restitution, partial restitution based on the false “transaction value” promised by Kohls, or restitution tied to Kohls’ profits from the scheme. The court agreed:

the Court agrees with Le’s interpretation of California law, namely, that restitutionary relief under the UCL and CLRA is not strictly and categorically confined to the price-to-value method as proffered by Kohls.

(emphasis added).  Later, the court cited Pulaski:

Kohls maintains that Le has not suffered any loss because he does not allege to have paid more for Kohls’ products than what those products were valued. … However, Le does not claim his “loss” flows from having purchased products over the prices at which they were valued.  Instead, he claims that, as a result of Kohls’ marketing tactics: (1) he bought products that he would not have bought “but for” Kohls’ illusory “sales;” and/or (2) he paid more for products than he would have paid had he been fully informed of the actual “item prices” for that merchandise.

At least one of Le’s proposed measures of restitution seems to correlate with the theory articulated by the Pulaski court. (Docket #25, Ex. 3 at 6-9) (describing the “transaction value” method of restitution, which would be calculated by measuring “the amount that each class member would have paid had Defendants offered a discount from the actual ‘regular’ price”).

Finally, the court also addressed the increasingly common argument that once a consumer learns of a deceptive marketing practice, she loses Article III standing to enjoin the practice since she now understands the scheme and isn’t at risk of being duped again. The court rejected the argument:

as explained by another district court faced with this same “one bitten, twice shy” argument, were the Court to accept Kohls’ position that Le’s awareness of the alleged deception would operate to defeat standing for an  injunction, then injunctive relief would never be available in false advertising cases under the UCL, a wholly unrealistic result. This is because as soon as a UCL plaintiff would become “aware” of his/her cause of action—at least sufficiently enough to be able to meet the pleading requirements of Federal Rule of Civil Procedure 8(a)—they would be denied standing to pursue an injunction. Such a broad holding would “eviscerate the intent of the California legislature,” which undeniably provided UCL plaintiffs with the right to seek injunctive relief.

(citations, quotations omitted, emphasis added).