Tuesday, March 30, 2010

FYI: 7th Cir Upholds Dismissal of Deceptive Pricing Putative Class Action

The U.S. Court of Appeals for the Seventh Circuit recently upheld a district court’s decision to dismiss a putative class action for allegedly deceptive pricing practices, involving a "sale" price supposedly discounted below an allegedly fictitious "suggested retail price."  A copy of the opinion is attached.


Plaintiffs brought separate, but substantially similar, class action lawsuits for breach of contract and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”) against Carter’s.  Plaintiffs purchased clothing from Carter’s that were listed as “on sale” and offered at a 30% discount from the “suggested retail price” that was listed on the price tag.  Plaintiffs later discovered that Carter’s rarely, if ever, sold the clothing for the “suggested retail price.”  Plaintiff then sued for breach of contract, claiming that the sales contract required Carter’s to apply the 30% discount to the actual price at which Carter’s sold the clothing, not the suggested retail price.  Plaintiff also claimed that Carter’s practice violated the ICFA regulations which “specifically address this type of comparison between actual and fictitious ‘suggested retail price[s]’ as an ‘unfair or deceptive act.’


The Seventh Circuit concluded that “Carter’s fulfilled its obligations under the straightforward, everyday sales contract described in the complaint.”  The Court found that all parties to the sales contract were aware of the terms, there was a valid offer and acceptance and both parties received consideration.  The Seventh Circuit rejected as unreasonable the Plaintiff’s argument that the discount should be applied to the regular price that Carter’s sells the clothing.  Rather, the Seventh Circuit agreed with the district court concluding, “it ‘strains common sense’ to conclude that the parties actually intended to apply the advertised 30% discount to some lower, undisclosed, regular price.”


The Seventh Circuit also dismissed the Plaintiffs’ ICFA claim because the Plaintiffs failed to show actual damage, which requires “actual pecuniary loss.”  Under the ICFA, an individual consumer Plaintiff, most show that “the seller’s deception deprives the plaintiff of ‘the benefit of her bargain’ by causing her to pay more than the actual value of the property.”  In this case, plaintiff received a benefit of the bargain, in the ownership of the clothing and could not show “that the value of what she received was less than the value of what she was promised.”  Further, the Plaintiffs failed to allege that but for Carter’s deception, they would have received a better price on the clothing that they would have purchased at another store. 


For these reasons, the Seventh Circuit affirmed the district court’s decision to dismiss the case.

Let me know if you have any questions.  Thanks.


Ralph T. Wutscher

Kahrl Wutscher LLP

The Loop Center Building

105 W. Madison Street, Suite 2100
Chicago, Illinois  60602
Direct:  (312) 551-9320 

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Mobile:  (312) 493-0874




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