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 

Fax:  (866) 581-9302
Mobile:  (312) 493-0874

RWutscher@kw-llp.com

http://www.kw-llp.com

 

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FYI: 11th Cir Denies TILA Rescission Claim Under Rooker-Feldman Doctrine

The United States Court of Appeals for the Eleventh Circuit recently held that the district court lacked subject matter jurisdiction over a Truth In Lending Act (“TILA”) rescission claim under the Rooker-Feldman doctrine, where a state court granted final judgment of foreclosure prior to the commencement of the federal claim.  A copy of the unpublished opinion is attached.

 

The plaintiff borrower (“Borrower”) refinanced her Florida home, and the related note and mortgage were later assigned to Defendant.  Defendant instituted foreclosure proceedings, and in January 2005 a Florida state court granted final judgment of foreclosure to Defendant. Defendant subsequently held a foreclosure sale, purchased the property, and sold it to a third party.

 

In February 2006, Borrower sought a restraining order in federal court to prevent the third-party sale.  The District Court dismissed with prejudice, but the Appellate Court vacated and remanded to allow Borrower the opportunity to amend the complaint and proceed with an action for rescission under TILA, which Borrower did in July 2007.  On this, the District Court granted summary judgment in favor of Borrower, holding that Borrower could rescind the mortgage based on disclosure violations under TILA.

 

Borrower filed a motion for clarification seeking $725,000 from Defendant for an alleged unjust enrichment obtained through the sale of the property.  Construing the motion as a request to alter or amend the judgment, the District Court denied the motion and concluded that Borrower had given up the right to damages under TILA by not specifically requesting them in her amended complaint or motion for summary judgment. 

 

Borrower appealed the District Court’s denial of equitable relief and Defendant appealed the mortgage rescission.  The Eleventh Circuit vacated and remanded the District Court’s decision with instructions to dismiss Borrower’s rescission claim, holding that, under the Rooker-Feldman doctrine, the District Court did not have jurisdiction to hear Borrower’s rescission claim.

 

The Rooker-Feldman doctrine provides that “federal courts – other than the Supreme Court – do not have subject matter jurisdiction over cases brought by state-court losers complaining of injuries caused by state court judgments rendered before the federal district court proceedings commenced and inviting district court review and rejection of those judgments.”  Specifically, the doctrine applies when “(1) the party in federal court is the same as the party in state court; (2) the prior state court ruling was a final or conclusive judgment on the merits; (3) the party seeking relief in federal court had a reasonable opportunity to raise its federal claims in the state court proceeding; and (4) the issue before the federal court was either adjudicated by a state court or was inextricably intertwined with the state court’s judgment.”  In the Eleventh Circuit, the doctrine bars federal courts from reviewing, reversing, or invalidating final state court decisions.

 

Addressing each prong, the Eleventh Circuit first reasoned that the “same parties in this action participated in the subject state proceeding, and a Florida court granted a final judgment for foreclosure in favor” of Defendant against Borrower.  Also, Borrower “sought a restraining order in the District Court to prevent the sale of the foreclosed property over a year after the Florida court’s final judgment,” and moreover, “no record evidence suggests that [Borrower] did not have an opportunity to raise her TILA claim in Florida or that the state court would have prevented her from doing so.”  Finally, “the Florida court adjudicated the underlying issue before the District Court – the legal effect of the mortgage.” 

 

Borrower attempted to distinguish the state and federal claims on the basis that the former dealt with payments under the note, while the latter dealt with disclosure compliance under TILA.  The Eleventh Circuit rejected this argument, stating that “the effect of the District Court’s judgment unquestioningly invalidated the state court’s final judgment granting foreclosure,” and “therefore offended the Rooker-Feldman doctrine.”  Accordingly, the Court vacated and remanded the District Court’s decision with directions to dismiss Borrower’s claim for rescission under TILA.

 

 

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 

Fax:  (866) 581-9302
Mobile:  (312) 493-0874

RWutscher@kw-llp.com

http://www.kw-llp.com

 

NOTICE:  We do not send unsolicited emails.  If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention.  Thank you.