The business practice described here reminds me of the alternatepunchline for every New Yorkercartoon. During 2008 and 2009, Avanza (part of Nash Finch’s range ofstores) operated several grocery stores. Prices for goods were posted on the goods, on store shelves or inpublished ads. Some promotionalmaterials said: “A great way to save—plus 10% at the register!”
The plaintiffs alleged that they understood this claim tomean that the posted price would be reduced 10% at the register. To the contrary, the posted price wasincreased by 10%.
This terrible idea was apparently applied exclusively ornear-exclusively in stores that marketed to Latinos, though apparently theColorado Department of Agriculture informallyrequested that the practice stop, which at first only led to Avanza postinga sign disclosing the register surcharge. Given how people process information,this was still misleading. Take a look at thisamazing corporate nonanswer to a news organization,which found that 8 shoppers it asked hadn’t noticed the markup, andreported that many consumers it talked to interpreted “plus 10%” to mean anextra discount:
Question 9: Wouldn't it be morehonest/up front to just add 10 percent to the price of all of the products–sothat people can see the actual price on the shelf and on the sticker?
Answer: The grocery industry isextremely competitive. Stores vie for customers. Customer loyalty is highlyvalued. Given the need to attract and retain customers, our stores cannotafford to alienate its customers by charging unexplained fees or unanticipatedmark-ups. Our pricing is attracting customers–rather than losingthem--demonstrating that the pricing policy is in fact fair, obvious, andwell-understood by our shoppers.
The industry is competitive, so we need to put prices wedon’t actually charge on the shelves. Sure, yeah, I see that. Here’s anothersummary from a law firm (also the source of the pictures).
Plaintiffs sued for violations of the Colorado ConsumerProtection Act, common law fraud, and civil theft (obtaining money bydeception). Avanza moved todismiss.
The CCPA bars, among other things, “mak[ing] false ormisleading statements of fact concerning the price of goods” and“advertisi[ing] goods ... with intent not to sell them as advertised.” The court found that the claims sounded infraud and had to be pled with particularity, but were so pled given that theyprovided fair notice of the plaintiffs’ claims and their factual grounds. Plaintiffs didn’t need to identify the time,place, and contents of every ad that misrepresented the “plus 10%” policy,especially since part of the claim was that Avanza’s ads were misleadingthrough omission of the disclosure that prices would increase at the register. For omissions, a plaintiff must identify the information that shouldhave been disclosed, the reason why it should have been disclosed, whoshould’ve disclosed it, and where/when it should’ve been disclosed. This plaintiffs did.
Also, plaintiffs properly alleged affirmativemisrepresentations in “A great way to save—plus 10% at the register!” Theydidn’t identify the time and place of every ad that included the language, butthat didn’t deprive Avanza of meaningful notice, given the allegations that itwas commonly and systematically used. “Presumably,Avanza itself is aware of the contents of its own advertising materials, andthus, can readily ascertain when and where it used” the ads.
Avanza then argued that “great way to save—plus 10%” was notdeceptive as a matter of law. It wasn’tliterally false, and at least one of its meanings wasn’t misleading, soplaintiffs’ claim wasn’t plausible under Iqbal.
Rather than expressing disbelief at such chutzpah, the courtmerely rejected these arguments. “Anatural and plausible reading of the ‘great way to save—plus 10%’ language isthe interpretation offered by the Plaintiffs: that Avanza was promising an additional 10% savings that would beapplied at the time of checkout.” The close proximity of “save” and “10%”suggested that they were related, and the plaintiffs’ understanding that they’dget an extra discount at checkout was “consistent with general retailpractice. Most consumers haveencountered sales in which a discount is promoted along with the advisement of‘discount taken at register.” Avanza’s practice of charging higher prices thanthose disclosed on conspicuous price tags was “far less common.” Apparently, a court in Minnesota granted a motionto dismiss, buying Avanza’s argument, but the court here was unpersuaded;notably, the Minnesota ruling made no mention of the juxtaposition of “greatway to save” with “plus 10%.”
Unfortunately, the court then ruled that Colorado haddeliberately hamstrung consumers in class actions by barring all damages in CCPA class actions,including actual damages, and barring awards of costs and attorney’s fees. I can see why a statutory damages award mightbe unavailable, but why actualdamages? Because the law was written tosay that “Except in a class action, ... any person who, in a private civilaction, is found to have [violated the CCPA] shall be liable in an amount equalto the sum of” actual damages (or statutory damages of $500, or trebled damagesin certain circumstances) plus costs and attorney's fees. The court found this clearly to exclude anykinds of damages, including actual damages, in a class action. Any large-scale enforcement of the CCPA mustcome from the AG, who is not limited by this provision. However, assuming that a class would not becertified, the court let plaintiffs’ claims proceed.
The court also found that plaintiffs had properly pledcommon-law fraud and civil theft. Amongother things, “one could reasonably infer from Avanza's use of such anunorthodox pricing model, coupled with promotional language that tends toobscure, rather than highlight, that pricing policy, that Avanza specificallyexpected and intended that its customers might misunderstand the nature of thepolicy.” Avanza argued that theallegations of reliance were conclusory, but the court wasn’t willing torequire more detail “in the particular circumstances of this case” to putAvanza on notice of the claims. Perhapsdiscovery might show that plaintiffs couldn’t prove reliance, but that was notfor the pleading stage.
Avanza argued that, because the receipts disclosed the 10%surcharge, plaintiffs couldn’t have relied on the ads. But the court wasn’t willing to make thatdetermination as a matter of law. The manner of disclosure and thereasonableness of plaintiffs’ diligence, or lack thereof, in reviewing receiptswould bear on reliance. (The reason wehave consumer protection laws is to reverse the rule of caveat emptor, whichAvanza apparently thinks should extend past purchase.)
Avanza argued that the civil theft claims were untimelybecause plaintiffs shopped at Avanza from June 2008 to March 2009 and filedsuit in June 2011, and there’s a two-year statute of limitations on civiltheft. The cause of action accrues wheninjury or deceit is known or discovered, or should have been by the exercise ofreasonable diligence. The complaintindicated that one plaintiff actually discovered the 10% surcharge in January2009 as a result of examining her receipts. Thus, her civil theft claim was time-barred.
Avanza argued that all plaintiffs had constructive noticebased on their receipts by the time they completed their shopping (March 2009at the latest). Ultimately thedisclosure might be sufficient, but the court wasn’t prepared to dismiss thecivil theft claims on that ground at such an early stage. “Whether thedisclosure of the surcharge is so sufficiently clear and conspicuous that acustomer exercising reasonable diligence should be expected to promptlydiscover it is a question better suited for analysis on a full factual recordat the summary judgment stage.”
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