Appeals court ruling complicates what's considered fair advertising

By John Myers | Feb 28, 2017

LOS ANGELES — A California appellate court has added a new wrinkle to the complications surrounding honest adverting.

LOS ANGELES — A California appellate court has added a new wrinkle to the complications surrounding honest adverting.

The 2nd District Court of Appeals in California ruled in Veera v. Banana Republic that the Unfair Competition Law (UCL), False Advertising Law (FAL) and the Consumers Legal Remedies Act (CLRA) apply even if the plaintiff is aware of the facts behind an advertisement under the concept of “momentum to buy.”

According to their complaint, the plaintiffs made the choice to shop at a Banana Republic because they saw signs advertising 40 percent off. Neither plaintiff recalled seeing any information explaining the limits of the sale. The defense countered saying the store staff had made the rules available.

After selecting their items, the plaintiffs said when they went to pay for their items they learned that none of their selections was on sale. The plaintiffs told the court this made them feel pressured to make their purchase since they were at the front of a long line and because of the time they had already invested shopping. They made the choice to purchase several of their selected items at full price.

The plaintiffs filed a class-action lawsuit in Los Angeles Superior Court, alleging violations of the UCL, FAL and CLRA. The initial trial court ruled that the plaintiffs had not established the requisite standing. The California Court of Appeals reversed this ruling, arguing there was a triable issue of fact both on the question of whether plaintiffs had suffered injury and whether that injury had been caused by plaintiffs’ reliance on the 40 percent off signs.

The basis of the appeals court's ruling was its argument that it is possible for a plaintiff to meet the reliance requirement of a UCL, FAL or CLRA claim when they know all of the true facts, such as the inapplicability of the sale, before the purchase.

For store owners, this ruling could further murky the waters of what is considered unfair adverting, John Doherty, president and CEO, Civil Justice Association of California, told the Northern California Record.

Veera v. Banana Republic does significantly reduce a common-sense threshold for litigation,” he said. “Namely that a consumer should not be able to prove harm when they completed a commercial transaction with full and accurate knowledge of the terms of the sale.”

In addition the ruling implies that plaintiffs preparing a a lawsuit under the "momentum to buy" theory will have a lighter burden evidence, as they will not have to demonstrate actual harm Doherty explained.

“But it is worth noting that the appellate decision was a review of summary judgment, which requires the court to assume the truth of the plaintiffs assertions.” he said. “In that light, there is a process bias for allowing the case to proceed."

In the long, run retailers will have to be more careful in their advertising.

“Ultimately, retailers will need to make sure that every piece of information advertised, clearly declares limits on an offer, which would significantly limit the ability of a plaintiff to effectively allege deception,” Doherty said.

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