I like this case because the plaintiff went after a national retailer, alleging that it falsely advertised clothing at two of its Aeropostale stores as discounted when, in fact, the clothing had never been sold in those stores at a higher price. Plaintiffs asserted that this “markup to markdown” practice constitutes a violation of both the Consumer Fraud Act, N.J.S.A. 56:8-1 to -227, and the Truth in Consumer Contract, Warranty, and Notice Act (the Truth Act), N.J.S.A. 56:12-14 to -18. The trial judge dismissed the complaint, but the state appellate court disagreed and reversed. Here’s why.
Background of Case
The plaintiffs detailed the defendant’s alleged “markup to markdown” practice. They claimed that each plaintiff purchased at the defendant’s Cherry Hill and Paramus stores (1) a hoodie advertised as being 60% off an original price of $59.95, and three t-shirts advertised as
“Buy one get two free”, (2) a pair of pants advertised as being 50% off their original price of $36.50. Plaintiffs claimed these items were never available at higher prices, thereby rendering the offered discounts illusory.
The appellate court noted the broad concepts identified in N.J.S.A. 56:8-2, which prohibits the use of “unconscionable or abusive” commercial practices, as well as “deception, fraud, false pretense, false promise, misrepresentation, or the knowing concealment, suppression or omission of any material fact with intent that others rely …” By regulation, it has also been declared that the “[u]se of a fictitious former price,” as alleged here, constitutes a violation of the Consumer Fraud Act. N.J.S.A. 13:45A-9.6(a), as well as federal law, 16 CFR § 233.1.
Plaintiff’s Consumer Fraud Act claim contains both the particulars required by Court Rule 5:5-2 and the violations of the Act alleged. The Truth Act is violated whenever a seller offers any “consumer warranty, notice or sign” containing “any provision that violates any clearly established legal right of a consumer or responsibility of a seller…as established by State or Federal law.” N.J.S.A. 56:12-15. Plaintiffs’ allegations of illusory discounts and misleading price tags state a claim under the Truth Act. As the court also observed, the alleged deceptive practice violates N.J.A.C. 13:45A-9.6(a) and 16 CFR § 233.1.
The court then discussed the bigger issue of proving an ascertainable loss.
In construing the meaning of “ascertainable loss,” the Supreme Court has held that the loss must be “quantifiable or measurable,” not “hypothetical or illusory.” On the other hand, the Truth Act requires that a plaintiff be an “aggrieved consumer,” which is defined as someone who has suffered an adverse consequence but not necessarily harm that may give rise to an award of damages.
N.J.S.A. 56:8-19 defines an ascertainable loss as that which involves the “loss of money or property, real or personal.” The court was satisfied that plaintiffs alleged such a loss by alleging, in essence, that they received no value for the offered discount; that is something real and quantifiable. The court seemingly rejected the retailers’ argument that plaintiffs failed to allege an ascertainable loss because, even accepting the allegations as true, they bought $50 items for $50. This argument, said the court, completely ignores the part of the exchange of promises that included the defendant’s offers of discounts and the fact that the plaintiffs received no benefit from those discounts.
The retailer claimed they had discounted the sale price from a stated higher price. The bargain here was the value of the discounts the defendant offered and the plaintiffs accepted, but those discounts, in fact, had no value. This fake discount constituted ascertainable losses under the Consumer Fraud Act; the alleged illusion of a discount is an ascertainable loss.
To discuss your NJ consumer fraud matter, please contact Fredrick P. Niemann, Esq. at (732) 863-9900 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Consumer Fraud Attorney