Binder v. Sycamore Partners Management, L.P.

Background

Three named plaintiffs—Demetra Binder, Angela Waldner, and Christina Calcagno—filed a proposed class action against Premium Brands Opco LLC, which owns and operates Ann Taylor Factory Store and LOFT Outlet stores. The plaintiffs purchased merchandise in New Jersey, New York, and California after seeing percentage-off signs and reference prices. They alleged that the reference prices were artificially inflated, that the products were rarely or never sold at those prices, and that the pricing practice made discounts appear larger than they were.

The plaintiffs asserted claims under New York’s Consumer Protection from Deceptive Acts and Practices Act and False Advertising Act; New Jersey’s Consumer Fraud Act and Truth in Consumer Contract, Warranty, and Notice Act; and California’s Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act. They sought damages and injunctive relief. Premium Brands moved to dismiss under Federal Rule of Civil Procedure 12(b)(1) for lack of standing to seek injunctive relief and under Rule 12(b)(6) for failure to state a claim.

Standing for Injunctive Relief

The court granted the motion under Rule 12(b)(1) as to injunctive relief. A plaintiff seeking an injunction must show a real and immediate threat of future injury, not only a past injury. The court concluded that the plaintiffs’ knowledge of the alleged deceptive pricing practice made it implausible that they would be deceived by the same practice again, even if they planned to shop at the outlet stores in the future. The possibility that other consumers might be deceived did not establish standing for these named plaintiffs.

New York Claims

The court granted the motion under Rule 12(b)(6) as to the New York claims. New York law requires an actual injury connected to the alleged deception. The court explained that being deceived or losing the subjective benefit of a perceived bargain, without more, is not enough. A price-premium theory can qualify, but the plaintiff must allege an objective measure showing that the product was worth less than the price paid or that the plaintiff paid an inflated price.

The court found that the plaintiffs’ expert analysis did not establish the products’ market value or what they would have sold for without the reference prices. The analysis measured the relationship between Premium Brands’ reference prices and sale prices, but did not measure the products’ value without the alleged deception. The court also found the cited academic studies too speculative to show that Premium Brands’ sale prices exceeded objective market value. It therefore dismissed the New York claims.

New Jersey Claims

The court also granted the motion as to the New Jersey claims. Under the New Jersey Consumer Fraud Act, a plaintiff must plead an ascertainable loss—one that is quantifiable or measurable rather than hypothetical. The court relied on the New Jersey Supreme Court’s decision in Robey, which rejected similar claims involving allegedly fictitious discounts where the plaintiffs did not allege that the products were unusable, defective, materially different from what they purchased, or worth less than the amount paid.

The court concluded that the plaintiffs did not adequately allege either an out-of-pocket loss or a deprivation of the benefit of their bargain. Because the New Jersey Truth in Consumer Contract, Warranty, and Notice Act also requires an aggrieved consumer who suffered adverse consequences, the court dismissed that claim for the same reasons.

California Claims

The court denied the motion to dismiss the California claims. Those claims were subject to Rule 9(b), which requires fraud-based allegations to state the circumstances of the alleged misconduct in particular detail. The court held that the complaint identified the relevant details, including Calcagno as the purchaser, the January 18, 2022 purchase date, the Ann Taylor Factory Store in San Diego, the item purchased, its sale price and reference price, and how the reference price allegedly misled reasonable consumers.

The court also found sufficient the allegations about the plaintiffs’ investigation of outlet-store pricing from October 2021 through September 2022. The investigation allegedly showed that numerous products remained discounted from substantially higher reference prices over a long period. The court rejected Premium Brands’ arguments that the investigation did not track every purchased item or provide complete pricing histories. It concluded that the allegations plausibly supported a broader deceptive-pricing pattern and stated claims under the California Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act.

Disposition

Judge Naomi Reice Buchwald held that Premium Brands’ motion to dismiss was granted in part and denied in part. The motion was granted because the plaintiffs lacked standing to seek injunctive relief and because the New York and New Jersey claims were dismissed. The motion was denied as to the California claims, which were the only claims remaining. The opinion did not specify whether any dismissal was with or without prejudice.