Vizcarra v. Michaels Stores, Inc.

Background

Nea Vizcarra alleged that Michaels Stores, Inc. advertised products as discounted from “regular” prices even though Michaels’ products were always available online and in stores at discounts of at least 20%. She alleged that Michaels’ website and stores prominently advertised coupons and discount codes, creating the impression that the higher list prices were regular or former prices and that the discounts were not always available.

Vizcarra alleged that she bought products from Michaels online on November 28, 2022, using a 40%-off code, and bought additional products at a Michaels store on January 19, 2023, using a 20%-off coupon. She alleged that she believed the products had previously sold at the published regular prices and that she would not have bought them if she had known the discounts were continuously available.

She sued on behalf of herself and a proposed nationwide class, as well as a California subclass. Her amended complaint asserted claims under California’s False Advertising Law, the California Consumer Legal Remedies Act, and the Unfair Competition Law; claims for intentional and negligent misrepresentation; breach of contract; breach of express and implied warranties; and unjust enrichment or quasi-contract.

Michaels’ Motions

Michaels moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal for failure to state a legally sufficient claim. Michaels also moved under Rule 12(f) to strike the class allegations, or alternatively to dismiss the nationwide class claims. Michaels separately asked the court to take judicial notice of court documents and webpages.

Analysis

The court held that Vizcarra plausibly stated a claim under California Business and Professions Code section 17501, which governs advertising a former price. Although Michaels’ higher list price was currently available, the court concluded that a currently offered price could also be presented as a former price. The allegations that Michaels continuously offered at least 20%-off discounts were sufficient at the pleading stage to suggest that the lower discounted price could be the prevailing market price and that the higher price was misleadingly presented as a former price.

The court also held that Vizcarra adequately pleaded claims under the California False Advertising Law, the California Consumer Legal Remedies Act, and the Unfair Competition Law. Applying the reasonable-consumer standard, the court concluded that the advertising could plausibly be false, misleading, deceptive, or confusing. The court rejected Michaels’ argument that Vizcarra had to investigate and plead the prices charged by other retailers for each product. It also held that her allegations of a blanket, sitewide discount practice were sufficiently specific under the heightened pleading rule for fraud-based claims.

The court declined to dismiss the California Consumer Legal Remedies Act damages claim based on notice requirements. Vizcarra had sent a demand letter before filing her initial complaint, which sought injunctive relief rather than damages, and later amended the complaint after the required period. The court held that she had complied with the statute.

The court held that Vizcarra’s intentional misrepresentation claim was not barred by the economic-loss rule because she alleged that Michaels’ representations fraudulently induced her to make purchases she otherwise would not have made. The court also held that she adequately pleaded breach of contract and breach of express and implied warranties. The parties disagreed about the contract’s terms, the products’ value, and whether Michaels provided the promised discounts; the court treated those disputes as factual issues not suitable for resolution on a motion to dismiss.

The court dismissed the unjust enrichment or quasi-contract claim with leave to amend. It found that the complaint did not clearly explain how Michaels’ discount practices caused Vizcarra to pay a price premium, and it did not allege that the express contract was invalid or unenforceable. Under California law, a quasi-contract claim generally cannot proceed alongside an express contract covering the same subject unless the plaintiff alleges facts suggesting that the contract may be invalid or unenforceable.

Class Allegations and Judicial Notice

The court denied Michaels’ motion to strike the proposed class allegations. It concluded that a Rule 12(f) motion to strike was not the proper method for challenging whether class allegations could ultimately be certified. The court also denied Michaels’ alternative request to dismiss the nationwide class claims. Vizcarra asserted California-law claims, and whether California law could apply to a nationwide class would require a later choice-of-law analysis at the class-certification stage.

The court granted Michaels’ request for judicial notice of the submitted court filings and webpages. Judicial notice allows a court to recognize certain documents or facts without treating them as disputed allegations proved at trial.

Disposition

The court dismissed Vizcarra’s unjust enrichment claim with leave to amend. Michaels’ motion to dismiss was denied as to all other claims. Michaels’ motion to strike was denied. Michaels’ request for judicial notice was granted. Any amended complaint was due February 2, 2024; if Vizcarra did not amend, Michaels’ response to the existing complaint was due February 23, 2024. The order was signed by Judge P. Casey Pitts.