Robey v. SPARC Group, LLC, ___ N.J. ___ (2024). Today saw a relatively rare 4-3 decision from the Supreme Court. The majority consisted of Justice Solomon, the author of the majority opinion, Chief Justice Rabner, and Justices Patterson and Pierre-Louis. Justice Fasciale authored the dissent, in which Justices Wainer Apter and Noriega joined. The case, a putative consumer class action, involved allegations that illusory discounts on clothing sold by Aeropostale violated the Consumer Fraud Act, N.J.S.A. 56:8-1 et seq. (“the CFA”), and the Truth in Consumer Contract, Warranty, and Notice Act, N.J.S.A. 56:12-14 et seq. (“the TCCWNA”).
An illusory discount, as the majority described it, is one in which a merchant has “advertised clothing as being discounted when, in fact, the items had never been offered or sold at the non-discounted prices, or reference prices, listed.” Plaintiffs in this case alleged that Aeropostale had done just that in selling clothing. As the majority summarized plaintiffs’ allegations, “plaintiff Christa Robey purchased a sweatshirt for $23.98 that was advertised as being 60% off an original price of $59.95, and three t-shirts advertised as ‘Buy 1 Get 2 Free’ for $29.95. Plaintiff Maureen Reynolds purchased a pair of pants for $18.25 that were advertised as being 50% off an original price of $36.50. Plaintiffs claim that the items they purchased ‘on sale’ are never offered for purchase at the ‘original’ or reference prices listed on the price tag, thereby rendering the advertised ‘markdowns’ illusory and the reference prices fictitious.”
The majority agreed with plaintiffs that illusory discounts violate the CFA), but held that plaintiffs had not alleged the “ascertainable loss” required by the CFA. Thus, the Court held that plaintiffs had failed to state a damages claim for violation of the CFA, or of the TCCWNA, which permits only “aggrieved consumers” to invoke its provisions. Nor could plaintiffs seek injunctive relief, since the CFA provides that only the Attorney General can pursue such claims absent proof by a private plaintiff of an ascertainable loss. The Law Division had granted a defense motion to dismiss, under Rule 4:6-2(e), for failure to state a claim. The Appellate Division had reversed that ruling, as discussed here. The Supreme Court restored the Law Division’s dismissal.
The majority conceded that “the pricing practices challenged are indeed unlawful under the CFA.” But the complaint failed, the majority said, because there was no ascertainable loss as mandated by N.J.S.A. 56:8-19. Prior cases had addressed two types of loss that qualified as “ascertainable”: benefit of the bargain and out of pocket loss. The majority held that plaintiffs had neither.
Plaintiffs did not adequately allege out of pocket loss, the majority said, because they “do not allege that they purchased defective or deficient goods, or that the items they received are worthless or even worth less than the price paid. Indeed, plaintiffs do not dispute that the items they bought are precisely what they intended to purchase.” And “[a]lthough plaintiffs allege that they never would have purchased the items, plaintiffs do not claim that they attempted to return the items or that Aéropostale refused to accept such a return.”
Nor, according to the majority, did plaintiffs sufficiently allege benefit of the bargain damages. “Plaintiffs also argue that they suffered an ascertainable loss because they did not receive a higher-value item for a discounted price, which denied them the benefit of their bargain. Put another way, plaintiffs allege that they did not receive the savings that defendant advertised. But plaintiffs do not allege that the items purchased were materially different from what was promised — wearable pants, t-shirts, and a sweatshirt, as advertised. Nor have they alleged any dissatisfaction with or defects in the items purchased.”
The majority offered distinctions of prior decisions of the Court and cited “the majority of decisions by other state and federal courts that have addressed whether plaintiffs suffered a cognizable injury as a result of deceptive pricing under various state consumer protection laws.” And though the majority recognized that, on a motion to dismiss, a complaint is to be construed liberally in favor of sustaining it, a posture accentuated by the Legislature’s intent that the CFA be liberally applied in favor of consumers, the majority rejected the complaint at the threshold and reinstated the Law Division’s dismissal.
The most that the majority could offer in response to illusory pricing was that the Attorney General should pursue such violations. The majority noted that Justice Fasciale’s “dissent makes a strong case for why the Attorney General should choose to exercise his power and authority to seek a court order prohibiting businesses from employing illusory discounts and fictitious former prices.”
That dissent is the better reasoned opinion. Justice Fasciale observed that the Court has never been able to define “ascertainable loss” or to limit it to certain measures. Instead, “the clear objectives of the [CFA] itself” permit any loss that is “quantifiable or measurable” and not “hypothetical or illusory” should suffice. The dissenters quoted extensively from the complaint, which was extraordinarily detailed in describing how illusory pricing leads consumers to believe that they are getting a bargain, when in fact the transaction is no bargain at all. That pleading cited numerous scholarly articles about illusory discounts and the fact that they are widespread, and Justice Fasciale added more. (The majority had nothing to say about any of them). There was plainly a sufficient description of a loss from illusory discounts to allow the case to proceed.
Justice Fasciale also emphasized the context of a motion to dismiss for failure to state a claim. The dissenters observed that the Court’s prior cases called for “search[ing] the complaint in depth and with liberality to ascertain whether the fundament of a cause of action may be gleaned even from an obscure statement of claim” (emphases by Justice Fasciale). The arid majority opinion did not do that.
Justice Fasciale also exposed the fallacy in the majority’s suggestion that the Attorney General try to pursue illusory discount violations. “The Attorney General, an unquestionably integral part of the CFA’s enforcement, appeared as amicus curiae in support of plaintiffs’ position and advocated at oral argument that there are simply too many fictitious pricing violations in the marketplace for the Attorney General to be able to prosecute them all. Therefore, without private parties like plaintiffs bringing actions against wrongdoers engaging in fictitious pricing schemes, the Attorney General will continue to be burdened, wrongdoers will not be deterred, and these unlawful practices will continue to run rampant in the marketplace, just as studies have reported. Those avoidable pitfalls contravene the CFA’s remedial purposes. And as an essential part to the enforcement of the CFA, the Attorney General’s position on this issue is profoundly significant, a sentiment the majority fails to meaningfully consider.”
Over 25 years ago, the Court in Lemelledo v. Beneficial Management, 150 N.J. 255 (1997), recognized the importance of private plaintiffs as “private attorneys general” to enforce the CFA when the State lacks the resources or the will to do so. The need for that is especially significant in the context of illusory discounts, which have “proliferated” over time, as the scholarly authorities that Justice Fasciale marshaled demonstrated. The majority gave insufficient respect to the continued need for private attorneys general. The dissenters took a more realistic position.
Justice Fasciale also debunked the majority’s position that it was relevant that plaintiffs had not tried to return the items they purchased. That was “of no moment, especially at this stage in the litigation.” Justice Fasciale noted that in Bosland v. Warnock Dodge, Inc., 197 N.J. 543 (2009), the Court held that “the CFA does not require a consumer, who has been victimized by a practice which the statute is designed to remedy, to seek a refund from the offending merchant as a prerequisite to filing a complaint.” [Disclosure: I represented an amicus curiae in support of the successful plaintiff in Bosland].
Both the majority opinion and the dissent are well worth reading in full. But the Court, by the narrowest of margins, missed an opportunity to aid in combating what the Court recognized was a CFA violation, despite the liberal construction mandates of Rule 4:6-2(e) and the CFA. The immediate real world effect of today’s decision is to shrug and say that nothing can be done about illusory discounts.
Today’s ruling may give reason for concern from a larger perspective. Though two cases do not a trend make, this is the second case this year in which the Court has sustained the grant of a motion to dismiss in questionable circumstances and despite the Court’s repeated prior statements that the grant of such motions should be rare. (The other was AC Ocean Walk, LLC v. American Guarantee & Liability Ins. Co., ___ N.J. ___ (2024), discussed here).