Department store Kohl’s can be sued in California court for allegedly advertising misleading markdowns, the U.S. Ninth Circuit Court of Appeals has ruled.

Plaintiff Antonio S. Hinojos charged that he had bought luggage and shirts from Kohl’s in May 2010 that were “marked down” more than 40 percent from the original price. However, he claimed in legal papers filed October 2011, the items regularly were sold at the “marked down” prices and only rarely appeared at the “original” or “regular” prices.

His complaint seeking class action status accused Kohl’s of unfair and fraudulent business practices and of violating California advertising laws.

Kohl’s argued in response: “The lawsuit does not claim that the products he bought were worth less than the amount he paid. Nor does plaintiff claim that the products he bought were unsatisfactory in any way, were not excellent values, or were available for less anywhere else.”

In April 2011, U.S. District Judge Otis D. Wright dismissed the compliant, ruling that Hinojos had no standing to sue because he had not lost money on the transaction.

However, the Court of Appeals overturned that ruling on May 21. “The deceived bargain hunter suffers [an] obvious economic injury as a result of false advertising,” appellate Judge Stephen Reinhart wrote on behalf of the three-judge panel. “The bargain hunter’s expectation is [that the product has] a higher perceived value and therefore has a higher resale value.”

“In sum, price advertising matters,” Reinhart concluded. “When a consumer purchases merchandise on the basis of false price information, and when a consumer alleges he would not have made the purchase but for the misrepresentation, he has standing to sue.”

In June 2012, retailer Jos. A Bank was also targeted by an attempt at a class action which alleged it had “misleading sales.” That case was similarly dismissed several months later by a judge who said the plaintiffs had not suffered an injury. That case does not appear to have been appealed.

Kohl’s did not respond to a request for comment from JCK.

Rob Bates

JCK News Director