Kohl’s loses appeal in California false-advertising lawsuit

by Rick Romell, Journal Sentinal

A federal appeals court has reinstated a false-advertising lawsuit brought against Kohl’s Corp. in California.

The action again allows a Los Angeles area man and his lawyers to pursue a potential class-action claim that Kohl’s falsely portrayed merchandise as being sold at large discounts to the original prices.

It also marks at least the third time Kohl’s has been formally challenged on the way it promotes its prices.

In 2000 and 2002, the Menomonee Falls firm paid a total of $500,000 to settle deceptive-advertising cases brought by the district attorney in Wichita, Kan. Kohl’s agreed to consent judgments in the actions, but admitted no wrongdoing.

In 2004, the Massachusetts attorney general concluded that Kohl’s had violated a law barring false advertising of sale prices, but he decided not to prosecute because he didn’t think it would significantly help consumers.

At issue are the markdowns ‘ 30% off regular price, 50% off regular price, and such – routinely touted by retailers.

In the ongoing case in California, Antonio S. Hinojos, of West Covina, claims that those types of purported savings led him to buy more than $500 worth of luggage, shirts and shorts at a Kohl’s Department Store in suburban Los Angeles in May 2010. In fact, Hinojos alleged, the prices of the items had not been reduced as much as Kohl’s had advertised.

Kohl’s has denied any wrongdoing.

 But the company’s initial victory came on other grounds: U.S. District Judge Otis D. Wright II concluded that Hinojos hadn’t lost anything ‘ he had his luggage and apparel, he wasn’t claiming it was worth less than he paid, and he wasn’t claiming there was anything wrong with it. So Hinojos had no standing to lodge a complaint, Wright ruled.

The appeals court disagreed.

Knowing well that customers love bargains, retailers have incentive to lie that products previously have sold for much higher ‘original’ prices, Appellate Judge Stephen Reinhardt wrote in the opinion. ‘Because such practices are misleading ‘ and effective ‘ the California legislature has prohibited them,’ Reinhardt wrote.

Reinhardt said misinformation about a product’s ‘normal’ price is significant in the same way a false product label would be, and that a deceived bargain hunter does suffer economic injury.

The case now will go back to a federal district court, where lawyers for Hinojos will ask that it be made a class action, which would open the door to claims by other Kohl’s customers.