Hennessey v. Kohls Corporation

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION

JILL HENNESSEY, Individually and on )

Behalf of Others Similarly Situated, )

)

Plaintiff, )

)

v. ) No. 4:19 CV 1866 DDN

)

KOHL’S CORPORATION and )

KOHL'S DEPARTMENT STORES, INC., )

)

Defendants. )

MEMORANDUM AND ORDER

Before the Court is the motion of defendant Kohl’s Corporation and Kohl’s Department

Stores, Inc. (collectively “Kohl’s” or defendant) to dismiss the claims of plaintiff and class

representative Jill Hennessey, pursuant Federal Rules of Civil Procedure 8, 9(b), 12(b)(1), and

12(b)(6). (Docs. 12, 13.) All parties have consented to the exercise of plenary authority by a

United States Magistrate Judge under 28 U.S.C. § 636(c). Following the oral arguments heard by

the Court both parties submitted supplemental memoranda.

BACKGROUND

Plaintiff Jill Hennessey has brought this action individually and on behalf of all others

similarly situated, invoking diversity of citizenship subject matter jurisdiction granted by 28

U.S.C. § 1332. Plaintiff alleges two claims under Missouri state law: (1) unlawful practices in

violation of the Missouri Merchandising Practices Act, Mo. Rev. Stat. § 407.020(1) (“MMPA”)

and (2) unjust enrichment under Missouri common law.

In her complaint, plaintiff alleges the following facts. Kohl’s markets its merchandise to

the public by making false and misleading price comparisons in connection with the

advertisement and sale of its private brand merchandise that is available “only at Kohl’s” and its

exclusive brands that are developed and marketed through agreements with nationally-

recognized brands. The false and misleading price comparisons appear on price tags affixed to

items, on signs posted in Kohl’s retail stores, in print advertisements, in mailing circulars, and on

Kohl’s website Kohls.com. Plaintiff alleges defendant represents that customers can buy its

private and exclusive brand products “on sale” at a substantial discount from its advertised

former prices, which defendant refers to as the “regular” or “original” prices. In reality the

“sale” discounts are illusory, fictitious, and in violation of Missouri law, because the “regular”

and “original” prices are not actual bonafide recent former prices of the products. Defendant

actually sells less than 5% of its private and exclusive branded products at regular or original

prices. Additionally, defendant has not sold substantial quantities at the regular or original

prices in the recent past, nor has it offered to sell merchandise for a reasonable and substantial

period of time preceding the advertised “sale.” (Id.) At checkout defendant perpetuates the

deception by providing customers with a receipt that shows an item’s original advertised item

price, its lower sale price, and “the total amount the customer purportedly saved in the

transaction.” (Id. at ¶ 23.)

Plaintiff further alleges that defendant offers a constant array of promotions, such as,

storewide sales, “Kohl’s Cash,” coupons, and discounts associated with credit card sales, such

that the actual selling price and related market value of each item is often less than the purported

“sale price.” Plaintiff alleges that customers who buy products at the advertised “sale price” are

“likely” paying more than the actual fair market value of the item by more than what most

people pay for the same item. (Id. at ¶ 25.) Additionally, through its use of fictitious regular and

original former prices, Kohl’s intentionally and/or negligently misrepresented and/or failed to

disclose material information concerning the actual value of its products. (Id. at ¶ 27.)

Plaintiff alleges that defendant advertises former prices that “materially overstate the

actual market value and worth” of the products. Because of this, customers like plaintiff and the

class suffer damages because they do not receive items that have the value or worth that

defendant represents the products have. (Id. at ¶ 26.) Plaintiff alleges that by concealing the true

information, defendant intended to induce plaintiff and members of the class to purchase its

products at prices they would not have otherwise agreed to pay. (Id. at ¶ 27.)

Plaintiff alleges that defendant knew or should have known that its price-comparison

advertisements conveyed false information to consumers about the value of the merchandise it

sells. Defendant knew or should have known that as the discount sizes increase, customers’

perceptions of value and willingness to buy increase, while their intention to seek lower prices

decreases. (Id. at ¶ 29.)

Plaintiff alleges she has been a frequent Kohl’s shopper, both at its stores and online. She

alleges she was misled by the higher price comparison value of the products advertised. She

alleges she would not have purchased items or would have purchased fewer items, if defendant

had not used its “price-comparison advertising scheme.” Plaintiff alleges in the alternative that, if

defendant had offered “a truthful discount” from “the actual, former prices of” the products,

plaintiff would have paid less for the items she bought. Either way, plaintiff alleges, she “did not

receive the actual value that Kohl’s represented she would receive through its false and

misleading price-comparison advertising scheme.” (Id. at ¶¶ 31, 32.)

Plaintiff’s complaint provides examples of plaintiff’s purchases with data that include

location, dates, quantity, SKU number, item description, advertised former price, advertised sale

price, additional discount, and price paid for these purchases. (Id. at 11-19.) These transactions

occurred between September 5, 2016, and May 27, 2019. (Id. at 11, 18.) Plaintiff, on

“information and belief,” alleges the advertised former price of each example item was false and

misleading, and further believes defendant may have failed to disclose intermediate markdowns

that took place prior to her purchase. (Id. at 11-19.)

Plaintiff alleges that she and the proposed class were exposed to and are victims of

defendant’s false comparisons. As a result of the alleged practices, plaintiff and the class have

not received the benefit-of-the-bargain, because the products they purchased do not have the

higher value and worth that defendant represented through its false and misleading regular and

original price comparisons. (Id.)

Plaintiff seeks certification of the following class:

All persons who, in the state of Missouri, and any time between the date that is

five years immediately preceding the filing of this lawsuit and the date of any

judgment in the case (the “Class Period”), purchased from Kohl’s (either at a

Kohl’s retail store or from its website) for personal, family or household purposes

one or more private or exclusive branded items advertised with a “Sale” price of

20% or more below a stated “Original” or “Regular” price and who have not

received a refund or credit for their purchase(s).

Excluded from the Class are Defendants, as well as their officers, directors,

employees.

(Id. at 20-21.)

Plaintiff seeks certification of this class under F. R. Civ. P. 23(a) and 23(b)(3), because

the number of class members is so numerous that joinder would be impracticable, there are

thirteen questions of law and fact common to the members of the class, plaintiff’s claim is

typical of the claims of the other class members, plaintiff will fairly and adequately protect the

interest of the class to include experienced counsel in this type of allegation, the prosecution of

the claims by the members individually would foster inconsistent adjudication, and individual

damages are insufficient to justify the cost of litigation. (Doc. 1 at 21-24.)

KOHL’S MOTION TO DISMISS

Defendant Kohl’s moves to dismiss plaintiff’s complaint, because plaintiff has failed to

meet the particularity requirements of F. R. Civ. (9)(b) ("In alleging fraud or mistake, a party

must state with particularity the circumstances constituting fraud or mistake"), and because

plaintiff has not alleged she suffered an ascertainable loss. Further, defendant argues that,

because plaintiff is aware of defendant’s alleged merchandising practices, she does not have

standing to seek injunctive relief to protect her from being deceived in the future.

Under Rule 12(b)(6), a party may move to dismiss all or part of a complaint for its failure

to state a claim upon which relief can be granted. Fed. R. Civ. Pro. 12(b)(6). To overcome a

motion to dismiss under Rule 12(b)(6) a complaint “must include enough facts to state a claim to

relief that is plausible on its face,” providing more than just labels and conclusions. Bell Atl.

Corp. v. Twombly, 550 U.S. 544, 570 (2007). Such a complaint will “allow[] the court to draw

the reasonable inference that the defendant is liable for the misconduct alleged,” Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009), and will state a claim for relief that rises above mere

speculation. Twombly, 550 U.S. at 555.

In reviewing plaintiff’s complaint under this standard, the Court must accept all of

plaintiff’s factual allegations as true and draw all inferences in the plaintiff’s favor; however, the

Court is not required to accept the legal conclusions the plaintiff draws from the facts alleged.

Retro Television Network, Inc. v. Luken Commc’ns, LLC, 696 F.3d 766, 768-69 (8th Cir. 2012).

Additionally, the Court “is not required to divine the litigant’s intent and create claims that are

not clearly raised . . . and it need not conjure up unpled allegations to save a complaint.”

Gregory v. Dillard’s, Inc., 565 F.3d 464, 473 (8th Cir. 2009) (en banc).

Additionally, if allegations are grounded in fraud, they are subject to the heightened

pleading standard of Rule 9(b). To satisfy Rule 9(b), “conclusory allegations that a defendant’s

conduct was fraudulent and deceptive are not sufficient.” Drobnak v. Andersen Corp., 561 F.3d

778, 783 (8th Cir. 2009).

Missouri Merchandising Practices Act

Defendant argues that plaintiff’s MMPA claim does not allege facts that show a plausible

entitlement to relief and does not allege she has suffered an ascertainable loss. The MMPA

prohibits “any deception, fraud, false pretense, false promise, misrepresentation, unfair practice

or the concealment, suppression, or omission of any material fact in connection with the sale or

advertisement of any merchandise. . . .” Mo. Rev. Stat. § 407.020.1.

The elements of an MMPA claim are: (1) the purchase of merchandise; (2) primarily for

personal or household purposes; (3) an ascertainable loss; and (4) the ascertainable loss being the

result of an act made unlawful by § 407.020. See Mo. Rev. Stat. § 407.025.1; Hess v. Chase

Manhattan Bank, USA, N.A., 220 S.W.3d 758, 773 (Mo. banc 2007); Murphy v. Stonewall

Kitchen, LLC, 503 S.W.3d 308, 311 (Mo. Ct. App. 2016); Parnes v. Gateway 2000, Inc., 122

F.3d 539, 549 (8th Cir.1997); White v. Just Born, Inc., 2017 WL 3130333 (W.D. Mo. Jul. 21,

2017).

1. Ascertainable Loss

As stated, to allege a violation of the MMPA, plaintiff must allege facts that, if true,

establish she suffered an ascertainable loss of money or property as a result of an unlawful act,

which in this case plaintiff alleges includes defendant’s allegedly false advertising. The

ascertainable loss concept in fraud and deceit cases in Missouri imports the “benefit-of-the-

bargain rule.” The proper measure of damages where the claimant purchases and retains the

subject property is “the difference between the actual value of the property at the time of the sale

and what its value would have been if the representations had been true, for the purchaser is

entitled to the full benefits of [her] bargain.” Kendrick v. Ryus, 123 S.W. 937, 939 (Mo. 1909);

Finkee v. Boyer, 56 S.W.2d 372, 377 (Mo. 1932); Murphy v. Stonewall Kitchen, LLC, 503

S.W.3d at 313. If a court determines a buyer received the benefit-of-the-bargain, the buyer did

not suffer an ascertainable loss. Thompson v. Allergan USA, Inc. 993 F. Supp. 2d 1007, 1012

(E.D. Mo. 2014).

To qualify her claims as not receiving the benefit of the bargains advertised by defendant,

plaintiff must allege facts that indicate the actual, as advertised values of the products she bought

and that she thereby lost the difference between the values as advertised and the prices she paid.

Plaintiff’s allegations indicate she took defendant up on the actual values as advertised and

struck their bargain when she bought and paid for them. Plaintiff suffered an ascertainable loss

if the actual values of the merchandise when advertised were less than as advertised. Plaintiff’s

Memorandum in Opposition to Defendant’s Motion to Dismiss (Doc. 18 at 2-3) (arguing that

plaintiff’s damages equal “Value Represented – Value Received”).

Defendant’s argument that plaintiff alleged she purchased products for prices she was

willing to pay, because she paid them, misses the point. Plaintiff alleges the products she

purchased were worth less than defendant’s advertising evaluated them. If the actual values of

the items were less than as advertised, plaintiff did not receive the benefit of her bargains and she

suffered an ascertainable loss. Smith v. Tracy, 372 S.W.2d 925, 938 (Mo. 1963) (in a case

involving the sale of real property, ruling “the defrauded party is entitled to the difference

between the actual value of the property and what its value would have been if it had been as

represented”); Fong v. Town & Country Estates, Inc., 600 F.2d 179, 182 (8th Cir. 1979).

2. Heightened Pleading

To satisfy the heightened pleading requirement of Rule 9(b), plaintiff’s complaint must

allege the “who, what, where, when, and how” of the alleged fraud. Drobnak v. Andersen Corp.,

561 F.3d at 783. Plaintiff must allege specifically what it was that defendant did that constituted

the fraud plaintiff attributed to defendant. U.S. ex rel. Coster v. United States, 317 F.3d 883, 889

(8th Cir. 2003); cf., United States ex rel. Joshi v. St. Luke’s Hosp., Inc., 441 F.3d 552, 557 (8th

Cir. 2006) (affirming dismissal of plaintiff’s complaint that did not allege specific details to

indicate how “every claim submitted by” defendant hospital was fraudulent and thereby did not

comply with Rule 9(b)).

Plaintiff argues the complaint included enough facts to put defendant on notice of the

misconduct alleged, as required by Coster, 317 F.3d at 889. Indeed, plaintiff’s complaint alleges

several aspects of defendant’s alleged fraudulent conduct, including the dates of 18 purchases,

places, prices paid for described merchandise, and the contents of defendant’s advertising.

Defendant, however, argues that plaintiff has failed to plead specific facts demonstrating

how it deceived her, what her expectations were, and how defendant failed to meet them. More

specifically, defendant argues that plaintiff rests on “information and belief” and offers no facts

to support her allegations that items she purchased were in fact not offered at full price recently

or frequently enough, that defendant did not make enough actual sales at those prices, that it took

intermediate markdowns, or that it does not have support for its reference prices.

The Court agrees with defendant with respect to the as-advertised values of the

merchandise plaintiff bought and the alleged intermediate markdowns prior to plaintiff's

purchases. Without this information, the Court cannot determine whether plaintiff was deprived

of the benefit of her bargain with the defendant, thereby suffering an ascertainable loss, an

essential element of her MMPI and unjust enrichment claims against defendant.

Plaintiff has alleged the actual values as advertised of the merchandise she bought only in

conclusory and speculative terms:

In any event, Plaintiff did not receive the actual value that Kohl’s represented she

would receive through its false and misleading price-comparison advertising

scheme. (Doc. 1 ¶ 32.)

[Regarding five purchases made on September 5, 2016, alleged in ¶ 33,] Plaintiff

is now informed and believes and thereupon alleges that the advertised “Regular”

or “Original” prices of each of these items were false and misleading . . . because

they did not represent the actual, bona fide prices at which Kohl’s had recently

offered to sell each product for a reasonable period of time, or at which Kohl’s

sold a substantial number of such products, in the time period recently preceding

her transaction. Plaintiff is further informed and believes that Kohl’s may have

failed to disclose intermediate markdowns that took place prior to her purchase.

Plaintiff is further informed and believes that the prevailing retail price and,

therefore, the actual fair market value of each item at the time of her purchase was

materially lower than the advertised former price and may have even been less

that the so-called “sale” price. As a result, Plaintiff suffered monetary damages

because she did not receive products worth the higher values Kohl’s represented

she would receive, and she therefore did not receive the benefit of the bargain that

Kohl’s promised. Alternatively, Plaintiff paid more than the actual, fair market

value of each item, while Kohl’s was unjustly enriched and received ill-gotten

gains. (Id. at ¶ 34) (emphasis added.)

Plaintiff makes similar “information and belief” allegations regarding her purchases on

December 7, 2016 (id. at ¶ 37) and on May 27, 2019 (id. at ¶¶ 40, 42, 44, 46, 48).

Plaintiff's current allegations, based on “information and belief,” do not satisfy Rule

9(b)'s particularity requirements. Drobnak, 561 F.3d at 783. To satisfy Rule 9(b), the

allegations must include facts on which her belief is founded. Id. (citing Florida State Board of

Administration v. Green Tree Fin. Corp., 270 F.3d 645, 668 (8th Cir. 2001)); Parnes v. Gateway

2000, Inc., 122 F.3d 539, 549 (8th Cir. 1997). Her complaint does not include such information.

The Court’s current Case Management Order (Doc. 37) grants plaintiff focused discovery

that includes purchase orders and sales data which might provide plaintiff the information that

Rule 9(b) requires. Accordingly, plaintiff is granted leave to amend her complaint to include the

actual and expected values of the items she bought in order to sufficiently plead ascertainable

loss, and to include facts upon which her "information and belief" allegations are based.

UNJUST ENRICHMENT

Plaintiff’s unjust enrichment claim fails for the same reasons stated above regarding the

MMPA claim. Further, defendant contends that because a valid sales contract occurred, plaintiff

cannot seek relief under this claim. While plaintiff may not ultimately recover under both

theories, she may allege alternate theories of recovery, including unjust enrichment and MMPA

claims. Hawkins. V. Nestle U.S.A. Inc., 309 F. Supp. 3d 696, 708 (E.D. Mo. 2018) (citing

Murphy, 503 S.W.3d at 314). Therefore, plaintiff’s unjust enrichment claim has the same

strengths and shortcomings as its MMPA claim and the Court will grant leave to file an amended

complaint.

INJUNCTIVE RELIEF

Defendant argues that plaintiff lacks standing under Article III of the Constitution to seek

injunctive relief, because knowing what she now knows about defendant's marketing practices,

she is no longer at risk of being deceived. However, she pled that defendant's practices are

ongoing, that she would likely continue to purchase from Kohl's, and thus she could benefit from

injunctive relief. This is sufficient to establish standing and potential entitlement to injunctive

relief. E.g., Hawkins v. Nestle U.S.A., Inc., 309 F.Supp.3d 696, 707 (E.D. Mo. 2018).

CONCLUSION

For the reasons set forth above,

IT IS HEREBY ORDERED that the motion of defendant to dismiss plaintiff's

complaint (Doc. 12) is sustained without prejudice to plaintiff filing an amended complaint to

allege ascertainable loss with particularity. In all other respects, the motion to dismiss is denied.

IT IS FURTHER ORDERED that plaintiff is granted leave to file an amended

complaint not later than March 31, 2020.

__________/s/ David D. Noce____________

UNITED STATES MAGISTRATE JUDGE

Signed on February 21, 2020.