Robey v. SPARC Grp.

256 N.J. 541

311 A.3d 463

CHRISTA ROBEY AND MAUREEN REYNOLDS, ON BEHALF OF THEMSELVES AND ALL OTHERS. SIMILARLY SITUATED, PLAINTIFFS-RESPONDENTS, v. SPARC GROUP LLC, DEFENDANT-APPELLANT.

A-50 September Term 2022

087981

Argued November 6, 2023—Decided March 25, 2024

On certification to the Superior Court, Appellate Division, whose opinion is reported at 474 N.J. Super. 593 (App. Div. 2023).

Michael D. Meuti (Benesch, Friedlander, Coplan & Aronoff) of the Ohio, California, and District of Columbia bars, admitted pro hac vice, argued the cause for appellant (Sills Cummis & Gross, and Benesch, Friedlander, Coplan & Aronoff, attorneys; Jeffrey J. Greenbaum, Charles J. Falletta, Michael S. Carucci, Michael D. Meuti, Stephanie A. Sheridan and Meegan B. Brooks (Benesch, Friedlander, Coplan & Aronoff) of the California bar, admitted pro hac vice, of counsel and on the briefs).

Stephen P. DeNittis argued the cause for respondents (DeNittis Osefchen Prince, attorneys; Stephen P. DeNittis, Joseph A. Osefchen, and Shane T. Prince, on the brief).

Jeffrey S. Jacobson argued the cause for amici curiae the Chamber of Commerce of the United States of America and the New Jersey Civil Justice Institute (Faegre Drinker Biddle & Reath, attorneys; Jeffrey S, Jacobson and Jennifer G. Chawla, on the brief).

Viviana Hanley, Deputy Attorney General, argued the cause for amicus curiae Attorney General of New Jersey (Matthew Platkin, Attorney General, attorney; Jeremy M. Feigenbaum, Solicitor General, and Angela Cai, Deputy Solicitor General, of counsel, and Viviana Hanley, Zeyad A. Assaf, and Monica E. Finke, Deputy Attorneys General, on the brief).

Jared M. Placitella argued the cause for amicus curiae New Jersey Association for Justice (Cohen, Placitella & Roth, attorneys; Jared M. Placitella, of counsel and on the brief).

Christopher S. Porrino submitted a brief on behalf of amici curiae National Retail Federation and Retail Litigation Center, Inc. (Lowenstein Sandler, attorneys; Christopher S. Porrino and Peter Slocum, on the brief).

JUSTICE SOLOMON delivered the opinion of the Court.

In this case, plaintiffs, a class of shoppers at the retail clothing store Aéropostale, allege that the store 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 contend that this practice of "illusory discounts" violates the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -227, the Truth in Consumer-Contract, Warranty and Notice Act (TCCWNA), N.J.S.A. 56:12-14 to -18, and various common law contract rights.

It is a violation of the CFA to use fraud, deception, or misrepresentation in connection with the sale and advertisement of merchandise. Indeed, the Appellate Division found here -- and defendant SPARC Group LLC does not contest -- that defendant’s conduct violates the CFA.

[1] However, to state a CFA claim, private plaintiffs -- in contrast to the Attorney General -- must show that they suffered an "ascertainable loss of moneys or property, real or personal, as a result of the use or employment by another person of any … practice declared unlawful under" the CFA. N.J.S.A. 56:8-19; Meshinsky v. Nichols Yacht Sales, Inc., 110 N.J. 464, 473, 541 A.2d 1063 (1988). The core issue before this Court is whether plaintiffs have sufficiently pled that they sustained an ascertainable loss -- that is, a "loss that is quantifiable or measurable." Thiedemann v. Mercedes-Benz USA, LLC, 183 N.J. 234, 248, 872 A.2d 783 (2005).

[2] A plaintiff can establish an ascertainable loss by demonstrating either an out-of-pocket loss or a deprivation of the benefit of one’s bargain. Ibid. "Out-of-pocket damages represent the difference between the price paid and the actual value received," while "benefit-of-the-bargain principles allow ‘recovery for the difference between the price paid and the value of the property had the representations been true.’ " Finderne Mgmt. Co. v. Barrett, 402 N.J. Super. 546, 574, 955 A.2d 940 (App. Div. 2008) (quoting Correa v. Maggiore, 196 N.J. Super. 273, 284, 482 A.2d 192 (App. Div. 1984)). The trial court determined that plaintiffs could not show either form of ascertainable loss and dismissed their complaint; the Appellate Division reversed, although the appellate court split as to the applicable form of loss.

We do not find either type of ascertainable loss applicable here. Plaintiffs cannot assert a "quantifiable or measurable" loss because they purchased non-defective, conforming goods with no objective, measurable disparity between the product they reasonably thought they were buying and what they ultimately received. Plaintiffs’ CFA claim therefore fails.

Additionally, absent an ascertainable loss pursuant to the CFA, plaintiffs are not "aggrieved consumers" under TCCWNA, cannot show injury or damages under their common law claims, and are thus without claims entitling them to equitable relief.

We therefore reverse the judgment of the Appellate Division and reinstate the trial court’s order dismissing the complaint.

I.

A.

In June 2021, plaintiffs, on behalf of themselves and all others similarly situated, filed a six-count class action complaint against defendant SPARC Group LLC, owner and operator of Aéropos-tale. The complaint details that 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.

Count One of plaintiffs’ complaint alleges that such false advertisements violate the CFA because they are an "unconscionable commercial practice" proscribed in N.J.S.A. 56:8-2 and because they contravene certain state and federal pricing regulations. Plaintiffs seek treble damages, reasonable attorneys’ fees, and filing fees and costs under the CFA. Count Two alleges that defendant violated TCCWNA by offering illusory discounts via "consumer notices," i.e., signs and price tags. Plaintiffs seek statutory damages of $100 per class member, as well as actual damages and attorney’s fees under TCCWNA. Counts Three, Four, and Five allege breaches of contract, the implied covenant of good faith and fair dealing, and express warranty, respectively.

Finally, plaintiffs seek a declaratory judgment and class-wide injunctive relief under the Uniform Declaratory Judgment Act, N.J.S.A. 2A:16-50 to -62.

Defendant moved to dismiss plaintiffs’ complaint pursuant to Rule 4:6-2(e). The trial court granted defendant’s motion, observing that the CFA "unmistakably makes a claim of ascertainable loss a prerequisite for a private cause of action."

The court found plaintiffs failed to plead sufficient facts to establish either an "out-of-pocket" loss or a loss of the "benefit of [their] bargain." First, the trial court found that there was no out-of-pocket loss given that plaintiffs did not receive "products that were unsuitable for their intended use, or [plead] that they needed to incur extra expenses because of defendant’s alleged misrepresentations." Second, absent a showing that the goods were defective, nonconforming, or worth less than what plaintiffs paid, the trial court determined the losses were illusory and hypothetical under the benefit-of-the-bargain theory. Thus, the court found no ascertainable loss under the CFA.

The trial court concluded that, without an ascertainable loss under the CFA, the violations of the CFA alleged cannot form the basis of a violation of a "clearly established legal right" under TCCWNA. The court also found that the federal and state pricing regulations on which plaintiffs rely do not provide a private cause of action and therefore could not form the basis of a claim under TCCWNA. Finally, the court found that plaintiffs had not pled facts sufficient to invoke N.J.A.C. 13:45-9.6, which proscribes the use of "fictitious former prices" to make an offered price seem more appealing. Finding that plaintiffs had not shown that defendant violated a clearly established legal right, the trial court determined that plaintiffs "received the exact merchandise that they bargained for at prices they agreed to pay" and were thus not "aggrieved consumers." Therefore, the trial court found that plaintiffs’ TCCWNA claim necessarily failed.

B.

The Appellate Division disagreed and reversed the trial court’s judgment. Robey v. SPARC Grp. LLC, 474 N.J. Super. 593, 598, 290 A.3d 199 (App. Div. 2023).

The Appellate Division held that plaintiffs sufficiently pled an ascertainable loss under the CFA, finding that plaintiffs were denied the benefit of their bargain and suffered a "real and quantifiable" loss -- in the amount of the supposed markdowns, or "illusory discounts" -- because they "received no value for the offered discount." Id. at 601-02, 606, 290 A.3d 199. The court further held that, because plaintiffs had adequately alleged that they suffered an ascertainable loss for CFA purposes, they had also sufficiently pled that they were "aggrieved consumers" for purposes of TCCWNA. Id. at 603, 290 A.3d 199. Noting that the trial court’s dismissal of plaintiffs’ common law claims rested on its conclusion that plaintiffs had failed to adequately plead deprivation of the benefit-of-the-bargain, the Appellate Division reversed as to those counts as well. Id. at 603-04, 290 A.3d 199. Finally, the appellate court held that it was error to dismiss plaintiffs’ claims for a declaratory judgment and injunctive relief. Id. at 604-05, 290 A3d 199.

Judge Berdote Byrne concurred in the judgment, agreeing that plaintiffs’ pleadings were adequate but...