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Taylor v. Nike, Inc.

United States District Court, D. Oregon, Portland Division

February 17, 2017

MONIKA TAYLOR, individually and on behalf of all others similarly situated,
NIKE, INC., Defendant.


          Michael W. Mosman Chief United States District Judge

         This matter comes before the Court on Nike's Motion to Dismiss [15] Ms. Taylor's Complaint [1]. For the reasons set forth below, I GRANT Nike's Motion and DISMISS Ms. Taylor's Complaint with leave to amend.


         Ms. Taylor asserts the following factual allegations in her Complaint. In the summer of 2015, Ms. Taylor visited a Nike Outlet Store in Orange, California. There, she observed several items marked with tags that contained two prices: a “Sugg. Retail Price” and a lower “Our Price.” She also observed other items without such tags, leading her to believe that the items with tags were discounted. Enticed by the prospect of “receiving a bargain, ” Ms. Taylor purchased several items from the store.

         Believing she was deceived, Ms. Taylor brought this suit against Nike. In general, Ms. Taylor claims that Nike's use of the dual price tags is misleading to reasonable consumers. She asserts four causes of action arising under California law: the False Advertising Law (“FAL”); the Consumers' Legal Remedies Act, (“CLRA”); the Unfair Competition Law, (“UCL”); and unjust enrichment. Nike moves to dismiss these claims, arguing that Ms. Taylor lacks standing to bring suit and that the Complaint fails to satisfy the heightened pleading requirements for fraud. I held oral argument on November 10, 2016.


         I. Whether Ms. Taylor Has Standing Under Article III

         To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) for lack of standing, a plaintiff must have “(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016) as revised (May 24, 2016). Plaintiff bears the burden of proof and must “‘clearly . . . allege facts demonstrating' each element.” Id. (quoting Warth v. Seldin, 422 U.S. 490, 518 (1975)). An injury in fact is one that is (a) concrete and particularized and (b) actual or imminent. Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992). In other words, the injury “must affect the plaintiff in a personal and individual way, ” and “must actually exist.” Spokeo, 136 S.Ct. at 1548. “Even named plaintiffs who represent a class must allege and show that they personally have been injured.” Id. at 1547 n.6 (quoting Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 40 n.20 (1976)) (internal quotation marks omitted).

         Nike argues that Ms. Taylor lacks standing to bring these state law claims because she has failed to meet Article III's injury in fact requirement. Nike also argues that Ms. Taylor has failed to plead facts sufficient to show she has standing to seek injunctive relief.

         A. Injury in Fact

         A person has standing under the UCL, FAL, or CLRA when that person has suffered an economic injury as a result of unfair competition. Hinojos v. Kohl's Corp., 718 F.3d 1098, 1103-04, 1108 (9th Cir. 2013) as amended on denial of reh'g and reh'g en banc (July 8, 2013). An “economic injury” is a loss or deprivation of money or property which requires no more injury than “the corresponding requirement under Article III of the U.S. Constitution.” Reid v. Johnson & Johnson, 780 F.3d 952, 958 (9th Cir. 2015). Plaintiffs meet the economic injury in fact requirement when “they show that, by relying on a misrepresentation on a product label, they ‘paid more for a product than they otherwise would have paid, or bought it when they otherwise would not have done so.'” Id. (quoting Hinojos, 718 F.3d at 1104 n.3).[1]

         Ms. Taylor has sufficiently pled that she suffered an injury in fact. In her Complaint, she alleges that she observed merchandise with the dual price tags and understood the tags to mean she was “receiving a bargain.” She also asserts that she was “induced” to purchase the items on the prospect of the bargain and would not have purchased them, or paid the prices she did, had she “known she was not truly receiving a bargain.” These allegations are sufficient to meet the economic injury requirement under the UCL, FAL, or CLRA, which corresponds to the injury in fact requirement under Article III.

         Nike argues that Ms. Taylor's failure to plead sufficient facts regarding the falsity of Nike's statements undercuts her ability to establish standing under the UCL, FAL, or CLRA. But, the facts necessary to establish standing are not the same as those required to plead a claim with particularity. See Vassigh v. Bai Brands LLC, No. 14-CV-05127-HSG, 2015 WL 4238886, at *3 (N.D. Cal. July 13, 2015) (finding that challenges to standing and a complaint's sufficiency under Rule 8(a) or 9(b) involve different questions); Branca v. Nordstrom, Inc., No. 14CV2062-MMAJMA, 2015 WL 1841231, at *4, *6 (S.D. Cal. Mar. 20, 2015) (finding that the plaintiff had made sufficient allegations for purposes of standing even though those same allegations failed to meet the heightened pleading requirement under Rule 9(b)). Thus, even if Ms. Taylor's claims are insufficient under the heightened pleading standard of Rule 9(b), they are sufficient to provide Ms. Taylor with standing under Article III.

         B. Standing to Seek Injunctive Relief

         Regardless of whether Ms. Taylor has made sufficient allegations to show she suffered an injury in fact, she still has to demonstrate that she has standing to seek injunctive relief. Nike argues that even if Ms. Taylor plans to shop at Nike Outlets in the near future, her knowledge of the purported false pricing scheme precludes her from seeking injunctive relief because she can no longer be induced by a bargain she knows does not exist.

         In addition to the three general requirements for Article III standing, a plaintiff seeking injunctive relief must also show that she is “realistically threatened by repetition of the violation.” Gest v. Bradbury, 443 F.3d 1177, 1181 (9th Cir. 2006) (quoting Armstrong v. Davis, 275 F.3d 849, 860-61 (9th Cir. 2001)). “Past exposure to illegal conduct does not in itself show a present case or controversy regarding injunctive relief . . . if unaccompanied by any continuing, present adverse effects.” Lujan, 504 U.S. at 564 (quoting City of L.A. v. Lyons, 461 U.S. 95, 102 (1983)).

         District courts in the Ninth Circuit are split on the issue of whether plaintiffs in Ms. Taylor's position have standing to seek injunctive relief. Spann v. J.C. Penney Corp., No. SA CV 12-0215 FMO (RNBx), 2015 WL 1526559, at *11 (C.D. Cal. Mar. 23, 2015). In some cases, district courts have denied standing because consumers who become aware of a defendant's false advertising cannot establish that they are likely to be “fooled again” by the misrepresentations. See, e.g., Romero v. Flowers Bakeries, LLC, No. 14-CV-05189-BLF, 2015 WL 2125004, at*7 (N.D. Cal. May 6, 2015); Castagnola v. Hewlett-Packard Co., No. C 11-05772 JSW, 2012 WL 2159385, at *6 (N.D. Cal. June 13, 2012). In other cases, district courts have found standing, reasoning that holding otherwise would “eviscerate the intent of the California legislature in creating consumer protection statutes.” Koehler v. Litehouse, Inc., No. CV 12-04055 SI, 2012 WL 6217635, at *6 (N.D. Cal. Dec. 13, 2012); Spann, 2015 WL 1526559, at *11; Henderson v. Gruma Corp., No. CV 10-04173 AHM (AJWX), 2011 WL 1362188, at *7-8 (C.D. Cal. Apr. 11, 2011). Although I recognize the policy concerns of denying standing in cases like these, I agree with the former line of cases and conclude that Ms. Taylor does not have standing to seek injunctive relief.

         “[S]tanding in federal court is a question of federal law, not state law.” Hollingsworth v. Perry, 133 S.Ct. 2653, 2667 (2013). Under federal law, it is “the imminent prospect of future injury, ” not the “presence or absence of a past injury, ” that “determines Article III standing to seek injunctive relief.” Ervine v. Desert View Reg'l Med. Ctr. Holdings, LLC, 753 F.3d 862, 868 (9th Cir. 2014) (citations omitted) (internal quotation marks omitted); see also Lujan, 504 U.S. at 564 (“Past exposure to illegal conduct does not in itself show a present case or controversy regarding injunctive relief . . . if unaccompanied by any continuing, present adverse effects.” (citation omitted) (internal quotation marks omitted)).

         Here, Ms. Taylor's economic injury is rooted in Nike's alleged deception; without such deception, she would not have purchased the merchandise or paid as much as she did. By virtue of her past injury, however, Ms. Taylor is now aware of any false pricing scheme in which Nike might be engaged. Therefore, she cannot demonstrate “the imminent prospect of future jury” because she can no longer be deceived.

         The fact that California's consumer protection laws[2] explicitly provide for injunctive relief does not change this conclusion. See Cal. Bus. & Prof. Code § 17203 (West 2017); Cal. Civ. Code § 1780 (West 2017); Spann, 2015 WL 1526559, at *9 (“An injunction is the primary form of relief available . . . to protect consumers from unfair business practices[.]” (citation omitted) (internal quotation marks omitted)). Regardless of whether the California legislature intended injunctive relief to be available in these cases, Article III “limits the jurisdiction of federal courts to ‘cases and controversies.'” Lee v. Am. Nat. Ins. Co., 260 F.3d 997, 1001 (9th Cir. 2001); see also 3 Henry P. Johnston, Correspondence and Public Papers of John Jay 486-89 (1891); 10 Jared Sparks, The Writings of George Washington 542-45 (1836) (detailing how Justices, by letter to President Washington, declined to answer questions posed to the Supreme Court by Secretary of State Thomas Jefferson as not involving cases or controversies). Thus, “a plaintiff whose cause of action is perfectly viable in state court under state law may nonetheless be foreclosed from litigating the same cause of action in federal court, if he cannot demonstrate the requisite injury.” Lee, 260 F.3d at 1001-02.

         Again, I recognize that in this instance, the federal standing requirements create a situation in which a consumer who has demonstrated economic injury under California's consumer protection laws lacks Article III standing to pursue injunctive relief in federal court. But a body of law almost as old as the Republic requires this result. Ms. Taylor has not ...

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