B. Sanfield, Inc. v. Finlay Fine Jewelry Corp., 93 C 20149.
| Decision Date | 05 March 1998 |
| Docket Number | No. 93 C 20149.,93 C 20149. |
| Citation | 999 F.Supp. 1102 |
| Parties | B. SANFIELD, INC., Plaintiff/Counterdefendant, v. FINLAY FINE JEWELRY CORPORATION, Defendant/Counter-plaintiff. |
| Court | U.S. District Court — Northern District of Illinois |
Brian D. Shore, Guyer & Enichen, Erik K. Jacobs, Kostantacos, Traum, Reuterfors & McWilliams, P.C., Rockford, IL, for Plaintiff.
Tyrone C. Fahner, Mayer, Brown & Platt, Chicago, IL, for Defendant.
Plaintiff, B. Sanfield, Inc., filed a three-count, second amended complaint alleging a false advertising claim under the Lanham Act, 15 U.S.C. § 1125(a), a false advertising claim under the Illinois Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) 815 ILCS § 505/2, and a claim for punitive damages under the Consumer Fraud Act against defendant, Finlay Fine Jewelry Corp. based on certain advertisements by defendant of fine jewelry at 50% off the regular price.1 The court conducted a bench trial pursuant to Rule 52(a) of the Federal Rules of Civil Procedure and, based upon the following findings of fact and conclusions of law2, enters judgment in favor of defendant and against plaintiff on all three counts of the second amended complaint.
Plaintiff is a locally-owned retailer located in Rockford, Illinois, that sells, among other things, jewelry, including the types at issue in this case. Defendant also sells jewelry at retail. It does so by leasing space in host department stores. Defendant leases in host department stores to benefit from the host's established customer base, its general customer traffic, and its policies, such as liberal returns and interest free credit. In this case, plaintiff's claims are based on the advertised sales of jewelry by defendant at two Bergner's department store locations in Rockford, Illinois.
Defendant advertises its jewelry consistent with the department store industry. In that regard, it markets jewelry by periodically offering it at discounted prices. While the discounts for the four categories of jewelry at issue here vary, they typically range from 40-60% off the regular, ticketed price. These items are originally priced at about 5.5 times the cost. Defendant offers its jewelry at the regular price for about one third of the fiscal year. This is done via a jewelry sale rotation schedule. Defendant does not, however, strictly adhere to the rotation schedule.
Defendant advertises its discount prices in several ways. Many of its sales are advertised in-store only, through the use of counter signs located on its jewelry counters. Defendant also advertises outside its host stores by using newspaper advertisements, direct mail flyers and catalog inserts.
Defendant and plaintiff differ in their methods of purchasing these types of gold jewelry. Defendant purchases inventory for more than 827 stores from one location and does so by the price from hundreds of vendors. On the other hand, plaintiff purchases for only one location and does so primarily by weight rather than price. In addition to purchasing gold jewelry outright for resale, defendant also sells jewelry on consignment and under gold leasing. Pursuant to this latter method, defendant pays the vendor for the gold value up-front and pays for the value of the other costs after the jewelry is sold at retail.
Defendant and plaintiff also price their jewelry differently. For example, plaintiff ordinarily prices gold chains by weight, whereas defendant sets prices based on its costs and a profit margin. Additionally, plaintiff sells custom jewelry whereas defendant does not.
The court points out these differences in the way plaintiff as a local, single-store retailer prices and advertises jewelry versus that of large, multi-store retailers, such as defendant, only to give context to plaintiff's claims of deception. Other relevant facts will be set forth in discussing the dispositive issues presented at trial.
To establish a claim under the Consumer Fraud Act, plaintiff must prove: (1) defendant engaged in a deceptive act or practice; (2) intended that a party rely on the deception; and (3) the deception occurred in a course of conduct involving trade or commerce.4 See Garcia v. Overland Bond & Inv. Co., 282 Ill.App.3d 486, 491, 218 Ill.Dec. 36, 668 N.E.2d 199 (1st Dist.1996) (citing Siegel v. Levy Org. Dev. Co., 153 Ill.2d 534, 542, 180 Ill.Dec. 300, 607 N.E.2d 194 (1992)). The Consumer Fraud Act does not require, however, that a party have relied on the deception. Id. Nor does it require that anyone actually be misled, deceived or damaged, 815 ILCS 505, or that the defendant acted in bad faith, Washington Courte Condo. Association-Four v. Washington-Golf Corp., 267 Ill.App.3d 790, 837, 205 Ill.Dec. 248, 643 N.E.2d 199 (1st Dist.1994). A plaintiff need only prove an innocent misrepresentation. Washington-Courte, 267 Ill.App.3d at 837, 205 Ill.Dec. 248, 643 N.E.2d 199. Furthermore, an advertisement is deceptive if it creates the likelihood of deception or has the capacity to deceive. Id. In interpreting advertising in this context, the focus is on the net impression it is likely to make on the general population. Id. It is immaterial that a given phrase may be technically construed as not constituting a misrepresentation or that a deception is accomplished by innuendo rather than an affirmative misstatement. Id.
While defendant claims it is entitled to judgment under the Consumer Fraud Act on several bases, the court finds plaintiff has failed to carry its burden on the issue of whether the accused advertising constituted a deceptive act or practice. As to this first issue, plaintiff claims that defendant's advertisements, which offer certain types of fine jewelry5 at 50% off the regular price, is deceptive for the following reasons: (1) defendant does not intend to sell any of the jewelry items at regular price; (2) defendant fails to sell a substantial number of jewelry items at the regular price; (3) defendant does not offer the jewelry items for sale at the regular price for a substantial period of time; (4) defendant does not offer the jewelry items for sale with the good-faith intention to sell them at regular price; and (5) a public opinion poll conducted by plaintiff's expert demonstrates that consumers are misled or deceived by defendant's advertisements. Put another way, plaintiff claims that defendant's advertisements constitute a deceptive act or practice because it uses the term "regular price" merely as a basis for its discounted price with no intention of ever selling any of the items at the regular price. The evidence, however, fails to support plaintiff's claim.
The evidence demonstrates that defendant prices its jewelry to meet certain gross margin goals. In doing so, it establishes both a regular price and a discount price simultaneously. In pricing its jewelry in this fashion, defendant uses certain mark-ups that, when discounted 50%, will yield the desired gross margins. It does not keep records of the amount of sales at discount or regular prices, only whether a store is meeting its gross margin goals. The court finds nothing actionable about defendant's pricing scheme under the Consumer Fraud Act. Indeed, plaintiff apparently does not suggest otherwise. Rather, plaintiff's focus is on the fact that the formulated regular price, which is subsequently used to advertise the discount price, is a sham which deceives the public.
It is undeniable that the term "regular price" is material to defendant's pricing and advertising scheme. There is nothing inherent in the term "regular price," however, that suggests that defendant either sells those jewelry items at that price or that it offers them at that price for any particular period of time. Regular price, in this context, merely implies the non-discounted price. On their face, the advertisements are not deceptive.
Plaintiff's contend, however, that the advertisements are deceptive because defendant actually sells very few, if any, of the items at the stated regular price or that they even attempt to do so for a reasonably substantial period of time. Deception, like beauty, is in the eye of the beholder. If consumers generally understand that a retailer makes little or no concerted effort to sell at a stated regular price, then stating the price as regular would be neither deceptive nor misleading. It might impact the efficacy of the promoted sale, but it would not deceive. If the consuming public held the opposite belief, that is, that regular price is the price that defendant's regularly and genuinely offer the advertised items for sale at, then that would evidence deception. Absent consumer perceptions, however, whether defendant actually offers or sells the items at regular price proves little, if anything, in this context.
Recognizing this point, plaintiff has offered survey evidence of consumers' attitudes toward the term regular price in discount advertising. To that end, plaintiff engaged the services of Dr. Janet McConeghy, associate director of the Northern Illinois Public Opinion Laboratory, to conduct a telephone survey in the Rockford area to assess the attitudes of consumers concerning jewelry discount advertising. In that regard, plaintiff points to the survey results which show that: (1) 95.1% of consumers believe that at least some jewelry products sell at the regular price; (2) 94% of consumers are under the impression that more jewelry is sold at regular price than the actual highest percentage sold at regular price in this case; (3) only 0.8% of consumers were under the impression that the mark-up used to establish the regular price exceeded five times the cost; (4) consumers believe that, on average, an item costing $100.00 is given a regular price of $228.56; (5) 21% of consumers had bought an item of jewelry at 50% off its regular price at one store and later found the same or similar item at another...
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B. Sanfield, Inc. v. Finlay Fine Jewelry Corp.
...the district court found in favor of Finlay, reasoning that Finlay's advertisements were not deceptive. B. Sanfield, Inc. v. Finlay Fine Jewelry Corp., 999 F.Supp. 1102 (N.D.Ill.1998). Because the court failed to consider the pertinent state and federal regulations in making that assessment......
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B. Sanfield, Inc. v. Finlay Fine Jewelry Corp., 93 C 20149.
...false. B. Sanfield, 168 F.3d at 972 n. 3. This court already found that Sanfield's evidence failed to establish literal falsity. B. Sanfield, 999 F.Supp. at 1108. The guidelines at issue do not change that conclusion. Finlay's advertisements, however, are misleading, thus violating the firs......
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Sanfield v. Finlay Fine Jewelry Corp., 99-4234
...court found that Finlay's 50%-off and sale signs are not false or even misleading, because customers see through the ruse. 999 F. Supp. 1102 (N.D. Ill. 1998). We vacated that judgment, observing that the judge appeared to confuse falsity with injury from the lie. The district court had not ......