Jerome's Furniture Warehouse v. Ashley Furniture Indus., Inc.
| Decision Date | 15 January 2021 |
| Docket Number | Case No.: 20CV1765-GPC(BGS) |
| Court | U.S. District Court — Southern District of California |
| Parties | JEROME'S FURNITURE WAREHOUSE, a California Corporation, Plaintiff, v. ASHLEY FURNITURE INDUSTRIES, INC., a Wisconsin Corporation; and DOES 1 through 50, inclusive, Defendant. |
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS WITH LEAVE TO AMEND
[Dkt. No. 15.]
Before the Court is Defendant's motion to dismiss pursuant to Federal Rule of Civil Procedure 9(b) and 12(b)(6). (Dkt. No. 15.) Plaintiff filed an opposition. (Dkt. No. 17.) Defendant replied. (Dkt. No. 18.) Based on the reasoning below, the Court GRANTS Defendant's motion to dismiss with leave to amend.
On September 9, 2020, Plaintiff Jerome's Furniture Warehouse ("Plaintiff") filed a complaint against its competitor Defendant Ashley Furniture Industries, Inc. ("Defendant") for 1) false advertising arising under the Lanham Act, 15 U.S.C. § 1125(a)(1)(B), and 2) unfair competition under the common law and the California Business and Professions Code section 17200 et seq. ("UCL") and section 17500 et seq. ("FAL") (Dkt. No. 1, Compl.) Plaintiff has been selling quality furniture and home furnishings to retail customers since 1954. (Id. ¶ 7.) Its business model offers quality product and outstanding customer service at the lowest prices possible. (Id.) It has built its brand and customer goodwill through "Jerry's price" which the consumers have come to recognize as a no-haggle price where the customer can expect to purchase furniture and home furnishings with confidence that the stated price reflects a fair and honest price with no hidden fees or terms. (Id.)
Defendant is also a retail seller of furniture since 1987 but in contrast to Plaintiff's no-haggle price, its business practices include false and misleading advertising in order to lure the customers into the store and customers do not learn of the true prices of the merchandise until they have selected the items they want to purchase. (Id. ¶¶ 4, 8.) At that point, customers are less likely to simply walk away and begin a new search. (Id. ¶ 8.)
Plaintiff alleges five misrepresentations in Defendant's advertisements. First, Defendant's advertisement for 50% off PLUS 12 months of interest free payments is false. (Id. ¶ 9.) It is not until the customers are inside the store and have already selected merchandise when they are told that the promotion is for either 50% off or 60 months1 of interest-free payments but not both. (Id.) Second, Defendant routinely fraudulently overstates the "retail value" of its merchandise by falsely overstating the "savings" to be realized from its "sales" price. (Id. ¶ 11.) Third, Defendant misrepresents the purported "value" of its merchandise to mispresent the "savings" to be realized. (Id.) Fourth, it buries undisclosed finance payments into monthly payments while also stating the payments are "interest-free." (Id. ¶ 14.) Fifth, Defendant advertises "NO DOWN PAYMENT REQUIRED" but in very fine print that is impossible to read, it states thatcustomers will still have to pay sales tax and delivery charges up front which is effectively a "downpayment" of 13%. (Id. ¶ 12.)
Defendant only reveals the truth of the misleading advertisements after a customer has decided to purchase a product and by that point they are reluctant to leave and start a new search. (Id. ¶ 13.) Because foot traffic is the "very lifeblood of the retail industry", these tactics and misrepresentations in advertising generate undeserved "foot traffic" into Defendant's stores and diverts them away from Plaintiff's stores causing it financial harm due to loss of sales and profits. (Id. ¶¶ 11-16.)
Federal Rule of Civil Procedure ("Rule") 12(b)(6) permits dismissal for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Dismissal under Rule 12(b)(6) is appropriate where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory. See Balistreri v. Pacifica Police Dep't., 901 F.2d 696, 699 (9th Cir. 1990). Under Federal Rule of Civil Procedure 8(a)(2), the plaintiff is required only to set forth a "short and plain statement of the claim showing that the pleader is entitled to relief," and "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).
A complaint may survive a motion to dismiss only if, taking all well-pleaded factual allegations as true, it contains enough facts to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. "In sum, for a complaint to survive a motion to dismiss, the non-conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitlingthe plaintiff to relief." Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quotations omitted). In reviewing a Rule 12(b)(6) motion, the Court accepts as true all facts alleged in the complaint, and draws all reasonable inferences in favor of the plaintiff. al-Kidd v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009).
Where a motion to dismiss is granted, "leave to amend should be granted 'unless the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency.'" DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992) ). In other words, where leave to amend would be futile, the Court may deny leave to amend. See DeSoto, 957 F.2d at 658; Schreiber, 806 F.2d at 1401.
Courts in this district have applied Rule 9(b) to false advertising claims under the Lanham Act that are grounded in fraud. See Bobbleheads.com, LLC v. Wright Bros., Inc., 259 F. Supp. 3d 1087, 1095 (S.D. Cal. 2017) (). Moreover, the Ninth Circuit has held that Rule 9(b) applies to state-law causes of action, including the UCL and FAL. Vess v. Ciba-Geigy Corp., U.S.A., 317 F.3d 1097, 1103 (9th Cir. 2003) (); Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009) ().
In federal court, where a plaintiff alleges fraud or a claim is grounded in fraud, Rule 9(b) requires a plaintiff to "state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). However, "[m]alice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Id. A party must set forth "the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentation." Odom v. Microsoft Corp., 486 F.3d 541, 553 (9th Cir. 2007) (internal quotation marks omitted).
Allegations of fraud must be "specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong." Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985); see also Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997) (). "Rule 9(b) would clearly be superfluous if its only function were to ensure that defendants are provided with that degree of notice which is already required by Rule 8(a)." In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1547 (9th Cir. 1994) (en banc) superseded by statute on other grounds, Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4(b)(1), as recognized in Ronconi v. Larkin, 253 F.3d 423, 429 n.6 (9th Cir. 2001). In addition, the complaint must state "what is false or misleading about a statement, and why it is false." Id. at 1548.
Defendant moves to dismiss the complaint for failure to comply with Rule 9(b). (Dkt. No. 15-1, at 9-14.2) Plaintiff does not dispute that Rule 9(b) applies to its claims which are grounded in fraud and argues it has sufficiently alleged facts to put Defendant on notice as to the claims against it. (Dkt. No. 17 at 12 n.4, 15-16.)
Here, the complaint makes several false advertising claims. First, Plaintiff alleges that a St. Patrick's Day advertisement stating 50% off PLUS 12 months interest-free financing is misleading because later when the customers enter the stores and select their furniture, they are told that they may choose either 50% off OR 12 months interest-free payments but not both. The complaint also references a similar advertisement that ran on September 4, 2020 in the San Diego Union Tribune. That advertisement presents a Labor Day sale advertisementpromoting 40% off PLUS! 5 years of no interest, no down payment and no minimum purchase. (Id., Ex. A at 19.) The complaint alleges that customers have frequently complained about these misleading advertisements. (Id.)
However, a statement that customers have frequently complained about the misleading advertisements do not provide the when, where, why and how of these customers' complaints.3 As such, the complaint fails to allege that the advertisements are, in fact, false. See Avakian v. ...
To continue reading
Request your trial