Knapp v. Art.Com, Inc.
| Decision Date | 15 June 2016 |
| Docket Number | Case No. 16-cv-00768-WHO |
| Court | U.S. District Court — Northern District of California |
| Parties | JAMES PRESCOTT KNAPP, Plaintiff, v. ART.COM, INC., Defendant. |
Re: Dkt. No. 19
Plaintiff James Knapp brings this putative class action against defendant Art.com, Inc. ("Art.com"), accusing it of violating California's consumer protection laws by conducting "perpetual sales" that deceive consumers into believing that they are receiving significant bargains on Art.com's merchandise, when in fact they are not. Art.com moves to dismiss or strike certain portions of Knapp's first amended complaint ("FAC"). Knapp has not plausibly alleged that Art.com's advertising falls within the scope of 15 U.S.C. § 52(a), and his claim based on that statute is DISMISSED WITH LEAVE TO AMEND. In all other respects, Art.com's motion is DENIED.
Art.com is a California corporation headquartered in Emeryville, California. FAC ¶ 6 (Dkt. No. 6). It owns and operates several online commerce websites selling posters and other home decor products, including www.art.com, www.posters.com, and www.allposters.com. Id. ¶¶ 1-2.
On October 11, 2015, Knapp was browsing www.art.com in search of a piece of framed artwork. Id. ¶ 61. He saw an item he liked but was "not immediately prepared to purchase [it]," until he saw that there was a 40% off sale ending at midnight that day. Id. "Enticed by the idea of saving 40% off his purchase," Knapp decided to purchase the item. Id. In placing his order, he entered an optional coupon code, which triggered the 40 percent discount off the non-sale price of $172.99. Id. at fig. 16.
The next day, shortly after midnight, the sale at www.art.com "automatically renewed," although this time at a discount of 45 percent instead of 40 percent. Id. ¶ 62. Knapp states that he "was induced to purchase the product at '40% off because he believed that the sale was ending that day," and that he "would not have purchased the product if it were not for the '40% off sale' advertised on the www.art.com website." Id. He also states that "[h]ad [he] waited until just after midnight - when the sale that induced him to make the purchase ended - he could have gotten '45% off the product he purchased." Id.
Knapp accuses Art.com of conducting "perpetual sales" on www.art.com, as well as www.posters.com and www.allposters.com (collectively, the "accused websites"). Id. ¶ 31. He alleges that the sales (1) are "automatically generate[d]" such that they run back-to-back with "zero lag time between the end of one sales and the beginning of another," (2) consistently offer discounts ranging from 30 to 50 percent; and (3) are "prominently advertise[d]" on each of the accused websites with language such as "40% OFF EVERYTHING* ENDS TODAY" or "45% OFF ALL ORDERS* - TODAY ONLY." Id. ¶¶ 38, 48-49. He also notes that in connection with each sale, the accused websites provide a six-character coupon code which consumers "enter at the time of checkout in order to take advantage of the purported sale." Id. ¶ 34. Knapp contends that Art.com's sales are "designed to falsely induce consumers to purchase their products under the mistaken belief that they are getting a significant bargain," and that the sales "deceive consumers into believing they are being offered a discount from Art.com's regular prices when, in fact, they are not." Id. ¶¶ 31, 38.1
Art.com filed its motion to dismiss and strike on May 2, 2016. Dkt. No. 19 ("Mot."). Art.com does not seek to dismiss or strike Knapp's FAC in its entirety. Art.com's arguments are limited to (1) the first cause of action for violation of the FAL, and (2) certain aspects of the second cause of action for violation of the UCL. See, e.g., Mot. at 1-4. I heard argument from the parties on June 8, 2016. Dkt. No. 29.
Federal Rule of Civil Procedure 8(a)(2) requires a complaint to contain "a short and plain statement of the claim showing that the pleader is entitled to relief," Fed. R. Civ. P. 8(a)(2), in order to "give the defendant fair notice of what the claim is and the grounds upon which it rests," Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotation marks and alterations omitted).
A motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). "Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory." Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). While a complaint "need not containdetailed factual allegations" to survive a Rule 12(b)(6) motion, "it must plead enough facts to state a claim to relief that is plausible on its face." Cousins v. Lockyer, 568 F.3d 1063, 1067-68 (9th Cir. 2009) (internal quotation marks and citations omitted). A claim is facially plausible when it "allows 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) (internal quotation marks omitted).
In considering whether a claim satisfies this standard, the court must "accept factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party." Manzarek v. St. Paul Fire & Marines Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). However, "conclusory allegations of law and unwarranted inferences are insufficient to avoid a Rule 12(b)(6) dismissal." Cousins, 568 F.3d at 1067 (internal quotation marks omitted). A court may "reject, as implausible, allegations that are too speculative to warrant further factual development." Dahlia v. Rodriguez, 735 F.3d 1060, 1076 (9th Cir. 2013).
Federal Rule of Civil Procedure 9(b) requires that claims sounding in fraud or mistake "state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b).2 To satisfy this standard, a plaintiff must identify "the time, place, and content of [the] alleged misrepresentation[s]," as well as the "circumstances indicating falseness" or "manner in which the representations at issue were false and misleading." In re GlenFed Inc. Sec. Litig., 42 F.3d 1541, 1547-48 (9th Cir. 1994) (internal quotation marks and alterations omitted). "In other words, the plaintiff must set forth an explanation as to why the statement or omission complained of was false or misleading." Siegel v. Lyons, No. 95-cv-03588-DLJ, 1996 WL 438793, at *3 (N.D.Cal. Apr. 26, 1996) (internal quotation marks omitted). The 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." Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007).
Federal Rule of Civil Procedure 12(f) authorizes a court to "strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). The function of a motion to strike "is to avoid the expenditure of time and money that must arise from litigating spurious issues by dispensing with those issues prior to trial." Sidney-Vinstein v. A.H. Robins Co., 697 F.2d 880, 885 (9th Cir. 1983). Such motions are generally disfavored and "should not be granted unless the matter to be stricken clearly could have no possible bearing on the subject of the litigation." Platte Anchor Bolt, Inc. v. IHI, Inc., 352 F. Supp. 2d 1048, 1057 (N.D. Cal. 2004).
DISCUSSION
The FAL prohibits businesses from disseminating advertising "which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading." Cal. Bus. & Prof. Code § 17500. The basic standard for finding a section 17500 violation is the "reasonable consumer" test, which requires a showing that members of the public are likely to be deceived by the advertising at issue. Williams v. Gerber Products Co., 552 F.3d 934, 938 (9th Cir. 2008). "A reasonable consumer is [an] ordinary consumer acting reasonably under the circumstances [who] is not versed in the art of inspecting and judging a product." Colgan v. Leatherman Tool Grp., Inc., 135 Cal. App. 4th 663, 682 (2006) (internal quotation marks and citations omitted); accord Elias v. Hewlett-Packard Co., 903 F. Supp. 2d 843, 854 (N.D. Cal. 2012).
An advertised discount off a seller's regular price can be deceptive where (1) the alleged sale price does not in fact differ from the regular price at which the product is ordinarily sold; or (2) "the alleged original price...
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