Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_15-cv-05329/USCOURTS-cand-3_15-cv-05329-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

GAYLIA PICKLES, et al.,

Plaintiffs,

v.

KATE SPADE AND COMPANY,

Defendant.

Case No. 15-cv-05329-VC 

ORDER DENYING MOTION TO 

DISMISS

Re: Dkt. No. 48

Laura Marks, Gaylia Pickles, and Donna Vandiver have sued Kate Spade and Company, 

alleging Kate Spade has violated California's Unfair Competition Law, Cal. Bus. & Prof. Code § 

17200 et seq., California's False Advertising Law, Cal. Bus. & Prof. Code § 17500 et seq., 

California's Consumer Legal Remedies Act, Cal. Civ. Code § 1750 et seq., and Texas' Deceptive 

Trade Practices Act, Tex. Bus. & Com. Code § 17.46 et seq. This case in a putative class action, 

in which the plaintiffs seek to represent a class of California consumers and a class of Texas 

consumers. The plaintiffs allege that Kate Spade manufactures inferior quality goods for sale at

its outlet stores, while giving shoppers the false impression that those items were manufactured 

for and previously sold at regular Kate Spade boutiques at much higher prices, such that 

shoppers wrongly believe they are getting boutique-quality goods for a bargain. Kate Spade has 

moved to dismiss the plaintiffs' second amended complaint in its entirety for failure to state a 

claim. The motion is denied.

I.

Kate Spade argues that the plaintiffs' claims under the UCL, FAL, CLRA, and DTPA

must be dismissed under Fed. R. Civ. P. 8, 9(b), and 12(b)(6) because the plaintiffs have not 

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pleaded with the requisite particularity and plausibility that Kate Spade made a false or 

misleading statement that is likely to deceive a reasonable consumer. 

It's true that the plaintiffs' UCL, FAL, CLRA, and DTPA claims are subject to Rule 9(b)

because the plaintiffs' theory of the violations sounds in fraud. See Fed. R. Civ. P. 9(b); Cal. 

Bus. & Prof. Code § 17200; Cal. Bus. & Prof. Code §§ 17500, 17501; Cal. Civ. Code § 

1770(a)(13); Tex. Bus. & Com. Code Ann. §§ 17.46, 17.45(13); Reid v. Johnson & Johnson, 780 

F.3d 952, 958 (9th Cir. 2015); Williams v. Gerber Products Co., 552 F.3d 934, 938 (9th Cir. 

2008); see also Kearns v. Ford Motor Co., 567 F.3d 1120, 1125-27 (9th Cir. 2009); Vess v. CibaGeigy Corp. USA, 317 F.3d 1097, 1105 (9th Cir. 2003); Berry v. Indianapolis Life Ins. Co., 608 

F. Supp. 2d 785, 800 (N.D. Tex. 2009) (quoting Patel v. Holiday Hospitality Franchising, Inc., 

172 F.Supp.2d 821, 824–25 (N.D. Tex. 2001)). "Rule 9(b) demands that the circumstances 

constituting the alleged fraud 'be specific enough to give defendants notice of the particular 

misconduct . . . so that they can defend against the charge and not just deny that they have done 

anything wrong." Kearns, 567 F.3d at 1124 (quoting Bly–Magee v. Cal., 236 F.3d 1014, 1019 

(9th Cir. 2001)).

The plaintiffs have satisfied Rule 9(b) in the second amended complaint. The plaintiffs 

plausibly allege that Kate Spade uses unique 4-letter product codes to identify merchandise that 

it manufactures exclusively for sale at its outlet stores, and that this merchandise is similar in 

appearance to items sold at Kate Spade's flagship boutiques, but of inferior quality. The 

plaintiffs also plausibly allege that Kate Spade advertises former prices for items sold at its outlet 

stores using the phrase "our price," and tells outlet store customers that the current sale price for 

a particular item is a percentage discount from the purported former "our price." The plaintiffs 

further allege, in detail, that their investigation – consisting of internet comparative and archival 

research, Kate Spade corporate documents, and interviews with current and former Kate Spade 

employees – has uncovered that Kate Spade's "our price" representations are false, because

goods marked with the outlet-only 4-letter codes were in fact never sold at Kate Spade flagship 

stores or anywhere else at the advertised "our price" prices, much less within the relevant time 

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period. See Cal. Bus. & Prof. Code § 17501. The plaintiffs plausibly allege that Kate Spade's 

representations as to the false "our price" and the corresponding percentage discount deceive 

reasonable consumers into thinking they are purchasing boutique-quality merchandise at a 

significant savings, when in fact they are receiving inferior quality made-for-outlet merchandise 

at an inflated price. And the plaintiffs allege that they themselves were so deceived: that they

purchased particular goods marked with an "our price" former price and advertised at a particular 

discount, at identified Kate Spade outlet stores, on identified dates. The plaintiffs attach exhibits 

showing that the items they purchased were tagged with the unique 4-letter product codes that 

the plaintiffs allege Kate Spade uses to differentiate its inferior, made-for-outlet goods. Finally,

the plaintiffs allege they would not have purchased the items but for Kate Spade's 

misrepresentations that they were receiving boutique-quality merchandise at a significant 

discount. These allegations are more than specific enough to give Kate Spade notice of the 

alleged misconduct against which it must defend, and to show that the plaintiffs have a factual 

basis for their fraud claims. See Kearns, 567 F.3d at 1125; cf. Sperling v. DSW Inc., No. 15-

1366-JGB, 2016 WL 354319, at *7 (C.D. Cal. Jan. 28, 2016).

1

 

1 Kate Spade also argues that the plaintiffs must allege that neither the items they purchased nor 

products "similar to those items" were sold either by Kate Spade or other retailers at the 

advertised "our price" former prices within the relevant time period under the FAL. See Cal. 

Bus. & Prof. Code § 17501. Kate Spade cites for this proposition a California Attorney General 

opinion from 1957. But even if that stale opinion reflected the Attorney General's current view 

of the law, which is doubtful, a state attorney general opinion is persuasive authority, and is not 

binding on this Court. See, e.g., Cent. Delta Water Agency v. U.S. Fish & Wildlife Serv., 653 F. 

Supp. 2d 1066, 1079 (E.D. Cal. 2009) (citing Louis v. McCormick & Schmick Restaurant Corp., 

460 F. Supp. 2d 1153, 1156 n.4 (C.D. Cal. 2006)). Nor does the opinion, in the unlikely event it 

remained relevant in some other context, seem applicable to this case, because it did not seem to 

contemplate a situation where a retailer advertised a former price as "our" price. In that scenario, 

it makes little sense to compare "similar" products sold in other stores. Furthermore, in today's 

brand-obsessed, seasonally dependent fashion market, where the finest details and distinctions 

make a world of difference to many consumers, the universe of items that could be considered 

truly "similar" to the ones the plaintiffs purchased would be quite small. Indeed, a product 

manufactured by Kate Spade for sale at its boutique stores, using higher quality materials and 

better workmanship, of similar visual design to the made-for-outlet items the plaintiffs actually 

purchased, which they have alleged were of inferior quality to Kate Spade boutique items, would 

likely not be "similar" products within the meaning of the Attorney General's opinion, given the 

actual difference in market value of those items. 

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II.

Kate Spade also argues that Vandiver's DTPA claim must be dismissed because Vandiver 

has not alleged she suffered actual economic damages, as the statute requires. See Tex. Bus. & 

Com. Code § 17.50(a); Brown v. Bank of Galveston, Nat. Ass'n, 963 S.W.2d 511, 513 (Tex. 

1998), abrogated on other grounds by Ford Motor Co. v. Ledesma, 242 S.W.3d 32 (Tex. 2007). 

But the plaintiffs allege that Kate Spade's made-for-outlet merchandise, which Vandiver 

purchased, is of "inferior quality," and that Kate Spade has induced consumers to purchase 

made-for-outlet merchandise "at artificially inflated prices," i.e., that the purportedly 

"discounted" sale prices were still higher than the items' true value. Those allegations support 

the inference that Vandiver received items that were worth less than the price she paid for them, 

such that she suffered actual economic harm. See W.O. Bankston Nissan, Inc. v. Walters, 754 

S.W.2d 127, 128 (Tex. 1988) (a DTPA plaintiff can recover actual damages measured either by 

"out of pocket" damages, i.e. the difference between the amount paid and the value received, or 

"benefit of the bargain" damages, i.e. the difference between the value as represented and the 

value actually received); cf. Kim v. Carter’s Inc., 598 F.3d 362, 365 (7th Cir. 2010) ("The

plaintiffs agreed to pay a certain price for Carter's clothing, which they do not allege was 

defective or worth less than what they actually paid."); Shaulis v. Nordstrom Inc., 120 F. Supp. 

3d 40, 51 (D. Mass. 2015) ("[I]t appears [the plaintiff] paid $49.97 for a sweater that is, in fact, 

worth $49.97. . . . She does not allege that it is worth less than the selling price, that it was 

manufactured with shoddy materials or inferior workmanship, that it is of an inferior design, or 

that it is otherwise defective.").

III.

In a similar vein, Kate Spade argues that the plaintiffs' prayers for monetary damages and 

monetary restitution must be dismissed under Rule 12(b)(6) because they have failed to allege 

that they overpaid for the items they purchased. But as previously explained, the plaintiffs allege 

that Kate Spade's made-for-outlet merchandise was of inferior quality and that its sale prices for 

these items were still artificially inflated. The plaintiffs' prayers for monetary damages and 

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restitution therefore survive as well.

IT IS SO ORDERED.

Dated: July 26, 2016

______________________________________

VINCE CHHABRIA

United States District Judge

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