Advertising Law Blog

New Jersey Supreme Court Sides with Aéropostale in Consumer Class Action

In a significant legal victory for New Jersey retailers, that state’s Supreme Court has ruled in a class-action lawsuit that advertising illusory discounts and phantom former prices does not necessarily cause consumers to sustain an ascertainable loss, and therefore dismissed the lawsuit despite the state’s generally very pro-consumer protection statute, the Consumer Fraud Act (“CFA”).

The lawsuit, Robey v. SPARC Group LLC (decided on March 25, 2024), was filed against clothing retailer Aéropostale. The plaintiffs alleged the store had advertised fake “discount” prices by comparing “on sale” prices to higher “original” prices at which the items were never actually sold. For example, one of the plaintiffs bought a sweatshirt for $23.98 that was advertised as 60% off the original price of $59.95, but the sweatshirt was never actually sold at the higher price.

A private plaintiff suing under the CFA must prove three things: (a) an unlawful practice, (b) a quantifiable monetary injury, known as an “ascertainable loss,” and (c) a causal connection between the two. The Court agreed that the first element was met because this pricing practice violates state regulations under the CFA. However, the Court’s seven judges held by a margin of 5-2 that the plaintiffs could not prevail because they did not suffer an ascertainable loss.

The key issue was whether consumers who received fully functional products at agreed-upon prices were denied the “benefit of the bargain” because they allegedly paid more than the items’ true value based on a deceptive higher reference price. The Court’s majority dismissed the lawsuit, on the basis that the consumers got exactly what they bargained for - the clothing items as described at the listed selling price. Any perceived “loss” of an advertised but fictitious discount, they ruled, is insufficiently concrete to meet the ascertainable loss requirement.

The Court held that while defective or non-conforming goods could support an ascertainable loss claim, as could a refusal to issue a refund upon return, illusory discount claims alone cannot sustain a private CFA suit. This holding aligns New Jersey with several other states’ consumer protection laws.

While private plaintiffs are unable to recover damages for themselves under these circumstances, the Court noted that the state’s Attorney General retains full authority to pursue injunctive relief against deceptive pricing practices under the CFA even without an ascertainable loss. The two dissenting justices argued shoppers were deprived of the benefit of their bargain and should have been able to seek damages.

TAKEAWAY: The New Jersey Supreme Court’s ruling demonstrates that breaking the law through falsely advertised discounts is not always enough to support a lawsuit under the CFA.