New York & Company Dodges Phantom Markdown Class Action For Now

A federal judge will give a New York & Company shopper one more chance to present her claims that the retailer uses a deceptive pricing scheme.

On a motion by the defendant, U.S. District Judge Cynthia Bashant dismissed all claims brought by plaintiff Monica Rael against defendant New York & Company Inc., a retailer of women’s clothing.

Rael alleges New York & Company uses a pricing tactic known as “phantom markdowns,” luring customers to make purchases by creating the impression of markdowns that don’t actually exist.

In her order granting New York & Company’s motion for dismissal, Judge Bashant determined that Rael doesn’t have standing to seek injunctive relief because she does not allege she is at risk for any future injury if the defendants are allowed to continue their allegedly deceptive pricing tactics.

The California-based plaintiff also does not have standing to bring claims under the laws of 40 other states, the judge determined. She also found that Rael failed to plead her fraud-based claims with the required particularity.

Judge Bashant will allow Rael one more opportunity to amend her pleadings, but only as to her claims under California law. Rael will have to submit any amended pleadings by the Jan. 23 deadline.

In the company’s motion for dismissal, New York & Company challenged the truth of Rael’s factual assertions. The company said its San Diego outlet stores did not sell the shoes Rael claims to have bought at the time she alleges to have bought them.

Judge Bashant responded that it’s too early in the litigation to address such factual issues directly. However, the judge noted other discrepancies between Rael’s original complaint and her first and second amended complaints. Rael originally claimed to have purchased a pair of pants but later amended that claim to reference a pair of shoes purchased for the same price.

In her New York & Company class action lawsuit, Rael claims she bought a pair of Jute Espadrille shoes for $16.17 at a New York & Company store in an outlet mall. She recalls seeing store signage and the shoes’ price tag, both of which advertised the shoes for sale at 70 percent off an original price of $49.94.

Rael claims New York & Company made up that “original” price to create the impression of a nonexistent discount. She says that price was not the prevailing retail price for those shoes during the three months immediately preceding her purchase, as required by California law.

The plaintiff claims that, but for New York & Company’s alleged misrepresentation, she never would have purchased the shoes, and that she suffered an economic harm as a result.

She seeks a court order requiring New York & Company to engage in a corrective advertising campaign. She is also asking for damages, restitution and disgorgement of profits, declaratory and injunctive relief, court costs and attorneys’ fees.

Rael is represented by attorneys Todd D. Carpenter, Edwin J. Kilpela and Gary F. Lynch of Carlson Lynch.

The New York & Company Phantom Markdown Class Action Lawsuit is Monica Rael v. New York & Company Inc., et al., Case No. 3:16-cv-00369, in the U.S. District Court for the Southern District of California.