Belcastro v. Burberry Limited

Filing 64

OPINION AND ORDER re: 50 MOTION to Dismiss Amended Class Action Complaint Pursuant to Fed. R. Civ. P. 12(b)(6). filed by Burberry Limited: For the reasons given above, and in Burberry I, the Court GRANTS Defendant's motion to dismiss the Amended Complaint. The Amended Complaint is DISMISSED WITH PREJUDICE. The Clerk of the Court is directed to close the open motion at docket entry 50 and to close the case. (Signed by Judge Valerie E. Caproni on 12/1/2017) (jwh)

USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #:
DATE FILED: 12/1/2017

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
THOMAS BELCASTRO, individually and on
behalf of all others similarly situated,

16-CV-1080 (VEC)

Plaintiff,

OPINION AND ORDER
-againstBURBERRY LIMITED,
Defendant.

VALERIE CAPRONI, District Judge:
This is Plaintiff Thomas Belcastro’s (“Belcastro”) second attempt to plead actual injury
under New York and Florida law. Belcastro purchased five shirts from Burberry factory outlets
in Florida, believing, according to Belcastro, that the shirts were deeply discounted. The Court
dismissed Belcastro’s original complaint because he did not allege an actual injury under New
York and Florida law: Belcastro did not allege that the shirts he purchased were worth less than
the amount he paid or that they were in any objective way different from what he believed he
was buying. Belcastro’s amended complaint does not cure this deficiency, and the Amended
Complaint must be dismissed for the same reasons. Burberry’s motion to dismiss the Amended
Complaint is GRANTED, and the Amended Complaint is DISMISSED WITH PREJUDICE.
BACKGROUND
There is a rash of litigation in the federal courts concerning so-called outlet-pricing
schemes. Generally speaking, these suits allege that brand-name, luxury retailers like Burberry
use deceptive pricing to mislead outlet shoppers into believing they are purchasing goods at a
significant markdown. Goods are marked with a higher “compare at” price, or a “was” price, or

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a “manufacturer’s suggested retail price” (“MSRP”), which causes bargain-hunters like Belcastro
to believe that the same or similar goods previously sold for more. Because the goods are sold in
outlet stores, some consumers may also believe that the goods so-marked were formerly sold in
luxury retail or “mainline” stores. These “reference” prices are false; the goods are
manufactured specifically for sale in outlet stores and were never sold for the “compare at” or
“was” price.
On February 23, 2017, the Court dismissed Belcastro’s original complaint with leave to
amend. Belcastro v. Burberry Ltd., No. 16-CV-1080 (VEC), 2017 WL 744596 (S.D.N.Y. Feb.
23, 2017) (“Burberry I”). The Court explained that the complaint did not allege a cognizable
“actual” injury under either New York or Florida law. Id. at *5-6. In his initial complaint,
Belcastro alleged that he purchased five Burberry shirts from Burberry outlet stores in Florida
between 2014 and 2015 and that each of the shirts was marked with a “was” price or MSRP. Id.
at *1. Belcastro did not allege, however, that he overpaid for any of the shirts or that the shirts
were objectively different in any measurable way from what he believed he was purchasing. Id.
at *5-6. Instead, Belcastro alleged that he was injured because he “would not have purchased the
Burberry Outlet Products, or would not have paid the price he did, if he had known he was not
truly receiving a bargain.” Id. at *1 (quoting Compl. (Dkt. 13) ¶ 37). This theory of injury is
inadequate because neither New York nor Florida law recognizes as a cognizable injury a
consumer’s subjective disappointment at not receiving a promised bargain. See id. at *3 (citing
Small v. Lorillard Tobacco Co., 94 N.Y.2d 43, 56 (1999)). “New York law . . . requires some
connection between the deception and the price actually paid by the plaintiff or the intrinsic
value of the good.” Id. at *5.

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The Court dismissed Belcastro’s complaint but granted him leave to amend with clear
instructions as to what New York law requires:
Plaintiff will have the opportunity to amend and allege injury based on a price premium
theory [that he overpaid] or that the product Plaintiff purchased was different than what he
expected. Plaintiff is forewarned, however, that nonspecific allegations that Burberry sells
the same shirt for less or that Plaintiff was led by Burberry’s actions to believe erroneously
that he was purchasing a product normally sold in regular Burberry retail stores without
any factual investigation and support are inadequate to state a claim. Any amendment of
these claims must set forth factual allegations with the particularity required by Rule 9(b).
Id. at *8.
Belcastro filed his amended complaint on March 15, 2017, Dkt. 49 (the “Amended
Complaint”). The Amended Complaint attempts to cure the deficiencies identified by the Court
by pleading two new theories. First, Belcastro alleges that he was deceived into purchasing
made-for-outlet products because he was led to believe that the products were “designed and
manufactured for ‘real,’ mainline Burberry stores or for sale at mainline retailers.” Am. Compl.
¶ 36. According to Belcastro, he was injured by this deception because “made-for-outlet
products are intrinsically less valuable than mainline products” and because “he did not receive a
product that was discounted by a particular percentage over the retail price; he did not receive a
product that was regularly sold for the Deceptive Reference Price; and he did not receive a
product whose prestige and quality was accurately conveyed by its Deceptive Reference Price.”
Am. Compl. ¶¶ 36-37. In the alternative, Belcastro alleges that he overpaid because the
“Deceptive Reference Prices induced [Belcastro] to overvalue, and thus overpay for, the Outlet
Products . . . .” Am. Compl. ¶ 42. Belcastro “valued Defendant[‘]s Outlet Products at a
percentage value lesser than” whatever their retail price; thus, by assigning outlet-only products a
higher, false reference price, Burberry led Belcastro to “over inflate the value at which [he] [was]
comfortable parting with [his] money.” Am. Compl. ¶¶ 43-44.

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Burberry has renewed its motion to dismiss. Burberry argues that neither of Belcastro’s
revised theories states an actual injury as required by New York and Florida law. Alternatively,
Burberry contends the Amended Complaint does not allege fraud with the particularity required
under Rule 9 of the Federal Rules of Civil Procedure.
DISCUSSION
“To survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), a complaint must allege
sufficient facts, taken as true, to state a plausible claim for relief.” Johnson v. Priceline.com,
Inc., 711 F.3d 271, 275 (2d Cir. 2013) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56
(2007)); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “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.” N.J. Carpenters Health Fund v. Royal
Bank of Scot. Grp., PLC, 709 F.3d 109, 120 (2d Cir. 2013) (quoting Iqbal, 556 U.S. at 678). In
deciding a motion to dismiss, courts must “accept all allegations in the complaint as true and
draw all inferences in the non-moving party’s favor.” L.C. v. LeFrak Org., Inc., 987 F. Supp. 2d
391, 398 (S.D.N.Y. 2013) (quoting LaFaro v. N.Y. Cardiothoracic Grp., PLLC, 570 F.3d 471,
475 (2d Cir. 2009)).
A heightened pleading standard applies to claims sounding in fraud: “In alleging fraud or
mistake, a party must state with particularity the circumstances constituting fraud or mistake.
Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.”
Fed. R. Civ. P. 9(b). To plead the circumstances constituting fraud with particularity, the
complaint must “(1) specify the statements that the plaintiff contends were fraudulent, (2)
identify the speaker, (3) state where and when the statements were made, and (4) explain why the
statements were fraudulent.” Lerner v. Fleet Bank, N.A., 459 F.3d 273, 290 (2d Cir. 2006)

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(quoting Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir. 1993)). To plead malice,
intent, or knowledge “generally” means that “the general ‘short and plain statement of the claim’
mandate in Rule 8(a) . . . should control the second sentence of Rule 9(b).” Iqbal, 556 U.S. at
687 (quoting 5A C. Wright & A. Miller, Federal Practice and Procedure § 1301, p. 291 (3d ed.
2004)). But “‘generally’ is not the equivalent of conclusorily . . . [P]laintiffs must still plead the
events which they claim give rise to an inference of [malice, intent, or] knowledge” to satisfy the
Rule 8(a) pleading standard. Krys v. Pigott, 749 F.3d 117, 129 (2d Cir. 2014) (citations omitted).
The central issue in this case remains whether Belcastro has alleged a cognizable “actual”
injury that is separate from Burberry’s allegedly deceptive conduct. As the Court explained in
Burberry I, New York law “does not recognize an injury based on deception itself—the fact that
Plaintiff was deceived is not, standing alone, an ‘actual injury.’” Burberry I, 2017 WL 744596 at
*3 (citing Small, 94 N.Y.2d at 56). “[A]n actual injury claim . . . requires a plaintiff to ‘allege
that, on account of a materially misleading practice, she purchased a product and did not receive
the full value of her purchase.’” Braynina v. TJX Cos., Inc., No. 15-CV-5897 (KPF), 2016 WL
5374134, at *10 (S.D.N.Y. Sept. 26, 2016) (quoting Orlander v. Staples, 802 F.3d 289, 302
(2d Cir. 2015)). This may be accomplished by showing either that the plaintiff did not receive
the product he bargained for or that the deceptive practice caused the plaintiff to overpay. See id.
As applied to an outlet-pricing case, New York’s “actual injury” requirement means that an
outlet shopper may not state a claim based simply on the fact that he thought the products he was
purchasing previously sold for more. Burberry I, 2017 WL 744596 at *5; see also Irvine v. Kate
Spade & Co., No. 16-CV-7300 (JMF), 2017 WL 4326538, at *4 (S.D.N.Y. Sept. 28, 2017). This
“but-I-thought-I-got-a-bargain” theory impermissibly combines deception (the appearance of a
bargain) with injury (there was no actual bargain).

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The First Circuit recently discussed the “actual injury” requirement, as it applies to
deceptive reference pricing, in a lengthy and persuasive opinion.1 See Shaulis v. Nordstrom,
Inc., 865 F.3d 1 (1st Cir. 2017). In Shaulis, the plaintiff purchased a sweater from a Nordstrom
Rack outlet store marked with a sale price and a “compare at” price. Id. at 4. Like Belcastro,
Shaulis alleged that she believed that the “compare at” price was a “bona fide price at which
Nordstrom (or some other retailer) formerly sold those products.” Id. at 5. And, like Belcastro,
Shaulis alleged that her injury was that she believed the “sweater was worth more than the price
Nordstrom actually charged.” Id. at 11. The First Circuit rejected this theory because it “is
simply another way of saying that Shaulis was wrongfully deceived by Nordstrom. She
identifies no objective injury traceable to the purchased item itself – for example, that the
sweater was poorly made or that its materials were misrepresented.” Id. And, in language that is
directly applicable to this case, the First Circuit rejected Shaulis’s argument that the “‘compare
at’ price tag was a false representation that the sweater was of ‘high quality,’” because Shaulis
did not explain why the sweater was “not of ‘high quality’ in any objective way.” Id. at 12.
Shaulis is persuasive and, along with Small, it forecloses each of Belcastro’s revised
injury theories. Belcastro’s theory that he paid more than he otherwise would have been willing
to pay is based solely on the subjective injury rejected in Burberry I and in Shaulis. Under this
theory (Am. Compl. ¶¶ 42-46), the deceptive act is the false appearance of a discount and the
injury is that Belcastro paid more than he was otherwise willing to pay. Taking as an example a
navy polo shirt with a $150 MSRP and true price of $119, Belcastro explains that he valued the
shirt at 21% below retail (the difference between $150 and $119) and thus, would only have been

1

The First Circuit was applying Massachusetts law in Shaulis but Massachusetts law is similar to New York
law on this issue, and Shaulis cited for support to the Small decision as well as a decision from the Seventh Circuit
applying Illinois law. See Shaulis, 865 F.3d at 13 (citing Small and Kim v. Carter’s Inc., 598 F.3d 362, 366 (7th Cir.
2010)).

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willing to pay $94.01 (a 21% discount off of $119) if the true retail price had been disclosed
accurately. Am. Compl. ¶¶ 45-46. This is exactly the injury the Court rejected in Burberry I.
New York law does not recognize an injury based on the subjective value assigned to a missing
bargain because it merges deception and injury.2 See Burberry I, 2017 WL 744596 at *5.
Belcastro’s attempt to recast this theory as a “price premium” theory is unpersuasive. A
“price premium” injury exists when a misrepresentation causes the plaintiff to overpay for a
product. See Orlander, 802 F.3d at 302. A price premium injury may be alleged by showing
either that because of a misrepresentation the plaintiff received a good worth less than what he
paid for, i.e., a good of inferior quality, or that because of a misrepresentation the plaintiff paid
an inflated price.3 Judge Furman recently fleshed out the latter theory in Irvine. In order to
allege a price premium injury based on overpayment, a plaintiff must allege that he overpaid by
some objective measure, and not just that he felt, subjectively, that he overpaid:
In the absence of [that] sort of allegation—for instance, that Kate Spade sells the same
merchandise, without the deceptive “Our Price” labeling, for a lower price—Plaintiffs
cannot connect any cognizable injury to Kate Spade’s alleged deceptive practice. In
other words, Plaintiffs do not, and cannot, establish a valid ‘price premium’ claim based
solely on the ‘Our Price’ tags, as they do not allege that the tagged goods commanded a
higher price than goods without the tag.
2017 WL 4326538 at *4; see also Shaulis, 865 F.3d at 12 (“claims of injury premised on
‘overpayment’ for a product, or a loss of the benefit of the bargain, require an objective measure

2

Unlike New York law, California law recognizes an injury based on false advertising that leads a buyer to
subjectively assign a higher value to a product than he would have otherwise. See Burberry I, 2017 WL 744596 at
*5 (citing Hinojos v. Kohl’s Corp., 718 F.3d 1098, 1104 (9th Cir. 2013)). Belcastro’s Amended Complaint appears
to attempt to plead exactly the injury which was recognized in Hinojos but which is not cognizable under New York
law. See id.

3

The difference between these two theories is slim, if any. Typically, consumers have overpaid because
they received a good that is of inferior quality. Nonetheless, Belcastro alleges each theory separately, and the Court
addresses them in turn.

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against which the plaintiff’s allegations may be evaluated”).4 The Amended Complaint does not
plead such an injury. Belcastro does not allege that he purchased products that normally retail
for less than he actually paid. Rather, Belcastro’s theory is that he paid a price premium because
he did not receive a shirt that is objectively worth more than what he paid. See Opp’n (Dkt. 53)
at 10 (Belcastro “believed he was paying $100 for an outlet product ‘worth’ $150 to shoppers at
Burberry’s standard retail stores, . . . .”). This is nothing more than a slightly repackaged version
of the “but-I-thought-I-got-a-bargain” injury the Court has rejected already.
Belcastro’s attempt to plead an injury based on the quality of the goods he purchased is
more promising, but it is inadequately pleaded. The classic example of a quality-based injury is
paying for fat free milk but receiving milk containing fat instead, Koenig v. Boulder Brands. Inc.,
995 F. Supp. 2d 274 (S.D.N.Y. 2014), or paying for dog food made from bacon that in fact
contains grain fillers, Kacocha v. Nestle Purina Petcare Co., No. 15-CV-5489 (KMK), 2016 WL
4367991, at *2 (S.D.N.Y. Aug. 12, 2016).5 Belcastro alleges that the MSRPs or “was” prices led
him to believe he was purchasing “retail” Burberry products ordinarily sold in mainline Burberry
stores. Allegations that a plaintiff believed he was purchasing a retail product when in fact he

4

Courts in other districts, including those applying Florida law, have explained the overpayment theory
similarly. See Hubert v. General Nutrition Corp., No. 15-CV-1391, 2017 WL 3971912, at *7 (W.D. Pa. Sept. 8,
2017) (dismissing complaint where plaintiff failed to identify “any comparable, cheaper products” to show that they
purchased goods at a price premium”); Meyer v. Colavita USA Inc., No. 10-61781-CIV, 2011 WL 13216980, at *5
(S.D. Fla. Sept. 13, 2011) (“For example, Plaintiffs do not plead facts demonstrating that they paid ‘X’ dollars for
what they thought was extra virgin olive oil that in fact turned out to be simply virgin olive oil worth ‘Y’ dollars.”),
Smith v. Wm. Wrigley Jr. Co., 663 F. Supp. 2d 1336, 1340 (S.D. Fla. 2009) (Finding price premium adequately pled
because plaintiff alleged that “Wrigley has been able to charge a price premium for Eclipse® gum over other
chewing gum products, including other Wrigley chewing gum products.”).
5

Orlander, which Belcastro cites, is such a case, but it is not helpful to Belcastro’s cause. In Orlander, the
Plaintiff alleged that he “purchased a two-year ‘Carry-in’ Protection Plan,” but in fact got a protection plan for one
year from Staples that would follow the standard-issue one-year manufacturer’s warranty. Orlander, 802 F.3d at
294, 302. Because the plaintiff was led to believe he was getting a two year warranty from Staples but was actually
only getting a one year warranty, the plaintiff was injured. That is not Belcastro’s theory. As the Court pointed out
in Burberry I, Belcastro could pursue that theory if he alleged that Burberry mismarked clothing saying, for
example, that it was made of pure wool when the clothing was, in fact, a wool-cotton blend. 2017 WL 744596 at *6.

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received outlet-only goods potentially allege distinct injury and deception because outlet-only
products may be inferior in quality to, and have a lower resale value than, retail goods. See
Irvine, 2017 WL 4326538, at *4-5; Belcastro I, 2017 WL 744596 at *6. A retailer who presents
outlet-only products as retail products might be similar to a wine merchant who passes off new
world table wine as first growth Bordeaux or a horologist who sells a counterfeit watch as a
Rolex if there are similar differences between the retail products and the outlet-only products.
See Shaulis, 865 F.3d at 12 (“falsely advertising a [counterfeit] watch as a ‘Rolex’ is a material
misstatement about the watch’s quality”); Ebin, 2013 WL 6504547, at *4-5 (plaintiff adequately
alleged a quality-based injury when he purchased oil labeled as “100% pure olive oil” that
contained olive-pomace oil).
To the extent Plaintiff intends to proceed on this theory it is inadequately pleaded; fatally
so. The Amended Complaint does not allege how the outlet-only goods purchased by Belcastro
differ from the retail products Belcastro believed he was purchasing. The only relevant
allegations in the Amended Complaint are that “made-for-outlet products are intrinsically less
valuable than mainline products,” Am. Compl. ¶ 36, and that Belcastro “did not receive a
product whose prestige and quality was accurately conveyed by its Deceptive Reference Price,”
Am. Compl. ¶ 37. Neither of these allegations puts Burberry on notice of Belcastro’s claim and
they do not satisfy Rule 8(a) of the Federal Rules of Civil Procedure.6
A statement that a good is of inferior quality – or different in “prestige and quality,” in
Belcastro’s words – is the sort of highly generalized allegation that is inadequate to put a
defendant on notice without additional factual support. See ID7D Co., Ltd. v. Sears Holding

6

Because Belcastro alleges fraud, a heightened pleading standard applies pursuant to Rule 9(b) of the
Federal Rules of Civil Procedure. For the reasons given above, Belcastro’s bare assertion that Burberry retail goods
are of better quality than outlet goods is inadequate to state a claim under Rule 8(a), much less the more stringent
standard applicable under Rule 9(b).

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Corp., No. 11-CV-1054 (VLB), 2012 WL 1247329, at *11 (D. Conn. April 13, 2012) (Plaintiff’s
assertion that a competing barbecue grill was of “inferior quality” is “at best a ‘naked assertion
devoid of further factual enhancement’” (quoting Iqbal, 556 U.S. at 678)). If the goods were
really inferior, Plaintiff ought to be able to specify objective ways in which that is so. The
Amended Complaint leaves Burberry guessing whether Belcastro’s theory is that the shirts he
purchased are inferior because they are made of different and less luxurious materials (for
example, the shirts have plastic buttons instead of horn or are made of a cashmere-lamb’s wool
blend instead of pure cashmere); or because Burberry outlet products are sold in bulk, making
them less exclusive; or because Burberry outlet products are made in particular patterns and cuts,
which differentiate them from Burberry retail goods, thereby making them less valuable.7 As the
First Circuit explained in Shaulis, a “plaintiff’s ‘bare assertion’ that a product is deficient in
some way is ‘conclusory and can be subjective.’” 865 F.3d at 12. Absent factual allegations that
a good “was not of ‘high quality’ in [an] objective way” this bare allegation is “fundamentally no
different” than the subjective “but-I thought-I-got-a-bargain” theory this Court has already
rejected. Id.
The Amended Complaint also fails to allege any facts to show that the shirts purchased
by Belcastro were in fact “outlet only” products, and not overrun, unsold retail goods. See Am.
Compl. ¶ 36. In other outlet pricing cases, plaintiffs have alleged facts supporting an inference
that the goods purchased were made exclusively for sale in outlets. For example some plaintiffs
have alleged that outlet-only products are marked with a different product code, see, e.g., Marino

7

The Court rejects Belcastro’s argument that Burberry outlet-only goods are similar to counterfeit goods.
Am. Compl. ¶ 36. Belcastro acknowledges that he purchased Burberry-branded products, and he has not alleged
any objective differences between the products he purchased and Burberry retail goods. Cf. Shaulis, 865 F.3d at 12
(explaining that a counterfeit Rolex is inferior to the real thing because it is made from inferior materials).

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v. Coach, Inc., __ F. Supp. 3d __, 2017 WL 3731954, at *5 (S.D.N.Y. Aug. 28, 2017) (Plaintiff
satisfied Rule 9(b) standard by alleging that Coach-branded outlet products are marked with style
numbers beginning with an “F”); Pickles v. Kate Spade & Co., No. 15-CV-5329-VC, 2016 WL
3999531, at *1 (N.D. Cal. July 26, 2016) (same), while others have alleged that store
representatives confirmed to the plaintiff that the goods were outlet-only, Taylor v. Nike, Inc.,
No. 16-CV-661-MO, 2017 WL 663056, at *8 (D. Or. Feb. 17, 2017) (concluding that Plaintiff
satisfied Rule 9(b) only by alleging that Nike sales associates “routinely confirm that products
are manufactured exclusively for outlet stores”). Such allegations are necessary to allege fraud
with particularity and to satisfy the requirement that a plaintiff alleging fraud must conduct a prefiling investigation of his claim.8
In sum, the Amended Complaint fails to allege an “actual injury” cognizable under New
York or Florida law. Because this shortcoming is fatal to each of Belcastro’s claims, the
Amended Complaint must be dismissed in its entirety.

8

Courts have dismissed “compare at” pricing cases for similar reasons. See Sperling v. DSW Inc., No. 151366-JGB, 2016 WL 354319, at *6 (C.D. Cal. Jan. 28, 2016) (“Nowhere does the SAC explain how Defendants’
comparative reference prices are inflated or why they do not accurately reflect prevailing market prices.”); Branca v.
Nordstrom, Inc., No. CV 14–2062–MMA (JMA), 2015 WL 1841231, at *6 (S.D. Cal. Mar. 20, 2015) (conclusory
allegations that “compare at” prices were fictional are inadequate to state a claim under Rule 9(b)); Mahfood v.
QVC, Inc., No. SACV 06–0659 AG, 2007 WL 9363986 at *4 (C.D. Cal. Feb. 7, 2007) (conclusory allegations that
“compare at” prices did not reflect prevailing market prices are inadequate under Rule 9(b)).

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CONCLUSION
For the reasons given above, and in Burberry I, the Court GRANTS Defendant’s motion
to dismiss the Amended Complaint. The Amended Complaint is DISMISSED WITH
PREJUDICE. 9 The Clerk of the Court is directed to close the open motion at docket entry 50
and to close the case.

SO ORDERED.
_________________________________
____________________________
_
_
__
_
VALERIE CAPRONI
CAPRONI
N
United States District Judge

Date: December 1, 2017
New York, New York

9

Belcastro has not requested leave to amend a second time or attached a proposed second amended
complaint for the Court’s consideration. To the contrary, Belcastro’s opposition to the motion to dismiss appears to
double-down on the theory of injury the Court has already rejected in Burberry I and rejects again in this opinion.
In light of Belcastro’s multiple, unsuccessful attempts to state a claim, the Court finds that leave to amend would be
futile.

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