Fresh & Easy Neighborhood Market, Inc. Prevails in Closely Watched Item Pricing Case

August 31, 2012

California Grocers Association, CGAbulletin

The California grocery industry scored a win yesterday when the Second District Court of Appeal affirmed a judgment entered in favor of Fresh & Easy Neighborhood Market, Inc (“Fresh & Easy”). However, this important victory may not be the end of this, or other similar attacks on grocers in California.

In Diamond v. Fresh & Easy Neighborhood Market, Inc., the plaintiffs alleged that Fresh & Easy had violated the Rosenthal-Roberti Pricing Act (Civil Code sections 7100-7106) (the “Pricing Act”) by using shelf tags and other markers indicating the price of items offered for sale in its stores. The Pricing Act requires grocers who use a point-of-sale-system to have a clearly readable price indicated on 85 percent of the packaged consumer commodities offered for sale.

The plaintiffs argued that the Pricing Act requires Fresh & Easy to individually mark 85 percent of the individual items on its shelves. Fresh & Easy took the contrary, and more rational position that the Pricing Act only requires that “commodities” as opposed to “items” be marked; thus, its practice of using shelf tags or signs in close proximity complied with the statute. The trial court dismissed the case finding that the plaintiffs failed to establish that a violation had occurred, and also held that the plaintiffs misunderstood the requirements of the Pricing Act. Unfortunately, the appellate court punted on the issue of whether the Pricing Act requires individual-item marking. Instead, the court held that even if we assume the plaintiffs’ interpretation of the Pricing Act is correct, they failed to prove a violation of the statute. In short, the appellate court left open the possibility that future lawsuits may be brought.

The appellate court, in an unpublished opinion, held that even under their argued interpretation of the Pricing Act, the plaintiffs “had to demonstrate that 15 percent of the total number of every individual item of a nonexempt consumer commodity offered for sale in [Fresh & Easy’s] stores had no readable price affixed to it.” (Diamond v. Fresh & Easy Neighborhood Market, Inc. (2012) B234324 at p. 11.) To achieve this, the plaintiffs would have had to provide evidence of the total number of nonexempt items in the store and the total number of nonexempt items that did not have readable prices affixed to them. Like the trial court, the appellate court concluded that the plaintiffs failed in their burden of proof.

CGA filed an amicus brief in support of Fresh & Easy’s position and urged the court to reject the Plaintiffs’ interpretation of the Pricing Act and accept the interpretation urged by Fresh & Easy. A favorable ruling is always welcome, however, the way in which the court reached its decision does not preclude the possibility that these, or other plaintiffs will attempt to gather the required proof and mount another assault against a retail grocer in California. Had the plaintiffs done a better job collecting and presenting evidence in support of their case, the court might have considered the statutory interpretation issue. Considering the road map of proof the court gave the plaintiffs, this Fresh & Easy victory may be one in a series of further challenges to the practice of shelf-edge label pricing.

Published in the California Grocers Association, CGAbulletin. August 31, 2012. Republished with permission.