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B. SANFIELD, INC. v. FINLAY FINE JEWELRY CORP.

November 16, 1999

B. SANFIELD, INC., PLAINTIFF,
v.
FINLAY FINE JEWELRY CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Reinhard, District Judge.

  MEMORANDUM OPINION AND ORDER

INTRODUCTION

Plaintiff, B. Sanfield, Inc. ("Sanfield"), sued defendant Finlay Fine Jewelry Corporation ("Finlay") alleging Finlay's advertising scheme violated the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS § 505/2 ("Consumer Fraud Act") and the Lanham Act, 15 U.S.C. § 1125(a). After a 4-day bench trial, this court found that Sanfield failed to prove Finlay's advertising practices were deceptive, and ruled in favor of Finlay on Sanfield's complaint.*fn1 B. Sanfield, Inc. v. Finlay Fine Jewelry Corp., 999 F. Supp. 1102 (N.D.Ill. 1998). Sanfield appealed, and the Seventh Circuit vacated the judgment and remanded the case for further consideration, specifically directing this court to consider the Illinois regulations and federal guidelines on the subject. B. Sanfield, Inc. v. Finlay Fine Jewelry, Corp., 168 F.3d 967 (7th Cir. 1999).

BACKGROUND

The court adopts and reiterates all the findings of fact developed from the bench trial as in its March 5, 1998, memorandum opinion and order. However, a few facts are particularly relevant, and will be detailed in this opinion. The parties have filed briefs on remand, arguing the points detailed in the Seventh Circuit opinion.*fn2

The items at issue in this lawsuit are four types of gold jewelry, i.e., chains, bracelets, earrings and charms. Finlay originally prices these items at about 5.5 times their cost ("regular price"), with a typical discount of 40-60% off the regular price ("sale price"). Finlay develops a gold jewelry sale rotation schedule, with the goal of offering its gold jewelry at regular price for about one third of the fiscal year. However, Finlay does not strictly adhere to that schedule.

DISCUSSION

I. Consumer Fraud Act

To establish a claim under the Consumer Fraud Act, plaintiff must prove: (1) defendant engaged in a deceptive act or practice; (2) defendant intended that a party rely on the deception; and (3) the deception occurred in a course of conduct involving trade or commerce. Zekman v. Direct American Marketers, Inc., 182 Ill.2d 359, 231 Ill.Dec. 80, 695 N.E.2d 853, 860 (1998). The parties have stipulated as to the third element, and the evidence is clear that Finlay intended the public rely on its discount advertising, the second element. The statute does not require proof of actual reliance, nor proof that anyone was actually deceived or damaged. B. Sanfield, 168 F.3d at 971. However, an advertisement is deceptive if it creates the likelihood of deception or has the capacity to deceive. Garcia v. Overland Bond & Inv. Co., 282 Ill. App.3d 486, 218 Ill.Dec. 36, 668 N.E.2d 199, 203 (1st Dist. 1996).

The Illinois Attorney General has promulgated regulations pursuant to the Consumer Fraud Act that further defines unfair or deceptive acts. See 14 Ill. Admin. Code § 470.220; see also 815 ILCS 505/4. As these regulations have been given the force of law by the Illinois legislature, they are binding on the court. See 815 ILCS 505/4; B. Sanfield, 168 F.3d at 973. In finding that Finlay's advertising scheme was not actually deceptive, this court did not consider the regulations. Instead, this court found plaintiff had failed to show the advertisements were deceptive because there was no evidence the consumer was deceived. The Seventh Circuit disagreed with this court's analysis, finding the regulations to be relevant to Sanfield's prima facie case because they define the circumstances under which advertising of a discount price is deceptive.

The relevant regulation states:

  It is an unfair or deceptive act for a seller to
  compare current price with its former (regular) price
  for any product or service, . . . unless one of the
  following criteria is met:
    (a) the former (regular) price is equal to or below
    the price(s) at which the seller made a substantial
    number of sales of such products in the recent
    regular course of its business; or
    (b) the former (regular) price is equal to or below
    the price(s) at which the seller offered the
    product for a reasonably substantial period of time
    in

    the recent regular course of its business, openly
    and actively and in good ...

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