Freeman v. Indochino Apparel, Inc.Freeman v. Indochino Apparel, Inc.
Case Information
*1 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA J EFFREY F REEMAN , C ASE N O . 19-cv-04539-YGR Plaintiff , O RDER ENYING M OTION TO D ISMISS F IRST A MENDED C OMPLAINT ; S ETTING vs. C ASE M ANAGEMENT C ONFERENCE Re: Dkt. No. 37 I NDOCHINO A PPAREL , I NC ., ET AL ., Defendants .
Dеfendants Indochino Apparel Inc., Indochino Apparel (US), Inc. (collectively “Indochino”) sell made-to-measure clothing such as suits, tuxedos, blazers, vests and pants. Plaintiff Jeffrey Freeman brings this consumer class action alleging that defendants engaged in a systematic and pervasive fаlse reference pricing scheme by deceptively advertising through their website, in stores, via e-mails and on social media that their clothing was “on sale” and was previously sold at a substantially higher price when, in fact, the clothing was always sold at or near the falsely claimed “sale” price. Plaintiff’s First Amended Complaint, filed December 18, 2019 (Dkt. No. 35, “FAC”), alleges he bought a custom, made-to-measure suit from Indochino on August 4, 2017, in its San Francisco showroom location. Plaintiff claims he viewed the suit’s pricing on Indochino’s website as well as when he visited its showroom. Plaintiff alleges he was injured by Indоchino’s use of “reference pricing.” Plaintiff alleges Indochino’s clothing was regularly and repeatedly advertised at substantial discounts to a specified reference price but rarely, if ever, sold at the represented reference price. Plaintiff alleges claims for violations of the California Consumer Legal Remedies Act (“CLRA,” Cal. Civil Code § 1750 et seq. ); California False Advertising Law (“FAL,” Cal. Bus. & Prof. Code § 17500 et seq. ); and California’s Unfair Competition Law (“UCL,” Cal. Bus. & Prof. Code § 17200 et seq. ), as well as claims for breach of contract; and unjust enrichment.
*2 Indochino moves to dismiss on several grounds: (1) insufficient pre-suit notice with respect to Freeman’s CLRA and contrаct claims; (2) failure to allege plausible claims under the UCL, FAL or CLRA; (3) failure to plead a plausible breach of contract claim; (4) failure to allege a basis for and standing to pursue equitable relief; and (5) failure to allege a basis for punitive damages. The Court, having considered carefully the papers [1] and pleadings filed in support of and in opposition to the motion, D ENIES the motion to dismiss.
I. ISCUSSION
A. Pre-Suit Notice
Indochino moves to dismiss the CLRA and breach of contract claims on the grounds that plaintiff failed to provide sufficient pre-suit notice as required by California Civil Code section 1760 and Califоrnia Commercial Code section 2607(3)(A). The Court disagrees. Plaintiff sent pre-suit notices to defendants on June 5, 2019, via Federal Express and July
9, 2019, by certified and registered mail. Plaintiff did not seek damages in the CLRA claim until the amendment of the complaint in December 2019. The letters informed Indochino of the facts underlying the claims here. Based upon the allegations of the FAC, plaintiff did not learn of the basis for his breach of contact claim until shortly before the first letter was sent. (FAC ¶ 12.) In light thereof, the FAC alleges timely and sufficient notice under these statutes. B. Plausibility of Claims of Deceptive Advertising
Indochino next argues that plaintiff’s claims under thе UCL, FAL, and CLRA are not plausible because no reasonable consumer likely would be deceived by the pricing practices plaintiff alleges; the references prices were not deceptive; and restitution is not available in this type of case. The Court addresses eаch argument in turn.
1. Reasonable Consumers Would Not Be Deceived The FAC alleges that Indochino had a practice of advertising their clothing with a “sale” price adjacent to a higher, crossed-out price along with a graphic reading “Sale” or “XX% OFF” *3 (FAC ¶¶ 28-35.) In addition, defendants’ advertising included statements indicating the sale pricing was for a limited time, such as “April Clearance Over 100 Suits for $299 USD (you save $500) [¶] Last Chance on Our Limited Runs.” ( Id . ¶ 35.) Plaintiff alleges that the top banner of the homepage for Indochino’s website nearly always included language that a “sale” was in progress and consumers had a limited time to obtain the clothing at the “sale” price, even though the clothing was always sold at the “sale” price. ( Id ., ¶¶ 35-40.) Further, plaintiff alleges Indochino did not include any language to indicate to consumers that the False Reference Price was a comparison to another “substantially similar” product (such as “compаre” or “compare at”), as opposed to the regular, original or former price of that same article of Clothing. ( Id ., ¶¶ 3, 29- 33, 42-43.)
Claims under the UCL, FAL, and CLRA concerning deceptive advertising are governed by
a “reasonable consumer” standard. Under that standard, plaintiffs must plead facts showing that a
“significant portion of the general consuming public or of targeted consumers, acting reasonably
in the circumstances, could be misled.”
Lavie v. Procter & Gamble Co.
,
Indochino contends that the alleged pricing practices here differ significantly from
reference pricing cases in which the representations were express statements like “original price”
or “compare to,” and all reasonable consumers would understand that the struck-through prices
were comparisons to former prices of
substantially similar
items sold by another retailer.
Indochino’s argument essentially seeks a ruling that, as a matter of law, no reasonable consumer
would their reference prices (
i.e.
“$799”) as a comparison to the former price of that
identical
item. Plaintiff alleges in detail, with images from Indochino’s advertising, the struck-through
reference prices were coupled with representations of “sale,” “You save $___,” or a percentage
*4
“off” the reference price, and had no accompanying language indicating that the reference price is
one the consumer should “compare to” another itеm from another retailer. (FAC ¶¶ 28-39.)
“[W]hether a business practice is deceptive will usually be a question of fact not appropriate for
decision” on a motion to dismiss.
Williams v. Gerber Prod. Co.
,
2.
Basis for Deceptiveness of Reference Prices
Indochino further argues that plaintiff has not alleged
why
the crossed-out reference prices
are deceptive, contending that plaintiff must allege more than that the “prevailing market price”
was the price at which Indochino regularly sold the clothing items. Plaintiff alleges the clothing
items at issue here are all custom, “made-to-measure private label Clothing sold exclusively by”
Indochino. (FAC ¶ 48;
see also
¶¶ 5, 52, 62, 111.)
[2]
He further alleges that Indochino
“manufacture[s] and distribute[s]” the clothing at issue, is “the exclusive source for” it, clothing
items are labeled only with the Indochino brand name, “is not sold by any other cоmpany and is
not sold at any other retail stores or websites, other than those owned and operated by” Indochino.
(
Id
. ¶ 52.) Plaintiff alleges a reasonable consumer would understand the reference prices in
Indochino’s advertising refer to a regular, original or former price of Indоchino’s clothing, not
similar items of clothing sold by a different company under a different label. (FAC at ¶¶ 2-3, 41,
51, 53, 89.) Thus, the Court finds that the FAC alleges why the reference prices are deceptive.
[3]
*5
3.
Availability of Restitution On Consumer Fraud Claim
Indochino next argues that Freeman’s UCL and FAL claims should be dismissed because
most, if not all, measures of restitution would be unavailable to him because he received some
value from the underlying transaction. Arguing that “precedent in this Circuit bars Plaintiff from
restitution for his consumer-fraud claims” (Motion, Dkt. No. 37, at 12:13-14), Indochino cites this
Court’s decision in
Stathakos v. Columbia Sportswear Co.
, No. 15-CV-04543-YGR, 2017 WL
1957063 (N.D. Cal. May 11, 2017) and another district court decision in
Chowning v. Kohl's Dep't
Stores, Inc.
, No. CV-15-08673-RGK-SPX,
Indochino misrepresents the decisions in
Stathakos
and
Chowning
. Both decisions rejected
plaintiffs’ particular
models
for calculating clаss-wide restitution at the summary judgment stage.
Stathakos
,
As stated above, plaintiff’s CLRA, UCL, and FAL claims are sufficiently alleged.
Determination of whether plaintiff can offer a viable model for measuring restitution is premature
at this point in the litigation.
See Stathakos v. Columbia Sportswear Co.
, No. 15-CV-04543-YGR,
The motion to dismiss the CLRA, UCL, and FAL claims on the foregoing grounds is, therefore, .
C. Elements of Breach of Contract Claim
Indochino next argues that plaintiff’s breach of contract claim should be dismissed for the further reason that he has failed to plead the necessary factual elemеnts, including the terms of the *6 contract, the nature of the breach, and the resulting damage. Indochino contends the allegations do not give fair notice of the basis for the claim, and that plaintiff has not alleged a plausible breach or damages.
The FAC alleges that plaintiff enterеd into a contract with defendants when he purchased
clothing, subject to the defendants’ terms and conditions, including those in his order
confirmation. (FAC ¶ 108.) Freeman alleges that the contracts stated Indochino would provide a
product that had a value equal to the reference price and failed to do so, instead providing clothing
of a quality “materially less than the value of the Clothing set forth in the contracts.” (FAC ¶¶ 111,
114, 115.) Freeman has alleged the required elements of his breach of contract claim.
Cf. Munning v. Gap, Inc.
, No. 16-CV-03804-TEH,
D. Equitable Relief
Next, Indochino offers three reasons why Freeman’s claims for equitable relief should be dismissed: (1) failure to allege legаl remedies would not be adequate; (2) lack of standing for injunctive relief to address any future harm; and (3) unjust enrichment is not a claim recognized in California law. All three bases are without merit.
Plaintiff may allege claims in the alternative at the pleading stage. The equitable remedies *7 afforded by the UCL and CLRA are expressly stated to be in addition to other available remedies at law. See Cal. Bus. & Prof. Code § 17205; Cal. Civ. Code § 1752, 1780(a).
With respect to injunctive relief, plaintiff alleges that, regardless of any pricing policy
changes implemented by Indochino on present iteration of its website, he cannot be certаin that
Indochino will not revert to its prior alleged practices in the absence of injunctive relief. (FAC ¶¶
60, 62, 85.) A plaintiff sufficiently alleges standing for prospective injunctive relief based upon a
threat of future injury where the complaint alleges he “faces the similar injury of being unable to
rely on [defendant’s] representations . . . in deciding whether or not . . . [to] purchase the product
in the future.”
Davidson v. Kimberly-Clark Corp.
,
Thus, Indochino’s motion on these grounds is .
E. Punitive Damages
Finally, Indochino argues that the Court should dismiss plaintiff’s prayer for punitive damages, even while acknоwledging that California Civil Code section 1780(a)(4) expressly permits such damages. Indochino argues the statute does not give plaintiff an entitlement to such damages, but instead plaintiff must offer substantial evidence to support such an award. *8 California Civil Code section 3294(a) sets the standard for аn award of punitive damages on a state law claim, requiring plaintiff to show that the defendant’s conduct evinces “oppression, fraud or malice.” Plaintiff alleges fraudulent and misleading conduct. As with other arguments by Indochino, dismissal of plaintiff’s request for punitive damages at this stage is premature and without a substantial basis. The motion on these grounds is D ENIED .
II. C ONCLUSION
Indochino’s motion to dismiss is D on all grounds stated.
Defendants shall file their answer to the FAC within 14 days of this Order.
An initial case management conference is hereby scheduled for April 6, 2020, at 2:00 p.m. The parties shall file an updated joint case management statement seven days in advance of the conference. This terminates Docket No. 37. I T I S S O O RDERED .
Dated: March 11, 2020 Y VONNE G ONZALEZ R OGERS U NITED S TATES ISTRICT C OURT J UDGE
Notes
[1] Defendants seek judicial notice of plaintiff’s pre-suit demand letters to Indochino, referenced in the FAC, in support of their motion to dismiss. The Court G RANTS the unopposed request for judicial notice.
[2] Indochino’s attempt to distinguish
Spann v. J.C. Penney Corp.
,
[3] In contrast to the
Branca
decision cited by Indochino, plaintiff here has alleged “he was
23
exposed to or relied on . . . other reprеsentations by [Indochino], such as other advertisements or
marketing, that le[d] him to believe that the [reference] price was a former price at which
24
[Indochino] sold the items.”
Branca v. Nordstrom, Inc.
, No. 14CV2062-MMA JMA, 2015 WL
25
1841231, at *7 (S.D. Cal. Mar. 20, 2015). Similar to the amended complaint in
Branca
, plaintiff
has sufficiently alleged that the reference prices are deceptive.
See Branca v. Nordstrom, Inc.
, No.
26
14CV2062-MMA (JMA),
[4] Further, Indochino’s attempt to distinguish
Munning
’s contract terms from those alleged
here fails. As Indochino acknowledges, the basis for the contract claim in
Munning
was the
allegation that “a full price that was struck through, followed by a percentage discount and the
phrase “now $16.99.”
Munning
,