Metropolitan News-Enterprise


Friday, August 25, 2017


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C.A. Justices Affirm Dismissal of Action Alleging the Gap Engaged in Consumer Flimflamming

Says Selling Goods of Less Quality at Factory Stores Than Regular Outlets Is Not Wrongful


By a MetNews Staff Writer


The Court of Appeal for this district yesterday affirmed the dismissal of an action claiming that The Gap, Inc. cheats consumers who buy merchandise at Gap or Banana Republic factory stores without a forewarning that the quality of the goods is not the same as like items sold at regular outlets.

The expectation of consumers, the plaintiff argued was that the factory store goods are items that had been for sale at regular outlets but weren’t purchased and were now being offered at discounted prices.

The opinion, by Justice Elwood Lui of Div. One, affirms a judgment of dismissal that followed Los Angeles Superior Court Judge Kenneth Freeman’s sustaining of demurrers, without leave to amend, to the second amended complaint filed by Linda Rubenstein, a consumer. She claims she was “was misled about the quality and authenticity of Defendant’s Products.”

Lui declared:

“As a matter of law, Gap’s use of its own brand name labels on clothing that it manufactures and sells at Gap-owned stores is not deceptive, regardless of the quality of the merchandise or whether it was ever for sale at other Gap-owned stores.”

No UCL Violation

No cause of action was stated under Business & Professions Code §17200 et seq.—the Unfair Competition Law (“UCL”)—he said.

One basis for liability under that law is fraud. None is present, the jurist said, explaining:

“Gap’s use of its own brand names in factory store names and on factory store clothing labels is not likely to deceive a reasonable consumer for the simple reason that a purchaser is still getting a Gap or Banana Republic item….A reasonable consumer would…inspect the quality of factory store clothing items before buying them and could return items after purchase if they turn out to be unsatisfactory. In the end, the allegation that Gap is not living up to the quality standards it has set for Gap and Banana Republic brands fails to state a cause of action for a fraudulent business practice….”

The jurist said no acts were stated in support of the contention that Gap was guilty of “active concealment” by not disclosing that items of lesser quality were manufactured exclusively for sale at factory stores.

Lui also said there was nothing “unlawful” or “unfair”—also bases for liability under the UCL—about the Gap’s conduct.

Was No Advertising

There was no advertising by Gap that the goods were of the same quality at factory stores as at regular outlets, Lui said, so there could be no liability under the False Advertising Law, Business & Professions Code §17500 et seq. He commented:

“Retailers may harm the value of their brands by selling inferior merchandise at factory stores, but doing so does not constitute false advertising.”

Lui found no cause of action under the Consumer Legal Remedies Act. He said the pleading “does not allege a single affirmative representation by Gap regarding factory store clothing other than a true one—the brand of the clothing is Gap or Banana Republic.”

The case is Rubinstein v. The Gap, Inc., B272356.

Behram V. Parekh and Joshua A. Fields of Kirtland & Packard were Rubinstein’s appellate lawyers. Deputy Attorney General Tina Charoenpong also argued on her behalf; her office played the role of amicus curiae. Successfully arguing for the Gap were Joseph Duffy and Esther K. Ro of Morgan, Lewis & Bockius.


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