Rubenstein v. GAP, 8/24/17, DCA2/1
The GAP has outlet stores where it sells GAP brand merchandise that it does not sell at its traditional stores. Rubenstein purchased GAP merchandise at an outlet store thinking that the merchandise had once been marketed in GAP’s traditional stores. She further alleged that the merchandise GAP sold at its outlet stores was of inferior quality, although she alleged no facts in support of that allegation. She sued GAP for false advertising, unfair competition (UCL) and related claims, all premised on the same conduct. The trial court granted GAP’s demurrer without leave to amend. Held: Affirmed.
Rubenstein’s didn’t allege that GAP made any representations that merchandise sold at its outlet stores had ever been sold at its traditional stores. Nor did GAP make representations about the quality of outlet store merchandise. Therefore, what Rubenstein simply assumed was not the basis of a lawsuit. Her concealment theory also failed: Absent a special/confidential relationship, GAP had not duty to disclose such facts to Rubenstein. Finally, when someone sells merchandise under its own brand, that is not an implied representation about merchandise quality that would support an unfair competition claim under the “fraudulent” prong of the UCL.
This case deals with an important issue in UCL jurisprudence: The UCL has three prongs (unlawful, unfair, fraudulent), each which can independently support a cause of action under the UCL. For purposes of the UCL, a fraudulent practice is where a statement is made that would deceive a reasonable consumer. In an amicus brief, the Attorney General argued that a defendant should potentially be liable for a fraudulent practice under the UCL even absent a false representation. That is, the Attorney General urged the court to find that a business practice itself could mislead a reasonable consumer. The DCA2/1 declined to adopt the AG’s position, finding it contrary to holdings by other DCAs.
To Rubenstein’s credit, she is not the only one who assumes that outlet merchandise was once sold at a brand’s traditional stores. There have been some news reports on this exact issue and my sense—based on about three minutes of online research—is that some consumers are confused, but they are generally okay with the quality trade-off because they get the brand at a better price point.