Freeman v. Indochino Apparel, Inc.

Background

Indochino Apparel Inc. and Indochino Apparel (US), Inc. sell made-to-measure clothing. Jeffrey Freeman alleged that Indochino engaged in a systematic false-reference-pricing scheme by advertising clothing as being “on sale” from substantially higher prices, even though the clothing was always or nearly always sold at the lower advertised price. He alleged that he bought a custom suit from Indochino on August 4, 2017, after viewing the pricing online and at an Indochino showroom in San Francisco.

Freeman’s first amended complaint asserted claims under the California Consumer Legal Remedies Act, the California False Advertising Law, and California’s Unfair Competition Law, along with a breach-of-contract claim. Indochino moved to dismiss the first amended complaint on several grounds.

Pre-Suit Notice

Indochino argued that Freeman had not provided sufficient notice before filing his Consumer Legal Remedies Act and breach-of-contract claims. The court rejected that argument. Freeman sent notices on June 5 and July 9, 2019. The court found that, based on the allegations in the first amended complaint, the notices timely informed Indochino of the facts underlying the claims. The court also noted that Freeman did not seek damages under the Consumer Legal Remedies Act until he amended the complaint in December 2019.

Deceptive-Advertising Claims

The court held that Freeman adequately pleaded claims under the Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act. Those claims use a “reasonable consumer” standard, which asks whether a significant portion of ordinary or targeted consumers could be misled.

Freeman alleged that Indochino displayed a sale price next to a higher crossed-out price and used statements suggesting that the sale was temporary. He also alleged that Indochino’s website nearly always advertised an ongoing sale, even though the clothing was allegedly always sold at the sale price. The court declined to rule at the pleading stage that no reasonable consumer could be misled by those representations.

The court also found that Freeman adequately alleged why the reference prices were deceptive. He alleged that the clothing was custom, made-to-measure private-label clothing sold exclusively by Indochino, rather than products sold by other companies. On those allegations, a reasonable consumer could understand the reference price to represent Indochino’s own regular, original, or former price for the same clothing, rather than a comparison with similar clothing from another retailer.

The court rejected Indochino’s argument that Freeman’s claims should be dismissed because restitution—a court-ordered repayment or other equitable remedy—might be difficult to calculate. The court explained that earlier decisions cited by Indochino rejected particular restitution methods at the summary-judgment stage; they did not bar restitution in every circumstance. Whether Freeman could present a viable restitution model was premature to decide on a motion to dismiss.

Breach of Contract

The court held that Freeman adequately alleged a breach-of-contract claim. He alleged that he entered into contracts with Indochino when he purchased clothing, that the contracts included Indochino’s terms and order-confirmation terms, and that the contracts promised products with a value equal to the reference prices. He further alleged that Indochino provided clothing of materially lower value.

The court rejected Indochino’s argument that Freeman had not estimated his damages or proposed a method for calculating them. The court found those issues premature and not a valid basis for dismissing the claim.

Equitable Relief

Indochino argued that Freeman had not shown that legal remedies were inadequate, lacked standing to seek an injunction addressing future harm, and could not assert unjust enrichment under California law. The court rejected all three arguments.

The court stated that Freeman could plead equitable remedies as alternatives to other remedies. It also held that he adequately alleged standing to seek prospective injunctive relief because he alleged an ongoing inability to rely on Indochino’s pricing representations when deciding whether to purchase Indochino clothing in the future. Finally, the court concluded that Freeman’s unjust-enrichment theory was cognizable and not duplicative of his contract or restitution theories at this stage.

Punitive Damages and Disposition

Indochino also sought dismissal of Freeman’s request for punitive damages. The court noted that California law permits such damages under the Consumer Legal Remedies Act and requires allegations showing oppression, fraud, or malice. Because Freeman alleged fraudulent and misleading conduct, the court found dismissal of the punitive-damages request premature and denied the motion on that ground.

The court denied Indochino’s motion to dismiss on all stated grounds. It ordered the defendants to answer the first amended complaint within 14 days, scheduled an initial case-management conference for April 6, 2020, and terminated the motion docketed as No. 37.