How did Urban Outfitters, Inc. evolve from a Philadelphia second-hand clothing shop in the 1970s to a more than $5 billion omni-channel, global apparel and lifestyle leader?
Urban makes customers a priority.
The company’s commitment to customers was so vividly proved by a GRSM California trial team that it led to a landmark defeat of a consumer privacy class action and sent a powerful warning to those looking to challenge Urban in the future.
Unique Retail Experiences
Urban’s (NASDAQ: URBN) portfolio of brands includes Urban Outfitters, Anthropologie, Free People and FP Movement as well as expansions into hospitality. Their signature retail experiences inspire and connect with customers.
Their brands exude confidence and unique styles, which are points of distinction in the competitive retail environment. But when plaintiffs’ firms filed hundreds of lawsuits against brick-and-mortar retailers in California, Urban became one of many targets.
A Billion Dollar Issue
With an initial demand of $288 million and a potential $1 billion in exposure, Urban faced a major threat.
At issue were alleged violations of customer privacy and data collection. The suit claimed that customers were asked for their ZIP codes as a condition of the purchase, which would violate California’s Song-Beverly Credit Card Act.
Most retailers just wanted their legal headache to disappear. Many resigned themselves to multimillion-dollar settlements, with some as steep as $80 million.
But Urban knew it stood on solid ground with customers and that providing ZIP codes was entirely voluntary. The company chose to defend itself and asked GRSM to lead the fight.
Ahead of the Class
Led by nationally recognized trial attorney Miles Scully and second-chaired by partner Timothy Branson, GRSM structured a strategy to definitively knock down the claims in California and prevent copycat lawsuits appearing nationwide.
We began in monitoring mode. For years, our team closely watched hundreds of ZIP code cases filed in state and federal courts across California…
One turning point came when Restoration Hardware risked going to trial — and lost. GRSM culled key intelligence from that trial. When Urban’s legal chief reupped its commitment to fight and to win, Scully, Branson and their team were armed and ready.
Novel Defense Needed
Prevailing at Urban’s trial required pioneering a new defense.
Our attorneys worked closely with Urban’s technology and sales teams to drill down on its transactions practices, clerk prompts, and the customer experience. The lead plaintiffs, all members of Urban’s loyalty program, testified emphatically that they were asked for their ZIP codes prior to completing the transaction. GRSM knew, however, that this was impossible.
We brought in testimony from Urban’s store managers, cashiers, and director of operations. The judge learned how a loyalty customer is never asked for a ZIP code. There was no need, as all of their personal information was already known and in Urban’s database. Because of this, any prompts for sales clerks to request ZIP codes were automatically suppressed. And, by design, plaintiff’s counsel was completely unaware of this fact until the time of trial.
At trial, GRSM also focused heavily on the varying experiences of each customer, producing numerous Urban executives and brick-and-mortal store clerks to testify about the lack of scripts for requesting ZIP codes during the sales transactions, the countless different ways that clerks requested the ZIP codes, and the inconsistent timing of the requests.
GRSM’s courtroom strategy clearly exposed both the unreliability of the plaintiffs’ testimony and the futility of proving their claims on a classwide basis.
Delivering a Rare Win for Retailers
The six-day bench trial in Dremak V. Urban Outfitters, presided over by San Diego Superior Court Judge Joel Pressman, ended in the decertification of the class and a verdict in Urban’s favor — and the first defense verdict in California state courts related to the collection of ZIP codes. In his decision, Judge Pressman referenced the “undisputed evidence” we presented. Plaintiffs were also ordered to pay Urban’s litigation costs.
Called a “rare win for retailers” by the Daily Journal, the victory was hailed as one of the largest defense verdicts in 2016. Urban’s victory was later upheld on appeal.
Our client was thrilled with the outcome. Urban upheld its belief to not settle bad cases.
“This was a scary case. All of our peer retailers were losing and/or settling for ridiculous amounts of money,” said Michael Silbert, General Counsel of URBN.
Silbert explained that they needed a new approach and “a firm that wasn’t just going to go through the typical litigation motions. Miles, Tim and team always think outside the box and their efforts in this case were another example of how they work to truly accomplish the client’s goal: WIN!”
The first-of-its-kind verdict has also served as a warning to the next wave of plaintiffs’ firms who may consider targeting our client.