Cooley litigators scored an important win on behalf of Stitch Fix, a company that provides online personal styling services, before the US Court of Appeals for the Ninth Circuit. The win affirmed the 2021 dismissal of a putative class action alleging violations of the Securities Exchange Act of 1934. Lawyers Patrick Gibbs, Samantha Kirby, Zaneta Kim and Samuel Blankenship led the Cooley team representing Stitch Fix. The successful appellate outcome earned the Cooley team a shout out as part of The American Lawyer’s Litigation Daily Litigator of the Week Runners-Up and Shout Outs list.
In 2018, four putative class actions were filed against Stitch Fix in the US District Court for the Northern District of California alleging that the company made material misrepresentations about its active client growth and TV advertising efforts. Stitch Fix’s first motion to dismiss was granted, but the plaintiff was given a chance to amend. In November 2020, the plaintiff renewed claims against the company concerning its TV advertising efforts, alleging that Stitch Fix made material misrepresentations to its investors by stating that its advertising efforts included TV when the company had in fact halted national TV advertising for 10 weeks to test the efficacy of that marketing channel.
In 2021, US District Judge James Donato issued an order dismissing all claims with prejudice, holding that the plaintiff failed to allege any false or misleading statement to support an actionable securities fraud claim. The judge also held that Stitch Fix did not have a duty to disclose its 10-week stoppage of national TV advertising to its investors, because the plaintiff failed to show that Stitch Fix “touted” the importance of TV advertising to the company’s growth as to give rise to such duty.
The Ninth Circuit recently held that the California federal judge was correct to toss the putative investor class action, finding that the challenged statements were broad and not misleading.