Legal Roundup: Gap Beats Shareholder Lawsuit; Patagonia Files Complaint Against Nordstrom

Gap has reportedly beaten a shareholder lawsuit regarding its commitment to racial diversity among its leadership, and has settled a trademark lawsuit with Patagonia regarding an “iconic” pocket design, according to Reuters. Patagonia also has filed a complaint against Nordstrom alleging that the company sold “thousands” of counterfeit Patagonia sweatshirts and T-shirts at Nordstrom Rack stores.

The diversity lawsuit, which was brought by Gap investor Noelle Lee, alleged that the retailer made misleading statements in securities filings about its commitment to racial diversity among its leaders. Lee claimed that Gap had failed to make progress adding more diverse leaders despite making statements to the contrary in its corporate filings.

In a 6-5 decision, an en banc panel of the 9th U.S. Circuit Court of Appeals ruled that Gap can enforce a corporate bylaw requiring shareholder derivative litigation to be filed in Delaware Chancery Court, even when it blocks federal securities claims that can only be heard in federal court. The judges rejected claims that enforcing the forum selection clause would allow Gap to avoid litigation and effectively allow it to waive its obligations under federal securities law.

Gap has maintained that the allegations in the lawsuit are “offensive, racially charged and demonstrably false.”

Gap and Patagonia Reach an Undisclosed Settlement

Gap also reportedly reached a settlement with Patagonia regarding accusations that Gap has illegally copied Patagonia’s “iconic” snapped flap pocket, which is a feature on its Snap-T fleece outerwear, according to Reuters. A judge dismissed the lawsuit after the companies told the court they had reached a settlement and agreed to drop the claims. Terms of the settlement were not disclosed.

The complaint was initially filed in San Francisco federal court in November 2022. Patagonia alleged that Gap willfully and deliberately sold fleece jackets that mimic its flap pocket, with the intent of confusing shoppers into believing they were Patagonia products or that Patagonia had let Gap use its trademarks.

Gap has denied the claims and stated in filings that Patagonia waited too long to bring the lawsuit. Gap also filed a counterclaim asking a judge to rule that the design of the Snap-T fleece was not legally protected.

Patagonia Accuses Nordstrom of Misleading Shoppers

Patagonia also has filed a lawsuit against Nordstrom in the U.S. District Court for the Central District of California regarding its alleged sale of counterfeit Patagonia items at Nordstrom Rack. Patagonia has accused Nordstrom of “counterfeiting, trademark infringement, unfair competition, dilution, and copyright infringement,” according to court documents.

Patagonia also said that it asked Nordstrom to recall the items or reimburse customers, but that Nordstrom failed to take action on the matter.