After breaking off acquisition talks, Urban Outfitters Inc. “misappropriated and misused” Le Tote Inc.’s proprietary information to launch a competing fashion rental service, Le Tote claims in a new lawsuit.
Le Tote, a subscription-based rental service founded in 2012, filed a complaint against Urban on Monday in U.S. District Court for the Eastern District of Pennsylvania.
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According to the filing, Le Tote’s founders and Urban leaders engaged in merger talks beginning in March 2018. After the two companies signed a non-disclosure agreement, Le Tote shared proprietary information with Urban about its business, the complaint says, including information about the technology underlying its logistics and infrastructure systems, a detailed product roadmap based on years of data collection and wide-ranging analyses of how to scale a fashion rental service. In May 2018, in what Le Tote described as a “complete surprise,” Urban said it was abandoning the acquisition talks.
According to the complaint, Urban officials told Le Tote it “lacked the capability, infrastructure, and technological know-how” to launch its own fashion rental service without acquiring an existing company.
However, around the time Urban nixed merger plans, the retailer began planning a competing women’s fashion subscription service, Nuuly, according to the filing. Nuuly was launched to the public in summer 2019, offering items from Urban’s owned brands, including Anthropologie and Free People, as well as items from third-party labels.
“Upon information and belief, Urban misused the proprietary information that Le Tote disclosed to it as a roadmap to evaluate independent entry to the market and launch Nuuly quickly, cheaply, and effectively, despite its agreement in the NDA to use Le Tote’s proprietary information solely to evaluate a potential transaction involving Le Tote and not for any other purpose,” the filing reads.
Le Tote alleges Urban violated federal and state trade protection acts, and is also accusing the retailer of unjust enrichment as well as breach of contract. Le Tote is seeking injunctive relief against Urban’s use of proprietary information as well as restitution and/or disgorgement.
Urban Outfitters is one of several traditional retailers that have embraced fashion rental services in recent years amid shifting consumer preferences and an increased focus on sustainability. Since 2017, Ann Taylor, Express and NY & Company have all launched similar services.
Representatives from Le Tote and Urban Outfitters did not immediately reply to FN’s request for comment.