State Of Washington, V. National Maintenance Contractors, Llc.

Opinion

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

STATE OF WASHINGTON, No. 87492-6-I

Appellant,

DIVISION ONE

v.

UNPUBLISHED OPINION

NATIONAL MAINTENANCE CONTRACTORS, LLC; NMC FRANCHISING, LLC; and MARSDEN HOLDINGS, LLC,

Respondents,

and ENCORE ONE, LLC, † Defendant.

DÍAZ, J. — The State sued several buildings and facilities services companies for violating Washington’s consumer protection and franchising laws. The State argues the court erred both in granting the companies’ motions to dismiss the suit on summary judgment and in denying the State’s own motions for partial summary judgment as to liability. We agree dismissal was improper and

† The trial court dismissed all claims against Encore One, LLC, pursuant to a stipulated motion to dismiss.

remand the matter for further proceedings because genuine issues of material fact remain on the State’s claims.

I. BACKGROUND

Marsden Holding, LLC (Marsden) is a national holding company in the buildings and facilities services industry and the parent company of National Maintenance Contractors, LLC and NMC Franchising, LLC (together, NMC). Between 2006 and 2017, NMC sold franchises to individuals who would operate building-maintenance businesses and provide janitorial services.

More specifically, NMC’s business model generally operated as follows:

NMC would bid on and secure service contracts known as “accounts” from entities that owned or managed commercial or governmental properties. The property owners/managers agreed to pay NMC a monthly fee, which included some of NMC’s expenses and overhead.

Individual franchisees then would purchase, by separate written agreement, a franchise to perform the mostly janitorial services for the accounts NMC secured, and franchisees would work to receive earnings pursuant to the accounts. When a person purchased an NMC franchise, they did not become an NMC employee; instead, as one of NMC’s CR 30(b)(6) witness testified, franchisees were “purchasing volume and that volume was revenue that was attached to customer accounts.” That is, a franchisee’s monthly volume is the “amount of money gross that they would have access to for the accounts that they are providing services for.”

The contract required franchisees to pay an initial fee in order to “access”

3

their purchased volume. Then, NMC assigned accounts from which franchisees could earn money servicing, minus other administrative costs NMC charged. Franchisees were otherwise responsible for purchasing necessary equipment for their businesses, setting their own hours, hiring and firing employees, performing the janitorial work in a customer’s facility, submitting tax returns, and complying with all other applicable legal requirements.

In 2021, the State sued Marsden and NMC, accusing the companies of violating the Consumer Protection Act (CPA), chapter 19.86 RCW, and the Franchise Investment Protection Act (FIPA), chapter 19.100 RCW. Its second amended complaint included 16 distinct claims. In summary, it accused NMC of engaging in numerous unfair and/or deceptive business practices, claiming, inter alia, that it:

• failed to disclose material facts to franchisees, such as the number of accounts they would need to service to realize their desired monthly revenue;

• failed to provide franchisees with enough accounts to generate the volume the franchisees had purchased;

• concealed the dollar amounts the company received directly from customers and then paid franchisees a disproportionately lower gross rate than the customers paid NMC;

• charged franchisees excessively high “office support” fees;

• prevented franchisees from renewing existing franchises beginning in 2011 and, instead, required that they sign a release of all claims against NMC, while also requiring them to convert any sole proprietorships into limited liability companies and to hire at least one employee; and • imposed contracts on franchisees which required arbitration of any claims against NMC outside of Washington and were otherwise unconscionable.

Thereafter, the parties filed competing summary judgment motions: NMC moved for full dismissal, while the State moved for partial summary judgment against NMC on liability.

4

The court granted NMC’s motion to dismiss and denied Marsden’s motion as moot, and it denied the State’s motions. It then awarded Marsden and NMC over three million dollars in attorney fees and costs as the prevailing parties.

The State timely appeals.

II. ANALYSIS

A. Errors of Law We review orders on summary judgment, including issues of law therein, de novo. See State v. StarKist Co., 25 Wn. App. 2d 83, 88, 522 P.3d 594 (2023). We remand this matter to the trial court, first, because the trial court committed several errors of law. We address each in turn below, after providing a brief overview of uncontested portions of the CPA and FIPA.

The CPA declares unlawful “[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.” RCW 19.86.020.

When the State brings a CPA claim on behalf of an injured Washington resident (see RCW 19.86.080), it must prove three elements. State v. TVI, Inc., 18 Wn. App. 2d 805, 821, 493 P.3d 763 (2021), aff’d on other grounds, 1 Wn.3d 118, 524 P.3d 622 (2023). It must establish: an “(1) an unfair or deceptive act or practice (2) occurring in trade or commerce, and (3) public interest impact.” State v. Kaiser, 161 Wn. App. 705, 719, 254 P.3d 850 (2011). 1 Unlike such claims brought by a private individual, it need not prove causation or injury. Id.

As to the first element, an act or practice is unlawful under the CPA if it is

1 The parties do not contest the second element.

5

either deceptive or unfair. Klem v. Wash. Mut. Bank, 176 Wn.2d 771, 787, 295 P.3d 1179 (2013). But the CPA itself does not define the terms “unfair” or “deceptive,” so our Supreme Court has interpreted their meaning in “‘a gradual process of judicial inclusion and exclusion.’” Id. at 785 (internal quotation marks omitted) (quoting Saunders v. Lloyd’s of London, 113 Wn.2d 330, 344, 779 P.2d 249 (1989)). 2 In addition to the CPA, FIPA governs the sale of franchises and establishes rights and prohibitions for franchisors and franchisees. In relevant part, RCW 19.100.170 states that it is unlawful to sell or offer to sell a franchise “by means of any written or oral communication which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made in light of the circumstances under which they were made not misleading.” RCW 19.100.170(2). The provision also declares it is unlawful to “engage in any

2 By way of preliminary general definition: As to the meaning of “unfair,” we take

guidance from federal law which states such an act “‘causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits.’” Klem, 176 Wn.2d at 787 (quoting 15 U.S.C. § 45 (n)). As to the meaning of “deceptive,” one example of such an act would be a “knowing failure” to reveal something of “material importance.” Robinson v. Avis Rent A Car Sys., Inc., 106 Wn. App. 104, 116, 22 P.3d 818 (2001); see also Young v. Toyota Motor Sales, U.S.A., 196 Wn.2d 310, 320, 472 P.3d 990 (2020) (holding a material misrepresentation is likely sufficient, though not a prerequisite, to satisfy the first element of a CPA claim). Even sharing information which is itself accurate can be deceptive “‘if there is a representation, omission or practice that is likely to mislead.’” Kaiser, 161 Wn. App. at 719 (internal quotation marks omitted) (quoting Panag v. Farmers Ins. Co. of Wash., 166 Wn.2d 27, 50, 204 P.3d 885 (2009)); see also State v. Mandatory Poster Agency, 199 Wn. App. 506, 519, 398 P.3d 1271 (2017) (holding a “deceptive act or practice is measured by ‘the net impression’ on a reasonable consumer”) (internal quotation marks omitted) (footnote omitted) (quoting Kaiser, 161 Wn. App. at 719).

6

act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.” RCW 19.100.170(4).

Further, RCW 19.100.180 generally requires that franchisors “deal with”

franchisees “in good faith.” RCW 19.100.180(1). It also proscribes other specific conduct, including deeming it unlawful to:

• “sell, rent, or offer to sell any product or service” to a franchisee “for more than a fair and reasonable price,” RCW 19.100.180(2)(d);

• obtain “money, goods, services, anything of value, or any other benefit from any other person with whom the franchisee does business on account of such business unless such benefit is disclosed to the franchisee,” RCW 19.100.180(2)(e);

• “require a franchisee to assent to a release, assignment, novation, or waiver which would relieve any person from liability imposed except as otherwise permitted by RCW 19.100.220,” RCW 19.100.180(2)(g); 3 • impose “any standard of conduct” on franchisees “unless [the franchisor]

can sustain the burden of proving such to be reasonable and necessary,”

RCW 19.100.180(2)(h); and • to terminate a franchise prior to the expiration of its term without good cause, RCW 19.100.180(2)(j).

Finally, RCW 19.100.190(1) specifies that violations of any prohibitions in RCW 19.100.180(2) “constitute an unfair or deceptive act or practice under the provisions of [the CPA].”

1. Failure to Show a “Public Interest Impact”

First, the State argues the court erred when it dismissed all CPA claims because the State failed to show a “public interest impact,” i.e., the third element of a CPA claim. We agree this was error and conclude to the contrary. We hold

3 RCW 19.100.220(2) provides that “[a]ny agreement, condition, stipulation or provision, including a choice of law provision, purporting to bind any person to waive compliance with any provisions of this chapter or any rule or order hereunder is void.” And RCW 19.100.220(3) states, “This chapter represents a fundamental policy of the state of Washington.”

7

the State has demonstrated a public interest impact for each of its CPA claims and it need not prove that element of those claims going forward, though it still must prove at trial the remaining elements, including establishing that NMC’s practices were deceptive or unfair.

More specifically, we hold as a matter of law that the factors announced in Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co, 105 Wn.2d 778, 790-91, 719 P.2d 531 (1986), establish a public interest impact in this case. 4 There, our Supreme Court instructed reviewing courts to apply one of two sets of considerations, depending on the “context” of the alleged unlawful actions. Id. One set of factors applies to “consumer” transactions involving the exchange of goods, e.g., purchases of wheat seed, mobile home, automobiles. Id. at 790. 5 The other set of factors applies to “private disputes” involving the exchange of services, e.g., between attorney-client, insurer-insured, realtor-property purchaser. Id. But neither set of factors is dispositive; each simply serves as “indicia of an effect on public interest from which a trier of fact could reasonably find public interest impact.” Id. at 791.

4 The State appeared to claim at oral argument that we need not apply Hangman

Ridge at all. See Wash. Ct. of Appeals oral arg., State v. Nat’l Maint. Contractors, LLC., No. 87492-6-I (Jan. 15, 2026), at 22 min., 57 sec. through 23 min., 27 sec. video recording by TVW, Washington State’s Public Affairs Network, https://tvw.org/video/division-1-court-of-appeals-2026011403/. It appeared to suggest that the Hangman Ridge factors are a tool for determining public impact only in “edge” cases or those involving fewer people. Id. But it cited no authority for that proposition and we disagree. 5 In such cases, we consider: (1) whether the alleged unlawful acts were committed

in the course of a defendant’s business (2) were part of pattern or generalized course of conduct (3) were repeated (4) had the potential for repetition, and (5) whether many consumers were affected or likely to be affected by them. Hangman Ridge, 105 Wn.2d at 790.

8

Furthermore, the Court has explained that, even in cases that involve individual breaches of private contracts, “the likelihood that additional plaintiffs have been or will be injured in exactly the same fashion” changes a “private dispute to one that affects the public interest.” Id. at 790. In other words, actions stemming from private disputes can still implicate the public interest by showing a likelihood additional plaintiffs have or will be injured in the same fashion. Trujillo v. Nw. Tr. Servs., Inc., 183 Wn.2d 820, 835, 355 P.3d 1100 (2015); see also RCW 19.86.093 (stating that a private claimant establishes an act is injurious to the public interest because it injured others or had the capacity to do so).

Here, the State’s suit arises from a service NMC provided, namely, to procure client accounts for franchisees to work on. In such cases, we consider: (1) whether the acts were committed in the course of the defendant’s business (2) whether the defendant advertised to the public (3) whether the defendant actively solicited the plaintiff and potentially others, and (4) whether the plaintiff and defendant occupied unequal bargaining positions. Hangman Ridge, 105 Wn.2d at 790-91.

We hold that the first and fourth Hangman Ridge factors plainly support the State’s claim that NMC’s actions, if proven to be deceptive or unfair and ultimately additional plaintiffs have or will be injured in the same fashion, would be as a matter of law injurious to the public interest.

As to the first factor, NMC does not contest that the alleged acts were committed in the course of its business. And as to the fourth, NMC also concedes in its briefing that “the parties occupied unequal bargaining positions at the time

9

the franchisees entered their franchise agreements.” 6 Moreover, the undisputed facts also demonstrate a likelihood of injury to others. There is no dispute that almost any resident in our state could have purchased a franchise from NMC. Indeed, NMC does not dispute that the State’s claims involve multiple hundreds of purchasing individual and, in its motion for summary judgment, explicitly referenced “the several hundred NMC franchisees involved here.” In short, there is a demonstrated likelihood that additional plaintiffs have or will be injured in the same fashion as any identified individual plaintiff. Trujillo, 183 Wn.2d at 835.

In response, NMC claims that (1) the second and third factors weigh in its favor because it is undisputed that NMC did not advertise to the general public or actively solicit franchisees, and (2) the State’s arguments to the contrary rely on “highly disputed issues of fact.” The former claim may be true, but no particular factor is dispositive; and NMC does not identify any specific contested issue of fact that would create a triable issue as to either factor. A party opposing summary judgment must respond with more than conclusory allegations or argumentative assertions of the existence of unresolved factual issues. Ruffer v. St. Frances

6 At oral argument, NMC first made the same concession but also appeared to

qualify it by contending there are factual questions about the sophistication of some of the franchisees. Wash. Ct. of Appeals oral arg., supra at 13 min., 28 sec. through 13 min., 54 sec. In response, we conclude that no reasonable person could find a corporation occupied the same position of bargaining power as an individual seeking income from janitorial work with limited education and/or limited English proficiency. See Panag, 166 Wn.2d at 50 (holding that in “‘evaluating the tendency of language to deceive’” we should “‘look not to the most sophisticated readers but rather to the least’”) (internal quotation marks omitted) (quoting Jeter v. Credit Bureau, Inc., 760 F.2d 1168, 1175 (11th Cir. 1985)).

10

Cabrini Hosp. of Seattle, 56 Wn. App. 625, 628, 784 P.2d 1288 (1990).

Thus, we hold that if the State establishes that NMC’s conduct is deceptive or unfair and additional plaintiffs have or will be injured in the same fashion, such conducts would have a public interest impact and the State would not need further proof to establish this third element for its CPA claims.

2. The Meaning of the First Element of a CPA Claim The State next argues the trial court erred in multiple respects when it dismissed many of the State’s “non-per se” CPA claims for purportedly failing to satisfy the first element of such a claim. We agree.

As a preliminary matter, the court generally correctly held the State typically may establish unfair or deceptive acts in several ways. (Citing TVI, 18 Wn. App. 2d at 821-22.) Namely, the State may seek to establish (1) a per se unfair or deceptive act or practice, 7 (2) an act or practice that has the capacity to deceive a substantial portion of the public, or (3) an unfair or deceptive act or practice, which is not regulated by statute but which still violates the public interest. State v. Mandatory Poster Agency, Inc., 199 Wn. App. 506, 518, 398 P.3d 1271 (2017). However, as it proceeded to discuss each kind of CPA claim, the trial court erred by dismissing each possible type.

First, it held that any claims that did not allege a corresponding FIPA violation failed to make out the first element of a CPA claim under “option (1)” because they were “not pled as per se claims.” Yet it then held those same counts

7 “A per se unfair trade practice exists when a statute which has been declared by

the Legislature to constitute an unfair or deceptive act in trade or commerce has been violated.” Hangman Ridge, 105 Wn.2d at 786.

11

failed under “option (3)” because FIPA regulated the conduct underlying them. It concluded: “the third option is not available because (1) franchising is heavily regulated by statute and regulation, both at the federal and state levels, and (2) Plaintiff asserts that the specific conduct underlying many of the Non-Per Se Counts is specifically regulated by FIPA. See Counts I, V, VII, IX, and XL.”

In doing so, the court appears to have read in a requirement that any claim must fit within one of three strictly-construed alternatives. To the contrary, our Supreme Court rejected the idea that the common law sets “exclusive ways the first element[] of a CPA claim can be established.” Klem, 176 Wn.2d at 785. Instead, it reiterated the Court “has allowed” its understanding of the scope of the CPA to “evolve” through a “gradual process.” Id.

Moreover, no case stands for the proposition that certain CPA claims can only allege deception but not unfairness. Our Supreme Court instead has stated that “an act or practice can be unfair without being deceptive” and emphasized that RCW 19.86.020’s plain language “clearly establishes that unfair acts or practices can be the basis for a CPA action.” Id. Moreover, it recently clarified, “a statutory violation can demonstrate that an action violates public policy and is unfair for the purposes of a non-per-se CPA violation.” Schiff v. Liberty Mut. Fire Ins. Co., 2 Wn.3d 762, 772, 542 P.3d 1002 (2024). Thus, in the court’s vernacular, a claim may be brought under neither options (1) or (3), but still survive summary judgment under option (2).

Nor does any authority dictate that CPA claims may not be brought for conduct that is prohibited by FIPA or otherwise part of an already “heavily

12

regulated industry.” 8 Instead, RCW 19.100.910 makes clear FIPA is a non- exclusive statute which “shall not affect any other remedy available at law.” (Emphasis added.) Likewise, the CPA must be “liberally construed that its beneficial purposes may be served.” RCW 19.86.920 (emphasis added); Short v. Demopolis, 103 Wn.2d 52, 56, 691 P.2d 163 (1984).

In Klem, our Supreme Court specifically rejected the idea that highly regulated industries are somehow exempt from CPA liability. 176 Wn.2d at 786. It cautioned, “‘There is no limit to human inventiveness,’” so it is “‘practically impossible’” for legislation “‘to define unfair practices so that the definition will fit business of every sort.’” Id. (internal quotation marks omitted) (quoting Panag, 166 Wn.2d at 48). Therefore, it reasoned, courts “must be able to determine whether an act or practice is unfair or deceptive to fulfill the protective purposes of the CPA.” Id.; see also Panag, 166 Wn.2d at 54 (holding that a “central purpose” of the CPA is to provide “‘an efficient and effective method of filling the gaps’” in the common law and statutes”) (internal quotation marks omitted) (quoting Short, 103 Wn.2d at 62).

For these reasons, the trial court was incorrect to conclude that acts or practices already regulated by FIPA or part of an industry that is generally regulated cannot also constitute violations of the CPA unless the regulatory statute deems them per se violations. Its ruling effectively created a regulatory “safe harbor” which would improperly restrict cognizable claims. The law does not

8 The State was incorrect to reiterate that position at oral argument. Wash. Ct. of Appeals oral arg., supra at 18 min., 57 sec. through 19 min., 12 sec.

13

support such a limitation, and we decline to narrow the CPA in this way.

Finally, the court erred with respect to the second “option” in another way.

It held that the State’s CPA claims failed to establish that NMC’s actions had the capacity to deceive a “substantial portion of the public.” Its analysis on this point relied on federal cases or otherwise distinguishable Washington precedent. No binding authority has imposed a minimum number or percentage of a population necessary for a claim to concern a “substantial portion” of the public. Rather, our Supreme Court long ago specifically declined to “to set a specific number of instances of unfair or deceptive conduct which necessarily establishes the potential for repetition” because it held that “a quantitative and mechanistic standard would be inherently unfair.” Burton v. Ascol, 105 Wn.2d 344, 349, 715 P.2d 110 (1986). 9 Similar to our holding regarding public impact, we hold as a matter of law that, if the State establishes that NMC engaged in acts proved to be deceptive or unfair, such conduct could satisfy option (2), i.e., that NMC engaged in acts and practices having the capacity to deceive a substantial portion of the public. Thus, the State is relieved from proving the percentage of the public which was or could be deceived.

In summary, we reverse the court’s ruling that dismissed the State’s non-

9 To be clear, whether conduct can affect a “substantial portion of the public” is,

strictly speaking, a distinct inquiry from the “public interest impact” element required for CPA claims. Compare TVI, 18 Wn. App. 2d at 821 and Mandatory Poster Agency, 199 Wn. App. at 518, with Kaiser, 161 Wn. App. at 719. However, we address both in tandem because the court’s rulings generally focused on the number of people implicated by NMC’s conduct.

14

per se CPA counts for purportedly failing to meet the first element of a CPA claim. For purposes of remand, we reiterate: (1) the State may seek to establish that any acts or practices presented in its various claims violated the CPA because they were unfair or deceptive, irrespective of whether they also violate FIPA or were otherwise regulated; and, (2) while the State must prove unfairness or deception, it need not further prove NMC’s actions deceived a “substantial portion of the public.”

3. Need to Establish Common Law Fraud We next turn to assignments of error more specifically directed to particular counts in the State’s second amended complaint.

The court dismissed the second count, which alleged a violation of RCW 19.100.170(4), because the State had not offered evidence “on many of th[e] elements” of a cause of action for “common law fraud.” This was error.

The plain language of RCW 19.100.170(4) prohibits franchisors from conduct that “would operate as a fraud or deceit upon any person.” Thus, a violation of RCW 19.100.170(4) could be established by proof of deceit without any reference to fraud. Moreover, we have held that the CPA “‘significantly differs from traditional common law standards of fraud and misrepresentation.’” TVI, 18 Wn. App. 2d at 822 (emphasis added) (quoting Deegan v. Windermere Real Est./Ctr.- Isle, Inc., 197 Wn. App. 875, 884, 391 P.3d 582 (2017)). By logical extension, the court erred in applying common law fraud standards to the State’s claims under either the CPA or FIPA.

4. Limiting RCW 19.100.180(2)(e) to “vendor kickbacks”

15

The court dismissed the State’s eighth cause of action brought under RCW 19.100.180(2)(e), holding that that provision “concerns undisclosed vendor kickbacks rather than monies a franchisor obtains from its customers on accounts serviced in part or in full by its franchisees.” This was error.

In full, that provision in FIPA directs that it is unlawful for a franchisor to “[o]btain money, goods, services, anything of value, or any other benefit from any other person with whom the franchisee does business on account of such business unless such benefit is disclosed to the franchisee.” RCW 19.100.180(2)(e).

“If the meaning of the statute is plain on its face, then we must give effect to that meaning as an expression of legislative intent.” Lenander v. Dep’t of Ret. Sys., 186 Wn.2d 393, 405, 377 P.3d 199 (2016). Here, the terms “anything of value,” “any other benefit,” and “any . . . other person with whom the franchisee does business” are unambiguously broad and inclusive. RCW 19.100.180(2)(e). What’s more, narrowing the statute’s scope as the court did to prohibiting “vendor kickbacks” renders the differences between “value” and “benefit” meaningless. State v. Roggenkamp, 153 Wn.2d 614, 624, 106 P.3d 196 (2005) (holding that statutes must be interpreted so that all the language used is given effect, with no portion rendered meaningless or superfluous).

Therefore, on remand, the State need not prove the commissions which customer properties paid to NMC were “vendor kickbacks” in order to prevail on this claim, but rather just that they were “of value” or a “benefit.”

5. Limiting Violations to Contracts Sought To Be Enforced In dismissing counts 14 and 15, the court held that only the contracts with

16

allegedly unconscionable terms that NMC sought to enforce could violate the CPA. We disagree.

Contrary to the trial court’s understanding, this court in Mellon v. Regional Trustee Services Corp., 182 Wn. App. 476, 334 P.3d 1120 (2014), did not announce such a holding. Rather, that case addressed whether “proposing a[n] [] agreement [which allegedly] . . . advanced a substantively or procedurally unconscionable contract term” was a “cognizable CPA claim.” Id. at 490-91 (emphasis added) (footnote omitted). And we held it would be, if proven. Id. Moreover, a rule limiting CPA violations to contracts a violator sought to enforce would be contrary to Kaiser, 161 Wn. App. at 721, which affirmed that the defendant violated the CPA by simply inducing people to enter into unconscionable agreements.

6. Applying Contract Law Defenses to CPA claims Next, the court appears to have held that unconscionability claims may be defeated by contract law defenses, including the defense that franchisees purchase franchises at their own risk. To the extent the court did so, it was error because we have held the CPA “reject[s] caveat emptor.” Deegan, 197 Wn. App. at 890, 884-85 (holding that the CPA “‘replaces the now largely discarded standard of caveat emptor with a standard of fair and honest dealing’”) (quoting 25 DAVID K. DEWOLF, KELLER W. ALLEN & DARLENE BARRIER CARUSO, WASHINGTON PRACTICE: CONTRACT LAW AND PRACTICE § 18:310.00, at 629 (3d ed. 2014)).

Stated even more broadly, “[g]rossly unfair or unconscionable contracts”

violate the CPA, and “the test for unfairness and deception differs from traditional

17

contract law defenses.” Kaiser, 161 Wn. App. at 722 (citation omitted); see also Young v. Toyota Motor Sales, U.S.A., 196 Wn.2d 310, 313, 472 P.3d 990 (2020) (“‘Buyer beware’ is not the law in the state of Washington. Instead, our [CPA] prohibits unfair or deceptive acts or practices in trade or commerce.”).

As to the State’s final assignment of legal error regarding its 13th count, we do not agree that NMC bore the burden to show its franchisee-requirements were “reasonable and necessary.” The State is correct that RCW 19.100.180(2)(h) prohibits a franchisor from imposing any standard of conduct on franchisees unless they “can sustain the burden of proving such to be reasonable and necessary.” But the State still bears the overall burden to establish liability. It cites no authority for the proposition the provision creates some sort of presumption a franchisor must overcome or somehow shifts the overall burden of persuasion at trial. DeHeer v. Seattle Post-Intelligencer, 60 Wn.2d 122, 126, 372 P.2d 193 (1962) (“Where no authorities are cited in support of a proposition, the court is not required to search out authorities, but may assume that counsel, after diligent search, has found none.”). Still, we remand the 13th count for trial because we conclude issues of material fact remain as to whether NMC’s restructuring requirements were reasonable and necessary business decisions. B. Genuine Issues of Material Fact Preclude Summary Judgment for Either As to the remaining arguments, we reverse the court’s order dismissing the State’s claims, and we decline to grant summary judgment in the State’s favor on nearly all of the counts, because we conclude that genuine issues of material fact remain which render resolution on summary judgment improper.

18

Our review is de novo, and summary judgment is appropriate only where there are no genuine issues as to any material fact and the moving party is entitled to a judgment as a matter of law. Hearst Commc’ns, Inc. v. Seattle Times Co., 154 Wn.2d 493, 501, 115 P.3d 262 (2005). A “material fact” is one upon which the outcome of the litigation depends. See Jacobsen v. State, 89 Wn.2d 104, 108, 569 P.2d 1152 (1977). 10 Further, we must view all material evidence and reasonable inferences in the light most favorable to the nonmoving party. Jacobsen, 89 Wn.2d at 108. We only affirm the grant of summary judgment if we determine, viewing all of the evidence in such a light, that reasonable persons could reach but one conclusion. Vallandigham v. Clover Park Sch. Dist. No. 400, 154 Wn.2d 16, 26, 109 P.3d 805 (2005). Where, by contrast, the record shows genuine issues of fact must still be resolved on a claim’s merits, such a claim “should have survived summary judgment.” See Lyons v. U.S. Bank Nat’l Ass’n, 181 Wn.2d 775, 789, 336 P.3d 1142 (2014).

As to CPA claims, the question of whether a defendant engaged in a deceptive act or practice presents an issue of law “when the facts are undisputed.” See Mandatory Poster Agency, 199 Wn. App. at 519 (emphasis added). But where

10 More specifically, we review summary judgment motions under a two-step burden-shifting framework. TracFone, Inc. v. City of Renton, 30 Wn. App. 2d 870, 875, 547 P.3d 902 (2024). The party moving for summary judgment bears an initial burden to show there is no disputed issue of material fact. Haley v. Amazon.com Servs., LLC, 25 Wn. App. 2d 207, 216, 522 P.3d 80 (2022). Then the nonmoving party must respond with admissible evidence demonstrating that a genuine issue of material fact remains. Pac. Nw. Shooting Park Ass’n v. City of Sequim, 158 Wn.2d 342, 351, 144 P.3d 276 (2006). Summary judgment is appropriate only where the nonmoving party cannot meet that burden. See id.

19

there is evidence to suggest a reasonable consumer likely would have been misled by a defendant’s actions, the nonmoving party has “at the very least, [] established an issue of material fact” as to the first element of a CPA claim. Rush v. Blackburn, 190 Wn. App. 945, 966-67, 361 P.3d 217 (2015). On such a record, a trial court may not determine whether an act is unfair or deceptive as a matter of law. See id.

We conclude that, except for the State’s final count—number 16 regarding arbitration clauses—reasonable minds could differ on facts material to whether or not NMC’s alleged acts and practices were deceptive, unfair, or otherwise unlawful. As a result, summary judgment disposition in either party’s favor is improper at this juncture, and we remand the first 15 counts for trial. But we direct the court to grant the State’s motion for summary judgment as to liability on the final claim. We group related claims together and address each in turn.

1. Counts 1 and 2: Failure to Disclose Facts to Prospective Franchisees The State’s first two counts allege that NMC violated the CPA (RCW 19.86.020) and FIPA (RCW 19.100.170(2), (4)) by failing to adequately disclose material facts to prospective franchisees. The State claims NMC did not disclose how many accounts a franchisee would need to service to attain the monthly “volume” they were purchasing or how many hours of work would be needed to attain that volume. The State also claims NMC did not disclose that dozens of its franchisees were “under-volume,” which created a deceptive net impression about how likely prospective franchises were to attain what they had purchased.

The State adduced evidence showing that such information was known to

20

NMC, e.g., that its former NMC operations vice president knew franchisees would consider this information important or that its former consultant noted that its staff believed a “guaranteed account provision” was “critical as a selling feature”.

In response, NMC argues that the purportedly withheld information was unknowable and speculative and therefore misleading, unhelpful, and immaterial.

A jury must decide whether NMC actually knew and then withheld the existence of this information, and whether such information was material to prospective franchisees’ decisions to contract with NMC. Cf. Robinson v. Avis Rent A Car Sys., Inc., 106 Wn. App. 104, 116, 22 P.3d 818 (2001). Therefore, neither party should prevail on summary judgment and we remand these first two counts for trial. 11 2. Count 3: Failure to Provide Purchased Volume The State’s third cause of action alleges that NMC violated the CPA, specifically RCW 19.86.020, by failing to provide franchisees with the monthly “volume” that they purchased.

The State adduced evidence that NMC’s managers understood the company was obligated to fulfill franchisees’ “monthly volume” over their franchise term and were aware there were too few accounts to do so, and, yet, withheld this information.

11 On appeal, NMC adds that the franchise agreements “explicitly cautioned prospective franchisees that success was not guaranteed and that they would face business risks and competition” and those “contractual warnings and admonishments eliminate any alleged deceptive ‘net impression,’” particularly because franchise disclosure documents advised franchisees to consult with an attorney. The import of these statements are for a jury to decide.

21

For its part, NMC submits that early versions of franchise agreements only made guarantees of volume heavily qualified by “conditions” and that franchisees were able to purchase additional “replacement guarantees.” NMC also offered evidence that some agreements permitted franchisees to get partial refunds if NMC did not offer franchisees accounts within 90 days, and the company promised to use its reasonable best efforts to replace any discontinued accounts within 180 days.

In reply, the State argues that NMC’s contractual conditions, disclaimers, and remedial measures serve as further evidence that its promises to franchisees about the value they purchased were “illusory.”

The evidence proffered by each party creates genuine issues of material fact as to whether NMC’s account assignment and replacement policies were fair and “absolved” it of alleged wrongdoing or rather, were illusory. Therefore, we remand the claim for trial.

3. Counts 4, 5, and 6: Underpriced Accounts, Mandatory Work, and Prohibition on Discussing Compensation

The State’s fourth count alleges that NMC violated the CPA, RCW 19.86.020, by unfairly underbidding client accounts. The State offered evidence that NMC admitted it had no policy for formulating account bids and did not track task-performance; franchisees complained accounts were underpriced; NMC managers knew franchisees netted less than minimum wage; and a former franchising director admitted it offered franchisees more work rather than raise pricing. In turn, in the fifth and sixth counts, the State alleges that NMC violated the CPA (RCW 19.86.020) and/or FIPA (RCW 19.100.180(1), (2)(j); RCW

22

19.100.190(1)) by engaging in unfair and deceptive dealings related to the assignment, servicing, and termination of client accounts. Moreover, the State adduced evidence that NMC imposed unfair and disproportionate fines and required franchisees to do extra work without extra pay.

In response, NMC argued to the trial court that the fourth, fifth, and sixth counts were legally meritless for reasons we have rejected. But NMC acknowledged that these claims should proceed to trial if their legal position proves unavailing, as it has. 12 We accept that concession and remand these counts for trial.

4. Counts 7 and 8: Concealment of NMC’s Earnings from Serviced Accounts The State’s seventh and eighth counts allege that NMC violated the CPA (RCW 19.86.020) and/or FIPA (RCW 19.100.180(2)(e); RCW 19.100.190(1)) because it did not disclose its earnings on franchisee-serviced accounts to the franchisees. The State in its summary judgment motion argued that NMC unlawfully failed to disclose the amount of money it received from the customers with whom franchisees did business, such as the “operating cost” fee it imposed on most accounts. The State adduced evidence that NMC had concealed these earnings to hide increases in its own profit, given that the franchisees worked for years without receiving pay increases.

In response, NMC argued that “what NMC may earn for its Operations

12 As to the fourth count, NMC argues for the first time on appeal that the State

simply “cherry-picked a few” accounts “that appeared to be unprofitable” as evidence of underbidding in violation of the CPA. Even assuming without deciding that we should consider this argument, this argument simply provides further evidence of a genuine issue of material fact.

23

Coordinators’ efforts or for other work that NMC is performing directly for the customer is not material to the franchisee–since that amount is not what the franchisee receives for its work.”

These differing characterizations of what the record shows demonstrate a genuine issue of material fact as to whether NMC actually failed to disclose any material information when it did not share the earnings it received from customers, such that it unlawfully withheld information from franchisees in bad faith. Therefore, we remand the seventh and eighth counts. 13 5. Counts 9 and 10: Excessive Service Fees The State’s ninth and tenth counts allege that NMC violated the CPA (RCW 19.86.020) and/or FIPA (RCW 19.100.180(2)(d); RCW 19.100.190(1)) by charging franchisees excessive “office support” fees, exceeding what was fair and reasonable. The State adduced evidence the fees disparately impacted certain franchisees more harshly than others, that management had admitted the high fee contributed to its profit margin, and that these fees were among the highest in the industry.

NMC responded that the State’s evidence did not prove the fee was excessive and argued it was fair because the billing and collection service allowed franchisees to focus on their cleaning businesses rather than taking on administrative burdens.

Once again, the parties’ conflicting characterizations of the record

13 On appeal, NMC newly contends such disclosures could be commercially unfeasible or misleading. Again, it is for a jury to decide whether this additional context explains its failure to provide certain information.

24

demonstrate that there is a genuine issue of material fact as to whether the fees were unfair and unreasonable so as to be unlawful. RCW 19.100.180(2)(h). A jury must decide such issues. Therefore, we remand these claims for trial.

6. Counts 11, 12, and 13: Required Restructuring The State’s eleventh, twelfth, and thirteenth counts allege that NMC violated the CPA (RCW 19.86.020) and/or FIPA (RCW 19.100.180(1), (2)(j), (g), (h)); RCW 19.100.190(1)) through mandatory restructuring it imposed on franchisees.

The State adduced evidence that NMC began to require franchisees to sign a comprehensive release and convert their franchises into corporations or LLCs in 2011 without understanding the terms. The State further adduced evidence that NMC instituted such requirements to evade regulatory oversight and caused franchisees to incur additional fees with no offsetting benefit. The State also offered evidence that NMC admitted that forming an LLC was not necessary to operate a cleaning business.

NMC responds that the challenged requirements reflected the exercise of reasonable ordinary business decisions needed to develop and grow. On appeal, NMC argues the requirements are “unremarkable” and simply “business decisions to maintain a viable company and franchise system.”

Again, there are genuine disputes of material fact as to whether or not the challenged restructuring requirements were necessary or reasonable. RCW 19.100.180(2)(h). Therefore, we remand these claims for a jury to decide.

7. Counts 14 and 15: Unconscionable Agreements The State’s fourteenth and fifteenth causes of action allege that NMC

25

violated the CPA (RCW 19.86.020) because its franchise agreements were procedurally and substantively unconscionable and, thus, unfair.

The State adduced evidence showing, as it characterized it, “NMC willfully failed to ensure that its franchisees entered the relationship with an understanding of NMC’s complex, harsh, one-sided terms.” The State also provided evidence NMC did not provide translated versions or interpreter services for franchisees it knew had limited English proficiency and lacked the means to pay for it on their own. The State also claimed other related provisions unfairly limited recourse for franchisees and created other “asymmetrical benefits” to NMC which were blatant and excessive.

In response, NMC argues the evidence in the record established otherwise.

NMC points to declarations showing inter alia that NMC sought to ensure prospective franchisees understood the business model before agreeing to contracts; that franchisees who did not speak English “would usually bring a translator with them, typically a friend or relative”; that NMC provided franchisees 14 days to review agreements before signing; and that franchisees were advised to consult with lawyers or other advisers as necessary. They also generally averred the evidence showed that franchisees were never forced to enter into the agreements and the State mischaracterized the provisions to make them appear unfair. 14

14 On appeal, NMC likewise cites declarations of a former NMC vice president for

the proposition that franchisees had a meaningful choice whether or not to enter the franchise relationship, and it disagrees key provisions in the agreements were “buried.” It also argues there is no evidence the challenged provisions rose to the level of being “monstrously harsh” so as to be unconscionable. It is for a jury to

26

Again, these differing accounts of the evidence demonstrate that genuine issues remain which preclude summary judgment. Reasonable minds could differ as to whether or not the challenged contract terms were made understandable to franchisees or were misleading, and whether the terms favored NMC in an excessive way such that they were unfair under the CPA. Therefore, we remand these claims as well.

8. Count 16: Out-of-State Arbitration Clause Finally, in contrast to the first fifteen counts, we agree with the State that the court should have granted the State’s motion for partial summary judgment on liability as to this final count. We conclude that there is no genuine issue of material fact as to whether NMC imposed an unfair or unreasonable out-of-state arbitration clause under the CPA and/or FIPA.

In Gandee v. LDL Freedom Enters., Inc., 176 Wn.2d 598, 604, 293 P.3d 1197 (2013), our Supreme Court held that mandatory out-of-state arbitration clauses posing prohibitive costs are unconscionable. See also Gorden v. Lloyd Ward & Assocs., P.C., 180 Wn. App. 552, 564, 323 P.3d 1074 (2014) (holding a binding out-of-state arbitration clause was procedurally unconscionable).

The State proffered evidence that some of NMC’s contracts included an arbitration clause with a Minnesota venue and it sought to enforce that provision. And the State adduced evidence this clause was unreasonable or unfair because NMC’s franchisees were people of limited means seeking to make ends meet who were living in Washington, making nearly any cost prohibitively expensive.

assess these defenses.

27

In response, NMC has not pointed to any evidence showing that any genuine issue of fact precludes summary judgment in the State’s favor. NMC simply argues the court was correct to reach the legal determination it did, which we find unavailing. Pac. Nw. Shooting Park Ass’n, 158 Wn.2d at 351 (holding “Once the moving party has met its burden, the burden shifts to the nonmoving party to present admissible evidence demonstrating the existence of a genuine issue of material fact. If the nonmoving party cannot meet that burden, summary judgment is appropriate.”). In fact, NMC concedes it sought arbitration in Minnesota for a group that included Washington franchisees.

It is also immaterial that the record includes evidence that some agreements and addendums did contemplate arbitration in Washington. That evidence does not negate the existence of the challenged out-of-state provisions, nor does it create a question of fact as to whether the out-of-state provisions were reasonable.

Therefore, upon remand, we direct the trial court to grant the State’s request for summary judgment on liability on the 16th claim.

But otherwise, we remand the first 15 counts for further proceedings, concluding genuine issues of material fact preclude summary judgment disposition in either party’s favor. See Rush, 190 Wn. App. at 966-67. C. Fees The State requests that we reverse the trial court’s order awarding NMC over three million dollars in attorney fees and costs, and it also seeks costs and fees on appeal. However, a request for attorney fees pursuant to RAP 18.1 and an applicable underlying law—here, RCW 19.86.080(1))—is premature where no

28

party has yet prevailed in the action before the trial court. See Bittner v. Symetra Nat’l Life Ins. Co., 32 Wn. App. 2d 647, 678, 558 P.3d 177 (2024).

Because we are remanding this suit which was dismissed on summary judgment, the case has not yet been decided on its merits and the prevailing party has not yet been ascertained. Thus, we hold that neither party is entitled to fees at this point in the litigation and hereby vacate the award granted below. See Dowler v. Clover Park Sch. Dist. No. 400, 172 Wn.2d 471, 486, 258 P.3d 676 (2011); cf. State v. CLA Est. Servs., Inc., 23 Wn. App. 2d 279, 306, 515 P.3d 1012 (2022) (affirming and awarding the State appellate fees, where it had prevailed in a bench trial on its claims alleging violations of the CPA). 15 III. CONCLUSION

We reverse the trial court’s summary judgment dismissal, vacate the fees awarded to Marsden and NMC, and order the matter remanded for further proceedings on the State’s claims consistent with this opinion.

WE CONCUR:

15 The State argues this matter must be reassigned to a different judge to ensure

just and fair proceedings on remand. We do not conclude the State has shown that the judge’s impartially might reasonably be questioned, as it avers. See State v. Solis-Diaz, 187 Wn.2d 535, 540, 387 P.3d 703 (2017). The statements the court made which the State references do not establish that it will be unable to preside over the case “with an open mind” in accordance with our opinion. See id. at 541.