Vernon v. Closets by Design Inc

District Court, W.D. Washington·Decided September 30, 2024·No. 2:23-cv-01180·Unknown

Opinion

UNITED STATES DISTRICT COURT AT SEATTLE CORLIS VERNON, CASE NO. 2:23-cv-1180-JNW Plaintiff, ORDER ON DEFENDANTS’ MOTION v. CLOSETS BY DESIGN, INC. and CBD

Defendants. 1. INTRODUCTION This matter comes before the Court on Defendants Closets by Design, Inc. (“CBD”) and CBD Franchising, Inc.’s (“CBDF”) motion to dismiss for lack of personal jurisdiction. Dkt. No. 27. After reviewing the briefing, the record, and the law, the Court finds oral argument unnecessary. Because the Court finds that it has specific personal jurisdiction over CBD and CBDF, the Court DENIES Defendants’ motion. 2. BACKGROUND CBD and CBDF are California-based companies. Through a license agreement, CBD allows CBDF “to utilize its trademark for the purpose of franchising pursuant to a written license agreement.” Dkt. No. 29 ¶ 2, 4. These franchises sell and install Closets By Design® “custom closets, garage cabinets[,]

and other organizers within a designated [geographic] territory.” Dkt. No. 16-2 at 2. There are two Washington CBD franchises, one serving “Seattle North WA” and the other serving “Tacoma/Seattle WA.” Dkt. No. 16 ¶¶ 21-22. John Kelly Reed is the CBD franchisee serving “Seattle North.” Dkt. No. 28 ¶ 5. Plaintiff Corlis Vernon, a resident of Mill Creek, Washington, saw a CBD ad on Facebook, advertising a purportedly time-limited 40-percent discount with

another 15 percent off if certain conditions were met. Dkt. No. 36-2 ¶¶ 1-2. Relying the advertised discount, Vernon called CBD and scheduled an in-home initial consultation with a sales representative. Id. ¶¶ 3-4. Vernon also visited the CBD website, www.closetsbydesign.com, and confirmed the 40- and 15-percent-off discounts. Id. ¶ 5. During the consultation, the sales representative told Vernon that, after applying the 40-plus-15-percent discount, the price for her custom closet would be

roughly $10,000, meaning that the regular price was roughly $19,600. Dkt. No. 36-2 ¶ 7. Vernon negotiated an even steeper discount and landed on $8,700 as the final price. Id. Vernon then contracted with CBD’s Washington franchisee to build her custom closet. Dkt. No. 28 at 6. Vernon alleges, however, that had she known CBD’s products “were not discounted as advertised, that they did not have the advertised regular price or market value, and that [she] was not receiving the advertised

discount, [she] would not have bought them and would not have paid as much as [she] did for them.” Dkt. No. 36-2 ¶ 9. Vernon’s claims stem from CBD and CBDF’s allegedly deceptive advertising campaigns. Specifically, Vernon alleges CBD and CBDF display advertisements on

their website, closetsbydesign.com, Facebook account, and physical mailers, “create[ing] an illusion that at any given time, customers are receiving a limited- time discount.” Dkt. No. 16 ¶ 30. But the sales always offer at least 40-percent off the “regular prices” and run in perpetuity because, even when they are set to expire on a specific date, the same discount will appear the next day for another stretch of time. Id. ¶ 32.

Although CBD franchises are independently owned, CBD and CBDF control all advertising efforts. Each franchisee contributes to CBD’s National Promotion and Protections Fund. Dkt. No. 28 ¶ 7. CBDF spends the funds on national and regional ad campaigns, including print, broadcast, and internet promotions. Id.; Dkt. No. 16-3 at 33. Per their Franchise Agreement, franchisees may only use advertising which CBDF has “either furnished or approved in writing in advance.” Id. at 32.

CBD and CBDF operate the closetsbydesign.com website, which list 63 locations across the United States and Canada. Dkt. No. 16 ¶ 18. Included are “Tacoma/Seattle WA” and “Seattle North WA,” which connect through hyperlinks to https://seattle.closetsbydesign.com/ and https://seattlenorth.closetsbydesign.com/. Id. ¶¶ 18-19. CBD and CBDF operate these location specific webpages, not the Washington franchisees. Id. Indeed, CBDF prohibits franchisees from establishing

separate websites or conducting business online without CBDF approval.1 Dkt. No. 16-3 at 7.

In addition, CBD and CBDF send geographically targeted ads from the CBD Facebook account to Washington consumers that promote their perpetual 40 percent plus 15 percent off discount. Dkt. No. 16 ¶¶ 20, 45. CBD and CBDF also send print mailers to Washington consumers from their California address marketing these discounts. Id. ¶ 40. Customers cannot buy CBD services from CBD’s website or Facebook

account. Instead, in addition to advertising 40-percent discounts, CBD’s website invites consumers to “schedule a free in-home design consultation.” Dkt. No. 36-1 at 2. This prompts the consumer to fill in their contact information and preferred appointment times. Dkt. No. 36-1 ¶¶ 2-4. Potential customers can submit this information by clicking “Let’s Get Started” on the www.closetsbydesign.com web page or the location-specific webpages including seattle.closetsbydesign.com and seattlenorth.closetsbydesign.com. Id.

1 The CBD Franchise Agreement states:

[CBDF] will provide [franchises] with web pages and links to those web pages on any general Closets By Design web site [it] maintain[s.] [Franchises] are prohibited from establishing or maintaining any other web sites related to [their] Business or Location without [CBDF’s] prior written consent and, except to the extent that [franchises] receive customers through the localized web page [CBDF] provide[s] to [them] or to which [CBDF] ha[s] consented, [franchises] may not establish or advertise promote or sell [CBD] services or products electronically or via the Internet.

Dkt. No. 16-3 at 7. This is one way that CBDF identifies prospective customers for CBD franchisees. CBDF generates prospective customers for custom organizer services

(“Leads”) through “displays in home centers, catalogs, CBDF’s website, direct mail[,] [and] telephone sales.” Dkt. No. 16-2 at 27. Then in exchange for a fee, CBDF refers these Leads to the franchisee in a given geographic territory. Id. Vernon alleges that CBD’s website generates these Leads for its Washington franchisees. Franchise employees then conduct the in-home consultation and install the custom design. Dkt. No. 28 ¶ 7.

CBD franchisees must honor all discounts listed in CBD and CBDF advertisements. Dkt. No. 30 at 6. CBDF also reserves the right to control franchisee pricing. Specifically, CBDF “may exercise rights with respect to the pricing of products and services to the fullest extent permitted by then-applicable law.” Dkt. No. 16-3 at 21. CBDF’s rights “include (without limitation)” the following: [P]rescribing the maximum and/or minimum retail prices which [a franchisee] may charge customers for the goods and/or services offered and sold at [their] franchised Business, recommending retail prices[,] advertising specific retail prices for some or all products by [their] franchised Business, which prices [a franchisee] will be compelled to observe, engaging in marketing, promotional prices . . . and otherwise mandating, directly or indirectly the maximum and/or minimum retail prices which [their] franchised Business may charge the public for the products and services it offers[.]

Id. at 21-22. Contrariwise, Jerry Egner, CBDF President, states that “[w]hile CBDF has a proprietary price book of suggested retail prices for numerous components of home organization systems, CBDF does not control the pricing of its franchisees either on the component or system level and franchisees are free to negotiate prices with the consumer directly.” Dkt. No. 28 ¶ 7. Egner adds that although “there are certain national and regional promotions offered from time to time, because home

Free access — add to your briefcase to read the full text and ask questions with AI

Vernon v. Closets by Design Inc, (W.D. Wash. 2024).

Vernon v. Closets by Design Inc (Vernon v. Closets by Design Inc) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

Related

World-Wide Volkswagen Corp. v. Woodson
444 U.S. 286 (Supreme Court, 1980)
Burger King Corp. v. Rudzewicz
471 U.S. 462 (Supreme Court, 1985)
Cochran v. Quest Software, Inc.
328 F.3d 1 (First Circuit, 2003)
Goodyear Dunlop Tires Operations, S. A. v. Brown
131 S. Ct. 2846 (Supreme Court, 2011)
Mavrix Photo, Inc. v. Brand Technologies, Inc.
647 F.3d 1218 (Ninth Circuit, 2011)
Menken v. Emm
503 F.3d 1050 (Ninth Circuit, 2007)
Zippo Manufacturing Co. v. Zippo Dot Com, Inc.
952 F. Supp. 1119 (W.D. Pennsylvania, 1997)
WASH., DEPT. OF REVENUE v. Www. Dirtcheapcig. Com
260 F. Supp. 2d 1048 (W.D. Washington, 2003)
Seahavn, Ltd. v. Glitnir Bank
226 P.3d 141 (Court of Appeals of Washington, 2010)
Axiom Foods, Inc. v. Acerchem International, Inc.
874 F.3d 1064 (Ninth Circuit, 2017)
Mears v. City of Spokane
60 P. 1127 (Washington Supreme Court, 1900)
Schwarzenegger v. Fred Martin Motor Co.
374 F.3d 797 (Ninth Circuit, 2004)
Erica Davis v. Cranfield Aerospace Solutions
71 F.4th 1154 (Ninth Circuit, 2023)