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Vinci v. V.F. Corp.

United States District Court, D. Vermont

January 9, 2018

WILLIAM VINCI, LINDA VINCI, TNF GEAR, INC., Plaintiffs,
v.
V.F. CORP., VF OUTDOOR, LLC, Defendants.

          OPINION AND ORDER TRANSFERRING TNF GEAR, INC.'S CLAIMS AGAINST DEFENDANT VF OUTDOOR, LLC TO THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA, OAKLAND DIVISION (Doc. 9)

          Christina Reiss, District Judge.

         Plaintiffs William and Linda Vinci (the "Vincis") and TNF Gear, Inc. ("TNF") bring state law claims against Defendants V.F. Corp. ("V.F. Corp.") and VF Outdoor, LLC ("VF Outdoor"), arising out of the parties' "business arrangement" for the purchase and sale of The North Face branded products. Pending before the court is Defendant VF Outdoor's motion to dismiss Plaintiff TNF's claims under Fed.R.Civ.P. 12(b)(1), 12(b)(3), and 12(b)(6) on the basis of a forum selection clause contained within a Multiparty Guaranty Agreement (the "Agreement") between TNF, VF Outdoor, and a non-party corporation controlled by the Vincis (Doc. 9).[1]

         The parties completed their briefing on August 17, 2017. The court heard oral argument on October 19, 2017, after which it took the pending motions under advisement. Plaintiffs are represented by David E. Bond, Esq. Defendants are represented by R. Jeffrey Behm, Esq.

         I. The Allegations of the Amended Complaint.

         The Vincis are husband and wife and the sole shareholders of TNF, a Vermont corporation with its principal place of business in Burlington. In 2001, TNF opened The North Face Store @ KL Sport in Shelburne, Vermont, which was later moved to College Street in Burlington and then to 90 Church Street in Burlington. TNF's store sold only The North Face branded apparel purchased at wholesale. In their Amended Complaint, Plaintiffs allege that until 2015, "The North Face was positioned as a premium brand, " and Defendants required them to adhere to manufacturer approved pricing plans that dictated correspondingly high retail prices. (Doc. 5 at 3, ¶ 11.) Plaintiffs allege that Defendants "represented to Plaintiffs that these policies applied to all retailers selling The North Face products." Id. at ¶ 9.

         In early 2015, Plaintiffs placed their yearly order for winter apparel, totaling approximately $1.2 million in merchandise. In the fall of 2015, after Plaintiffs accepted delivery of those products, Defendants allegedly dramatically reduced their wholesale prices for sales made to third-party vendors. These third-party vendors, in turn, sold the discounted merchandise at significantly reduced retail prices to the general public, in violation of the marketing policies with which Defendants required Plaintiffs to comply. Plaintiffs claim that they were unable to compete with the significantly reduced prices, and that even if they could match them, they were barred from doing so pursuant to their promise to adhere to Defendants' manufacturer approved pricing plans. Plaintiffs allege that they fell "deeply into debt[, ]" id. at 3, ¶ 13, and reported this to Defendants who promised to "reign[] in" the third-party discounters. Id. at 4, ¶ 14.

         In 2016, Plaintiffs purchased $650, 000 in winter apparel inventory, and in the fall of that year Defendants again allegedly offered the same apparel to third-party vendors at steep discounts. Plaintiffs allege that they were again substantially under priced by other retailers and were unable to maintain profitability. "As a result of Defendants' actions, the Vincis exhausted their savings and their credit, and in under 20 months saw their business go from a successful enterprise to the verge of failure." Id. at 4, ¶ 17. The Vincis claim they offered to sell their business to Defendants, but that Defendants refused to entertain a fair market value purchase.

         On May 23, 2017, Plaintiffs filed this suit against V.F. Corp., alleging breach of contract, promissory estoppel, breach of the implied covenant of good faith and fair dealing, and fraudulent concealment under Vermont common law. On June 19, 2017, Plaintiffs amended their complaint to include VF Outdoor as a defendant, stating that VF Outdoor "is a wholly-owned subsidiary of [V.F. Corp.] On information and belief, [VF Outdoor] is the owner of The North Face brand, and operates a division under the trade name, 'The North Face.'" Id. at 1. The Amended Complaint includes a jury demand and seeks $5 million in damages.

         On July 18, 2017, Defendant VF Outdoor sought dismissal of the claims against it on the basis of the forum selection clause in section 13 of the Agreement. VF Outdoor included the affidavit of Lisa Long with its motion, which incorporated the Agreement as an exhibit. Ms. Long serves as Senior Credit Manager at VF Outdoor and signed the Agreement on its behalf.[2] William Vinci signed the Agreement on behalf of TNF.

         Section 10 of the Agreement is entitled "Applicable Law" and states that "this guaranty shall be governed by, and shall be construed and enforced in accordance with, the internal law of the state of California, without regard to conflict of laws principles." (Doc. 9-3 at 6.) Section 13 is entitled "Consent to Jurisdiction" and states in pertinent part that "any legal action or proceeding with respect to [the Agreement] . . . shall be brought in the courts of the State of California, County of Alameda or the United States of America for the Northern District of California, Oakland Division[.]" (Doc. 9-3 at 6.)

         VF Outdoor argues that section 13 divests the court of jurisdiction over any claims arising out of the business relationship between itself and TNF. Plaintiffs oppose both dismissal and transfer, asserting that the Agreement was the product of both procedural and substantive unconscionability. They ask the court to decline to enforce section 13 of the Agreement on that basis.

         II. Conclusions of Law and Analysis.

         A. Enforcement of a Forum Selection Clause Under Rule 12.

         VF Outdoor relies on three subsections of Fed.R.Civ.P. 12(b) for its motion to enforce the forum selection clause in the Agreement, pointing out that the Second Circuit has refused "to pigeon-hole these claims into a particular clause of Rule 12(b)." Asoma Corp. v. SK Shipping Co.,467 F.3d 817, 822 (2d Cir. 2006). Clause (b)(1) of Fed. R Civ. P. 12 allows the court to dismiss claims for lack of subject matter jurisdiction, clause (b)(3) permits dismissal for improper venue, and clause (b)(6) provides for dismissal when plaintiffs fail to state a claim for which relief can be granted. See Fed. R. Civ. P. 12(b). Recent guidance from the Supreme Court counsels against using Rule 12 as a vehicle for enforcing forum selection clauses. See Atlantic Marine Const. Co. v. U.S. Dist. Ct. for W. Dist. of Texas,134 S.Ct. 568, 579 (2013) (holding that district courts may not dismiss on the basis of improper venue under Rule 12(b)(3) where venue is otherwise proper but a forum selection clause governs). ...


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