United States District Court, D. Vermont
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.
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
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.
The Allegations of the Amended Complaint.
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.
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.
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.
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.
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. William Vinci signed the Agreement on
behalf of TNF.
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.)
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.
Conclusions of Law and Analysis.
Enforcement of a Forum Selection Clause Under Rule
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). ...