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Vinci v. V.F. Corp.

United States District Court, D. Vermont

February 21, 2018

V.F. CORP., VF OUTDOOR, LLC, Defendants.[1]


          Christina Reiss, District United States District Court Judge.

         Plaintiffs William and Linda Vinci (the "Vincis") and TNF Gear, Inc. ("TNF") (collectively, "Plaintiffs") bring state law claims against Defendants V.F. Corp. ("VF") and VF Outdoor, LLC ("VF Outdoor") (collectively "Defendants") arising out of the purchase and sale of The North Face branded products. Pending before the court are Defendant VF's motion to dismiss Plaintiffs' claims against it for lack for personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2) (Doc. 10) and Defendants' motion to dismiss the Vincis' personal claims for failure to plead fraud with particularity and failure to state a claim under Fed.R.Civ.P. 9(b) and 12(b)(6) (Doc. 11).

         The parties completed their briefing on August 17, 2017. The court heard oral argument on October 19, 2017, whereupon 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 underpriced 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 VF, 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 VF. On information and belief, [VF Outdoor] is the owner of The North Face brand, and operates a division under the tradename, 'The North Face.'" Id. at 1, ¶ 4. The Amended Complaint includes a jury demand and seeks $5 million in damages.

         On July 18, 2017, Defendants moved to dismiss all claims against VF for lack of personal jurisdiction, arguing that Plaintiffs have not established that VF has sufficient minimum contacts with Vermont to subject it to suit in this state. In support of their motion, Defendants included two affidavits, one from VF Outdoor's Senior Credit Manager Lisa Long and one from VF's Assistant Secretary and Assistant General Counsel Mark Townsend. Ms. Long avers that VF Outdoor is a wholly owned subsidiary of VF but that it is a "separate and distinct entity[.]" (Doc. 10-1 at 1, ¶ 2.) She further avers that VF "does not directly control day-to-day operations of VF Outdoor, " that VF "has had no regular contacts or dealings with William or Linda Vinci or TNF Gear[, ] Inc. in Vermont[, ]" and that VF "has not directly shipped or sold The North Face branded products to any of the Plaintiffs in this case and has no agreement with Plaintiffs." Id. at 1-2, ¶3-4.

         Mr. Townsend avers that VF "conducts business primarily through its many subsidiaries around the world[, ]" but that VF Outdoor "independently designs, procures, markets and distributes branded outdoor and activity-based lifestyle apparel, footwear, and related products for the U.S. market, including for The North Face brand." (Doc. 10-2 at 1, ¶ 3.) He further avers that VF "has few, if any, regular, direct contacts with persons in Vermont" and that VF "has not directly shipped or sold The North Face branded products to any of the Plaintiffs in this case and has no agreement with Plaintiffs." Id. at 2, ¶4.

         Plaintiffs opposed the motion to dismiss on jurisdictional grounds and included an affidavit from William Vinci, wherein he avers that "[t]hroughout the course of my dealings with VF Outdoor and VF[], and based on my review of publicly available information, I have never been able to tell where one business begins and the other ends." (Doc. 14-1 at 4, ¶ 11.) He further avers that "[p]ersonnel with whom I regularly interacted seemed to frequently switch jobs from one company to the other[, ]" and that when he communicated with both VF and VF Outdoor employees, he uniformly received email replies from "" addresses with signatures that "described the correspondent's affiliation as simply 'The North Face."' Id. at 4-5, ¶ 11- Mr. Vinci also references a Fortune Magazine article published in February 2017 and attached to his affidavit which he characterizes as proof that VF "itself was responsible for the decision to clear extra unsold merchandise through outlet stores." Id. at 5, ¶ 14.

         II. Conclusions of Law and Analysis.

         A. VF's Motion to Dismiss for Lack of Personal Jurisdiction.

         "In the absence of a federal statute specifically directing otherwise, and subject to limitations imposed by the United States Constitution, [courts] look to the law of the forum state to determine whether a federal district court has personal jurisdiction over a foreign corporation." Brown v. Lockheed Martin Corp., 814 F.3d 619, 624 (2d Cir. 2016) (citing Fed.R.Civ.P. 4(k)(1)(A) (federal courts may exercise personal jurisdiction over a defendant "who is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located")); see also Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir. 1996) ("[T]he amenability of a foreign corporation to suit in a federal court in a diversity action is determined in accordance with the law of the state where the court sits, with federal law entering the picture only for the purpose of deciding whether a state's assertion of jurisdiction contravenes a constitutional guarantee") (alteration in original) (internal quotation marks omitted). "On a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of showing that the court has jurisdiction over the defendant." Metro. Life Ins. Co. at 566.

         There are two types of personal jurisdiction: general personal jurisdiction and specific personal jurisdiction. A corporation is subject to general personal jurisdiction in a particular forum when '"the continuous corporate operations within a state [are] so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities.'" Goodyear Dunlop Tires Operations., S.A. v. Brown, 564 U.S. 915, 924 (2011) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 318 (1945)). For a corporation, "the paradigm forum for the exercise of general jurisdiction is ... one in which the corporation is fairly regarded as at home." Id.

         Specific personal jurisdiction, by contrast "aris[es] out of or relate[s] to the defendant's contacts with the forum." Id. at 923-24 (quoting Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n.8 (1984)). "As a rule in these cases, [the Supreme Court] has inquired whether there was 'some act by which the defendant purposefully avail[ed] itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.'" Id. at 924 (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)). "[A] State may authorize its courts to exercise [specific] personal jurisdiction over an out-of-state defendant if the defendant has 'certain minimum contacts with [the State] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" Id. at 923 (quoting Int 7 Shoe, 326 U.S. at 316 (internal quotation marks omitted)). Thus, where a plaintiff asserts the court's specific personal jurisdiction over a defendant, the court must first determine if the defendant has sufficient minimum contacts to establish jurisdiction. Only if minimum contacts exist must the court then decide if the exercise of jurisdiction would be reasonable under the circumstances. See Metro. Life Ins. Co., 84 F.3d at 567-68. As the Second Circuit has explained:

[I]n resolving questions of personal jurisdiction in a diversity action, a district court must conduct a two-part inquiry. First, it must determine whether the plaintiff has shown that the defendant is amenable to service of process under the forum state's laws; and second, it must assess whether the court's assertion of jurisdiction under these laws comports with the requirements of due process.

Ehrenfeld v. Mahfouz, 489 F.3d 542, 547 (2d Cir. 2007) (quoting Metro. Life Ins., 84 F.3d at 567).

         In Vermont, state courts may exercise personal jurisdiction over a non-resident defendant "to the full extent permitted by the . . . Due Process Clause" of the Fourteenth Amendment. State v. Atl. Richfield Co.,2016 VT 22, ¶ 10, 201 Vt. 342, 349, 142 A.3d 215, 220; see also In re Roman Catholic Diocese of Albany, N.Y., Inc., 745 F.3d 30, 38 (2d Cir. 2014) ("Vermont's long-arm statute reflects a clear policy to assert jurisdiction over individual defendants to the full extent permitted by the Due Process Clause.") (internal citation, footnote, and quotation marks omitted). As a result, "the first part of [the] inquiry-the interpretation of the Vermont law governing service of process- merges with the second part of the ...

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