Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Money Mailer, LLC v. Brewer

United States District Court, W.D. Washington, Seattle

June 28, 2018

MONEY MAILER, LLC, Plaintiff,
v.
WADE G. BREWER, Defendant. WADE G. BREWER, Counterclaim Plaintiff,
v.
MONEY MAILER, LLC, et al., Counterclaim Defendants.

          ORDER GRANTING IN PART BREWER'S MOTION FOR SUMMARY JUDGMENT

          Robert S. Lasnik United States District Judge.

         This matter comes before the Court on Wade G. Brewer's “Motion for Partial Summary Judgment for Violations of FIPA and CPA.” Dkt. # 105. Brewer alleges that, pursuant to his contract with Money Mailer Franchise Corporation (“MMFC”), he was required to purchase goods and service from Money Mailer, LLC (“MMLLC”) and that the franchisor marked up the charges for printing services by over 100% without adequate disclosure. Brewer seeks a summary determination that these practices violated the Washington Franchise Investment Protection Act (“FIPA”) and the Washington Consumer Protection Act (“CPA”).

         Summary judgment is appropriate when, viewing the facts in the light most favorable to the nonmoving party, there is no genuine issue of material fact that would preclude the entry of judgment as a matter of law. The party seeking summary dismissal of the case “bears the initial responsibility of informing the district court of the basis for its motion” (Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)) and “citing to particular parts of materials in the record” that show the absence of a genuine issue of material fact (Fed. R. Civ. P. 56(c)). Once the moving party has satisfied its burden, it is entitled to summary judgment if the non-moving party fails to designate “specific facts showing that there is a genuine issue for trial.” Celotex Corp., 477 U.S. at 324. The Court will “view the evidence in the light most favorable to the nonmoving party . . . and draw all reasonable inferences in that party's favor.” Krechman v. County of Riverside, 723 F.3d 1104, 1109 (9th Cir. 2013). Summary judgment should be granted where the nonmoving party fails to offer evidence from which a reasonable jury could return a verdict in its favor. FreecycleSunnyvale v. Freecycle Network, 626 F.3d 509, 514 (9th Cir. 2010).

         Having reviewed the memoranda, declarations, and exhibits submitted by the parties and having heard the arguments of counsel, the Court finds as follows:

         BACKGROUND

         As the Court has previously summarized (Dkt. # 47 and # 103), MMFC contracts with franchisees to operate direct mail advertising businesses within a franchised territory. MMFC requires franchisees to contract with MMLLC for various goods and services that are deemed integral to the franchised business, including “printing and inserting advertisements into shared mail envelopes, list procurement, and freight procurement for delivery to the United States Post Office.” Dkt. # 22-1 (MMFC Franchise Disclosure Document) at 12. Until 2013, MMLLC performed the printing and other production services itself, but transitioned those activities to third party Trend Offset Printing Services pursuant to an agreement dated November 15, 2012. Dkt. # 109-6.

         MMFC and MMLLC are separate entities, but there is significant organizational overlap between the two companies. Many of the senior officers and managers are the same. In addition, to requiring franchisees to pay MMLLC for all of their printing, production, distribution, and mailing needs, MMFC also allows MMLLC to bill and collect charges, fees, and royalties from franchisees on behalf of both companies. The companies, hereinafter referred to together as “Money Mailer, ” do not dispute that they operate as one for purposes of FIPA. Dkt. # 122 at 16.

         When Brewer signed a ten-year franchise agreement with Money Mailer in June 2011, he was aware that he would have to purchase shared mailing production services from the franchisor (Dkt. # 22-1 at 12, 28, and 39-40). He was specifically informed that printing costs would average $115 per spot, [1] that other costs related to the production of the shared mailing would be approximately $2, 245 per month, and that he would be charged royalties and marketing fees at specified rates. Dkt. # 22-1 at 21; Dkt. # 22-4 at 66-67. MMLLC's price lists at the time show that the lowest price it was charging for printing services was $118 per spot. Dkt. # 109-2 at 2. Other types of production goods and services, including envelopes, the creation of mailing lists, insertion, and postage, were separately listed and billed. Dkt. # 109-2 at 3. By 2014, the printing and fixed costs had increased by 4-5%. Dkt. #109-4 at 2-3. There is no evidence that Brewer had or was given any information regarding Money Mailer's costs for these goods and services. Nor is there any indication that the prices listed for printing costs included reimbursement for any other expenses or services.

         Starting in 2012, Brewer began complaining about errors in the invoices and statements issued by Money Mailer. Brewer asserted that credits he had received had been retroactively reversed and that Money Mailer reneged on agreements regarding credits and pricing. He also began to suspect that Money Mailer was not providing freight services at cost and requested documentation regarding those charges. Dkt. # 26 at ¶ 9. In September 2015, Brewer alleged in support of his counterclaims that Money Mailer was charging unreasonable fees and costs that had no relationship to the actual costs incurred, identifying handling, zone handling, postage, printing, and freight charges as examples. Dkt. # 12 at ¶¶ 1.8, 3.5, and 4.2. Brewer did not provide any specifics regarding the alleged overcharges: at the time, his theory seemed to be that Money Mailer's practice of offering credits and rate changes was evidence of a markup of some unknown amount. At various points, he alleged that his efforts to obtain evidence or documentation regarding Money Mailer's true costs for freight, printing, and other services had been rebuffed. Dkt. # 12 at ¶¶ 3.35, 3.39, and 3.40.

         During discovery in this litigation, Money Mailer produced a 2014 Advisory Board PowerPoint presentation that showed that the average cost to print a spot was $44.53 in 2012 and $37.22 in 2014. Dkt. # 109-1 at 32. According to Money Mailer's own calculations, it was receiving per spot revenue of $97.13 in 2012 and $98.60 in 2014. Id.[2] Thus, Money Mailer internally claimed a 118-165% mark up of its printing costs as one of its “Key Financial Metrics.” Money Mailer does not deny that it charges franchisees twice what it costs to print the advertisements.

         DISCUSSION

         A. Violation of FIPA

         FIPA imposes certain rights and prohibitions on the relationship between a franchisor and a franchisee, often referred to as the franchisee's bill of rights. Of particular importance in the context of this motion is the statutory declaration that it is an unfair or deceptive act and a violation of FIPA for any person to “[s]ell, rent, or offer to sell to a franchisee any product or service for more than a fair and reasonable price” RCW 19.100.180(2)(d).[3] Selling printing services to a franchisee at more than twice what those services cost violates this provision. While it is likely that the courts of Washington would find that any percentage markup on the costs of materials is a violation of FIPA (see Nelson v .Nat'l Fund Raising Consultants, Inc., 64 Wn.App. 184, 191-93 (1992)), [4] the Court need not resolve that issue to find that, as a matter of law, selling a franchisee printing services for twice what they cost is not a “fair and reasonable price.” To hold otherwise would allow undisclosed profit centers and vitiate FIPA's essential purpose to protect franchisees “from oppressive practices historically associated with the sale of franchises.” Rutter v. BX of Tri-Cities, Inc., 60 Wn.App. 743, 748 (1991).

         Money Mailer argues that it provides such overwhelming benefits to its franchisees in the form of its integrated printing-insertion-mailing methodology that the prices it charges for printing are eminently reasonable. This argument fails, both on the law and on the facts. As a matter of law, huge markups in the price of a product or service that a franchisee is required to purchase from the franchisor are simply not permitted. The market has established a fair and reasonable cost for the type of printing services provided to the franchisees. It cost Money Mailer approximately $45 per spot to do it in-house, and it was able to obtain the same printing services from a third party for approximately $38 per spot. It is both unreasonable and unfair to charge the franchisees two or three times that much. As a matter of fact, Money Mailer separately charged franchisees for printing, insertion, envelopes, mailing list generation, postage, royalties, and a host of other services. See Dkt. # 109-3. Whatever benefits are ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.