Money Mailer, LLC v. Brewer ( 2019 )

This opinion was
yHKEEv
' IN CLEma OFFICE X
filed for record
atXa»von
•umsEcoum;enoE OF\Mik8HMsraN
M Susan L. Carlson
Supreme Court Clerk
CHIEF JUSTKE
IN THE SUPREME COURT OF THE STATE OF WASHINGTON
CERTIFICATION FROM THE UNITED
STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF WASHINGTON No. 96304-5
IN
En Banc
MONEY MAILER, LLC,
Filed SEP 1 9
Plaintiff,
WADE G. BREWER,
Defendant.
WADE G. BREWER,
Counterclaim Plaintiff,
V.
MONEY MAILER, LLC, and MONEY
MAILER FRANCHISE CORP, a Delaware
corporation.
Counterclaim Defendants.
Money Mailer, LLC v. Brewer(Wade G.), No. 96304-5
WIGGINS, J.—The United States District Court for the Western District of
Washington asks us to answer two certified questions about the meaning of "fair and
reasonable price" in ROW 19.100.180(2)(d), part of the Franchise Investment
Protection Act (PIPA):
[(1)] For purposes of FIPA's prohibition on selling "to a franchisee any
product or service for more than a fair and reasonable price"
(ROW 19.100.180(2)(d)), may the franchisee rely on the price at which
the franchisor is able to obtain the product or service in the absence of
evidence indicating that the price was not a true market price?
[(2)] Does a franchisor violate ROW 19.100.180(2)(d) as a matter of law
when it charges the franchisee twice what it pays for a product or
service?
Order Certifying Questions to the State Supreme Ct. Money Ma/Ve/"Certification Order)
at 4-5.
In answering these questions, we first define "fair and reasonable price" as a
question of fact regarding what prudent franchisors and franchisees in similar
circumstances would consider an appropriate price. In light of this definition, we
answer both questions in the negative. We hold that (1) the fair and reasonable price
is not inherently established by the price at which the franchisor obtains the good and
(2) a franchisor does not violate the FlPA as a matter of law by selling a product or
service to a franchisee for twice the price at which the franchisor obtained it.
Money Mailer, LLC v. Brewer(Wade G.), No. 96304-5
FACTS AND PROCEDURAL HISTORY
In 2011, Money Mailer^ and Wade Brewer entered a 10-year
franchisor/franchisee relationship. Money Mailer, LLC v. Brewer, 2018 WL 3156901,
at *2 (W.D. Wash. June 28, 2018)(Order Granting in Part Brewer's Mot. for Summ.
J.). Money Mailer is an "envelope-based direct marketing company" whose
franchisees sell local businesses advertisement space in Money Mailer's shared
envelopes, which are mailed to potential customers in the area. Appellants' Opening
Br. on Certified Questions (Appellant's Br.) at 4-6. Money Mailer requires its
franchisees to enter into contracts with Money Mailer for services related to "'printing
and inserting advertisements into shared mail envelopes.'" Money Mailer, 2018 WL
3156901, at *2.
In 2015, Money Mailer sued Brewer in federal district court, alleging breach of
contract and nearly $2 million in damages. Brewer counterclaimed against Money
Mailer, arguing, among other things, that Money Mailer had violated the FlPA by
selling him "products and services . . . at more than a fair and reasonable price,"
contrary to ROW 19.100.180(2)(d).
Brewer moved for partial summary judgment on the alleged FlPA violation. The
district court found it undisputed that Money Mailer sold printed advertisements to
Brewer at twice the price at which Money Mailer obtained and/or produced them.
■' Brewer counterclaimed against both Money Mailer LLC and Money Mailer Franchise
Corporation. Due to the "significant organizational overlap" between the companies, the district
court treated them as one entity for purposes of the FiPA. Money Mailer, LLC v. Brewer, 2018
WL 3156901, at *2 (W.D. Wash. June 28, 2018) (Order Granting in Part Brewer's Mot. for Summ.
J.). The two organizations did "not dispute that they operate as one for the purposes of FiPA." Id.
We adopt the Money Mailer reference to both organizations herein.
Money Mailer, LLC v. Brewer(Wade GJ, No. 96304-5
Money Mailer, 2018 WL 3156901, at *2. The court found that this markup violated
RCW19.100.180(2)(d)as a matter of law and, on this ground, granted in part Brewer's
summary judgment motion. Id. at *3-4.
In concluding that Money Mailer's behavior violated the FlPA, the district court
relied on two conclusions regarding Washington law:
First, the Court impliedly found that a franchisee may generally rely on
the price at which a franchisor purchased a particular good or service to
show what the "fair and reasonable price" for that service is. Second, the
Court found that selling a franchisee a particular good or service for twice
what it cost the franchisor is not a "fair and reasonable price" and violates
FlPA as a matter of Washington law.
Money Mailer Certification Order at 4. After denying Money Mailer's motion for
reconsideration and/or interlocutory review, the district court certified two questions to
this court, asking us to clarify whether those two rules of law are correct. Id. at 4-6.
The district court first asks:
For purposes of FIPA's prohibition on selling "to a franchisee any product
or service for more than a fair and reasonable price"
(RCW 19.100.180(2)(d)), may the franchisee rely on the price at which
the franchisor is able to obtain the product or service in the absence of
evidence indicating that the price was not a true market price?
Id. at 4. Recognizing that Washington law differs from many states in the protection it
allows to franchisees, the court "impliedly found that a franchisee may generally rely
on the price at which a franchisor purchased a particular good or service to show what
the 'fair and reasonable price' for that service is." Id. Put differently, this question asks.
Is the price at which the franchisor obtains the good or service inherently the fair and
reasonable price? See Allen v. Dameron, 187 Wash. 2d 692, 701, 389 P.3d 487(2017)
Money Mailer, LLC v. Brewer(Wade G.), No. 96304-5
("We have the authority to reformulate certifiecl questions." (citing Danny v. Laidlaw
Transit Servs., Inc., 165 Wash. 2d 200, 205, 193 P.Sd 128 (2008)(plurality opinion))).
The district court next asks:
Does a franchisor violate RCW 19.100.180(2)(d) as a matter of law when
It charges the franchisee twice what It pays for a product or service?
Money Ma/7erCertification Order at 4-5. This question Is drawn from the district court's
second finding that "selling a franchisee a particular good or service for twice what It
cost the franchisor Is not a 'fair and reasonable price' and violates FlPA as a matter
of Washington law." Id. at 4.
Both questions are questions of law. The federal court has asked us to resolve
only those questions of law. See id. at 4-6. We therefore resolve only whether the
district court correctly Interpreted Washington law; we do not resolve whether
summary judgment was proper under the facts of this case. Resolving the questions
In this manner, we answer no to both.
STANDARD OF REVIEW
We review certified questions from federal courts de novo. Broughton Lumber
Co. V. BNSF Ry. Co., 174 Wash. 2d 619, 624, 278 P.Sd 173 (2012)(citing Bradburn v.
N. Cent. Reg'l Library Diet., 168 Wash. 2d 789, 799, 231 P.3d 166 (2010)). Legal Issues
In certified questions are not considered In the abstract but are based on the record
provided by the federal court. Id. (citing Bradburn, 168 Wn.2d at 799 (citing
RCW 2.60.030(2))). We review questions of statutory Interpretation de novo. Dep't of
Ecology v. Campbell & Gwinn, LLC, 146 Wash. 2d 1, 9, 43 P.3d 4(2002).
Money Mailer, LLC v. Brewer(Wade G.), No. 96304-5
ANALYSIS
This case presents, at its core, a question of statutory interpretation: What is
the meaning of "fair and reasonable price" in the FlPA? We first define "fair and
reasonable price," and then we apply that definition to answer the certified questions.
I. "Fair and reasonable price" is a question of fact regarding what prudent
franchisors and franchisees in similar circumstances would regard as an
appropriate price
Both certified questions involve the meaning of RCW 19.100.180(2)(d).
Located in the portion of the FlPA governing the "[r]elation between franchisor and
franchisee," section .180 reads:
(2) For the purposes of this chapter and without limiting its general
application, it shall be an unfair or deceptive act or practice or an unfair
method of competition and therefore unlawful and a violation of this
chapter for any person to:
(d) Sell, 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).
This section does not define "fair and reasonable price." Nor does the
definitions section of the FlPA. RCW 19.100.010. Indeed, no portion of Title 19 RCW
defines "fair and reasonable price," though the term recurs throughout. See, e.g.,
RCW 19.120.080(2)(c). In Nelson v. National Fund Raising Consultants, Inc., we
discussed "fair and reasonable price"—but offered no definition of the phrase. 120
Wash. 2d 382, 842 P.2d 473 (1992). Lacking an explicit statutory or case law definition,
we turn to the principles of statutory interpretation for guidance.
Money Mailer, LLC v. Brewer(Wade G.), No. 96304-5
The goal of statutory interpretation is ascertaining and carrying out the intent of
the legislature. Campbell & Gwinn, 146 Wash. 2d at 9-10. We first look to the plain
meaning of the statutory language. Id. at 10. Plain meaning comes from the statutory
text itself as well as related statutes. Id. at 11-12. We employ legislative history to
clarify any ambiguity of the plain meaning of the language. Id. at 12.
Here, both the plain language and the legislative history support the conclusion
that "fair and reasonable price" is a question of fact regarding what prudent franchisors
and franchisees in similar circumstances would regard as an appropriate price. The
circumstances relate to market forces.
A. Plain language
The plain language of the statute indicates, first and foremost, that whether a
price is "fair and reasonable" is a question of fact. The legislature chose, in crafting
the FIFA, to use the word "reasonable." The word "reasonable" has a long history in
our jurisprudence, consistently invoking questions of fact. See, e.g., Wuthrich v. King
County, 185 Wash. 2d 19, 27, 366 P.3d 926 (2016) ("Whether the roadway was
reasonably safe and whether it was reasonable for the County to take (or not take)
any corrective actions are questions of fact . . . ."); Bodin v. City of Stanwood, 130
Wash. 2d 726, 735-36, 927 P.2d 240(1996)(citing Gordon v. Deer Park Sch. Dist. No.
414, 71 Wash. 2d 119, 122, 426 P.2d 824 (1967)("Whether one who is charged with
negligence has exercised reasonable care is a question of fact for the jury.")); Wood
V. City of Seattle, 57 Wash. 2d 469, 471-72, 358 P.2d 140(1960)("Whether a person's
conduct has met the reasonably prudent man test is a question of fact for
determination by the jury . . . ." (citing West v. Mount Vernon Sand & Gravel, Inc., 56
Money Mailer, LLC v. Brewer(Wade G.), No. 96304-5
Wn.2d 752, 355 P.2d 795 (1960))). Therefore, by using the word "reasonable" here,
the legislature intended that whether a price is "fair and reasonable" is a question of
fact.
The term "fair and reasonable" also indicates that subsection .180(2)(d)invokes
a question of fact. Federal courts, as well as the courts of other states, have repeatedly
made clear that determinations of what is "fair and reasonable" are questions of fact.^
Indeed, treating questions of what is "fair and reasonable" as questions of fact goes
back centuries.^ While our courts have not explicitly held that "fair and reasonable"
invokes a question of fact, the legislature's use of the term supports the conclusion
that whether a price is "fair and reasonable" is a question of fact.
The use of "reasonable" has a further implication: it indicates that a fact finder
must adopt the perspective of a prudent person under the circumstances when
determining whether a price is "fair and reasonable." At common law, we have long
employed the word "reasonable" in the phrase "reasonable care," which means the
care that "a reasonably prudent person would have exercised under the same or
^ E.g., Minn. Lawyers Mut. ins. Co. v. Comm'r, 285 F.3d 1086, 1092 (8th Cir. 2002) ("The
determination of a fair and reasonable estimate of a taxpayer's unpaid losses is essentially a
valuation issue and a question of fact.'" (quoting Hanover ins. Co. v. Comm'r, 598 P.2d 1211,
1220 (1st Cir. 1979))); Porter v. Toledo Wimsett Fin. & Thrift Co., 13 Ohio L. Abs. 509, 510 (Ohio
Ct. App. 1933) ("[T]he test to be applied to a sale of this character is whether the sale
was fair and reasonable and the price what could be reasonably expected. This was
a question of fact to be determined by a jury." (citation omitted)).
^ E.g., Huffv. Wolfe, 48 111. App. 589, 591-92 (1893)("Whether the amount agreed upon by the
parties in this case as the proper'fees and compensation' of the guardian was fair and reasonable,
was practically the sole contention presented to the jury. It was a question of fact."); Kent v.
Pheips, 2 Day 483, 483 (Conn. 1807) ("[Wjhether such charge was fair and reasonable is
a question of fact to be left to the jury.").
Money Mailer, LLC v. Brewer(Wade G.), No. 96304-5
similar circumstances." Chadwickv. Ek, 1 Wash. 2d 117, 129, 95 P.2d 398(1939)(citing
Scott V. Pac. Power & Light Co., 178 Wash. 647, 35 P.2d 749(1934); N. Coast Power
Co. V. Cowlitz, Chehalis & Cascade Ry., 108 Wash. 591, 185 P. 615 (1919)).
Therefore, a price is fair and reasonable when it accords with a price acceptable to a
prudent person in similar circumstances.
But here, what are these similar circumstances? Plainly, the sale of products or
services to a franchisee within a franchise relationship is such a circumstance. See
RCW 19.100.180(2)(d). We must therefore ask what a prudent franchisor and
franchisee would look to in the course of such a sale and what they would consider to
determine whether a sale is fair and reasonable.
The term expresses what prudent parties would look to In considering the
fairness and reasonableness of a sale: the current market. Definitions of terms similar
to "fair and reasonable price" show the importance of taking the current market into
account. The revised fourth edition of Black's Law Dictionary, which was current at
the time the FlPA was passed, defines "fair and reasonable value" as "the best price
obtainable at a voluntary sale." Black's Law Dictionary 714 (rev. 4th ed. 1968).
Black's similarly defines "fair market value" as the "[p]rice at which a willing seller and
willing buyer will trade." id. at 716.
In its 11th edition, Biack's equates "value" to "price." Black's Law Dictionary
1864 (11th ed. 2019) (defining "value" as "[t]he monetary worth or price of
something"). It defines "fair value" as "[a]n estimate of a good, service, or asset's
potential price, based on a rational and unbiased assessment of the amount at which
it could currently be bought and sold between willing parties." id. at 1865. The 11th
Money Mailer, LLC v. Brewer(Wade G.), No. 96304-5
edition also states that "fair market value" is equivalent to "fair and reasonable value,"
and defines both as "[t]he price that a seller is willing to accept and a buyer is willing
to pay on the open market and in an arm's-length transaction; the point at which supply
and demand intersect." Id. These definitions demonstrate the importance of taking the
market into account.
B. Legislative History
The legislative history of the FlPA resolves whatever ambiguity remains in the
language of subsection .180(2)(d). See Campbell & Gwinn, 146 Wn.2d at 12(we turn
to legislative history to resolve ambiguity in the plain language of statutes). The
legislative history of subsection .180(2)(d) confirms the importance of the marketplace
in resolving whether a price is fair and reasonable. The legislature explained that
[r]equiring fair and reasonable prices on all charges will give the
franchisors flexibility necessary for price [fluctuations] but deny to them
the current power of unilateral price changes. Such power is particularly
vicious when combined with any variation of the exclusive supply
contract.
Comments on the Proposed Investment Franchise Act, S.B. 755, 42d Leg., 1st Ex.
Sess.(Wash. 1971) on file with Wash. State Archives. In other words, the legislature
intended for the prices to vary based on "fluctuations," presumably those of the
market, and did not intend to give franchisors free reign to set any price they choose.
Comments by a draftsperson of the FlPA also support this conclusion.
Discussing the change in an early draft of the FlPA from "except af a fair and
reasonable price to "more than a" fair and reasonable price (emphasis added), a
draftsperson explained that the new language
10
Money Mailer, LLC v. Brewer(Wade G.), No. 96304-5
more clearly reflected our Intent of allowing the industry to determine
through the supply and demand mechanisms a reasonable price and
then prohibiting the sale of products or services for more than that price
by the franchisor to the franchisee rather than to prescribe a price at
which the franchisor can sell products or services to the franchisee.
James Fletcher, Franchise Investment Protection Act 37 (1971) (unpub. research
paper, Univ. of Wash. Sch. of Law)(on file with the Wash. State Law Library) Thus
the market price ("supply and demand mechanisms")is to be taken into consideration.
But no particular price is mandated.
C. Determining a "fair and reasonabie price"
The plain language and the legislative history of the FlPA make clear that a
broad understanding of the market and market forces must inform a fact finder
determining whether prices are fair and reasonable under the FlPA. A fact finder must
take into consideration market forces writ broadly. This includes what the district court
relied on—the price at which the franchisor acquired the products or services—but
reaches beyond. The prices of competitor franchisors should be taken into account,
including whether the prices of all franchisors are the same. So, too, should the
statements of profit margin made by the franchisor."^
Other relevant factors include the franchisor's charges to other franchisees for
the same or similar products or services; what other similarly situated franchisors
charge similarly situated franchisees for the same or similar products or services;
business and industry practices; the price the franchisor pays for the products or
services; and the price at which the franchisee could obtain the same or equivalent
Of course, this is information that will likely be in the possession of the franchisor, not the
franchisee, but it might be available to the franchisee in the normal course of discovery.
11
Money Mailer, LLC v. Brewer(Wade G.), No. 96304-5
products or services elsewhere, including in an arnn's-length deal on the open market.
There are other, less tangible market forces at work as well. For Instance, the fact
finder should consider the value that the franchisor adds to the product or service, If
any.
Other market forces can apply; this list Is not exhaustive. Nor Is It exclusive or
mandatory: not every,factor need be referenced or used.
These factors allow the finder of fact to take complex scenarios Into account.
For example. If the franchisor obtains a product for price x, and the franchisee could
only obtain It on the open market for 5x, then selling It at the price of 2x might not be
unfair or unreasonable—but If all other similarly situated franchisors are selling It for
1.5x, then the price of 2x may be unfair or unreasonable.
Money Mailer has a different view of the meaning of "fair and reasonable price,"
arguing that a "fair and reasonable price" Is determined solely by the market price of
the product or service at a comparable level of distribution. Appellant's Br. at 22-23.
Under this proposed definition, a price Is fair and reasonable If It Is at or below the
price at which the franchisee could otherwise obtain the goods. Id. at 31.
Money Mailer makes no textual argument supporting Its definition of "fair and
reasonable price."® It Instead provides us with ample reason to reject Its rule. Money
® in its briefing before this court. Money Mailer argued that this definition came from the meaning
of "bona fide wholesale price," found in subsection .010(8) of the FlPA—a term that. Money Mailer
argued, is equivalent to "fair and reasonable price." Appellant's Br. at 17-19; Appellant's Answer
to Amicus at 16. These arguments were misguided as the statute provides no reason to connect
the terms. In any event, at oral argument. Money Mailer expressly disclaimed any link between
"fair and reasonable price" and "bona fide wholesale price." Wash. Supreme Court oral argument,
Money Mailer, LLC v. Brewer, No. 96304-5 (Mar. 19, 2019), at 1 min., 16 sec. (noting its
12
Money Mailer, LLC v. Brewer(Wade G.), No. 96304-5
Mailer argues at length that per se rules are inappropriate in this context, noting that
per se rules '"almost always tend to restrict competition and decrease output.'" Id. at
38(quoting Leegin Creative Leather Prods. Inc. v. PSKS, Inc., 551 U.S. 877, 886, 127
S. Ct. 2705, 168 L. Ed. 2d 623 (2007)). Yet Money Mailer offers a per se rule of its
own: under Money Mailer's definition, any price at or below the price available to the
franchisee on the open market is fair and reasonable per se. The concerns Money
Mailer cites against applying per se rules in this situation—for instance, that a "per se
rule is appropriate only after the courts have weighed all of the circumstances and
amassed considerable experience with [the issue]"—militate against Money Mailer's
rule, as well. Id. at 39. Adopting Money Mailer's definition would "not be based on any
history or experience, but instead on an arbitrary assumption": the assumption that
nothing matters but the price at which the franchisee could itself obtain the product or
service. Id.
We agree with Money Mailer and decline to "replace[][a]factual and reasoned
inquiry with [a] simplistic formula[ ]." Id. While the price at which a franchisee could
otherwise obtain the goods is certainly a factor in whether a price is fair and
reasonable, it alone does not resolve whether a price is "fair and reasonable." The
FlPA requires consideration of other facts, as the discussion above makes clear.
Brewer also argues for a rule that lacks support from the case law. Brewer
states that we "need only determine what a 'fair and reasonable price' is not." Resp't's
argument is "separate from" any connection between "fair and reasonable price" and "bona fide
wholesale price"), video recording by TVW, Washington State's Public Affairs Network,
http://www.tvw.org. We therefore do not consider what "bona fide wholesale price" means.
13
Money Mailer, LLC v. Brewer(Wade G.), No. 96304-5
Br. at 13. In that vein, Brewer argues that "any markup of goods or services" violates
the "fair and reasonable price" provision of subsection .180(2)(d). Id. at 14.
Brewer's rule would mean that the price paid by the franchisor—and every
advantage the franchisor had in getting such a price—must be passed on to the
franchisee. Wash. Supreme Court oral argument, Money Mailer, LLC v. Brewer, No.
96304-5 (Mar. 19, 2019), at 35 min., 45 sec., video recording by TVW, Washington
State's Public Affairs Network, http://www.tvw.ora. We need not delve into the details
of economics to observe the problems with such a rule. First, from a plain language
and legislative history standpoint, there is no reason to think the legislature Intended
"fair and reasonable price" to mean "the price at which the franchisor obtained the
goods." Had the legislature meant for Brewer's interpretation to be the rule, it would
have said so. Second, prices are raised between differing levels of distribution
frequently: for Instance, a wholesaler charges a retailer a higher price than the
wholesaler paid the supplier for the goods. True, a franchisor-franchisee relationship
is not identical to a wholesaler-retailer relationship; it is for such reasons that our
legislature enacted the FIPA. But the existence of the FlPA does not inherently
prevent franchisors from increasing prices of the products and services they sell to
their franchisees.
Brewer disagrees, relying solely on Nelson to support his definition of "fair and
reasonable price." Resp't's Br. at 14. Contrary to Brewer, Nelson does not stand for
the proposition that any markup is impermissible. In Nelson, the franchisee ordered
the supplies locally. 120 Wash. 2d at 385. The supplier then sent the bill to the franchisor,
who marked up the price by about 20 percent and sent that marked-up bill to the
14
Money Mailer, LLC v. Brewer(Wade G.), No. 96304-5
franchisee. Id. The trial court found that this act violated RCW 19.100.180(2)(d) and
granted injunctive relief to the franchisee. Nelson v. Nat'l Fund Raising Consultants,
Inc., 64 Wash. App. 184, 191, 823 P.2d 1165 (1992), rev'd in part and aff'd in relevant
part, 120 Wash. 2d 382. The Court of Appeals, reviewing for abuse of discretion, affirmed
the trial court's injunction. Id. at 188, 194. It issued no broad holding regarding the
impermissibility of markups. Id. at 193.
Similarly, we did not announce a broad rule that any markup of prices is
impermissible in our own review of Nelson. See 120 Wash. 2d at 392. Rather, we
affirmed the Court of Appeals only with respect to FIFA, reasoning that none of the
arguments made by the franchisor about the meaning of the FIFA were persuasive.
Id. Nelson did not announce or indicate the existence of a general rule prohibiting all
price markups. See id. at 388. Brewer cannot read into Nelson things we did not say.
Brewer also claims that "[tjhis case is Nelson redux," arguing we must reach
the same result because the facts of the cases are the same. Resp't's Br. at 14. But
this case is not "Nelson redux." As noted above, the Nelson franchisee ordered the
supplies locally, and the franchisor, having received the bill, then marked up the prices
and sent that marked-up bill to the franchisee. 120 Wash. 2d at 385. Unlike Nelson,
Money Mailer paid for the goods directly, or produced them itself, and then sold them
at an increased price to Brewer. Money Mailer, 2018 WL 3156901, at *1-2. Money
Mailer did not mark up the prices of goods that the franchisee had itself ordered, as
occurred in Nelson. See id.] see also Appellant's Answer to Amicus at 15 (correctly
making the same argument). In Nelson, it appears that no value was added to the
product or service; the markup was a pure increase in price of a good that the
15
Money Mailer, LLC v. Brewer(Wade G.), No. 96304-5
franchisee apparently could have obtained on its own, outside of the franchise
relationship. See 120 Wash. 2d at 385.® Here, there might very well have been such
value added that, alongside other factors, justified the markup. We therefore cannot
see this case as "Nelson redux."
In any event, due to the procedural posture of this case, it is for the fact finder,
not this court, to determine whether the markup here was fair and reasonable. We are
not tasked with resolving whether summary judgment was proper, only with answering
the certified questions presented by the district court—to which we now turn.
II. We answer no to each certified question
We now answer the certified questions. We bear in mind our definition of "fair
and reasonable price," which, restated, is a question of fact regarding what prudent
franchisors and franchisees in similar circumstances would regard as an appropriate
price, paying particular attention to market forces. The answer to both is no.
A. A franchisee may not rely solely on the price at which the franchisor obtains a
product or service to establish the "fair and reasonable price"
The district court has asked, "For purposes of FIPA's prohibition on selling 'to
a franchisee any product or service for more than a fair or reasonable price'
(RCW 19.100.180(2)(d)), may the franchisee rely on the price at which the franchisor
is able to obtain the product or service in the absence of evidence indicating that the
price was not a true market price?" Money Ma/Ver Certification Order at 4. We surmise
that the court asked this question because it had "impliedly found that a franchisee
® We caution, however, that Nelson Is not explicit about this. See Nelson, 120 Wash. 2d at 385. There
may have been other reasons the trial court found the markup unfair or unreasonable. See id.
16
Money Mailer, LLC v. Brewer(Wade G.), No. 96304-5
may generally rely on the price at which a franchisor purchased a particular good or
service to show what the 'fair and reasonable price' for that service is." Id. The district
court had concluded that "[ajbsent some evidence of a special discount or other
indication that the price Money [Mailer] paid was not a market price, the fair and
reasonable costs of the services were established by what Money Mailer was actually
paying for the printing services." Id. at 2. In other words, the district court concluded
that the fair and reasonable price of a good or service under .180(2)(d) is established
by the price the franchisor pays for that good. This question therefore essentially asks,
Is the "fair and reasonable price" inherently the price at which the franchisor obtains
the good? Or, put differently. Is the franchisee entitled to get the good at the same
price the franchisor paid for it? See Allen, 187 Wash. 2d at 701.
The answer to this question, under the definition of "fair and reasonable price,"
is no. True, a franchisee is free to present whatever evidence it wants and shape its
argument in whatever manner it prefers. It may therefore rely on the price at which the
franchisor obtained the good. But a price is not fair and reasonable under .180(2)(d)
merely because it is the price the franchisor pays. As the definition of "fair and
reasonable price" makes clear, determining whether a price is "fair and reasonable"
takes more into account. The price at which the franchisor obtains a good or service
is not inherently the fair and reasonable price.
'' We could interpret question 1 differently and view it as asking whether, in the absence of other
competent, admissible evidence, the difference between the prices paid and charged is sufficient
to create a question of material fact that would allow the franchisee to overcome summary
judgment. If so, the answer is yes. However, we understand question 1 as asking whether the
price at which the franchisor obtains the good alone establishes the fair and reasonable price, in
17
Money Mailer, LLC v. Brewer(Wade G.), No. 96304-5
Brewer, even as he argues that the answer to this question is yes, nearly admits
that the price at which the franchisor obtains the goods does not inherently establish
the fair and reasonable price. In oral argument, he noted that "if there is other evidence
[beyond the price at which the franchisor obtained the goods], that can be considered
too"—implying that no such other evidence existed here. Wash. Supreme Court oral
argument, supra, at 26 min., 45 sec. to 26 min., 54 sec. But there was other evidence
here, which the district court concluded was immaterial. See Money Mailer, 2018 WL
3156901, at *3. Indeed, according to the district court. Money Mailer, as part of its
motion for reconsideration, had proffered evidence purporting to show that "Brewer
would likely be unable to obtain printing services on the open market for less than
what Money Mailer was charging him." Money Mailer Certification Order at 2. The
district court concluded that such evidence had no bearing on whether Money Mailer
had violated the FIPA. Id. But as discussed above, such evidence is central to the
question of whether a price is "fair and reasonable." Furthermore, Brewer is wrong is
to assert, without other evidence, that the price paid by the franchisor must be the fair
and reasonable price. See Wash. Supreme Court oral argument, supra, at 26 min.,
45 sec. to 26 min., 54 sec. The FIPA does not support that interpretation.
B. A franchisor does not violate subsection . 180(2)(d) as a matter of law merely
by charging a franchisee twice what the franchisor pays for a product or service
The district court has also asked, "Does a franchisor violate RCW
19.100.180(2)(d) as a matter of law when it charges the franchisee twice what it pays
and of itself. The answer to that is no, for much the same reason: whether a price is fair and
reasonable is a question of fact.
18
Money Mailer, LLC v. Brewer(Wade G.), No. 96304-5
for a product or service?" Money Mailer Certification Order at 4-5. Considering our
definition of "fair and reasonable price," the answer to this question must also be no.
No such per se rule exists because what is "fair and reasonable" is a question of fact.
Thus there may be situations in which a franchisor may charge a franchisee twice
what it paid to acquire a good or service but nevertheless still be charging a fair and
reasonable price. A per se rule does not reflect our law.
Brewer disagrees. But Brewer's only argument is that Nelson stands for the
existence of this per se rule. As discussed above, Nelson created no such rule.
At several points. Brewer also insists that the district court's question 2 asks us
to decide whether Money Mailer's price was "fair and reasonable," as a matter of law,
under the facts of this case—not whether a price is per se unfair or unreasonable
when a franchisor charges the franchisee twice what it pays for a product or service.
E.g., Resp't's Br. at 21. Indeed, at oral argument, when explicitly asked whether
Brewer considered this question factual or legal. Brewer answered that it was factual.
Wash. Supreme Court oral argument, supra, at 27 min., 13 sec. to 27 min., 55 sec.
This is incorrect. The district court clearly concluded that as a matter of law, any 100
percent markup violated subsection .180(2)(d). Money Ma/Ver Certification Order at 4.
When the district court asked question 2, it asked whether that conclusion was correct:
that is, whether the district court correctly articulated the law of our state. Nothing in
the district court's certification order indicates the court was asking us whether Money
Mailer's markup itself violated the FlPA as a matter of law.
Similarly, Brewer accuses Money Mailer of having concealed its price markups
by not disclosing what it paid for the goods, which plays into why Money Mailer's prices
19
Money Mailer, LLC v. Brewer(Wade G.), No. 96304-5
were allegedly unfair and unreasonable. Resp't's Br. at 8, 25; Wash. Supreme Court
oral argument, supra, at 19 min., 17 sec. ("What's at stake is really how transparent
do franchisors have to be? The issue is really can [Money Mailer] maintain these
hidden profit centers . . . ."). It is true that we held in Nelson that disclosure of prices
does not prevent a price from being unfair or unreasonable under subsection
.180(2)(d). Nelson, 120 Wash. 2d at 389. But disclosure of "profit centers" is neither here
nor there for the purposes of answering question 2. We are asked whether ICQ
percent markups are impermissible as a matter of law with respect to subsection
.180(2)(d). Money Ma/Ver Certification Order at 4-5. The answer to question 2 remains
no, irrespective of disclosure.
In answering question 2 in the negative, we do not hold that whether a price is
"fair and reasonable" can never be resolved as a question of law. "'[W]hen reasonable
minds could reach but one conclusion, questions of fact may be determined as a
matter of law.'" Harvey v. County of Snohomish, 157 Wash. 2d 33, 43, 134 P.3d 216
(2006)(quoting Hartley v. State, 103 Wash. 2d 768, 775,698 P.2d 77(1985)). But, again,
we are not tasked with resolving whether reasonable minds could differ as to whether
Money Mailer's markups were unfair or unreasonable. We are asked to decide only
whether 100 percent markups are always unfair or unreasonable. The answer to that
question is no.
III. The parties' remaining arguments are meritless
Money Mailer argues that subsection .180(2)(d) does not apply because here
the prices of goods were allegedly agreed to at the start of the franchise relationship,
not during it. Appellant's Answer to Amicus at 9. We decline to reach this issue as it
20
Money Mailer, LLC v. Brewer(Wade G.), No. 96304-5
lies beyond the scope of the certified questions. We are asked only about the meaning
of "fair and reasonable price," not whether .180(2)(d) applies to the factual scenario
before us.
Additionally, Brewer has requested sanctions against Money Mailer, and
Money Mailer has requested we strike portions of Brewer's opening brief. Resp't's Br.
at 27; Appellant's Reply Br. at 17. We deny both motions. Both were made in briefs,
and granting either (or both) would not preclude our reaching the merits of the case.
RAP 17.4(d) (requiring motions made in briefs be those which, if granted, would
prevent our reaching the merits). Equally to the point, both motions lack merit.
CONCLUSION
We hold that a "fair and reasonable price" in ROW 19.100.180(2)(d) is a
question of fact involving what prudent franchisors and franchisees in similar
circumstances would regard as an appropriate price. The circumstances must take
into account the forces of the market, as described above. We thus answer no to both
of the certified questions. This opinion answers only questions of law, not fact.
Whether Money Mailer violated the FlPA remains a question of fact to be determined
by the district court.
21
Money Mailer, LLC v. Brewer(Wade G.), No. 96304-5
WE CONCUR.
pl:
"yTZa-ck-i^,
r
/
/
:22