Washington state AG must pay $4.3 million to thrift store chain

(CN) — The office of Washington state Attorney General Bob Ferguson was ordered to pay $4.3 million in attorneys’ fees and costs to the parent company of a thrift store chain on Tuesday following the state’s longstanding accusations of deceptive advertising and marketing.

The fee order from King County Superior Court Judge David Whedbee arrives about seven months after Washington state’s Supreme Court ruled unanimously in favor of Bellevue-based TVI Inc., the parent company of a thrift store chain known as Savers Value Village and the largest for-profit operator of thrift stores in the U.S.

In that order, an en banc panel found the state brought its 2017 claims of deceptive advertising and marketing in violation of TVI’s First Amendment right to solicit charitable contributions on behalf of nonprofit organizations.

“The state’s claims violated established First Amendment rights, as we repeatedly explained to the attorney general’s office,” TVI attorney Jim Grant of Davis Wright Tremaine said in a statement.

Washington “needlessly proceeded, forcing TVI to spend millions in defense, even in the absence of any evidence that any consumer was harmed by the marketing the State challenged, nor any evidence that TVI ever intended to mislead anyone,” Grant added.

Ferguson’s case against Value Village began in 2017 following a three-year investigation that concluded the thrift store’s marketing model violated the Consumer Protection Act and Charitable Solicitations Act. According to that complaint, Value Village generated “over $1 billion in annual revenue by hiding its for-profit status behind a veneer of charitable goodwill.”

“Value Village sources the products it sells in its stores almost exclusively through donations made by Washingtonians to its ‘charity partners,’” Ferguson wrote in the complaint, meaning the company had contracts with charities and used their logos, likeness and stories while “leveraging a vast network of donation bins, attended donation centers and ‘on-site donation centers’” that asks customers to donate items to these charities.

Ferguson said Value Village held itself out to have paid its charity partners each time customers donated until 2016, yet the store paid nothing for a large amount of its donations.

But while the state initially won on three of its Consumer Protection Act claims at a bench trial in 2019, the Ninth Circuit reversed the lower court’s decision in 2021 for dismissal. The state petitioned its Supreme Court, which found that Value Village did pay its charity partners for donated items on a per-pound or per-item basis, “regardless of whether the items can be sold at retail in Value Village stores.”

The store’s marketing was not deceptive either, the high court found, explaining that 90% of the company's advertising and marketing budget promotes sales-oriented messages, naming benefits of thrift shopping like saving money, protecting the environment and browsing a variety of incoming merchandise.

“TVI’s marketing does not claim that it is a nonprofit organization or that TVI donates a portion of its sales revenue to charity,” wrote Justice Mary I. Yu. “To the contrary, where TVI’s marketing identifies its corporate structure, it explicitly states that it is a ‘for-profit thrift store chain.’”

Overall, the en banc panel agreed with the Ninth Circuit, ruling that Washington state violated TVI’s First Amendment right to engage in constitutionally protected charitable solicitation for the community charities it worked with. As such, Judge Whedbee awarded TVI $4.3 million for attorneys’ fees and costs, the largest amount awarded against the state’s attorney general’s office in any reported case, according to David Wright Tremaine.

The company plans to donate over $1 million of its fee award to charities, the firm added. General counsel Richard Medway said TVI is “very pleased with the court’s fee award and the ruling confirming the full vindication of our defense in this case.”

“The result underscored the many positive aspects of our unique business model, which benefits the environment, consumers, and our many nonprofit partners,” Medway added.

The office of Washington state’s attorney general did not immediately respond to a request for comment.

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