Closets by Design Lawsuit Over Fake Sale Prices

Closets by Design has been sued at least three times in class action lawsuits alleging its sale prices are fake, with plaintiffs claiming the company’s heavily advertised “40% off” and “$200 off” promotions are calculated from inflated “regular” prices that no customer ever actually pays. The cases were filed in 2019 and 2023 in federal courts in California and Washington. None reached a verdict. Two ended in private settlements with undisclosed terms, and one was voluntarily dismissed within weeks of filing.¹

What the Lawsuits Allege

The core allegation is simple. Closets by Design manufactures its own custom closets, garage organizers, entertainment centers, and home office systems, and it is the only seller of those products. There is no outside market setting a retail price. According to the complaints, the company invented reference prices with no connection to what anyone actually pays, then advertised steep “discounts” off those invented numbers to make every sale feel like a bargain.¹

The complaints say the discount offers have run continuously since at least late 2015 on the company’s website, social media, Yelp listings, and direct mail. When one promotion expires, the same discount reappears the next day under a new deadline. One plaintiff called it a perpetual sale designed to trick customers into thinking they were acting on a limited-time deal.²

Plaintiff Knut Grevle’s delivery receipt showed the pattern in practice. The receipt listed “regular” prices of $3,380 for master bedroom shelves and $2,870 for bedroom cabinets, then showed Grevle paid $2,028 and $1,722. The complaint alleged those higher reference figures were fabricated and that Closets by Design merchandise and services “are never sold to customers at undiscounted reference prices.”¹

The legal theory draws on both state consumer protection statutes and federal advertising rules. In California, the complaints cited the Consumers Legal Remedies Act, the Unfair Competition Law, and the False Advertising Law. The federal hook is 16 C.F.R. § 233.1, an FTC regulation requiring that “bargain” advertising be based on bona fide former prices at which the product was actually sold. If a seller never sold at the reference price, the discount claim is not a bargain under the rule. The Grevle complaint also added fraud, unjust enrichment, breach of contract, breach of express warranty, and a claim under the Magnuson-Moss Warranty Act.¹

The Three Class Actions and How They Ended

Newbold v. Closets by Design (2019)

The first case, Newbold v. Closets by Design, Inc., Case No. 8:19-cv-00077, was filed in January 2019 in the Central District of California. Plaintiff Annemarie Newbold alleged the company’s discounts were illusory and brought claims under the three California consumer statutes. The case lasted only weeks. Newbold voluntarily dismissed the lawsuit without prejudice on February 5, 2019, before the defendants had to respond. Closets by Design later said the suit was “dismissed without any settlement” after its lawyers advised the plaintiff’s counsel of what the company called “the meritless nature of the complaint.”³⁴

Grevle v. Closets by Design (2019)

Three months later came the more developed version. Grevle v. Closets by Design, Inc., Case No. 2:19-cv-03881, was filed on May 3, 2019, in the Central District of California, naming both Closets by Design, Inc. and franchisor CBD Franchising, Inc. Grevle sought to represent a nationwide class of customers who bought products subject to the “40% off” or “$200 off” promotions, and the complaint laid out nine causes of action across state, federal, and common law.⁵

The case ended about four months in. Defendants filed a notice of settlement on August 22, 2019, and Judge John F. Walter dismissed the case without prejudice, with the dismissal converting to with prejudice after September 23, 2019, absent further action. The settlement terms were not made public.⁶

Vernon v. Closets by Design (2023–2025)

The fake-discount theory came back four years later. Vernon v. Closets by Design Inc., Case No. 2:23-cv-01180, was filed by plaintiff Corlis Vernon on August 7, 2023, in the U.S. District Court for the Western District of Washington, again naming both Closets by Design, Inc. and CBD Franchising, Inc. The court docketed it as a contract dispute, and class certification proceedings were scheduled.⁷

In September 2024, Judge Jamal N. Whitehead denied the defendants’ motion to dismiss for lack of personal jurisdiction, letting the case proceed. It continued into 2025, but on June 10, 2025, the parties filed a stipulation of dismissal with prejudice, and the court terminated the case on June 16, 2025. A stipulated dismissal with prejudice typically signals a private settlement, though no terms were disclosed in the court record.⁷

Why the Pricing Looks the Same Everywhere

Closets by Design is a franchise system with about 66 locations as of the end of 2022, but the advertising comes from the top. The complaints allege that CBD Franchising maintains exclusive control over nationwide advertising through centralized corporate management and a “National Promotion and Protection Fund” that franchisees are required to pay into. Under the company’s franchise disclosure document, franchisees contribute 2.25% of monthly gross revenues to that fund, on top of a 6.75% royalty. Franchisees are required to honor the discounts in the national and regional ads, and the franchisor reserves the right to prescribe promotional prices.⁸

Closets by Design has pushed back on the premise that it dictates pricing. The company has said it publishes a “proprietary price book of suggested retail prices” but that actual pricing is “normally individually negotiated between the franchisee’s designer and the customer.”²

What This Means If You Bought From Closets by Design

No court has ruled on the merits of the fake-discount claims. The Newbold case was voluntarily dropped, and the Grevle and Vernon cases settled privately before any decision on whether the discounts actually violated the law. That means there is no judicial finding either confirming or rejecting the allegations, and there is no publicly announced class settlement fund you can file a claim against. If a future settlement with a claims process is announced, it would be posted on the court docket and settlement administration sites.

There is a separate consumer issue worth knowing about if you are trying to back out of an order. The Better Business Bureau profile for the company’s City of Industry, California location recorded 30 complaints over a recent three-year period, with recurring disputes over the company’s three-day cancellation policy and deposit refunds. At least one customer argued the company failed to provide the “Notice of Right to Cancel” in the format California law requires, which if true would extend the cancellation window beyond three days. That is a question about your individual contract and the paperwork you received, not a question the pricing lawsuits have answered.⁹

1
ClassAction.org. Grevle v. Closets by Design, Inc. et al., Class Action Complaint
2
Casemine. Casablanca Design Center, Inc. v. Closets by Design, Inc.
3
Truth in Advertising. Closets by Design Class Action
4
Top Class Actions. Closets by Design Lawsuit Says Sale Prices Fake
5
ClassAction.org. Closets by Design Accused of Selling Home Organizer Products at False Discount Prices
6
PACER Monitor. Knut Grevle v. Closets by Design, Inc. et al.
7
CourtListener. Vernon v. Closets by Design Inc.
8
Franchise Chatter. FDD Talk: Closets by Design Franchise Costs, Fees, Average Revenues
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Better Business Bureau. Closets by Design Complaints, City of Industry