Opinion
Case No. 3:20-cv-536-JGC
01-15-2021
CAJUNLAND PIZZA, LLC, et al., Plaintiff v. MARCO'S FRANCHISING, LLC, et al., Defendants
James Wesley Bearden, J. W. Bearden & Associates, Lawrence J. Centola, III, Martzell & Bickford, Susanne W. Jernigan, Jernigan Law Firm, New Orleans, LA, for Plaintiff. Brian J. Comarda, Gordon & Rees, Houston, TX, Carrie E. Thiem, Gregory D. Brunton, Gordon & Rees Scully Mansukhani, Columbus, OH, Rachel S. Bland, Gordon & Rees Scully Mansukhani, New Orleans, LA, W. Barry Blum, Genovese Joblove & Battista, Miami, FL, for Defendants.
James Wesley Bearden, J. W. Bearden & Associates, Lawrence J. Centola, III, Martzell & Bickford, Susanne W. Jernigan, Jernigan Law Firm, New Orleans, LA, for Plaintiff.
Brian J. Comarda, Gordon & Rees, Houston, TX, Carrie E. Thiem, Gregory D. Brunton, Gordon & Rees Scully Mansukhani, Columbus, OH, Rachel S. Bland, Gordon & Rees Scully Mansukhani, New Orleans, LA, W. Barry Blum, Genovese Joblove & Battista, Miami, FL, for Defendants.
ORDER
James G. Carr, Sr. U.S. District Judge This suit arises out of the termination of franchise agreements. The six plaintiffs (collectively, "CajunLand") formerly owned Louisiana pizza restaurants pursuant to franchise agreements with defendant Marco's Franchising LLC ("Marco's"), a Toledo, Ohio franchisor. Plaintiffs allege that Marco's violated the Louisiana Unfair Trade Practices Act ("LUTPA") and tortiously interfered with their contracts to sell their franchises after already having approved the sale. By order of October 5, 2020, I directed the parties to file briefs regarding whether Louisiana or Ohio law applied in this case, and they have complied.
For the reasons discussed below, I hold that CajunLand's claims are subject to Ohio law.
Background
Five of the six plaintiffs executed franchise agreements with Marco's. Each franchise agreements contains the same choice of law and choice of forum provisions:
The sixth plaintiff, CajunLand Pizza, LLC, executed an agreement to become Marco's Area Representative. (Doc. 1, pgID 5-6; Doc. 13-3). Although it owned interests in other plaintiffs, CajunLand did not itself execute a franchise agreement. Defendants have challenged CajunLand's standing to assert its claims. (Doc. 13-1, 88-89). That issue, however, is beyond the scope of this order.
21.1 Governing Law. Severability. and Substitution of Provisions. "Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act; 15 U.S.C. § 1051 et seq. ), this Agreement and the relationship between Franchisor, you and any Franchisee Owner will be exclusively governed by the laws of the State of Ohio (without regard to, and without giving effect to, the application of Ohio choice-of-law rules).
...
21.4 Jurisdiction and Venue. All litigation, court proceedings, lawsuits, arbitration proceedings and other hearings must and will be venued exclusively in Toledo, Ohio. You and each Franchisee Owner do hereby agree and submit to personal jurisdiction in Lucas County, Ohio or the Federal District Court having jurisdiction therein for the purposes of any suit, proceeding, arbitration or hearing permitted to be brought to enforce or construe the terms of this Agreement or to resolve any dispute or controversy arising in connection with this Agreement. You and each Franchisee Owner waive any rights to contest such venue and jurisdiction and any claims that such venue and jurisdiction are invalid.
Plaintiff CajunLand's Area Representative Agreement also contained a choice of law provision providing that Ohio law would apply to disputes. (Doc 13-3, pgID 202).
Plaintiffs originally filed their complaint in the Eastern District of Louisiana. Chief Judge Nannette Jolivet Brown granted Marco's motion to transfer on the basis of the franchise agreements’ forum selection clause. (Doc. 37). In her decision, Chief Judge Brown found that Ohio law applies to the meaning and scope of the forum selection clauses. (Id. , pgID 776). Notably, Marco's argued to her that Ohio law governed the parties’ dispute, while CajunLand "d[id] not respond to this argument or dispute that Ohio law should govern the interpretation of the contracts at issue." (Id. , pgID 774). Applying Ohio law, Chief Judge Brown found "that the franchise agreements and the [Area Representative Agreement] each contain a mandatory, valid and enforceable forum selection clause." (Id. , pgID 788).
In doing so, she rejected CajunLand's argument that the franchise agreements’ choice of forum clause was irrelevant because its claims arose after the parties had terminated them. She determined that the fact CajunLand had asserted tort claims rather than contract claims did not control her decision. She explained:
"If forum selection clauses are to be enforced as a matter of public policy, that same public policy requires that they not be defeated by artful pleading of claims." Travelers Property Cas. Co. of Am. v. Centimark Corp. (May 3, 2005), S.D. Ohio No. 2:04–CV–0916, 2005 WL 1038842 at *2, quoting Terra Internatl., Inc. v. Mississippi Chem. Corp. (N.D. Iowa 1996), 922 F. Supp. 1334, 1379. Therefore, "even where a forum selection clause does not explicitly govern a given cause of action, courts will inquire into whether the other claims are sufficiently related to the claim that is specifically covered by the clause." Id.
(Doc. 37, pgID 784) (quoting Bohl v. Hauke , 180 Ohio App.3d 526, 2009-Ohio-150, 906 N.E.2d 450, ¶ 26 ).
Chief Judge Brown determined that the choice of forum provisions’ language was so broad that they applied to any claim connected to the contract. (Id. , pgID 787). She found that CajunLand's tort claims arose out of the sale of the franchises pursuant to the franchise agreements and that they were "directly related to [plaintiffs’] rights under the franchise agreements." (Id. ) She reasoned that: "[a]ll of Plaintiffs’ claims arise out of Marco's Franchising's actions regarding the sale of plaintiffs’ franchises, which comes within the scope of the forum selection clause's ‘arising in connection with’ provision. (Id. ).
Pending is Marco's motion, which it originally filed when the case was in the Louisiana district court as a "Motion Transfer Actions Under U.S.C. § 1404 or to Dismiss for Lack of Subject Matter Jurisdiction and Failure to State a Claim Upon Which Relief May be Granted." (Doc. 13). Both parties have asked me to proceed to decide the remaining portion of Marco's motion regarding dismissal of the plaintiffs’ claims pursuant to Rule 12(b)(6) as they previously had briefed that issue. (Doc. 46). Despite Judge Brown's order, and despite the fact that Marco's had argued to Chief Judge Brown that Ohio law applies and CajunLand did not challenge that contention, both parties’ briefs relied primarily on Louisiana law.
After working on the motion, I noted the franchise agreements’ choice of law clause. See, e.g. , (Doc. 13-4, pgID 262). This caused me to order the parties to brief whether Louisiana or Ohio law controlled the decision on the pending motion. (Order Oct. 5, 2020). The parties have briefed that question.
CajunLand contends that Louisiana law controls both of its claims. Marco's contends that Ohio law governs CajunLand's LUTPA claim but that Louisiana law governs CajunLand's tortious interference claim. I conclude that Ohio law governs both claims.
Discussion
A. CajunLand's Argument
CajunLand makes the same argument to me that Chief Judge Brown rejected: that its tort claims are not connected to the contract because the torts occurred after the contract had terminated. Therefore, it argues, the contracts’ choice of law provisions do not apply.
Despite multiple rounds of briefing, CajunLand has yet to explain the basis for its naked assertion that the franchise agreements had terminated by the time the tortious conduct they allege occurred. In the context of determining the applicable law, I am not required to accept conclusory statements from the complaint as true. See Mill's Pride, Inc. v. Cont'l Ins. Co. , 300 F.3d 701, 706 (6th Cir. 2002) ("choice of law controversies are ‘fact driven and each case has to be analyzed within its own factual context.’ " (quoting Int'l Ins. Co. v. Stonewall Ins. Co. , 86 F.3d 601, 608 (6th Cir. 1996) )). Nevertheless, because whether or not the parties terminated the franchise agreements does not change the choice of law analysis, I need not determine for the present motion whether to accept CajunLand's assertion that the parties had terminated those agreement prior to the conduct at issue in this case.
Chief Judge Brown, however, held that Ohio law applies to the choice of law and choice of forum issues regardless of when the alleged tortious conduct took place. (Doc. 37, pgID 774-76). Those rulings now constitute the law of the case. I may only reverse them if I find that "extraordinary circumstances" exist, "such as where the initial decision was ‘clearly erroneous and would work a manifest injustice.’ " Christianson v. Colt , 486 U.S. 800, 817, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988) (quoting Arizona v. California , 460 U.S. 605, 618, 103 S.Ct. 1382, 75 L.Ed.2d 318 (1983) ).
"As most commonly defined, the [law of the case] doctrine posits that when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case." Arizona, supra , 460 U.S. at 618, 103 S.Ct. 1382.
I find no such circumstances here. Instead, Chief Judge Brown's ruling is entirely consistent with Ohio Law.
"Under Ohio law, contractual choice-of-law provisions are valid and enforceable." Miami Valley Mobile Health Servs., Inc. v. ExamOne Worldwide, Inc. , 852 F. Supp. 2d 925, 932 (S.D. Ohio 2012) (citing Schulke Radio Prod. Ltd. v. Midwestern Broad. Co. , 6 Ohio St.3d 436, 438–39, 453 N.E.2d 683, 686 (Ohio 1983) ). The Sixth Circuit has held repeatedly that contractual choice of law provisions apply to tort claims that are closely related to the contractual relationship, as opposed to those that are only tangentially related. See Adelman's Truck Parts Corp. v. Jones Transp. , 797 F. App'x 997, 1000 (6th Cir. 2020) (applying contractual choice of law to claim under North Carolina Unfair and Deceptive Trade Practices Act because the tort claim was sufficiently related to the contract); Banek Inc. v. Yogurt Ventures U.S.A., Inc. , 6 F.3d 357, 363 (6th Cir. 1993) (applying contractual choice of law to fraud and misrepresentation claims because they were sufficiently related to the contract); Moses v. Bus. Card Express, Inc. , 929 F.2d 1131, 1139-40 (6th Cir. 1991) (concluding that contractual choice-of-law provision applied to tort claims of fraud and misrepresentation) See also Baumgardner v. Bimbo Food Bakeries Distribution, Inc. , 697 F. Supp. 2d 801 (N.D. Ohio 2010) (Lioi, J.) (applying contractual choice of law provision because allegations that bakery tortiously interfered with distributer's sale of his distribution route and was unjustly enriched by interference were closely related to distribution agreement.).
As set out supra , the franchise agreements’ choice of law provisions are extremely broad, applying Ohio law to "this Agreement and the relationship between Franchisor, you and any Franchisee Owner." (Doc 13-4 ¶ 2.1). CajunLand claims that the defendants employed unfair trade practices to try to force plaintiff to sell the franchises to Marco's preferred buyer at a substantially lower cost than CajunLand's intended buyer had offered for the franchises. Thereby, plaintiffs contend, Marco's intentionally interfered with plaintiff's agreement with the intended purchaser. Those claims are sufficiently connected to the parties’ agreements that they fall within the ambit of the franchise agreements’ broad choice of law provisions.
The franchise agreements contained a detailed provision governing their sale. Plaintiff had to satisfy extensive requirements. Among these were offering Marco's a right of first refusal (Id. , pgID 259 ¶ 20.2.2), payment of certain fees, (Id. ¶ 20.2.4.6), and executing a general release of the franchisor. (Id. , pgId 260 ¶ 20.2.4.8). Most notably, the agreements require franchisor approval to sell the franchises and provide that: "Franchisor discretion with regard to the approval or disapproval of any proposed Franchisee ... is absolute, but shall not be unreasonably withheld." (Id. , pgID 259 ¶ 20.2.3).
Plaintiffs’ complain that after allegedly approving their proposed buyer, Marco's withdrew its approval and refused to fulfill its role in the transaction. In the process, Marco's president allegedly unlawfully interfered with plaintiffs’ agreement to sell the franchises.
Marco's defense is that it properly exercised its contractual right to withhold approval of the transfer.
Plaintiffs’ claims involve a dispute over the sale of the franchises, a matter the franchise agreements encompass. Thus, those claims inescapably fall within the choice of law provisions, which cover all claims arising out of "the relationship[s]" between the parties.
CajunLand argues, nevertheless, that the fact Marco's initially had approved the sale means that the parties had terminated their franchises, so that the choice of law provision no longer applied at when Marco's withdrew its consent.
That argument fails for two reasons.
First, the choice of law provision is not limited to claims that seek to enforce contractual rights but extends to claims arising out of the parties’ relationship. As the nature of CajunLand's tort claims amply demonstrate, the parties did not terminate their relationship. Otherwise, CajunLand would not have been able to block their franchise transfers.
Second, contractual dispute resolution provisions, such as those covering choice of forum and choice of law, survive the termination of the contract. Rini Wine Co. v. Guild Wineries & Distilleries , 604 F. Supp. 1055, 1059 (N.D. Ohio 1985) (Battisti, C.J.) (choice of forum provision applied to dispute arising from termination of distributorship agreement); see also Delta Alcohol Distrib. v. Anheuser-Busch Int'l, Inc. , 28 F. Supp. 3d 682, 689 (E.D. Mich. 2014) ("The case law reviewed by the Court supports broad application of the forum selection clause although Delta's claims are not for breach of the contract and even if the alleged tortious conduct occurred before the contract commenced or after it terminated."). Stereo Gema, Inc. v. Magnadyne Corp ., 941 F. Supp. 271, 278 (D.P.R. 1996) (choice of forum provision applied to claim brought after defendant had terminated distributorship agreement alleging antitrust violation based on defendant charging a lower price to its new distributor than it had charged plaintiff); Advent Elecs., Inc. v. Samsung Semiconductor, Inc. , 709 F. Supp. 843, 846 (N.D. Ill. 1989) ("In the absence of contractual language expressly or implicitly indicating the contrary, a forum selection clause survives termination of the contract."); 13 Corbin on Contracts § 67.2, at 12 (rev. ed. 2003) ("Although termination and cancellation of an agreement extinguish future obligations of both parties to the agreement, neither termination nor cancellation affect those terms that relate to the settlement of disputes or choice of law or forum selection clauses.").
B. Marco's Argument
Marco's choice of law analysis rests on a false premise: that I am required to apply the transferor court's choice of law rules. (Doc. 50, pgID 48). It relies on the Supreme Court's opinion in Van Dusen v. Barrack , 376 U.S. 612, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964), and its progeny for the proposition that "following a § 1404(a) transfer, the transferee court must apply the law that would have applied in the transferor court." (Doc. 50, pgID 48).
While Van Dusen remains good law, it does not apply to this case. In Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas , 571 U.S. 49, 64, 134 S.Ct. 568, 187 L.Ed.2d 487 (2013), the Supreme Court specifically held that Van Dusen does not apply in cases that a court has transferred pursuant to a forum selection clause. Instead, it held, "when a party bound by a forum-selection clause flouts its contractual obligation and files suit in a different forum, a § 1404(a) transfer of venue will not carry with it the original venue's choice-of-law rules." Id. The Court explained that to apply the Van Dusen rule in such a case would allow a plaintiff to obtain its choice of law merely by filing its complaint in a court other than the one to which the plaintiff agreed. Id. at 85, 134 S.Ct. 568.
Marco's filed a motion in the Louisiana district court seeking a Rule 1404(a) transfer based on the agreements’ choice of forum clauses. Chief Judge Brown granted its motion on that basis. Marco's will not now be heard to argue that Atlantic Marine does not govern the choice of law in this case.
Its arguments, which are based entirely on the peculiarity of Louisiana's civil code-based choice of law rules, simply carry no weight. I, therefore, find that Ohio law governs CajunLand's claims in this action.
Conclusion
Because CajunLand's complaint alleges a violation of Louisiana's unfair trade practices statute, it fails to state a claim on which it could obtain relief. That count, Count I, must be dismissed. Nevertheless, it appears likely that the count's factual allegations could suffice to state a claim under Ohio's Deceptive Trade Practices Act, O.R.C. § 4165.01, et seq.
Accordingly, I grant sua sponte plaintiffs leave to file an amended complaint, pleading their unfair trade practices claim under Ohio law. See Islamic Ctr. of Nashville v. Tennessee, 872 F.3d 377 (6th Cir. 2017) (leave to amend should be freely granted). Because CajunLand undoubtedly drafted its tortious interference claim, Count II, with Louisiana law in mind, I also grant it leave to amend that count as well.
It is, therefore,
ORDERED THAT:
1. Plaintiffs’ claim under the Louisiana Unfair Trade Practices Act be, and the same hereby is dismissed, without prejudice to the right to restate such claim under Ohio law;
2. Leave be, and the same hereby is granted to plaintiff to file an amended complaint recasting both their claims under Ohio law; they shall file their amended complaint on or before February 15, 2021; and
3. Defendants’ motion to dismiss (Doc. 13), to the extent not otherwise resolved in this order be, and the same hereby is denied, without prejudice.
On plaintiffs’ filing of their amended complaint the Clerk shall forthwith schedule a status/scheduling conference (by Zoom), with the parties to submit status report(s) and proposed timetable for discovery and dispositive motion practice not later than one week before the conference.
So ordered.