Opinion
Case No. 3:20-cv-536-JGC
12-08-2021
CAJUNLAND PIZZA, LLC, et al., Plaintiff, v. MARCO'S FRANCHISING, LLC, et al., Defendants.
For the Plaintiffs: James Wesley Bearden, J. W. Bearden & Associates, New Orleans, LA, Lawrence J. Centola, III, Martzell & Bickford, New Orleans, LA, Susanne W. Jernigan, Jernigan Law, New Orleans, LA. For Defendants: Eric S. Bravo, Gregory D. Brunton, Gordon Rees Scully Mansukhani, Columbus Ohio, Michael D. Joblove, W. Barry Blum, Genovese Joblove & Battista, Miami, FL.
For the Plaintiffs: James Wesley Bearden, J. W. Bearden & Associates, New Orleans, LA, Lawrence J. Centola, III, Martzell & Bickford, New Orleans, LA, Susanne W. Jernigan, Jernigan Law, New Orleans, LA.
For Defendants: Eric S. Bravo, Gregory D. Brunton, Gordon Rees Scully Mansukhani, Columbus Ohio, Michael D. Joblove, W. Barry Blum, Genovese Joblove & Battista, Miami, FL.
ORDER
James G. Carr, Sr. United States District Judge
This case involves claims by former franchisees, (collectively, the "Franchisees") against their former franchisor, Marco's and its President, Tony Libardy (collectively, "Marco's") arising from the termination of the franchises and misrepresentations they allege Marco's made for the purpose of inducing the Franchisees to invest in their franchises. Pending is Marco's Motion to Dismiss Count II of Plaintiffs’ Third Amended Complaint. (Doc. 76). For the reasons that follow, I grant defendants’ motion.
Background
Initially, plaintiffs, CajunLand Pizza, LLC, Sela Pizza #1, LLC; Sela Pizza #2, LLC; Old Tyme Pizza, LLC; Crescent City Pizza, LLC; and Partners Pizza, LLC (collectively "CajunLand") filed this action against defendants Marco's Franchising, LLC, Marco's Pizza Holdings, LLC, and Tony Libardi. In a prior order, I dismissed all claims against Marco's Pizza Holdings, LLC; dismissed all claims asserted by CajunLand Pizza, LLC; dismissed all of plaintiffs’ claims under the Ohio Deceptive Trade Practices Act, ORC §§ 4615.01 et seq; dismissed all of plaintiffs’ claims based on tortious interference with contract or with business opportunity; and dismissed all plaintiffs’ claims alleging unfair competition. (Doc. 67).
The remaining plaintiffs’ (collectively, "CajunLand") surviving claims were for breach of contract and violation of Ohio's Business Opportunity Act, ORC §§ 1331.01 et seq. By order of July 6, 2021, I granted plaintiffs’ motion to file a second amended complaint setting out those two claims. In response, Plaintiffs filed an amended complaint, which they denominated as their Third Amended Complaint. (Doc. 74).
DISCUSSION
Plaintiff's Third Amended Complaint, (Doc. 67), includes claims against the remaining defendants - Marco's Franchising, LLC and Tony Libardi (collectively, "Marco's") - for violation of Ohio's Business Opportunity Plan Act, O.R.C. § 1331.01 et seq. ("BOPA"). Defendants contend that those claims are barred by BOPA's five-year statute of limitations. O.R.C. § 1334.10. That statute provides:
No action under sections 1334.01 to 1334.15 of the Revised Code may be brought to recover for a transaction more than five years after either the occurrence of the violation or the date on which the parties executed the agreement selling or leasing the business opportunity plan, whichever is earlier.
Two of plaintiffs signed their franchise agreements in 2010; two others in 2011; and one in 2013. Thus, by the statute's terms, plaintiffs’ BOPA claims are time-barred.
Nevertheless, plaintiffs argue that they did not discover that defendants allegedly had made misrepresentations in their franchise disclosure documents ("FDDs") until 2017, when Marco's unreasonably revoked its approval of a buyer who had contracted to purchase their franchises. They allege Marco's misrepresented in the FDDs, inter alia , "that a franchisee could sell or transfer the investment, namely the entire business concern, to a third party, subject to the approval of Marco's, which would not be unreasonably withheld." (Doc. 74 ¶ 110).
Plaintiffs also allege that Marco's failed to disclose that they "would have to pay a higher percentage of their income for the cost of food and paper products than other franchisees," and that Marco's would require them "to purchase all food items from their approved vendor." (Doc 74 ¶ 106-07.). They allege that these undisclosed requirements imposed substantial, additional, unexpected costs on them. (Id. ). If Marco's failed to disclose these costs, it is apparent that plaintiffs would have discovered them when they first purchased inventory. They do not allege, nor is it reasonable to believe, that they first discovered those costs less than five years before they filed this action. So, even their "discovery" theory would not save those allegations.
Plaintiffs cite RY/EH v. Arthur Treacher's, Inc. , 115 Ohio App. 3d 332, 355, 685 N.E.2d 316, 318 (1996), for the proposition that a failure to make disclosures in the FDD is a continuing violation until that information is provided. That case, however, involved a claim by a franchisee for recission because the franchisor had not provided any FDD whatsoever and also had failed to include in its franchise agreement the notice of cancellation rights required by O.R.C. 1334.06(A)(7). RY/EH, supra , 685 N.E.2d. at 318. Section 1334.06(A)(7) requires that a franchise agreement give notice of the purchaser's right to cancel the agreement within five days of its execution.
The court accepted the plaintiff's argument that BOPA's statute of limitations does not begin to run until the franchisor gives the required notice of the purchaser's five-day right of cancellation. It explained that statutory provision:
provides that the five-day period within which the purchaser may cancel the agreement begins to run from the time the seller makes the disclosures and gives the notice required by 1334.06(A). By implication, if the seller never makes the disclosures and never gives the notice of cancellation, the violation is a continuing one and the time for cancellation never begins to run.
RY/EH, supra , 685 N.E.2d. at 318.
Here, it is not disputed that Marco's provided each plaintiff with an FDD, and plaintiffs do not allege that defendants failed to give them the statutorily mandated notice of their cancellation rights. Plaintiff's complaint is that the FDD's disclosure were inaccurate and/or incomplete.
The court in RY/EH explained its holding both as a reading of the relevant statutes in pari materia and because it believed that allowing a franchisor who failed altogether to provide the required FDD to claim the benefit of the five-year limitation "frustrates the purposes of the Act, does nothing to encourage compliance therewith, and leaves an unsophisticated franchisee without an available remedy." RY/EH, supra , 685 N.E.2d at 319.
Those considerations do not apply to a case, like the present one, in which the franchisor has provided an FDD, but the franchisee claims the document was deficient. Permitting such franchisees to overcome the statutory five-year limitation merely by claiming that the FDD presented misrepresentations or omissions effectively would write the five-year limitation out of the statute. Doing so would undermine the Ohio legislature's intent in including the limitation provision in the statute. That simply is not my role.
Because I have determined that it is necessary to grant defendants’ motion on the grounds stated above, I need not reach the parties’ dispute regarding whether Marco's met the financial and other requirements to be exempted from BOPA.
Accordingly, it is ORDERED THAT defendants’ Motion to Dismiss Count II of Plaintiffs’ Third Amended Complaint is GRANTED. The Clerk of Court shall forthwith set a status conference in this matter.
So ordered.