Fowler et al v. Cold Stone Creamery Incorporated
DECISION AND ORDER granting in part and denying in part 4 Motion to Dismiss; the motion to dismiss is DENIED, but the request in the alternative that the matter be transferred is GRANTED and the suit is hereby TRANSFERRED to the United States District Court for the District of Arizona. So Ordered by Judge William E. Smith on 11/22/13. (Jackson, Ryan) [Transferred from rid on 11/25/2013.]
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
COLD STONE CREAMERY, INC.,
GREGORY FOWLER and
DOUBRI ENTERPRISES, LLC,
C.A. No. 13-662 S
DECISION AND ORDER
WILLIAM E. SMITH, United States District Judge.
What started out as a plain vanilla franchise agreement has
led the parties down a Rocky Road of federal litigation.
against Cold Stone Creamery, Inc. (“Cold Stone”), asserting an
franchise agreement and a separate sublease agreement.
Stone, which hails from Arizona, felt chilled in Rhode Island
Superior Court and, seeking the softer service of federal court,
It has now filed the instant motion to dismiss for
(ECF No. 4.)
Cold Stone says this is no Baskin
Robbins; there is only one forum flavor on the menu of the
franchise agreement, and that is Arizona.
Cold Stone asks that
alternative, that the matter be transferred to the United States
District Court for the District of Arizona.
For the reasons
action is unwarranted, but transfer is indeed appropriate.
such, Cold Stone’s motion to dismiss is DENIED; the request in
the alternative that the matter be transferred is GRANTED and
the matter is hereby transferred to the United States District
Court for the District of Arizona.
Plaintiffs and Cold Stone executed a franchise agreement on
April 3, 2007.
Prior to this date, in 2005, Cold Stone had
entered into a lease agreement with Edens and Avant Financing
Shortly after execution of the franchise agreement, Plaintiffs
and Cold Stone entered into a sublease agreement, pursuant to
which Plaintiffs became sublessees of the space.
parties had an arrangement whereby Cold Stone withdrew money
monthly from Plaintiffs’ account in order to make rent payments
however, Cold Stone continued to withdraw funds from Plaintiffs’
account, but failed to make rent payments to E&A, beginning a
chain of events that led to Plaintiffs’ eviction for nonpayment
This lawsuit followed.
Cold Stone has moved to dismiss or transfer the case citing
the choice of venue provision in the franchise agreement, which
Each party agrees that any litigation between the
parties will be commenced and maintained only in the
courts located in Maricopa County, Arizona, and each
party consents to the jurisdiction of those courts;
provided, however, that [Cold Stone] may seek to
obtain injunctive relief in any court that [Cold
Stone] may select.
(Mot. to Dismiss Ex. A, ECF No. 4-1.)
That Cold Stone would
include this choice of venue provision in its standard franchise
agreement comes as no surprise; Cold Stone is incorporated and
based in Arizona.
Federal Rule of Civil Procedure 12(b)(3) allows a party to
invoke an improper venue defense.
“The district court of a
district in which is filed a case laying venue in the wrong
division or district shall dismiss, or if it be in the interest
of justice, transfer such case to any district or division in
which it could have been brought.”
28 U.S.C. § 1406(a).
Plaintiffs oppose both dismissal and transfer for two reasons:
unconscionable contract of adhesion; and (2) because the terms
of the choice of venue provision are unreasonable.
Was the franchise agreement an unconscionable contract
absence of meaningful choice on the part of one of the parties;
favorable’ to the other party.”
E.H. Ashley & Co. v. Wells
meaningful choice requirement.
Plaintiffs argue that they faced an absence of meaningful
choice in that Cold Stone drafted the franchise agreement in its
entirely, employed standard boilerplate terms in doing so, and
obvious second option: to decline the franchise and walk away. 1
Plaintiffs rely on E.H. Ashley in suggesting that they
were denied meaningful choice.
There, however, the First
Circuit declined to reach the issue of meaningful choice because
it determined that the plaintiffs had failed to satisfy the
requirement that the contract in question be “unreasonably
favorable.” E.H. Ashley & Co. v. Wells Fargo Alarm Servs., 907
F.2d 1274, 1278 (1st Cir. 1990).
See Awuah v. Coverall N. Am., Inc., 554 F.3d 7, 12 (1st Cir.
parties of bad bargains”).
selection clause was buried within the franchise agreement and
Plaintiffs also viewed a separate franchise offering circular
that prominently displayed a risk factor informing prospective
franchisees of the risks posed by out-of-state litigation. 2
Def.’s Reply to Pls.’ Opp’n to Mot. to Dismiss Ex. B, ECF No. 62.)
grounds of unconscionability either the franchise agreement as a
whole, nor the choice of venue provision specifically.
Is the choice of venue provision unreasonable?
Forum selection clauses are common and have usually been
Huffington v. T.C. Group, LLC, 637 F.3d 18,
23 (1st Cir. 2011); see also Roby v. Corp. of Lloyd’s, 996 F.2d
1353, 1361 (2d Cir. 1993), cert. denied, 510 U.S. 945 (1993).
The Court likewise cannot credit Plaintiffs’ argument that
The record (though scant at this early stage)
indicates that Plaintiffs successfully executed a complicated
franchise agreement and successfully operated a Cold Stone
location for several years prior to the events that led to this
It cannot accurately be said that Cold Stone is
significantly more sophisticated or capable of understanding the
terms of the franchise agreement than Plaintiffs.
choice of forum clause “should control absent a strong showing
(quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15
burden” of demonstrating why the clause should not be enforced.
Zapata, 407 U.S. at 17.
Courts have identified four grounds for
finding a choice of venue clause unenforceable: (1) the clause
was the product of fraud or overreaching; (2) enforcement would
be unreasonable and unjust; (3) proceedings in the contractual
forum will be so gravely difficult and inconvenient that the
party challenging the clause will for all practical purposes be
contravene a strong public policy of the forum in which suit is
brought, whether declared by statute or by judicial decision.
Huffington, 637 F.3d at 23 (internal citations omitted).
giving rise to the lawsuit occurred in Rhode Island, it would be
unreasonable and unjust to litigate the matter in Arizona.
selection clause would be unreasonable or unjust.
See id. at
Plaintiffs also contend that proceeding in Arizona would be
so gravely difficult and inconvenient so as to deprive them of
litigating in Arizona would necessitate additional travel costs
and a new round of filing fees to initiate the lawsuit anew. 3
As noted earlier, Plaintiffs not only agreed to the terms
opposed to the franchisee’s home state.
While it is regrettable
that Plaintiffs may indeed incur certain additional costs in
litigating this matter in Arizona, these costs were (or should
have been) contemplated as part of Plaintiffs’ decision to enter
into the franchise agreement.
See Furness v. Wright Med. Tech.,
Inc. (In re Mercurio), 402 F.3d 62, 66 (1st Cir. 2005) (“The
record in this case is bare of specific evidence regarding the
Tennessee that were not foreseen by the contracting parties when
they entered into the [a]greement.”).
As such, Plaintiffs have
not demonstrated that transfer of this matter to Arizona would,
The Court’s decision to transfer the case to Arizona,
rather than dismiss it outright, was motivated in part by a
desire to avoid certain filing fees that might have been
required were the lawsuit to be reinitiated in full.
in effect, be so gravely difficult and inconvenient so as to
deprive them of their day in court.
complaint are true, there can be no doubt that they deserve
their day in court.
But, the express terms of the franchise
Arizona, and not this one.
For that reason, Cold Stone’s motion
alternative that the matter be transferred is GRANTED and the
suit is hereby transferred to the United States District Court
for the District of Arizona.
IT IS SO ORDERED.
/s/ William E. Smith
William E. Smith
United States District Judge
Date: November 22, 2013
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