5280 Prosperity LLC v. West USA Realty, Inc. et al

Filing 24

ORDER. Counsel are directed to confer and to call in JOINTLY on or before April 28, 2016, to set a date for oral argument on the Court's calendar. Should either side desire a referral to a magistrate judge for settlement in the interim, it may request one at the time of thephone call. Signed by Judge John L. Kane on 04/21/16. (jhawk, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 16-cv-00248-JLK
5280 PROSPERITY LLC, a voluntarily
dissolved Colorado limited liability company,
Plaintiff,
v.
WEST USA REALTY, INC., an Arizona corporation;
WW Franchise LLC, an Arizona limited liability company;
CLINT FOUTS, an individual; and DOES 1-50,
Defendants.

ORDER
Kane, J.
I have reviewed Defendants’ Motion to Dismiss (or Alternatively, to Transfer Venue)
(Doc. 14) as well as all of the attendant documents and briefing. I am not, at this point, favorably
impressed with the Motion and am disinclined to dismiss Plaintiff’s fraud claim as being contrary
to either Arizona or Colorado’s view of the economic loss doctrine, or violative of the Franchise
Agreement’s mandatory arbitration clause. I am unpersuaded that the Franchise Agreement
applies to Mr. Sanchez’s claim at all, which is premised not on a violation of any contractual
obligation arising under the agreement, but on extra-contractual obligations that arise
independently of it. Arizona, like Colorado, applies the Rest.(2d) of the Conflict of Laws in
diversity cases such as this, and it is clear under either jurisdiction’s case law that Colorado law

applies to Plaintiff’s claim. Even if the Agreement were to apply, I would be disinclined to enforce
its mandatory arbitration clause at § 22 of the Agreement that requires Franchisees, but not the
Franchisor to subject its disputes to mandatory “secret” mediation, and then to arbitration,
exclusively in Maricopa County, Arizona. The Franchisor is explicitly excluded under § 22C of the
Agreement from the mandatory mediation/arbitration/venue limitations of § 22B, and may bring an
action for “[monetary relief], declaratory relief, preliminary or permanent equitable relief, any
action at law for damage to goodwill, proprietary information, service marks or other property or
for fraudulent conduct by the Franchisee” anywhere it likes. The one-sided nature of the mandatory
arbitration and venue provision couldn’t be more patent. Finally, with respect to the suggestion that
Colorado constitutes a forum non conveniens in this case, there has been no showing that the weight
of the factors to be considered in a § 1404 transfer request militates strongly in favor of Arizona, or
that Plaintiff’s choice of forum should be disturbed.
While these are my leanings, I remain open to persuasion and would like to set Defendants’
Motion to Dismiss for oral argument. I am aware counsel for Defendants resides in Arizona, but
believe oral argument will assist me in considering the multiple and overlapping issues Defendants
raise. ACCORDINGLY,
Counsel are directed to confer and to call in JOINTLY on or before April 28, 2016, to set a
date for oral argument on the Court’s calendar — 303-844-6118. Should either side desire a
referral to a magistrate judge for settlement in the interim, it may request one at the time of the
phone call.
SO ORDERED this 21st day of April, 2016.

BY THE COURT:

JOHN L. KANE
Senior U.S. District Court Judge