EA Independent Franchisee Association, LLC v. Edible Arrangements International, Inc. et al

Filing 46

ORDER denying 25 Motion to Dismiss. See the attached memorandum of decision. Signed by Judge Warren W. Eginton on 7/19/11. (Wilson, J.)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT

EA INDEPENDENT FRANCHISEE
ASSOCIATION, LLC,
Plaintiff,

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v.
EDIBLE ARRANGEMENTS
INTERNATIONAL, INC., ET AL.,
Defendants.

3:10-cv-1489 (WWE)

MEMORANDUM OF DECISION
Defendants Edible Arrangements International, Inc. (“Edible Arrangements”), EA
Connect, Inc. (“EA Connect”), Netsolace, Inc. (“Netsolace”), and Dipped Fruit, Inc.
(“Dipped Fruit”), move to dismiss the complaint filed by plaintiff EA Independent
Franchisee Association, LLC (“plaintiff”), for lack of standing. For the following reasons,
defendants’ motion will be denied.
BACKGROUND
Plaintiff, a Michigan limited liability company, represents more than 170
franchisees of Edible Arrangements, a Connecticut corporation that has several
Connecticut corporate affiliates, including EA Connect, Netsolace, and Dipped Fruit.
Plaintiff alleges that Edible Arrangements violated federal regulations by failing to
disclose its relationships with its affiliates while requiring its franchisees to do business
with them. Plaintiff also alleges that there were undisclosed fees associated with
franchisees’ mandatory use of an online ordering system provided by EA Connect and
computer software provided by Netsolace.
Plaintiff further alleges that Edible Arrangements improperly imposed new rules

requiring longer franchise hours of operation and the purchase of supplies from only
certain vendors. According to the complaint, Edible Arrangements has sanctioned
franchisees who do not comply with the new rules by imposing special costs and
barring them from filling orders placed via the Edible Arrangements website. The
complaint also alleges that franchisees paid for national advertising, but Edible
Arrangements used the money for the benefit of itself and Dipped Fruit, which operates
a website selling products similar to those of Edible Arrangements. According to the
complaint, Edible Arrangements unfairly allows only selected franchisees to fill orders
for Dipped Fruit.
Plaintiff seeks a declaratory judgment that defendants breached their franchise
agreements, violated the implied covenant of good faith and fair dealing, and violated
the Connecticut Unfair Trade Practices Act (CUTPA), Conn. Gen. Stat. § 42-110a et
seq. Jurisdiction is grounded in diversity of citizenship pursuant to 28 U.S.C. § 1332.
DISCUSSION
In considering a motion to dismiss for lack of standing, the Court construes the
complaint in favor of the plaintiff, accepting the material allegations as true. Kendall v.
Employees Ret. Plan of Avon Prods., 561 F.3d 112, 118 (2d Cir. 2009). An
association, such as plaintiff in this case, has standing to sue if: “(a) its members would
otherwise have standing to sue in their own right; (b) the interests it seeks to protect are
germane to the organization’s purpose; and (c) neither the claim asserted nor the relief
requested requires the participation of individual members in the lawsuit.” Bldg. &
Constr. Trades Council of Buffalo, N.Y. & Vicinity v. Downtown Dev., Inc., 448 F.3d 138,
144 (2d Cir. 2006).
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Defendants briefly challenge the first prong of associational standing. They
assert that plaintiff’s members probably lack individual standing, which requires the
showing of an injury that is concrete, particularized, and actual or imminent; traceability
to the defendants’ actions; and redressability by a favorable ruling. Green Party of
Conn. v. Garfield, 616 F.3d 213, 242 (2d Cir. 2010). Defendants argue that in order to
allege an injury, plaintiff must identify at least one franchisee injured by each of the
defendants’ allegedly improper actions. However, “[t]here is no heightened pleading
requirement for allegations of standing. . . . [G]eneral factual allegations of injury
resulting from the defendant’s conduct may suffice” in the early stages of litigation.
Bldg. & Constr. Trades Council, 448 F.3d at 145. Plaintiff therefore does not need to
identify specific franchisees. Defendants also argue that the complaint does not
support redressability because plaintiff limited its claim to declaratory relief and did not
request damages. The Court disagrees. Redressability is “a non-speculative likelihood
that the injury can be remedied by the requested relief.” Selevan v. N.Y. Thruway
Auth., 584 F.3d 82, 89 (2d Cir. 2009). Failing to request damages does not make the
declaration sought by plaintiff a speculative form of relief because the declaration would
specifically address the defendants’ conduct.
Defendants do not challenge the second prong of associational standing. They
devote most of their argument to the third prong, asserting that plaintiff’s members
would be required to participate in the lawsuit, thereby depriving plaintiff of standing.
Defendants point out that the Edible Arrangements franchise agreement requires
arbitration of disputes, and they argue that franchisees should not be allowed to evade
that requirement by forming an association for the purpose of bringing litigation.
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However, defendants themselves explain that plaintiff “has no right or obligation to
arbitrate . . . on behalf of its members.” The arbitration provision of the individual
members’ franchise agreements does not require the Court to conclude that plaintiff
lacks standing.
Defendants attempt to link plaintiff’s allegations to defendants’ argument in favor
of individual participation and against associational standing. As to the fees for EA
Connect’s online ordering system and Netsolace’s computer software, defendants
contend that “there are at least three significantly different versions of the franchise
agreement at issue and at least as many different versions of [disclosure documents].”
Defendants thus suggest that plaintiff’s members must rely on different facts. However,
Edible Arrangements states that it “believes that under all of the relevant versions of its
franchise agreement and [disclosure documents] it has the right to charge a fee . . . .”
The existence of three different versions of the relevant writings does not establish the
need for individual participation. Defendants acknowledge that the versions all provide
for a fee, and the propriety of such fees is the focus of plaintiff’s complaint. The Court
can consider each of the versions and their corresponding fees without receiving
individual guidance from plaintiff’s members.
Defendants further argue that plaintiff’s members may have had different
experiences with the new rules requiring longer franchise hours of operation and the
purchase of supplies from only certain vendors. Defendants point out that the
complaint alleges that Edible Arrangements has sanctioned some franchisees who do
not comply with the new rules and that Edible Arrangements unfairly selects only
certain franchisees to fill orders for Dipped Fruit. Therefore, defendants contend that
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these claims will require the individual testimony of plaintiff’s members. The Court
disagrees because defendants’ arguments address the damages that plaintiff’s
members may have sustained. Plaintiff is seeking only declaratory relief. The
complaint puts at issue the propriety of defendants’ rules and actions, not the degree to
which individual franchisees may have been hurt by having to keep their franchises
open longer hours, having to purchase supplies from approved vendors, and not being
able to fill orders for Dipped Fruit. “[W]here the organization seeks a purely legal ruling
without requesting that the federal court award individualized relief to its members, the
[associational standing] test may be satisfied.” Bldg. & Constr. Trades Council, 448
F.3d at 150.
Plaintiff asserts that it can prove its allegations by using only experts and
defendants’ documents. At this early stage of litigation, the Court will afford plaintiff the
opportunity to do so. As the case progresses, the Court may reconsider plaintiff’s ability
to maintain standing if circumstances warrant. See Penn. Psychiatric Soc’y v. Green
Spring Health Servs., Inc., 280 F.3d 278, 287 (3d Cir. 2002).
CONCLUSION
Defendants’ motion to dismiss (Doc. #25) is DENIED.
Dated at Bridgeport, Connecticut, this 19th day of July, 2011.

/s/
Warren W. Eginton
Senior United States District Judge

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