MEINEKE CAR CARE CENTERS, LLC v. JULIANO, SR. et al
Filing
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OPINION. Signed by Judge Robert B. Kugler on 9/26/2018. (dmr)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAMDEN VICINAGE
MEINEKE CAR CARE CENTERS, LLC,
Plaintiff,
v.
JAMES JULIANO, SR., JNMVR
ENTERPRISES, INC., NICHOLAS
JULIANO, JAMES JULIANO, Jr., AND MY
FAMILY CARE CARE LLC,
Defendants.
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Civil No. 17-12408 (RBK/KMW)
OPINION
KUGLER, United States District Judge:
This matter arises out of Meineke Car Care Centers, LLC’s (“Meineke” or “Plaintiff”)
claims against James Juliano, Sr., Nicholas Juliano, James Juliano, Jr., JNMVR Enterprises, Inc.,
(“JNMVR”) and My Family Car Care, LLC, (“MFCC”) (collectively, “Defendants”) for
allegedly breaching a franchise agreement, among other things. (Doc. No. 1.) Defendants 1
asserted six Amended Counterclaims against Meineke. (Doc. No. 18 (“Countercl.”).) Pursuant
to Federal Rule of Civil Procedure 12(b)(6), Meineke now moves to dismiss each counterclaim
but the first. (Doc. No. 19.) Although Defendants had ample opportunity to oppose the motion,
they did not do so. For the following reasons, Meineke’s motion is GRANTED in part and
DENIED in part.
James Juliano, Sr. and JNMVR are collectively referred to as the “JNMVR Defendants.”
Nicholas Juliano, James Juliano, Jr., and My Family Car Care are collectively referred to as the
“MFCC Defendants.”
1
1
I.
BACKGROUND2
In February 2011, Meineke entered into a Franchise Agreement (the “Agreement”) with
JNMVR. (Countercl. at ¶ 3.) The Agreement, guaranteed by Juliano, Sr., granted JNMVR the
right to operate a franchise at 912 Haddonfield Road in Cherry Hill, New Jersey. (Id. at ¶¶ 3–4.)
Among its many provisions, the Agreement prohibited Juliano, Sr. from operating the franchise
elsewhere without Meineke’s consent. (Agreement at § 2.1.) It also required Juliano, Sr. to
obtain approval before relocating the franchise, (e.g., id. at §§ 2.2, 2.6) and before selling or
transferring it (id. at art. 12). And importantly, the Agreement contained a territorial protection
clause. (Id. at § 2.3.) In that clause, Meineke promised, among other things, not to grant others
the right to operate a franchise within a 3-mile radius of JNMVR without first giving the
JNMVR Defendants a 30-day right of first refusal. (Id.) This same protection was also afforded
to another franchisee in Cinnaminson (the “Cinnaminson franchisees”) in their franchise
agreement.3 (See Pl. Br., Ex. A.)
Around August 2013, JNMVR learned that its landlord intended to sell its property by
2016 and terminate JNMVR’s lease early. (Countercl. at ¶¶ 5–7.) Thereafter, the landlord made
an offer to buy the franchise, but Meineke’s representative, Mr. Fillman, notified Juliano, Sr. that
the landlord was not approved as a franchisee. (Id. at ¶¶ 9–10.) Although for the next two years,
2
On this motion to dismiss, the Court accepts as true the facts as pled in the counterclaims and
construes them in the light most favorable the Defendants. See Phillips v. Cty. of Allegheny, 515
F.3d 224, 231 (3d Cir. 2008).
“While courts typically cannot consider matters outside of the pleadings when deciding a
motion to dismiss, there is an exception to this general rule when a document is integral to, or
explicitly relied upon in, the complaint.” Allen v. New Jersey State Police, No. 16-cv-1660,
2017 WL 5714707, at *2 n.2 (D.N.J. Nov. 28, 2017). Because the counterclaims expressly refer
to the Cinnaminson franchisees’ right of first refusal (see, e.g., Agreement ¶¶ 34–35, 38) the
Court considers their franchise agreement in deciding this motion. See Allen, 2017 WL
5714707, at *2 n.2. The same goes for JNMVR’s own Agreement. (Agreement at ¶¶ 3–4, 49,
67, 72.)
3
2
the landlord maintained interest in buying the franchise, (id. at ¶ 11), this relationship eventually
soured; both parties sued each other over the property’s proposed sale, and they reached a
settlement requiring JNMVR to leave 912 Haddonfield Road by August 1, 2017. (Id. at ¶¶ 18–
20.) The relocation process thus began.
First, Juliano, Sr. found a potential purchaser and a new location on Route 70 in Cherry
Hill, New Jersey, that Meineke approved, but the lease and purchase both fell through. (Id. at ¶¶
13–17, 22.) In May 2017, “Plaintiff insisted on payment of all unpaid royalty and advertising
fees before they would approve relocation of JNMVR’s franchise location.” (Id. at ¶ 23.)
JNMVR paid these fees (id.), and Juliano, Sr. found a second relocation option at 326
Haddonfield Road in Cherry Hill. (Id. at ¶ 24.) Meineke approved that property soon after, (id.
at ¶ 25), but the lease again fell through. (Id. at ¶ 26.) At this point, Juliano, Sr. “requested help
from the Plaintiff to find a new location,” but “never received a response.” (Id. at ¶ 27.) Juliano,
Sr. would continue requesting Meineke’s help, but Meineke “never substantively responded to”
Juliano, Sr.’s “multiple emails.” (Id. at ¶ 58.)
On July 10, 2017, Juliano, Sr. found a third option at 54 Haddonfield Road in Cherry
Hill. (Id. at ¶ 28.) With JNMVR’s August 1, 2017 move-out deadline approaching, (id. at ¶ 20),
Juliano, Sr., notified Mr. Fillman that if this relocation failed, JNMVR would close. (Id. at ¶ 29.)
Accordingly, Juliano, Sr. requested expedited approval from Mr. Fillman and began lease
negotiations. (Id. at ¶¶ 29–30.) A month later, Mr. Fillman responded to Juliano, Sr. and
requested that Juliano, Sr. provide more information about the proposed relocation site. (Id. at ¶
33.) “On August 14, 2017, more than six (6) weeks after it was first proposed, JNMVR was
notified by the Plaintiff that the proposed location at 54 Haddonfield Road was .2 of a mile
within another Meineke franchisees’ territory in Cinnaminson, New Jersey, even though it was
3
only 800 yards from the approved location at 326 Haddonfield Rd. and 1.2 miles from the
original location at 912 Haddonfield Road.” (Id. at ¶ 34.)4 This triggered the Cinnaminson
franchisees’ rights under their territorial protection clause. (Id. at ¶ 35.)
Accordingly, Mr. Fillman informed Juliano, Sr. that “before Plaintiff could approve the
relocation, [the Cinnaminson franchisees] would be entitled to a right of first refusal” under their
franchise agreement, which permitted them “to purchase a new franchise license and negotiate a
lease with the landlord at the proposed location, within 30 days.” (Id.) On August 18, 2017,
Juliano, Sr. asked Meineke to initiate “the supposed 30-day right of first refusal processes” with
the Cinnaminson franchisees for 54 Haddonfield Road. (Id. at ¶ 38.)
That same day, the landlord at 54 Haddonfield Road gave JNMVR permission to move
belongings into the premises without a lease, which they would finalize after Meineke’s
approval. (Id. at ¶ 39.) While moving in, Juliano, Sr. “requested that Plaintiff update their web
site to reflect the new location, until the territorial issue with the Cinnaminson franchisees was
resolved,” but “Plaintiff responded that they could not update the website as requested, at that
time.” (Id. at ¶ 41.) Around September 5, 2017, after the move was complete, Juliano, Sr. “was
informed verbally, that the right of first refusal details that were given to him by Mr. Fillman,
were incorrect, and that the owners of the Cinnaminson franchise did not have to negotiate a
lease at 54 Haddonfield Road, but instead had a year to find another location within that
territory.” (Id. at ¶ 42.)
Two days later, Juliano, Sr. received an email “from the Plaintiff, that they had not
approved the relocation to 54 Haddonfield Road, and that JNMVR should close the Center, until
the right of first refusal process was completed.” (Id. at ¶ 43.) On September 11, 2017, Juliano,
4
These are the distances alleged in the counterclaims. (Id.) The Court takes them as true on this motion to dismiss
and expresses no opinion as to their accuracy.
4
Sr. contacted Meineke’s general counsel to clarify the right of first refusal details and learned
that he “was correct in his original interpretation of the process, but the circumstances in
JNMVR’s situation were somehow different.” (Id. at ¶ 44.) All the while, from August 15, 2017
to September 12, 2017, Juliano, Sr. continued negotiating—unsuccessfully—with the
Cinnaminson franchisees so JNMVR could relocate to 54 Haddonfield Road. (Id. at ¶ 45.)
Juliano, Sr. “repeatedly requested help from the Plaintiff’s representatives to mediate these
negotiations as they promised to do,” but “Plaintiff never complied with those promises.” (Id. at
¶ 45.) Ultimately, JNMVR rescinded its relocation request and shut down at 54 Haddonfield
Road. (Id. at ¶¶ 48–49.) Juliano, Sr. also advised Meineke’s representatives that JNMVR was
selling its assets to another entity, My Family Car Care, which would run an independent car
care business at 54 Haddonfield Road. (Id. at ¶¶ 49–51.) My Family Car Care was formed by
James Juliano, Jr. and Nicholas Juliano, who signed a lease at 54 Haddonfield Road on
September 18, 2017. (Id. at ¶¶ 50–51.)
On September 28, 2017, Juliano, Sr. attended Meineke’s regional sales meeting, when he
spoke with Meineke’s President, Mr. Daniel Rivera. (Id. at ¶ 55.) “Mr. Rivera asked Mr.
Juliano, Sr. if he would accept the Plaintiff as a mediator” in the Cinnaminson franchisee dispute.
(Id. at ¶ 56.) “Mr. Rivera promised that he would reach out to [them],” but “to date, Mr. Rivera
has never followed through with this promise.” (Id. at ¶ 57.) On November 7, 2017, Juliano, Sr.
proposed one final relocation site to Mr. Fillman, who responded about two weeks later asking
for more information. (Id. at ¶ 60–61.) Thereafter, Mr. Fillman advised Juliano, Sr. that
Meineke would not approve the proposed site or any other, and around December 4, 2017,
Meineke filed the Complaint in this matter. (Id. at ¶¶ 63–65.)
5
Meineke’s suit alleges that when Defendants began operating MFCC, which it calls a
“copy-cat, knock off business offering the same types of goods and services” as Meineke, they
breached their franchise agreement and infringed Meineke’s trademarks. (Pl. Br. at 1.) The
Defendants filed an Amended Answer and Counterclaims, asserting six counterclaims for breach
of contract, breach of the implied covenant of good faith and fair dealing, fraudulent
misrepresentation, negligent misrepresentation, tortious interference with contract/prospective
contractual relations, and unfair competition. (Doc. No. 18.) Meineke now moves to dismiss
each counterclaim but the first. Defendants have not opposed the motion, but the Court must still
analyze whether they have stated claims on the merits. See Stackhouse v. Mazurkiewicz, 951
F.2d 29, 30 (3d Cir. 1991).
II.
LEGAL STANDARD
“A motion to dismiss a counterclaim
is
properly evaluated under
the familiar
Rule 12(b)(6) standard.” Signature Bank v. Check-X-Change, LLC, No. 12-2802, 2013 WL
3286154, at *2 (D.N.J. June 27, 2013). Under that standard, “courts accept all factual allegations
as true, construe the complaint in the light most favorable to the plaintiff, and determine whether,
under any reasonable reading of the complaint, the plaintiff may be entitled to relief.” Fowler v.
UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (quoting Phillips v. Cty. of Allegheny, 515
F.3d 224, 233 (3d Cir. 2008)). In other words, a complaint survives a motion to dismiss if it
contains enough factual matter, accepted as true, to “state a claim to relief that is plausible on its
face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 570 (2007).
To make this determination, a court conducts a three-part analysis.
Santiago v.
Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010). First, the court must “tak[e] note of the
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elements a plaintiff must plead to state a claim.” Id. (quoting Iqbal, 556 U.S. at 675). Second,
the court should identify allegations that, “because they are no more than conclusions, are not
entitled to the assumption of truth.” Id. at 131 (quoting Iqbal, 556 U.S. at 680). Finally, “where
there are well-pleaded factual allegations, a court should assume their veracity and then
determine whether they plausibly give rise to an entitlement for relief.” Id. (quoting Iqbal, 556
U.S. at 680).
This plausibility determination is a “context-specific task that requires the
reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at
679. A complaint cannot survive where a court can only infer that a claim is merely possible
rather than plausible. Id.
III.
DISCUSSION
The Agreement contains a choice-of-law provision that states: “all issues arising from or
relating to this Agreement will be governed by and construed under” North Carolina law.
(Agreement at § 17.1.)
Given the clause’s broad language, New Jersey’s preference for
enforcing private choice-of-law clauses, see Gen. Motors Corp. v. New A.C. Chevrolet, Inc., 263
F.3d 296, 331 n.21 (3d Cir. 2001), and Defendants’ failure to argue that another jurisdiction’s
law applies, the Court, on this record, will apply North Carolina law in assessing Defendants’
counterclaims. See Intervet, Inc. v. Mileutis, Ltd., No. 15-cv-1371, 2016 WL 740267, at *3
(D.N.J. Feb. 24, 2016) (applying contractually chosen law to all counterclaims, including tort
claims, when there was no dispute over a nearly identical choice-of-law clause). As set forth
below, Counts II, III, V, and VI are dismissed; Meineke’s motion to dismiss Count IV is denied.
A. Breach of the Implied Covenant of Good Faith and Fair Dealing (Count II)
The JNMVR Defendants allege that Meineke breached various covenants of good faith
and fair dealing implied in the Agreement. (Countercl. at ¶ 72.) Meineke argues that this claim
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should be dismissed because the duties alleged are either contrary to the Agreement’s express
terms or do not exist in the Agreement. (Pl. Br. at 11.) The Court agrees that this claim must be
dismissed, but for a different reason. See Hanson Eng’g, Inc. v. Ascher, No. 07-2651, 2008 WL
1782392, at *2 (D.N.J. Apr. 18, 2008). The JNMVR Defendants’ implied covenant claim is
identical to their breach of contract claim (Count I), which Meineke has not moved to dismiss.
(Countercl. at ¶¶ 67, 72.) “[A] claim for breach of the covenant of good faith and fair dealing
based on facts identical to those supporting a breach of contract claim should not be pursued
separately.” BioSignia, Inc. v. Life Line Screening of Am., Ltd., No. 12-cv-1129, 2014 WL
2968139, at *5 (M.D.N.C. July 1, 2014); see also Pres. Prof’l Servs., LLC v. M2 Pictures, LLC,
No. 14-cv-589, 2015 WL 3659506, at *6 (W.D.N.C. May 5, 2015) (dismissing implied covenant
claim “based on facts identical to those alleged to support the claims for breach of contract”
because claims “should not be pursued separately”). Count II is dismissed, without prejudice.
B. Fraudulent Misrepresentation (Count III)
The JNMVR Defendants allege Meineke made several fraudulent misrepresentations to
Juliano, Sr. and JNMVR. (Countercl. at ¶ 76.) Meineke argues that the economic loss rule bars
this claim, (Pl. Br. at 14–17), and that the JNMVR Defendants failed to plausibly allege fraud.
(Id. at 11–14). For the second reason, Count III is dismissed, without prejudice.
i. Economic Loss Rule
The economic loss rule prevents a party from recovering purely economic losses in tort
for conduct that amounts to a mere breach of contract. See Bradley Woodcraft, Inc. v. Bodden,
795 S.E.2d 253, 257 (N.C. Ct. App. 2016). Meineke argues that under North Carolina law, this
rule bars fraud claims. (Pl. Br. at 17.) But not all courts agree. In Bradley Woodcraft, the North
Carolina Court of Appeals held that “while claims for negligence are barred by the economic
8
loss rule where a valid contract exists between the litigants, claims for fraud are not so barred
and, indeed, ‘[t]he law is, in fact, to the contrary: a plaintiff may assert both claims[.]’” 795
S.E.2d at 259 (citation omitted). Following Bradley Woodcraft, several courts have not barred
fraud claims under the rule. See, e.g., Prassas Capital, LLC v. Blue Sphere Corp., No. 17-cv131, 2018 WL 1567362, at *5 (W.D.N.C. Mar. 30, 2018); Potts v. KEL, LLC, No. 16-cv-2877,
2018 WL 1597644, at *4 (N.C. Super. Ct. Mar. 27, 2018) (citing cases).
Other courts have reached the opposite conclusion. See, e.g., Broussard v. Meineke Disc.
Muffler Shops, Inc., 155 F.3d 331, 345–47 (4th Cir. 1998); Forest2Market, Inc. v. Arcogent, Inc.,
No. 15-cv-9547, 2016 WL 56279, at *4–5 (N.C. Super. Ct. Jan. 5, 2016). And recently, the
Fourth Circuit, applying North Carolina law, rejected an argument that after Bradley Woodcraft,
North Carolina’s economic loss rule bars only negligence claims, not intentional tort claims like
fraud. See Legacy Data Access, Inc. v. Cadrillion, LLC, 889 F.3d 158, 166 (4th Cir. 2018)
(stating that “a plaintiff may not circumvent the economic loss rule simply by claiming that a
breach of contract claim also sounds in fraud”). Whatever the state of the law, the Court need
not resolve it here.
The JNMVR Defendants have not plausibly alleged any fraudulent
misrepresentation.
ii. The JNMVR Defendants Have Not Plausibly Alleged Fraud
To state a fraudulent misrepresentation claim, the JNMVR Defendants must plausibly
allege: “(1) a false representation or concealment of a material fact, (2) that was reasonably
calculated to deceive, (3) that was made with the intent to deceive, (4) which does in fact
deceive, (5) resulting in damage to the injured party.” Packrite, LLC v. Graphic Packaging Int’l,
Inc., No. 17-cv-1019, 2018 WL 4112827, at *4 (M.D.N.C. Aug. 29, 2018). The allegations must
also satisfy Federal Rule of Civil Procedure 9(b), which requires a party to “state with
9
particularity the circumstances constituting fraud or mistake.” To meet this “stringent” standard,
the party “must plead or allege the date, time and place of the alleged fraud or otherwise inject
precision or some measure of substantiation into a fraud allegation.”
Frederico v. Home
Depot, 507 F.3d 188, 200 (3d. Cir. 2007); see also U.S. ex rel. Moore & Co., P.A. v. Majestic
Blue Fisheries, LLC, 812 F.3d 294, 307 (3d Cir. 2016) (requiring allegations to contain “the
who, what, when, where and how of the events at issue” (citation omitted)).
Here, the JNMVR Defendants allege that Meineke, through Mr. Fillman, Mr. Rivera, and
others, “made numerous fraudulent misrepresentations to Mr. Juliano, Sr., and JNMVR
regarding: the proposed purchases of the JNMVR franchise, the approval process for franchise
relocation requests, the right of first refusal process for resolving alleged territorial disputes
amongst franchisees, and the mediation of territorial disputes between JNMVR and the
Cinnaminson franchisees.” (Countercl. at ¶ 76.) These allegations fail to identify which specific
representations are believed fraudulent, and this alone could warrant dismissal under Rule 9(b)’s
stringent standards. See Inventory Recovery Corp. v. Gabriel, No. 11-cv-01604, 2012 WL
2990693, at *3 (D.N.J. July 20, 2012) (dismissing fraud claim when plaintiff alleged that
defendants “made representations” “concerning” certain budgets but “never identifie[d] what
‘[t]his statement’ was”); accord Bon Aqua Int’l, Inc. v. Second Earth, Inc., No. 10-cv-169, 2013
WL 357469, at *12 (M.D.N.C. Jan. 29, 2013) (recommending dismissal where Plaintiffs did not
“identify, with particularity, a specific misrepresentation or concealment of a material fact by a
specific Defendant” but instead, provided a “general list of alleged wrongs”).
10
In any event, the representations alleged that may conceivably fit within these general
categories5 suffer from at least two defects: either they fail to plausibly allege an intentionally
false and deceptive statement (e.g., Countercl. at ¶¶ 10, 14–15, 23, 26, 34–35, 41–44, 64), or they
fail to fully identify the who, what, when, where, or how of the statement (e.g., id. at ¶¶ 10, 23,
26, 34, 41–43).
Nor can the JNMVR Defendants’ more specific allegations plausibly plead fraud. As
pled, on September 28, 2017, Juliano, Sr. spoke with Daniel Rivera at a regional sales meeting,
where Rivera asked if Juliano, Sr. “would accept the Plaintiff as a mediator” in the Cinnaminson
franchisee dispute. (Id. at ¶¶ 55–56.) Rivera “promised that he would reach out” to the
Cinnaminson franchisees, but “never followed through with this promise.”
(Id. at ¶ 57.)
Without more, these and similar allegations (see id. at ¶¶ 45, 48) are merely unfulfilled promises.
Swift Beef Co. v. Alex Lee, Inc., No. 17-cv-176, 2018 WL 792071, at *4 (W.D.N.C. Feb. 8, 2018)
(“Simply put, ‘[a]n unfulfilled promise is not actionable fraud . . . unless the promisor had no
intention of carrying it out at the time of the promise, since this is a misrepresentation of a
material fact.’” (citation omitted)). Count III is dismissed, without prejudice.
C. Negligent Misrepresentation (Count IV)
Next, the JNMVR Defendants allege that Meineke made several negligent
misrepresentations to Juliano, Sr. and JNMVR. (Countercl. at ¶ 80.) Meineke’s lone argument
is that the economic loss rule bars this claim. (Pl. Br. at 14–18.) The Court finds that Count IV
narrowly escapes dismissal. “To pursue a tort claim and a breach of contract claim concerning
the same conduct,” the economic loss rule requires the claimant to “allege a duty owed him by
The Court’s review of the allegations that could conceivably support this claim aimed for overinclusion. The Court expresses no opinion on whether the cited allegations should, in fact, be
used in support of a well-pleaded claim.
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the defendant separate and distinct from any duty owed under a contract.” Kelly v. Georgia-Pac.
LLC, 671 F. Supp. 2d 785, 791 (E.D.N.C. 2009) (citation omitted). A party has not alleged an
independent duty if the tort “arise[s] in the course of contractual performance, since those sorts
of claims are most appropriately addressed by asking simply whether a party adequately fulfilled
its contractual obligations.” Strum v. Exxon Co., U.S.A., a Div. of Exxon Corp., 15 F.3d 327, 333
(4th Cir. 1994); Mecklenburg Cty. v. Nortel Gov’t Sols. Inc., No. 07-cv-00320, 2008 WL
906319, at *4–5 (W.D.N.C. Apr. 1, 2008) (dismissing negligent misrepresentation claim because
“the County fails to allege distinct and identifiable facts outside of contract performance”).
A party may, however, allege an independent duty if it alleges facts to plausibly suggest
that the tort is not based on mere contract performance, but rather, arises from acts outside the
contract’s scope. See Regions Bank v. Fairway Indep. Mortg. Corp., No. 09-cv-534, 2010 WL
455045, at *5 (W.D.N.C. Feb. 2, 2010) (denying motion to dismiss fraud claim because the
“facts alleged f[e]ll outside the contract between the parties”); Capital Factors, Inc. v. The
Fryday Club, Inc., 209 F. Supp. 2d 583, 585 (W.D.N.C. 2002) (declining to dismiss negligent
misrepresentation counterclaim because allegations were not “merely ‘assertions that . . . [a
party] failed to meet its alleged obligations’” under a contract, but rather, acts “outside the scope
of the contract”). Nor does the rule bar claims based on non-existent contractual duties. See
Artistic S. Inc. v. Lund, No. 12-cv-11789, 2015 WL 8476587, at *11 (N.C. Super. Ct. Dec. 9,
2015) (declining to bar claim under economic loss rule when “alleged contractual duties . . . did
not exist”); see also USConnect, LLC v. Sprout Retail, Inc., No. 17-cv-2554, 2017 WL 1450593,
at *6 (N.C. Super. Ct. Apr. 21, 2017). Put differently, courts may “focus on the availability of a
contractual remedy” Kelly, 671 F. Supp. 2d at 794, and “only allow[] tort causes of action if
contract theory is insufficient to cover the facts.” Capital Factors, Inc., 209 F. Supp. 2d at 585.
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Here, the JNMVR Defendants allege that Meineke, through Mr. Fillman, Mr. Rivera, and
others made negligent misrepresentations concerning four topics: “the proposed purchases of the
JNMVR franchise, the approval process for franchise relocation requests, the right of first refusal
process for resolving alleged territorial disputes amongst franchisees, and the mediation of
territorial disputes between JNMVR and the Cinnaminson franchisees.” (Countercl. at ¶ 80.)
The Court finds that the economic loss rule bars the first two categories of alleged
misrepresentations. (Countercl. at ¶¶ 10, 14–15, 23, 26, 34–35, 41–44, 64.) 6 As Meineke
argues, the Agreement contains provisions covering the JNMVR Defendants’ rights to sell and
relocate its franchise subject to Meineke’s approval. (E.g., Agreement at art. 12; id. at §§ 2.2,
2.6.) Accordingly, any duty attaching to the representations alleged arises from Meineke’s
performance of the applicable terms and is not independent of the Agreement.
The economic loss rule also bars the third category of alleged misrepresentation
regarding the right of first refusal process for resolving territorial disputes amongst franchisees.
As pled, Mr. Fillman informed Juliano, Sr. that because 54 Haddonfield Road was too close to
the Cinnaminson franchise, Meineke owed the Cinnaminson franchisees a 30-day right of first
refusal under their contract to negotiate a lease at that location; then, Juliano, Sr. was told that the
Cinnaminson franchisees had a year to find another location in that territory; finally, Juliano, Sr.
was told that the original information was correct, but that JNMVR’s situation was different.
(Countercl. at ¶¶ 34–35, 42, 44.) Although Meineke’s franchise agreement afforded the JNMVR
Defendants and the Cinnaminson franchisees the same territorial protection and first refusal
clauses, this branch of Count IV does not appear to be based on Meineke’s performance of that
duty under the Agreement, but rather, its statements about the duties it owed to the Cinnaminson
6
See supra n.5.
13
franchisees under theirs.7 Viewed in the light most favorable to the JNMVR Defendants, this
would suggest conduct outside Meineke’s performance of the Agreement’s territorial duties,
meaning that the economic loss rule would not bar the claim. See Strum, 15 F.3d at 333; Regions
Bank, 2010 WL 455045, at *5; Capital Factors, Inc., 209 F. Supp. 2d at 585.
But even if these statements do not arise out of Meineke’s performance of the
Agreement’s territorial duties, they do arise out of Meineke’s performance of its right to approve
JNMVR’s relocation. (E.g., Agreement at §§ 2.2, 2.6.) Indeed, the first refusal process—and
Meineke’s accompanying statements—occurred “before Plaintiff could approve [JNMVR’s]
relocation” to 54 Haddonfield Road. (Countercl. at ¶ 35.) Because Meineke was performing
under the Agreement’s approval clauses when these purported misrepresentations occurred, the
JNMVR Defendants do not plausibly allege the independent duty required to avoid dismissal.
Nevertheless, the Court cannot find that the economic loss rule bars the final category of
misrepresentation alleged regarding Meineke’s promises to mediate the Cinnaminson dispute.
Although the Agreement governs the parties’ rights in the event of a territorial dispute (see
Agreement at § 2.3), Meineke’s own view is that it contains no clause that fairly embraces a duty
to mediate or help settle those disputes. (Pl. Br. at 11.) Instead, the JNMVR defendants allege
that Meineke’s representatives made unfulfilled, extra-contractual promises over the course of
several exchanges to mediate the Cinnaminson dispute. (Countercl. at ¶¶ 45, 56–57.) Viewed in
the light most favorable to the JNMVR Defendants, the allegations suggest conduct that cannot
be addressed by asking whether Meineke adequately fulfilled a seemingly non-existent
Meineke appears to acknowledge as much, arguing that Defendants’ counterclaims “seek
redress for [Meineke’s] insistence that it honor and comply with its obligations to another
franchisee under the express terms of that franchisee’s franchise agreement, rather than ignoring
those rights and obligations and allowing Defendants to establish an otherwise prohibited, and
otherwise non-approvable, new franchise location.” (Pl. Br. at 1 (emphasis added).)
7
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contractual obligation. See Strum, 15 F.3d at 333; Artistic S. Inc. v. Lund, 2015 WL 8476587, at
*11. To the contrary, the allegations suggest conduct outside the Agreement’s scope for which
there is no contractual remedy. See Regions Bank, 2010 WL 455045, at *5; Kelly, 671 F. Supp.
2d at 794; Capital Factors, Inc., 209 F. Supp. 2d at 585. At minimum, there is a question about
the Agreement’s applicability to these alleged statements that defeats Meineke’s economic loss
argument at this juncture. See USConnect, LLC, 2017 WL 1450593, at *5–6 (denying motion to
dismiss claim under economic loss rule because questions existed as to the “application of the
contract to the alleged wrongdoing”). Accordingly, Meineke’s motion to dismiss Count IV is
denied.8
D. Tortious Interference (Count V)
For their first counterclaim, the MFCC Defendants bring a claim for “tortious
interference with contract/prospective contractual relations.” (Countercl. at ¶¶ 82–85.) Though
raised as a single claim, Count V includes two separate claims—one for tortious interference
with contract and one for tortious interference with prospective economic advantage.9 To state a
8
Meineke suggests—albeit indirectly—that Count IV also fails because it is not accompanied by
“an aggravating element, such as fraud, malice, reckless indifference, oppression, insult, and
willfulness.” (Pl. Br. at 16 (citation omitted).) But that requirement applies “before any punitive
damages may be recovered.” Strum, 15 F.3d at 331. Count IV does not seek punitive damages.
(Countercl. at ¶ 81.) The Court also notes that while attempts “to turn a contract dispute into a
tort action . . . [are] inconsistent both with North Carolina law and sound commercial practice,”
Strum, 15 F.3d at 329, it is “equally sound policy to assure that parties do not sacrifice other
extra-contractual rights just because they have a contract.” Capital Factors, Inc., 209 F. Supp.
2d at 585.
Courts “have used varying terminology in identifying tortious interference claims.” Tucker
Auto-Mation of N. Carolina, LLC v. Russell Rutledge & Rutledge Commercial, LLC, No. 15-cv893, 2017 WL 2930926, at *2 n.2 (M.D.N.C. July 10, 2017). Because the North Carolina
Supreme Court referred to the claims as tortious interference with contract and tortious
interference with prospective economic advantage, the Court will reference the claims consistent
9
15
claim of tortious inference with contract, a claimant must allege: “(1) a valid contract between
the [claimant] and a third person which confers upon the [claimant] a contractual right against a
third person; (2) the [claimant’s adversary] knows of the contract; (3) the [claimant’s adversary]
intentionally induces the third person not to perform the contract; (4) and in doing so acts
without justification; (5) resulting in actual damage to [the claimant].” Beverage Sys. of the
Carolinas, 784 S.E.2d at 462. “A tortious interference with prospective economic advantage
claim has the same elements except that instead of an existing contract, there must be a contract
that would have been entered into but for the defendant’s conduct.” Tucker Auto-Mation of N.
Carolina, LLC, 2017 WL 2930926, at *2 (citation omitted).
The MFCC Defendants claim that Meineke “is unlawfully attempting to interfere with
[MFCC’s] contractual obligations and benefits between [MFCC] and, amongst others, its
landlord at the 54 Haddonfield Road location; its internet and web service providers, as well as
its retail customers who chose to have their car serviced at an independently owned shop, as
opposed to a franchise location.”
(Countercl. at ¶ 83.)
Meineke argues that the MFCC
Defendants do not plausibly allege a lack of justification. (Pl. Br. at 22.) The Court need not
reach this element, as the MFCC Defendants fail to plausibly allege the preceding elements
nested within it. That is, the counterclaims do not allege that Meineke intentionally induced the
54 Haddonfield Road landlord to not perform a contract, or to have declined to enter a contract
but for Meineke’s potentially justified conduct. If anything, the lone allegation invoking any
contract suggests the opposite: that on September 18, 2017, MFCC “entered into a lease
agreement with the landlord at 54 Haddonfield Road.” (Countercl. at ¶ 51.) Nor do the
with that decision. See id. (citing Beverage Sys. of the Carolinas, LLC v. Associated Beverage
Repair, LLC, 784 S.E.2d 457, 462–63 (N.C. 2016)).
16
counterclaims allege such facts—or any facts at all—regarding MFCC’s “web service providers”
or “retail customers.” Accordingly, Count V is dismissed, without prejudice.
E. Unfair Competition (Count VI)
Finally, Meineke moves to dismiss Count VI, which the MFCC Defendants label a claim
for “unfair competition” without identifying the law under which it arises. (Countcl. at ¶¶ 86–
89.) As North Carolina permits claims for both common law and statutory unfair competition,
see generally Dowless v. Warren-Rupp Houdailles, Inc., 866 F.2d 1415 (4th Cir. 1989), the
Court will not guess at which claim the MFCC Defendants intend to bring. See Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007) (requiring claims to “raise a right to relief above the
speculative level”). Count VI is dismissed, without prejudice.
IV.
CONCLUSION
For the foregoing reasons, Meineke’s motion to dismiss is GRANTED in part and
DENIED in part. Counts II, III, V, and VI are dismissed, WITHOUT PREJUDICE, with leave
to amend by October 26, 2018. Meineke’s motion to dismiss Count IV is DENIED. An
appropriate Order shall issue.
Dated: 9/26/18
/s/ Robert B. Kugler
ROBERT B. KUGLER
United States District Judge
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