G.C. Franchising Systems, Inc. v. Kelly et al
ORDER denying in part and granting in part Defendants David Kelly and Growth Solution LLC's motion to dismiss or, alternatively, transfer venue (Doc. 6 ). Signed by Judge Timothy S. Black on 3/31/2021. (rrs)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
G.C. FRANCHISING SYSTEMS, INC.,
DAVID KELLY, et al.,
Case No. 1:19-cv-49
Judge Timothy S. Black
ORDER DENYING IN PART AND GRANTING IN PART
DEFENDANTS DAVID KELLY AND GROWTH SOLUTION LLC’S
MOTION TO DISMISS OR, ALTERNATIVELY, TRANSFER VENUE (Doc. 6)
This civil case is before the Court on Defendants David Kelly and Growth
Solutions LLC’s motion to dismiss for lack of personal jurisdiction, for failure to state a
claim upon which relief can be granted, and/or for improper venue (Doc. 6), and the
parties’ responsive memoranda (Docs. 8, 10). Alternatively, Defendants request this
Court transfer the case to the District of Maryland.
Plaintiff G.C. Franchising Systems, Inc., which operates under the name Growth
Coach, is an Ohio corporation with a principal place of business in Ohio.
(Doc. 7 at
¶ 1). Defendant David Kelly, a Maryland resident, is the sole member of Defendant
Growth Solutions LLC (“Growth Solutions”) (collectively, “Defendants”). (Id. at ¶¶ 3–
7). Growth Solutions is a Maryland resident. (Id.). 1
Plaintiff is a franchised business, offering business coaching, management and
personal development programming, and consulting services. (Id. at ¶ 2). On or around
December 17, 2012, Kelly, individually, signed an agreement with Plaintiff (the
“Agreement”) to own and operate one of Plaintiff’s franchises (the “Franchise”). (Id. at
¶ 13; see also Doc. 1-1). The Agreement has a term length of ten years and contains a
forum selection clause, which provides:
18.4 Jurisdiction and Venue. . . . each party hereby
irrevocably agrees that all lawsuits between the parties and/or
their affiliates shall be litigated only in courts having situs in
Hamilton County, Ohio. Each party agrees that the following
courts have personal jurisdiction over it in all lawsuits
between the parties and/or their affiliates, irrevocably submits
to the jurisdiction of these courts, and irrevocably waives any
defense based upon lack of personal jurisdiction in any
lawsuit filed in these courts: . . . all courts of the United States
of America sitting within the State of Ohio, including,
without limitation, all United States District Courts within the
State of Ohio. Each party agrees that venue shall be proper in
any of the following courts in all lawsuits between the parties
and/or their affiliates and irrevocably waives any right to
transfer or change the venue in any lawsuit filed in these
courts . . . the United States District Court for the Southern
District of Ohio, Western Division.
(Doc. 1-1 at § 18.4) (See also Doc. 7 at ¶ 11).
After signing the Agreement, on or around March 8, 2013, Defendant Kelly
formed Defendant Growth Solutions with the purpose of operating the Franchise. (Id. at
Delay v. Rosenthal Collins Grp., LLC, 585 F.3d 1003, 1005 (6th Cir. 2009) (“The general rule
is that all unincorporated entities—of which a limited liability company is one—have the
citizenship of each partner or member.”).
¶ 14). In June 2013, Kelly attended a one-week franchisee training program with
Plaintiff, in Cincinnati, Ohio, during which he received access to confidential and
proprietary information about the operation of the Franchise. (Id. at ¶¶ 28–29).
Defendants Kelly and Growth Solutions then opened and operated the Franchise under
the name “Growth Coach of Greater Baltimore.” (Id. at ¶ 30). On or around May 29,
2018, without Plaintiff’s consent, Defendants renamed the business to “Growth Solutions
Team,” marketing the businesses as “formerly known as Growth Coach of Greater
Baltimore.” (Id. at ¶¶ 31–33).
According to Plaintiff, Defendants contend that “Growth Solutions Team” is a not
associated with the Franchise. (Id. at ¶ 34). However, Defendants continue to use
Plaintiff’s marks. (Id. at ¶ 35). Moreover, according to Plaintiff, Defendants have
underpaid required royalties under the Agreement and have refused to cure defaults under
the Agreement. (Id. at ¶¶ 36–39).
On January 22, 2019, Plaintiff filed the instant action, asserting claims against
Kelly and Growth Solutions for: (1) breach-of-contract; (2) fraud; (3) failure to comply
with in-term covenants against competition; (4) unjust enrichment; (5) failure to comply
with confidentiality restrictions under the agreement; (6) accounting, (7) trademark
infringement, (8) unfair competition; (9) refusal to comply with territorial restrictions
under the franchise agreement; and (10) personal guaranty. (See id.). Plaintiff also seeks
a declaratory judgment (Count 11). (Id.).
In response to the original complaint, Growth Solutions and Kelly filed a
combined motion to dismiss. (Doc. 6). Growth Solutions argues that complaint should
be dismissed for lack of personal jurisdiction and/or improper venue. (Id.). Growth
Solutions also argues that Plaintiff fails to state a claim against it for all claims except
trademark infringement and unfair competition. (Id. at 10–16). Alternatively, Growth
Solutions argues that the claims against it should be transferred to the District of
Maryland. (Id. at 19-20). Kelly argues that certain claims should be dismissed because
Plaintiff fails to state a claim against him for fraud, unjust enrichment, accounting,
personal guaranty, and declaratory judgment. (Id.).
On April 19, 2019, in response to the motion to dismiss, Plaintiff filed an
Amended Complaint. (Doc. 7). Then, on April 23, 2019, Plaintiff filed a response in
opposition to the motion to dismiss. (Doc. 8). Defendants filed their reply in support of
their motion to dismiss on May 13, 2019. (Doc. 10). Because the Amended Complaint is
nearly identical to the original complaint, Defendants’ purported deficiencies with the
complaint still exist, and all parties continued briefing on the motion to dismiss, the Court
will construe the motion to dismiss (Doc. 6) and responsive memoranda (Docs. 8, 10) as
directed at the Amended Complaint. 2
It is true that “the filing of an amended complaint generally moots a pending motion to
dismiss.” Rainey v. Patton, No. 1:11CV327, 2011 WL 5239241, at *2 (S.D. Ohio Sept. 26,
2011), report and recommendation adopted, No. C-1-11-327, 2011 WL 5239237 (S.D. Ohio
Nov. 1, 2011) (citing Yates v. Applied Performance Techs., Inc., 205 F.R.D. 497, 499 (S.D. Ohio
2002). However, “‘[i]f some of the defects raised in the original motion remain in the new
pleading, the court simply may consider the motion as being addressed to the amended pleading.
To hold otherwise would be to exalt form over substance.” Yates, 205 F.R.D. at 499 (citing 6
Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure
§ 1476 (2d ed.1990)).
III. PROPER FORUM
Growth Solutions argues that the Amended Complaint should be dismissed
because: (1) this Court cannot exercise personal jurisdiction over Growth Solutions; or
(2) for improper venue. (See generally, Doc 6). Alternatively, this action should be
transferred to the District of Maryland pursuant to 28 U.S.C. § 1404(a). (Id. at 19–20).
Plaintiff contends that Growth Solutions is bound by the Agreement’s forum selection
clause and, based on the forum selection clause, the proper forum is this Court. (Doc. 8
at 4–13). Growth Solutions opposes this argument, asserting that because it is not a
signatory to the Agreement, it cannot be bound by the Agreement. (Doc. 10 at 3–11).
Application of the Forum Selection Clause
As an initial matter, the Court must determine if the forum selection clause in the
Agreement applies to Growth Solutions as a non-signatory. The enforceability of a
contract’s forum selection clause is governed by federal law, not state law. Stewart Org.,
Inc. v. Ricoh Corp., 487 U.S. 22, 32 (1988) (“[F]ederal law, specifically 28 U.S.C.
§ 1404(a), governs the District Court’s decision whether to give effect to the parties’
“[A] non-signatory to a contract may be bound by a forum selection clause in that
contract if the non-signatory is so sufficiently ‘closely related’ to the dispute that it is
foreseeable that the party will be bound.” Baker v. LeBoeuf, Lamb, Leiby & Macrae, 105
F.3d 1102, 1106 (6th Cir. 1997).
In sum, it is clear from these cases that courts considering this
question of whether a non-signatory may be bound by a
forum selection clause take a common sense, totality of the
circumstances approach that essentially inquires into whether,
in light of those circumstances, it is fair and reasonable to
bind a non-party to the forum selection clause. As noted
above, this approach places emphasis on whether it should
have been reasonably foreseeable to the non-signatory that
situations might arise in which the non-signatory would
become involved in the relevant contract dispute. The
question, then, is whether, in light of all of the circumstances
of this case and what should have been reasonably
foreseeable to [Growth Solutions], it is fair and reasonable to
conclude that [Growth Solutions] is sufficiently “closely
related” to the parties to the [Agreement] that [Growth
Solutions] should be bound by the forum selection clause.
Regions Bank v. Wyndham Hotel Mgmt., Inc., No. 3:09-1054, 2010 WL 908753, at *6
(M.D. Tenn. Mar. 12, 2010) (collecting and discussing cases on forum selection clauses
and non-signatories) (emphasis added). See also Mahan v. Core Values Roadside Serv.,
LLC, No. 1:19-CV-480 (WOB), 2020 WL 1291589, at *4 (S.D. Ohio Mar. 18, 2020)
(holding non-signatory bound by forum selection clause).
In this case, Growth Solutions is “closely-related” to Kelly and should be bound
by the Agreement’s forum selection clause.
It is undisputed that Kelly, not Growth Solutions, is the Agreement’s signatory. It
is further undisputed that Kelly is the sole member of Growth Solutions. As alleged by
Plaintiff, Kelly created Growth Solutions to operate his franchise. Moreover, in June
2013, Kelly (already sole member of Growth Solutions) attended a one-week franchisee
training in Cincinnati, Ohio. (Id. at ¶ 28). Defendants then owned and operated the
Franchise, named “Growth Coach of Greater Baltimore,” for around six-years. (Id. at
¶ 30). When Defendants decided to rename their business and cut ties from Plaintiff, it
was marketed “Growth Solutions Team (formerly known as Growth Coach of Greater
Baltimore).” (Id. at ¶ 33). Growth Solutions Team also marketed a “Strategic Mindset
process,” which allegedly uses confidential and proprietary information of and infringes
upon Plaintiff’s “Strategic Mindset® program.” (Doc. 8-1 at 3–4).
Thus, common sense and a totality of the circumstances dictate that the forum
selection clause applies to Growth Solutions. It should have been “reasonably
foreseeable” to Growth Solutions, and its sole member Kelly, that Growth Solutions is so
“closely-related” to Kelly and his Agreement with Plaintiff, that Growth Solutions would
be bound by the Agreement.
The plaintiff bears the burden of establishing personal jurisdiction. Mich. Nat’l
Bank v. Quality Dinette, Inc., 888 F.2d 462, 466 (6th Cir. 1989). When deciding whether
personal jurisdiction exists, a court has discretion to hold a hearing or to rely on the
affidavits and factual allegations in the pleadings. Id. Where, as here, the court relies
solely on written submissions and declarations, plaintiffs “need only make a prima facie
showing of jurisdiction.” Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 887
(6th Cir. 2002). Nevertheless, if the court rules on written submissions alone, the
plaintiff may not rest on his pleadings to answer the movant’s affidavits, but must set
forth, “by affidavit or otherwise[,]...specific facts showing that the court has jurisdiction.”
Serras v. First Tenn. Bank Nat’l Ass’n, 875 F.2d 1212, 1214 (6th Cir. 1989). A court
must construe the facts presented in the pleadings and affidavits in the light most
favorable to the nonmoving party. See Serras, 875 F.2d at 1214.
Moreover, “‘[t]he requirement that a court have personal jurisdiction over a party
is a waivable right and there are a variety of legal arrangements whereby litigants may
consent to the personal jurisdiction of a particular court system.” Preferred Cap., Inc. v.
Assocs. in Urology, 453 F.3d 718, 721 (6th Cir. 2006) (citing Kennecorp Mortgage
Brokers, Inc. v. Country Club Convalescent Hospital, Inc., 66 Ohio St.3d 173, 610
N.E.2d 987, 988 (Ohio 1993)). “The use of a forum selection clause is one way in which
contracting parties may agree in advance to submit to the jurisdiction of a particular
court.” Id. (citing M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972).
“In determining the validity of a particular forum selection clause, we thus
consider the following factors: (1) the commercial nature of the contract; (2) the absence
of fraud or overreaching; and (3) whether enforcement of the forum selection clause
would otherwise be unreasonable or unjust.” Id. (citations omitted).
Here, this Court has already found that Growth Solutions is bound by the forum
selection clause; thus, the next step is to determine if the forum selection clause is valid.
In this instance, it is valid.
First, the Agreement is clearly commercial in nature, as a for-profit contract that
allows Defendants to operate the Franchise and license Plaintiff’s business coaching and
consulting programs. Second, Defendants offer no evidence of fraud, misrepresentation,
or overreaching on the part of Plaintiff when entering into the Agreement. Finally,
enforcing the forum selection clause would not be unreasonable or unjust.
“A finding of unreasonableness or injustice must be based on more than mere
inconvenience to the party seeking to avoid the requirements of the forum selection
clause.” Id. at 722. “It must instead appear that “enforcement in Ohio would be
‘manifestly and gravely inconvenient’ to the party seeking to avoid enforcement such that
it will ‘effectively be deprived of a meaningful day in court.’” Id. (quoting Info. Leasing
Co. v. Jaskot, 151 Ohio App.3d 546, 784 N.E.2d 1192, 1195–96 (Ohio Ct. App.2003)).
At most, Growth Solutions argues that it will be inconvenienced by litigation in
Ohio because evidence and witnesses will be in Maryland. Although the Court agrees
that some evidence and witnesses may likely be in Maryland, there will also likely be
evidence and witnesses in Ohio given Plaintiff is in Ohio. With mere inconvenience
being Defendants’ only argument, Defendants have not carried their ‘heavy burden’ of
showing that enforcing this forum selection clause would be unjust or unreasonable.”
Wong v. PartyGaming Ltd., 589 F.3d 821, 830 (6th Cir. 2009).
Accordingly, Growth Solutions has waived any dispute over personal jurisdiction.
However, even if Growth Solutions did not contractually concede to personal
jurisdiction in the Southern District of Ohio, personal jurisdiction is still proper under
Ohio’s long-arm and due process.
Ohio’s Long-Arm & Due Process
Because Growth Solutions contends it is not bound by the forum selection clause,
Growth Solutions’ personal jurisdiction argument is based on whether this Court may
exercise personal jurisdiction under Ohio’s long-arm statute and Federal Due Process.
To exert personal jurisdiction over a non-resident defendant, the forum’s long-arm
statute must be satisfied and the exercise of jurisdiction must comport with traditional
notions of fair play and substantial justice under the Due Process Clause. See Tharo Sys.,
Inc. v. cab Produkttechnik GmbH & Co. KG, 196 Fed. App’x 366, 369 (6th Cir. 2006)
(quoting Neogen, 282 F.3d at 888). “Jurisdiction may be found to exist either generally,
in cases in which a defendant’s “continuous and systematic” conduct within the forum
state renders that defendant amenable to suit in any lawsuit brought against it in the
forum state, or specifically, in cases in which the subject matter of the lawsuit arises out
of or is related to the defendant’s contacts with the forum.” Nationwide Mut. Ins. Co. v.
Tryg Int’l Ins. Co., 91 F.3d 790, 793 (6th Cir. 1996) (quoting Perkins v. Benguet
Consolidated Mining Co., 342 U.S. 437, 445–47 (1952)).
First, Growth Solutions’ actions are within the scope of Ohio’s long-arm statute.
Ohio Rev. Code. § 2307.382. Pursuant to this statute:
A court may exercise personal jurisdiction over a
person who acts directly or by an agent, as to a cause
of action arising from the person’s: . . .
(6) Causing tortious injury in this state to any person
by an act outside this state committed with the purpose
of injuring persons, when the person might reasonably
have expected that some person would be injured
thereby in this state;
Id. at § 2307.382(A)(6). “[S]ubsection (6) [is] a provision that courts in this circuit have
generally interpreted broadly.” Stolle Mach. Co., LLC v. RAM Precision Indus., 605 F.
App’x 473, 480 (6th Cir. 2015) (citing Schneider v. Hardesty, 669 F.3d 693, 700 (6th Cir.
At a minimum, Plaintiff made a prima facie showing that Growth Solutions
caused a tortious injury outside of Ohio when Growth Solutions “might reasonably have
expected” Plaintiff would be injured in Ohio. Id. At a minimum, Growth Solutions
concedes that Plaintiff has stated a claim against it for trademark infringement and unfair
competition. Further, Plaintiff’s affidavit in support of jurisdiction states that Plaintiff
advised, supported, and communicated with Kelly and Growth Solutions when setting up
the Franchise. (Doc. 8-1 at ¶ 9). Thus, Plaintiff has made a prima facie showing that
Growth Solutions’ actions in Maryland caused tortious injury in Ohio and that Growth
Solutions should have reasonably expected its actions would cause Plaintiff such injury.
Second, exerting personal jurisdiction over Growth Solutions comports with
Federal Due Process. The Sixth Circuit has “recognized that Ohio’s long-arm statute is
not coterminous with federal constitutional limits,” and has “consistently focused on
whether there are sufficient minimum contacts between the nonresident defendant and the
forum state so as not to offend ‘traditional notions of fair play and substantial justice’”
when analyzing the propriety of personal jurisdiction under Ohio’s long-arm statute.
Bird v. Parsons, 289 F.3d 865, 871 (6th Cir. 2002) (quoting Int’l Shoe Co. v. Washington,
326 U.S. 310, 316 (1945)).
Thus, the Sixth Circuit uses a three-part test to determine whether personal
jurisdiction under Ohio’s long-arm statute satisfies due process requirements. See, e.g.,
Conn v. Zakharov, 667 F.3d 705, 713 (6th Cir. 2012). First, the defendant must
purposely avail themself of the privilege of acting in Ohio or causing a consequence in
Ohio. Id. Second, the cause of action must arise from the defendant’s activities in Ohio.
Id. Finally, the acts of or consequences caused by the defendant must have a substantial
enough connection with Ohio to make the exercise of jurisdiction over the defendant
The first element “ensures that the defendant’s actions create a ‘substantial
connection’ to the forum state, such that the defendant ‘should reasonably anticipate
being haled into court there.’” Cmty. Trust Bancorp, Inc. v. Cmty. Trust Fin. Corp., 692
F.3d 469, 471–72 (6th Cir. 2012) (quoting Neogen, 282 F.3d at 889). In this case, given
Growth Solutions’ connections to Kelly and the allegations in the Amended Complaint,
as discussed, supra, Growth Solutions should have reasonably anticipated being haled
into court in Ohio.
The second element is also present. The claims in this case against Growth
Solutions alleging, among other things, trademark infringement and unfair competition,
are clearly intimately connected with Growth Solutions’ alleged contacts with Ohio.
Specifically, Plaintiff alleges that Growth Solutions has been branding a “Strategic
Mindset program” to customers. (Doc. 8-1 at ¶ 10–11). One of Plaintiff’s propriety and
trademarked business methods is the “Strategic Mindset® process.” (Id. at ¶ 8). Kelly,
allegedly on behalf of himself and as sole member of Growth Solutions, attended a
franchisee training in Cincinnati, Ohio as part of the Agreement, learning about, among
other things, the “Strategic Mindset® process.” (Id). Accordingly, Plaintiff has made a
prima facie showing that the claims against Growth Solutions arose out of Kelly and
Growth Solutions’ contacts with Ohio.
Concerning the third element, “[s]everal factors are relevant to the reasonableness
inquiry, ‘including the burden on the defendant, the interest of the forum state, the
plaintiff’s interest in obtaining relief, and the interest of other states in securing the most
efficient resolution of controversies.’” Bird, 289 F.3d at 875 (quoting CompuServe, Inc.
v. Patterson, 89 F.3d 1257, 1268 (6th Cir. 1996) ). Furthermore, “[a]n inference arises
that the third factor is satisfied if the first two requirements are met.” Bird, 289 F.3d at
875 (quoting CompuServe, 89 F.3d at 1268). The Court sees no reason to deviate from
that inference in this case.
Accordingly, the exercise of specific personal jurisdiction over Growth Solutions
is appropriate pursuant to Ohio’s long-arm statute and Federal Due Process, and pursuant
to the forum selection clause in the Agreement, as discussed, supra.
Growth Solutions’ motion to dismiss for lack of personal jurisdiction is DENIED.
Venue is also waived and proper in this district. See See Atl. Marine Const. Co. v.
U.S. Dist. Ct. for W. Dist. of Texas, 571 U.S. 49, 62 (2013) (absent extraordinary
circumstances, a valid forum selection clause should be given controlling weight). In Atl.
Marine, the Supreme Court set out a three part test to determine whether a motion to
transfer venue should be granted in the face of a forum selection clause: (1) the party
defying the forum selection clause must establish that the bargained-for forum is
unwarranted; (2) whether public-interests only, not private interests of the parties, is best
served by transfer; and (3) how choice-of-law rules may affect public-interest
considerations. Id. at 62–66.
Again, in this case, Growth Solutions only argues its private interests – e.g.,
convenience of parties and Growth Solutions’ witnesses, location of evidence, etc. (Doc.
6 at 19–20). Growth Solutions has not met its burden of demonstrating that this venue is
unwarranted in the face of a valid forum selection clause.
Accordingly, Growth Solutions’ motion to dismiss for improper venue, or,
alternatively, to transfer to the District of Maryland, is DENIED.
IV. FAILURE TO STATE A CLAIM
To reiterate, Plaintiff brings eleven causes of action against Kelly and Growth
Solutions: (1) breach-of-contract; (2) fraud; (3) failure to comply with in-term covenants
against competition; (4) unjust enrichment; (5) failure to comply with confidentiality
restrictions under the agreement; (6) accounting, (7) trademark infringement, (8) unfair
competition; (9) refusal to comply with territorial restrictions under the franchise
agreement; (10) personal guaranty; and (11) declaratory judgment. (Doc. 7).
In the motion to dismiss, Growth Solutions argues that Plaintiff fails to state a
claim against it for all claims, except trademark infringement and unfair competition.
(Doc. 6 at 10–16). Kelly argues Plaintiff fails to state a claim against him for fraud,
unjust enrichment, accounting, personal guaranty, and declaratory judgment. (Id.). 3
As an initial matter, much of the parties’ briefing related to Defendants’ 12(b)(6) motion is
argued in a skeletal and conclusory manner as to why specific claims in the Amended Complaint
should or should not be dismissed for failure to state a claim. Based on this, the Court could
decline to consider these arguments. Brook v. sanofi-aventis U.S., LLC, No. 2:14-CV-976, 2014
WL 7272243, at *2 (S.D. Ohio Dec. 18, 2014) (“This essentially perfunctory method of briefing
fails to constitute developed arguments that this Court will consider adequately presented for
disposition.”) (citing Kuhn v. Washtenaw Cnty., 709 F.3d 612, 624 (6th Cir. 2013); Embassy
Realty Investments, Inc. v. City of Cleveland, 976 F.Supp.2d 931, 944 (N.D. Ohio 2013)).
Nevertheless, the Court will consider Defendants’ motion to dismiss for failure to state a claim.
Standard of Review
A motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) operates to test the
sufficiency of the complaint and permits dismissal of a complaint for “failure to state a
claim upon which relief can be granted.” To show grounds for relief, Fed. R. Civ. P. 8(a)
requires that the complaint contain a “short and plain statement of the claim showing that
the pleader is entitled to relief.”
While Fed. R. Civ. P. 8 “does not require ‘detailed factual allegations,’...it
demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S.
544 (2007)). Pleadings offering mere “‘labels and conclusions’ or ‘a formulaic recitation
of the elements of a cause of action will not do.’” Id. (citing Twombly, 550 U.S. at 555).
In fact, in determining a motion to dismiss, “courts ‘are not bound to accept as true a
legal conclusion couched as a factual allegation[.]’” Twombly, 550 U.S. at 555 (citing
Papasan v. Allain, 478 U.S. 265 (1986)). Further, “[f]actual allegations must be enough
to raise a right to relief above the speculative level[.]” Id.
Accordingly, “[t]o survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’” Iqbal, 556 U.S. at 678. A claim is plausible where “plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id. Plausibility “is not akin to a ‘probability requirement,’
but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id.
“[W]here the well-pleaded facts do not permit the court to infer more than the mere
possibility of misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the
pleader is entitled to relief,’” and the case shall be dismissed. Id. (citing Fed. Rule Civ.
Contract Claims Related to Growth Solutions – Counts 1, 3, 5, and 9
Growth Solutions argues that Plaintiff fails to state a claim against it on Counts 1,
3, 5, and 9 because those claims “depend on the existence of a contract to which Growth
Solutions is not a party, or depend on duties that exist only under a contract to which
Growth Solutions is not a party.” (Doc. 6 at 10–16). Both Growth Solutions and
Plaintiff reference their forum selection clause arguments to support why the Agreement
does or does not apply to Growth Solutions. (Doc. 6 at 10–11; Doc. 8 at 14; Doc. 10 at
11–12). The Court has addressed these arguments, supra. See Sec. III(A).
Accordingly, at this stage in the proceedings, the Court cannot conclude that
Growth Solutions is not bound by the Agreement. Growth Solutions’ motion to dismiss
Counts 1, 3, 5, and 9 is DENIED.
Fraud – Count 2
Both Growth Solutions and Kelly move to dismiss Plaintiff’s fraud claim.
Plaintiff concedes in its opposition that this claim should be dismissed as to Kelly.
(Doc. 8 at 15). Thus, the claim against Kelly will be dismissed.
Growth Solutions argues Plaintiff fails to state a fraud claim because, since
Growth Solutions is not a party to the Agreement, Growth Solutions had no duty to
disclose information to Plaintiff. “Generally, under Ohio Law a tort claim such as fraud
cannot duplicate a breach of contract claim in its factual and legal basis.” Cunningham
Prop. Mgmt. Tr. v. Ascent Res. Utica, LLC, 351 F. Supp. 3d 1056, 1067 (S.D. Ohio 2018)
(citing Telxon Corp. v. Smart Media of Delaware, Inc., 2005-Ohio-4931, 2005 WL
2292800 (Ohio Ct. App. 2005)). “‘A tort claim based upon the same actions [as] those
upon which a claim [for] contract breach is based will exist independently of the contract
action only if the breaching party also breaches a duty owed separately from that created
by the contract.’” Id. (quoting Telxon, 2005-Ohio-4931 at ¶ 34).
At this stage in the proceedings, based on the well-pled allegations in the
Amended Complaint, Growth Solutions may be a bound by the Agreement and may also
owe a duty to Plaintiff separate and distinct from those duties created under the
Agreement. “Dismissal of the fraud claim is therefore premature. Of course, should
[Plaintiff] ultimately prevail on [its] fraud claim, [Plaintiff’s] recoverable damages would
be limited to those separate and distinct from any damages awarded on [its] breach of
contract claim.” Id. (quotation omitted).
Accordingly, Kelly’s motion to dismiss Plaintiff’s fraud claim is GRANTED.
Growth Solutions’ motion to dismiss the fraud claim is DENIED.
Unjust Enrichment – Count 4
Kelly contends that Plaintiff fails to state a claim for unjust enrichment because
there exists a valid contract, and Growth Solutions argues that it cannot be held liable for
Kelly’s unjust enrichment because it was not part of the Agreement. (Doc. 6 at 13–14).
As discussed, Growth Solutions is not entitled to dismissal of the breach-of-contract
claim because, based on the allegations, Growth Solutions may be a party.
Moreover, unjust enrichment may be pled as a permissible alternative to a breachof-contract claim when the scope of the parties’ agreement remains to be developed
during discovery. See, e.g., FedEx Corp. Servs., Inc. v. Heat Surge, LLC, 2019-Ohio217, ¶ 19, 131 N.E.3d 397, 402 (quoting Building Industry Consultants, Inc. v. 3M
Parkway, Inc., 182 Ohio App.3d 39, 2009-Ohio-1910, 911 N.E.2d 356, ¶ 17 (9th Dist.))
(““While it is true that a party may not recover for the same services under both a
contractual claim and a claim for quantum meruit, a party is not barred from seeking
alternative theories and recovering under a quantum meruit theory if his contractual claim
fails’”). See also Highman v. Gulfport Energy Corp., No. 2:20-CV-1056, 2020 WL
6204344, at *3 (S.D. Ohio Oct. 22, 2020) (discussing alternative unjust enrichment
pleading in the face of a contract under Ohio law).
Here, Growth Solutions disputes whether the Agreement is valid and binding.
Moreover, Kelly, although recognizing that he is a party to an express contract, disputes
the scope of the Agreement. (See, e.g., Doc. 6 at 14–15). At this stage, it would be
premature to dismiss Plaintiff’s unjust enrichment claim because the scope and validity of
the Agreement “remain[s] to be developed in discovery.” Id. (citations omitted).
Accordingly, Kelly and Growth Solutions’ motion to dismiss Count 4 is DENIED.
Accounting – Count 6
In its Amended Complaint, Plaintiff alleges that it needs complete accounting of
all revenues received by Defendants to ascertain its damages. (Doc. 7 at ¶ 79). Both
Defendants move to dismiss this claim, arguing accounting is not cause of action, but an
equitable remedy. (Doc. 6 at 14; Doc. 10 at 15–17). Plaintiff argues that accounting may
be grounded in equity, but it also may be an action in law; thus, Plaintiff’s claim should
not be dismissed at this stage in the proceedings. (Doc. 8 at 16).
Under Ohio law, accounting is an equitable remedy that is improper when there is
an adequate remedy at law. Highman, 2020 WL 6204344 at *4 (applying Ohio law)
(citing Cunningham, 351 F. Supp. 3d at 1064; McNulty v. PLS Acq. Corp., 2002-Ohio7220, ¶ 80, 2002 WL 31875200 (Ohio Ct. App. Dec. 26, 2002)).
At a minimum, Kelly and Growth Solutions acknowledge that Plaintiff has
properly pled trademark infringement and unfair competition claims. Thus, Plaintiff
would be entitled to much, if not all, of the information it seeks to ascertain damages in
discovery. However, given the stage of the proceedings, the Court cannot say whether
Plaintiff can prove any of its claims and whether Plaintiff has an adequate remedy at law.
Dismissal of Plaintiff’s accounting claim is premature.
Accordingly, Kelly and Growth Solutions’ motion to dismiss Count 6 is DENIED.
Personal Guaranty – Count 10
Count 10 is only alleged against Kelly. (Doc. 7 at ¶¶ 103–05). Kelly contends
that this claim should be dismissed because the personal guaranty is part of the
Agreement; thus, this claim is simply duplicative of Plaintiff’s breach-of-contract claim
and must be dismissed. (Doc. 6 at 14; Doc. 10 at 17). Plaintiff argues that this claim is
not duplicative because the claim alleges Kelly assigned rights under the Agreement to
Growth Solutions, and Kelly, individually, owes a duty under the personal guaranty.
(Doc. 8 at 16–17). Alternatively, duplication is not cause for dismissal. (Id.). Neither
party asserts any case law in support of their arguments.
Based on briefing, the parties dispute the applicability and scope of the personal
guaranty. It is unclear on its face whether this claim is duplicative of the breach-ofcontract claim. Moreover, it is interesting that Kelly would seek to dismiss this claim as
duplicative of the breach-of-contract claim, but not seek the same for other claims
asserting relief based on Defendants’ alleged breach of the Agreement. (See Counts 3, 5,
9). At this premature stage, and given the parties’ factual dispute over the extent of the
personal guaranty, Plaintiff’s personal guaranty claim is plausible on its face.
Accordingly, Kelly’s motion to dismiss Count 10 is DENIED.
Declaratory Judgment – Count 11
Plaintiff’s final claim is for declaratory judgment and injunctive relief. Plaintiff
alleges that, under the Agreement, it is entitled to: (1) client lists and data obtained by
Defendants in conjunction with the franchise; (2) ownership of websites used by
Defendants when operating the franchise; (3) all other improvements development by or
acquired by Defendants when furthering the franchise; and (4) all other materials
developed by Defendants for use in the franchise. (Doc. 7 at 107–17).
Growth Solutions argues that it is not a party to the Agreement; thus, Plaintiff
cannot state an “actual controversy” against it based on the Agreement as required by the
Declaratory Judgement Act, 28 U.S.C. § 2201. (Doc. 6 at 14–15). Kelly limits Plaintiff’s
declaratory judgment claim to Plaintiff’s claim for the websites; thus, Kelly argues
Plaintiff cannot state an “actual controversy” against him because the websites belong to
Growth Solutions. (Id. at 15–16). No party cites any law (other than the Declaratory
Judgment Act statute) in support of their positions.
As previously addressed, the Court cannot, at this premature stage in the
proceedings, find that Growth Solutions is not a party to the Agreement. Moreover,
Kelly’s limited reading of the Amended Complaint is in error. Although Plaintiff
discusses the websites, it also seeks relief for client lists and data, other improvements,
and other materials as defined by the Agreement. Thus, like many of the other claims
discussed, the parties argue a factual dispute over: (1) the extent Growth Solutions is the
franchisee and bound by the Agreement; and (2) the breadth and scope of the Agreement.
These determinations are improper at the motion to dismiss stage when the Court is
construing all plausible allegations in light most favorable to the plaintiff. Therefore,
Plaintiff plausibly states an “actual controversy” against Growth Solutions and Kelly.
Accordingly, Defendants’ motion to dismiss Count 11 is DENIED.
Based upon the foregoing, Defendants David Kelly and Growth Solutions, LLC’s
motion to dismiss for lack of personal jurisdiction, for failure to state a claim, and/or for
improper venue, or, alternatively, motion to transfer venue (Doc. 6) is DENIED …
except for Defendant Kelly’s motion to dismiss Plaintiff’s fraud claim.
That is, Defendant Kelly’s motion to dismiss for failure to state a fraud claim (Count II)
IT IS SO ORDERED.
s/Timothy S. Black
Timothy S. Black
United States District Judge
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