DFO LLC et al v. UR PARTNERS LLC et al
Filing
24
OPINION AND ORDER denying 16 Motion to Dismiss. Signed by Honorable Donald C Coggins, Jr on 6/15/2018.(abuc)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
SPARTANBURG DIVISION
D.F.O., LLC and Denny’s, Inc.,
)
)
Plaintiffs,
)
)
v.
)
)
UR Partners, LLC and Uzma Rafik,
)
)
Defendants. )
________________________________ )
C/A No. 7:17-cv-01986-DCC
OPINION AND ORDER
This matter comes before the Court upon Defendants’ Motion to Dismiss for
Improper Venue or, in the Alternative, for Transfer of Venue. ECF No. 16. Plaintiffs filed
a Response in Opposition, ECF No. 17, and Defendants filed a Reply, ECF No. 18. The
Court heard argument on the Motion on April 3, 2018. Therefore, the Motion is ripe for
review.
I.
Procedural and Factual History
Defendant Uzma Rafik has extensive experience operating franchise restaurants
throughout the United States. ECF No. 16-2 at 2–3. Sometime between 2008 and 2010,
Defendant Rafik and her husband travelled to a franchise convention and met Doug
Wong, the Senior Director of Global Franchise Recruitment for Denny’s, Inc. Id. at 3.
Defendant Rafik became interested in operating a Denny’s franchise, filled out a franchise
application, and sent it to Mr. Wong. Id. Defendant Rafik then met with Mr. Wong in San
Jose, California, where she had her initial recruiting interview. Id. Subsequent to this
interview, Mr. Wong requested that Defendant Rafik travel to Philadelphia, Pennsylvania
to meet with Bob Clemens, Denny’s Northeast Regional Director of Franchise Operations.
Id. at 4. These interviews were successful, and Defendant Rafik was preapproved for a
1
Denny’s franchise. Id. Prior to purchasing a franchise, Defendant Rafik and her husband
travelled to Spartanburg, South Carolina for a “discovery day” to meet some of the
Denny’s senior management. Id. Ultimately, Defendant Rafik purchased a Denny’s
franchise in East Brunswick, New Jersey. Id. Defendant Rafik created Defendant UR
Partners, LLC, in order to own and operate the Denny’s franchise. Id. at 2. Defendant
UR Partners, LLC, signed a Franchise Agreement, wherein it agreed “that any action
brought by either party against the other in any court, whether federal or state, will be
brought within the State of South Carolina.” ECF No. 1-1 at 30. Defendant Rafik signed
a personal guaranty, in which she “agree[d] that any action brought by either party against
the other in any court, whether federal or state, will be brought within the State of South
Carolina.” ECF No. 1-3 at 3.
Several years after Defendants opened the franchise, Plaintiffs provided notice
that Defendants were in breach of the Franchise Agreement and Lease Agreement for a
variety of reasons. Unable to resolve this dispute, Plaintiffs filed the instant case against
the Defendants. In response, Defendants filed a Motion to Dismiss, or Alternatively, for
Transfer of Venue to the District of New Jersey. ECF No. 16. Plaintiffs filed a Response,
in which they contend that venue is appropriate in the District of South Carolina and
transfer is inappropriate in light of the forum selection clauses to which Defendants
voluntarily assented. ECF No. 17. Defendants filed a Reply, ECF No. 18, and the Motion
is now ripe for review.
2
II.
Legal Standard
A. Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(3)
Motions brought under Fed. R. Civ. P. 12(b)(3) are disfavored. Sucampo Pharms.,
Inc. v. Astellas Pharma, Inc., 471 F.3d 544, 549 (4th Cir. 2006). The Court may “freely
consider evidence outside the pleadings” when ruling on a Rule 12(b)(3) motion. Id. at
549–50. “A plaintiff is obliged, however, to make only a prima facie showing of proper
venue in order to survive a motion to dismiss.” Aggarao v. MOL Ship Mgmt. Co., Ltd.,
675 F.3d 355, 366 (4th Cir. 2012) (citation omitted). In assessing whether a plaintiff has
made the required showing, the Courts must view the facts in the light most favorable to
the plaintiff. Id.
Generally, a civil action may be brought in: (1) a judicial district in which any
defendant resides, if all defendants are residents of the State in which the district is
located; (2) a judicial district in which a substantial part of the events or omissions giving
rise to the claim occurred, or a substantial part of the property that is the subject of the
action is situated; or (3) if there is no district in which an action may otherwise be brought
as provided in this section, any judicial district in which any defendant is subject to the
court’s personal jurisdiction with respect to such action. 28 U.S.C. § 1391(b). “[I]t is
possible for venue to be proper in more than one judicial district.” Mitrano v. Hawes, 377
F.3d 402, 405 (4th Cir. 2004).A case filed in an incorrect venue must be dismissed, or, if
in the interests of justice, transferred to a district in which it could have been brought. 28
U.S.C. § 1406(a).
3
B. Motion for Transfer of Venue Pursuant to 28 U.S.C. § 1404(a)
28 U.S.C. § 1404(a) provides that “[f]or the convenience of parties and witnesses,
in the interest of justice, a district court may transfer any civil action to any other district
or division where it might have been brought or to any district or division to which all
parties have consented.” “The appropriate venue of an action is a procedural matter that
is governed by federal rule and statutes.” Albemarle Corp. v. AstraZeneca UK Ltd., 628
F.3d 643, 651 (4th Cir. 2010) (citing Fed. R. Civ. P. 12(b)(3); 28 U.S.C. § 1391; 28 U.S.C.
§ 1406(a)). Whether a case should be transferred to an alternative venue is a decision
that rests within the sound discretion of the district court. In re Ralston Purina Co., 726
F.2d 1002, 1005 (4th Cir. 1984).
“In the typical case not involving a forum-selection clause, a district court
considering a § 1404(a) motion (or a forum non conveniens motion) must evaluate both
the convenience of the parties and various public-interest considerations.” Atl. Marine
Constr. Co. v. U.S. Dist. Ct. W.D. Tex., 571 U.S. 49, 62 (2013). However, “[w]hen the
parties have agreed to a valid forum-selection clause, a district court should ordinarily
transfer the case to the forum specified in that clause.” Id. “[A] valid forum-selection
clause, which ‘represents the parties’ agreement as to the most proper forum[,]” should
be “given controlling weight in all but the most exceptional cases.’” Id. at 63 (quoting
Stewart Org., Inc. v. Ricoh Corp., 467 U.S. 22, 31, 33 (1988)).
A court conducts a two-part analysis in deciding whether to enforce the parties’
forum-selection clause. First, the court must determine whether the forum-selection
clause is valid and enforceable. Id. A forum-selection clause is “prima facie valid and
should be enforced unless enforcement is shown by the resisting party to be
4
‘unreasonable’ under the circumstances.” M/S Bremen v. Zapata Off-Shore Co., 407 U.S.
1, 10 (1972). A forum-selection clause may be considered unreasonable if “(1) [its]
formation was induced by fraud or over-reaching; (2) the complaining party ‘will for all
practical purposes be deprived of his day in court’ because of the grave inconvenience
or unfairness of the selected forum; (3) the fundamental unfairness of the chosen law may
deprive the plaintiff of a remedy; or (4) [its] enforcement would contravene a strong public
policy of the forum state.” Albemarle Corp., 628 F.3d at 651 (quoting Allen v. Lloyd’s of
London, 94 F.3d 923, 928 (4th Cir. 1996)). Second, the court must consider whether
“extraordinary circumstances” would hinder the enforcement of the forum-selection
clause. Atl. Marine, 571 U.S. at 62. In making this determination, the court may consider
“arguments about public-interest factors only.” Id. at 64.
III.
Analysis
Initially, the Court must determine whether proper venue lies in the United States
District Court for the District of South Carolina under 28 U.S.C. § 1391(b). As Defendants
are not residents of South Carolina, the relevant inquiry is one under 28 U.S.C.
§ 1391(b)(2), which states that venue is proper in any “judicial district in which a
substantial part of the events or omissions giving rise to the claim occurred.” “[I]n
determining whether events or omissions are sufficiently substantial to support venue
under [Section 1391(b)(2)], a court should not focus only on those matters that are in
dispute or that directly led to the filing of the action.” Mitrano, 377 F.3d at 405 (citation
omitted). “Rather, it should review ‘the entire sequence of events underlying the claim.’”
Id. (quoting Uffner v. La Reunion Fracaise, S.A., 244 F.3d 38, 42 (1st Cir. 2001)).
5
Here, while Defendants point out a number of events that occurred outside of
South Carolina, the Court agrees with Plaintiffs that a substantial part of the events or
omissions giving rise to the claim did occur in South Carolina.
For example: (1)
Defendants applied to be a franchisee knowing that Plaintiffs were headquartered in
South Carolina; (2) Defendants came to South Carolina to gather information about the
franchise opportunity; (3) Defendants use Plaintiffs’ resources based in South Carolina
for the financial operation of the franchise; (4) Defendants provided financial information
and franchise information to Plaintiffs in South Carolina; and (5) Defendants used
advertising and marketing materials developed by Plaintiffs in South Carolina. These
facts are essential to understanding the course of conduct that led to the eventual
franchise operation dispute underscoring this lawsuit. Drawing all inferences in favor of
the Plaintiffs, as it must, the Court finds that the acts are substantial enough to give rise
to venue under § 1391(b)(2) in light of the nature of the controversy in this case. See Silo
Point II LLC v. Suffolk Const. Co., Inc., 578 F. Supp. 2d 807, 809 (D. Md. 2008)
(“Nevertheless, ‘[i]n deciding a motion to dismiss, all inferences must be drawn in favor
of the plaintiff, and the facts must be viewed as the plaintiff most strongly can plead them.’”
(quoting Sun Dun, Inc. of Washington v. Coca-Cola Co., 740 F. Supp. 381, 385 (D. Md.
1990))).
Having established that venue is proper here, the Court must now determine
whether a transfer of venue under 28 U.S.C. § 1404(a) is appropriate. It is undisputed
that the parties entered into a forum selection clause that dictates venue is appropriate in
South Carolina. However, Defendants now contend that the forum selection clause is an
unconscionable adhesion contract.
The Court disagrees and finds that the forum
6
selection clause is valid and enforceable. Defendant Rafik filed a Declaration outlining
her extensive experience in the franchise restaurant business. It strains credibility to
contend that Defendant Rafik did not have the knowledge and experience to meaningfully
evaluate and negotiate a proposed franchise agreement. See ECF No. 16-2 at 2–3
(outlining Defendant Rafik’s experience operating eleven Long John Silver franchises).
Moreover, Defendants have offered no evidence that the forum-selection clause is
unreasonable. To that end, there is no evidence that the forum-selection clause was
induced by fraud or overreaching, that Defendants will be deprived of their day in court,
or that any public policy is contravened. While Defendants claim that New Jersey would
be a more appropriate venue to resolve proposed counterclaims under the New Jersey
Franchise Practices Act, federal courts can and do apply the law of various states in many
cases. Of course, Defendants may be disadvantaged by having to travel to South
Carolina to litigate this case; however, great deference is shown to the Plaintiffs’ choice
of venue as they initiated the lawsuit in the venue designated by the forum-selection
clause, and South Carolina has a significant public interest in resolving disputes involving
South Carolina businesses. See Brock v. Entre Comput. Ctrs., Inc., 933 F.2d 1253, 1258
(4th Cir. 1991) (“No matter which forum is selected, one side or the other will be burdened
with bringing themselves and their witnesses from far away.”); see also Ashmore v. Allied
Energy, Inc., No. 8:14-cv-00227-JMC, 2015 WL 128596, at *4 (D.S.C. Jan. 9, 2015)
(noting the interest of South Carolina courts in resolving disputes involving South Carolina
citizens). In short, Defendants have not offered any compelling public-interest factors
that would justify disregarding the parties’ agreed upon forum-selection clause.
Defendant Rafik is a sophisticated franchise owner who willingly agreed to litigate her
7
claims in South Carolina courts, and this Court must enforce the forum-selection clause
to effectuate the agreement of the parties.
IV.
Conclusion
For the foregoing reasons, Defendants’ Motion, ECF No. 16, is DENIED.
IT IS SO ORDERED.
s/Donald C. Coggins, Jr.
United States District Judge
June 15, 2018
Spartanburg, South Carolina
8
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?