Lentini v. McDonald's USA

SEBASTIAN E. LENTINI, et. al., Plaintiffs, v. MCDONALD'S USA, et. al., Defendants.

Civil Action No. 19-4596

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

September 30, 2019

NOT FOR PUBLICATION

OPINION

ARLEO, UNITED STATES DISTRICT JUDGE

THIS MATTER comes before the Court by way of Defendants McDonald's USA LLC's ("McDonald's"), Ingrid Rodriguez's, Mwafak Kanjee's, and Matthew Ahayi's (collectively, the "Individual Defendants" and together with McDonald's, "Defendants") Motion to Dismiss, ECF No. 4, Plaintiffs'¹ Amended Complaint. For the reasons set forth below, the Motion is granted in part and denied in part.

I. BACKGROUND

This action arises from a dispute between McDonald's and one its New Jersey franchisees concerning the cost of upgrades to the franchisee's stores. Lentini, through the corporate Plaintiffs, owns and operates six McDonald's franchises in New Jersey. Am. Compl. ¶¶ 2-8, ECF No. 2.1. Lentini is 81 years old, and alleges that McDonald's, as "part of a broader policy aimed at pushing out older, long-term franchisees," is "unlawfully attempting to force Lentini out of the McDonald's system" by undermining his franchise network and weakening customer goodwill in his area ofoperation. Id. ¶¶ 2, 17. He alleges that McDonald's has attempted to oust him by having the Individual Defendants suggest that he retire, preventing him from expanding to other McDonald's locations, opening new McDonald's locations near his existing franchises, and has imposed excessive rebuilding and modernization costs on him, in violation of the terms of his Franchise Agreement. Id. ¶¶ 18-19, 21-28, 29-38, 40-78.

On September 18, 2017, Plaintiffs filed this action in the Superior Court of New Jersey, Hudson County, alleging violations of the New Jersey Law Against Discrimination, ("NJLAD"), N.J.S.A. § 10:5-1 et seq., the New Jersey Franchise Practices Act, ("NJFPA"), N.J.S.A. § 56:10 et seq., and breach of the covenant of good faith and fair dealing. On March 16, 2018, at oral argument on a pending motion to dismiss, the state court dismissed the NJFPA and breach of implied covenant claims against the Individual Defendants and otherwise denied the motion, permitting the aiding and abetting claims against the Individual Defendants under the NJLAD in Count I to proceed. The state court subsequently entered an order on the motion. ECF No. 12.2.

Plaintiffs thereafter filed an Amended Complaint in the Superior Court, incorporating the court's dismissal of the above counts and adding Counts IV-VII. Plaintiffs' Amended Complaint asserts seven counts: (1) violation of the NJLAD against all Defendants (Count I); (2) violation of the NJFPA against McDonald's only (Count II); (3) breach of the implied covenant of good faith and fair dealing against McDonald's only (Count III); (4) breach of contract against McDonald's only (Count IV); (5) a violation of the federal Racketeering Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c) (Count V); (6) New Jersey's State RICO Act, N.J.S.A. § 2C:41-2(c) (Count VI); and (7) one count of common law civil conspiracy (Count VII). On February 4, 2019, Defendants removed this case to this Court. See ECF No. 2. Defendants brought the current Motion to Dismiss on February 25, 2019.

II. LEGAL STANDARD

Rule 12(b)(6) allows for dismissal where the non-moving party fails to state a claim upon which relief can be granted. "To 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.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is plausible on its face "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. "A pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do. Nor does a complaint suffice if it tenders naked assertions devoid of further factual enhancement." Id. (internal quotation marks omitted). "[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 'shown'—that the pleader is entitled to relief." Id. at 679. It is well settled that the Court may consider "document[s] integral or explicitly relied upon in the complaint" at the motion to dismiss stage "without converting the motion into one for summary judgment." In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (quoting Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1220 (1st Cir. 1996)). .

III. DISCUSSION

A. The Superior Court's Order (Counts I-III)

In their Motion to Dismiss, Defendants seek dismissal of Counts I through III on the same grounds that they raised at the state court before removal. Plaintiffs argue that this Court should not revisit the state court's rulings on the motion to dismiss before the case was removed; Defendants argue that it should because it involves "different standards." The Court agrees with Plaintiffs.

By statute, after an action "is removed from a state court to a district court of the United States, . . . [a]ll injunctions, orders, and other proceedings had in such action prior to its removal shall remain in full force and effect until dissolved or modified by the district court." 28 U.S.C. § 1450. Thus, after removal, "interlocutory state court orders are transformed by operation of 28 U.S.C. § 1450 into orders of the federal district court" which is then "free to treat the order as it would any such interlocutory order it might itself have entered." In re Diet Drugs, 282 F.3d 220, 232 (3d Cir. 2002); In re Farah, 126 F. App'x 66, 70 (3d Cir. 2005).

"A Court may reconsider its own interlocutory orders on motion or sua sponte. Therefore . . . this Court is not barred from revisiting the [a]rguments advanced by the [Defendants], or from entering an order contrary to that entered by the state trial court." Long Branch Citizens Against Hous. Discrimination, Inc. v. City of Long Branch, No. 09-4980, 2010 WL 3271733, at *4 (D.N.J. Aug. 17, 2010). Thus, the proper mechanism is not to file a duplicative motion to dismiss, but a motion for reconsideration. See Hautz Const., LLC v. H & M Dep't Store, No. 12-347, 2012 WL 5880370, at *4 (D.N.J. Nov. 20, 2012) (concluding "that reconsideration is appropriate" upon federalization of a state court order); Long Branch Citizens, 2010 WL 3271733, at *4 (discussing federalization of state court orders and stating that "[a] Court may reconsider its own interlocutory orders on motion or sua sponte").

Defendants have not submitted a motion for reconsideration, and nothing in the record suggests any deficiency at the state court level to prompt a sua sponte reconsideration by this Court. Defendants did not seek reconsideration and do not cite any mistakes of law or fact made by the Superior Court. The motion to dismiss Counts I-III is therefore denied.

B. Breach of Contract (Count IV)

Defendants seek to dismiss Plaintiffs' claim of breach of contract (Count IV).² The Court must first determine which law to apply.

The Court will "turn to New Jersey choice-of-law rules to determine what state's substantive contract law governs the interpretation of the Agreements' forum selection clauses." Collins on behalf of herself v. Mary Kay, Inc., 874 F.3d 176, 183 (3d Cir. 2017). Under these rules,"[o]rdinarily, when parties to a contract have agreed to be governed by the laws of a particular state," the courts "will uphold the contractual choice." Id. at 183-184.

Here, the Franchise Agreement contains a "Governing Laws" provision that elects Illinois law. ECF No. 4.2 at Ex. A, § 27. New Jersey's courts will respect this provision unless "(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or (b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue." Instructional Sys., Inc. v. Computer Curriculum Corp., 130 N.J. 324, 342 (1992). The New Jersey Supreme Court has made clear that the state "has a strong policy in favor of protecting its franchisees." Id. at 345; see also id. at 344 (disregarding a California choice-of-law provision in a franchise agreement because most courts "have held that the parties to a franchise agreement cannot avoid the franchise law of the state in which the franchisee is located by providing in their agreement that the laws of another state will govern") (internal quotation marks omitted). See also Sokoloff v. Gen. Nutrition Companies,Inc., No. 00-641, 2001 WL 536072, at *6 (D.N.J. May 21, 2001) (applying New Jersey law despite Pennsylvania choice-of-law provision "because plaintiffs reside in New Jersey, the franchise business is located in New Jersey, and the alleged violation occurred in New Jersey"). The Court will therefore apply New Jersey law here.

"To prevail on a breach of contract claim, a party must prove a valid contract between the parties, the opposing party's failure to perform a defined obligation under the contract, and the breach caused the claimant to sustain[] damages." EnviroFinance Grp., LLC v. Envt'l Barrier Co., LLC 440 N.J. Super. 325, 345 (App. Div. 2015). See Pearlmont, LLC v. Waterfall, Inc., No. A-5057-09T1, 2011 WL 2652154, at *3-4 (N.J. Super. Ct. App. Div. July 8, 2011). See also Kearny PBA Local # 21 v. Town of Kearny, 81 N.J. 208, 221 (1979) ("The polestar of construction of a contract is to discover the intention of the parties"). "If a contract is unambiguous, it must generally be enforced as written. A contract is ambiguous if it is reasonably susceptible of two interpretations. The issue of ambiguity is one of...