Mr. Sandless Franchise, LLC v. Karen Cesaroni LLC

498 F.Supp.3d 725

MR. SANDLESS FRANCHISE, LLC, Plaintiff,

v.KAREN CESARONI LLC, et al., Defendants.

CIVIL ACTION NO. 19-01267

United States District Court, E.D. Pennsylvania.

Filed October 29, 2020

Robert B. Famiglio, Famiglio & Associates, Media, PA, Alan L. Frank, Jaclyn Hope Frank, Jeffrey J. Goldin, Alan L. Frank Law Associates, P.C., Jenkintown, PA, for Plaintiff.

William T. Hangley, Robert Wiygul, Hangley Aronchick Segal & Pudlin, Philadelphia, PA, for Defendants.

MEMORANDUM

EDUARDO C. ROBRENO, District Judge

I. INTRODUCTION

This case involves claims by Mr. Sandless Franchise, LLC ("MSF") against: (1) a former franchisee, Karen Cesaroni LLC ("KCLLC"); (2) KCLLC's owners, Karen and Roldo Cesaroni; and (3) the Cesaronis' newly-formed company, New England Wood & Tile Services LLC (collectively, the "Cesaroni Parties") for breach of contract, service mark infringement, and unfair competition, inter alia.

In response, the Cesaroni Parties bring counterclaims against MSF for breach of contract, inter alia, and name the following parties as additional counterclaim defendants: (1) MSF's CEO, Daniel J. Prasalowicz; (2) another Mr. Sandless franchisee, Mr. Sandless Central Massachusetts ("MSCM"); and (3) MSCM's owner, Frank Pupillo.¹

MSCM and Pupillo move to dismiss the counterclaims against them for lack of personal jurisdiction and failure to state a claim. MSF and Prasalowicz move to dismiss the counterclaims against them for failure to state a claim.²

For the reasons described below, the Court will grant MSCM and Pupillo's Motion to Dismiss for lack of personal jurisdiction. The Court will also grant the Motion to Dismiss Counts V and VI against Prasalowicz for failure to state a claim and will deny MSF and Prasalowicz's Motion to Dismiss the remaining counterclaims against them.

II. BACKGROUND³

MSF, a Pennsylvania franchisor, licenses the "Mr. Sandless" trademark used in connection with wood floor refinishing services. In 2012, KCLLC entered into a franchise agreement with MSF to operate a Mr. Sandless franchise in Massachusetts. The Cesaroni Parties allege MSF represented to them orally and in writing that the franchise territories acquired by KCLLC would be "exclusive"—i.e., other providers of Mr. Sandless goods and services would be excluded from those territories.

The franchise agreement between MSF and KCLLC contains a provision for special treatment of "Regional Accounts," which are Mr. Sandless customers with five or more businesses "whose presence is not confined within any one particular designated territory." Am. Answer to First Am. Compl. ¶ 161, ECF No. 84. Under the franchise agreement, MSF has "the exclusive right ... to negotiate and enter into agreements or approve forms of agreement to provide services to Regional Accounts, licensees or franchisees, including locations within [KCLLC's] Designated Territory." Id. The agreement also provides that, with respect to any "contract with or the acceptance of a bid by a Regional Account which contemplates the provision of services to one or more Regional Accounts located within [KCLLC's] Designated Territory, KCLLC has the option to perform such services." Id.

The Cesaroni Parties allege that MSF and Prasalowicz entered into a continuing agreement with MSCM and Pupillo to service a large Mr. Sandless customer with multiple facilities in KCLLC's exclusive territory and did not disclose this agreement to KCLLC. They allege MSCM and Pupillo performed interfering activities "outside business hours and under cover of darkness" to avoid detection by KCLLC. Id. ¶ 170.

The Cesaroni Parties learned of this activity by "happenstance" around December of 2016. Id. ¶ 172. When KCLLC confronted Prasalowicz, he represented that the customer at issue was a "Regional Account" within the meaning of the franchise agreement. Id. ¶ 175. The Cesaroni Parties allege MSF was contractually obligated to give KCLLC the option of serving the customer before presenting the opportunity to another Mr. Sandless franchisee, and that MSF continued to authorize and arrange for MSCM and Pupillo to service customers in violation of KCLLC's rights through the termination of KCLLC's franchise in November 2018.

The counterclaims currently before the Court arise from the alleged agreement between MSF/Prasalowicz and MSCM/Pupillo to perform Mr. Sandless services in KCLLC's exclusive territory. The Cesaroni Parties bring the following counterclaims:

Count I: Breach of contract (KCLLC v. MSF)

Count II: Interference with contract (KCLLC v. MSCM and Pupillo)

Count III: Interference with prospective contractual relations (KCLLC v. Prasalowicz, MSCM, and Pupillo)

Count IV: Civil conspiracy (KCLLC v. MSF, Prasalowicz, MSCM, and Pupillo)

Count V: Relief under federal trademark law (The Cesaroni Parties v. MSF and Prasalowicz)

Count VI: Relief under Pennsylvania Trademark and Trade Secrets Acts (The Cesaroni Parties v. MSF and Prasalowicz)

III. LEGAL STANDARD

Courts evaluate a motion to dismiss a counterclaim under the same standard as a motion to dismiss a complaint. See, e.g., Barefoot Architect, Inc. v. Bunge, 632 F.3d 822, 826 (3d Cir. 2011). A party may move to dismiss a complaint for lack of personal jurisdiction. Fed. R. Civ. P. 12(b)(2). In deciding a motion to dismiss for lack of jurisdiction, "a court is required to accept the [counterclaim plaintiff's] allegations as true, and is to construe disputed facts in favor of the [counterclaim plaintiff]." Metcalfe v. Renaissance Marine, Inc., 566 F.3d 324, 330 (3d Cir. 2009) (quoting Toys "R" Us, Inc. v. Step Two, S.A., 318 F.3d 446, 457 (3d Cir. 2003) ).

A party may also move to dismiss a complaint for failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). When reviewing such a motion, the Court is "required to accept as true all allegations in the complaint and all reasonable inferences that can be drawn from [the allegations] after construing them in the light most favorable to the nonmovant." Conard v. Pa. State Police, 902 F.3d 178, 182 (3d Cir. 2018) (quoting Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994) ). However, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). To survive a motion to dismiss for failure to state a claim, a complaint must "contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Id. (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955 ).

IV. DISCUSSION

A. Personal Jurisdiction

MSCM and Pupillo move to dismiss the counterclaims against them for lack of personal jurisdiction. "The burden of demonstrating the facts that establish personal jurisdiction" falls on the party asserting such jurisdiction. Metcalfe v. Renaissance Marine, Inc., 566 F.3d 324, 330 (3d Cir. 2009) (quoting Pinker v. Roche Holdings Ltd., 292 F.3d 361, 368 (3d Cir. 2002) ). If a counterclaim defendant raises a jurisdictional defense, "the [counterclaim plaintiff] must ‘prov[e] by affidavits or other competent evidence that jurisdiction is proper.’ " Id. (quoting Dayhoff Inc. v. H.J. Heinz Co., 86 F.3d 1287, 1302 (3d Cir. 1996) ). If the district court does not hold an evidentiary hearing, a counterclaim plaintiff "need only establish a prima facie case of personal jurisdiction." Id. (quoting O'Connor v. Sandy Lane Hotel Co., 496 F.3d 312, 316 (3d Cir. 2007) ).

A federal court may exercise personal jurisdiction over a non-resident defendant to the extent provided by the law of the state in which the federal court sits. Fed. R. Civ. P. 4(k)(1)(A). Pennsylvania's long-arm statute gives its courts jurisdiction over out-of-state defendants to the maximum extent allowed by the U.S. Constitution. 42 Pa. Stat. and Cons. Stat. Ann. § 5322(b) (West 2020).

Consistent with the Due Process Clause of the Fourteenth Amendment, a federal court may exercise personal jurisdiction over a non-resident defendant on two bases: (1) general jurisdiction and (2) specific jurisdiction. General jurisdiction exists where a defendant's contacts with the forum "are so ‘continuous and systematic’ as to render them essentially at home in the forum State." Daimler AG v. Bauman, 571 U.S. 117, 127, 134 S.Ct. 746, 187 L.Ed.2d 624 (2014) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919, 131 S.Ct. 2846, 180 L.Ed.2d 796 (2011) ). Where general jurisdiction is present, a court has personal jurisdiction over the defendant "even if the plaintiff's cause of action arises from the defendant's non-forum related activities." Remick v. Manfredy, 238 F.3d 248, 255 (3d Cir. 2001) (citing Vetrotex Certainteed Corp. v. Consol. Fiber Glass Prod. Co., 75 F.3d 147, 151 n.3 (3d Cir. 1996) ).

In contrast, specific jurisdiction "is present only if the plaintiff's cause of action arises out of a defendant's forum-related activities, such that the defendant ‘should reasonably anticipate being haled into court’ in that forum." Id. (quoting Vetrotex, 75 F.3d at 151 ) (internal quotation marks omitted). When a defendant challenges personal jurisdiction, a plaintiff must establish the following elements with "reasonable particularity" to demonstrate that the court's exercise of specific jurisdiction comports with the Due Process Clause: " ‘First, the defendant must have "purposefully directed [its] activities" at the forum.’ Second, the plaintiff's claims ‘must "arise out of or relate to" ’ the defendant's activities. And third, exercising personal jurisdiction must not ‘offend traditional notions of fair play and substantial justice.’ " Danziger & De Llano, LLP v. Morgan Verkamp LLC, 948 F.3d 124, 129–30 (3d Cir. 2020) (...