Purugganan v. AFC Franchising, LLC

DANILO PURUGGANAN, Plaintiff, v. AFC FRANCHISING, LLC, Defendant.

No. 3:20-cv-00360 (KAD)

UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

February 24, 2021

MEMORANDUM OF DECISION RE: DEFENDANT'S MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION OR, IN THE ALTERNATIVE, FOR PARTIAL JUDGMENT ON THE PLEADINGS (ECF NO. 58)

Kari A. Dooley, United States District Judge:

Defendant AFC Franchising, LLC ("AFC" or the "Defendant") has moved to dismiss several of the claims asserted against it by Plaintiff Danilo Purugganan ("Purugganan" or the "Plaintiff") pursuant to Fed. R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction. (ECF No. 58.) Specifically, AFC challenges Purugganan's standing to bring claims for a violation of the Sherman Act (Count Seven), tortious interference with contractual relations and prospective economic advantage (Count Eight), violation of the Connecticut Franchise Act, or "CFA" ( Count Ten), violation of the Connecticut Unfair Trade Practices Act, or "CUTPA" (Count Eleven), and abuse of process. (Count Twelve). In the alternative, AFC moves pursuant to Fed. R. Civ. P. 12(c) for judgment on the pleadings with respect to these claims. AFC additionally challenges the Plaintiff's ability to state claims for a violation of the covenant of good faith and fair dealing (Count Three), violation of the Uniform Commercial Code, or "UCC" (Count Four), and promissory estoppel (Count Five). The parties' familiarity with the procedural history of this case and the allegations in the complaint is presumed. The Court has considered Purugganan's opposition to the motion to dismiss (ECF No. 65) and AFC's reply. (ECF No. 68.) For the reasons that follow, the motion is GRANTED in part and DENIED in part.

Legal Standards

Motion to Dismiss for Lack of Subject Matter Jurisdiction

"A case is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it." Eliahu v. Jewish Agency for Israel, 919 F.3d 709, 712 (2d Cir. 2019) (per curiam) (quoting Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000)). "Article III, Section 2 of the Constitution limits the jurisdiction of the federal courts to the resolution of 'cases' and 'controversies.'" Mahon v. Ticor Title Ins. Co., 683 F.3d 59, 62 (2d Cir. 2012) (internal quotation marks omitted). "This limitation is 'founded in concern about the proper—and properly limited—role of the courts in a democratic society.'" Id. (quoting Warth v. Seldin, 422 U.S. 490, 498 (1975)).

"A plaintiff can demonstrate standing [under Article III] by establishing three elements: (1) an injury-in-fact; (2) causation; and (3) redressability." Vullo v. Office of Comptroller of Currency, 378 F. Supp. 3d 271, 282 (S.D.N.Y. 2019) (citing Sprint Commc'ns Co., L.P. v. APCC Servs., Inc., 554 U.S. 269, 273-74 (2008)). "Under the injury-in-fact requirement, 'the first and foremost' element, 'a plaintiff must show that he or she suffered an invasion of a legally protected interest that is concrete and particularized and actual or imminent, not conjectural or hypothetical.'" Id. (quoting Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547-48 (2016)). As to the second element, "there must be a causal connection between the injury and the conduct complained of—the injury has to be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court." Rothstein v. UBS AG, 708F.3d 82, 91 (2d Cir. 2013) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)) (alterations, ellipses, and emphasis omitted). "Third, it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision." Id. (quoting Lujan, 504 U.S. at 560-61).

"In resolving a motion to dismiss under Rule 12(b)(1), the district court must take all uncontroverted facts in the complaint . . . as true, and draw all reasonable inferences in favor of the party asserting jurisdiction." Mercer v. Schriro, 337 F. Supp. 3d 109, 122 (D. Conn. 2018) (quoting Tandon v. Captain's Cove Marina of Bridgeport, Inc., 752 F.3d 239, 243 (2d Cir. 2014)). "The plaintiff bears the burden of alleging facts that affirmatively and plausibly suggest that [he] has standing to sue." Cortlandt St. Recovery Corp. v. Hellas Telecommunications, S.À.R.L., 790 F.3d 411, 417 (2d Cir. 2015) (quotation marks and alterations omitted). In resolving a motion to dismiss on this basis, the Court may also consider "evidence outside the complaint." Id.

Motion for Judgment on the Pleadings

"A party may move for judgment on the pleadings 'if, from the pleadings, the moving party is entitled to judgment as a matter of law.'" Rojas v. Berryhill, 368 F. Supp. 3d 668, 669 (S.D.N.Y. 2019) (quoting Burns v. Int'l Sec. Serv., Inc. v. Int'l Union, United Plant Guard Workers, 47 F.3d 14, 16 (2d Cir. 1995)). "The standard for addressing a Rule 12(c) motion for judgment on the pleadings is the same as that for a Rule 12(b)(6) motion to dismiss for failure to state a claim." Hogan v. Fischer, 738 F.3d 509, 514-15 (2d Cir. 2013) (quoting Cleveland v. Caplaw Enters., 448 F.3d 518, 521 (2d Cir. 2006)). Under this standard, the Court must accept the complaint's factual allegations as true and must draw inferences in the plaintiff's favor. Littlejohn v. City of New York, 795 F.3d 297, 306 (2d Cir. 2015). The motion "must be decided on 'facts stated on the face of the complaint, in documents appended to the complaint orincorporated in the complaint by reference, and matters of which judicial notice may be taken.'" Lunardini v. Mass. Mut. Life Ins. Co., 696 F. Supp. 2d 149, 155 (D. Conn. 2010) (quoting Leonard F. v. Israel Discount Bank of New York, 199 F.3d 99, 107 (2d Cir. 1999)) (brackets omitted). The "complaint must 'state a claim to relief that is plausible on its face,'" setting forth "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Kolbasyuk v. Capital Mgmt. Servs., LP, 918 F.3d 236, 239 (2d Cir. 2019) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). "Accordingly, 'threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.'" Nielsen v. Rabin, 746 F.3d 58, 62 (2d Cir. 2014) (quoting Iqbal, 556 U.S. at 678) (brackets omitted).

Discussion

Standing

AFC first asserts that Plaintiff's allegations of damages are too speculative to establish Article III standing with respect to the Plaintiff's Sherman Act, tortious interference, CFA, CUTPA, and abuse of process claims. (Counts Seven, Eight, Ten, Eleven, and Twelve, respectively). This argument derives from the Plaintiff's allegations that he will suffer economic losses as a result of AFC's anticipated closing on the purchase of certain urgent care franchises within the Plaintiff's territory. (See, e.g., Compl. ¶¶ 83, 89-92, 95, 109, 115, 121, ECF No. 1.) Although it is the Court's understanding that AFC has since closed on the purchases of the franchises at issue, "the standing inquiry remains focused on whether the party invoking jurisdiction had the requisite stake in the outcome when the suit was filed." Davis v. Fed. Election Comm'n, 554 U.S. 724, 734 (2008). "Allegations of future harm establish injury in fact as long asthe future harm is 'certainly impending.'" Sackin v. TransPerfect Glob., Inc., 278 F. Supp. 3d 739, 746 (S.D.N.Y. 2017) (quoting Clapper v. Amnesty Int'l USA, 568 U.S. 398, 409 (2013)).

The Court easily concludes that the harm Purugganan alleges was sufficiently imminent or "certainly impending" at the time the complaint was filed, given his assertion that AFC had entered into contracts to purchase the franchises at issue, which Purugganan alleges constitutes a breach of the parties' Master Developer Agreement ("MDA"). (See, e.g., Compl. ¶¶ 21, 30, 54-56.) Therefore even if the closings had not yet occurred, the allegations indicating that the transactions were underway support Purugganan's standing to bring claims based on AFC's alleged breach of the MDA and Purugganan's attendant anticipated losses, which also form the basis for the other common law and statutory causes of action. Moreover, as the Court observed in its memorandum of decision denying the Plaintiff's motion for temporary restraining order, the Plaintiff has identified a concrete harm in the form of lost profits comprised of 2.5% of gross sales from the franchises that AFC has recently acquired or will soon acquire that will no longer inure to the Plaintiff under the MDA if the Plaintiff is stripped of his master developer responsibilities for these franchises. (See Decision at 9, ECF No. 94).¹ These lost profits are sufficient to satisfy the injury-in-fact requirement of Article III. See, e.g., Fido's Fences, Inc. v. Radio Sys. Corp., 999 F. Supp. 2d 442, 449 (E.D.N.Y. 2014) (concluding that "economic harm to [the plaintiff's] business—i.e., lost sales and profits—is sufficiently 'concrete and particularized,' as well as 'actual or imminent,' to constitute injury in fact under Article III" where plaintiff alleged that defendants' exclusionary practices harmed its existing business).

The Court therefore denies Defendant's motion to dismiss to the extent it is predicated on the Plaintiff's purported lack of Article III standing and next considers the remainder of the Defendant's claims under the standard applicable to Fed. R. Civ. P. 12(c).

Choice of Law

As a threshold matter the parties dispute whether the choice of law provision included in the MDA executed between the Plaintiff and AFC's predecessor-in-interest, Doctors Express Franchising, LLC ("Doctors Express") governs the instant action. That provision provides:

Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. Sections 1051 et seq.), or

...