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G&R MOOJESTIC TREATS v. MAGGIEMOO'S INTERNATIONAL

May 19, 2004.

G&R MOOJESTIC TREATS INC., GEORGE LISI, ROSEMARIE LISI, WATARU IWATA, JI INTERNATIONAL, LLC, and JUN IWATA, Plaintiffs
v.
MAGGIEMOO'S INTERNATIONAL, Defendant



The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge

OPINION

Defendant MaggieMoo's International, LLC ("MMI"), has moved to stay, dismiss and/or transfer the claims of plaintiffs G&R Moojestic Treats, Inc. ("G&R"), George Lisi, Rosemarie Lisi, JI International, LLC, Jun Iwata and Wataru Iwata (collectively, "`Franchisee Plaintiffs") and to dismiss the claims of plaintiff Wataru Iwata for failure to state a claim upon which relief may be granted pursuant to Fed.R. Civ. P.l2(b)(6), and for attorney's fees. All plaintiffs have moved to stay or dismiss the suit brought by MMI in the District of Maryland.

 Parties

  MMI is a Delaware limited liability company with its principal offices in Columbia, Maryland. MMI is a franchisor of specialty ice cream stores.

  G&R is a New York corporation with its principal offices in Syracuse, New York. George Lisi and Rosemarie Lisi are citizens of New York and are the sole shareholders and officers of G&R. On April 10, 2001, a Franchise Agreement was executed between MMI and G&R (the UG&R Franchise Agreement").

  Jun Iwata resides in Pennsylvania and is a member of JI International, LLC ("JI"), a Pennsylvania limited liability company with its principal offices in Pennsylvania. On March 25, 2002, a Franchise Agreement was executed between MM I and Jun Iwata, `on behalf of an entity to be later named (the "JI Franchise Agreement"). The entity to be later named was JI. JI is an intended beneficiary of the Franchise Agreement.

  Wataru Iwata, a citizen of New York, is the brother of Jun Iwata and is alleged by Plaintiffs to be the provider of funds for the purchase of the franchise by Jun Iwata and a "silent partner" in the franchise, although his name is not on the JI Franchise Agreement.

 Prior Proceedings

  On December 11, 2003, Plaintiffs filed an action in this Court alleging that MMI breached both Franchise Agreements, committed fraud, breached an implicit covenant of good faith, caused Plaintiffs not to pursue other business opportunities, and violated the Federal Trade Commission Rule on Franchising, the Sherman Anti-Trust Act, the Clayton Act, the Robinson-Patman Act arid the Racketeer Influenced and Corrupt Organizations Act.

  In addition, G&R, George Lisi, and Rosemarie Lisi allege that MMI violated Article 33 of the New York State General Business Laws. JI, Jun Iwata, and Wataru Iwata allege that MMI violated the Maryland Franchise Registration and Disclosure law. On February 13, 2004, MMI commenced separate actions in the United States District Court for the District of Maryland' to compel mediation pursuant to identical mediation clauses in the Franchise Agreements of both sets of Plaintiffs, captioned Maqqiemoo's International, LLC v. G&R Moojestic Treats Inc., et. al., WMN-04-392, and Maggiemoo's International. LLC v. JI Interna-tional, Inc., et. al., WMN-04-393, respectively. On March 8, 2004, the Honorable William M. Nickerson of the District of Maryland ordered that:
In the interests of judicial economy, I will delay the scheduling of a hearing concerning MMI's Motion(s) to Compel Mediation until after Judge Robert Sweet of the Southern District of New York has had a chance to hear arguments and make rulings on related motions before him on March 31st, 2004.
On March 22, 2004, Judge Nickerson denied the motion of MMI to reconsider the March 8 Order.

  On February 28, 2004, Plaintiffs filed an amended complaint. Following the filing of the amended complaint, MMI then filed amended versions of its briefs in support of its two motions. On March 26, 2004, MMI' s interim motion to stay discovery pending the determination of the instant motions was denied.

  Following the submission of briefs, oral argument on the motion was heard on March 31, 2004. On April 26, 2004, MMI's motion to supplement its memorandum of law in support of the motion to stay, dismiss or transfer the action was granted, at which time the motion was deemed fully submitted.

 Facts

  The following facts are drawn from Plaintiffs' amended complaint (the "Amended Complaint") and accompanying exhibits and do not constitute findings of fact by the Court.

  The Amended Complaint alleges that after G&R entered the Franchise Agreement with MMI, MM I rejected more than fifteen sites that were submitted by G&R, George Lisi and Rosemarie Lisi to open the franchise, effectively taking their money and refusing to allow an opening of a franchise. Because another ice cream specialty store subsequently signed a lease for one of the spots they had chosen, Plaintiffs claim that the competitive nature of the business was forever altered, damaging their ability to successfully introduce MMI's franchise system in the area.

  The Amended Complaint also alleges that MMI intended to deceive Jun Iwata with a misleading Uniform Franchise Offering Circular ("UFOC"), and intended to deceive any lenders Jun Iwata would employ, such as Wataru Iwata. Further, the lack of support from MMI in granting approval for a site led to another specialty ice cream store signing a lease for the site chosen by JI, thereby damaging Plaintiffs' ability to successfully introduce MMI's franchise system in the area. Upon executing a lease at another location, JI claims that losses were incurred in the amount* of rental payment made during months when construction of the store could not begin due to MMI's actions and that construction estimates were more than 51% higher than MMI's UFOC had disclosed, forcing them to terminate the lease.

  Paragraph 24.2 of both the G&R and the JI Franchise Agreements provides that "all controversies, disputes, and claims arising out of or related to this Agreement (including any claim that the Agreement or any of its provisions is invalid, illegal, or otherwise voidable or void) . . . shall first be subject to non-binding mediation."

  Paragraph 24.4 of both the G&R and the JI Franchise Agreements provide that, "Any legal action brought by Franchisee against Franchisor in any forum or court, whether federal or state, shall be brought exclusively in the federal district court covering the location at which Franchisor has its principal place of business at the time of the action."

 MMI's Motion to Stay, Dismiss and/or Transfer the Claims of G&R, George Lisi, Rosemarie Lisi, JI and Jun Iwata

  MMI has moved to stay the instant litigation or to dismiss the claims on the basis of the mediation clauses in both the G&R and the JI Franchise Agreements. However, because of the pending actions in the District of Maryland and the forum selection clause providing that all litigation between MM I and the Franchisee Plaintiffs must be brought in that District, MMI's ...


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