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Passport Health, Inc. v. Travel Med

May 11, 2010

PASSPORT HEALTH, INC., A MARYLAND CORPORATION, PLAINTIFF,
v.
TRAVEL MED, INC., A CALIFORNIA CORPORATION AND GINA FLAHARTY AN INDIVIDUAL AND CITIZEN OF THE STATE OF CALIFORNIA, DEFENDANTS.
TRAVEL MED, INC., A CALIFORNIA CORPORATION AND GINA FLAHARTY AN INDIVIDUAL AND CITIZEN OF THE STATE OF CALIFORNIA, COUNTER-CLAIMANTS,
v.
PASSPORT HEALTH, INC., A MARYLAND CORPORATION, COUNTER-CLAIM DEFENDANTS.



The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge

ORDER GRANTING AND DENYING IN PART COUNTER-CLAIM DEFENDANT'S MOTION TO DISMISS COUNTER-CLAIMANTS' AMENDED COUNTERCLAIM*fn1

Plaintiff and Counter-Claim Defendant, Passport Health, Inc. ("Passport"), filed a motion under Federal Rule of Civil Procedure 12(b)(6) to dismiss Defendants Travel Med, Inc. ("TMI") and Gina Flaharty's (collectively, the "Counter-Claimants") amended counterclaim. A previous order, filed on November 16, 2009, granted Passport's motion to dismiss the Counter-Claimants' original counterclaim. Counter-Claimants, however, filed an amended counterclaim on November 26, 2009. Passport argues the claims alleged in the amended counterclaim remain deficient and should be dismissed. For the reasons stated below, Passport's motion to dismiss is GRANTED AND DENIED IN PART.

I. DISCUSSION*fn2

A. Breach of the Franchise Agreement

Passport argues Counter-Claimants' first claim for breach of the Franchise Agreement (the "Agreement") should be dismissed since Counter-Claimants' allegations, even if true, do not constitute breaches of the Agreement.*fn3 Counter-Claimants argue the amended counterclaim specifies the sections of the Franchise Agreement that Passport allegedly breached and Passport's conduct giving rise to their claims of breach. (Opp'n 3:17-20.)

Under California law, "[a] cause of action for breach of contract requires pleading of a contract, plaintiff's performance or excuse for failure to perform, defendant's breach and damage to plaintiff resulting therefrom." McKell v. Washington Mut., Inc., 142 Cal. App. 4th 1457, 1489 (2006) (citation omitted). Counter-Claimants allege "TMI has performed all contractual obligations pursuant to the Franchise Agreement except those obligations excused by [Passport's] breach of the Franchise Agreement." (Amended Countercl. ¶ 51.)

Counter-Claimants further allege that Passport breached Sections 2(a), 7(b), 7(g), 7(j), 9(a) and 9(b) of the Agreement. (Id. ¶¶ 55, 60, 63, 66, 69, 72, 75, 78, 81, 85, 88, 91, 94.)

1. Section 2(a)

Section 2(a) of the Agreement states: "Subject to the terms and provisions of this Agreement, [Passport] grant[s] [TMI] the right (a) to use the System to operate the Franchised Business at and from the Franchise Sites . . . ." The "System" refers to "[t]he confidential, proprietary system relating to the operation of health travel businesses[,] . . . developed and . . . owned by [Passport] . . . ."

Counter-Claimants allege Passport breached Section 2(a) of the Agreement "by failing to provide 'the System' to TMI . . . [and] by not providing any distinctive and unique training, marketing, management methods, procedures and materials to TMI." (Amended Countercl. ¶ 55.) This allegation, however, fails to allege a breach of Section 2(a). Through Section 2(a), Passport only "grant[ed] [TMI] the right . . . to use the System"; Section 2(a) imposes no obligation on Passport to provide the System nor to provide any training, marketing, or other materials to Counter-Claimants. Therefore, even if Counter-Claimants' allegations are true, they have failed to allege a breach of the Agreement.

2. Section 7(b)

Counter-Claimants also allege Passport violated various provisions of Section 7(b) of the Agreement. Section 7(b) provides, in pertinent part:

[Passport] shall furnish to [TMI] such guidance and assistance as [Passport] believe[s] appropriate, related to the following:

(i) advice and written materials concerning methods, standards, and operating procedures that [TMI] should be using in the operation of [TMI's] Franchised Business as such are developed by [Passport] from time to time, including new developments and improvements in product marketing and delivery of services;

(ii) methods, standards, and operating procedures for [TMI] to follow in purchasing and selling approved goods and services, as such are developed and modified by [Passport] from time to time;

(iii) negotiation of supplier arrangements on behalf of the Passport Health system and franchisees conducting business thereunder, including system-wide discounts where available, and a list of approved suppliers from whom [TMI] may purchase; . . .

(v) formulation and implementation of advertising and promotional material and programs for [TMI] and other franchisees to use in the operation and promotion of the Franchised Business in local advertising and ...


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