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Aussie Pet Mobile, Inc. v. Benton

June 28, 2010

AUSSIE PET MOBILE, INC., PLAINTIFF,
v.
DANIEL L. BENTON, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Andrew J. Guilford United States District Judge

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS

This case involves a contract dispute between Plaintiff Aussie Pet Mobile, Inc. ("Plaintiff") and Defendants Daniel L. Benton ("Mr. Benton"), Tammy Benton ("Ms. Benton"), and Excelsior Enterprises, Inc. ("Excelsior") (collectively "Defendants"). Defendants filed a Motion to Dismiss ("Motion"). All Defendants move for dismissal of Plaintiff's third claim under Federal Rule of Civil Procedure 12(b)(6). In addition, Ms. Benton moves to dismiss under Rule 12(b)(2) for lack of personal jurisdiction. After considering the papers and arguments submitted, the Motion is GRANTED in part DENIED in part.

BACKGROUND

The following facts are taken from the Complaint and admissible evidence. Defendant Excelsior is a corporation set up by Mr. Benton. (Compl. ¶ 7.) Ms. Benton resides in Ohio and is the daughter and former employee of Mr. Benton. In 2008, Mr. Benton, the franchiseee, executed a franchise agreement ("Franchise Agreement") with Plaintiff, a franchisor, to operate an mobile pet grooming business in Northeast Cincinnati, Ohio. (Compl. ¶¶ 25-27.)

The outcome of Defendants' 12(b)(6) motion turns on whether the Court will enforce a non-competition clause. The Franchise Agreement contains two terms at issue here. Section 17.1 is titled "Exclusive Relationship, Restrictions on Similar Businesses During Terms and After Transfer, Termination, Expiration, Repurchase, etc." ("the Exclusive Relationship Clause") and states:

During the Term of the Agreement and any successor franchise, and for three (3) years after any transfer, termination, expiration or repurchase of this Agreement, the termination of your rights, and/or the date on which you cease to operate your Aussie Pet Mobile Franchise Business, whichever is later, neither you, any Affiliate of yours, nor any shareholder, member or partner of yours (in the event you are or become a business entity), nor any member of the immediate family of you or any of the foregoing, will: (a) have any direct or indirect interest as a disclosed or beneficial owner in any Similar Business located anywhere; (b) have any direct or indirect interest as a disclosed or beneficial owner in any entity which is awarding franchises or licenses or establishing joint ventures or licenses or establishing joint ventures or other business enterprises for the operation of Similar Businesses located anywhere; (c) perform services for any Similar Business located anywhere; or (d) directly or indirectly employ, or seek to employ, any person who is employed by us, any of the Franchisor Related Persons/Entities or by any other Aussie Pet Mobile franchisee, without the prior written consent of us and that person's employer. In any case, you will first notify us and the employer before taking any action with respect to any such employment or offer of employment. (Complaint, Exhibit "A", § 17.1 (emphasis in original).)

The interpretation of the Exclusive Relationship Clause partially depends on what state's law applies. Section 24.2 of the Franchise Agreement is titled "Choice of Laws" (the "Choice of Law Clause") and states:

You and we agree on the practical business importance of certainty as to the law applicable to your and our relationship and its possible effect on the development and competitive position of the System. Therefore, you and we also agree that, except with respect to the applicability of the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. and the effect of federal pre-emption of state law by such Act, and except to the extent governed by the United States Trademark Act and other federal laws and as otherwise expressly provided in this Agreement, this Agreement and all other matters, including, but not limited to respective rights and obligations, concerning you and us, will be governed by, and construed and enforced in accordance with, the laws of the state where the largest geographic portion of your Protected Area is located [i.e. Ohio]. You and we agree that this provision shall be enforced without regard to the laws of such state relating to conflicts or laws or choice of law; except that the provisions of any law of that state regarding franchises (including, without limitation, registration, disclosure, and/or relationship laws) shall not apply unless such state's jurisdictional, definitional and other requirements are met independently of, and without reference to this Section. (Id., § 24.2.)

Ms. Benton's 12(b)(2) Motion turns on whether she had sufficient contacts with California for this Court to exercise personal jurisdiction. After Mr. Benton signed the Franchise Agreement, he and Ms. Benton attended Plaintiff's five day franchisee business training class in California. (Compl. ¶ 28; Arevalo Decl. ¶ 4.) At the training, Plaintiff trains franchisees on its confidential marketing, operating and sales systems. (Arevalo Decl. ¶ 5.) Plaintiff has developed these systems and procedures through significant research and expenditure of resources, and treats them as company confidential information. (Compl. ¶¶ 23-24; Arevalo Decl. ¶ 6.) Plaintiff takes precautions to prevent disclosure of these systems to anyone outside the company, including providing access only to franchisees and employees who agree to in writing to maintain the confidentiality of the systems and procedures. (Compl. ¶ 24; Arevalo Decl. ¶ 7.)

Plaintiff alleges that Defendants breached the Franchise Agreement by closing their franchise down without Plaintiff's authorization. (Compl. ¶¶ 29-31.) Plaintiff further alleges that Ms. Benton breached the agreement by operating a competing mobile pet grooming business. (Compl. ¶ 32.)

Based on these facts and others, Plaintiff asserts three claims, numbered as follows: (1) declaratory relief, against Mr. Benton and Excelsior; (2) injunctive relief against Mr. Benton and Excelsior; and (3) injunctive relief against all Defendants. Defendants now all move for dismissal of the third claim. Ms. Benton also moves to dismiss for lack of personal jurisdiction.

ANALYSIS

1. PERSONAL JURISDICTION OVER MS. BENTON

1.1 Legal Standard

Under Federal Rule of Civil Procedure 12(b)(2), a defendant may bring a motion to dismiss for lack of personal jurisdiction. Although the defendant is the moving party, the plaintiff bears the burden of making a prima facie showing of facts establishing personal jurisdiction by a preponderance of the evidence. Rio Properties, Inc. v. Rio Int'l Interlink, 284 F.3d 1007, 1019 (9th Cir. 2002). When a court decides the motion before conducting a trial or evidentiary hearing, the plaintiff need only make a prima facie showing that personal jurisdiction exists. Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995). A plaintiff makes a prima facie showing if the plaintiff produces admissible evidence which, if believed, would be sufficient to establish the existence of personal jurisdiction. Harris Rutsky & Co. Ins. Servs., Inc. v. Bell & Clements Ltd.,328 F.3d 1122, 1129 (9th Cir. 2003). For a 12(b)(2) motion brought before trial or an evidentiary hearing, a court accepts as true the complaint's uncontroverted factual allegations and resolves any factual conflicts in the plaintiff's favor. Id. Otherwise, defendants could prevent plaintiffs from meeting their burden simply by contradicting plaintiffs' affidavits. Farmers Ins. Exchange v. Portage La Prairie Mut. Ins. Co., 907 F.2d 911, 912 (9th Cir. 1990).

"The Due Process Clause protects an individual's liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful 'contacts, ties, or relations.'" Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-72 (1985) (citing Int'l Shoe Co. v. Washington, 326 U.S. 310, 319 (1945)). Lawful exercise of jurisdiction over a nonresident defendant must comport with "traditional notions of fair play and substantial justice." Int'l Shoe, 326 U.S. at 316. Concerns for fairness require that a court exercise jurisdiction only if the defendant's actions in ...


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