CJ Consultants LLC v. Window World, Inc.
| Decision Date | 20 September 2022 |
| Docket Number | 1:22-cv-3 |
| Parties | CJ CONSULTANTS, LLC, et al., Plaintiffs, v. WINDOW WORLD, INC., Defendant. |
| Court | U.S. District Court — Western District of Michigan |
Plaintiffs CJ Consultants, LLC d/b/a/ Window World of Lansing, James Hindman, Cynthia Hindman, Hugh Stempfley, and Paulette Stempfley bring suit against Defendant Window World, Inc. under diversity jurisdiction. Plaintiffs bring six claims against Defendant, including: (1) breach of contract (Count I); (2) breach of implied duty of good faith and fair dealing (Count II); (3) declaratory relief (Count III); (4) trespass (Count IV); (5) violation of Section 8 of the Michigan Franchise Investment Law (MFIL), Mich. Comp. Laws § 445.1508 (Count V); and (6) violation of Section 27 of the MFIL, Mich. Comp. Laws § 445.1527. Before the Court is Defendant Window World, Inc's motion to dismiss all claims without prejudice in favor of contractual mediation procedures, and in the alternative, dismiss Counts I to IV without prejudice and Counts V and VI with prejudice (ECF No 10). For the reasons stated below, the Court will grant Defendant's motion.
Plaintiffs and Defendant have a franchisee/franchisor relationship. The franchise relationship began in 2012, with the 2012 Franchise Agreement. This agreement was for a term of five years. In 2017, the parties entered into another franchise agreement the 2017 Franchise Agreement, for a term of ten years. Plaintiffs allege that about three years into the 2017 Franchise Agreement, Defendant began requiring more onerous financial reporting. While Plaintiffs allege that they attempted to comply with these new requirements, Defendant terminated their agreement on November 22, 2021.
A claim may be dismissed for failure to state a claim if it fails “‘to give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). To determine whether a pleading fails to state a claim, courts must ask whether the plaintiff has alleged “facts that, if accepted as true, are sufficient to raise a right to relief above the speculative level,' and . . . ‘state a claim to relief that is plausible on its face.'” Hensley Mfg. v. ProPride, Inc., 579 F.3d 603, 609 (6th Cir. 2009) (quoting Twombly, 550 U.S. at 555). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Plausible does not mean probable, but the standard Id. (quoting Twombly, 550 U.S. at 557). '” Id. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).
Assessment of the complaint under Rule 12(b)(6) must ordinarily be undertaken without resort to matters outside the pleadings; otherwise, the motion must be treated as one for summary judgment under Rule 56. Wysocki v. Int'l Bus. Mach. Corp., 607 F.3d 1102, 1104 (6th Cir. 2010). “However, a court may consider exhibits attached to the complaint, public records, items appearing in the record of the case, and exhibits attached to defendant's motion to dismiss, so long as they are referred to in the complaint and are central to the claims contained therein, without converting the motion to one for summary judgment.” Gavitt v. Born, 835 F.3d 623, 640 (6th Cir. 2016).
Defendant seeks to dismiss most of Plaintiffs' claims without prejudice in order to enforce the 2017 Franchise Agreement's contractual Informal Resolution/Mediation Procedures. Section 32(b) of the 2017 Franchise Agreement states:
(b) Informal Resolution/Mediation. Before commencing any legal action against FRANCHISOR or its affiliates with respect to any claim or dispute and except as set forth in Section 32(c) below, FRANCHISEE shall submit to FRANCHISOR, through FRANCHISOR's registered agent as identified herein, a written notice which specifies in detail, the precise nature and grounds of such claim or dispute. Within thirty (30) days after receiving the written notice, FRANCHISOR and FRANCHISEE shall meet in person or telephonically to discuss the issues raised in the written notice provided by FRANCHISEE (“Informal Discussions”). After the Informal Discussions have occurred and if the dispute has not been resolved, FRANCHISOR will have a period of twenty (20) days following the Informal Discussions to notify FRANCHISEE as to whether FRANCHISOR or its affiliates elects to exercise its option to submit such claim or dispute to mediation. If FRANCHISOR elects to submit the claim or dispute to mediation, the mediation will occur in North Wilkesboro, North Carolina in accordance with the American Arbitration Association's Commercial Mediation Rules then in effect. It is agreed that the mediator selected will have experience in franchise matters and/or franchise law. FRANCHISEE may not commence any action against FRANCHISOR or its affiliates with respect to any such claim or dispute in court unless FRANCHISOR fails to exercise its option to submit such claim or dispute to mediation, or such mediation proceedings have been terminated either: (i) as the result of a written declaration of the mediator(s) that further mediation efforts are not worthwhile; or (ii) as a result of a written declaration by FRANCHISOR. FRANCHISOR'S rights to mediation, as set forth herein, may be specifically enforced by FRANCHISOR. Each party shall bear its own cost of mediation and FRANCHISOR and FRANCHISEE shall share mediation costs equally. This agreement to mediate shall survive any termination, non-renewal, or expiration of this Agreement.
(2017 Franchise Agreement 26, ECF No. 26-2.) Section 32(b) requires Plaintiffs as the Franchisee to engage in Informal Discussions with Defendant and submit to mediation if Defendant elects to before filing suit in court. Defendant contends that this suit must be dismissed because Plaintiffs have failed to do so.
Plaintiffs argue that this clause is unenforceable because it is unconscionable. A contract is unconscionable “‘only when the inequality of the bargain is so manifest as to shock the judgment of a person of common sense, and where the terms are so oppressive that no reasonable person would make them on the one hand, and no honest and fair person would accept them on the other.'” Tillman v. Com. Credit Loans, Inc., 655 S.E.2d 362, 369 (N.C. 2008)[1] (quoting Brenner v. Little Red Sch. House Ltd., 274 S.E.2d 206, 210 (N.C. 1981)). The party asserting that a contract is unconscionable has the burden of proving both procedural and substantive unconscionability. Id. at 369-70. Procedural unconscionability can include “unfair surprise, lack of meaningful choice, and an inequality of bargaining power.” Id. at 370 (citing Rite Color Chem. Co. v. Velvet Textile Co., 411 S.E.2d 645, 648 (N.C. 1992)). Substantive unconscionability refers to “harsh, one-sided, and oppressive contract terms.” Id. “[T]he presence of both procedural and substantive problems is necessary for an ultimate finding of unconscionability,” but the court is to take a balancing approach to these two aspects. Id. ().
In Tillman, the North Carolina Supreme Court found procedural unconscionability based on several factors:
(1) the plaintiffs were rushed through the loan closing: (2) the closing officer indicated where to sign; (3) there was no mention of the offending terms at the closing; (4) the defendants admitted they would have refused to make the loan rather than negotiate terms of the arbitration agreement; and (5) “the bargaining power between [the] defendants and [the] plaintiffs was unquestionably unequal in that [the] plaintiffs [were] relatively unsophisticated consumers contracting with corporate defendants who drafted the arbitration clause and included it as boilerplate language in all of their loan agreements.”
Westmoreland v. High Point Healthcare Inc., 721 S.E.2d 712, 717 (N.C. Ct. App. 2012) (quoting Tillman, 655 S.E.2d at 370). As the factors illustrate, procedural unconscionability focuses on the manner in which the contract was formed.
Plaintiffs contend that the 2017 Franchise Agreement is procedurally unfair because (1) “Defendant can unilaterally enforce a requirement to mediate in another state,” and (2) “the Mediation Clause applies to ‘any legal action against [Defendant] or its affiliates with respect to claim or dispute.'” Neither of these arguments relate to the manner in which the contract was formed. These arguments focus on the substance of Section 32(b). Plaintiffs have failed to make a showing of procedural unconscionability.
As to substantive unconscionability, Plaintiffs argue that Section 32(b) is harsh, one-sided and oppressive because (1) only Plaintiffs' claims are subject to Section 32(b); (2) the timing and procedures are convoluted in order to “run out the clock on soon to expire limitation...
To continue reading
Request your trial