Cottman Transmission v. Metro Distributing

• Decision Date: 12 June 1992
• Docket Number: Civ. A. No. 92-2131,92-2253.
• Citation: 796 F. Supp. 838
• Parties: COTTMAN TRANSMISSION SYSTEMS, INC., Plaintiff, v. METRO DISTRIBUTING, INC., et al., Defendants. COTTMAN TRANSMISSION SYSTEMS, INC., Plaintiff, v. CHERRY HILL PRODUCTIONS, INC., et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

796 F. Supp. 838

COTTMAN TRANSMISSION SYSTEMS, INC., Plaintiff, v. METRO DISTRIBUTING, INC., et al., Defendants.

COTTMAN TRANSMISSION SYSTEMS, INC., Plaintiff, v. CHERRY HILL PRODUCTIONS, INC., et al., Defendants.

Civ. A. Nos. 92-2131, 92-2253.

United States District Court, E.D. Pennsylvania.

June 12, 1992.

Richard P. McElroy, George J. Krueger, Blank, Rome, Comisky & McCauley, Philadelphia, Pa., for plaintiff.

Donald J. Farage, Dennis Scanlon, Philadelphia, Pa., for defendants.

MEMORANDUM

RAYMOND J. BRODERICK, District Judge.

The above-captioned actions have been filed as related cases. This Memorandum shall be applicable to each. Resolved in herein are the following attacks upon plaintiff's Complaint: (1) Defendants' Motion to Dismiss for Lack of Subject Matter Jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure, (2) Defendants' Motion to Dismiss for Lack of Personal Jurisdiction pursuant to Rule 12(b)(2), (3) Defendants' Motion to Dismiss for Improper Venue pursuant to Rule 12(b)(3), (4) Defendants' Motion to Dismiss Count I for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6), and (5) Defendants' Motion to Transfer pursuant to 28 U.S.C. § 1404(a).

Plaintiff alleges the following facts in its Complaint: Plaintiff, Cottman Transmission Systems, Inc. ("Cottman"), is a corporation organized and existing under the laws of the Commonwealth of Pennsylvania with its principal place of business in Fort Washington, Pennsylvania. Cottman is the owner and nationwide franchisor of the Cottman trademark, which it licenses for use in connection with the automotive transmission repair business.

Defendants are fourteen corporations, all organized and existing under the laws of the State of Michigan, and fifteen individuals, all corporate officers of the defendant corporations and citizens of the State of Michigan. Defendants operate automotive transmission repair shops in central and southeastern Michigan.

A-1 Transmissions, Inc. ("A-1"), is a non-party franchisor of automotive transmission repair shops in Michigan. In the summer of 1991, Cottman and A-1 entered into an agreement granting Cottman exclusive use of the "A-1 Transmission" mark in Michigan and giving Cottman the right to convert existing A-1 franchises to Cottman franchises.

Pursuant to the agreement between Cottman and A-1, each defendant or its predecessor in interest received a Michigan Uniform Offering Circular from Cottman proposing the conversion of its A-1 franchise into a Cottman franchise. Conversion consisted of substitution of Cottman licensing agreements for the A-1 licensing agreements then in effect. Compared to the A-1 licensing agreements, the Cottman agreements reduced the advertising fees to be charged during the first month of the new franchises, shortened the period of the covenants not to compete, and did not require payment of franchise fees or changes in franchises' locations, operators, or telephone numbers.

All of the defendants accepted Cottman's offer to convert. In or around August of 1991, each entered into a licensing agreement with Cottman and a related agreement terminating its A-1 franchise. Cottman and A-1 entered into a one-year management agreement whereby A-1 appointed Cottman manager of all A-1 franchises not converted.

On March 19, 1992, Cottman mailed a letter to each defendant notifying him, her, or it that certain forms required under Michigan law, referred to as Michigan "facing pages," had been inadvertently excluded from the Michigan Uniform Offering Circular. The March 19, 1992 letter included the previously omitted facing pages. Michigan Law, M.C.L. § 445.1531(2), required Cottman to provide each defendant with the option to rescind its license agreement as a result of Cottman's failure to include the facing pages in the original offering circular. The March 19, 1992 letter to each defendant stated in relevant part:

If you are satisfied with the information that was provided you and the current status of your License Agreement, no further action on your part is necessary. Another option provided by Michigan Law, MCL 445.1531(2), is for you to pay Cottman all income received from the Center since the signing of the License Agreement in exchange for the return of the amount you paid to enter into the License Agreement, which in this instance was nothing. Your License Agreement would then revert back to an A-1 Transmissions license which Cottman would administer under its Management Agreement with A-1 Transmissions, Inc. This option must be exercised within thirty (30) days of receipt of this letter.

On April 6, 1992, counsel for defendants sent letters to Cottman on behalf of each of the defendants stating:

This is to advise you of our acceptance of your March 19, 1992 offer to rescind our Licensing Agreement and the related agreements in accordance with the requirements of MCL 445.1531(2). To the extent that offer to rescind is requesting or seeking concessions and/or commitments not required by MCL 445.1531(2), we are not agreeing to, or accepting, such concessions and/or commitments. Pursuant to the provisions of MCL 445.1531(2), we hereby tender to you all items received by us for the consideration and not sold. To insure a date certain for determination of our respective rights, the within recession is effective Wednesday, April 8, 1992.

On April 8, 1992, Cottman responded to defendants' purported acceptance of its offer to rescind with a letter to each defendant stating that the rescissions were invalid because they failed to comply with Michigan law. Specifically, Cottman claimed that (1) defendants failed to tender all income and other benefits received from the operation of the franchise from August 26, 1991, to present, (2) defendants failed to cure all breaches of the License Agreement and restore Cottman to the status quo ante, and (3) defendants failed to return to Cottman any of the materials provided to them in conjunction with the License Agreement, particularly those associated with the A-1 and Cottman trademarks and with advertising. The April 8, 1992 letter informed defendants that until these deficiencies were cured, Cottman considered the License Agreements to be in effect and expected defendants to continue to operate their businesses pursuant to the terms of those agreements.

On or about April 9, 1992, defendants ceased operating as A-1, A-1/Cottman or Cottman transmission centers and began operating competing transmission repair facilities. On April 10, 1992, Cottman instituted the instant actions alleging that the defendants conspired to violate Cottman's exclusive right to use the "A-1 Transmission" trademark and the "Cottman" trademark in the State of Michigan. Cottman alleges that defendants have exploited the goodwill of the Cottman mark and have caused confusion as to the origin of services provided by defendants. Cottman claims these acts constitute violations of the Lanham Act (Count I), breach of covenant not to compete (Count II), tortious interference with existing and prospective contractual relations (Count III), unfair competition (Count IV), breach of contract (Counts V and VI), and various violations of Pennsylvania law (Count VII). Cottman seeks declaratory and injunctive relief as well as damages.

(1) Defendants' 12(b)(1) Motion

Defendants' contend that Cottman has failed to allege a sufficient jurisdictional amount in controversy as to each defendant. Title 28 of the United States Code, § 1332(a), provides that district courts shall have diversity jurisdiction over only those cases in which "the matter in controversy exceeds the sum or value of $50,000.00, exclusive of interest and costs...." 28 U.S.C. § 1332(a). Where a single plaintiff's claims against more than one defendant are what Professor Moore refers to as "integrated," the amounts sought as to each defendant are aggregated to determine the jurisdictional amount in controversy. 1 J. Moore, Moore's Federal Practice ¶ 0.972 (2d ed. 1990). "Integrated" claims are claims "so tied together by combination or conspiracy, as to make the relief single in regard to the same...." Id. On the other hand, where a plaintiff alleges independent, several liability against more than one defendant, plaintiff's claims against each defendant must individually satisfy the amount in controversy requirement. Id.; 14A C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 3704, pp. 78-80 (2d ed. 1985 & 1991 Supp.).

In the instant case, the Court need not determine whether or not Cottman's claims are integrated or several since Cottman has submitted the affidavit of Edward Kelly in response to defendants' motion. Mr. Kelly's affidavit states, inter alia, that Cottman's claims against each defendant are well in excess of $50,000.00. (Exhibit "E" to Cottman's Opposition to Defendants Motion to Dismiss, May 4, 1992). On the basis of the Kelly affidavit and the Complaint, the Court has determined that Cottman has made a sufficient showing to defeat defendants' motion to dismiss pursuant to Rule 12(b)(1).

(2) Defendants' Motion Pursuant to Rule 12(b)(2)

Defendants next contend that the Court lacks personal jurisdiction over them. This Court, as a federal district court located in the Commonwealth of Pennsylvania, may assert personal jurisdiction over a nonresident of Pennsylvania only to the extent authorized by the laws of Pennsylvania, and consistent with the United States Constitution. Bane v. Netlink, Inc., 925 F.2d 637, 639 (3d Cir.1991), citing Fed.R.Civ.P. 4(e); Provident National Bank v. California Fed. Sav. & Loan Ass'n, 819 F.2d 434, 436 (3d Cir.1987). The relevant jurisdictional statute in Pennsylvania provides that "the jurisdiction of the tribunals of this Commonwealth shall extend ... to the fullest extent allowed under the Constitution of the United States and may be based on the most minimum contact with this Commonwealth allowed...