Crest Furniture, Inc. v. Ashley Homestores, Ltd.
| Decision Date | 30 October 2020 |
| Docket Number | 1:20-cv-01383-NLH-AMD |
| Parties | CREST FURNITURE, INC. and SIMON KAPLAN, Plaintiffs, v. ASHLEY HOMESTORES, LTD. and ASHLEY FURNITURE INDUSTRIES, INC., Defendants. |
| Court | U.S. District Court — District of New Jersey |
Paul S. Grossman
WEINER LAW GROUP LLP
629 Parsippany Road
Parsippany, New Jersey 07054
Stuart I. Friedman
Andrew A. Wittenstein
Chris Seelinger
FRIEDMAN & WITTENSTEIN
599 Lexington Avenue, 12th Floor
New York, New York 10022
On behalf of Plaintiffs
Jeffrey A. Carr
Jason J. Moreira
PEPPER HAMILTON LLP
301 Carnegie Center, Suite 400
Princeton, New Jersey 08540-5276
Eric L. Yaffe
Frank J. Sciremammano
Michael L. Sturm
LATHROP GPM LLP
600 New Hampshire Ave NW, Suite 700
Washington, DC 20037
On behalf of Defendants
In this action lodged by a furniture store franchisee against the franchisors, currently pending is the defendant franchisors' motion to dismiss the complaint.1 For the reasons expressed below, the franchisors' motion will be denied.
Plaintiff Simon Kaplan, who was 95 years old at the time the complaint was filed, has been chairman of Plaintiff Crest Furniture, Inc. ("Crest") for 49 years. In 2004, after having purchased furniture from Defendants Ashley HomeStores, LTD. ("Ashley") and Ashley Furniture Industries, Inc. ("AFI") (collectively, "Ashley" or "Defendants") for decades for Crest's Value City stores, Crest and Ashley entered into a Trademark Usage Agreement ("TUA") pursuant to which Crest would operate an Ashely HomeStore in Millville, New Jersey. By November 2019, Crest and Ashley had entered into eleven TUAs regarding Crest's operation of six HomeStores in New Jersey and five HomeStores in Pennsylvania. Crest maintains its headquarters at its warehouse, from which the Ashley furniture is stored and distributed, in Dayton, New Jersey.
In October 2019, Plaintiffs claim that Ashley's director ofstore development told Kaplan "you're too old" to run Crest and "we want you out." On November 13, 2019, Ashley sent a letter to Kaplan informing him that Ashley would not renew the TUAs for four of Crest's HomeStores in Pennsylvania. Those TUAs are set to expire in January and June 2021. Plaintiffs claim that the loss of these four stores, which had approximately $30 million in annual sales in 2018, would have a devastating effect on Plaintiffs, including the ultimate result of forcing Crest out of business altogether.
Additionally, Plaintiffs claim that even though they have spent millions of dollars at Ashley's urging to upgrade their stores and open new stores, including two in 2019, and they have had an exemplary business relationship with Ashley, Ashley terminated their TUAs as part of a larger plot between Ashley and Plaintiffs' competitors to take over all of Crest's HomeStores.
Plaintiffs have asserted seven claims against Defendants: (1) breach of the New Jersey Franchise Practices Act ("NJFPA"), N.J.S.A. 56:10-1, et seq.; (2) breach of common law franchise rights; (3) equitable estoppel; (4) unfair competition; (5) fraud; (6) violation of the New Jersey Law Against Discrimination ("NJLAD"), N.J.S.A. 10:5-1, et seq.; and (7) for a declaratory judgment.
Defendants have moved to dismiss all of Plaintiffs' claims.Defendants argue that the forum selection clauses in the four TUAs require Plaintiffs to litigate their claims regarding the termination of those TUAs in Wisconsin state court. Because Plaintiffs' federal action cannot be transferred to a state court, Defendants argue that Plaintiffs' complaint must be dismissed.
Defendants also argue that even if the forum selection clause did not apply, Plaintiffs' claims under the NJFPA and NJLAD cannot be asserted against Defendants because Plaintiffs' claims arising from the termination of the four TUAs concern only stores in Pennsylvania and Defendants' alleged actions directed only to Pennsylvania. Defendants further argue that Plaintiffs' remaining claims under the common law fail as a matter of law or are insufficiently pleaded, including Plaintiffs' claims against AFI, about which Defendants contend Plaintiffs have not directly ascribed any alleged violative conduct.
Plaintiffs' opposition is premised on their contention that Crest has held a unified multi-state franchise with Ashley that cannot be parsed out into separate franchises based on individual TUAs. Plaintiffs contend that Defendants' argument regarding the forum selection clause is misplaced because it improperly presumes at this motion to dismiss stage that Crest's franchise is not a unified multi-state franchise as it pleads intheir complaint. Plaintiffs argue that as a unified multi-state franchise operated out of New Jersey, New Jersey law is applicable to their claims. Specifically, Plaintiffs point out that under the NJFPA, forum selection clauses in franchise agreements are presumptively invalid. With regard to Kaplan's NJLAD claim, which can be asserted by and against individuals or a corporation, Kaplan is afforded the protections of the NJLAD because he and his company reside in New Jersey. Plaintiffs further argue that the remainder of their New Jersey state law based claims are cognizable and properly pleaded.
Defendants removed Plaintiffs' case from New Jersey Superior Court to this Court, averring that this Court has jurisdiction over this matter based on the diversity of citizenship of the parties and an amount in controversy in excess of $75,000, exclusive of interests and costs, pursuant to 28 U.S.C. § 1332(a). According to Defendants' notice of removal, Crest is a citizen of New Jersey (its principal place of business and state of incorporation), Kaplan is a citizen of New Jersey, Ashley is a citizen of Wisconsin (its principal place of business and state of incorporation), and AFI is a citizen of Wisconsin (its principal place of business and state of incorporation).
When considering a motion to dismiss a complaint for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6), a court must accept all well-pleaded allegations in the complaint as true and view them in the light most favorable to the plaintiff. Evancho v. Fisher, 423 F.3d 347, 351 (3d Cir. 2005). It is well settled that a pleading is sufficient if it contains "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2).
"While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do . . . ." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (alteration in original) (citations omitted) (first citing Conley v. Gibson, 355 U.S. 41, 47 (1957); Sanjuan v. Am. Bd. of Psychiatry & Neurology, Inc., 40 F.3d 247, 251 (7th Cir. 1994); and then citing Papasan v. Allain, 478 U.S. 265, 286 (1986)).
To determine the sufficiency of a complaint, a court must take three steps: (1) the court must take note of the elements a plaintiff must plead to state a claim; (2) the court shouldidentify allegations that, because they are no more than conclusions, are not entitled to the assumption of truth; and (3) when there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief. Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 664, 675, 679 (2009) ().
A district court, in weighing a motion to dismiss, asks "not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claim." Twombly, 550 U.S. at 563 n.8 (quoting Scheuer v. Rhoades, 416 U.S. 232, 236 (1974)); see also Iqbal, 556 U.S. at 684 (); Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (). "A motion to dismiss should be granted if the plaintiff is unable to plead 'enough facts to state a claim to relief that is plausible on its face.'" Malleus, 641 F.3d at 563 (quoting Twombly, 550 U.S. at 570).
A court in reviewing a Rule 12(b)(6) motion must only consider the facts alleged in the pleadings, the documentsattached thereto as exhibits, and matters of judicial notice. S. Cross Overseas Agencies, Inc. v. Kwong Shipping Grp. Ltd., 181 F.3d 410, 426 (3d Cir. 1999). A court may consider, however, "an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the document." Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993). If any other matters outside the pleadings are presented to the court, and the court does not exclude those matters, a Rule 12(b)(6) motion will be treated as a summary judgment motion pursuant to Rule 56. Fed. R. Civ. P. 12(b).
The four TUAs which Ashley has determined not to renew contain the same forum selection clause that requires any dispute arising from that TUA to be brought in Wisconsin state court. Ashley's non-renewal of four TUAs for stores in Pennsylvania, and not for stores in New Jersey, is significant because "forum-selection clauses in contracts subject to the [New Jersey] Franchise Act . . . are presumptively invalid." Kubis & Perszyk Associates, Inc. v. Sun Microsystems, Inc., 680A.2d 618, 626 (N.J. 1996).2 Thus, it must be...
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