Roberts v. SYNERGISTIC INTERNATIONAL, LLC

• Decision Date: 30 October 2009
• Docket Number: Case No. CV F 09-1634 LJO SMS.
• Parties: Kenneth E. ROBERTS, Jr., Plaintiff, v. SYNERGISTIC INTERNATIONAL, LLC; the Dwyer Group, LLC., and the Dwyer Group, Inc., Defendants.
• Court: U.S. District Court — Eastern District of California

676 F.Supp.2d 934

Kenneth E. ROBERTS, Jr., Plaintiff, v. SYNERGISTIC INTERNATIONAL, LLC; the Dwyer Group, LLC., and the Dwyer Group, Inc., Defendants.

Case No. CV F 09-1634 LJO SMS.

United States District Court, E.D. California.

October 30, 2009.

Joseph P. Collins, Patrick Alan Cathcart, Adorno Yoss Alvarado & Smith, Los Angeles, CA, for Plaintiff.

David Norman Makous, Leo A. Bautista, Robert Michael Collins, Lewis Brisbois Bisgaard & Smith LLP, Los Angeles, CA, for Defendants.

ORDER ON DEFENDANTS' MOTIONS TO DISMISS AND COMPEL ARBITRATION

LAWRENCE J. O'NEILL, District Judge.

INTRODUCTION

Defendants Synergistic International, LLC ("Synergistic"), The Dwyer Group LLC. ("Dwyer LLC"), and The Dwyer Group, Inc. ("Dwyer INC") (collectively "Dwyer") (all defendants collectively "defendants") move to compel arbitration and to dismiss plaintiff Kenneth E. Roberts, Jr.'s ("Mr. Roberts"') complaint pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. and Fed.R.Civ.P. 12(b)(6). In addition, Dwyer moves to dismiss Mr. Roberts' complaint for lack of personal jurisdiction, pursuant to Fed.R.Civ.P. 12(b)(2). Because of Dwyer's solicitous contacts with Mr. Roberts in Fresno County, upon which this action is based, this Court finds limited personal jurisdiction over those parties. As to the motion to compel arbitration, this Court finds that the court, rather than an arbitrator, may determine arbitrability. In addition, based on the parties lack of "meeting of the minds" on the forum, choice of law, and jurisdiction clauses, this Court compels the parties to arbitrate pursuant to the valid provisions of the arbitration agreement contained in Section 14 of the Franchise Agreement.

BACKGROUND

In July 2005, Mr. Roberts, a resident of Fresno County, California, was contacted by telephone Andrew Baker ("Mr. Baker"), "an agent of Synergistic and Dwyer Group." Compl. ¶ 11. Mr. Baker invited Mr. Roberts to attend a Dwyer conference in Las Vegas to recruit him to be a new "Glass Doctor" franchisee. Synergistic operates as the franchisor for over one hundred Glass Doctor franchises across the country. Dwyer is the parent corporation of Synergistic.¹ Compl. ¶ 9.

At the Las Vegas conference, Mr. Baker, Mark Dawson, and Robert Tunmire, who were "representatives of defendants," stated that as a Glass Doctor franchisee, Mr. Roberts would have access to a national customer base and would benefit from advantageous pricing on materials and national advertising. In addition, defendants told Mr. Roberts that by participating in the "Dwyer Group `System,'" Mr. Roberts "would be able to move from automotive glass into the more lucrative business of residential, commercial and industrial glass installation and repair, known in the trade as `flat glass.'" Compl. ¶ 14. At the end of the Las Vegas Conference, defendants invited Mr. Roberts to the Glass Doctor training in Waco, Texas. Defendants informed Mr. Roberts that he must be prepared to pay for his franchise territory at the conclusion of the Texas training.

Mr. Roberts attended defendants' five-day training in Waco, Texas beginning August 22, 2005. "Much of the training was provided by the Dwyer Group officers, employees, and representatives, while other parts of the training were provided by officers, employees, and representatives of Synergistic." Compl. ¶ 16. At the Glass Doctor training in Texas, defendants made the same representations regarding the benefits of the franchise that they made in Las Vegas. Defendants also told Mr. Roberts that to perform flat glass work in California on jobs that exceed $500, he would need to work under a license issued by the California State Contractor's License Board ("CLB"). Defendants knew that Mr. Roberts did not qualify for a CLB license and told Mr. Roberts that he could work under the license of Dan Mock ("Mr Mock"), an officer and representative of Synergistic. Compl. ¶¶ 19-23.

On August 26, 2005, during the training in Waco, Mr. Roberts and Synergistic entered into a Franchise Agreement. Compl. Exh. A. Pursuant to the Franchise Agreement, Mr. Roberts was obliged to pay Synergistic a franchise territory fee of $147,816 and start-up costs of $8,403.80. In addition, Mr. Roberts was obligated to pay an ongoing Franchise Service Fee, which was calculated as a percentage of weekly gross sales. Prior to executing the Franchise Agreement, defendants told Mr. Roberts that he could finance the balance of the territory fee over five years at 10%; however, at the time the parties entered into the Franchise Agreement, defendants presented Mr. Roberts with a Promissory Note and Security Agreement that indicated an interest rate of 11%. Compl. ¶ 33. Defendants presented both the Franchise Agreement and Security Agreement as "take it or leave it" propositions if Mr. Roberts desired to proceed as a franchisee. Mr. Roberts paid Synergistic 35% of the territory fee and his start-up costs, for a total of $52,748.80, while at the Texas training. Compl. ¶¶ 31-32.

The Franchise Agreement contains a Dispute Resolution provision. According to Article 14, the Franchisor and Franchisee agree to utilize the procedures described in the Franchise Agreement for "any controversy or claim arising out of or relating to this Agreement or the breach thereof or any transaction embodied therein or related thereto (a `Dispute') ... before commencing any legal action." Franchise Agreement ("FA"), 14(A). Article 14 of the Franchise Agreement describes an initial process of mediation to resolve a dispute between the parties. The parties agreed that "if they are not able to resolve the Dispute through the mediation process described above, the controversy shall be submitted to binding arbitration." FA, 14(J). The arbitration, inter alia, "shall be governed by the United States Arbitration Act, 9 U.S.C. Section sic 1-16." Id.

The Franchise Agreement also includes a choice of law, jurisdiction, and venue provision. Pursuant to Article 15(K), the parties agreed that the agreement "shall be governed by the internal laws of the state of Texas, except to the extent governed.. by the Federal Arbitration Act (9 U.S.C. Section 1 et seq.)." As to jurisdiction and venue, the Franchise Agreement provides:

AS TO ANY DISPUTE NOT SUBJECT TO BINDING ARBITRATION, FRANCHISEE SPECIFICALLY AGREES THAT ANY ACTION ON SUCH DISPUTE SHALL BE FILED IN A FEDERAL OR STATE COURT LOCATED IN WACO, McLENNAN COUNTY, TEXAS, AND FRANCHISEE HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS AND SPECIFICALLY WAIVES ANY OBJECTIONS IT MAY HAVE TO EITHER THE JURISDICTION OR VENUE OF SUCH COURTS.

FA, 15(K) (emphasis in original).

In addition to the Franchise Agreement, the parties contemporaneously executed an "Addendum to Franchise Agreement For Residents of California" ("Addendum"). The Addendum contains the following relevant provisions:

7. Section 14, Dispute Resolution, is amended by adding the following: "The Franchise Agreement requires mediation and/or arbitration. Mediation and/or arbitration will occur at a mutually convenient time and place with the costs being borne equally by the parties. If the parties cannot agree on a place for the mediation and/or arbitration, the meditation and/or arbitration will occur in Texas. This provision may not be enforceable under California law."

* * *

9. Section 15.K, Governing Law and Jurisdiction, is amended by addition the following: "This provision may not be enforceable under California law."

Mr. Roberts alleges that Synergistic failed to meet its obligations under the Franchise Agreement in a number of ways. Mr. Roberts claims that Synergistic failed adequately to train him and his staff in marketing, managerial and technical skills, and failed to provide a "System" as promised. Mr. Roberts contends that Synergistic failed to provide ongoing support to Mr. Roberts and failed to provide an effective promotion and advertising effort that would benefit him. Compl. ¶ 37. In addition, Mr. Roberts contends that about one month after signing the Franchise Agreement, he learned from the CLB that he could not use Mr. Mock's CLB license for flat glass legally. In response, defendants, including Mr. Mock and Mark Dawson, advised Mr. Roberts on ways to evade the California law. Compl. ¶¶ 22-26.

Mr. Roberts initiated this action against defendants on September 30, 2008 in the Superior Court of the State of California, County of Fresno. Mr. Roberts' complaint asserts six causes of action against defendants: (1) breach of contract (against Synergistic only); (2) negligent misrepresentation; (3) fraud; (4) violation of California's Consumer Legal Remedies Act; (5) violation of California's franchise law (against Synergistic only); and (6) declaratory relief. Dwyer removed the action to this Court on September 15, 2009, based on diversity of citizenship jurisdiction, 28 U.S.C. § 1332. Defendants moved to compel arbitration and to dismiss on September 21, 2009. Mr. Roberts opposed the motions on October 2, 2009. Defendants replied on October 13, 2009. This Court found these motions suitable for decision without a hearing, vacated the October 20, 2009 hearings pursuant to Local Rule 78-230(h), and issues the following order.

DISCUSSION

I. Dwyer's Motion to Dismiss for Lack of Personal Jurisdiction

A. Standard of Review

Dwyer contends that this Court lacks personal jurisdiction over Dwyer INC and Dwyer LLC, and moves to dismiss this action against them pursuant to Fed. R.Civ.P. 12(b)(2). Dwyer submits undisputed evidence that Dwyer INC and Dwyer LLC are foreign corporations, as they are incorporated under the laws of the state of Delaware and both corporations have their principal place of business in Texas. Declaration of Parker Pieri ("Pieri Decl.") ¶¶ 2-3.

Fed.R.Civ.P. 12(b)(2) empowers a defendant to challenge a complaint "for lack of jurisdiction over the person." A district court's determination whether to exercise personal jurisdiction is a...