Three M Enterprises v. Texas D.A.R. Enterprises, No. CIV. RDB 05-252.

Decision Date05 May 2005
Docket NumberNo. CIV. RDB 05-252.
PartiesTHREE M ENTERPRISES, INC. Plaintiff, v. TEXAS D.A.R. ENTERPRISES, INC., et al. Defendants.
CourtU.S. District Court — District of Maryland

Timothy Michael Monahan, Alex Matthew Allman, Owings Mills, MD, for Plaintiff.

Richard E. Hagerty, McLean, VA, for Defendants.

MEMORANDUM OPINION

BENNETT, District Judge.

This action arises out of a business dispute between Plaintiff Three M Enterprises, Inc. ("Three M") and Defendants Texas D.A.R. Enterprises, Inc. ("Texas DAR") Blankenship Aero, Inc. ("Blankenship Aero"); David M. Blakenship; William Hughes; and Harren Equity Partners. Texas DAR manufactures aftermarket products for automobiles, such as spoilers and dash kits. Blankenship Aero is a subsidiary of Texas DAR, which markets and distributes Texas DAR's products. Defendants Hughes and Blakenship are directors and officers of the two companies, and Harren Equity Partners owns a majority of the shares of both Texas DAR and Blankenship Aero.

On February 21, 2003, Plaintiff Three M entered into an agreement with Defendant Blankenship Aero, pursuant to which Three M agreed to distribute Blankenship Aero products in the general vicinity of Baltimore County, Maryland. Three M created the Blankenship Aero branch and made efforts to market the products. However, the relationship between the companies eventually soured, and, on January 15, 2005, Plaintiff Three M filed a three-Count Complaint in the Circuit Court for Baltimore County, Maryland, alleging: a violation by all Defendants of the Maryland Franchise Registration and Disclosure Law, MD. CODE ANN., Business Regulation §§ 14-201 — 14-233 (2004), and/or the Maryland Business Opportunity Sales Act, MD. CODE ANN., Business Regulation §§ 14-101 — 14-129 (2004) (Count I); breach of an implied contract by Defendants Texas DAR and Blankenship Aero (Count II); and violation by Defendants Texas DAR and Blankenship Aero of Plaintiff's right to the use of the trade name "Blankenship Aero" (Count III). Defendants removed Plaintiff's action to this Court on January 28, 2005, pursuant to 28 U.S.C. § 1441(a), based upon the complete diversity of citizenship between Plaintiff and Defendants. See 28 U.S.C. § 1332(a)(2) (diversity jurisdiction).

Now pending before the Court is Defendants' Motion to Dismiss pursuant to Rule 12(b)(3) of the Federal Rules of Civil Procedure, or, in the Alternative, to Transfer Venue pursuant to 28 U.S.C. § 1406(a). In support of this Motion, Defendants first contend that, based on the forum selection clause in the agreement between the parties, the proper venue for this case is the United States District Court for the Northern District of Texas. In light of that clause, Defendants submit that the Court should either dismiss the case or transfer the matter to the Texas federal court. Alternatively, Defendants argue that the action must be dismissed pursuant to Fed.R.Civ.P. 12(b)(6), because Plaintiff fails to state a viable claim under any of the asserted theories. The issues have been fully briefed, and no hearing is necessary. See Local Rule 106.5 (D.Md.2004). For the reasons that follow, Defendants' Motion to Dismiss or, in the Alternative, to Transfer Venue will be denied.

I. Background

During the fall of 2002, Texas DAR, Blankenship Aero, and Harren Equity solicited David Blair, who eventually founded Three M, to operate a Blankenship Aero franchise in Baltimore County, Maryland. Blair discussed the franchise opportunity with various representatives of the Defendants on numerous occasions during late 2002 and early 2003. These representatives presented Blair with financial projections and expected results for the proposed franchise. As a result of these discussions, Blair formed Three M Enterprises, Inc. for the sole purpose of operating a Blankenship Aero franchise. On February 21, 2003, authorized representatives of Three M and Blankenship Aero executed the Authorized Distributor Agreement ("Agreement"), pursuant to which Three M agreed to distribute only Blankenship Aero products in Baltimore County, Maryland. On the same day, Three M paid $15,000 to Texas DAR. According to Plaintiff, the $15,000 payment was a franchise fee.

The Agreement is a standard form contract drafted by Blankenship Aero. (See Def.'s Mem. Supp. M. Dismiss Ex. A.) The document generally defines the standards that the "Authorized Distributor" must follow in maintaining the distributorship, and Blankenship Aero's duties with regard to the distributor, e.g., training, providing products, etc. (Id.) However, the Agreement states that Three M is to operate as "an independent business as an independent business person." (Id. at § 15.1.) The Agreement purports to govern both the forum and choice of law to be applied in connection with any dispute between the parties. Specifically, the Agreement provides:

This Agreement shall be governed by the laws of the State of Texas. All disputes hereunder shall be resolved in the applicable state or federal courts of Texas. The parties consent to the jurisdiction of such courts, agree to accept service of process by mail, and waive any jurisdictional or venue defenses otherwise available.

(Id. at § 16.3.) As to Three M's right to use Blankenship Aero's logos, etc., the Agreement states that "[n]othing in this Agreement shall be deemed to grant [Three M] any right, title or interest in" Blankenship Aero's proprietary marks, and that Three M was prohibited from taking any action that "would infringe on, harm, impair or contest the rights claimed by Blankenship" in Blankenship Aero's proprietary marks. (Id. at § 13.1.) Finally, the Agreement provides that Three M "has not paid any fee to Blankenship [Aero] in connection with this Agreement." (Def.'s Mem. Supp. M. Dismiss Ex. A at § 15.1.)

After the Agreement was executed, as required by Maryland law, Three M registered the trade name "Blankenship Aero" with the Maryland State Department of Assessments and Taxation. In April of 2003, two Three M employees attended training sessions at the Texas DAR headquarters in Texas. Later in April of 2003, David M. Blankenship came to Baltimore to provide additional training to the Three M employees, and in July of 2003, Don Exum of Texas DAR came to Baltimore to provide additional training to the Three M employees.

Three M promoted the Blankenship Aero products to automobile dealerships throughout Baltimore County, and in other areas within the State of Maryland. Operating under the trade name "Blankenship Aero," Three M adhered to the marketing plan and system devised and prescribed by Texas DAR and Blankenship Aero. As early as May 2003, Three M began to notice problems with the quality of the products being supplied to Three M and the timeliness of the supply of products. Three M complained about these problems to Texas DAR and Blankenship Aero. Although Blankenship Aero and Texas DAR made some efforts to cure these deficiencies, the problems persisted throughout the year 2003.

In January of 2004, Texas DAR and Blankenship Aero cancelled the Agreement with Three M and revoked Three M's right to sell Blankenship Aero products. Subsequently, Three M returned all of its unsold inventory to Blankenship Aero. Yet, Blankenship Aero never refunded the cost of that inventory to Three M. After terminating its relationship with Three M, Texas DAR and Blankenship Aero opened a company-owned branch in Baltimore County, through which the company continued to market and sell Blankenship Aero products.

On December 8, 2004, Plaintiff brought suit in the Circuit Court for Baltimore County. Defendants removed the action to this Court on January 28, 2005. Plaintiff's Complaint sets forth three Counts. In Count I, Plaintiff alleges that Defendants violated Maryland Franchise Registration and Disclosure Law, MD. CODE ANN., Business Regulation §§ 14-201 — 14-233 (2004), and/ or the Maryland Business Opportunity Sales Act, MD. CODE ANN., Business Regulation §§ 14-101 — 14-129 (2004) by selling a franchise or business opportunity in Maryland without registering with the Securities Commissioner in the Office of the Attorney General of Maryland, and by making false and misleading statements in connection with the sale of the franchise or business opportunity. Based upon the failure to register and the fraud and misrepresentation, Plaintiff submits that the Agreement between the parties is void. Count II alleges that an implied contract was in effect between the parties, and that Defendants Texas DAR and Blankenship Aero breached that agreement by failing to timely ship products to Plaintiff, and by shipping defective products to Plaintiff. Finally, in Count III of the Complaint, Plaintiff alleges that it owns the right to the use of the trade name "Blankenship Aero" in Maryland through March 5, 2009, by virtue of its registration of that trade name with the Maryland Department of Assessments and Taxation, and that Defendants Texas DAR and Blankenship Aero are violating Plaintiff's right to the use of that trade name by operating and holding themselves out to the public as "Blankenship Aero."

II. Standard of Review

Defendants seek to dismiss Plaintiff's action under Rule 12(b)(3) of the Federal Rules of Civil Procedure based on improper venue, and Rule 12(b)(6) of the Federal Rules of Civil Procedure, for failure to state a claim.1 Preliminarily, "[i]n deciding a motion to dismiss, all inferences must be drawn in favor of the plaintiff, and `the facts must be viewed as the plaintiff most strongly can plead them.'" Sun Dun, Inc. of Washington v. Coca-Cola Co., 740 F.Supp. 381, 385 (D.Md.1990)(quoting Coakley & Williams, Inc. v. Shatterproof Glass Corp., 706 F.2d 456, 457 (4th Cir.1983)).

A Rule 12(b)(6) motion to dismiss should be granted only if, after accepting the plaintiff's well-pleaded allegations as true, it appears certain that the plaintiff can prove no set of facts in support of his claim...

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