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Christy v. We the People Forms and Service Centers

March 6, 2003


The opinion of the court was delivered by: Irenas, Senior District Judge


Presently before this Court is Defendants', We The People Forms and Service Centers, USA, Inc. ("We The People") and Ira T. Distenfield ("Distenfield"), Motion for Judgment on the Pleadings, pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, as to Count I of Plaintiff's, Lawrence Christy ("Christy"), First Amended Complaint. For the reasons set forth below, we will grant Defendants' Motion for Judgment on the Pleadings.


Defendant, We The People, is a California based national franchisor of document preparation franchises. We The People provides its franchises with the license to use We The People's trademarks and business system in the operation of each franchisee's We The People paralegal document preparation service. Defendant, Distenfield, a former stockbroker and County Official in Los Angeles, California, is Chairman of We The People. Plaintiff, an auto-mechanic by trade, is a former franchisee of We The People franchises in Cherry Hill and Turnersville, New Jersey.

On September 21, 1999, after reading an article in a business magazine regarding We The People, Plaintiff flew to Santa Barbara, California, to meet Distenfield and tour three We The People offices in the Los Angeles area. (See Pl.'s Opp. Br. at 1). Plaintiff claims that Distenfield explained that he could expect to gross $60,000 a month as a We The People "legal document preparation" office. (Id.).

On September 22, 1999, Plaintiff executed a We The People Franchise Agreement pursuant to which he purchased a We The People franchise to be operated in Camden County, New Jersey for $89,500. Plaintiff also executed an Addendum to the Franchise Agreement pursuant to which he purchased the option to operate the remaining territory in Camden County, New Jersey for $10,500. *fn1 After Plaintiff executed the Franchise Agreement and paid We The People a total of $100,000, Distenfield provided Plaintiff with a We The People Uniform Circular ("UFOC"), which suggested an opportunity to become a "paralegal document" preparer.

On December 8, 1999, Plaintiff and We The People executed a Second Addendum to the Franchise Agreement, modifying the First Addendum. *fn2 The Second Addendum stated that the parties agreed that Plaintiff would exercise his option to purchase the second territory, pursuant to which Plaintiff was given credit for the $10,500 paid to We The People on September 22, 1999, and for a second payment of $20,000 made on December 6, 1999. The remaining balance of $29,000 was to be paid within twenty-four (24) months of the date of the Second Addendum.

In February 2000, Plaintiff began operating his first We The People franchise at the Washington Shopping Center in Turnersville, New Jersey. We The People provided Plaintiff with a three inch file folder with "legal overviews" and "workbooks," which were to be sold to New Jersey customers. Plaintiff paid We The People twenty-five (25%) percent of the retail fee he was required to charge for the overviews and workbooks. If Plaintiff's customers brought the completed workbooks back, Plaintiff was required to fax them to Santa Barbara where the legal forms were prepared. Plaintiff claims that he was not allowed, nor was he taught how, to "prepare" these legal documents. (See Pl.'s Opp. Br. at 3). Plaintiff also contends that We The People instructed him not to render assistance in filling out clients' forms. (Id.). If the forms prepared in California were not proper or accurate, Plaintiff was required to resubmit the forms to We The People in Santa Barbara for corrections. However, in the case of bankruptcy petitions Plaintiff was required by We The People to sign as the preparer, pursuant to 11 U.S.C. § 110.

On March 13, 2000, Distenfield sent Plaintiff a memorandum confirming a conversation whereby Plaintiff agreed to pay We The People $12,500 on or before April 1, 2000, for the full and final payment on the second territory. *fn3 On March 20, 2000, Plaintiff tendered We The People a check in the amount of $12,500 in full and final payment of the second territory, and on January 1, 2001, Plaintiff opened his second We The People franchise in Cherry Hill, New Jersey.

On September 12, 2001, nearly two years after executing the original Franchise Agreement, Plaintiff filed the underlying action against We The People in Superior Court, Law Division, Camden County. Plaintiff alleges in Count I, of his four count complaint, that We The People failed to provide adequate disclosure to him during his acquisition of the franchise, in violation of Federal Trade Commission Rule 436, 16 C.F.R. § 436, et seq., which resulted in a violation of the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1, et seq. Specifically, Plaintiff claims that under 16 C.F.R. §§ 436.1(a), 436.2(g), 436.2(o) Distenfield was required to wait ten (10) business days after providing Plaintiff with the UFOC before accepting Plaintiff's payment, and that the UFOC failed to disclose required information about We The People, its predecessors, affiliates, or its key personnel. Plaintiff contends that this information would have disclosed serious problems with other We The People franchisees regarding such issues as the unauthorized practice of law, fee splitting arrangements with lawyers, and We The People's processes and fees. (See Pl.'s Opp. Br. at 3). Plaintiff also claims that the only financial statement supplied in the UFOC was for fiscal year-end 1997, and therefore, the UFOC contained financial statements that did not meet the requirements of 16 C.F.R. § 436.1(a)(20)(i). *fn4

Accordingly, Plaintiff contends that We The People violated 16 C.F.R. § 436, et seq. by engaging in per se affirmative unconscionable commercial practices, deception, fraud, false pretenses, false promises and/or misrepresentations in violation of Section 2 of the New Jersey Consumer Fraud Act.

On October 29, 2001, We the People removed the case to this Court. We The People requests that this Court dismiss Count I of Plaintiff's First Amended Complaint pursuant to Fed.R.Civ.P. 12(c) because the Act does not apply to the sale and acquisition of a franchise.


As the pleadings are closed and a trial date has not been set, this Court will treat Defendants' 12(c) Motion for Judgment on the Pleadings as a 12(b)(6) motion to dismiss. "Courts have noted the similarity of the wording of the standard for a motion for judgment on the pleadings to the wording of the standard for a motion to dismiss under Rule 12(b)." Sprague v. American Bar Ass'n, No.CIV.A. 01-382, 2001 WL 1450606, at *1 (E.D.Pa. Nov. 14, 2001). Courts therefore review motions for judgment on the pleadings in the same manner as motions to dismiss. Sprague, 2001 WL 1450606 at *1 (citing Rose v. Bartle, 871 F.2d 331, 342 (3d Cir. 1989) ("We view the standard of review under [another case] as identical to that for review of a dismissal under either Rule 12(b)(6) or Rule 12(c)."); GATX Leasing Corp. v. National Union Fire Ins. Co., 64 F.3d 1112, 1114 (7th Cir. 1995) ("We review a motion pursuant to Rule 12(c) under the same standard as a motion to dismiss under Fed.R.Civ.P. 12(b)...."). This interpretation is further supported by Rule 12(h)(2), which permits courts to rule on Rule 12(b) motions as motions for judgment on the pleadings. *fn5 Fed.R.Civ.P. 12(h)(2); Sprague, 2001 WL 1450606 at *1 (citing 2 James Wm. Moore, et al., Moore's Federal Practice ยง 12.38 (3d ed. 2001) ("In fact, any distinction between [a judgment on the pleadings under Rule 12(c) and a motion to dismiss under Rule 12(b)] is merely semantic because the same standard applies to motions made under either subsection.")); See also Regalbuto v. City of Philadelphia, 937 F.Supp. 374, 376-77 (E.D.Pa. 1995), aff'd, 91 F.3d 125 (3d Cir.) (table), and cert. denied, 519 U.S. 982, 117 S.Ct. 435, 136 L.Ed.2d 333 (1996) (applying the same standard to motions for judgment on ...

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