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McPeak v. S-L Distribution Co., Inc.

United States District Court, D. New Jersey

September 5, 2014

JOSEPH A. McPEAK, individually and on behalf of all similarly situated individuals, Plaintiff,
v.
S-L DISTRIBUTION COMPANY, INC., Defendant.

OPINION

ROBERT B. KUGLER, District Judge.

This matter comes before the Court upon the motion of S-L Distribution Company, Inc. ("Defendant" or "S-L")[1] to dismiss and/or strike certain allegations in the Second Amended Complaint of Joseph A. McPeak ("Plaintiff"). In his putative class action, Plaintiff alleges that his Distributor Agreement with Defendant constituted a franchise under the meaning of the New Jersey Franchise Practices Act ("NJFPA") and that Defendant violated the statute when it unilaterally terminated the Agreement. This Court previously granted Plaintiff's motion to file his Second Amended Complaint. Defendant now seeks to dismiss or strike Plaintiff's request for injunctive and declaratory relief, his request for a jury trial, his demand for certain types of damages, and his class allegations. For the reasons expressed in this Opinion, the motion will be GRANTED IN PART, DENIED IN PART.

I. BACKGROUND AND PROCEDURAL HISTORY

The factual allegations of this case have been set forth in the Court's Opinion dated December 19, 2012 as follows:

On October 27, 2006, Plaintiff contracted with S-L (formerly known as SOH Distribution Company, Inc.) to obtain the exclusive right to sell and distribute certain products in a specified geographic region in Southern New Jersey. See Amend. Compl. ¶¶ 1, 22. The contract, entitled "Distributor Agreement, " classified Plaintiff as an independent contractor and explicitly stated that "nothing herein shall be construed: (i) to be inconsistent with that relationship; (ii) as constituting Distributor as the franchisee, partner, agent, or employee of SOH." Pl. Amend. Compl., Ex. B at 2. The contract further contained a provision that Plaintiff, the distributor, "understands and acknowledges that this Agreement is not a franchise agreement. This Agreement does not provide the Distributor with a franchise to distribute Authorized Products under a marketing plan or system prescribed by SOH." Id. at 16. The contract also prohibited Plaintiff from conducting "his business under SOH's name, or the trademarks or tradenames of any of the Authorized Products or Other Products." Id. at 12. Under the contract's terms, Plaintiff could not use S-L's "name, or the trademarks or tradenames of any of the Authorized Products or Other Products for any reason, whatsoever, except upon receiving SOH's prior written consent." Id.
The contract required Plaintiff to, among other things, "use his best efforts" to sell certain products to authorized outlets and retail centers within the designated territory, comply with the standard operating guidelines, develop new accounts and additional shelf space for the respective products, and to "establish and to maintain the established, [ sic ] reputation and good will of the Authorized Products." Id. at 4. The contract also reserved S-L's right to authorize other persons from time to time to act as SOH's wholesaler in an area that included Plaintiff's territory. Id. at 6.
For several years, Plaintiff invested capital, labor, and "specialized skills" into his business, leading to an approximate twenty-five percent increase in sales and a two hundred percent increase in the "market value" of his distributorship. Pl. Opp'n. at 6. Unfortunately, in November 2011, Plaintiff received notice that S-L was terminating the distributor agreement. Id. at 5. Plaintiff alleges that after news spread of S-L's termination of the distributor agreements, his business became "worthless" because "[n]o prospective purchaser would agree to purchase a business that would essentially disappear within days." Pl. Amend. Compl. ¶¶ 51-54. On January 3, 2012, S-L allegedly modified Plaintiff's "exclusive right to sell territory by reducing its size, " leading to an almost fifty percent reduction in Plaintiff's sales volume. Id. at ¶ 56. Plaintiff and S-L executed a revised contract that required Plaintiff to use only advertising supplied or approved by S-L. Pl. Amend. Compl., Ex. C at 14. The provisions prohibiting Plaintiff's use of S-L's trademarks and explicitly repudiating that Plaintiff was a franchisee were also contained in the new agreement. See Id. at 3, 14, 21.
On January 19, 2012, Plaintiff filed the instant lawsuit against S-L, asserting a claim on behalf of himself and other allegedly similarly situated individuals for declaratory, injunctive, and monetary relief. Pl. Opp'n at 12; Pl. Amend. Compl. ¶ 10. In his Amended Class Action Complaint, Plaintiff alleges that S-L illegally terminated his franchise in violation of the NJFPA. Pl. Amend. Compl. ¶¶ 66-88. On March 8, 2012, Plaintiff sold his distributorship back to S-L. Pl. Opp'n at 12.

McPeak v. S-L Distribution Co., Civ. No. 12-348, 2012 WL 6652764, at *1-2 (D.N.J. Dec. 19, 2012) (ECF Doc. No. 29).

Pursuant to its Opinion of December 19, 2012, this Court found that Plaintiff failed to plead a factual basis for his claim that he owned a franchise within the meaning of the NJFPA. In order to do so, he was required to plead facts sufficient to support a finding that S-L granted him a license to use its trade name and that a "community of interest" existed between the parties. Plaintiff's allegations that he had the exclusive right to sell and distribute S-L products within a defined territory were insufficient to arrive at a finding that a license existed. Id. at *5. Plaintiff's right to use the S-L name and insignia was similarly insufficient, as were the general allegations that some retail customers believed that S-L was responsible for the quality of Plaintiff's services, believed that they were dealing with S-L itself when dealing with Plaintiff, or that S-L vouched for the activities of Plaintiff. Id. at *5-6. The Court also rejected an argument by Defendant that Plaintiff had no standing to pursue his claims because he no longer owned his distributorship at the time the motion was decided. Id. at *3.[2]

Although Defendant's motion to dismiss was granted, the Court indicated that Plaintiff could request leave to file a Second Amended Complaint. On January 29, 2014, the Court granted Plaintiff's motion for leave to file his Second Amended Complaint. See McPeak v. S-L Distribution Co., Civ. No. 12-348, 2014 WL 320074 (D.N.J. Jan. 29, 2014) (ECF Doc. No. 42). The Court found that additional allegations set forth by Plaintiff, including an email by an employee of Defendant that could be interpreted as referring to Plaintiff as a "Snyder's salespe[rson], " and specific allegations related to resources provided to Plaintiff by Defendant, and to the use of Defendant's trademark on Plaintiff's clothing and vehicle were sufficient to plead the existence of a license. Id. at *6-7. This, coupled with Plaintiff's pleading that a community of interest existed between the parties, and that he maintained warehouse space in New Jersey, was sufficient to state a claim under the NJFPA. After Plaintiff filed his Second Amended Complaint, Defendant filed the instant motion.

II. LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), a court may dismiss an action for failure to state a claim upon which relief can be granted. With a motion to dismiss, "courts accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.'" Fowler v. UPMC Shadyside , 578 F.3d 203, 210 (3d Cir. 2009) (quoting Phillips v. Cnty. of Allegheny , 515 F.3d 224, 233 (3d Cir. 2008)). In other words, a complaint survives a motion to dismiss if it contains sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 570 (2007).

In making this determination, a court must engage in a two-part analysis. Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009); Fowler , 578 F.3d at 210-11. First, the court must separate factual allegations from legal conclusions. Iqbal , 556 U.S. at 678. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id . Second, the court must determine whether the factual allegations are sufficient to show that the plaintiff has a "plausible claim for relief." Id. at 679. Determining plausibility is a "contextspecific task" that requires the court to "draw on its judicial experience and common sense." Id . A complaint cannot survive where a court can only infer that a claim is merely possible rather than plausible. See id.

Alternatively, under Rule 12(f), a party may move to strike from a pleading "an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." A court has "considerable discretion" in deciding a Rule 12(f) motion. Tonka Corp. v. Rose Art Indus., Inc. , 836 F.Supp. 200, 217 (D.N.J. 1993). However, motions to strike are disfavored and usually will be denied unless "the allegations have no possible relation to the controversy and may cause prejudice to one of the parties, or if the allegations confuse the issues." Eisai Co. v. Teva Pharm. USA, Inc. , 629 F.Supp.2d 416, 425 (D.N.J. 2009) (citing Garlanger v. Verbeke , 223 F.Supp.2d 596, 609 (D.N.J. 2002)). In connection with class allegations, Federal Rule of Civil Procedure 23(d)(1)(D) is an additional procedural vehicle, providing that a "court may issue orders that... require that the pleadings be amended to eliminate allegations about representation of absent persons and that the action proceed accordingly." Fed.R.Civ.P. 23(d)(1)(D).

In a putative class action suit, a plaintiff is generally entitled to discover information relevant to Rule 23's class certification requirements. Thus, a court should grant a motion to strike class allegations only if the inappropriateness of class treatment is evident from the face of the complaint and from incontrovertible facts. See Landsman & Funk PC v. Skinder-Strauss Assocs. , 640 F.3d 72, 93 n.30 (3d Cir. 2011) (holding that it is premature for a district court to decide class certification issues prior to discovery unless the "complaint itself demonstrates that the requirements for maintaining a class action cannot be met"); John v. Nat'l Sec. Fire and Cas. Co. , 501 F.3d 443, 445 (5th Cir. 2007) ("Where it is facially apparent from the pleadings that there is no ascertainable class, a district court may dismiss the class allegation on the pleadings"); Advanced Acupunture Clinic, Inc. v. Allstate Ins. Co., Civ. No. 07-4925, 2008 WL 4056244, at *7 (D.N.J. Aug. 26, 2008) ("A defendant may move to strike class allegations prior to discovery in rare cases where the complaint itself demonstrates that the requirements for maintaining a class action cannot be met").

It is only when no amount of discovery or time will allow for plaintiffs to resolve deficiencies in class definitions under Rule 23, that a motion to strike class allegations should be granted. Pilgrim v. Universal Health Card, LLC , 660 F.3d 943, 949 (6th Cir. 2011). Otherwise, in order for a district court to engage in the "rigorous analysis" required to determine if certification is proper, an early motion to strike should be denied so that the court can "probe behind the pleadings before coming to rest on the certification question, " after discovery has taken place. Id . (quoting Gen. Tel. Co. v. Falcon , 457 U.S. 147, 160 (1982)). A leading treatise on class action litigation notes that although a "motion to strike class action allegations may properly be filed before plaintiffs have filed a motion for class certification... [i]f the viability of a class depends on factual matters that must be developed through discovery, a motion to strike will be denied pending the full-blown certification motion." 1 Joseph M. McLaughlin, McLaughlin on Class Actions § 3.4 (7th ed. 2010).

III. DISCUSSION

A. Requests for Injunctive and ...


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