United States District Court, D. New Jersey
Stephen Sussman, Esq., LEBENSFELD SHARON & SCHWARTZ P.C., Red Bank, N.J. and Adrienne Noel Gittens, Esq., DUANE MORRIS LLP, Philadelphia, PA., and Sheila Raftery Wiggins, Esq., DUANE MORRIS LLP, One Riverfront Plaza Newark, NJ., Attorneys for Plaintiff 7-Eleven, Inc.
Steven E. Angstreich, Esq., Amy Robin Brandt, Esq., WEIR & PARTNERS LLP, Cherry Hill, NJ., Attorneys for Defendants Maia Investment Company, Inc., Nashwa Younes, Sam Younes, Mohammad Younes, and Kathy, Morgan.
JEROME B. SIMANDLE, Chief District Judge.
This matter comes before the Court upon a motion to dismiss by Defendants Maia Investment Company, Inc., Nashwa Younes, Sam Younes, Mohammad Younes, and Kathy Morgan. [Docket Item 29.] In this trademark infringement action, Plaintiff 7-Eleven, Inc. ("7-Eleven") alleges that Defendants conspired to sell 7-Eleven branded products at a competing convenience store. Specifically, 7-Eleven contends that Sam Younes, a 7-Eleven franchisee, provided 7-Eleven proprietary products, including Cheeseburger Bites, BIG BITE hot dogs, Buffalo Chicken Rollers, and Buffalo Chicken Taquitos, for sale at the "24-7 Foodmart" in Cherry Hill, New Jersey, owned and operated by Maia Investment Company, Inc. ("Maia"). Sam Younes' wife, Nashwa Younes, is Maia's president and his son, Mohammad Younes, is Maia's vicepresident. Defendant Kathy Morgan is the manager of the 24-7 Foodmart where the alleged infringement occurred. Defendants seek dismissal of 7-Eleven's claims for fraud, conspiracy, and trademark infringement, and request that the Court decline to exercise supplemental jurisdiction over 7-Eleven's breach of contract claim against Sam Younes.
For the reasons discussed below, the Court will grant in part and deny in part Defendants' motion to dismiss.
The Court accepts as true for purposes of the instant motion the following facts alleged in 7-Eleven's Amended Complaint. Plaintiff 7-Eleven franchises the 7-Eleven chain of convenience stores. (Am. Compl. [Docket Item 21] ¶ 16.) Defendant Sam Younes executed Store Franchise Agreements ("Franchise Agreements") with 7-Eleven for each of his three 7-Eleven stores located at the following addresses: 1440 Brace Road, Cherry Hill, New Jersey; 610 Kresson Road, Cherry Hill, New Jersey; and 340 North Broadway Avenue, Pittman, New Jersey. (Id. ¶¶ 25-28.) The 24-7 Foodmart, owned and operated by Maia, is located at 1498 Haddonfield-Berlin Road, Cherry Hill, New Jersey, no more than 1.1 miles from Sam Younes' Brace Road and Kresson Road stores. (Id. ¶¶ 10, 29.)
1. The franchise arrangement, generally
Under a typical 7-Eleven franchise arrangement, 7-Eleven leases its franchisees "a complete turn-key' physical plant ready for retail operation, " which includes the store, fixtures, and equipment. (Id. ¶ 30.) A franchisee may, on a weekly basis, draw from the net income from the store's operations - the amount remaining after deducting from gross profit both "operating expenses" (e.g. payroll) and the 7-Eleven Charge. (Id. ¶ 31.) The 7-Eleven Charge is a percentage of the gross profit (net sales less cost of goods sold), usually between 50 and 52 percent, established in the franchise agreement. (Id. ¶ 32.)
As part of the Franchise Agreements between 7-Eleven and Sam Younes, 7-Eleven licensed for "use the 7-ELEVEN name and mark, and related trademarks, trade dress and systems of operations" (collectively, "Marks"). (Id. ¶ 33.) Pursuant to Paragraph 7(b) of the Franchise Agreements, Sam Younes agreed that he is not authorized to "operate the Store or to offer or sell any products or services offered and sold by 7-Eleven Stores at or from any location other than the Store location identified in [the franchise agreement] or through any other channel or method of distribution other than a 7-Eleven Store, including by or through the Internet or similar electronic media." (Id. ¶ 34.) As to 7-Eleven's trademarks, Sam Younes agreed that:
(a) 7-Eleven is the owner of all right, title and interest in and to the Marks and the goodwill associated with and symbolized by them;
(b) The franchisee will not take any action that would prejudice or interfere with 7-Eleven's rights in and to the Marks;
(c) All goodwill arising from the franchisee's use of the Marks will inure solely and exclusively to 7-Eleven's benefit; and
(d) Any unauthorized use of the Marks will constitute an infringement of 7-Eleven's rights in the Marks.
(Id. ¶ 35.) Sam Younes further agreed that he shall not:
(a) Make, support or help another to make use of any name, trademark, service mark, trade dress or other visual or audible material which is not expressly permitted by this Agreement and comprises in part the numeral "7" or the term "eleven" or is otherwise likely to cause confusion with or dilute the distinctiveness of the Marks; or
(b) Commit any other act which may adversely affect or be detrimental to 7-Eleven, other 7-Eleven franchisees, or any of 7-Eleven's rights in or to the Marks, ...