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Free Green Can, LLC and Fgc Franchises, LLC v. Green Recycling Enterprises

January 28, 2011

FREE GREEN CAN, LLC AND FGC FRANCHISES, LLC, PLAINTIFFS,
v.
GREEN RECYCLING ENTERPRISES, LLC A/KA GREEN RECYCLING ENTERPRISES, INC. ,ASLAN FINANCIAL GROUP, INC., EDWARD JARZOBSKI, DEDRIC GILL, ROBB JORGENSEN, AND BRIAN GUBBELS DEFENDANTS.



The opinion of the court was delivered by: Judge Sharon Johnson Coleman

Magistrate Judge Arlander Keys

MEMORANDUM OPINION AND ORDER

This matter is before the Court on motion by Defendants Dedric Gill, Robb Jorgensen, Brian Gubbels, Aslan Financial Group, Inc., and Edward Jarzobski (collectively "Moving Defendants") to dismiss the First Amended Complaint ("FAC") for lack of personal jurisdiction and for failure to state a claim. (Dkt. No. 31.) Plaintiffs Free Green Can, LLC and FGC Franchises, LLC (collectively "Plaintiffs") asserted trademark infringement (count I), unfair competition (count II), breach of franchise agreement (count IV), and specific performance of the franchise agreement (counts V and VI) against Defendants Green Recycling Enterprises, LLC, Edward Jarzobski, Dedric Gill, Robb Jorgensen, and Brian Gubbels (collectively the "GRE Defendants"). Plaintiffs also seek a declaratory judgment finding the franchise agreement valid and enforceable (count III) and to enjoin the GRE Defendants from using Plaintiffs' trademarks and copyrighted material (count VII). Plaintiffs further assert breach of a consulting agreement (count VIII) and breach of fiduciary duty against Defendant Aslan Financial Group, Inc. ("Aslan"). For the reasons that follow, the Court grants the Moving Defendants' motion.

FACTS

The relevant factual allegations in the FAC, which the Court must accept as true for present purposes, are as follows: Plaintiff Free Green Can LLC ("Free Green Can") developed the business concept of providing dual purpose recycle and trash bins to public and private institutions and selling advertising rights on those bins to third-parties. (Am. Compl. ¶ 6.) Free Green Can envisioned the placement of the bins in heavily-trafficked "host site" locations. (Id. at ¶ 15.) Host sites would receive a cost-free trash and recycling solution and earn a share of the advertising revenue. (Id.) Free Green Can is the owner of registered trademarks licensed and used in connection with the Free Green Can operation. (Id. at ¶ 6.) Free Green Can licenses its registered trademarks to Plaintiff FGC Franchises, LLC ("FGC Franchises"), who in turn sub-licenses the trademarks to Free Green Can franchises. (Id.)

Free Green Can sought help from Defendant Aslan to secure financing to develop the Free Green Can business. (Id.) Defendant Edward Jarzobski ("Jarzobski") serves as Aslan's president. (Id. at ¶ 9.) Defendant Green Recycling Enterprises, LLC ("GRE") holds the franchise rights to operate a Free Green Can business within the State of Nebraska. (Id. at ¶ 29.) Defendants Jarzobski, Dedric Gill ("Gill"), Robb Jorgensen ("Jorgensen"), and Brian Gubbels ("Gubbels") (collectively the "individual defendants") are all members of GRE and Gill is its president. (Id. at ¶¶ 9-12.) GRE and the individual defendants are all citizens of Nebraska. (Id. at ¶ 7.)

In August 2009, Free Green Can entered into a consulting agreement with Aslan. (Id. at ¶ 22.) Pursuant to this agreement, Aslan was to develop an investor package for the purpose of soliciting financing from potential lenders. (Id.) Aslan required Free Green Can to disclose certain confidential information needed to facilitate the lender review process. (Id. at ¶ 22.) The parties agreed that the wrongful discharge of this confidential information may result in harm entitling Free Green Can to all available remedies. (Id. at ¶ 23.) Jarzobski executed the consulting agreement on behalf of Aslan, which contained neither a choice of law nor a forum selection clause. (Pls.' Mem. In Opp'n ("Dkt. No. 39"), Ex. C.) Plaintiffs allege Aslan violated the consulting agreement and its fiduciary duty to Free Green Can by disclosing confidential information to GRE and the individual defendants. (Am. Compl. ¶¶ 86, 91.)

Jarzobski also executed a mutual confidentiality agreement with Free Green Can, which contains a forum selection clause binding the parties to the exclusive jurisdiction of "the duly constituted courts of the State of Illinois." (Dkt. No. 39, Ex. B.) Plaintiffs and the Moving Defendants dispute whether Jarzobski executed the confidentiality agreement on behalf of Aslan. (Id. at p. 4; Defs.' Reply ("Dkt. No. 45"), p. 10.) This factual dispute cannot be resolved on this motion dismiss nor is it relevant as Plaintiffs have not alleged that either Jazorbski or Aslan violated the confidentiality agreement. (See generally Am. Compl.)

Aslan approached Free Green Can and proposed to acquire franchise rights to the Free Green Can business in Nebraska. (Id. at ¶ 25.) In October 2009, Free Green Can and GRE executed a franchise agreement that contained a forum selection clause providing that:

"[a]ny legal action or proceeding with respect to this Agreement shall be brought exclusively in state or federal court in Chicago, Illinois and each Party consents to the jurisdiction of said court as the proper and convenient forum for all matters that arise under this Agreement." (Dkt. No. 39, Ex. A.)

The preamble to the franchise agreement states that the agreement was entered into by and between Free Green Can Products, LLC and "the individual or business entity identified in the signature block of this Agreement ("Franchisee")." (Id.) Green Recycling Enterprises, Inc. was listed in the signature block as the Franchisee. (Id.) Defendants Gill, Jorgensen, and Jarzobski signed the franchise agreement without indicating their corporate affiliation. (Id.)

After the franchise agreement was executed, Free Green Can received the initial $125,000 initial fee owed under the agreement. (Dkt. No. 23 ¶ 30.) The initial fee included the cost for 100 of the Free Green Can proprietary dual purpose recycle and trash containers. (Id.) Free Green Can was also paid $40,000 for an additional 100 dual purpose containers. (Id.) GRE allegedly placed these bins in several venues and secured advertising commitments from major organizations. (Id. at ¶ 32.)

GRE and the individual defendants, referred to as the "GRE Defendants" throughout the FAC, failed to pay Free Green Can the advertising fees due under the franchise agreement. (Id.) The GRE Defendants allegedly violated the franchise agreement by failing to report on the placement and solicitation of the dual purpose bins, failing to submit financial statements to Free Green Can, and failing to permit Free Green Can to inspect the GRE Defendants' books and records. (Id. at ¶ 35.) Plaintiffs allege that the GRE Defendants have used the Free Green Can trademarks, have represented themselves as having the right to sell franchises, and have provided the proprietary dual purpose bins to a third-party outside of Nebraska. (Id. at ¶ 45.) The GRE Defendants allegedly informed Plaintiffs that the franchise agreement was null and void because Free Green Can did not register its franchise with the Nebraska Department of Banking. (Id. at ¶ 36.) Plaintiffs provided the GRE Defendants with notice that their acts violated the franchise agreement and infringed upon Plaintiffs' trademarks. (Id. at ¶ 46.)

On September 10, 2010, Plaintiffs filed the instant action after the GRE Defendants allegedly refused to comply with the franchise agreement and continued to infringe Plaintiffs' trademarks. (Dkt. No. 1.) Plaintiffs filed their First Amended Complaint one month later on October 14, 2010. (Dkt. No. 23.) Defendant GRE filed its answer, affirmative defenses, and counterclaims on November 5, 2010 and does not challenge the exercise of personal jurisdiction before this Court. (Dkt. No. 33.) The Moving Defendants, however, seek dismissal alleging they are not subject to personal jurisdiction in Illinois because they have no contacts within the State of Illinois and are not bound by the forum selection clause in the franchise agreement. (Dkt. No. 31.) The individual defendants seek dismissal on the additional basis that the FAC fails to state a claim because it asserts claims against the "GRE Defendants" only and does not allege that the individual defendants committed any tortious acts or contributed in any way to the ...


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