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Rosati's Franchising, Inc. v. Fire It UP, LLC

United States District Court, N.D. Illinois, Eastern Division

June 29, 2015

ROSATI'S FRANCHISING, INC., ANTHEM WAY ROSATI'S, INC., and ROSATI'S FRANCHISE SYSTEMS, INC., Plaintiffs,
v.
FIRE IT UP, LLC, an Arizona limited liability company; KEVIN DOUKAS, individually; DONNA KUTARNIA, individually; and TROY WOLVER, individually, Defendants.

OPINION AND ORDER

SARA L. ELLIS, District Judge.

This case arises out of the failed business relationship between franchisor Rosati's Franchising, Inc. ("Rosati's") and its former franchisee Fire It Up, LLC ("Fire It Up"). The dispute concerns their now-terminated franchise agreement, which granted Fire It Up the right to operate a Rosati's pizza location and use Rosati's Franchise Systems, Inc.'s ("RFSI") trademarks at that location in Scottsdale, Arizona. Rosati's, RFSI, along with Anthem Way Rosati's, Inc. ("Anthem Way"), which had previously operated the Rosati's location bought by Fire It Up, brought suit against Fire It Up and its members, Kevin Doukas, Donna Kutarnia, and Troy Wolver, alleging trademark infringement, false advertising, unfair competition, breach of the franchise agreement, and violation of the Illinois Deceptive Trade Practices Act and the Illinois Consumer Fraud and Deceptive Business Practices Act, seeking damages and to prevent Defendants from using RFSI's trademarks and otherwise representing themselves as connected to Rosati's. Before the Court is Defendants' motion to dismiss for lack of personal jurisdiction and improper venue pursuant to Federal Rules of Civil Procedure 12(b)(2) and (3) or, in the alternative to transfer venue pursuant to 28 U.S.C. § 1406(a) or 1404(a) [36]. Although the Court finds that it has personal jurisdiction over Defendants and that venue is proper because the forum selection clause contained in the franchise agreement is valid, the Court nevertheless finds that transfer to the District of Arizona under § 1404(a) is appropriate in the interest of justice and for the convenience of non-party witnesses.

BACKGROUND[1]

Rosati's is an Illinois corporation that franchises Rosati's pizza locations across the country, including in Illinois, Nevada, and Arizona. There are currently approximately 120 Rosati's locations. Rosati's is the licensee of certain trademarks owned by RFSI. Since 1995, franchisees have been granted exclusive licenses to use the Rosati's name and marks as part of their franchise agreements with Rosati's.

Rosati's entered into a franchise agreement with Fire It Up on May 5, 2014, granting Fire It Up the right to operate a Rosati's pizza franchise at 10855 N. 116th Street in Scottsdale, Arizona. The franchise agreement includes the following forum selection clause:

Governing Law/Consent to Jurisdiction. Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act 15 U.S.C. Section 1051 Et. Seq.), this Agreement and the franchise shall be governed by the internal laws of the State of Illinois (without reference to its choice of law and conflict of law rules), except that the provisions of any franchise law of such state shall not apply unless the jurisdictional requirements of said law have been met independently of this provision. Franchisee irrevocably submits to the exclusive jurisdiction of any state or federal court of jurisdiction located in the State of Illinois and waives any objection Franchisee may have to either the jurisdiction or venue of such court.

Ex. B to Compl. § 16.C.[2] The franchise disclosure document, which was provided to Fire It Up prior to the franchise agreement being signed, also states in a table of key provisions related to the franchise relationship that "[l]itigation must be in any state court of general jurisdiction or a federal court in Illinois (subject to state law)." Ex. B to Pls.' Resp. at 34. The individual Defendants-Doukas, Kutarnia, and Wolver- personally guaranteed the franchise agreement. In doing so, they agreed to be personally bound by and personally liable for the breach of every provision of the franchise agreement. Fire It Up also purchased an existing Rosati's location from Anthem Way.

According to Plaintiffs, Fire It Up never assumed the lease as required by its contract with Anthem Way. As a result, by December 2014, Fire It Up was locked out of the property by the landlord for non-payment of rent. Fire It Up vacated the property at that time without providing notice to Rosati's, which under the franchise agreement constituted grounds for its termination. Rosati's thus sent Fire It Up a termination notice on February 12, 2015. Fire It Up also owed Rosati's royalties and advertising fees, having reported over $40, 000 per month in revenue from its business but not paid royalties and fees on these amounts as set forth in the agreement.

In response, on February 26, 2015, counsel for Fire It Up sent a cease and desist demand letter to Rosati's, asserting that Fire It Up had ownership rights in the Rosati's trade name and associated trademarks and demanding that Rosati's stop using the trade name and trademarks. Counsel also asserted that Fire It Up was seeking a new location to operate under the Rosati's trade name. Rosati's counsel responded with a cease and desist letter of its own on March 13, 2015, the same day that the initial complaint in this case was filed by Rosati's and Anthem Way.

In addition to filing the complaint, Rosati's and Anthem Way sought a temporary restraining order ("TRO"). After a hearing, at which Defendants did not appear, the TRO was granted on March 24, enjoining Defendants from claiming any rights to use the Rosati's name or trademarks and requiring Defendants to return all of Rosati's and Anthem Way's manuals to them. Doc. 19. The TRO was converted into a preliminary injunction order on April 6, after Defendants again did not appear for that hearing. Doc. 21. A first amended complaint was filed on April 11, adding RFSI as a Plaintiff. The first amended complaint, which is the operative complaint, includes claims for trademark infringement, false advertising, unfair competition, breach of the franchise agreement, and violation of the Illinois Deceptive Trade Practices Act and the Illinois Consumer Fraud and Deceptive Business Practices Act.

LEGAL STANDARD

A motion to dismiss under Rule 12(b)(2) challenges whether the Court has jurisdiction over a party. The party asserting jurisdiction has the burden of proof. See Tamburo v. Dworkin, 601 F.3d 693, 701 (7th Cir. 2010). The Court may consider affidavits and other competent evidence submitted by the parties. Purdue, 338 F.3d at 782. If the Court rules on the motion without a hearing, the plaintiff need only establish a prima facie case of personal jurisdiction. GCIU-Emp'r Ret. Fund v. Goldfarb Corp., 565 F.3d 1018, 1023 (7th Cir. 2009). The Court will "read the complaint liberally, in its entirety, and with every inference drawn in favor of" the plaintiff. Central States, Se. & Sw. Areas Pension Fund v. Phencorp Reinsurance Co., 440 F.3d 870, 878 (7th Cir. 2006) (quoting Textor v. Bd. of Regents of N. Ill. Univ., 711 F.2d 1387, 1393 (7th Cir. 1993)). "[O]nce the defendant has submitted affidavits or other evidence in opposition to the exercise of jurisdiction, " however, "the plaintiff must go beyond the pleadings and submit affirmative evidence supporting the exercise of jurisdiction." Purdue, 338 F.3d at 783. Any dispute concerning relevant facts is resolved in the plaintiff's favor. Id. at 782-83.

The plaintiff also bears the burden of establishing proper venue. Id. The Court takes all allegations in the complaint as true but may also consider affidavits and other materials submitted by the parties. Cont'l Cas. Co., 417 F.3d at 733; Harris, 825 F.Supp.2d at 926. The Court resolves all factual conflicts and ...


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