Franchisor’s suit against former franchisee dismissed

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Where a franchise agreement waived the franchisor’s right to unpaid and/or future royalty fees, national marketing fund contribution and/or other fees owed post-termination, the franchisor’s breach of contract claim for allegedly unpaid minimum royalties, technology fees and contract center fees was dismissed.

Background

This case arises out of an alleged breach of a franchise agreement between franchisor, 360 Painting LLC, and its franchisee. Glenn A. Misiph operated a 360 Painting franchise through AASK Services LLC. Plaintiff brings claims of breach of contract, unjust enrichment, quantum meruit, tortious interference with contract, violation of state and federal trade secret laws, state statutory business conspiracy and common law conspiracy. Defendants have filed a motion to dismiss.

Breach of contract

Plaintiff alleges it suffered damages arising from Misiph’s failure to pay contractually due minimum royalties, technology fees and contract center fees in the amount of $131,462.00. However, this claim to damages fails to recognize the executed addendum attached to the franchise agreement, which both plaintiff and Misiph signed. It states that the parties “[w]aive any obligation to pay unpaid and/or future royalty fees, national marketing fund contribution and/or other fees owed post-termination in Sections 22.1(ii) and 23(iii).”

Plaintiff contends that the addendum is not dispositive as to the availability of money damages because it refers to a non-existent section in the franchise agreement — section 23(iii). The court disagrees. When read in context, this is a clear typographical error and the meaning of the addendum and its relation to section 23.2(iii) of the franchise agreement is unambiguous.

Plaintiff also contends that because Misiph signed the addendum in his individual capacity, rather than his representational capacity as AASK, the addendum is only effective as to Misiph — not AASK. This argument fares no better. The court will therefore grant defendants’ motion to dismiss Count One.

Quasi-contract claims

Plaintiff contends that if the franchise agreement is found to be void or if plaintiff is otherwise precluded from recovering under Count One, plaintiff should be able to plead in the alternative under the equitable theories of unjust enrichment and quantum meruit.

These claims also fail. The law does not allow the interposition of an implied contract of a different nature when an express contract exists. At bottom, Plaintiff cannot circumvent its express contractual agreement, in which plaintiff waived its right to damages, by allowing it to plead under the theory of an implied contract. Counts Two and Three are dismissed.

Remaining claims

Plaintiff fails to state a plausible claim for tortious interference with contract because plaintiff does not allege facts that, taken as true, showing intentional interference including or causing a breach or termination of the relationship or expectancy and resultant damages to the party whose relationship or expectancy has been disrupted.

Next, to state a claim under the Federal Defend Trade Secrets Act, a plaintiff must allege that: (1) it owns a trade secret, (2) the trade secret was misappropriated; (3) the trade secret implicates interstate or foreign commerce. Similarly, the Virginia Uniform Trade Secrets Act requires a plaintiff to establish that: (1) the information in question constitutes a trade secret; and (2) the defendant’s misappropriation of the trade secret. The defendants argue that plaintiff does not sufficiently allege what “trade secrets” were misappropriated by defendants. The court agrees.

Finally, plaintiff brings statutory business and common claims against defendants. Plaintiff alleges that Misiph and Mr. Sterling “combined to cause willful and/or malicious injury to Plaintiff in its reputation, trade, business, or profession.” This is a mere recitation of a legal element of a conspiracy claim, and is nothing more than conclusory. Furthermore, plaintiff must plead business conspiracy with particularity, which it has failed to do so here.

Defendants’ motion to dismiss granted.

360 Painting LLC v. Misiph, Case No. 3:22-cv-00056, July 13, 2023. WDVA at Charlottesville (Moon). VLW 023-3-396. 18 pp.