358 F. Supp. 3d 1295
M.D. Fla.2017Background
- Cluck-U Corp. (Maryland franchisor, owned by Jean Pierre Haddad) sold a franchise to Tartaglia/Cluck-U Chicken, Inc. for a Florida location; parties signed a Maryland-choice-of-law franchise agreement in 2013.
- Plaintiffs allege Defendants made multiple misrepresentations/omissions in the Franchise Disclosure Document (FDD) (start-up costs, number of franchisees, training, advertising, supply pricing), leading to financial losses; Plaintiffs opened in 2014 and closed by 2016.
- Defendants counter that Plaintiffs (especially Tartaglia) misrepresented financials and upgraded the store beyond Cluck-U standards, causing higher costs and operational issues; Defendants also asserted trademark and related claims after Plaintiffs briefly operated as Boardwalk Tony’s.
- Procedurally, cases from Maryland and Florida were consolidated in the Middle District of Florida; both parties moved for summary judgment on multiple counts.
- The court applied Maryland law to contract and most tort claims (due to the contract choice-of-law and contacts), Florida law to FDUTPA only, and granted summary judgment on specific statutory and declaratory claims while leaving most claims for trial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice of law for contract claims | Maryland choice-of-law in franchise agreement unenforceable against Florida statutory claims | Choice-of-law provision governs the franchise agreement and related statutory claims | Maryland law applies to contract claims; Florida Franchise Act and Sale of Business Opportunities Act inapplicable (D.S.J. granted) |
| Applicability of Florida Franchise Act & Sale of Business Opportunities Act | Misrepresentations in FDD violated Florida franchise/business statutes | Choice-of-law clause and contacts make Maryland law applicable; Florida statutes thus inapplicable | Defendants entitled to summary judgment on Plaintiffs’ counts under Florida Franchise Act and Florida Sale of Business Opportunities Act |
| Fraud / Fraudulent inducement (tort) | Defendants knowingly made material misrepresentations/omissions in FDD inducing contract | Disclaimers, FDD acknowledgment, and Plaintiffs’ own conduct negate reasonable reliance | Maryland law governs; genuine disputes of material fact exist — summary judgment denied for both sides on fraud |
| FDUTPA claim | FDD omissions/violations of FTC Franchise Rule amount to deceptive acts under FDUTPA | Technical noncompliance with Franchise Rule is not per se FDUTPA liability; Plaintiffs’ upgrades and acknowledgments undermine causation/reliance | Florida law governs FDUTPA; disputed facts preclude summary judgment — claim survives |
| Negligent misrepresentation | Defendants negligently provided false business information in FDD | Economic-loss rules or disclaimers bar tort recovery | Maryland law applies; intimate nexus/privity present; disputed facts — summary judgment denied (except Haddad individually: granted against negligent misrep) |
| Declaratory judgment re: post-termination non-compete; injunctive relief | Non-compete unenforceable or should be declared unenforceable | Plaintiffs’ location closed and are not operating; injunctive relief moot | Claim for declaratory relief moot — summary judgment for Defendants on that count; Plaintiffs obtain summary judgment defeating Defendants’ requests for injunctive relief |
| Personal liability of Haddad | Haddad personally liable for corporate misrepresentations (FDUTPA, torts) | Corporate veil prevents individual liability absent fraud or equity reasons | Haddad entitled to summary judgment on breach and negligent misrep claims against him individually; fraud and FDUTPA participation issues remain for trial |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (summary judgment standard and burdens)
- Anderson v. Liberty Lobby, 477 U.S. 242 (1986) (genuine issue for trial standard)
- Hickson Corp. v. N. Crossarm Co., 357 F.3d 1256 (11th Cir. 2004) (summary judgment evidence and inferences)
- Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941) (federal courts apply forum state's choice-of-law rules)
- Maxcess, Inc. v. Lucent Techs., Inc., 433 F.3d 1337 (11th Cir. 2005) (enforceability of contractual choice-of-law provisions)
- Grupo Televisa, S.A. v. Telemundo Commc'ns Grp., Inc., 485 F.3d 1233 (11th Cir. 2007) (most significant relationship test for tort choice of law)
- MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007) (requirements for an actual case or controversy under Declaratory Judgment Act)