Kiddie Academy Domestic Franchising, LLC v. Wonder World Learning, LLC, 1:17-cv-03420

Background

Kiddie Academy (franchisor) granted Wonder World Learning (franchisee, run by Sumanth husband & wife) a franchise for a Cedar Park, Texas childcare center; franchise agreement executed March 2014 and loan closed Nov. 2014.
Kiddie prepared and assisted with multiple pro formas and Site Analysis Reports (SARs); pro formas contained an express disclaimer stating they were estimates.
Evolve Bank declined financing after raising competition/profitability concerns; Kiddie personnel (Frick, Steelman, Conley) exchanged emails defending the site and helped prepare revised pro formas; Square 1 ultimately funded the loan.
Wonder World opened in Aug. 2015, later ceased operations in Nov. 2017; Kiddie terminated the franchise for nonpayment and disabled system access and sought retrieval of proprietary materials.
Defendants pleaded numerous counterclaims; court previously dismissed fraud and concealment claims but allowed a negligent misrepresentation claim to proceed and permitted amendment to add Frick and Steelman; extensive discovery and multiple motions followed.
The Court (Hollander, J.) granted summary judgment for Kiddie and for Frick and Steelman on negligent misrepresentation, granted in part and denied in part Kiddie’s Rule 12(c) motion re: affirmative defenses, denied reconsideration, and limited consideration of a late supplement.

Issues

Issue	Plaintiff's Argument (Kiddie)	Defendant's Argument (Wonder World)	Held
1. Viability of negligent misrepresentation claim against Kiddie	Pro formas were estimates with a disclaimer; statements were puffery/opinion and not actionable; no admissible evidence of false assertions or justifiable reliance causing proximate harm	Kiddie gave materially false pro formas and SARs and made affirmative misstatements and omissions that induced loan and construction decisions	Granted for Kiddie: no genuine dispute of material fact; statements were puffery/projections or opinions; reliance was unreasonable given disclaimers, revisions, bank skepticism, and claimant’s own involvement
2. Liability of individual officers (Frick & Steelman) for negligent misrepresentation	Frick’s statements were opinions; Steelman did not cause the loan pro forma (Conley aided); no factual basis for individual liability; summary judgment appropriate	Frick and Steelman made specific false factual statements (Frick re: Evolve Bank analysis; Steelman re: pro formas) that induced reliance	Granted for Frick & Steelman: at summary judgment their communications were opinions/projections or not the but-for cause; no justifiable reliance shown
3. Motion for judgment on the pleadings re: affirmative defenses (Rule 12(c))	Seek judgment striking certain affirmative defenses as implausible or legally improper (failure to state, fraud-based defenses)	Defendants contend defenses give fair notice and factual bases exist; 12(c) is improper to the extent it functions like 12(f)	Granted in part: defense of failure to state and fraud-based affirmative defenses dismissed; unclean hands, inequitable conduct, breach, and statute-of-limitations defenses remain for now
4. Motion to reconsider and to supplement record with late evidence (Conley affidavit, admin decision)	New evidence shows intent to deceive and exclusive control of pro forma data, warranting revival of fraud and concealment claims; COVID & discovery disputes justify late filings	Kiddie: filings were untimely surreplies, fall outside Local Rules, and do not alter prior findings; law of the case applies	Motion to Reconsider denied as untimely and meritless under law-of-the-case; supplement largely not considered as improper surreply though select deposition excerpts were considered for summary judgment

Key Cases Cited

Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading standard: plausibility requirement applies to complaints)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading standard: requires factual plausibility)
Lloyd v. General Motors Corp., 397 Md. 108 (Md. 2007) (sets Maryland elements for negligent misrepresentation)
Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (summary judgment burden-shifting principles)
Anderson v. Liberty Lobby, 477 U.S. 242 (U.S. 1986) (summary judgment: genuine dispute of material fact standard)
Scott v. Harris, 550 U.S. 372 (U.S. 2007) (court may disregard story blatantly contradicted by record on summary judgment)
Harrods Ltd. v. Sixty Internet Domain Names, 302 F.3d 214 (4th Cir. 2002) (Rule 56(d) affidavit requirement and when failure is excused)
Walker v. Kelly, 589 F.3d 127 (4th Cir. 2009) (Rule 12(c) standard tracks Rule 12(b)(6))