Schaefer v. HPB Foam LLC, 2:24-cv-06298

Plaintiffs Werner Schaefer, Leah Schaefer, and Shepherd International Innovations, Inc. (S3I) entered into franchise agreements with HPB Foam LLC to operate five iFoam insulation franchises in Texas.
Plaintiffs allege misrepresentations in the Franchise Disclosure Document (FDD) and oral communications, including understated investment costs and misleading financial performance data.
The agreements included a broad waiver of reliance on pre-contract representations, a one-year limitations provision, an assignment/release provision upon transfer to S3I, and Pennsylvania choice-of-law.
After operating for about a year, plaintiffs closed the franchises and sued under various statutory and common law theories, including the Texas Deceptive Trade Practices Act (DTPA), Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL), fraud, negligent misrepresentation, and breach of contract.
Defendants moved to dismiss the amended complaint and sought contractual attorneys’ fees.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Applicability of Texas DTPA (Count I)	Defendants’ misrepresentations are actionable.	DTPA exemption applies due to transaction size (> $500,000).	DTPA does not apply; claim dismissed.
Applicability of PA UTPCPL (Count II)	Franchises were bought for personal/family purposes.	UTPCPL inapplicable to business/franchise purchases.	UTPCPL does not apply; claim dismissed.
Adequacy of Fraud/NM Pleadings (Counts III & IV)	Pled with sufficient particularity as to all defendants.	Fails Rule 9(b) as to corporate affiliates.	Adequately pled as to individuals and HPB Foam LLC, not affiliates.
Release in Assignment Bars Fraud/NM	Not all claims released, especially unknown/non-accrued.	Release bars all claims as of signing.	Only claims known or reasonably knowable as of assignment released.
One-Year Contractual Limitation	Texas law requires a minimum 2-year period.	Agreement provides one-year limit; bars claim.	Texas law supersedes; two-year period applies.
Attorneys’ fees	Premature to decide.	Entitled under contract if successful.	Denied without prejudice as premature.

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading standards for plausibility)
Ashcroft v. Iqbal, 556 U.S. 662 (pleading must show more than possibility of misconduct)
Frederico v. Home Depot, 507 F.3d 188 (Rule 9(b) fraud pleading requirements)
Gibbs v. Ernst, 647 A.2d 882 (reasonable reliance element in fraud/negligent misrepresentation)
Bortz v. Noon, 729 A.2d 555 (reasonable reliance for misrepresentation claims)
Fine v. Checcio, 870 A.2d 850 (fraud claim accrual depends on knowledge or reasonable discovery by plaintiff)
Buttermore v. Aliquippa Hosp., 561 A.2d 733 (enforceability and exceptions to signed release contracts)