SWEET CHARLIE'S FRANCHISING, LLC v. SWEET MOO'S ROLLED ICE CREAM, LLC
2:19-cv-04618
| E.D. Pa. | Jun 19, 2020Background
- Plaintiffs (Sweet Charlie’s Franchising, LLC and related entities) sue five defendants for misappropriation of trade secrets under the DTSA, PUTSA, and common law, alleging defendants used confidential information obtained at Sweet Charlie’s Philadelphia training to operate two "Sweet Moo’s" stores in Tennessee.
- Defendants include Roll Up Tennessee, LLC (a Roll Up franchisee party to the Franchise Agreement), Sweet Moo’s Rolled Ice Cream, LLC (operating the Tennessee stores), and three individuals (some signatories, some not).
- The Franchise Agreement between Sweet Charlie’s and Roll Up contains an exclusive forum-selection clause designating Delaware courts as the exclusive forum for disputes between those parties.
- Defendants moved to transfer the case to the Middle District of Tennessee (where all defendants reside); Plaintiffs oppose transfer. The Court ordered supplemental briefing on whether the case should instead be transferred to Delaware under the forum clause.
- After briefing, Sweet Moo’s filed for Chapter 11 in the Middle District of Tennessee and attempted removal; the district court held that removal was ineffective but imposed an automatic stay as to Sweet Moo’s only.
- The Court denied transfer to Tennessee and, exercising its §1404(a) discretion (guided by Atlantic Marine and the Howmedica framework for non-signatories), transferred the entire action to the District of Delaware and stayed the case only as to Sweet Moo’s.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Venue proper in Eastern District of Pennsylvania under 28 U.S.C. §1391? | Trade secrets and development occurred at Sweet Charlie’s Philadelphia office; substantial part of the property at issue is situated in EDPA. | All defendants reside in Tennessee; venue should be Tennessee. | Venue is proper in EDPA under §1391(b)(2); §1406(a) transfer to TN is not required. |
| Transfer to Middle District of Tennessee under §1404(a)? | Forum-selection clause in Franchise Agreement designates Delaware; transfer to TN is unnecessary. | Convenience: all defendants and witnesses located in Tennessee; counsel and bankruptcy are in TN. | Transfer to TN denied; forum-selection clause favors Delaware and public factors do not overwhelmingly defeat it. |
| Enforceability of Delaware forum-selection clause against non-signatory defendants | Enforce clause; case should go to Delaware; severance would be inefficient. | Non-signatories (two individuals and Sweet Moo’s) are not bound and would be unfairly burdened by Delaware forum. | Applied Howmedica multi-step test; despite non-signatories, overall efficiency and Atlantic Marine presumption support transferring the entire case to Delaware. |
| Effect of Sweet Moo’s bankruptcy and attempted removal | Bankruptcy does not justify transfer; proceed against non-bankrupt defendants. | Sweet Moo’s removed case to bankruptcy court and asserted automatic stay. | Notice of removal ineffective; automatic stay applies to Sweet Moo’s only; case transferred to Delaware and stayed as to Sweet Moo’s. |
Key Cases Cited
- Atlantic Marine Constr. Co. v. U.S. Dist. Court for W. Dist. of Tex., 571 U.S. 49 (2013) (forum-selection clauses generally enforceable; private-interest factors deemed to favor the chosen forum)
- Jumara v. State Farm Ins. Co., 55 F.3d 873 (3d Cir. 1995) (multi-factor public/private interest balancing for forum non conveniens/transfer analysis)
- Shutte v. Armco Steel Corp., 431 F.2d 22 (3d Cir. 1970) (plaintiff’s choice of forum ordinarily entitled to deference absent strong reasons)
- In re Howmedica Osteonics Corp., 867 F.3d 390 (3d Cir. 2017) (framework for applying forum-selection clauses when some parties are non-signatories)