United States District Court, N.D. Ohio, Eastern Division
MEMORANDUM OF OPINION AND ORDER [RESOLVING ECF NO.
Y. Pearson United States District Judge
is Defendants' Motion to Dismiss, Stay, or in the
Alternative, to Transfer Venue. ECF No. 23.
Plaintiff filed a response in opposition. ECF No.
30. Defendants replied. ECF No. 36. The Court
heard oral argument. The Court has been advised, having
reviewed the record, including the parties' briefs and
applicable law. For the reasons stated below, the motion
(ECF No. 23) is denied.
action arises out of a franchise relationship between
Plaintiff Handel's Enterprises, Inc.
(“Handel's”) and Defendants Kenneth S.
Schulenburg, Juliana Ortiz, and Moonlight101, Inc.
(collectively “Defendants”). ECF No. 1.
Handel's was founded in 1945 and is a franchisor in the
ice cream industry with forty-one locations in nine states,
including company-owned and franchise locations. Id. at
PageID#: 6, ¶ 21.
October 14, 2015, Defendant Schulenburg met with Handel's
in Ohio to discuss the possibility of purchasing a
Handel's franchise in the San Diego, California area.
Id. at PageID#: 7, ¶¶ 24-26. During the
meeting, Handel's provided Defendant Schulenburg with
certain franchise disclosures, including a proposed Franchise
Disclosure Document (“FDD”) that was registered
with the California Department of Business Oversight with an
effective date of April 13, 2015. Id. at ¶ 25.
The FDD contains a Unit Franchise Agreement (the
“Franchise Agreement”) that governs the terms of
the parties' franchisor-franchisee relationship.
Id. Defendant Schulenburg signed the FDD at the
October 14, 2015 meeting. Id. at ¶ 26.
the Franchise Agreement, Defendant Schulenburg was assigned a
three-mile radius surrounding the Lofts at Moonlight Beach in
Encintas, California, and was also awarded the option to open
a second franchise location in the Gaslamp Quarter of
downtown San Diego. Id. at PageID#: 8, ¶ 29. On
or about January 22, 2016, Handel's and Defendant
Schulenburg executed the Franchise Agreement, commenced a
five year initial term, and opened the Encinitas Franchise.
Id. at ¶ 30. Defendant Schulenburg attended a
two-week Handel's training in Ohio, at which Handel's
provided Schulenburg with confidential information pertaining
to its operations. Id. at ¶ 32.
mid-2017, Defendant Schulenburg began to discuss the
development of his second Handel's location in San Diego,
California, and chose a location at 425 Market Street, San
Diego, California, which is in an area known as the Gaslamp
Quarter (the “Gaslamp location”). Id. at
PageID#: 21, ¶ 87. Handel's did not approve the
development of a Handel's franchise at this location.
Id. at ¶ 89. In December 2017, Defendant
Schulenburg refused to provide Handel's with both a copy
of the final lease for the Gaslamp location and the
franchisee fee. Id. at PageID#: 22, ¶¶
92-93. On December 15, 2017, Handel's sent
Defendants a notice of breach, informing Defendants of their
failure to provide the executed lease to Handel's and to
pay the required franchise fee, as required under the
Franchise Agreement. ECF No. 30 at PageID#: 1040.
Handel's subsequently engaged Defendants in discussions
to resolve matters concerning their failure to pay the
franchise fee and to execute all other duties under the
Franchise Agreement. ECF No. 1 at PageID#: 12-13.
January 30, 2018, Defendants filed an action in California
state court (the “California action”). ECF
No. 30 at PageID#: 1041. Under the California action,
Defendants sought relief from Handel's alleged violation
of California franchise law-Handel's allegedly presented
and had Defendant Schulenburg sign an unauthorized FDD that
was not yet approved by the California Department of Business
Oversight. ECF No. 23-6. The state action was
removed to the United States District Court for the Southern
District of California, No. 3:18-CV-00513 GPC
March 5, 2018, Handel's filed the present action against
Defendants. ECF No.1. The Verified Complaint asserts
claims for federal trademark infringement, federal trademark
dilution, federal false designation of origin, unfair
competition, breach of contract, misappropriation of trade
secrets, fraud, fraudulent concealment, conversion,
declaratory judgment, and tortious interference. ECF No.
March 27, 2018, Defendants filed the instant motion to
dismiss Handel's suit for lack of subject matter
jurisdiction and improper venue, or, alternatively, stay, or
transfer the case to the Southern District of California.
ECF No. 23. After notice to the parties, the Court
held a hearing on the motion to dismiss, stay, or transfer
venue, on May 9, 2018. ECF No. 19. Having been
advised by a review of the record, applicable law, and oral
advocacy, including the presentation of evidence, the Court
hereby denies the motion (ECF No. 23).
Law and Analysis
Motions to Dismiss
Lack of Subject Matter Jurisdiction
to Fed.R.Civ.P. 12(b)(1), Defendants moves to dismiss the
action for lack of subject matter jurisdiction.
the defendant challenges subject matter jurisdiction through
a motion to dismiss, the plaintiff bears the burden of
establishing jurisdiction.” Hedgepeth v.
Tenn., 215 F.3d 608, 611 (6th Cir. 2000). “[W]here
a defendant argues that the plaintiff has not alleged
sufficient facts in her complaint to create subject matter
jurisdiction, the trial court takes the allegations in the
complaint as true.” Nichols v. Muskingum
Coll., 318 F.3d 674, 677 (6th Cir.2003).
Verified Complaint asserts that the Court has jurisdiction
over this matter pursuant to 28 U.S.C. §§ 1331 and
1332. ECF No. 1 at PageID#: 4, ¶¶ 14-15.
§ 1331 grants the Court jurisdiction over all claims
arising under federal law. § 1332 grants the
Court jurisdiction over all claims in which the matter in
controversy exceeds $75, 000 and is between citizens of
present action, there is no dispute that the Verified
Complaint asserts claims arising under federal law-“15
U.S.C. § 1121 and 28 U.S.C. § 1338(a) (trademarks),
28 U.S.C. § 1338(b) (unfair competition when joined with
a substantial and related claim under the Trademark Laws of
the United States, 15 U.S.C. § 1051 et seq.), and 28
U.S.C. § 2201(a) (Declaratory Judgment Act).”
Id. at ¶ 15. Moreover, there is no dispute that
the required diversity of citizenship exists in this
matter-Handel's is incorporated in Ohio with its
principal place of business in Ohio, Defendants Schulenburg
and Ortiz are citizens of California, and Defendant
Moonlight101, Inc. is incorporated in California, with its
principal place of business in California-and, that the
amount in controversy exceeds $75, 000.00. Id. at ¶
the Court has subject matter jurisdiction over all claims
against Defendants. The Court therefore denies
Defendants' motion to dismiss for lack of subject matter
Defendants challenge the propriety of venue in the Northern
District of Ohio. ECF No. 23-1 at PageID#: 555. The
Franchise Agreement at issue in this case contains a forum
selection clause designating Ohio as a proper forum for the
adjudication of disputes: