Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D. Ariz.: LeTip franchise dispute narrows to contract termination challenge, (Sep 15, 2025)

By George Basharis, J.D.

Defamation claim dismissed as substantially true, leaving only termination claim to proceed.

A federal district court judge in Arizona pared back counterclaims in the ongoing LeTip franchise dispute, leaving only a contract termination claim for trial while dismissing defamation allegations with prejudice. The court found insufficient grounds to support claims based on alleged competition or by-law violations but determined the termination issue could proceed because the franchisee plausibly alleged both prior approval for the logo modification and compliance with the agreement’s cure period. At the same time, the defamation claim was rejected as barred by the substantial truth of the statement that the altered logo was sexually suggestive (LeTip World Franchise LLC v. Long Island Social Media Group LLC, No. 2:24-cv-00165-KML (D. Ariz. Sept. 12, 2025)).

Background. LeTip World Franchise is a “business leads networking organization” which, through its franchising entity, LeTip Franchise, grants franchises to qualified individuals to operate regional LeTip franchise chapters. At issue is the fallout from a 2020 franchise agreement between LeTip Franchise and Long Island Social Media Group, LLC (LISMG), operated by Clifford Pfleger and Saranto Calamas. That agreement permitted use of LeTip trademarks and logos but prohibited modifications without approval.

In 2021, Pfleger affixed a modified logo reading “Just LeTip” to his boat, allegedly with the consent of then–LeTip executive John Pokorny. The logo resurfaced in 2023 when Pfleger posted a photo of the boat on social media. LeTip’s owner, Summer Middleton, demanded its removal, later issuing a termination notice in June 2023. Around the same time, Middleton allegedly told other members that Pfleger had altered the logo into a “sexually suggestive, vulgar” phrase.

LeTip filed suit in early 2024, alleging breach of the franchise agreement and improper competition through the creation of BxB Professionals, LLC. LISMG counterclaimed for breach of contract, defamation, and injunctive relief.

Prior ruling. In May 2025, the court dismissed the counterclaims for lack of sufficient pleading. The breach of contract theory failed because LISMG could not show any contractual provision prohibiting LeTip from forming another chapter, and the alleged text-message approval of the logo did not satisfy the requirement of written authorization. The defamation claim faltered because the counterclaimants did not explain how calling the logo “sexually suggestive” and “vulgar” disparaged Pfleger’s professional reputation. Finally, the standalone claim for injunctive relief was dismissed with prejudice.

Renewed counterclaims. In June 2025, LISMG filed a second amended answer and renewed counterclaims for breach of contract and defamation. It alleged LeTip Franchise and LeTip International breached the franchise agreement by forming a competing chapter, soliciting members from LISMG’s group, and terminating the agreement without cause. LISMG further claimed Middleton’s remarks about the altered logo constituted defamation per se.

Breach of contract. The court first addressed whether LeTip International, the parent company of the franchisor, could be sued for breach of the franchise agreement. Finding no sufficient alter-ego allegations, the court dismissed the contract claim against the parent company, leaving only LeTip Franchise as a defendant. On the merits, the court divided the allegations into two theories: competition and termination.

LISMG argued that franchisor LeTip created a new chapter, Island Virtual, in violation of its territorial rights. The court rejected that argument. The franchise agreement prohibited others from holding chapter meetings in Suffolk County venues, but LISMG did not allege Island Virtual held such meetings. Allegations that LeTip marketed to LISMG’s members also fell short, as the counterclaims did not show such marketing constituted prohibited “targeted” activity under the agreement. Assertions that LeTip improperly revoked membership under LeTip’s by-laws likewise lacked any contractual hook requiring adherence to those by-laws.

By contrast, the court found the termination allegations sufficiently pleaded. LISMG contended Pfleger had approval to use the altered logo, that Middleton granted thirty business days to cure any breach, and that the franchise agreement’s advertising and intellectual property provisions could be read to authorize the logo’s use. Because the LeTip parties’ motion did not adequately address these allegations, the court permitted the termination-based breach claim to proceed.

Defamation. LISMG also pressed a defamation per se claim against Middleton, pointing to her statements that Pfleger had intentionally altered the logo into a vulgar phrase. The court dismissed the claim. Under Arizona law, truth is an absolute defense, and the court concluded that the phrase “Just LeTip” was at least substantially true in being sexually suggestive. Citing both dictionary definitions and prior findings, the court ruled the statement could not support liability.

The only surviving counterclaim is the breach of contract theory that LeTip Franchise wrongfully terminated the Suffolk County franchise without cause. The decision leaves the litigation centered on whether the modified logo was authorized and whether Middleton’s termination complied with the cure provisions of the franchise agreement.

The Case is No. 2:24-cv-00165-KML.

Judge: Lanham, K.

Attorneys: Daniel Geary Roberts (Quarles & Brady LLP) for LeTip World Franchise LLC. Raymond R. Grasing (Law Firm of Grasing & Associates PC) for Long Island Social Media Group LLC.

Companies: LeTip World Franchise LLC; Long Island Social Media Group LLC

Cases: FranchisingDistribution ArizonaNews