Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D. Mass.: Franchisee allegedly transferred interests to 24 corporations without franchisor’s consent, (Sep 19, 2014)

By Greg Hammond, J.D.

Dunkin’ Donuts Franchised Restaurants LLC was allowed to add 24 additional corporate defendants to its Lanham Act complaint, alleging that Anton Nader transferred interests in various Dunkin’ franchises without the franchisor’s knowledge or consent. In granting Dunkin’s motion for leave to file a first amended complaint, and denying Nader’s cross-motion to dismiss, the federal district court in Boston determined that Dunkin’s motion was timely filed, the amendment was not futile under the New Jersey Franchise Practices Act (NJFPA), and the “first-filed rule” was inapplicable (Dunkin’ Donuts Franchised Restaurants LLC v. Nader, September 17, 2014, Sorokin, L.).

Background. Dunkin originally filed suit against Nader and nine corporate entities, alleging breach of contract and violations of the Lanham Act, arising from Nader’s alleged transferred interests in corporate entities (“and, thus, the Dunkin’ franchises owned by them”) to Leonard Tallo. The transfers were purportedly made without Dunkin’s knowledge or consent, in violation of the parties’ franchise agreements. Dunkin’ further alleged that it did not become aware of Tallo’s interest in the franchises until a review of corporate documents conducted in September 2012. The franchisor subsequently filed a motion seeking leave to amend its complaint, by adding 24 additional corporate defendants controlled by Nader and partially owned by Tallo, which are associated with Dunkin’ franchises in New York and New Jersey. Nader opposed Dunkin’s motion for leave to amend, and filed a cross-motion to dismiss the complaint.

Motion to dismiss. Nader offered four arguments in opposition to Dunkin’s motion for leave to amend, and in support of his cross-motion to dismiss: (1) Dunkin missed the filing deadline with its motion for leave; (2) the amendment was futile under the NJFPA; (3) the “first-filed rule” should be applicable, given a similar action filed in the Superior Court of New Jersey; and (4) all of Dunkin’s claims were untimely under the applicable statute of limitations.

The court disagreed with all four arguments, first finding that Dunkin’s motion for leave did not miss the filing deadline. Contrary to Nader’s argument that the motion could not be filed pursuant to a date the parties included in the “Joint Discovery Plan and Proposed Pretrial Schedule,” the court noted that it did not adopt that deadline, and the timing of Dunkin’s motion did not warrant a denial. Second, Nader’s argument that the NJFPA requires Dunkin’ to bring its claims to terminate the New Jersey Dunkin’ franchise agreements in New Jersey was deemed incorrect, as the NJFPA does not have such a mandate. Third, the court noted that the “first-filed rule” applies to identical actions brought in two federal courts, not an alleged duplicative action in state court. Lastly, the court determined that Nader’s motion to dismiss pursuant to the statute of limitations was premature, as a number of fact questions could not be resolved on the current record, such as when and how Dunkin became aware that Nader was not the sole owner of the various franchises.

The case number is 13-13023-LTS.

Attorneys: David E. Worthen (Gray, Plant, Mooty, Mooty & Bennett, PA) for Dunkin' Donuts Franchised Restaurants LLC. Damian Albergo (Cole, Schotz, Meisel, Forman & Leonard) and Richard C. Van Nostrand (Mirick, O'Connell, DeMallie & Lougee, LLP) for Anton Nader.

Companies: Dunkin' Donuts Franchised Restaurants LLC

Cases: FranchisingDistribution MassachusettsNews