• United States District Court For Maryland Found That It Lacked Personal Jurisdiction Over Non-Resident Corporation In Claims Arising Out Of Franchise Negotiation
  • July 14, 2012
  • Law Firm: Semmes Bowen Semmes A Professional Corporation - Baltimore Office
  • A Love of Food I, LLC v. Maoz Vegetarian USA, Inc., No. 10-cv-02352 (D.Md. June 28, 2012)

    In A Love of Food I, LLC v. Maoz Vegetarian USA, Inc., the United States District Court of Maryland transferred claims by A Love of Food I, LLC (“Plaintiff”) against Maoz Vegetarian USA, Inc. (“Defendant”) to the District of Columbia, because the Court lacked personal jurisdiction. Defendant challenged the Court’s jurisdiction over claims stemming from a franchise agreement between the two parties. The Court considered whether it could exercise specific jurisdiction over non-resident Defendant, such that the Court could adjudicate Plaintiff’s claims without running afoul of due process. Reasoning that Defendant did not purposely avail itself of the privilege of conducting activities in Maryland, the Court held that it did not have personal jurisdiction. The Court transferred the action to the United States District Court for the District of Columbia, where both parties stipulated jurisdiction would be proper.

    This case arose out of a failed attempt to open a franchise quick-service vegetarian restaurant in the District of Columbia. Defendant was a Delaware company, with its principal place of business in New York, which sold franchise agreements to operate “Maoz Vegetarian” restaurants throughout the United States. Plaintiff was a Delaware company, with its principal place of business in Chevy Chase, Maryland. Plaintiff procured rights from Defendant to open a Maoz Vegetarian in the District of Columbia on August 27, 2007, and operated the restaurant from November 18, 2009, until the restaurant closed in January 2012.

    Plaintiff received the rights to open its restaurant under a franchise agreement, after about a year of negotiations with Defendant. Plaintiff and Defendant would often exchange emails about the franchise. Several times, both parties met in the District of Columbia to discuss the venture, but the parties never met in Maryland. During this period, Defendant was never aware that Plaintiff’s principal place of business was in Maryland. While Plaintiff indicated that it had a Maryland mailing address, Defendant never sent any important documentation to this address, nor placed any calls to a Maryland office. Plaintiff operated its restaurant solely out of the District of Columbia after signing the franchise agreement.

    On August 25, 2010, Plaintiff filed three (3) claims against Defendant. Plaintiff alleged violations of the Maryland Franchise Registration and Disclosure Law, Md. Code Ann., Bus. Reg § 14-201 to 14-233, and New York Franchise Sales Act, N.Y. Gen. Bus. L. §§ 680-95. Plaintiff also alleged common law fraudulent inducement. On November 18, 2010, Defendant moved to dismiss for lack of personal jurisdiction. The Court denied Defendant’s Motion to Dismiss, reasoning that Plaintiff had made a prima facie case for personal jurisdiction. After discovery revealed that negotiations took place almost entirely in the District of Columbia, Defendant filed a Motion for Summary Judgment, once again arguing that the Court lacked personal jurisdiction.

    The Court held that it did not have personal jurisdiction over Defendant, and that to adjudicate the case would violate the Maryland Long-Arm Statute, Md. Code Ann., Cts. & Jud. Proc. § 6-103, and Defendant’s basic due process rights. The Court first examined the Long-Arm Statute, which limits specific jurisdiction in Maryland to causes of action enumerated in the statute. In this case, the Court held that Defendant neither “[t]ransacted business” in Maryland, Cts. & Jud. Proc. § 6-103(b)(1), nor caused “tortious injury in the State by an act or omission in the State,” Cts. & Jud. Proc. § 6-103(b)(3). The Court was persuaded by the fact that Defendant never sent any documentation to Plaintiff’s Maryland mailing address, nor placed any calls to a Maryland location. Therefore, Defendant was not amendable to jurisdiction under the Long-Arm Statute.

    The Court then turned to Defendant’s basic rights to due process, and held that exercising jurisdiction would offend traditional notions of fair play and substantial justice. The Court held that Defendant neither purposely availed itself of conducting activities in Maryland, nor did the cause of action arise out of Defendant’s forum-related contacts. The Court noted that after Plaintiff opened its restaurant in 2009, Plaintiff transacted business solely from its District of Columbia location. Hence, exercising personal jurisdiction would violate Defendant’s rights to due process.

    Having found that it lacked personal jurisdiction, the Court transferred the action to the United States District Court for the District of Columbia, rather than dismiss the action. The Court noted that if Plaintiff preferred the Court to enter an Order of Dismissal so that Plaintiff could either appeal the Court’s decision or bring the suit elsewhere, the Court would consider Plaintiff’s request. The Court granted Defendant’s Motion for Summary Judgment on personal jurisdiction grounds, denying its remaining argument as moot.