Velicer v. Falconhead Capital, LLC

Full title: MARK VELICER, et al., Plaintiffs, v. FALCONHEAD CAPITAL, LLC, Defendant.

Court: UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE

Date published: Mar 11, 2020

Facts

This lawsuit arises out of four franchise agreements and an Area Development Agreement (“ADA”) that Mr. Velicer and non-party Rita’s Water Ice Franchise Company (“Rita’s”) executed in September 2015. (See Compl. ¶¶ 4, 8, 16; see also Oates Decl. (Dkt. # 10) ¶ 4, Exs. 5-9 (attaching copies of the franchise agreements and the ADA).) Plaintiffs’ allege that Mr. Velicer signed the franchise agreements and the ADA after Falconhead—”acting through Rita’s”—made fraudulent representations or omissions to Mr. Velicer. (See Compl. ¶¶ 2-3, 16-17, 40.)

Plaintiffs own and operate several franchised Rita’s Water Ice locations and are part of a franchised chain of frozen dessert stores. (Id. ¶ 1.) Falconhead is a former part-owner of non-party Rita’s Holdings, LLC (“Rita’s Holdings”) with a majority interest therein. (Id. ¶ 8.) In turn, Rita’s Holdings is the corporate parent of Rita’s. (Id.) Rita’s is a former franchisor of Rita’s Water Ice stores. (Id. ¶¶ 1, 8.)

In 2015, Mr. Velicer approached Rita’s to inquire about purchasing one or more of Rita’s franchise outlets in Washington State. (See id. ¶¶ 1, 16.) Mr. Velicer was also interested in acquiring an ADA, which would permit him to open multiple locations in a larger territory. (See id. ¶¶ 11, 16.) Plaintiffs allege that Rita provided Mr. Velicer //  with copies of its franchise disclosure document (“FDD”) for a single franchise and its FDD for an area development agreement. (Id. ¶ 17; see also Oates Decl. ¶ 2, Exs. 1-2 (attaching copies of the FDD for a single franchise and the FDD for an ADA that Rita provided to Mr. Velicer on or about April 30, 2015).) An FDD is a document that all franchisors are required to provide to prospective franchisees under Federal Trade Commission (“FTC”) regulations, known as the “Franchise Rule.” See 16 C.F.R. § 436 (setting forth the Franchise Rule). In addition to the original FDDs, on September 10, 2015, Rita provided Mr. Velicer two addenda to the FDDs, which disclosed a consumer class action against Rita alleging violations of the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227. (See Oates Decl. ¶ 3, Exs. 3-4 (attaching copies of the addenda).)

On September 10, 2015, Mr. Velicer executed an ADA and four franchise agreements with Rita’s for locations in Washington State. (See id. ¶ 4, Exs. 5-9 (attaching copies of the franchise agreements and the ADA).) In conjunction with those agreements, Mr. Velicer signed a release of all claims that he may have had against Rita and its affiliated entities before that date. (See id. ¶ 5, Ex. 10 (attaching a copy of the release).)

The franchise agreements and the ADA were originally between Mr. Velicer and Rita’s only. (See id. ¶ 4, Exs. 5-9.) On March 22, 2016, Mr. Velicer transferred the franchise agreements and the ADA to his corporations, which are also plaintiffs in this lawsuit. (See Compl. ¶¶ 4-7; Oates Decl. ¶ 6, Exs. 11-12 (attaching copies of the signed transfer agreements for the ADA and franchise agreements).) On the same day, Mr.  Velicer executed two additional releases “discharg[ing]” Rita’s and its “affiliates” “of and from all claims, obligations, actions or causes of action (however denominated), whether in law or equity, and whether known or unknown, present or contingent, for any injury, damage, or loss whatsoever arising from any acts or occurrences occurring as of or before the date of this Agreement . . . .” (See Oates Decl. ¶ 7, Ex. 13 at 997, Ex. 14 at 999.) Plaintiffs also agreed “not to sue any of the Releasees,” which included Rita’s and its “affiliates,” “regarding any of the claims being released under this Agreement.” (Id.)

Rita’s, Rita’s Holdings, and Falconhead are no longer involved with Rita’s franchise system. (See Compl. ¶¶ 8, 34; Resp. at 3 (acknowledging that “this implication is accurate”).)

On August 15, 2019, more than four years after receiving the FDDs, the Plaintiffs filed this lawsuit against Falconhead in Washington state court.

Issue

Decision

the court GRANTS in part and DENIES in part Falconhead’s motion to dismiss (Dkt. #9) as follows: // 

• The court GRANTS Falconhead’s motion to dismiss Plaintiffs’ claims for violation of FIPA based on RCW 19.100.080 (see Compl. ¶¶ 39-40) and for violation of the CPA (see Compl. ¶¶ 50-51) and DISMISSES these claims WITH PREJUDICE;

• The court GRANTS Falconhead’s motion to dismiss Plaintiffs’ remaining non-FIPA claims (see Compl. ¶¶ 52-56) based on the 2016 releases, but with leave to amend those claims;

• The court GRANTS Falconhead’s motion to dismiss Plaintiffs’ remaining claims based on the applicable statutes of limitation, but with leave to amend to allege facts that would plausibly render Falconhead’s remaining claims timely;

• The court GRANTS Falconhead’s motion to dismiss on grounds that Plaintiffs failed to adequately plead a basis for Falconhead’s liability under FIPA, as well as for fraud and negligent misrepresentation, but with leave to amend; and

• The court DENIES Falconhead’s motion in all other respects.

Plaintiffs shall file their amended complaint, if any, alleging facts that resolve the issues stated herein, no later than twenty (20) days from the filing date of this order. // // // // // //  Failure to timely file an amended complaint may result in the dismissal of Plaintiffs’ complaint.

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