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Protocol, LLC v. Henderson

United States District Court, M.D. North Carolina

May 8, 2014

PROTOCOL, LLC, a Delaware limited liability company, Plaintiff,
v.
DONALD BRUCE HENDERSON, JR., individually and doing business as VEND SOUTH, Defendant

As Amended May 15, 2014.

Page 690

For PROTOCOL, LLC, a Delaware limited liability company, Plaintiff: ERIC H. BIESECKER, LEAD ATTORNEY, NEXSEN PRUET, PLLC, GREENSBORO, NC; JAMES M. SUSAG, LEAD ATTORNEY, LARKIN HOFFMAN DALY & LINDGREN LTD., MINNEAPOLIS, MN; SUSAN E. TEGT, LARKIN HOFFMAN DALY & LINDGREN LTD, MINNEAPOLIS, MN.

For DONALD BRUCE HENDERSON, JR., individually and doing business as VEND SOUTH, Defendant: LUCAS J. THOMPSON, LEAD ATTORNEY, TWIN CITIES LAW FIRM, LLC, MINNEAPOLIS, MN; JOHN F. BLOSS, SR., HIGGINS BENJAMIN, PLLC, GREENSBORO, NC.

OPINION

Page 691

AMENDED MEMORANDUM OPINION AND ORDER

William L. Osteen, Jr., United States District Judge.

Presently before this court is the Rule 12(b) Motion to Dismiss for Lack of Personal Jurisdiction and Improper Venue or, in the Alternative, to Transfer Venue Under 28 U.S.C. § 1404 filed by Defendant Donald Bruce Henderson, Jr. (Doc. 13). Defendant has filed a memorandum (Doc. 14) and affidavit (Doc. 13-1) in support of his motion; Plaintiff Protocol, LLC, has filed a response (Doc. 16) and affidavit (Doc. 15) in opposition; and Defendant has filed his reply (Doc. 19) and an additional affidavit (Doc. 19-1). Defendant's motion is now ripe for adjudication, and for the reasons that follow, this court will grant the motion.

I. PROCEDURAL HISTORY

Plaintiff Protocol, LLC, is a Delaware limited liability company with its principal place of business in Greensboro, North Carolina. (Complaint (" Compl." ) (Doc. 1) ¶ 1.) Plaintiff is an international supplier of over-the-counter medications, personal products, and novelty items sold via wall-mounted vending dispensers. (Id. ¶ 7; Affidavit of Douglas M. Lang (" Lang Aff." ) (Doc. 15) ¶ 2.)

Plaintiff brought this action alleging various causes of action arising from Defendant's breach of a Franchise Agreement, a

Page 692

2007 Operation Agreement, and Product Purchase Agreement.

In the past, Plaintiff has offered franchises for the operation of multi-vending businesses that sell, place, service, and lease vending machines. (Compl. (Doc. 1) ¶ 8; Lang Aff. (Doc. 15) ¶ 3.) Plaintiff Protocol, LLC, is the successor of Protocol, Inc., a Delaware corporation with principal offices in Minnesota. (Lang Aff. (Doc. 15) ¶ 4.) Plaintiff was formed in 1998, and in 2006, moved its offices from Minnesota to Greensboro, North Carolina, where it is currently located. (Id. ¶ 5.) Franchisees would purchase an inventory of vending machines and products and then distribute those machines by (1) selling machines directly to businesses, (2) placing machines at businesses and sharing the revenue, or (3) installing machines in workplaces and receiving a monthly fee to service and stock the machines. (Compl. (Doc. 1) ¶ 9; Lang Aff. (Doc. 15) ¶ 3.) Plaintiff would assist its franchisees with obtaining accounts by soliciting national and regional accounts for placement of the vending machines. (Compl. (Doc. 1) ¶ 20.) Plaintiff also operates a number of its own machines. (Id. ¶ 8.)

Defendant Donald Bruce Henderson, Jr., resides in Grand Prairie, Texas. (Id. ¶ 3; Affidavit of Donald Bruce Henderson (" First Henderson Aff." ) (Doc. 13-1) ¶ ¶ 1-2.) His business relationship with Protocol, Inc., began while Protocol, Inc., was located in Minnesota, and he has operated and serviced Protocol vending machines since 1995. (Compl. (Doc. 1) ¶ 16; First Henderson Aff. (Doc. 13-1) ¶ 6.) In August 2005, Defendant purchased from Plaintiff, which was still located in Minnesota, a route in Florida, Alabama, Mississippi, Louisiana, and Texas of about 600 to 700 preinstalled vending machines. (First Henderson Aff. (Doc. 13-1) ¶ 10.) Defendant has never operated any of Plaintiff's vending machines in North Carolina. (Id. ¶ 17.)

In 2006 Douglas M. Lang, Plaintiff's President, was informed that Alfred Turene Newell wanted to terminate his franchise relationship with Plaintiff.[1] (Lang Aff. (Doc. 15) ¶ 6.) Lang " reached out to" Defendant about taking over Newell's vending machines because he thought Defendant might be interested in expanding his routes. (Id. ¶ 7.)

By the end of 2006, Plaintiff had moved almost all of its operations, including its principal office, from Minnesota to North Carolina. (Id. ¶ 5.) In February 2007, Newell transferred his rights, interests, and obligations under the Franchise Agreement to Defendant Henderson pursuant to an Asset Purchase Agreement. (Compl. (Doc. 1) ¶ 15; Lang Aff. (Doc. 15) ¶ 8.) The machines Defendant purchased were on a route in Georgia, Alabama, Florida, Mississippi, and Louisiana. (First Henderson Aff. (Doc. 13-1) ¶ 11.) Defendant wrote and mailed a check to Plaintiff for $2,025.10, which included a $500 " Franchise Transfer Fee" as required by Paragraph 13(b) of the Franchise Agreement. (Compl. (Doc. 1) ¶ 15; Lang Aff. (Doc. 15) ¶ 8 and Attach., Ex. C (Doc. 15-3).) In addition, Lang requested that the Franchise Agreement be transferred to Defendant, and Defendant agreed. (Lang Aff. (Doc. 15) ¶ 8.) Plaintiff approved the transfer. (Compl. (Doc. 1) ¶ 18.)

Page 693

This Franchise Agreement is one of the claims Plaintiff alleges Defendant breached. (Compl. (Doc. 1) ¶ ¶ 15, 18, 21, 34-46.) The Franchise Agreement (Compl., Ex. A (Doc. 1-1)) states, in part, that

[N]o action or proceeding involving this Agreement or any aspect of the relationship between Protocol and Franchisee, shall be commenced by either party except in the District Courts of Minnesota, County of Dakota, or the Federal District Court in Hennepin County . . . . The parties agree, however, that if either party seeks injunctive relief against the other, it may initiate that action in the county in which the other party remains its principal place of business.

(Id. at 10.)[2]

Defendant also entered into other agreements with Plaintiff after Plaintiff had moved its operations to North Carolina. On March 5, 2007, the parties executed an Operation Agreement (" 2007 Operation Agreement" ) that Lang had presented to Defendant for his signature.[3] (Comp. (Doc. 1) ¶ 24; Lang Aff. (Doc. 15) ¶ 9 and Attach., Ex. D (2007 Operation Agreement and addenda) (Doc. 15-4).) The 2007 Operation Agreement set forth the terms for servicing the national and regional accounts for which Defendant was responsible.

Notably, the 2007 Operation Agreement contains a provision which states, " The following provisions of the Franchise Agreement will be a part of this Agreement and are hereby incorporated herein by reference: . . . (iii) paragraph entitled 'Enforcement.'" (Lang Aff., Ex. D (Doc. 15-4) at 8.) The " Enforcement" paragraph of the Franchise Agreement (Doc. 1-1 at 9-10) contains the Minnesota forum-selection clause described above. Although Protocol had a principal place of business in North Carolina in 2007, its contracts still required that civil actions be filed in Minnesota.

Defendant also executed approximately twenty National/ Regional Account Addenda that set forth revenue reporting, commission, and management fee requirements, among others, for particular accounts. (See Lang Aff, Ex. D (Doc. 15-4) at 10-40.) Pursuant to the 2007 Operation Agreement and the National/Regional Account Addenda, Defendant was required to submit quarterly revenue reports and remit management fees and commissions to Plaintiff.[4] (See id.)

In February 2011, Defendant executed an Equipment and Product Purchase Agreement. (Compl. (Doc. 1) ¶ 30; Lang Aff. (Doc. 15) ¶ 14 and Attach., Ex. H (Doc. 15-8).) In exchange for Defendant's agreement to purchase products to stock

Page 694

his vending machines exclusively from Plaintiff until December 31, 2011, Plaintiff granted Defendant a twenty-five percent discount on those products. (Compl. (Doc. 1) ¶ ¶ 31-32.) That agreement lists Plaintiff's Greensboro address at the bottom of the last page. (See Lang Aff., Ex. H (Doc. 15-8) at 3.)

With each agreement at issue in this case, Defendant signed the agreement in Texas before faxing it to Plaintiff's office in North Carolina. Lang then executed the agreements and returned them to Defendant by fax. (Lang Aff. (Doc. 15) ¶ 9.) This process reflected Plaintiff's standard procedure for executing any contract with one of its distributors or franchisees. (Id. ¶ 14.) Defendant has never signed an agreement in North Carolina, and none of the contracts between Plaintiff and Defendant included a North Carolina forum-selection clause or choice-of-law provision. (First Henderson Aff. (Doc. 13-1) ¶ 18.) To the contrary, the Franchise Agreement and the 2007 Operation Agreement contained a Minnesota forum-selection clause.

Defendant also emailed purchase orders to Plaintiff's Greensboro office when he needed products to stock the vending machines. (Lang Aff. (Doc. 15) ¶ 16 and Attach., Ex. J (Doc. 15-10) (samples of purchase orders submitted to Plaintiff's Greensboro office).) Defendant submitted fourteen purchase orders in 2007, six in 2008, seven in 2009, five in 2010, and seven in 2011, all to Plaintiff's Greensboro address. (Lang Aff. (Doc. 15) ¶ 17.) Plaintiff's products are packaged in Fergus Falls, Minnesota, and Albany, Georgia, and then almost always shipped to North Carolina. (Id. ¶ 18.) The products are then sent to the distributor who placed the order. (Id.)

Defendant also communicated with Lang on a number of occasions. Those communications were largely through email, although they spoke over the phone a handful of times each year. (First Henderson Aff. (Doc. 13-1) ¶ 23.) Except for attending occasional conferences hosted by Plaintiff, Defendant has never visited North Carolina for business. (Id. ¶ 17.) Defendant has never owned property in North Carolina nor has he maintained an office in North Carolina. (Id. ¶ ¶ 20-21.)

In December 2011, Defendant sold his vending machine business to Hygeia Marketing Corporation, which has its principal place of business in Kannapolis, North Carolina. (Compl. (Doc. 1) ΒΆ 45; Lang Aff., Attach., Ex. M (Doc. 15-13).) Shortly thereafter, Plaintiff filed suit in the District of Minnesota because of the forum-selection clause in the Franchise Agreement. After Defendant moved to dismiss for lack of personal ...


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