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Trident Atlanta, LLC v. Charlie Graingers Franchising, LLC

United States District Court, E.D. North Carolina, Southern Division

February 3, 2019

TRIDENT ATLANTA, LLC, DUAL ENERGY, LLC, CYNERGETIC AR, LLC, MS. MARCIE BINDES d/b/a KS ENTERPRISES, LLC, MR. DALE ATKINSON & MRS. ROSE ATKINSON d/b/a ROSED ALE THREE, LLC, and MR. TRENT MOORE d/b/a LINDSTAN, INC., Plaintiffs,
v.
CHARLIE GRAINGERS FRANCHISING, LLC, CHARLIE GRAINGERS FRANCHISING, INC., LOUIS CRAIG NORTH, GREGORY BRUCE GEORGE, and JASON MATTHEW NISTA, Defendants.

          ORDER

          TERRENCE W. BOYLE CHIEF UNITED STATES DISTRICT JUDGE

         This matter is before the Court on three motions to dismiss and a motion for leave to file excess pages. [DE 88, 89, 91');">1');">1');">1, 93]. Each of the motions is ripe for disposition. For the reasons that follow, the motion for leave to file excess pages [DE 88] is GRANTED and the motions to dismiss [DE 89, 91');">1');">1');">1, 93] are each GRANTED IN PART and DENIED IN PART.

         BACKGROUND

         In 201');">1');">1');">15, the individual defendants--Mr. Louis C. North, Mr. Gregory B. George, and Mr. Jason M. Nista-formed Charlie Graingers Franchising, LLC. [DE 85, ¶ 1');">1');">1');">13]. Two years later, in 201');">1');">1');">17, they converted the LLC into Charlie Graingers Franchising, Inc., which remains in operation. Id. Defendants North, George, and Nista were the central figures in both entities, collectively "Charlie Graingers." The entities were created to offer "franchises to operate a hot dog restaurant" under the Charlie Graingers trade name, featuring "various hot dog recipes, beef brisket, pork barbeque, soups and side dishes." [DE 85-1');">1');">1');">1, p. 2].

         In October 201');">1');">1');">15, defendants North, George, and Nista drafted a Franchise Disclosure Document (FDD) to present to prospective franchisees. [DE 85, ¶ 1');">1');">1');">14]. Two versions of the FDD were prepared for two different groups: prospective "area representative" franchises and prospective individual franchisees. [DE 85, ¶¶ 1');">1');">1');">15-1');">1');">1');">16; 85-1');">1');">1');">1; 85-2]. Three of the plaintiffs in this consolidated action were area representative franchisees: Trident Atlanta, LLC in Georgia, Dual Energy, LLC in Alabama, and Cynergetic AR, LLC in Florida. [DE 85, ¶ 1');">1');">1');">1]. The remaining plaintiffs were individual franchisees: Ms. Marcie Bindes, d/b/a KS Enterprises, LLC, Mr. Dale Atkinson and Mrs. Rose Atkinson, d/b/a Rosedale Three, LLC, and Mr. Trent Moore, d/b/a LindsTan, Inc. Id. ¶ 2. Each of the plaintiffs separately received the FDD between May 201');">1');">1');">15 and December 201');">1');">1');">15. Id. ¶¶ 23-24.

         The FDD expressly represented that the franchisors would grant to each of the area plaintiffs the right to develop and operate Charlie Graingers franchises and to offer franchises to third parties within the designated area. Id. ¶ 25(a). In return, the area plaintiffs were required to establish and operate at least one Charlie Graingers restaurant in the designated area. Id. ¶ 25(b). In the FDD, defendants further represented to all of the plaintiffs that they would provide a wide variety of resources and operational support, including the following: an operating manual, site evaluations, advice on selecting a site and negotiating a lease, assistance remodeling and installing equipment and fixtures, help obtaining inventory and supplies, a comprehensive training program, a toll-free support line, marketing and promotional materials, and so on. Id. ¶ 25(a)-(r).

         In the months that followed, the defendants provided further written representations to each of the plaintiffs, including that they had "[0]ver 350 Franchise Commitments," would provide "24/7-Social Media Savvy," had the "[C]leanest Restaurants in America," and that defendant North had over forty years of restaurant experience. [DE 85, ¶ 28(a)-(d); 85-3]. In these subsequent written communications, defendants also claimed that a Charlie Graingers franchise was a "low cost-low overhead foolproof restaurant concept" that was "guaranteed to be successful." [DE 85, ¶ 28(f)]. Defendants went on to make many more representations about the strength of their national "concept and system," their supply agreements, their relationships with other brands, their "franchise real estate department" and its "connections across the country." Id. ¶ 28(g)-(y). Defendants then provided even more promotional materials emphasizing the "world-class" and "endless" support that the plaintiffs would receive. [DE 85, ¶¶ 29-31');">1');">1');">1; 85-4].

         Between September 201');">1');">1');">15 and September 201');">1');">1');">16, each of the plaintiffs entered into franchise agreements with defendants, paying at least $1');">1');">1');">19, 750 and as much as $1');">1');">1');">158, 000 in franchise fees. [DE 85, ¶¶ 35-36]. In connection with the franchise agreements, the plaintiffs also signed "General Release" documents, which provided as follows:

[Franchisee] and its shareholders, officers, and directors does hereby release and forever discharge CHARLIE GRAINGERS FRANCHISING, LLC its, successors, agents, assigns, officers, directors, shareholders, employees, representatives, and any and all other persons, firms and corporations whatsoever, from any and all claims, demands, damages, actions, causes of action, or suits of any kind or nature whatsoever, both known and unknown ....

         [DE 85-1');">1');">1');">1, p. 1');">1');">1');">11');">1');">1');">16]. The plaintiffs also signed an acknowledgement in the franchise agreements that they had "conducted an independent investigation," that operating a franchise "involves business risk," and that they had "not received any express or implied warranty or guaranty regarding potential volume, profits, or success." [DE 85-1');">1');">1');">1, p. 69-70]. The franchise agreements specified that the franchisor was not a fiduciary of plaintiffs. [DE 85-1');">1');">1');">1, p. 67].

         In January 201');">1');">1');">18, the area plaintiffs initiated this action, alleging that they had been fraudulently induced into entering the franchise agreements and that defendants had made intentional and negligent misrepresentations, breached their fiduciary duty and duty of good faith and fair dealing, violated North Carolina's Unfair and Deceptive Trade Practices Act, and violated the Racketeer Influenced and Corrupt Organizations (RICO) Act. [DE 8]. Around the same time, the individual plaintiffs filed a separate action making similar allegations against the same defendants. In August 201');">1');">1');">18, the Court consolidated the two actions under Federal Rule of Civil Procedure 42(a). [DE 84].

         In September 201');">1');">1');">18, plaintiffs filed an amended complaint with ten causes of action. Plaintiffs bring claims for (1');">1');">1');">1) rescission of their franchise agreements; (2) fraud, intentional misrepresentation, and concealment; (3) negligent misrepresentation; (4) breach of the duty of good faith and fair dealing; (5) breach of fiduciary duty; (6) violation of North Carolina's Unfair and Deceptive Trade Practices Act; (7) acquiring or maintain an interest in an enterprise engaged in interstate commerce through a pattern of racketeering activity, in violation of 1');">1');">1');">11');">1');">1');">1 U.S.C. § 1');">1');">1');">1962(b); (8) conducting an enterprise engaged in interstate commerce through a pattern of racketeering activity, in violation of 1');">1');">1');">11');">1');">1');">1 U.S.C. § 1');">1');">1');">1962(c); (9) conspiring to violate the RICO Act, in violation of 1');">1');">1');">11');">1');">1');">1 U.S.C. § 1');">1');">1');">1962(d); and (1');">1');">1');">10) breach of contract. [DE 85]. Soon after, all three individual defendants, George, Nista, and North, moved to dismiss each of the claims against them on a variety of grounds. [DE 89, 91');">1');">1');">1, 93]. Defendant George also filed a motion for leave to file excess pages. [DE 88]. Plaintiffs responded in opposition to each of the motions to dismiss. [DE 95, 99, 1');">1');">1');">100]. No. response was filed in opposition to the motion for leave to file excess pages. As each of the defendants' motions to dismiss raise similar arguments, all three will be considered together, with distinctions noted where appropriate.

         DISCUSSION

         When considering a motion to dismiss under Federal Rule of Civil Procedure 1');">1');">1');">12(b)(6), "the court should accept as true all well-pleaded allegations and should view the complaint in a light most favorable to the plaintiff." Mylan Labs., Inc. v. Matkari,1');">1');">1');">11');">1');">1');">130');">7 F.3d 1');">1');">1');">11');">1');">1');">130, 1');">1');">1');">11');">1');">1');">134 (4th Cir. 1');">1');">1');">1993). A complaint must state a claim for relief that is facially plausible. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). Facial plausibility means that the court can "draw the reasonable inference that the defendant is liable for the misconduct alleged," as merely reciting the elements of a cause of action with the support of conclusory statements does not suffice. Ashcroft v. Iqbal,556 U.S. 662, 678 (2009). The court need not accept the plaintiffs legal conclusions drawn from ...


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