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ARCPoint Franchise Group, LLC v. Blue Eyed Bull Investment Corp.

United States District Court, D. South Carolina, Greenville Division

June 13, 2018

ARCpoint Financial Group, LLC, Plaintiff,
v.
Blue Eyed Bull Investment Corporation, Timothy Rebori, and Marilyn Rebori, Defendants.

          OPINION AND ORDER

          The Honorable A. Marvin Quattlebaum, Jr. United States District Judge

         This matter comes before the Court on the Motion to Dismiss or Transfer of Defendants' Blue Eyed Bull Investment Corporation, Timothy Rebori, and Marilyn Rebori (collectively “Defendants”). (ECF No. 37.) The matter has been fully briefed, and the Court heard argument from counsel on May 10, 2018. For the reasons set forth below, the Defendants' Motion is granted in part and denied in part.

         BACKGROUND

         ARCpoint Franchise Group, LLC (“Plaintiff”) initiated this action on January 29, 2018 by filing its complaint in the United States District Court for the District of South Carolina. (ECF No. 1.) Thereafter, Plaintiff filed its amended complaint on March 7, 2018. (ECF No. 35.) The amended complaint alleges ten causes of action against Defendants for breach of a franchise agreement, breach of a non-disclosure agreement, violations of the Defend Trade Secrets Act, violations of the Lanham Act, violations of the South Carolina Trade Secrets Act, violation of the South Carolina Unfair Trade Practices Act, and tortious interference with contract, among others. Id.

         Plaintiff is a limited liability company organized and operating in the State of South Carolina, with its principal place of business located in Greenville, South Carolina. Id. at 1. Plaintiff grants franchises to qualified persons for the operation of an ARCpoint franchised business, which employs the ARCpoint branded proprietary system for operating a full-service laboratory business offering testing, screening, and related services both on and off-site, including drug, alcohol and DNA testing and background screens. Id. at 3. ARCpoint franchisees may also provide clinical testing, corporate wellness services, regulatory compliance services, telehealth services and other related services. Id. ARCpoint franchisees are licensed to use ARCpoint trademarks, service marks, logos, designs and materials in the conduct of the business. Id.

         Defendant Blue Eyed Bull Investment Company (“BEBIC”) is a corporate entity organized and existing pursuant to the laws of the State of Kansas, and is authorized to do business in the state of Missouri. Id. at 1. Plaintiff alleges that Defendants Timothy Rebori (“Mr. Rebori”) and Marilyn Rebori (“Mrs. Rebori”) are residents of Kansas. Id. Mr. and Mrs. Rebori are the owners, shareholders and/or sole members of BEBIC. Id.

         On or about December 27, 2010[1], Plaintiff, BEBIC and Mr. Rebori entered into a franchise agreement regarding BEBIC's operation of an ARCpoint franchised business. Id. at 5. In addition to the franchise agreement, BEBIC and Mr. Rebori executed a Nondisclosure and Non-Competition agreement on the same date. Id. at 6. Finally, Mr. Rebori executed an Unlimited Guaranty and Assumption of Obligations as part of the agreement between Plaintiff and BEBIC. Id. From the date of execution of the franchise agreement, BEBIC operated the ARCpoint franchised businesses. Id. at 8. Defendants operated the business in a territory encompassing areas in and around Kansas City, Kansas and Kansas City, Missouri. Id.

         In November or December of 2017, Defendants failed to make certain payments of royalties, technology and advertising fund fees to Plaintiff as required by the franchise agreement. Id. at 9. In a letter dated January 15, 2018, Defendants stated that they wished to end their franchise relationship with Plaintiff. Id. at 13. This litigation ensued.

         DISCUSSION

         Defendants move for an order (1) dismissing Plaintiff's Complaint in total as to Marilyn Rebori for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure; (2) for an order dismissing Plaintiff's Complaint in total as to all Defendants for improper venue pursuant to Rule 12(b)(3) of the Federal Rules of Civil Procedure and 28 U.S.C. § 1406(a) or, in the alternative, transferring the case to the United States District Court for the District of Kansas pursuant to 28 U.S.C. § 1404(a); and (3) for an order dismissing Plaintiff's Third, Sixth, Eighth and Ninth causes of action for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The Court will address each ground for the motion in turn.

         I. Motion to Dismiss for Lack of Personal Jurisdiction as to Marilyn Rebori

         Defendants move the Court for an order dismissing Ms. Marilyn Rebori from this action in accordance with Rule 12(b)(2) of the Federal Rules of Civil Procedure. In its response to Defendants' Motion to Dismiss, Plaintiff acknowledged that this Court lacks personal jurisdiction over Ms. Rebori. (ECF No. 42 at 2, n. 1.) Furthermore, Plaintiff stated that “it consents to the dismissal of Ms. Rebori from this action as well as the dismissal of its Ninth Claim.” Id. Therefore, upon consent of the parties, Defendants' Motion to Dismiss as to Ms. Marilyn Rebori is hereby granted.

         II. Motion to Dismiss for Improper Venue

         Defendants move to dismiss the Complaint in its entirety due to improper venue under Rule 12(b)(3) of the Federal Rules for Civil Procedure and 28 U.S.C. § 1406(a). For the reasons set forth below, the Motion to Dismiss for Improper Venue is denied.

         A. Legal Standard

         On a motion to dismiss under Rule 12(b)(3), the Court is permitted to consider evidence outside of the pleadings. Aggarao v. MOL Ship Mgmt. Co., 675 F.3d 355, 365-66 (4th Cir. 2012). A plaintiff need only make a prima facie showing of proper venue in order to defeat a motion to dismiss. Id. at 366. In determining whether the plaintiff has made a prima facie venue showing, the Court views the facts in the light most favorable to the plaintiff. Id.

         Section 1406(a) provides that where a litigant files a case laying venue in the wrong division or district, the Court shall dismiss the case or, in the interests of justice, transfer the case to any district or division where venue is proper. The question of whether venue is “wrong” or improper is governed by 28 U.S.C. § 1391. Section 1391(b) sets forth three options for proper venue. First, venue is proper in a judicial district where any defendant resides, provided all defendants are residents of the State where the district is located. § 1391(b)(1). Second, venue is proper in a judicial district where a substantial part of the events or omissions that gave rise to the claim occurred, or where a substantial part of the property that is the subject of the action is located. § 1391(b)(2). Third, venue is proper in any judicial district where a defendant is subject to the court's personal jurisdiction with regards to the action, but only if there is no district in which the action may otherwise be brought as provided in § 1391(b)(1) and (2). § 1391(b)(3) “When venue is challenged, the court must determine whether the case falls within one of the three categories set out in § 1391(b).” Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, 571 U.S. 49, 56 (2013). If it does not, then the case must be dismissed or transferred under § 1406(a). Id.

         B. ...


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