selling price to the distributor on the sale of all materials, equipment and supplies sold to Kopy-Kat Centers directly by Kopy-Kat, Inc. (after the initial Franchise package) within distributors territory.
Also: Distributor will receive 1 1/2% of all royalties received from Kopy-Kat Centers within his territory". It is perfectly obvious that the agreement contemplates substantial efforts on the part of the Distributor. On April 14, 1972, the agreement was modified to provide for the selling of 25 Kopy-Kat Centers and a performance bond in the amount of $25,000.
Exhibit "G" dated October 23, 1972, is significant: "Re: Your recent telephone call, please be advised that your royalties were to start effective September 15, 1972, and your royalty payments are 60% of your monthly gross, rather than 100%, because you are a Kopy-Kat Distributor. Also you are to receive 5% commission on completion and installation of the equipment package (not the Franchise Fee), on each new Kopy-Kat Center opened directly or indirectly in your territory."
When we turn to the Franchise Agreement of March 25, 1972, we find that: "(3) Company agrees that Franchise Holder, subject to the terms and conditions of this Agreement may trade as an approved Kopy-Kat Center. (4) Company agrees to provide Franchise Holder with such initial training in the methods of effective operation of a Kopy-Kat Center as is normally required to assume proficiency. (5) Company will take various steps to protect the good will of the name 'Kopy-Kat' and Franchise Holder, during the term of this agreement, shall be entitled to trade upon the said good will in accordance with the terms and conditions of this franchise agreement. (6) Company reserves the right to advertise Kopy-Kat Centers in national publication newspapers, and/or radio, and to promote the sales of the service and products through Kopy-Kat Centers in this manner."
While there are other duties on the part of the defendant corporation, no reference will be made to them. Only willful blindness to the contents of the documents and exhibits attached to the complaint, as herein set out, could lead to any other conclusion than that substantially full-time of the franchise holder was to be devoted to the running of a business using the Kopy-Kat name, in order that plaintiff would receive the benefits of the franchise and distributor agreements.
Accordingly, when the principles of law previously given are applied to the facts of this case the conclusion is irresistible that no "investment contract" is involved within the meaning of the Securities Act of 1933, and summary judgment must be granted in favor of both defendants.
This conclusion is also in accord with such recent cases as WIEBOLDT v. METZ, 355 F. Supp. 255 (S.D. N.Y. 1973); SECURITIES AND EXCH. COM. v. KOSCOT INTER., INC., 497 F.2d 473 (5th Cir. 1974); BEEFY TRAIL, INC. v. BEEFY KING INTL., INC., 348 F. Supp. 799 (M.D. Fla. 1972); BITTER v. HOBY'S INTERNATIONAL, INC., 498 F.2d 183 (9th Cir. 1974); NASH & ASSOCIATES, INC. v. LUM'S OF OHIO, INC., 484 F.2d 392 (6th Cir. 1973).
AND NOW, this 24th day of March, 1975, upon consideration of defendants' motion to dismiss, or for summary judgment, the memoranda of law in support of and in opposition thereto, and for the reasons given in the accompanying memorandum, it is ORDERED that:
(1) The allegation charging conspiracy will be stricken from Count IV.
(2) The motion of the corporate defendant Kopy-Kat, Inc. for an order to dismiss Counts I through IV, or for summary judgment thereon, is denied.
(3) The motion of defendant John Leslie, Jr. for a dismissal of the complaint as to Counts I through X is denied, and his motion for summary judgment thereon is held in abeyance until after discovery.
(4) Summary judgment is granted in favor of both defendants and against the plaintiff on Count XI.
BY THE COURT:
James H. Gorbey, U.S. District Judge
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