The opinion of the court was delivered by: DIAMOND
Long John Silver's Seafood Shoppes is a chain of restaurants operated and franchised by plaintiff Long John Silver's, Inc. (LJS), a wholly owned subsidiary of plaintiff, Jerrico, Inc. Plaintiffs brought this action to recover damages for the alleged deterioration of roofs at certain LJS Seafood Shoppes and named as defendants Korad, Inc., the supplier of a patented acrylic film (Korad film) used to coat the roofs, and three suppliers of the finished roofs, Architectural Engineering Products Co., Inc., ta/dba Perma-Shake (Perma-Shake), Atlanta Venetian Blind, Inc., ta/dba Permaclad (Permaclad), and Berridge Manufacturing Co. Defendant Korad joined as a third-party defendant the Rhom and Haas Company (RH), the company from whom it had purchased the patented Korad film process. And Permaclad then joined as third-party defendants RH and two companies which allegedly supplied the Korad-coated metal coils from which the roofs were constructed, Plasteel, Inc., and Enamel Products Company.
There are two motions presently before the court, a motion to dismiss filed by the defendant Berridge on the ground that this court lacks subject matter jurisdiction because certain assignments of claims were collusive for the purpose of "manufacturing" jurisdiction within the meaning of 28 U.S.C. § 1359 and a motion for partial summary judgment filed by Korad on the theory that under the principles of successor liability it cannot be held accountable for any products sold during the time that its predecessor RH owned and sold the Korad film. For the reasons set forth below, we will deny the motion to dismiss and grant substantially all of the motion for partial summary judgment.
The following facts submitted by plaintiffs in an affidavit are undisputed:
1. LJS operates and franchises over 1,000 Long John Silver's Seafood Shoppes throughout the United States. A LJS franchisee operates its Long John Silver's Seafood Shoppe(s) pursuant to a written franchise agreement (the "Agreement") executed by the franchisee and LJS ....
2. Pursuant to the Agreement, LJS: (a) trains certain of the employees of the franchisee; (b) periodically consults with the franchisee relative to the franchised operation; (c) originates, determines and controls all advertising; (d) approves all building plans and specifications and inspects the premises of the franchisee to determine the quality of operation and compliance with the Agreement (emphasis added) ; and (e) may at its option terminate the Agreement if the franchisee is deemed in default.
3. Pursuant to the Agreement, LJS franchisees are required, inter alia, to: (a) build LJS shoppes in strict compliance with LJS specifications; (b) conform to LJS operating standards and procedures; and (c) renovate and refurbish the shoppes to conform to LJS's then current public image.
4. Subsequent to 1973, LJS specified KORAD-coated blue roofs for use on LJS franchisee and company shoppes. LJS is the owner of Federal Service Mark Registration No. 959,078 covering shoppe structure and its distinctive appearance. Affidavits under 15 U.S.C. 1058(a) and 1065 have been filed in connection with the service mark registration and the service mark registration is now outstanding, validly subsisting and uncancelled, and is incontestable under 15 U.S.C. section 1065. LJS adopted the distinctive building design, including the blue roofs which form a major feature thereof, as a company symbol. The shoppe design is used extensively in LJS' advertising campaign as an identifying characteristic to promote its public image.
Plaintiffs allege that beginning in 1977 a substantial number of the roofs sold by Berridge and the other two suppliers, Perma-Shake and Permaclad, began to deteriorate and exhibit defects such as fading, chipping, peeling, rusting, and flaking of the Korad coating. The uncontested portion of plaintiffs' affidavit continues.
6. When the KORAD roof failures began to appear, the franchisees looked to LJS to assist them in notifying the suppliers, including Berridge, of the defective roofs. As the number of failures grew, LJS on behalf of itself and its franchisees negotiated with the suppliers, including Berridge, to resolve the matter.
7. By December 1978, having received no satisfactory response to its demands, LJS made a determination to institute this action on its behalf and on behalf of those franchisees who executed an assignment and release. The assignment and release provided, inter alia, that: (a) the franchisee releases and discharges LJS from any claims it may have against it in connection with KORAD roofs; (b) the franchisee assigns its entire claim against Berridge to LJS; (c) LJS bears all legal expenses and controls the litigation; and (d) the franchisee must cooperate fully with LJS.
As Berridge points out, the assignment also contained language to the effect that the franchisee "may share in the recovery, if any, which pertains to the shoppes."
Plaintiffs either own each of the buildings in the instant suit where roof damage is alleged to have occurred or as a result of the aforesaid assignments are the assignees of the claim arising out of that damage. It is ...