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COTTMAN TRANSMISSION SYS. v. METRO DISTRIB.

June 12, 1992

COTTMAN TRANSMISSION SYSTEMS, INC., Plaintiff,
v.
METRO DISTRIBUTING, INC., et al., Defendants. COTTOMAN TRANSMISSION SYSTEMS, INC., Plaintiff, v. CHERRY HILL PRODUCTIONS, INC., et al., Defendants.



The opinion of the court was delivered by: RAYMOND J. BRODERICK

 Broderick, J.

 The above-captioned actions have been filed as related cases. This Memorandum shall be applicable to each. Resolved in herein are the following attacks upon plaintiff's Complaint: (1) Defendants' Motion to Dismiss for Lack of Subject Matter Jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure, (2) Defendants' Motion to Dismiss for Lack of Personal Jurisdiction pursuant to Rule 12(b)(2), (3) Defendants' Motion to Dismiss for Improper Venue pursuant to Rule 12(b)(3), (4) Defendants' Motion to Dismiss Count I for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6), and (5) Defendants' Motion to Transfer pursuant to 28 U.S.C. § 1404(a).

 Plaintiff alleges the following facts in its Complaint: Plaintiff, Cottman Transmission Systems, Inc. ("Cottman"), is a corporation organized and existing under the laws of the Commonwealth of Pennsylvania with its principal place of business in Fort Washington, Pennsylvania. Cottman is the owner and nationwide franchisor of the Cottman trademark, which it licenses for use in connection with the automotive transmission repair business.

 Defendants are fourteen corporations, all organized and existing under the laws of the State of Michigan, and fifteen individuals, all corporate officers of the defendant corporations and citizens of the State of Michigan. Defendants operate automotive transmission repair shops in central and southeastern Michigan.

 A-1 Transmissions, Inc. ("A-1"), is a non-party franchisor of automotive transmission repair shops in Michigan. In the summer of 1991, Cottman and A-1 entered into an agreement granting Cottman exclusive use of the "A-1 Transmission" mark in Michigan and giving Cottman the right to convert existing A-1 franchises to Cottman franchises.

 Pursuant to the agreement between Cottman and A-1, each defendant or its predecessor in interest received a Michigan Uniform Offering Circular from Cottman proposing the conversion of its A-1 franchise into a Cottman franchise. Conversion consisted of substitution of Cottman licensing agreements for the A-1 licensing agreements then in effect. Compared to the A-1 licensing agreements, the Cottman agreements reduced the advertising fees to be charged during the first month of the new franchises, shortened the period of the covenants not to compete, and did not require payment of franchise fees or changes in franchises' locations, operators, or telephone numbers.

 All of the defendants accepted Cottman's offer to convert. In or around August of 1991, each entered into a licensing agreement with Cottman and a related agreement terminating its A-1 franchise. Cottman and A-1 entered into a one-year management agreement whereby A-1 appointed Cottman manager of all A-1 franchises not converted.

 On March 19, 1992, Cottman mailed a letter to each defendant notifying him, her, or it that certain forms required under Michigan law, referred to as Michigan "facing pages," had been inadvertently excluded from the Michigan Uniform Offering Circular. The March 19, 1992 letter included the previously omitted facing pages. Michigan Law, MCL 445.1531(2), required Cottman to provide each defendant with the option to rescind its license agreement as a result of Cottman's failure to include the facing pages in the original offering circular. The March 19, 1992 letter to each defendant stated in relevant part:

 
If you are satisfied with the information that was provided you and the current status of your License Agreement, no further action on your part is necessary.
 
Another option provided by Michigan Law, MCL 445.1531(2), is for you to pay Cottman all income received from the Center since the signing of the License Agreement in exchange for the return of the amount you paid to enter into the License Agreement, which in this instance was nothing. Your License Agreement would then revert back to an A-1 Transmissions license which Cottman would administer under its Management Agreement with A-1 Transmissions, Inc... This option must be exercised within thirty (30) days of receipt of this letter.

 On April 6, 1992, counsel for defendants sent letters to Cottman on behalf of each of the defendants stating:

 
Pursuant to the provisions of MCL 445.1531(2), we hereby tender to you all items received by us for the consideration and not sold. To insure a date certain for determination of our respective rights, the within recession is effective Wednesday, April 8, 1992.

 On April 8, 1992, Cottman responded to defendants' purported acceptance of its offer to rescind with a letter to each defendant stating that the rescissions were invalid because they failed to comply with Michigan law. Specifically, Cottman claimed that (1) defendants failed to tender all income and other benefits received from the operation of the franchise from August 26, 1991, to present, (2) defendants failed to cure all breaches of the License Agreement and restore Cottman to the status quo ante, and (3) defendants failed to return to Cottman any of the materials provided to them in conjunction with the License Agreement, particularly those associated with the A-1 and Cottman trademarks and with advertising. The April 8, 1992 letter informed defendants that until ...


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