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COTTMAN TRANSMISSION SYS. v. MELODY

October 26, 1994

COTTMAN TRANSMISSION SYSTEMS, INC.
v.
DONNA MELODY and LEE W. MELODY



The opinion of the court was delivered by: J. CURTIS JOYNER

 Joyner, J.

 This is an action filed by Plaintiff, Cottman Transmission Systems, Inc. for alleged violations of a franchise agreement by Defendants Melody. Plaintiff alleges fraud, copyright infringement, and breach of contract.

 Defendants' counterclaim alleges fraud, negligent misrepresentation, and violation of the California Franchise Investment Law ("CFIL"). *fn1" The issue currently before the Court is whether California or Pennsylvania law should be applied to the litigation's substantive claims.

 Defendants have moved to apply California law on the grounds that 1) California has more numerous and substantial contacts with the subject matter of the suit; and 2) California has a strong public policy against choice of law provisions. Defendants argue that this public policy against choice of law provisions, embodied in CFIL § 3100, overrides the parties' agreement to be bound by Pennsylvania law in the event of litigation.

 By way of response, Plaintiff asserts that 1) Pennsylvania, not California, has more substantial and numerous contacts with the subject matter of the suit; 2) the policy articulated in § 3100 of the CFIL is not "fundamental" and thus does not void a freely negotiated choice-of-law provision. *fn2"

 FACTS AND PROCEDURAL HISTORY

 In March of 1993, Defendant Lee Melody answered an advertisement from Joseph Sanfellipo, a franchise broker in California and the two met to discuss Defendant's interest in acquiring a Cottman franchise owned by Mr. Sanfellipo. From March, 1993 to April, 1993 negotiations between Mr. Sanfellipo and Defendants were conducted in California for the sale of a Cottman franchise.

 Defendants' attorney reviewed the franchise agreement before Defendants executed the contract in Philadelphia. The franchise agreement provided that the parties chose to apply Pennsylvania law in the event of any dispute. *fn3"

 Defendant Lee Melody travelled to Pennsylvania for three weeks of training. Defendant Donna Melody attended the third week of training in Pennsylvania. The franchise agreements and other contracts were entered into at Plaintiff's offices in Pennsylvania on May 6, 1993.

 Subsequent to the purchase of the Cottman franchise, Defendants received various training and informational materials sent from Plaintiff in Pennsylvania to their offices in California. Additionally, Plaintiff's personnel visited California to render assistance to Defendants in conducting their business.

 Defendants operated a Cottman Center in La Habra, California until early March, 1994. Defendants were unable to profit from the franchise, and in fact had substantial losses. In March, 1994, Defendants advised Plaintiff of their intention to rescind the License Agreement and began to operate an independent transmission business at the site.

 Defendants filed suit against Plaintiff and Sanfellipo in the Superior Court of Orange County, California on March 2, 1994. Plaintiff filed the instant action against Defendants in the Court of Common Pleas of Montgomery County, Pennsylvania on March 8, 1994, which was removed to this Court.

 STANDARD

 When jurisdiction is based on diversity of citizenship, the district court generally applies the conflict of law rules of the state in which it sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). As previously stated by this Court, "the laws of Pennsylvania and California are substantially in agreement insofar as the enforcement of choice of forum and choice of law ...


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