December 7, 1994
Presently before the Court is Plaintiff's motion for summary judgment on Counts I-IV of Defendants' counterclaims pursuant to Rule 56 of the Federal Rules of Civil Procedure.
Plaintiff, a Pennsylvania corporation, sold Defendants Melody a franchise located in California. Plaintiff filed this suit against Defendant seeking damages for alleged violations of a franchise agreement by Defendants.
Defendants counterclaimed, and Counts I-IV
were brought under California statutory law.
In an Order dated October 27, 1994, this Court decided that Pennsylvania law would govern all substantive claims pursuant to a contractual choice-of-law agreement between the parties. The Court must now consider whether summary judgment would be properly granted on Counts I-IV.
In considering a motion for summary judgment, the court must consider whether the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, show there is no genuine issue as to any material fact, and whether the moving party is entitled to a judgment as a matter of law. Fed. R.Civ.P. 56(c). The court is required to determine whether the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). In making this determination, all reasonable inferences must be drawn in favor of the nonmoving party. Anderson, 477 U.S. at 256, 106 S. Ct. at 2512. While the movant bears the initial burden of demonstrating an absence of genuine issues of material fact, the nonmovant must then establish the existence of each element of its case. J.F. Feeser, Inc., v. Serv-A-Portion, Inc., 909 F.2d 1524, 1531 (3rd Cir. 1990), cert. denied, 499 U.S. 921, 111 S. Ct. 1313, 113 L. Ed. 2d 246 (1991) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986)). It appearing that there are no issues of material fact, this matter is ripe for judgment as a matter of law.
The parties in the instant case agreed contractually to be bound by Pennsylvania law. In our Order of October 27, 1994 we upheld the validity of the agreement and found that application of Pennsylvania law would not cause any "substantial erosion of the quality of protection" afforded under a "fundamental [California] policy." As this court has found the choice-of-law provision valid and enforceable, summary judgment will be granted as to Counts I-IV.
Count I of Defendants' counterclaims alleges misrepresentation in violation of California Corporations Code §§ 31201, 31300 and 31301. Count III alleges misrepresentation in the form of false advertising. Count IV alleges negligence per se for failure to comply with the California Franchise Investment Law (CFIL). The remedies sought are recission, restitution, and damages including attorneys' fees. California's fundamental policy of prevention of fraud in the sale of franchises will not be compromised by relief afforded under Pennsylvania common law. Therefore, Counts I, III and IV of Defendants' counterclaims, brought under the CFIL, are dismissed.
Count II seeks recission, restitution, and damages including attorneys' fees for Plaintiff's failure to register or deliver a prospectus in violation of California Corporations Code §§ 31110, 31119, 31300, and 31301. As alleged under the CFIL, to prove a failure to register or deliver a prospectus it must be shown that there were untrue or omitted material facts.
Essentially, this requires proof of elements of misrepresentation. As discussed above, these elements may be pleaded and proven under Defendants' Pennsylvania common law claims. Accordingly, summary judgment will issue as to Count II.
As there would be no "substantial erosion" of Defendants' protections under a "fundamental policy" of the CFIL, Plaintiff's motion for summary judgment is accordingly GRANTED as to Defendants' Counterclaims I-IV as a matter of law. An appropriate Order follows.
AND NOW, this 7th day of December, 1994, upon consideration of the Plaintiff's Motion for Summary Judgment as to Counts I-IV of Defendants' Counterclaims, and replies thereto, the Motion is hereby GRANTED.
BY THE COURT:
J. CURTIS JOYNER, J.