The opinion of the court was delivered by: J. CURTIS JOYNER
Defendants Melody have filed a Motion for Reconsideration of this Court's Order of October 27, 1994, in which this Court decided that a choice of law provision was valid and enforceable, and that Pennsylvania law would apply to this action.
The purpose of a motion to reconsider is to "correct manifest errors of law or fact or to present newly discovered evidence." Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir. 1985). Having considered Defendants' motion, this Court finds that our earlier ruling shall remain in full force and effect.
Defendants argue that California law should be applied to their counterclaims as: 1) there is no Pennsylvania franchise law providing protection to Defendants similar to the California Franchise Investment Law (CFIL); 2) the application of Pennsylvania law would be a violation of California public policy as Defendants will not be able to recover the same damages or assert violations of the California statute under Pennsylvania law; and 3) the choice of law provision is not broad enough to govern claims raised under the CFIL.
First, Defendants argue that their rights will be compromised by the application of Pennsylvania law as this state has no statute analogous to the CFIL. Defendants argue that this Court should disregard the holding in Banek, Inc. v. Yogurt Ventures, U.S.A., Inc., 6 F.3d 357 (6th Cir. 1993). We found persuasive the Banek court's reasoning that a choice of law agreement should be upheld unless a "substantial erosion of the quality of protection" afforded under a "fundamental state policy" is shown.
Defendants argue that the Sixth Circuit so held as the franchisee in that case was protected by the Georgia Business Opportunities Act, even though the Michigan Franchise Investment Law (MFIL) was not applied. The Banek court stated that it "is not sufficient for plaintiff to simply assert that Michigan law should apply 'merely because a different result would be reached' under Georgia law." Id. at 363 (citations omitted). The court reasoned that the application of Georgia law would not "substantially erode" protections offered the franchisee as the plaintiff could pursue common law claims for fraud and breach of contract. Id. See also Tele-Save Merchandising Co. v. Consumers Distributing, Co., 814 F.2d 1120 (6th Cir. 1987) (one reason cited by court in applying chosen state's law was that plaintiff could pursue actions under common law fraud and breach of contract theories, although franchisee's state statute offered different protection).
As in Banek, Defendants in the present matter may pursue common law actions for fraud and breach of contract. That a different result may be reached under Pennsylvania law does not signal a "substantial erosion" of protections of the franchisee. Thus, merely because Pennsylvania does not have a statute analogous to the CFIL does not mean that there has been a "substantial erosion" of protections afforded a franchisee leading to our application of California law.
Second, in an argument closely related to the first, Defendants state that their protection under a "fundamental [California] policy" will be "eroded" because they will not be afforded the same remedies under California and Pennsylvania law. As support for this contention, Defendants cite the sole Ninth Circuit case where a choice of law provision was not enforced, and where damages and recission were allowed under the CFIL. Dollar Systems v. Avcar Leasing Systems, 890 F.2d 165 (9th Cir. 1989).
However, that case is distinguishable from the present matter. It was clear in Dollar Systems that the parties' contacts with California were more numerous than those with the chosen state.
Thus, the decision was not rendered under choice of law principles. Instead, the CFIL was applied to the dispute based upon California's more substantial interest in the transaction. The Court did not compare protections under the chosen law and California law; nor did the Court award recission and restitution so as to avoid an "erosion of protection" under a "fundamental policy."
Because Dollar Systems offers no guidance in comparing the rights and remedies available under the CFIL and common law comparable to our own, we do not rely on it to reconsider our prior determination. Defendants do not allege any new law to alter our disposition of the case.
Finally, Defendants assert under Dollar Systems that the present agreement is not broad enough to extend Pennsylvania law to their counterclaims under the CFIL. We find this argument unpersuasive as the language in the present waiver is broader than the waiver in Dollar Systems.
In Dollar Systems the franchise agreement stated, "this Agreement was made and entered into in the State [of] Georgia and all rights and obligations of the parties hereto shall be governed by and construed in accordance with the laws of the State of Georgia." Id. at 171 (emphasis added). The present contract states that this Agreeement has been entered into and shall be governed by, and construed and enforced in accordance with the laws of Pennsylvania." License Agreement, P 27 (emphasis added). Thus, the clause in the present matter is broader than the clause in Dollar Systems, and may be read to govern Defendants' counterclaims.
Accordingly, because the Defendants' new memorandum does not present such a subsequent change of the facts or the law that makes the original decision fundamentally wrong, our Order of October 27, 1994 stands. See ...