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Grosso Enterprises, Inc v. Domino's Pizza LLC

March 9, 2011

GROSSO ENTERPRISES, INC.,
PLAINTIFF,
v.
DOMINO'S PIZZA LLC, A/K/A DOMINO'S PIZZA FRANCHISING LLC, A/K/A DOMINO'S PIZZA MASTER ISSUER LLC, DEFENDANT.



The opinion of the court was delivered by: DuBOIS, J.

MEMORANDUM

I. INTRODUCTION

Plaintiff Grosso Enterprises, Inc. ("Grosso Enterprises"), a franchisee of defendant Domino's Pizza LLC ("Domino's"), seeks a temporary restraining order ("TRO") to enjoin defendant from enforcing the termination of plaintiff's franchise agreement.

Presently before the Court is plaintiff's Motion for a Temporary Restraining Order, filed on March 2, 2011.*fn1 Defendant filed a response to the motion on March 4, 2011. The Court conducted a hearing on the motion on March 7, 2011. For the reasons discussed below, the Court grants plaintiff's Motion for a Temporary Restraining Order.

II. BACKGROUND

Plaintiff Grosso Enterprises is a Pennsylvania corporation "created with the sole purpose of operating a Domino's franchise." (Compl. ¶¶ 1, 9.) In July 1996, Grosso Enterprises and Domino's entered into a Standard Franchise Agreement granting Grosso Enterprises a franchise to operate a Domino's Pizza Store ("the Store") located at 148 Wilmington Pike, in West Chester, Pennsylvania, for a term of ten years. (Id. ¶¶ 10, 11.) On July 31, 2006, Grosso Enterprises and Domino's entered into a renewal Standard Franchise Agreement ("the Agreement") granting Grosso Enterprises a franchise for another ten years. (Compl., Ex. A.) Gregory T. Grosso ("Grosso") is named as the "Controlling Person" in the Agreement, with an 85% ownership in Grosso Enterprises.

On May 5, 2010, Domino's terminated the Agreement with Grosso Enterprises. (TRO Hr'g, Ex. D-12.) After permitting Grosso Enterprises to continue operating the Store for a period of time, Domino's notified Grosso Enterprises by letter dated February 28, 2011 that it would enforce termination of the Agreement "effective immediately." (Compl., Ex. L.) On March 1, 2011, Domino's ceased delivery of supplies to Grosso Enterprises and terminated Grosso Enterprises' "computer access allowing credit card sales." (Pl.'s TRO Mot. at 7.)

A. The Three Alleged Defaults

The present dispute between the parties arises out of a series of three defaults, or breaches of the Agreement, allegedly committed by Grosso and Grosso Enterprises.

First, in a "Notice of Default" dated November 3, 2009, Domino's notified Grosso Enterprises that it had violated Section 15 of the Agreement by failing to comply with Domino's Criminal Background Check Standard ("CBC Standard"). (Compl., Ex. B.) Domino's first apprised franchisees of the new CBC Standard, to take effect August 1, 2009, through a mass e- mail to all franchisees dated June 11, 2009, followed by reminder e-mails to all franchisees dated July 20, 2009, and July 31, 2009. (TRO Hr'g, Exs. D-1, D-2, D-3.) Grosso and Grosso Enterprises deny having ever received these e-mails. Upon receipt of the November 3, 2009 Notice of Default, Grosso Enterprises contracted with HireRight in compliance with the CBC Standard. (Pl.'s TRO Mot. at 3.) By letter dated November 11, 2009, Domino's notified Grosso Enterprises that Grosso Enterprises had cured the default described in the November 3, 2009 letter. (Compl., Ex. C.)

Second, Domino's notified Grosso Enterprises, in a "Notice of Default" dated March 9, 2010, that Grosso Enterprises was in default of Section 15 of the Agreement due to its failure to "adhere to the standards, operating procedures and rules prescribed by [Domino's]." (TRO Hr'g, Ex. D-6.) The March 9 letter cites a series of thirteen violations of Domino's operational standards relating to, inter alia, the use of a "properly functioning time-delay safe," the shelf-life of product ingredients, and the appearance and cleanliness of the Store and its employees. (Id.) Grosso Enterprises promptly remedied those violations. By letter dated April 21, 2010, Domino's notified Grosso Enterprises that it had cured the default described in the March 9, 2010 letter. (Compl., Ex. F.)

Third, in a "Notice of Default" dated March 29, 2010, Domino's notified Grosso Enterprises that it had violated Section 10.3 of the Agreement as a result of Grosso's failure to attend a required "High Performance Franchisee" ("HPF") training class. (TRO Hr'g, Ex. D-11.) Domino's first notified franchisees about the class via a mass e-mail to all franchisees dated February 26, 2009. (Id., Ex. D-8.) On August 17, 2009, Domino's e-mailed Grosso Enterprises and seven other franchisees, informing them that they were the only franchisees in Domino's Northeast Zone who had not yet completed the HPF course, and alerting them to upcoming HPF class dates and locations. (Id., Ex. D-19.) Grosso and Grosso Enterprises deny having received the February 26, 2009 and August 17, 2009 e-mails. By letter dated September 21, 2009, sent via regular and certified mail, Domino's notified Grosso Enterprises that Grosso was "required to take [the HPF] class," and listed a number of upcoming HPF class dates and locations. (Id., Ex. D-9.) Domino's again contacted Grosso Enterprises by letter dated January 11, 2010, advising it of the need to complete the HPF course. (Id., Ex. D-10.) As Grosso had not yet attended the mandatory HPF course, Domino's sent Grosso Enterprises the third Notice of Default on March 29, 2010, providing that the default "shall be cured by registering for, attending and successfully completing the HPF class to be held May 4-6, 2010 . . . in Ann Arbor, Michigan." (Id., Ex. D-11.) Grosso did not attend the HPF class on May 4-6, 2010, and has not attended an HPF class since that date.

B. Termination of the Agreement

By letter dated May 5, 2010, Domino's terminated the Agreement, notifying Grosso Enterprises that the termination would be effective May 8, 2010. (Id., Ex. D-12.) Grosso Enterprises' franchise was terminated pursuant to Sections 18.2.1(l) and 18.2.2(d) of the Agreement. (Id.) Section 18.2.1(l) permits Domino's to terminate the Agreement if Grosso Enterprises or any of its owners "fail on three (3) or more occasions during any twelve (12) month period" to comply with any provision of the Agreement, "whether or not such failure to comply is [cured]." (Compl., Ex. A.) Section 18.2.2(d) provides that the Agreement may be terminated if Grosso Enterprises or any of its owners "fails to comply with any . . . provision of [the] ...


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