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Soft Pretzel Franchise Systems Inc. v. Taralli, Inc.

United States District Court, Third Circuit

September 5, 2013




Presently before the Court is Defendants’ Motion to Dismiss (ECF No. 14). For the following reasons, Defendants’ Motion will be denied.


A. Factual Background

Plaintiff, Soft Pretzel Franchise Systems, Inc. (“SPF”), initiated this action for preliminary injunctive relief to enforce a covenant not to compete and an equipment buy-back provision contained in the parties’ Franchise Agreement. (Compl., ECF No. 1.) SPF is a franchisor of Philly Pretzel Factory, a retail business offering traditional “South Philadelphia” pretzels and other authorized products. (Id. at ¶ 7.) SPF is a Pennsylvania corporation with its principal place business in Philadelphia. (Id. at ¶ 1.)

Defendants Steven M. Pisale and Lisa A. Pisale are husband and wife, and sole owners of Taralli, Inc., a/k/a Taralli Enterprises, LLC, (“Taralli”), a New Jersey based limited liability company. (Id. at ¶¶ 2-3.) On December 21, 2006, Taralli and Plaintiff executed a franchise agreement pursuant to which Taralli obtained the right to operate a Philly Pretzel Factory in Marlton, New Jersey. (Id. at ¶ 8.)

According to Plaintiff, Defendants violated the terms of their Franchise Agreement by failing to report the franchise’s gross sales, and failing to pay royalty, advertising, and legal fees. (Id. at ¶ 10.) As a result of these violations, on January 11, 2013, Plaintiff sent Defendants a notice of default giving them fifteen days to cure their monetary defaults. (Id.) Defendants failed to do so and the Franchise Agreement was terminated on February 5, 2013. (Id. at ¶¶ 11-12.)

On February 8, 2013, Defendants filed a complaint and order to show cause before the Superior Court of New Jersey, Burlington County, Chancery Division, in order to prevent the termination. (Id. at ¶ 13.) On May 31, 2013, the Honorable Karen L. Suter entered an Order permitting Plaintiff to proceed with the termination of the franchise and ruled that the termination would be effective June 14, 2013. (Id. at ¶ 14.) After the hearing, Defendants’ counsel advised Plaintiff in a letter dated June 4, 2013 that Defendants would continue to operate a pretzel shop at its current location under the name “Marlton Soft Pretzels.” (Id. at ¶ 15.) Plaintiff responded in a letter dated June 12, 2013, that Defendants’ intention to operate a pretzel business in that location violated the Franchise Agreement’s covenant not to compete. (Id. at ¶¶ 16-17.) Plaintiff also informed Defendants that it intended to exercise its right, pursuant to the Franchise Agreement, to purchase Defendants’ equipment, including a proprietary pretzel stringing machine. (Id. at ¶¶ 17, 19.)

Defendants have refused to sell the equipment and to date continue to operate a pretzel business out of the Marlton, New Jersey location. (Id. at ¶ 19.) As a result of Defendants’ failure to cease operations and sell the equipment, Plaintiff instituted arbitration proceedings requesting permanent injunctive relief and $60, 000 in damages for breach of the Franchise Agreement. (Id. at ¶ 5; Demand for Arbitration, Compl. Ex. B)

B. Procedural History

On June 28, 2013, Plaintiff filed a Complaint which requested preliminary injunctive relief pending the outcome of the arbitration. On July 1, 2013, Plaintiff filed a motion for preliminary injunction. (ECF No. 2.) A hearing was held on Plaintiff’s motion on July 24, 2013. (July 24, 2013, Hr’g Tr., ECF No. 12.) After the hearing, on August 6, 2013, Defendants filed the instant Motion to Dismiss for Lack of Jurisdiction. (Defs.’ Mot., ECF No. 14.) Defendants contend that Plaintiff cannot establish that the amount in controversy exceeds the statutory threshold of $75, 000. Plaintiff submitted a response on August 15, 2013. (Pl.’s Resp., ECF No. 15.)


A. Federal Rule of Civil Procedure 12(b)(1)

Under Federal Rule of Civil Procedure 12(b)(1) a party may bring a motion to dismiss a complaint for lack of subject-matter jurisdiction. A 12(b)(1) motion may be treated as either a facial or factual challenge to the Court’s jurisdiction. Gould Elec. Inc. v. United States, 220 F.3d 169, 177 (3d Cir. 2000). A facial attack “concerns an alleged pleading deficiency, ” while a factual attack addresses “‘the actual failure of [a plaintiff’s] claims to comport [factually] with the jurisdictional prerequisites.’” Edmonson v. Lincoln Nat. ...

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