United States District Court, D. Arizona
G. Campbell United States District Judge
Zounds Hearing Franchising, LLC (“Zounds
Franchising”), Zounds Hearing, Inc.
(“ZHI”), and third-party defendant Sam Thomasson
(founder and CEO of ZHI) have filed a motion to dismiss the
counterclaims and third-party complaint (collectively,
“Counterclaims”) filed by Defendants Coastal
Hearing, Inc. (“Coastal”) and Tina Moser. Doc.
31. The issues are fully briefed (Docs. 31, 32, 37) and no
party requests oral argument. For the reasons set forth
below, the Court will grant the motion to dismiss Counts VI
and X and deny the motion on all other counts.
Defendants are the non-moving party, the allegations set
forth in their Counterclaims are taken as true for purposes
of this motion. Zounds Franchising is an Arizona limited
liability company with its principal place of business in
Tempe, Arizona. Doc. 1 at 3. It contracts with third parties
to own and operate franchises that sell Zounds brand hearing
aids and accessories. Id. ZHI is a Delaware
corporation with its principal place of business in Tempe,
Arizona and is in the business of selling approved Zounds
products to franchisees and third parties. Id.
December 9, 2013, Zounds Franchising and Coastal entered into
a Franchise Agreement granting Coastal the rights to operate
three Zounds Hearing Centers in Florida. Doc. 31 at 4; Doc.
1-1 at 50. On February 26, 2014, Zounds Franchising and
Coastal entered into another Franchise Agreement for a Zounds
Hearing Center in Seminole, Florida. Doc. 10 at 11. Tina
Moser, president and controlling interest holder of Coastal,
personally guaranteed the obligations of Coastal.
Id. On March 13, 2014, Coastal purchased an
already-existing Zounds franchise in Clearwater, Florida
through an asset purchase agreement with Zounds Pennsylvania
LLC and Zounds Franchising. Doc. 10 at 12. Contemporaneously,
Zounds Pennsylvania LLC and Zounds Franchising entered into
an assignment and consent to transfer agreement with Coastal
(“Assignment Agreement”). Id.; Doc. 1-1
at 89. The Assignment Agreement included a clause which
released Zounds Franchising from all claims through the date
of the agreement (“the Release”). Doc. 1-1 at 91.
The Release states, in pertinent part:
Upon execution of this Agreement, and except for
Franchisor's obligations under this Agreement, Assignee
and Guarantors, for themselves and all persons and entities
claiming by, through or under any of them, hereby release,
acquit, and forever discharge the Franchisor Releasees from
all obligations, claims, debts, demands, covenants,
contracts, promises, agreements, liabilities, costs,
attorneys' fees, actions or causes of action whatsoever,
whether known or unknown, which Assignee and/or Guarantors,
by themselves or on behalf of, or in conjunction with any
other person, persons, partnership or corporation, have, had,
or might claim to have against the Franchisor Releasees
through the date of this Agreement, including those arising
out of or related to: the offer, sale, operation and transfer
of the Existing Franchise Agreement (and Existing Franchised
Business); the offer and sale of the Zounds Hearing
franchises under the Prior Franchise Agreements; the
parties' respective rights and obligations under the
Prior Franchise Agreements; and any and all rights,
obligations or claims under any state franchise regulations
or franchise relationship laws. . . . Assignee and Guarantors
covenant and warrant that neither of them will . . . sue,
[or] assist or cooperate with any third party in any
third-party action against, any Franchisor Releasee arising
out of or related to the claims released under this Section.
Id. The Franchise Agreement also states:
“Franchisee agrees that nothing that Franchisee
believes Franchisee has been told by Franchisor or
Franchisor's representatives shall be binding unless it
is written in this Agreement. This is an important part of
this Agreement.” Doc. 1-1 at 49.
allege that Plaintiffs made six material misrepresentations
relating to the sale and operation of the franchise - four
prior to the Franchise Agreement and two within the franchise
disclosure documents. Doc. 10 at 14-17. Counterclaims include
ten causes of action: Counts I-IV (fraud in the inducement),
Count V (violation of Wisconsin Franchise Investment Law),
Count VI (violation of Florida Stat. § 817.416), Count
VII (violation of Arizona Consumer Fraud Act), Counts VIII-IX
(declaratory judgement), and Count X (piercing the corporate
veil). Id. at 17-27. Plaintiffs argue that the
Counterclaims should be dismissed in their entirety as barred
by the Release. Doc. 31 at 10. In the alternative, Plaintiffs
allege individual counts I-IV, VI, VII, and X should be
successful Rule 12(b)(6) motion must show either that the
complaint lacks a cognizable legal theory or fails to allege
facts sufficient to support its theory. Balistreri v.
Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.
1990). A complaint that sets forth a cognizable legal theory
will survive a motion to dismiss if it contains
“sufficient factual matter . . . to ‘state a
claim to relief that is plausible on its face.'”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
Dismissal in the Entirety.
move to dismiss all Counterclaims on the ground that the
Release bars all causes of actions occurring before and
through the date of signing, including the fraud claims. Doc.
31 at 9-10. With the exception of the piercing the corporate
veil argument, Plaintiffs do not allege that Defendants
failed to provide sufficient factual allegations, failed to
plead with requisite particularity, or made only conclusory
assert that all of the claims in their Counterclaim
“sound in and are based on fraud.” Doc. 32 at 5.
Defendants argue that these claims are not within the scope
of the Release because they did not accrue until Defendants
discovered Plaintiffs' misrepresentations - after the
Release date. Defendants rely on Transamerica Ins. Co. v.
Trout, 701 P.2d 851 (Ct. App. Ariz. 1958), which in turn
cites A.R.S. § 12-543, the Arizona three-year statute of
limitations for fraud. Id. at 854. Section 12-543
provides that fraud claims “shall ...