Best Western International Inc. v. Twin City Lodging LLC

          ORDER

          Honorable Steven P. Logan, United States District Judge

         Plaintiff Best Western International Incorporated (the “Plaintiff”) filed suit against Twin City Lodging LLC, Percy Pooniwala, and Santha Kondatha alleging multiple causes of action related to the termination of a Best Western Membership Agreement (the “Membership Agreement”). (Doc. 1 at 2) The Defendants moved to dismiss the Plaintiff's claims against them (the “Motion”). (Doc. 18) The Court's ruling is as follows.

         I. Background

         The Plaintiff is a non-profit corporation that serves its members, who are independent owners and operators of Best Western branded hotels. (Doc. 1 at 3) On September 29, 2016, Twin City Lodging LLC and Pooniwala executed the Membership Agreement, by which they joined the community of members operating Best Western branded hotels. (Doc. 1 at 2) On August 31, 2017, Kondatha executed an “Application for Change in Voting Member/Voter Registration Card” through which he agreed to be bound by the Membership Agreement in exchange for designation as a voting member of the organization. (Doc. 1 at 2; Doc. 1-2 at 21)

         On July 26, 2018, the Plaintiff notified Twin City Lodging LLC, Percy Pooniwala, and Santha Kondatha that their membership with the Plaintiff had been terminated for failure to abide by the terms and conditions of certain regulatory documents. (Doc. 1 at 12) Following the termination of Twin City Lodging LLC's membership status, the Plaintiff alleges that Twin City Lodging LLC continued to operate while unlawfully using Best Western exterior signage, internet advertising, and other branded items. (Doc. 1 at 12) The Plaintiff initiated this lawsuit seeking damages for breach of contract and trademark infringement, among other claims. (Doc. 1 at 14-18) The defending parties filed the Motion seeking to dismiss that Plaintiff's claims pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6). (Doc. 18)

         II. Legal Standard

         A. 12(b)(2)

         A plaintiff bears the burden of establishing personal jurisdiction. Repwest Ins. Co. v. Praetorian Ins. Co., 890 F.Supp.2d 1168, 1184-85 (D. Ariz. 2012). When a defendant moves to dismiss a complaint for lack of personal jurisdiction, “the plaintiff is ‘obligated to come forward with facts, by affidavit or otherwise, supporting personal jurisdiction'” over the defendant. Cummings v. W. Trial Lawyers Assoc., 133 F.Supp.2d 1144, 1151 (D. Ariz. 2001). In the absence of an evidentiary hearing on the issue of personal jurisdiction, a plaintiff must only make “a prima facie showing of jurisdictional facts through the submitted materials” in order to avoid dismissal for lack of personal jurisdiction. Data Disc, Inc. v. Sys. Tech. Assocs., Inc., 557 F.2d 1280, 1285 (9th Cir. 1977). Because no applicable federal statute governing personal jurisdiction exists, Arizona's long-arm statute applies. Terracom v. Valley Nat'l Bank, 49 F.3d 555, 559 (9th Cir. 1995). Arizona's long-arm statute provides for personal jurisdiction to the extent permitted by the Due Process Clause of the United States Constitution. Ariz. R. Civ. P. 4.2(a).

         Absent traditional bases for personal jurisdiction (i.e., physical presence, domicile, and consent), the Due Process Clause requires that a nonresident defendant have certain minimum contacts with the forum state such that the exercise of personal jurisdiction does not offend traditional notions of fair play and substantial justice. See Doe v. Am. Nat'l Red Cross, 112 F.3d 1048, 1050 (9th Cir. 1997) (citing International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). “In determining whether a defendant had minimum contacts with the forum state such that the exercise of jurisdiction over the defendant would not offend the Due Process Clause, courts focus on ‘the relationship among the defendant, the forum, and the litigation.'” Brink v. First Credit Res., 57 F.Supp.2d 848, 860 (D. Ariz. 1999). If a court determines that a defendant's contacts with the forum state are sufficient to satisfy the Due Process Clause, then the court must exercise either “general” or “specific” jurisdiction over the defendant. Doe, 112 F.3d at 1050. The nature of the defendant's contacts with the forum state will determine whether the court exercises general or specific jurisdiction over the defendant. Doe, 112 F.3d at 1050-51.

         B. 12(B)(6)

         To survive a motion to dismiss, a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief” such that the defendant is given “fair notice of what the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 554, 555 (2007) (quoting Fed.R.Civ.P. 8(a)(2); Conley v. Gibson, 355 U.S. 41, 47 (1957)). The Court may dismiss a complaint for failure to state a claim under Federal Rule 12(b)(6) for two reasons: (1) lack of a cognizable legal theory, and (2) insufficient facts alleged under a cognizable legal theory. Balistreri v. Pacificia Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990).

         In deciding a motion to dismiss, the Court must “accept as true all well-pleaded allegations of material fact, and construe them in the light most favorable to the non-moving party.” Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010). In comparison, “allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences” are not entitled to the assumption of truth, and “are insufficient to defeat a motion to dismiss for failure to state a claim.” Id.; In re Cutera Sec. Litig., 610 F.3d 1103, 1108 (9th Cir. 2010). A plaintiff need not prove the case on the pleadings to survive a motion to dismiss. OSU Student All. v. Ray, 699 F.3d 1053, 1078 (9th Cir. 2012).

         III. Analysis

         Defendants Pooniwala, Kondatha, and Twin City Lodging LLC move to dismiss all of the Plaintiff's claims because (i) the Complaint does not state any plausible claim against Defendant Pooniwala, (ii) the Complaint does not state any plausible claim against Defendant Kondatha, (iii) the Plaintiff fails to comply with Minnesota Franchise Act, and (iv) the Court does not have personal jurisdiction over Pooniwala, Kondatha, or Twin City Lodging LLC. (Doc. 18 at 2) The Parties filed a stipulation to dismiss Defendant Pooniwala. (Doc. 24; Doc. 23 at 2) Therefore, the Court will ...