Bryfogle v. Carvel Corp.

Citations: 666 F. Supp. 730; 1987 U.S. Dist. LEXIS 6355Docket: Civ. A. 87-983

Court: District Court, E.D. Pennsylvania; July 14, 1987; Federal District Court

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James and Mitzi Bryfogle entered a franchise agreement with Carvel Corporation in 1975 to operate a Carvel ice cream store, which continued until the agreement expired in October 1985. After vacating the premises, Carvel terminated its lease in January 1986. The Bryfogles then leased the same property and opened "Mitzi's Ice Cream" in December 1986, completely remodeling the store to eliminate any Carvel branding. In January 1987, Carvel initiated legal action in New York, citing a non-competition clause in the franchise agreement, which prohibited the Bryfogles from selling ice cream within two miles of the former store for three years following termination. Carvel sought to enjoin the Bryfogles' operations, demand an accounting of profits, claim damages for trademark infringement, and recover owed funds. In response, the Bryfogles filed for an injunction in Pennsylvania to stop the New York action, which was granted. Carvel then moved the case to federal court. The Bryfogles sought to remand the case, while Carvel filed a motion to dismiss the complaint and dissolve the injunction. The court ultimately denied the remand, granted summary judgment for Carvel, and dissolved the preliminary injunction. The court clarified that a case is removable if it could have originally been brought in federal court, which Carvel argued was applicable under 28 U.S.C. 1332.

Citizenship of the parties is diverse, but plaintiffs assert that the amount in controversy is under ten thousand dollars. Removal rights depend on the pleadings at the time of the removal petition. The Bryfogles seek to enjoin a New York action, requesting damages deemed just by the court, including exemplary damages and attorney's fees. In cases seeking injunctions, the amount in controversy is determined by the value of the interest being protected. The potential outcome of the New York action, which involves claims exceeding six million dollars, could lead the Bryfogles to incur significant losses. They also argue that moving their business would involve considerable expense, further supporting the claim that their interests exceed ten thousand dollars. 

The legal standard requires that unless it is clearly certain the claim is below the jurisdictional amount, the requirement is satisfied. The review indicates that the Bryfogles' interests indeed exceed this threshold. Furthermore, plaintiffs contend that the Pennsylvania action is ancillary to the New York case and thus not removable, referencing cases that support remand for ancillary proceedings. However, the court finds the action is not truly ancillary, as it aims to halt the New York suit, and remanding would not resolve the issue of dual litigation in state and federal courts. The cited cases emphasize the inefficiencies of litigating the same matter in two forums, but this situation remains unchanged regardless of the court's jurisdiction.

The argument for remand is deemed meritless. The Bryfogles contend that Carvel waived its right to remove the case, asserting that this action serves as a response or defense in the New York action, merely filed in Pennsylvania. They argue that since Carvel is effectively acting as a plaintiff, it cannot remove the case under 28 U.S.C. § 1441, which allows only defendants to do so. This argument is rejected, as Carvel is recognized as a defendant, having not initiated any action in Pennsylvania but rather defending itself. 

Additionally, the Bryfogles claim that Carvel waived its right to a federal forum by choosing to file in New York. While the right to removal can be waived, such intent must be clear and unequivocal, which the plaintiffs fail to demonstrate. Carvel filed for removal promptly after an injunction was issued, indicating that it did not take substantial defensive action in state court before seeking removal. 

The assertion that Carvel's motives for removal are improper is also dismissed. The removal statute grants defendants the right to remove cases, and their motivations do not affect the legality of the removal. Consequently, the motion to remand is denied.

Regarding the motion for summary judgment, Carvel seeks dismissal under Fed. R. Civ. P. 12(b)(6) or alternatively for summary judgment. The court will treat it as a summary judgment motion since it has considered matters outside the pleadings. Summary judgment is appropriate when there are no genuine issues of material fact, taking all facts in favor of the opposing party.

Carvel argues that it is entitled to summary judgment because it acted within its rights under the forum selection clause of the License Agreement by filing in New York. The clause applies to actions arising under the agreement, and since Carvel is enforcing the non-competition clause, the matter falls within the scope of the contract. The Bryfogles oppose the enforceability of the forum selection clause, prompting the court to apply Pennsylvania law to determine its validity.

An argument exists under Pennsylvania law for applying either Pennsylvania or New York law regarding forum selection clauses; however, both jurisdictions share similar principles favoring enforceability. Pennsylvania courts will decline to proceed if the parties have mutually agreed on a different forum, provided that the agreement is not unreasonable. New York law similarly enforces forum selection clauses unless there is evidence of public policy violations or fraud. The burden lies with the party contesting the clause to demonstrate its unreasonableness. In this case, the Bryfogles do not allege fraud or public policy issues but argue that the clause is unreasonable due to financial constraints and logistical challenges associated with litigation in New York. However, the court notes that mere inconvenience or increased expenses do not qualify as unreasonable grounds for non-enforcement, especially since the Bryfogles voluntarily chose the forum and accepted the associated risks. The court finds no compelling reasons to deny enforcement of the clause, thus ruling it valid and enforceable, leading to summary judgment in favor of Carvel. The remaining matter pertains to Carvel's motion to dissolve a preliminary injunction from state court, which federal courts can modify or dissolve post-removal, as established in relevant case law.

A preliminary injunction is rendered moot by a final judgment on the merits, as established in Ameron v. U.S. Army Corps of Engineers. In this matter, the preliminary injunction for the Bryfogles is superseded by the final judgment favoring Carvel Corporation, necessitating its dissolution. The court's order includes the following rulings: 

1. Plaintiffs' motion to remand is denied.
2. Defendant Carvel Corporation is granted summary judgment against plaintiffs James C. Bryfogle and Mitzi Bryfogle. 
3. The injunction issued by Judge Richard D. Grifo in the Court of Common Pleas of Northampton County on February 20, 1987, which restricted Carvel Corporation from taking any actions related to a pending case in Westchester County, New York, is dissolved. 

Additionally, it is noted that although Carvel attended the injunction hearing, it did not actively participate. The Bryfogles maintain that the non-competition clause is inapplicable due to Carvel's termination of the License Agreement, a point they may present in their defense in the New York action. Carvel has also asserted that the state court injunction is procedurally flawed under Pennsylvania civil procedure rules; however, this issue is not addressed as the injunction is dissolved based on the final order in this case.