United States District Court, D. Minnesota
[Copyrighted Material Omitted]
For Rogovsky Enterprise, Inc., a Florida corporation, Plaintiff: John D Holland, LEAD ATTORNEY, J Michael Dady, Dady & Gardner, PA, Mpls, MN.
For MasterBrand Cabinets, Inc., a Delaware corporation, Defendant: Erin E Westbrook, LEAD ATTORNEY, Barnes & Thornburg, LLP, Minneapolis, MN; Mark P Miller, LEAD ATTORNEY, PRO HAC VICE, Barnes & Thornburg LLP, Chicago, IL.
MEMORANDUM OPINION AND ORDER
SUSAN RICHARD NELSON, United States District Judge.
This matter is before the Court on (1) Plaintiff's Motion for an Entry of Default [Doc. No. 32]; (2) Defendant's Motion to Transfer Venue [Doc. No. 12]; and (3) Defendant's Motion to Stay Proceedings [Doc. No. 20]. For the reasons set forth below, Plaintiff's motion is denied, Defendant's Motion to Transfer is granted, and Defendant's Motion to Stay is denied as moot.
Plaintiff Rogovsky Enterprise, Inc. (" Plaintiff" or " Rogovsky" ) filed suit against Defendant MasterBrand Cabinets, Inc. (" Defendant" or " MasterBrand" ) on January 17, 2014. (See generally Compl. [Doc. No. 1].) MasterBrand is a " leading manufacturer of cabinets in the United States," and is a Delaware corporation, with a principal place of business in Indiana. (Id. ¶ ¶ 1, 21.) Rogovsky is a " franchisor of kitchen and bath design and home remodeling businesses called Kitchen & Home Interiors," and is a Florida corporation, with a principal place of business also in Florida. (Id. ¶ ¶ 18, 36.)
Plaintiff alleges that in late 2011, Rogovsky and MasterBrand executed a written Exclusive Distribution Agreement [hereinafter, " Agreement" or " the contract" ]. (Id. ¶ 6; see Compl., Ex. A, " Agreement" [Doc. No. 4-1]) The Agreement allegedly encapsulated MasterBrand's intent that Plaintiff's franchisee purchasers would exclusively sell MasterBrand cabinetry sourced, not through one of MasterBrand's authorized dealers, but, instead through Plaintiff and MasterBrand. (Id. ¶ 5.) Plaintiff further alleges that the " Agreement granted Plaintiff the right to act as the putative 'franchisor' for the sale of MasterBrand cabinets in all 50 states." (Id. ¶ 7.) Defendant, however, contends that the Agreement did not grant Plaintiff franchisor status. (See Def.'s Mem. at 13 [Doc. No. 14].) Rather, MasterBrand argues that by authorizing Rogovsky's franchisees to use MasterBrand cabinets, " MasterBrand was nothing more than [the sole cabinet] product supplier to Rogovsky's franchisees." (See id.) Or, in other words, Rogovsky agreed that its franchisees would sell only MasterBrand cabinets to its end user customers. (See Compl. ¶ 39 [Doc. No. 1].) In exchange for MasterBrand serving as the sole product supplier for Rogovsky, the Agreement provided that Rogovsky would " receive rebates from [MasterBrand]." (See Agreement § 3(e) [Doc. No. 4-1].)
The Agreement was contracted to last for a term of seven years. (See id.
§ 4(a).) One term of the contract provided that Rogovsky would " use its best efforts and
all due diligence to achieve the maximum distribution, display and sale of the Products for its own accounts and through sales of Franchises." (See id. § 2(a).) Rogovsky was also obligated, under the terms of the Agreement, to " maintain its Florida showroom for training, including having qualified trainers on staff, all Products current and on display in the showroom, and ample facilities to host trainings." (See id. § 2(k).) Additionally, pursuant to paragraph 2(b) of the Agreement, Rogovsky committed to not " directly or indirectly distribute, sell or handle in the Territory any products which in [MasterBrand's] reasonable judgment would be in direct competition with [MasterBrand's] Products." (See id. § 2(b).)
The Agreement also provided a choice of law and a choice of forum clause. According to paragraph 5(c), " [t]he Agreement [was] governed by and [was] made under the laws of the State of Indiana." (See id. § 5(c).) According to paragraph 5(d), " [t]he parties agree[d] that any litigation arising out of this Agreement or the termination thereof shall be heard in a court located in the State of Indiana, and each party consents to jurisdiction over it by such a court." (See id. § 5(d).) In addition to the Agreement between MasterBrand and Rogovsky, Rogovsky also used a Franchise Disclosure Document with its Kitchen & Home Interiors franchisees to summarize certain provisions of its franchise agreement with the franchisees. (See Miller Decl., Ex. 3 [Doc. No. 16].) In Item 8 of that document, Rogovsky instructed its franchisees to purchase all cabinets sold to their customers from " the required supplier," MasterBrand. (See id. at Item 8.)
Plaintiff alleges that it started to sell franchises in the State of Florida in 2012. (Id. ¶ 8.) By 2012, however, MasterBrand allegedly began to receive " negative feedback from its pre-existing network of dealers with whom Plaintiff's franchisees could successfully compete." (Id. ¶ 9.) Furthermore, Defendant argues that because of Rogovsky's de minimis sales of MasterBrand cabinets, MasterBrand concluded that Rogovsky was not using its " best efforts" under the Agreement. (See Def.'s Mem. at 4 [Doc. No. 14].) As a result, on October 17, 2013, Defendant terminated Plaintiff's right to sell additional franchises, effective December 31, 2013. (Id. ¶ ¶ 13, 52.) Pursuant to the Agreement, Defendant had a right to terminate the contract if it had " good cause." (Id. ¶ 48; see Agreement § 4(a) [Doc. No. 4-1].) However, Plaintiff contends that MasterBrand did not have a good cause basis to terminate the Agreement because none of the requisite conditions described in § 4(a) of the Agreement had occurred. (See Compl. ¶ 49 [Doc. No. 1].)
As a result of Defendant's termination of the Agreement, Plaintiff brought suit, asserting thirteen distinct claims against Defendant. (Id. ¶ ¶ 65--314.) Rogovsky's claims against MasterBrand include: breach of contract; tortious interference with contractual relations; violations of the Minnesota Franchise Act, the California Franchise Relations Act, the Connecticut Franchise Act, the Hawaii Franchise Investment Act, the Illinois Franchise Disclosure Act of 1987, the Indiana Franchise Act and Deceptive Franchise Practices Act, the Michigan Franchise Investment Law, the Mississippi Code, the Washington Franchise Investment Protection Act; unjust enrichment; and equitable estoppel. (See
id.) Plaintiff alleges that it not only expended hundreds of thousands of dollars in order to perform its obligations under the Agreement, but MasterBrand has also deprived Rogovsky of its contractual right to make sales of this franchise concept across the United States. (Id. ¶ ¶ 56, 57.) All of Plaintiff's claims against MasterBrand
arise from the Agreement and/or its termination.
On June 20, 2014, the magistrate judge ordered that " on or before July 31, 2014 . . . [i]f no settlement is reached, [MasterBrand] shall file its answer or other response to the Complaint." (06/20/14 Magistrate Judge Order [Doc. No. 9].) The parties engaged in a full-day mediation on June 24, 2014. (See Def.'s Mem. at 3 [Doc. No. 40].) While Defendant did not file an answer or Rule 12(b) motion, it did file two other motions on July 31, 2014. First, MasterBrand filed a Motion to Transfer Venue [Doc. No. 12], with a supporting memorandum [Doc. No. 14], and two supporting declarations [Docs. No. 15, 16]. Plaintiff filed a response brief on August 21, 2014 [Doc. No. 37], and MasterBrand filed a reply on September 4, 2014 [Doc. No. 38]. MasterBrand's second motion was a Motion to Stay Proceedings Pending the Outcome of its Motion to Transfer Venue [Doc. No. 21]. Defendant filed this motion with a supporting memorandum [Doc. No. 22], and Rogovsky filed a response brief on August 7, 2014 [Doc. No. 30]. Finally, Plaintiff filed a Motion for an Entry of Default on August 19, 2014 [Doc. No. 32], with a supporting memorandum [Doc. No. 33]. Defendant submitted a response brief on September 9, 2014 [Doc. No. 40], and Plaintiff filed a reply on September 24, 2014 [Doc. No.44]. The Court heard oral argument on all three motions on December 4, 2014. (See Minute Entry [Doc. No. 46].)
A. Motion for an Entry of Default
In Plaintiff's Motion for an Entry of Default, Rogovsky argues that because Defendant failed to file either an answer, or one or more of the motions discussed in Federal Rule of Procedure 12(b), Plaintiff is entitled to a default judgment. (See Pl.'s Mem. at 1 [Doc. No. 33].) In the magistrate judge's June 20, 2014 order, the magistrate judge stated that " on or before July 31, 2014 . . . [i]f no settlement is reached, [MasterBrand] shall file its answer or other response to the Complaint." (06/20/14 Magistrate Judge Order [Doc. No. 9].)
Although MasterBrand filed a Motion to Transfer Venue and a Motion to Stay Proceedings, MasterBrand did not file a 12(b) motion or an answer. Federal Rule of Civil Procedure 55(a) states that " [w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default." See Fed.R.Civ.P. 55(a). In turn, Rule 55(b) allows a court to enter judgment of default upon a party's request. See Fed.R.Civ.P. 55(b). Accordingly, Plaintiff contends that it is entitled to an entry of default, pursuant to Rule 55. (See Pl.'s Mem. at 5 [Doc. No. 33]). The Court disagrees.
Entry of default judgment is at the discretion of the Court. See Ackra Direct Marketing Corp. v. Fingerhut Corp., 86 F.3d 852, 857 (8th Cir. 1996). " The entry of default judgment is not favored by the law, and should be a rare judicial act." Jones Truck Lines, Inc. v. Fosters Truck & Equip. Sales, Inc., 63 F.3d 685, 688 (8th Cir. 1995) (internal quotations and citations omitted). " When determining whether a Default Judgment is appropriate, the Court must consider whether the allegedly defaulting party has filed a responsive Answer, or other pleading." Patil v. Minnesota State University, Mankato, No. 12-cv-1052 (JRT/JSM), 2012 WL 7807608, at *12 (D. Minn. Dec. 10, 2012) (internal quotations and citations omitted).
Moreover, " '[w]here a defendant appears and indicates a desire to contest an action, a court may exercise its discretion
to refuse to enter default, in accordance with the policy of allowing cases to be tried on the merits.'" Wendt v. Pratt, 154 F.R.D. 229, 230 (D. Minn. 1994) (quoting Lee v. Brotherhood of Maintenance of Way Employees, 139 F.R.D. 376, 381 (D. Minn. 1991)); see also 10 Charles A. Wright, Arthur R. Miller & Mary K. Kane, Federal Practice and Procedure § 2682, at 411 (2d ed. 1983). The entry of a default judgment " is only appropriate when there has been a clear record of delay or contumacious conduct." Gold's Gym Licensing, LLC v. K-Pro Mktg. Grp., Inc., No. 09-cv-1211 (PJS/RLE), 2010 WL 391310, at *2 (D. Minn. Jan. 26, 2010) (citing United States on Behalf of and for the Use of Time Equip. Rental & Sales, Inc. v. Harre, 983 F.2d 128, 130 (8th Cir. 1993), and Taylor v. City of Ballwin, Missouri, 859 F.2d 1330, 1332 (8th Cir. 1988)).
Applying the standard set forth above, the Court finds that default judgment is inappropriate in this case. By participating in a full-day mediation, and filing two motions before this Court, Defendant " appears and indicates a desire to contest [this] action."
Wendt, 154 F.R.D. at 230; Lee, 139 F.R.D. at 381. In contrast, MasterBrand does not have a " clear record of delay or contumacious conduct." Gold's Gym,
2010 WL 391310, at *2. Therefore, the Court exercises its discretion to refuse to enter default, " in accordance with the policy of allowing cases to be tried on the ...