Baird v. Osteostrong Franchising, LLC.

CourtDistrict Court, E.D. California
DecidedMarch 9, 2022
Docket2:20-cv-02010
StatusUnknown

This text of Baird v. Osteostrong Franchising, LLC. (Baird v. Osteostrong Franchising, LLC.) is published on Counsel Stack Legal Research, covering District Court, E.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Baird v. Osteostrong Franchising, LLC., (E.D. Cal. 2022).

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 JOHN P. BAIRD; BRET KURIHARA; OS No. 2:20-cv-02010-TLN-DMC NEW MEXICO, LLC; BNS RD, LLC; 12 SEAN SIMPSON; CHARLA SIMPSON; MARY JO MCHENRY; and K& L 13 WELLNESS, LLC, ORDER 14 Plaintiffs, 15 v. 16 OSTEOSTRONG FRANCHISING, LLC; KYLE ZAGRODZKY; and JOHN 17 JAQUISH, 18 Defendant. 19 20 This matter is before the Court on Defendants OsteoStrong Franchising, LLC 21 (“OsteoStrong”) and Kyle Zagrodzky’s (“Zagrodzky”) (collectively, “Defendants”) Motion to 22 Transfer and Dismiss.1 (ECF No. 16.) Plaintiffs John P. Baird (“Baird”), Bret Kurihara 23 (“Kurihara”), OS New Mexico, LLC (“OS New Mexico”), BNS RD, LLC (“BNS RD”), Sean 24 Simpson, Charla Simpson, Mary Jo McHenry (“McHenry”), and K&L Wellness, LLC’s (“K&L”) 25 (collectively, “Plaintiffs”) filed an opposition. (ECF No. 18.) Defendants filed a reply. (ECF 26 No. 20.) For the reasons set forth below, Defendants’ motion is GRANTED. 27 1 This action involves three named Defendants. Defendant John Jaquish (“Jacquish”) did 28 not join in this motion. 1 I. FACTUAL AND PROCEDURAL BACKGROUND2 2 OsteoStrong is a company that sells franchises for bone density improvement centers that 3 utilize osteogenic loading equipment.3 (ECF No. 1 ¶ 22.) The equipment is branded as 4 “Spectrum equipment” pursuant to a non-exclusive license from Performance Health Systems. 5 (Id. at ¶¶ 19, 20.) OsteoStrong claims Spectrum equipment increases bone density, prevents 6 osteoporosis, and “diagnose[s], cure[s], mitigate[s], treat[s], or prevent[s] medical diseases.” (Id. 7 at ¶¶ 16, 89.) 8 Plaintiffs are small business owners and franchisees of OsteoStrong centers throughout the 9 United States. (ECF No. 4 ¶¶ 1, 2.) K&L operates an OsteoStrong franchise in California, but 10 the other seven Plaintiffs — Baird, Kurihara, McHenry, OS New Mexico, BNS RD, and Sean 11 Simpson and Charla Simpson (collectively, “non-California Plaintiffs”) — operate OsteoStrong 12 franchises in other states. (ECF No. 1 ¶¶ 4–10.) Plaintiffs allege OsteoStrong “intentionally 13 omit[s] certain information, mak[es] affirmative misrepresentations, and intentionally convey[s] 14 false information prior to executing the [franchise agreement] in an effort to induce potential 15 franchisees into signing the agreement.” (ECF No. 4 ¶ 35.) Specifically, Plaintiffs were harmed 16 by Defendants’ intentional omission of information regarding known bankruptcies and lawsuits in 17 Defendants’ Franchise Disclosure Document (“FDD”),4 their affirmative misrepresentation of the 18 patent rights and proprietary nature of OsteoStrong’s equipment, and their intentional 19 misrepresentation of their organizational relationship with motivational speaker Tony Robbins. 20 (Id. at ¶¶ 36, 42–47, 48–58, 59–65.) 21 2 The factual and procedural background is taken from the Court’s May 4, 2021 Order 22 denying Plaintiffs’ Motion for Preliminary Injunction. (ECF No. 21.) 23 3 “Osteogenic loading” exercises are defined in the Complaint as equipment “intended to 24 measure forces on bone and muscle, and through the application of force, or loads, foster strengthening of both bone and muscle tissue.” (ECF No. 1 at ¶ 17.) 25

4 As Plaintiffs note, in accordance with the Federal Trade Commission’s Franchise Rule, 16 26 C.F.R. Parts 436 and 437, a franchisor is required to serve a complete and accurate FDD on each 27 potential franchisee at least 14 days before entering into a Franchise Agreement (“FA”) with the potential franchisee. (Id. at ¶ 23.) Plaintiffs also note that they received and relied upon FDDs 28 issued by OsteoStrong. (Id. at ¶¶ 37–41.) 1 Plaintiffs further allege that OsteoStrong also “create[s] an impossibility of performance 2 under the [franchise agreement] and negligently expos[es] franchisees to criminal and civil 3 liability.” (Id. at ¶ 35.) Specifically, OsteoStrong “violates [f]ederal law by marketing its system 4 as a medical treatment,” and further fails to comply with the Federal Food, Drug, and Cosmetic 5 Act (“FDCA”) and the U.S. Food and Drug Administration (“FDA”) regulations for medical 6 devices. (Id. at ¶¶ 67, 68–88.) Additionally, OsteoStrong “requires franchisees to use these same 7 marketing materials and practices” and “may unilaterally terminate the FA with the [f]ranchisee 8 for failure to do so.” (Id. at ¶¶ 67, 110.) Plaintiffs also allege that the FAs require them to 9 comply with “all applicable laws, regulations, codes, and ordinances including, without 10 limitation, all governmental regulations relating to sales and marketing, which includes the FDA.” 11 (Id. at ¶ 113.) However, Plaintiffs believe that performance under the FA is impossible because 12 OsteoStrong mandates the usage of marketing materials and practices that “[do] not comply with 13 all applicable laws, regulations, codes and ordinances.” (Id. at ¶ 114.) Plaintiffs assert that had 14 they been aware the marketing materials and practices provided to them were not in compliance 15 with local and federal laws, they would not have signed the FAs. (Id. at ¶ 120.) 16 On October 7, 2020, Plaintiffs filed a Complaint in this Court, alleging claims for: (1) 17 common law fraud; (2) common law fraudulent inducement; (3) common law negligent 18 misrepresentation by OsteoStrong; (4) common law negligent misrepresentation by Zagrodzky 19 and Jaquish in their individual capacity; (5) unjust enrichment; (6) violations of the California 20 Unfair Competition Law (“UCL”) (Cal. Bus. & Prof. Code §§ 17200–210); (7) violations of the 21 California Corporations Code; (8) violations of 15 U.S.C. § 52; (9) violations of 35 U.S.C. § 292; 22 (10) declaratory judgment that the franchise agreements are void as contracts for an illegal 23 purpose or otherwise contrary to public policy; and (11) preliminary and permanent injunctive 24 relief. (See ECF No. 1 at 36–50.) On January 29, 2021, Defendants filed the instant motion to 25 transfer and dismiss. (ECF No. 16.) 26 II. STANDARD OF LAW 27 “For the convenience of parties and witnesses, in the interest of justice, a district court 28 may transfer any civil action to any other district or division where it might have been brought or 1 to any district or division to which all parties have consented.” 28 U.S.C. § 1404(a). The purpose 2 of 28 U.S.C. § 1404(a) (“§ 1404(a)”) “is to prevent the waste ‘of time, energy and money’ and ‘to 3 protect litigants, witnesses, and the public against unnecessary inconvenience and 4 expense[.]’” Van Dusen v. Barrack, 376 U.S. 612, 616 (1964) (quoting Cont’l Grain Co. v. 5 Barge FBL-585, 364 U.S. 19, 26–27 (1960)). In considering a transfer pursuant to § 1404(a), the 6 district court undertakes an “individualized, case-by-case consideration of convenience and 7 fairness.” Jones v. GNC Franchising, Inc., 211 F.3d 495, 498 (9th Cir. 2000) (internal citation 8 omitted). 9 III. ANALYSIS 10 With respect to the non-California Plaintiffs, Defendants argue the action should be 11 dismissed based on improper venue under Rule 12(b)(3) or, in the alternative, the action should 12 be transferred under the forum selection clauses in the non-California Plaintiffs’ franchise 13 agreements and § 1404(a). (See ECF No.

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Bluebook (online)
Baird v. Osteostrong Franchising, LLC., Counsel Stack Legal Research, https://law.counselstack.com/opinion/baird-v-osteostrong-franchising-llc-caed-2022.