Caribbean Restaurants, LLC v. Burger King Corp.

23 F. Supp. 3d 70, 2014 U.S. Dist. LEXIS 76352, 2014 WL 2465133
CourtDistrict Court, D. Puerto Rico
DecidedJune 3, 2014
DocketCiv. No. 14-1200(PG)
StatusPublished
Cited by13 cases

This text of 23 F. Supp. 3d 70 (Caribbean Restaurants, LLC v. Burger King Corp.) is published on Counsel Stack Legal Research, covering District Court, D. Puerto Rico primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Caribbean Restaurants, LLC v. Burger King Corp., 23 F. Supp. 3d 70, 2014 U.S. Dist. LEXIS 76352, 2014 WL 2465133 (prd 2014).

Opinion

OPINION AND ORDER

JUAN M. PEREZ-GIMENEZ, Senior District Judge.

Before the court is the defendant’s motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) or, in the alternative, to transfer venue to the United States District Court for the Southern District of Florida pursuant to 28 U.S.C. § 1404 (“Section 1404”). See Docket No. 37. For the reasons set forth below, the court GRANTS the defendant’s motion.

I. BACKGROUND

Plaintiff Caribbean Restaurants, LLC (hereinafter “Plaintiff’ or “Caribbean”) is a Delaware limited liability company with its principal place of business located in Cataño, Puerto Rico. See Docket No. 1, ¶ 1. On the other hand, defendant Burger Bang Corporation (hereinafter “Defendant” or “BKC” or “Burger King”) is a Florida corporation with its principal place of business located in Miami, Florida. Id. at ¶2. As it stems from the complaint, between May 24, 1976 and December 1, 2013, Caribbean, as franchisee, and BKC, as franchisor, entered into 182 franchise agreements pursuant to which BKC licensed to Caribbean the right to operate 182 Burger King restaurants in Puerto Rico. Id. at ¶ 7. The 182 Franchise Agreements are generally comprised of two forms of agreement: Forty-One (41) of the franchise agreements are the “Old Form Franchise Agreement” and One Hundred Forty-One (141) of the Franchise Agreements are the “New Form Franchise Agreement.”

On March 12, 2014, Caribbean filed the above-captioned diversity suit seeking damages and injunctive and declaratory relief. See Docket No. 1. In summary, Caribbean claims that BKC violated the Dealer’s Contracts Act Law No. 75 of June 24,1964 (“Law 75”), P.R. Laws Ann. tit. 10, §§ 278 et seq., and breached some of the existing franchise agreements, the implied covenant of good faith and fair dealing, and the obligation to negotiate in good faith. Id. Specifically, the controversy herein stems from Burger King’s alleged attempt to take control over Caribbean’s expenditure of funds for advertising, promotion and public relations.

To that effect, Section 9(3)-(5) of the Old Form Franchise Agreement states:

(3) The Franchisee shall expend not less than four (4) percent of Gross Sales on advertising, promotion and public relations....
(4) If at any time there is more than one franchisee in Puerto Rico, Burger King shall have the right by notice to the Franchisee to bring the following subclause (5) into effect in relation to all Franchise Agreements and new franchise agreements with the Franchisee in Puerto Rico including those assigned or transferred.
(5) The Franchisee shall by the fifteenth (15th) day of each month pay to Burger King or its designee, in the currency of the country where the Franchised Restaurant is located, an amount calculated by applying the percentage stated in the Schedule to the Gross Sales for the preceding calendar month. This sum, less administrative expenses and any applicable taxes, will be used for advertising, sales promotion and public relations for the benefit of the Franchised Restaurant including creative, production, media and clear-[73]*73anee costs of advertising and sales promotion materials, and market research expenses directly related to the development and evaluation of the effectiveness of advertising and sales promotion. Alternatively, Burger King may combine these moneys with payments from other Burger King Restaurants to form an ad fund which will be used on a fair and reasonable basis for advertising, sales promotion and public relations in Puerto Rico. The Franchisee is encouraged to participate in the planning of advertising, sales promotions and public relations for the Franchised Restaurant; however, all expenditures of such payment moneys shall be at the discretion of Burger King. In addition to the percentage of Gross Sales, the Franchisee agrees to transfer to Burger King or its designee for inclusion in the market fund for the area in which the Franchised Restaurant is located all advertising or promotional allowances given by suppliers of products which are sold in the Franchised Restaurant under a brand name such payment to be made to Burger King or its designee by the fifteenth (15th) day of the month following receipt of the said allowance.

See Docket No. 1-8 (emphasis ours). On the other hand, the Section 9.2 of the New Form Franchise Agreement states, in relevant part:

9.2. I Direct Expenditure Obligation. The Franchisee shall expend, in the country where the Franchised Restaurant is located, monthly advertising, sales promotion and public relation services for the benefit of Burger King Restaurants in the country where the Franchised Restaurant is located, including creative, production, media and clearance costs of advertising and sales promotion materials, and marketing research expenses directly related to the development and evaluation of the effectiveness of advertising and sales promotion. The amount expended for such advertising and sales promotion and public relations by the Franchisee will, at a minimum, be equal to the amount calculated by applying the advertising percentage stated in Schedule I to the Gross Sales for the preceding calendar month. Prior to hiring an advertising agency or issuing any promotion or advertisement, the Franchisee shall obtain the prior approval of BKC. At the request of BKC, the Franchisee shall provide BKC with a monthly and year-to-date accounting of all such expenditures together with other financial statements required pursuant to Section 10 below. 9.2.2 BKC’s Right to Administer Funds. Notwithstanding the language in Subparagraph 9.2.1 above, BKC and the Franchisee agree that at any time during the Term of this Agreement BKC may, in its sole and absolute discretion, require that the Franchisee, by the fifteenth (15th) day of each month, contribute into one or more advertising funds (collectively, the “Advertising Fund”) at the location(s) and in the manner specified by BKC or its designee from time to time and in the currency of the country where the Franchised Restaurant is located, an amount calculated by applying the advertising percentage stated in Schedule I to the Gross Sales for the preceding calendar month. Any monies contributed into the Advertising Fund under this Subparagraph shall be administered by BKC or its designee as provided in Sub-paragraph 9.2.3 below. In the event BKC requires and the Franchisee makes these contributions, the direct expenditure obligation of Subparagraph 9.2.1 above will be deemed fully satisfied.

See Docket No. 1-9 (emphasis ours).

According to the Plaintiff, BKC informed Caribbean on March 5, 2014 that [74]*74the latter should imminently begin contributing all of its required monthly advertising expenditure, to wit, 4% of monthly gross sales from all of its 182 restaurants to Burger King. See Docket No. 1 at ¶¶ 26-27. Shortly thereafter, the Plaintiff filed suit claiming that Defendant’s actions constitute a breach of contract and a violation of Law 75 to the extent they are in detriment to their established relationship.

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23 F. Supp. 3d 70, 2014 U.S. Dist. LEXIS 76352, 2014 WL 2465133, Counsel Stack Legal Research, https://law.counselstack.com/opinion/caribbean-restaurants-llc-v-burger-king-corp-prd-2014.