Medicap Pharmacies, Inc. v. Faidley

416 F. Supp. 2d 678, 2006 U.S. Dist. LEXIS 6889, 2006 WL 401718
CourtDistrict Court, S.D. Iowa
DecidedFebruary 22, 2006
Docket4:05 CV 00586
StatusPublished
Cited by10 cases

This text of 416 F. Supp. 2d 678 (Medicap Pharmacies, Inc. v. Faidley) is published on Counsel Stack Legal Research, covering District Court, S.D. Iowa primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Medicap Pharmacies, Inc. v. Faidley, 416 F. Supp. 2d 678, 2006 U.S. Dist. LEXIS 6889, 2006 WL 401718 (S.D. Iowa 2006).

Opinion

ORDER ON MOTION TO TRANSFER VENUE

PRATT, District Judge.

Before the Court is Defendants’ Motion to Transfer (Clerk’s No. 9), wherein Defendants request the Court transfer venue in the above-captioned case from the Central Division of the Southern District of Iowa to the United States District Court for the District of Arizona. Plaintiff filed a resistance to the motion (Clerk’s No. 13) and Defendants replied (Clerk’s No. 15). The matter is fully submitted.

I. FACTUAL BACKGROUND

Randall and Dianna Faidley (the “Faid-leys”) are a married couple, residing in Yuma, Arizona, with their four young children. Both Faidleys have college educations, though neither has attended business or law school. Mrs. Faidley is a licensed pharmacist, while Mr. Faidley works for the Department of Defense at the U.S. Army Proving Ground in Yuma, Arizona. Neither have ever lived or owned real property in Iowa, but both have visited Iowa approximately four or five times in relation to their business with Medicap Pharmacies, Inc. (“MPI”).

MPI is a corporation organized under the laws of Iowa with its headquarters located in Iowa. MPI became a wholly-owned subsidiary of Medicine Shoppe International, Inc. (“Medicine Shoppe”) in December 2003. Medicine Shoppe is headquartered in St. Louis, Missouri and is a Cardinal Health, Inc. company. Cardinal Health, based in Dublin, Ohio, acquired Medicine Shoppe in November 1995. MPI is a “national franchisor,” having developed a marketing and business operations system that provides training, services and assistance to franchisees for the operation of prescription pharmacies known individually as “Medicap” pharmacies.

On January 23, 1998, the Faidleys entered into an agreement with MPI to operate a Medicap Pharmacy in Yuma, Arizona, for a period of twenty years. The agreement provided, amongst other things, that the two mile radius around their Med-icap store, located at 1651 South Arizona *681 Avenue, Yuma, Arizona, would be designated as the Faidleys’ exclusive territory, and that no other Medicap franchisees would be granted license to operate a Medicap pharmacy within that territory. Additionally, the twenty-two page franchise agreement provided that the Faid-leys would establish a Medicap Pharmacy at their own expense and maintain the pharmacy as a Medicap store throughout the term of the franchise agreement. The franchise agreement provided that the Faidleys would “[rjefrain from selling, giving away, or otherwise encumbering any of the records or files related to customers” of their Medicap store, “except in connection with a sale or transfer” of the franchise agreement. The Faidleys were to pay MPI an ongoing license fee of four percent, as well as a national marketing fee of one percent of the gross monthly receipts of their Medicap store, throughout the term of the franchise agreement. Upon expiration, termination, or assignment of the agreement, Defendants as franchisees were subject to a two-year non-compete clause, which prohibited them from owning, operating, consulting with, or being employed by any drug store or pharmacy located within a two mile radius of the franchised Medicap pharmacy. The franchise agreement also provided that certain mediation requirements be met before the filing of suit and that the parties explicitly waive any right to trial by jury. Of particular importance in the present motion, the franchise agreement contained a forum-selection clause stating:

No action or preceding [sic] 'involving this Agreement or any aspect of the relationship between the parties or their agents or affiliates shall be commenced by any party except in Polk County, Iowa, nor shall any action commenced in any such court be removed or transferred to any other state o[r] federal court. Notwithstanding the foregoing, if the Company is permitted to seek in-junctive relief under this Agreement, the Company may, at its option, bring such action in the county in which the Franchisee’s Medicap Pharmacy store is located.

Franchise Agreement, Section XIV (11).

Upon signing the franchise agreement with Medicap, the Faidleys executed a personal guaranty, wherein they agreed to be jointly and severally bound by all covenants, obligations and commitments contained in the franchise agreement. From 1998 to October 6, 2005, the Faidleys operated the Yuma, Arizona, Medicap pharmacy in accordance with the terms of the franchise agreement. On October 6, 2005, according to Plaintiffs Complaint, the Faidleys sold the assets of their Medicap pharmacy, including their customer prescription list, to the Target Corporation for the sum of $260,000. The Faidleys subsequently sold the Medicap pharmacy’s inventory to Target as well, following evaluation by an inventory service. According to the Complaint, Dianna Faidley accepted employment, and is currently employed, by an in-store pharmacy at a Target store located less than two miles from the franchised Medicap location. Additionally, the telephone number used by the franchised Medicap pharmacy now rings directly into the Target pharmacy where Dianna Faid-ley is employed.

On October 25, 2005, MPI filed the present action, alleging that Plaintiffs have sold the Medicap pharmacy assets and have ceased operating the pharmacy, in violation of the franchise agreement. Specifically, Plaintiff claims in Count One that Dianna Faidley breached the licensing agreement by failing to comply with requirements regarding MPI’s right of first refusal as to any sale of pharmacy assets, and by failing to get MPI’s approval prior to the sale. Additionally, Plaintiff claims *682 that Dianna Faidley has violated the non-compete provision of the agreement, and should be enjoined from continuing her employment at Target’s pharmacy.

Count Two of Plaintiffs Complaint asserts breach of the license agreement in the failure of Defendants to deliver to MPI original records of all patients and customers of the Medicap pharmacy who became customers during the pendency of the franchise agreement, and in the failure of Defendants to return MPI’s Policy and Procedures Manual. Plaintiff claims that these breaches of the licensing agreement have caused it to suffer the loss of goodwill, loss of existing and potential customers, harm to reputation, and loss of valued assets in an amount exceeding $75,000.

Finally, Count Three of Plaintiffs Complaint alleges breach of contract based on the reasonable inference that Defendants have permanently closed their Medicap location prior to the expiration of the twenty-year franchise agreement. According to Plaintiff, the store closure and sale of assets to a competitor pharmacy within a two-mile radius has caused irreparable harm to MPI due to loss of customers and goodwill. MPI claims that Defendants’ actions have “effectively precluded it from operating a pharmacy within that territory.” Plaintiff seeks compensatory damages, attorney’s fees and costs.

II. LAW AND ANALYSIS

A. Venue Generally

Jurisdiction of the federal court in this matter is premised on Plaintiffs claim of diversity jurisdiction pursuant to 28 U.S.C. § 1332.

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Bluebook (online)
416 F. Supp. 2d 678, 2006 U.S. Dist. LEXIS 6889, 2006 WL 401718, Counsel Stack Legal Research, https://law.counselstack.com/opinion/medicap-pharmacies-inc-v-faidley-iasd-2006.