The Franchise Memorandum

A federal court in Pennsylvania granted in part and denied in part a licensee’s motion to dismiss the licensor’s breach of contract, fraud, and Lanham Acts claims. Westbrook Monster Mix Co. v. Easy Gardener Prods., Inc., 2024 WL 816243 (E.D. Pa. Feb. 27, 2024). Plaintiff Westbrook Monster Mix exclusively licensed its deer feed recipe, brand, and logo to defendant, Easy Gardener Products in exchange for a royalty. The parties later amended the license agreement, eliminating the royalty requirement in favor of Easy Gardener employing Westbrook’s CEO. After the CEO allegedly discovered problems with the product being sold, Easy Gardener sought to terminate the license agreement.  Westbrook and the CEO sued Easy Gardener for, among other things, breach of contract, fraud, and Lanham Act violations. Easy Gardener moved to dismiss all claims except breach of contract. 

The court partially granted Easy Gardener’s motion. It dismissed Westbrook’s fraud claims insofar as they were premised on alleged breaches of the implied covenant of good faith and fair dealing, noting that the complaint failed to plead the “special relationship” between Westbrook and Easy Gardener required under the applicable state law. But the court denied Easy Gardener’s motion as it related to certain alleged fraudulent misrepresentations. While some of the alleged misrepresentations were only “puffery” or expressions of opinion, quantitative or factual statements like “adding hundreds of stores” to grow the brand, having contacted every person on Westbrook’s customer list, or maintaining the deer feed formula “exactly as prescribed” could support a claim for fraud.  Furthermore, the court allowed Westbrook’s allegations concerning the falsity of Easy Gardener’s statements and its intent to proceed on circumstantial evidence. Finally, the court denied Easy Gardener’s motion to dismiss Westbrook’s Lanham Act claims, finding that Westbrook’s claims that Easy Gardener incorrectly manufactured the deer feed, falsely associated the incorrect product with Westbrook’s product name, and marketed out-of-date product could affect the reputation of the product in the marketplace and, therefore, supported a Lanham Act claim, even if the same facts also supported a breach of contract claim.