A federal court in Michigan recently granted a motion to dismiss for lack of personal jurisdiction against one owner of a franchisor, while denying the motion to dismiss against the other owner and granting the franchisor’s motion to compel arbitration. BDD Grp., LLC, Plaintiff, v. Crave Franchising, LLC, 2024 WL 4231195 (E.D. Mich. Sept. 18, 2024). Plaintiff BDD Group LLC opened a Michigan hot dog and barbecue franchise from Crave Franchising, LLC, which is jointly owned by a married couple living in New York. After entering into a Franchise Agreement with Crave, BDD Group filed a lawsuit against Crave and its owners in a Michigan federal court, alleging the defendants made numerous misrepresentations in order to induce BDD Group into executing the Franchise Agreement.
Both owners brought motions to dismiss, alleging that the Michigan court lacked personal jurisdiction over them. They also brought a motion to compel arbitration, as the Franchise Agreement contained a mandatory arbitration clause. The court granted the wife’s motion to dismiss, noting that the claims against her centered on her alleged failure to inform BDD Group of certain facts. Such a lack of communication does not give rise to personal jurisdiction, the court found. However, the court denied the husband’s motion to dismiss because he had numerous contacts with BDD Group in Michigan, the contacts allegedly contained misrepresentations that formed the basis of the claim, and he was aware that BDD Group was located in Michigan. After dismissing the claims against the wife, the court stayed the proceedings and granted the husband’s motion to compel arbitration, as the Franchise Agreement had a clear and unambiguous arbitration clause.