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Garrett v. Rothschild

United States District Court, W.D. Washington, Tacoma

November 6, 2019

Russell D. Garrett, Chapter 7 Trustee for the bankruptcy estate of Robert and Stephanie Taylor, Plaintiff,
v.
MORGAN ROTHSCHILD f/k/a MORGAN HENNING, HALEY HENNING, and FRANNET GLOBAL, LLC, Defendants.

          ORDER DENYING DEFENDANT'S MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION, GRANTING DEFENDANT'S MOTION TO COMPEL ARBITRATION, AND DENYING DEFENDANT'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM AS MOOT

          BENJAMIN H. SETTLE UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on Defendant Hayley Henning's (“Henning”) motion to dismiss or compel arbitration. Dkt. 45. The Court has considered the pleadings filed in support of and in opposition to the motion and the remainder of the file and hereby denies the motion to dismiss for lack of personal jurisdiction, grants the motion to compel arbitration, and denies the motion to dismiss for failure to state a claim as moot for the reasons stated herein.

         I. PROCEDURAL HISTORY

         On September 17, 2018, Robert Sean Taylor (“Sean Taylor”) and Stephanie Taylor (“Stephanie Taylor”) (collectively “the Taylors”) filed suit against Morgan Rothschild f/k/a Morgan Henning (“Rothschild”), his ex-spouse Haley Henning (“Henning”), and John Does 1-10 in the Washington Superior Court for Clark County. Dkt. 1-1. On October 25, 2018, Rothschild removed the case to this Court. Dkt. 1. On November 16, 2018, Rothschild moved to dismiss for lack of personal jurisdiction or in the alternative to compel arbitration and stay the case. Dkt. 7. On December 11, 2018, the Court entered a stay pursuant to the parties' stipulation for the parties to pursue settlement discussions and for the Taylors' counsel to seek litigation approval from the Bankruptcy Court. Dkts. 9, 10. On January 7, 2019, the parties agreed to lift the stay and renote the motion. Dkt. 11. On February 24, 2019, the Court granted the Taylors' motion to substitute Chapter 7 Trustee Russell Garrett (“Plaintiff”) into the action as Plaintiff in place of the Taylors. Dkt. 19.

         On May 2, 2019, the Court denied Rothschild's motion to dismiss for lack of personal jurisdiction or compel arbitration. Dkt. 25. On May 16, 2019, Rothschild filed a second motion to change venue and compel arbitration. Dkt. 27. On May 30, 2019, Plaintiff filed an amended complaint with leave of the Court adding claims against Defendant FranNet Global, LLC (“FranNet”). Dkts. 31, 33. On July 12, 2019, the Court granted Rothschild's motion to compel arbitration. Dkt. 42.

         On July 29, 2019, Plaintiff filed a notice of voluntary dismissal as to FranNet. Dkt. 43. On August 28, 2019, Henning filed the instant motion to dismiss or compel arbitration. Dkt. 45. On September 16, 2019, Plaintiff responded. Dkt. 49. On September 20, 2019, Henning replied. Dkt. 53.

         II. FACTUAL BACKGROUND

         This case involves a dispute between a franchisor and disenchanted franchisees. The Court summarized the facts relevant to all parties in prior orders but will focus in this order on the facts relevant to Henning. Dkts. 25, 42. Some of these facts are alleged in the amended complaint, Dkt. 33, and additional facts are contained in declarations and exhibits submitted with this motion.

         Rothschild runs Party Princess International (“Party Princess”). Dkt. 1-1, ¶ 2. Henning, his former spouse, worked with Rothschild on the business and advised on franchises. Id. Plaintiff alleges that Henning acted as a founder and active franchise advisor of Party Princess. Dkt. 33, ¶ 2. Henning declares that though she is “the creative founder of the Party Princess concept, ” she did not have a formal role in the company between 2015 and 2018. Dkt. 47, ¶ 2. Rothschild “explained that he was in charge of management and operations, and [Henning] handled the creative side and was the heart of the business.” Dkt. 33, ¶ 20. The Franchise Disclosure Document the Taylors received identified Henning as the founder of Party Princess and the CEO of its parent company, Rothschild Enterprises, Inc. Dkt. 8-1 at 90-91.

         At some point in 2015, Sean Taylor consulted a franchise broker about investment opportunities who referred him to Rothschild. Dkt. 1-1, ¶ 15. At this time, all parties resided in California. See Dkt. 12 at 2, 3; Dkt. 16 at 6. Sean Taylor and Rothschild spoke by phone, and Rothschild “informed Taylor that a Google advertising campaign alone in Taylor's prospective territory [partially in Washington] would generate at least $100, 000 per year for Taylor, ” but Rothschild “could not put the projections in writing due to regulatory prohibitions.” Dkt. 1-1, ¶ 17. Rothschild also told Sean Taylor that meeting Party Princess's requirement that each franchise host 40 parties per month would be “easily achievable.” Id. ¶ 18.

         Prior to purchasing a franchise, the Taylors attended an informational event about Party Princess where they met Henning, who was married to Rothschild at that time. Dkt. 33, ¶ 19. Sean Taylor declared that at this event he spoke to Henning, told her he was planning to move to Vancouver, WA with his wife and looking for a home business, and Henning responded with an extensive history of her work with Party Princess, her partnership with her husband Rothschild, and their support for husband-and-wife teams like theirs. Dkt. 51, ¶ ¶ 2-3. Henning declared that she recalled speaking to Sean Taylor at the event but only recalled him “mentioning they were moving.” Dkt. 47, ¶ 12.

         At a dinner following the event, Plaintiff alleges that Henning and Stephanie Taylor “made a connection and ended up exchanging phone numbers so Stephanie could ask [Henning] more questions about the franchise.” Dkt. 33, ¶ 19. After the event, Henning and Stephanie Taylor interacted through phone calls, text messages, and meetings with their children present. Id. ¶ 20. Henning declared that she had only a personal interest in Stephanie Taylor and they connected about their health-focused lifestyles and positions on vaccinating children. Dkt. 47, ¶ ¶ 5-6.

         Sean Taylor declared that in November 2015, he and Stephanie Taylor met with Rothschild in his office where he referenced himself and Henning as a team and represented how much revenue the Taylors should expect to generate in Vancouver, WA. Dkt. 51, ¶ 9. Henning joined for lunch after the meeting, and Sean Taylor declared that there, Rothschild and Henning said the Taylors “were they [sic] type of people that they wanted to build this business with.” Id. ¶ 10.

         On November 23, 2015, a representative from FranNet contacted Rothschild to inquire whether Party Princess had a signing and deposit date for Sean Taylor. Dkt. 52-1. Rothschild responded saying he would keep the representative updated and that Henning ...


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