United States District Court, D. Delaware
R. PALLON UNITED STATES MAGISTRATE JUDGE
before the court in this fraud action is a motion to dismiss
for failure to state a claim upon which relief can be granted
pursuant to Federal Rule of Civil Procedure 12(b)(6) filed by
defendants Little Nest Group, LLC ("Little Nest")
and Laura Novak Meyer ("Ms. Meyer") (collectively,
"defendants"). (D.I. 8) The court has jurisdiction
pursuant to 28 U.S.C. § 1332(a). For the following reasons,
the defendants' motion to dismiss is
Wagenbrenner ("plaintiff) is a citizen and resident of
the state of Washington. (D.I. 1 at ¶ 4) Little Nest is
a limited liability company formed under the laws of
Delaware, with its principal place of business in Glen Mills,
Pennsylvania. (Id. at ¶¶ 5, 10; D.I. 9,
Ex. B at 2) Ms. Meyer is a citizen and resident of the state
of Delaware and the sole member of Little Nest. (D.I.I at
Procedural History of Consolidated Cases
November 7, 2017, plaintiff originally filed this action
against defendants Little Nest, Ms. Meyer, and Noelle Peter
("Ms. Peter") for money damages, punitive damages,
and attorney's fees as a result of alleged misleading and
inflated revenue prospects concerning a franchising
opportunity. (D.I. 1) On January 17, 2018, defendants filed a
motion to dismiss pursuant to Federal Rules of Civil
Procedure 12(b)(6) and 12(b)(2). (D.I. 8) On February 26,
2018, plaintiff filed a notice of dismissal of complaint
against Ms. Peter without prejudice. (D.I. 20) The court
approved the dismissal of Ms. Peter on February 27, 2018.
(D.I. 21) On March 6, 2018, the parties consented to the
jurisdiction of a magistrate judge. (D.I. 24)
3, 2018, Ms. Meyer filed for bankruptcy under Chapter 7 of
the Bankruptcy Code in the United States Bankruptcy Court for
the District of Delaware. (D.I. 30) On July 10, 2018, the
court stayed and administratively closed the case with leave
to reopen pursuant to section 362(a) of the Bankruptcy Code.
(D.I. 31) On September 28, 2018, plaintiff filed an adversary
complaint in the Bankruptcy Court (the "Adversary
Proceeding"), asserting common law intentional and
negligent fraud and violation of Washington's Franchise
Investment Protection Act ("HPA"). (C.A. No.
18-1528, D.I. 1-1 at 4) The Adversary Proceeding was filed
only against Ms. Meyer as the individual debtor.
(See D.I. 32)
October 2, 2018, the Bankruptcy Court entered an Order of
Discharge. (C.A. No. 18-1528, D.I. 9 at 2) On October 3,
2018, plaintiff filed a motion to withdraw the reference of
Adversary Proceeding 18-50872 (BLS) to the Bankruptcy Court
and to consolidate the adversary case with the case at bar.
(C.A. No. 18-1528-SRF, D.I. 1) On November 14, 2018,
defendant Meyer consented to the consolidation of the present
action and the related earlier-filed action, Wagenbrenner v.
Little Nest Group, LLC, et al., C.A. No. 18-1528-SRF (the
"consolidated case"). (C.A. No. 18-1528, D.I. 5) On
November 20, 2018, the reference of the Adversary Proceeding
to the Bankruptcy Court was withdrawn and the Adversary
Proceeding was consolidated with this action. (D.I. 32) The
stay was lifted on January 8, 2019 in accordance with the
status report filed in the consolidated case. (C.A. No.
18-1528, D.I. 9)
case arises out of defendants' statements and business
dealings with the plaintiff leading up to plaintiffs
investment in a Little Nest photography studio franchise.
Plaintiff alleges, in Count One of the complaint, a claim of
common law fraud against all defendants based on allegedly
misleading statements meant to induce her into becoming a
franchisee. (D.I. 1 at ¶¶ 20-30) Count Two of the
complaint alleges negligent misrepresentation against all
defendants based on alleged misrepresentations upon which
plaintiff relied. (Id. at ¶¶ 31-34) Count
Three of the complaint alleges violations of Washington's
FIPA against all defendants for selling plaintiff a franchise
after presenting her with allegedly misleading information.
(Id. at ¶¶ 35-41)
2016, plaintiff became interested in purchasing a Little Nest
franchise. (Id. at ¶ 8) At that time, plaintiff
was employed in pharmaceutical sales and compensated more
than $300, 000 annually. (Id.) Upon review of Little
Nest's website and the available Franchise Disclosure
Document ("FDD"), plaintiff concluded that if she
were to purchase a Little Nest franchise, her potential
annual revenue would be $522, 164. (Id.) The Little
Nest website estimated that the total investment for a
franchise ranged from $130, 500 to $270, 000, with the
build-out of leased space amounting to $25, 000 to $75, 000.
(Id.) Plaintiff subsequently contacted Ms. Meyer and
Ms. Peter about the opportunity to purchase a franchise and
expressed concern as to whether she was able to replace her
income if she quit her job. (Id. at ¶ 9) Ms.
Meyer stated that one studio would not generate sufficient
income, but that two or three studios would equal or exceed
plaintiffs former annual income. (Id.)
series of calls between plaintiff and Ms. Meyer, plaintiff
traveled to Little Nest's headquarters in Glen Mills,
Pennsylvania for "Discovery Day" on September 2,
2016, where she met with Ms. Meyer, Ms. Peter, and Brianna
Clifford. (Id. at ¶¶ 9-10) During
Discovery Day, Ms. Meyer made a presentation that showed an
average of 459 classic photography sessions priced at $984,
and 257 shorter sessions priced at $459 per studio annually.
(Id. at ¶ 10) Ms. Meyer stated that corporate
studios historically ...