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Wagenbrenner v. Little Nest Group, LLC

United States District Court, D. Delaware

June 14, 2019

MELISSA WAGENBRENNER, Plaintiff,
v.
LITTLE NEST GROUP, LLC and LAURA NOVAK MEYER Defendants. MELISSA WAGENBRENNER, Plaintiff
v.
LAURA E. NOVAK a/k/a LAURA NOVAK MEYER, Defendant.

          MEMORANDUM OPINION

          SHERRY R. PALLON UNITED STATES MAGISTRATE JUDGE

         I. INTRODUCTION

         Presently 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").[1] (D.I. 8) The court has jurisdiction pursuant to 28 U.S.C. § 1332(a).[2] For the following reasons, the defendants' motion to dismiss is denied.[3]

         II. BACKGROUND

         A. The Parties

         Melissa 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 ¶¶ 5-6)

         B. Procedural History of Consolidated Cases

         On 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)

         On July 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)

         On 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)

         C. Facts[4]

         This 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)

         In July 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.)

         After a 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.[5] (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 ΒΆ 10) Ms. Meyer stated that corporate studios historically ...


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