June 10, 2026|Franchise Frontlines
June 10, 2026 | United States District Court for the Middle District of Florida | Slip Copy — Not Yet Reported (2026 WL 1678330)
Executive Summary
In a slip-copy order available only on Westlaw (2026 WL 1678330), the United States District Court for the Middle District of Florida ruled on franchisor Valpak Direct Marketing Systems, LLC’s motion to dismiss the second amended complaint of its franchisee, Maryland Media Solutions LLC (referred to in the opinion as “VPMD”); the order does not name the presiding judge. The questions were whether the franchisee stated a claim for breach of contract and breach of the implied covenant of good faith and fair dealing based on disputed Franchise Agreement provisions governing territory and new products, and whether it stated a claim under Florida’s Deceptive and Unfair Trade Practices Act (“FDUTPA”). The franchisee argued that Valpak breached Sections 3.1 and 3.6 by allowing a commonly owned competitor, Clipp, to compete within the franchisee’s territory and to use franchisee confidential information; Valpak argued that Section 3.3 reserved to it any right not expressly granted, that its reading of the agreement was correct as a matter of law, and that the FDUTPA claim failed for want of consumer injury and recoverable damages. The court denied the motion as to Count I, holding on this record that it would not interpret the contested provisions at the pleading stage, and granted the motion as to Count II with leave to amend, holding that the franchisee had not plausibly pleaded that it was a consumer harmed by Valpak and had sought a category of damages the statute does not permit.
Relevant Background
Valpak is a franchisor offering, in the opinion’s words, “cooperative direct mail advertising franchises,” whose principal advertising medium is the “VALPAK Envelope” that Valpak mails to consumers. Maryland Media Solutions LLC is one of Valpak’s franchisees, and the two entered into a renewed Franchise Agreement on January 30, 2015. Section 3.1 confers on the franchisee certain rights to sell and place advertising for distribution within its “Territory”; Section 3.6 establishes a system under which Valpak may offer the franchisee the right to promote, market, and distribute new products and services; and Section 3.3 reserves to Valpak the right to engage in any activity not expressly prohibited or not exclusively granted to the franchisee, providing that “anything not expressly granted by COMPANY to FRANCHISEE is reserved by COMPANY.”
In the fall of 2023, AmatoMartin, a privately held investment company, purchased Valpak through subsidiary organizations, one of which—“Clipp”—is also a direct mail advertising company. The franchisee initiated the action in March 2026 and filed its second amended complaint on April 8, 2026, asserting breach of contract (Count I) and violation of FDUTPA (Count II). The franchisee alleged that Valpak breached the agreement by allowing Clipp to compete with it within its territory and by permitting Clipp to use franchisee confidential information to its competitive advantage, causing the franchisee detriment. It further alleged that Valpak enabled and encouraged unfair methods of competition, allowed Clipp to divert business and undermine its operations, and created customer confusion evidenced by customers’ complaints of double billing.
Valpak moved to dismiss Count I only in part—insofar as it rested on the alleged breach of Sections 3.1 and 3.6 and the corresponding implied covenant of good faith and fair dealing—and moved to dismiss Count II in its entirety. The court granted the motion in part and denied it in part.
Decision
Applying the Rule 12(b)(6) standard, the court accepted the complaint’s well-pleaded allegations as true and drew all reasonable inferences in the franchisee’s favor, subject to the requirement of Bell Atlantic Corp. v. Twombly that factual allegations “raise a right to relief above the speculative level.” The parties advanced competing readings of Sections 3.1, 3.6, and 3.3: the franchisee contended that Section 3.1 grants it an exclusive right to operate and sell within its territory and that Section 3.6 requires its consent before new products may be introduced there, while Valpak contended that Section 3.1 contains no exclusivity provision, that Section 3.6 confers no right of first refusal, and that Section 3.3 reserves to Valpak everything not expressly granted. The court declined to choose between them, holding that it “will not resolve the parties’ disagreement over the correct interpretation of the contract at the motion to dismiss stage,” because whether the provisions are clear (a question of law suited to summary judgment) or ambiguous (requiring extrinsic evidence), contract interpretation is inappropriate on a motion to dismiss. It therefore declined to dismiss the breach-of-contract claim.
The court likewise denied the motion as to the implied covenant of good faith and fair dealing. Because it would not interpret the Franchise Agreement, Valpak’s argument that the franchisee “cannot establish a breach of any express contractual term” failed at this stage. The court was also not persuaded that the implied-covenant allegations were duplicative of the breach-of-contract claim, finding that they plausibly went further by addressing Valpak’s alleged “bad-faith exercise of purported discretionary authority” under the agreement. The court noted that Valpak could raise its arguments again at summary judgment.
The court reached a different result on the FDUTPA count. It identified three elements—“(1) a deceptive act or unfair practice; (2) causation; and (3) actual damages”—and noted that, although an entity need not itself be a consumer to sue, it must still prove an injury to a consumer. The court held that the franchisee had not plausibly alleged that it was a “consumer,” that is, a “‘purchaser’ of goods or services,” because it pleaded only that it was a franchisee of Valpak, not a customer. The complaint’s “fleeting reference” to actual consumers—customers complaining of being “double billed”—was, standing alone, too vague to satisfy the element, so dismissal was necessary; but because that reference suggested the franchisee might plausibly plead consumer injury in a third amended complaint, the court granted leave to amend.
On damages, the court agreed with Valpak that the franchisee’s alleged “diminution in value of the business” was not recoverable, because under FDUTPA actual damages are recoverable but consequential damages are not. The franchisee conceded the point, agreeing to strike that language and stating that it would limit its claim to recoverable actual damages, “inclusive of, but not limited to, past, lost profits actually suffered”; the court granted leave to amend the damages allegations. Finally, because Count I survived, the court rejected as premature Valpak’s argument that the FDUTPA claim was derivative of—and failed with—the contract claim, again preserving that argument for summary judgment.
Looking Forward
The most useful takeaway for franchisors is the court’s treatment of the FDUTPA “consumer” requirement. On this record the court held that a franchisee is not a “consumer” of its franchisor for FDUTPA purposes—because it is a franchisee, not a purchaser of the franchisor’s goods or services—and that pleading injury to itself does not supply the required injury to a consumer. That reasoning may inform how other courts approach statutory consumer-protection claims that a franchisee layers on top of an ordinary contract dispute, and a franchisor defending such a claim may wish to test whether the plaintiff has pleaded a genuine consumer injury rather than repackaged franchise-relationship harm. The point should not be overstated: the ruling rests on Florida’s statute and a single trial court, other states’ unfair-practices statutes differ, and here the court granted leave to amend because a stray reference to “double billed” customers suggested the deficiency might be curable—so the exposure was narrowed, not eliminated.
The contract rulings are a reminder that contested Franchise Agreement language can push an encroachment-style claim past the pleadings and into discovery. The court expressly declined to decide whether Section 3.3’s broad reservation of “anything not expressly granted” permits the challenged conduct, leaving that franchisor-favorable clause to be tested at summary judgment. The practical lesson is familiar and defense-side: clear, express reservations of rights and unambiguous definitions of territory and exclusivity give a franchisor its best chance to prevail early rather than after discovery. The dispute also illustrates a live structural risk—where a franchisor’s new private-equity owner also operates a competing brand (here, Clipp under AmatoMartin), a franchisee may characterize that competition as territorial encroachment and misuse of confidential information; franchisors in comparable ownership structures may wish to review their reserved-rights, confidentiality, and new-product provisions with that scenario in mind.
Finally, the court allowed the implied-covenant theory to proceed as tied to Valpak’s alleged “bad-faith exercise of purported discretionary authority,” and found it not duplicative of the express-breach claim. Where an agreement vests the franchisor with discretion—such as the Section 3.6 latitude to offer new products—a franchisee may attempt to recast the exercise of that discretion as bad faith, and such a theory may survive a motion to dismiss even where the express-breach reading is contested. Franchisors may benefit from documenting the legitimate business basis for discretionary decisions and from renewing both the interpretive and the derivative-claim arguments at summary judgment, as the court here invited.
Thomas O’Connell is a Partner at Buchalter LLP and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case. It was drafted with the assistance of an artificial intelligence system. AI systems can make mistakes, including in describing legal authority. Readers should independently confirm any legal authority before relying on it.
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