February 2, 2024
By: Thomas O’Connell
Citation:
Quick Dispense, Inc. v. Vitality Foodservice, Inc., Slip Copy, 2024 WL 655996 (C.D. Cal. 2024)
Executive Summary:
In this unpublished decision, Judge Fred W. Slaughter of the United States District Court for the Central District of California denied Quick Dispense, Inc.’s Ex Parte Application for a Temporary Restraining Order (TRO) against Vitality Foodservice, Inc. The decision revolved around whether the contractual relationship constituted a franchise under the California Franchise Investment Law (CFIL), Cal. Corp. Code §§ 31000 et seq., and the California Franchise Relations Act (CFRA), Cal. Bus. & Prof. Code §§ 20000 et seq. The court also examined Plaintiff’s claims for breach of contract and unfair competition under Cal. Bus. & Prof. Code § 17200. Ultimately, the court ruled that Plaintiff failed to establish the statutory elements of a franchise or the urgency required for ex parte relief.
Relevant Background:
This case arose from a contractual dispute between Quick Dispense, Inc. (“Plaintiff”), a distributor of beverage products, and Vitality Foodservice, Inc. (“Defendant”), a supplier operating under the well-recognized trademarks “Nescafé” and “Nestlé Professional.” The parties entered into a Distribution Agreement on November 20, 2020, which outlined the terms of Plaintiff’s distributorship across several territories. The agreement included exclusive rights to distribute Defendant’s products and set standards for marketing and operational practices.
On May 1, 2023, Defendant provided notice to the Plaintiff that the Distribution Agreement would not be renewed and was set to expire on November 16, 2023, in accordance with its terms. Defendant posited that the agreement had run its natural course and was concluded according to its terms. Plaintiff, however, alleged that the arrangement constituted a franchise relationship under the California Franchise Investment Law (CFIL), Cal. Corp. Code §§ 31000 et seq., and the California Franchise Relations Act (CFRA), Cal. Bus. & Prof. Code §§ 20000 et seq. Plaintiff further argued that it had paid franchise fees in form of excessive inventory and equipment and that it faced ongoing harm from Defendant’s conduct, including alleged interference with its operations.
Defendant strongly disputed Plaintiff’s characterization of the agreements, asserting that the contracts (Distribution Agreement) were standard business arrangements and did not meet the statutory definition of a franchise. Thus, Defendant asserted that any payments made by Plaintiff were ordinary business expenses, and not franchise fees under Cal. Corp. Code § 31011. Furthermore, Defendant pointed out that Plaintiff’s delay of nine months after receiving the nonrenewal notice demonstrated a lack of urgency and undermined its claims of immediate and irreparable harm. For this reason, Defendant referred the court to the case of Oakland Tribune, Inc. v. Chronicle Publishing Co., 762 F.2d 1374, 1377 (9th Cir. 1985), which held that