Defendant prohibited from selling real estate

Loislaw Federal District Court Opinions

HARDEE’S FOOD SYSTEMS, INC. v. HOFFMAN, (E.D.Mo. 2006)
HARDEE’S FOOD SYSTEMS, INC., Plaintiff, v. WILLIAM J.
HOFFMAN, in his capacity as a court-appointed receiver of
certain properties owned or leased by North Central Food
Systems, Inc., Defendant. Case number 4:05cv2264 TCM.
United States District Court, E.D. Missouri, Eastern
Division. January 18, 2006

MEMORANDUM AND ORDER

THOMAS MUMMERT III, Magistrate Judge

This matter is before the Court[fn1] on the motion of
defendant William J. Hoffman (“Defendant”) to dismiss, his
motion to transfer venue pursuant to 28 U.S.C. §
1404(a), and the motion of Hardee’s Food Systems, Inc.
(“Plaintiff”) for a preliminary injunction prohibiting
Defendant from selling or otherwise disposing of certain
real estate.

The parties appeared before the Court for a hearing on
January 5, 2006. No new evidence was presented; however,
the Court then heard arguments and accepted into evidence
the various affidavits and exhibits presented by the
parties with their respective memorandums in support of, or
in opposition to, the pending motions. Having heard
arguments and reviewed the memorandums and evidentiary
support thereof, the Court finds as follows. Page 2

Background

The instant lawsuit has its genesis in a November 2004
complaint and application for appointment of receiver in
the United States District Court for the Southern District
of New York filed by BNY Asset Solutions, Inc. (“BNY”)
against North Central Food Systems, Inc. (“NCFS”) to
enforce obligations owed BNY by NCFS. See BNY Asset
Solutions, Inc. v. North Central Food Sys., Inc.,
1:2004cv9395 (S.D.N.Y.). These obligations were incurred
pursuant to a series of loans secured by NCFS to fund and
operate various Hardee’s fast food restaurants. (Hoffman
Aff. § 3.) In this action, BNY requested the
appointment of a receiver to operate the restaurants and
preserve its property while the action was pending. (Id.
§ 4.)

After a hearing at which the parties and Plaintiff
appeared, the Honorable George B. Daniels found that BNY
was “clearly entitled to the appointment of a receiver” and
appointed William J. Hoffman of Trigild International, Inc.
(Hoffman Aff. Ex. 1 § 1, Ex. 2 at 1, 24.) The Order
appointing Defendant provided, inter alia, that he was to
take “immediate and exclusive possession, custody and
control of all real and personal property including,
without limitation, the business operated by [NCFS] on the
Property” and was authorized to “[m]aintain, protect,
collect, liquidate, or otherwise dispose of property;
including in connection with sale of associated real
property[.]” (Hoffman Aff. Ex. 1 §§ 6, 8(B).)
(Alterations added.) The Order further provided that “all
lessors . . . and or creditors seeking to enforce any
claim, right or interest against [NCFS] be barred by this
Order from . . . doing anything whatsoever to interfere in
any way with the Receiver in the control of the
receivership estate.” (Id. at 13.) Additionally, Defendant
was authorized to enter into a Page 3 Temporary License
Agreement (“TLA”) with Plaintiff and, upon the expiration
of such TLA, Plaintiff would “have the immediate right,
without further order of the Court, to exercise all of its
rights and remedies under the [TLA], its Franchise Agreement
with [NCFS].” (Id.) Upon the expiration of the TLA,
Defendant was to, inter alia, “otherwise comply with all
post-termination obligations as required by the [TLA].”
(Id. at 14.)

Consequently, that same day, Defendant entered a TLA with
Plaintiff. (Hoffman Aff. Ex. 3.) The purpose of the TLA was
to allow Defendant to temporarily operate 36 Hardee’s
restaurants under the terms of a Master Franchise Agreement
(“the Agreement”) that had been terminated on NCFS’ default
of its obligations under the Agreement. (Id. at 1.) As part
of the TLA, Defendant agreed to comply with the obligations
of a franchisee as set forth in the Agreement, as modified
by the TLA. (Id. at 2.) One of the obligations in the
Agreement was that Defendant would not, for a period of two
years after its termination, sell the franchised location
to a person or entity that intended to operate a restaurant
at the site. (Pl. Ex. 1 at 30.) The Agreement also provided
that Plaintiff be given the option to purchase the real
property at the franchised location for the fair market
value, set forth a procedure to determine that value if it
was disputed, and outlined the obligations of both
Plaintiff and the franchisee during the period between
Plaintiff’s purchase notice and closing, including the
obligation of the franchisee to continue to operate the
franchised Hardee’s. (Id. at 36.) Additionally, the
Agreement provided that any dispute concerning it was to be
construed in accordance with the laws of Missouri and that
any suit arising under the Agreement was to be filed in the
federal or state court having jurisdiction where
Plaintiff’s principal offices Page 4 were then located,
i.e., the Eastern District of Missouri. (Id. at 39, 40.)
These venue restrictions survived the expiration or earlier
termination of the Agreement. (Id. at 41.)

The TLA[fn2] was extended twice in writing for a period of
30 days each by letters dated May 25 and June 29, 2005,
thereby extending the agreement to July 31, 2005. (William
Werner Aff. § 7 and Exs. 4, 5.) Plaintiff contends
that e-mail correspondence extended the TLA an additional
30 days; Defendant disagrees. (See Werner Aff. § 7;
Hoffman Aff. §§ 16-20.)

While the second TLA extension was in effect, the parties
began negotiations for the sale of 24 of the Hardee’s
restaurants to Plaintiff. (Werner Aff. § 9.) During
the 30-day period following the termination of this second
extended period, Defendant entered into an agreement with a
broker, NRC Realty Advisors, L.L.C., to market and sell the
Hardee’s restaurants placed under his control by Judge
Daniels’ order. (Id. § 10.)

Two months later, in October, contending that Defendant
was ignoring his obligations under the TLA by selling
franchised property without regard to Plaintiff’s interest,
Plaintiff sought leave to intervene in the BNY action “to
establish an appropriate procedural framework within which
the Court may then consider the merits of [Plaintiff’s]
dispute with [Defendant].” (Hoffman Aff. Ex. 5 Declaration
§ 4.) A proposed complaint in intervention sought a
declaration of the parties’ rights and obligations with
respect to 24 of the franchised properties and a preliminary
and permanent injunction in connection with Defendant’s
Page 5 disposition of that property. (Hoffman Aff. Ex. 5,
Compl. at 2.) Plaintiff’s motion, styled as one to show
cause, was heard by Judge Daniels on October 20. (Hoffman
Aff. Ex. 6.)

Judge Daniels informed Plaintiff at the beginning of the
hearing that if Plaintiff had a contractual dispute with
someone to whom Plaintiff had extended a franchise,
including Defendant, then Plaintiff should sue that someone
as a franchisee. (Hoffman Aff. Ex. 6 at 6.) He did not
intend to complicate the litigation before him by having
Plaintiff come in as a defendant, bring Defendant in as
another party, and then sue Defendant on an unrelated
issue. (Id.) Seeking to clarify the issues before him,
Judge Daniels inquired of Plaintiff’s counsel what
Plaintiff wanted in addition to the right of first refusal
that had already been acknowledged as being Plaintiff’s.
(Id. at 8.) Counsel replied: “We want there is [sic] an
absolute prohibition for [Defendant], who is our
franchisee, to sell the properties to a competitor of
Hardee’s because doing so, that is in the franchise
agreement, that would undermine the goodwill that the
Hardee’s name has established in these restaurant
locations.” (Id. at 9.) The Court then inquired: “You want
the right of first refusal? You want the right to buy
instead of a competitor, or you want the right to simply
say we are not going to buy it but you can’t sell it to
them?” (Id.) Counsel replied, “We want both. We are
entitled contractually to both.” (Id.) The following
exchange occurred shortly thereafter:

The Court: I am saying to you, if somebody wants to buy
who is a competitor, and you don’t want the competitor to
buy it, what do you think should be the alternative in
terms of disposing of the property?

[Plaintiff’s counsel]: That is not my —

The Court: That is my problem, isn’t it?

[Counsel]: That is [Defendant’s] issue. Page 6

The Court: That is my issue, and you’re here trying to
complicate that issue.

. . .

The Court: . . . You either can sell the franchise or sue
the franchisee. That is your alternative. You have no
alternative here in this litigation. . . .

If you don’t like what is being done, you have three
choices: You can cancel it, and I have been saying this
from day one; you can sell the franchise if you think the
franchise agreement is violated; you can sue contractually
on the franchise agreement with whomever you think you
have a contractual agreement; or if at some point in this
case there is an imminent sale — and it seems to me
that nobody anticipated that there was going to be any
significant sale without either notifying this court of
the disagreement or going forward, with everyone’s
consent. . . .

Quite frankly if they want to sell this to Burger King,
and you oppose that, I will do exactly what I’ve done in
the past: I will hear you even though you aren’t a party
to this litigation.

(Id. at 10-12.) (Alterations added.) When Plaintiff’s
counsel suggested that he would file a plenary action that
would end up before the court as a related case, Judge
Daniels promptly informed him that he would deny it as a
related case. (Id. at 13.) After further discussion, Judge
Daniels instructed Plaintiff’s counsel to tell Defendant to
contact the court and all the parties if Defendant
unreasonably rejected an offer by Plaintiff and, upon being
so informed, the Court would have all the parties before
him to determine whether Plaintiff’s offer was reasonable
and Defendant’s rejection unreasonable. (Id. at 21.)

Plaintiff has appealed Judge Daniels’ ruling to the Second
Circuit Court of Appeals. (Hoffman Aff. § 28.)

One month after Judge Daniels’ hearing, on November 23,
Plaintiff filed this declaratory judgment action against
Defendant in Missouri state court, requesting a preliminary
and permanent injunction prohibiting him from (a) selling
any of the Hardee’s restaurants under his control without
Plaintiff’s prior written consent and without extending
Page 7 to Plaintiff the right of first refusal, and, (b)
should the franchise be terminated, disposing of the
restaurants to any of Plaintiff’s competitors and not
extending to Plaintiff the option to purchase the assets of
the restaurants. Defendant, a resident of California,
removed the case to this Court.

Shortly thereafter, the parties in the BNY action,
Plaintiff, and Defendant, appeared before Judge Daniels.
(Hoffman Aff. Ex. 7.) Defendant informed the court that the
bidding on the 34 Hardee’s restaurants under his control
had recently ended. (Id. at 5.) A few bidders, including
Plaintiff, submitted an all-or-nothing bid, wanting either
all of a group of restaurants or none. (Id. at 6.) For
example, Plaintiff either wanted 24 restaurants or none.
(Id.) If Defendant were to accept a group of bids other
than Plaintiff’s on the restaurants, the price would be
approximately two and one-half million dollars greater than
Plaintiff’s offer. (Id. at 7.) A hearing on the proposed
sale was set for the day before the hearing in this Court on
the pending motions.

In its motion for a preliminary injunction, Plaintiff
repeats its request that Defendant be prohibited from
selling the Hardee’s restaurants under his control without
complying with the requirements of the Agreement. In his
motion to dismiss, Defendant argues that this Court lacks
personal jurisdiction over him and subject matter
jurisdiction over the parties’ dispute. In his motion to
transfer, Defendant requests, in the alternative, that the
action be transferred to the Southern District of New York.

The day before the hearing on these motions, Judge Daniels
held a hearing on Defendant’s request to sell the Hardee’s
restaurants under his control. (Jan. 4, 2006, Tr.) Judge
Daniels decided that if Plaintiff could match the highest
bid, it should be awarded the Page 8 sale after the other
party was told of Plaintiff’s bid and had failed to submit
a higher bId. (Id. at 9.) Judge Daniels granted Defendant
preliminary approval for the sale, subject to a review of
the contracts. (Id. at 18.)

Discussion

Defendant’s Motion to Dismiss for Lack of Personal
Jurisdiction. Defendant argues that this Court lacks
personal jurisdiction over him and moves to dismiss
pursuant to Rule 12(b)(1) of the Federal Rules of Civil
Procedure.

It is undisputed that Defendant, a resident of California,
has no office in Missouri and does not transact any
business in Missouri. (Hoffman Aff. §§ 26,
27, 28; January 5, 2006 Hr’g Tr.) None of the Hardee’s
restaurants at issue are located in Missouri. Plaintiff’s
principal place of business is in St. Louis, Missouri, in
the Eastern District of Missouri. (Compl. § 1.)

“When personal jurisdiction is challenged, the plaintiff
has the burden to show jurisdiction exists.” Burlington
Indus., Inc. v. Maples Indus., Inc., 97 F.3d 1100, 1102
(8th Cir. 1996) (citing Gould v. P.T. Krakatau Steel, 957
F.2d 573, 575 (8th Cir. 1992)). To survive a motion to
dismiss challenging personal jurisdiction, however, “the
plaintiff need only make a prima facie showing of personal
jurisdiction over the defendant,” Digi-Tel Holdings, Inc.
v. Proteq Telecomms., Ltd., 89 F.3d 519, 522 (8th Cir.
1996), and “may do so by affidavits, exhibits, or other
evidence[,]” Romak USA, Inc. v. Rich, 384 F.3d 979, 983
(8th Cir. 2004) (alteration added). Accord St. Paul Fire
and Marine Ins. Co. v. Courtney Enter., Inc., 270 F.3d 621,
623 (8th Cir. 2001). When determining whether a plaintiff
has Page 9 made such a showing, “the court must view the
evidence in the light most favorable to plaintiff and
resolve all factual conflicts in the plaintiff’s favor,”
Digi-Tel Holdings, 89 F.3d at 522, although the burden
remains with the plaintiff to establish the court’s in
personam jurisdiction, Romak USA, Inc., 384 F.3d at 983-84.

“In a diversity action, [a] federal court . . . may assume
jurisdiction over nonresident defendants only to the extent
permitted by the long-arm statute of the forum state and by
the Due Process Clause.” Id. at 984 (interim quotations
omitted; alterations in original). Accord Digi-Tel
Holdings, 89 F.3d at 522. The “`ultimate objective'” of
Missouri’s long arm-statue[fn3] is “`to extend the
jurisdiction of the courts of [Missouri] over nonresident
defendants to that extent permissible under the Due Process
Clause of the Fourteenth Amendment of the Constitution of
the United States.'” Clune v. Alimak AB, 233 F.3d 538, 541
(8th Cir. 2000) (quoting State v. Pinnell, 454 S.W.2d 889,
892 (Mo. 1970) (en banc)) (alteration added). “Accordingly,
Missouri courts have interpreted the statute broadly to
cover those cases where the Due Process Clause permits the
assertion of personal jurisdiction.” Id. Thus, this Court
may “turn immediately to the question whether the assertion
of personal jurisdiction would Page 10 violate the due
process clause.” Porter v. Berall, 293 F.3d 1073, 1075 (8th
Cir. 2002). Accord Romak USA, Inc., 384 F.3d at 984.

“The principles of personal jurisdiction under the Due
Process Clause are well established. Jurisdiction is
appropriate only where a defendant has sufficient `minimum
contacts’ with the forum state that are more than random,
fortuitous, or attenuated, such that summoning the
defendant would not offend traditional notions of fair play
and substantial justice.” Pecoraro v. Sky Ranch For Boys,
Inc., 340 F.3d 558, 561 (8th Cir. 2003). Accord First Nat’l
Bank of Lewisville, Ark. v. First Nat’l Bank of Clinton,
Ky., 258 F.3d 727, 729 (8th Cir. 2001). “A defendant must
have warning that his activities may result in his being
haled into court in a particular jurisdiction and must
invoke the benefits and protections of that jurisdiction by
purposefully availing himself of the privilege of
conducting those activities.” Porter, 293 F.3d at 1075.
“Minimum contacts must exist either at the time the cause
of action arose, the time the suit is filed, or within a
reasonable period of time immediately prior to the filing
of the lawsuit.” Pecoraro, 340 F.3d at 562.

In determining whether personal jurisdiction over a
nonresident defendant is appropriate, the court should exam
“(1) the nature and quality of contacts with the forum
state; (2) the quantity of such contacts; (3) the relation
of the cause of action to the contacts; (4) the interest of
the forum state in providing a forum for its residents; and
(5) convenience of the parties.” Burlington Indus., Inc.,
97 F.3d at 1102. The first three considerations are closely
related and are of primary importance. Id. Analysis of the
third factor includes considerations of specific
jurisdiction compared to general jurisdiction. Id.
Specific Page 11 jurisdiction exists “only if the injury
giving rise to the lawsuit occurred within or had some
connection to the forum state.” Romak USA, Inc., 384 F.3d
at 984. “General jurisdiction refers to the power of a
state to adjudicate any cause of action and does not depend
on the relationship between the cause of action and the
contacts.” Burlington Indus., Inc., 97 F.3d at 1103.

In the instant case, there is no evidence that Defendant
had any contact with the State of Missouri until being
named in this action. Moreover, the basis for filing this
action in Missouri is the forum selection clause in the
Agreement and not any business allegedly conducted by
Defendant in the State. Therefore, jurisdiction in this
District must lie because of the forum selection clause and
not as a result of any activities of Defendant in the State
of Missouri. See St. Paul Fire and Marine Ins. Co., 270
F.3d at 624 (holding that a party may consent to personal
jurisdiction by signing a contract containing a forum
selection clause); Dominium Austin Partners L.L.C. v.
Emerson, 248 F.3d 720, 726 (8th Cir. 2001) (holding that
“[d]ue process is satisfied when a defendant consents to
personal jurisdiction by entering into a contract that
contains a valid forum selection clause”).

Defendant further argues that the forum selection clause
is voidable because a Missouri forum was not within the
reasonable expectations of the original parties when he
signed the TLA.

In Rainforest Caf?©, Inc. v. EklecCo, L.L.C., 340 F.3d 544
(8th Cir. 2003), the Eighth Circuit Court of Appeals
expressed its inclination that federal law controlled the
issue whether a forum selection clause applied in a
diversity case removed to federal court. Id. at 546 (citing
Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 31-32
(1988)). The court Page 12 noted, however, that the
parties had not argued that the application of state law
would have resulted in a “materially different outcome.”
Id. The parties in the instant case have not addressed
whether Missouri law or federal law applies. The Court will
discuss both federal and Missouri law. See, e.g., Lyon Fin.
Servs., Inc. v. Will H. Hall & Sons Builders, Inc., 2005 WL
503371 (D. Minn. Mar. 4, 2005) (analyzing under both
federal and state law defendant’s claim that forum
selection clause in contract did not apply to suit against
it).

Under federal law, “[f]orum selection clauses are prima
facie valid and are enforced unless they are unjust or
unreasonable or invalid for reasons such as fraud or
overreaching.” M.B. Restaurants, Inc. v. CKE Restaurants,
Inc., 183 F.3d 750, 752 (8th Cir. 1999) (citing M/S Bremen
v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972)) (alteration
added). “The fact that the contract was a form contract and
that the individual clauses were not actually negotiated
does not render the clause per se unenforceable.” Id.
(citing Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585,
593 (1991)). Additionally, general allegations that a party
was induced by fraud to enter into a contract are
insufficient to raise an issue that a forum selection
clause within the contract may be unenforceable because of
fraud. Marano Enters. of Kansas v. Z-Teca Restaurants, 254
F.3d 753, 757 (8th Cir. 2001). See also M.B. Restaurants,
Inc., 183 F.3d at 752-53 (rejecting challenge to forum
selection clause by plaintiff based only on belief that the
contract was procured by fraud and presented without any
allegation that the forum selection clause was itself a
product of fraud, and noting that fraud must be pled with
particularity under Fed.R.Civ.P. 9(b)). “[I]nconvenience
Page 13 to a party is an insufficient basis to defeat an
otherwise enforceable forum selection clause.” Id. at 753
(alteration added).

Similarly, under Missouri law, a forum selection clause is
to be enforced if the clause was “obtained through freely
negotiated agreements absent fraud and overreaching” and if
its enforcement would not be “unreasonable and unjust.”
Whelan Sec. Co. v. Allen, 26 S.W.3d 592, 596 (Mo.Ct.App.
2000). “A forum selection clause may be unreasonable if it
results in undue hardship, such as a necessity to travel or
transport witnesses such a distance that expenses would
render access to the courts impractical.” Id. “[T]he party
seeking to avoid [a forum selection clause’s] application
sustains a heavy burden to show that the clause is unfair
or unreasonable.” State ex rel. J.C. Penney Corp. v.
Schroeder, 108 S.W.3d 112, 113-14 (Mo.Ct.App. 2003)
(alterations added) (interim quotations omitted).
Consequently, a general allegation that a forum selection
clause would impose an unfair burden due to the distance
between the defendant and the selected forum is
insufficient to show an undue hardship. See Whelan Sec.
Agency, 26 S.W.3d at 596-97.

In support of his contention that the forum selection
clause should not be enforced, Defendant argues that when
signing the TLA he did not anticipate that it would govern
anything other than the manner and standard in which he
operated the Hardee’s restaurants under his control.
Defendant additionally contends that he did not understand
that by signing the agreement he granted extensive rights
to Plaintiff, including the right of Plaintiff to “hale”
him into a Missouri court.

“Under Missouri law, `a person who has an opportunity to
read a document but signs it without doing so is held to
have knowledge of the document’s contents, absent a
showing Page 14 of fraud.'” Midwest Printing, Inc. v. AM
Int’l, Inc., 108 F.3d 168, 170 (8th Cir. 1997) (quoting
United States for Use of Bussen Quarries, Inc. v. Thomas,
938 F.3d 831, 833 (8th Cir. 1991)). See also Farmland
Indus., Inc. v. Bittner, 920 S.W.2d 581, 584 (Mo.Ct.App.
1996) (“Missouri has long recognized that a person signing
an agreement has a duty to read it.”). “[A]bsent fraud,
accident or mistake, a party is held to have had knowledge
of a contract which he or she had an opportunity to read
but did not by reason of indolence, folly or careless
indifference to the ordinary and accessible means of
information.” Mercantile Trust Co. v. H.M. Carp., 648
S.W.2d 920, 924 (Mo.Ct.App. 1983) (alteration added)
(interim quotations omitted). Accord Savannah Place, Ltd.
v. Heidelberg, 122 S.W.3d 74, 79 (Mo.Ct.App. 2003).

Defendant is an attorney. His company, Trigild, has
managed hotels and restaurants for 35 years. He has been
appointed as a receiver in state and federal court hundreds
of times and is a real estate broker. He specializes in
managing distressed properties in situations similar to the
one present in the instant case. When Defendant was
appointed as the receiver in this case, he signed the TLA
in his capacity as the receiver and twice agreed to its
extension. The uncontroverted evidence before the Court is
that the TLA incorporated the Master Franchise Agreement in
its entirety. The language in the Agreement clearly
provides that Missouri law applies in interpreting the
agreement, and that jurisdiction and venue is vested where
Plaintiff has its principal place of business. Plaintiff’s
continuing presence in the BNY action proceedings gives
rise to the assumption that Defendant knew, or should have
known, where that principal place of business was. Indeed,
Defendant visited Plaintiff’s St. Louis headquarters at
some point. Page 15

Clearly, had Defendant read the Agreement he would have
understood its forum selection clause. There is no
allegation of any fraud being perpetrated that prevented
him from reading the Agreement or from understanding its
provisions. Indeed, Defendant’s expertise in real estate
dealings is the reason why he is involved in the events
giving rise to this action.

Defendant’s motion to dismiss for lack of personal
jurisdiction will be denied.

Defendant’s Motion to Dismiss for Lack of Subject Matter
Jurisdiction. Defendant next challenges this Court’s
subject matter jurisdiction. “Because jurisdiction is a
threshold question, the court may look outside the
pleadings in order to determine whether subject matter
jurisdiction exists.” Green Acres Enters. Inc. v. United
States, 418 F.3d 852, 856 (8th Cir. 2005). The burden of
proving subject matter jurisdiction is on Plaintiff. Id.
Accord V S Ltd. P’ship v. HUD, 235 F.3d 1109, 1112 (8th
Cir. 2000). An argument that an action may not be brought
in one court against a receiver appointed by another court
without leave of that court challenges the first court’s
subject matter jurisdiction. See Muratore v. Darr, 375 F.3d
140, 143 (1st Cir. 2004).

Title 28 U.S.C. § 959(a) provides that “[t]rustees,
receivers or managers of any property . . . may be sued,
without leave of the court appointing them, with respect to
any of their acts or transactions in carrying on business
connected with such property. Such actions shall be subject
to the general equity power of such court so far as the
same may be necessary to the ends of justice . . .”

“. . . [Section] 959(a) was originally enacted in response
to the Supreme Court’s decision in Barton v. Barbour, 104
U.S. 126 (1881).” Diners Club, Inc. v. Bumb, Page 16 421
F.2d 396, 398-99 (9th Cir. 1970) (alterations added). In
Barton, the Supreme Court held that a personal injury
action against Barton in his capacity as receiver of a
railroad was improperly filed in the United States District
Court for the District of Columbia because he had been
appointed by a Virginia court. Barton, 104 U.S. at 126-27,
131. The Supreme Court further held that such a suit may be
filed against a receiver only by leave of the appointing
court. Id. at 131. In his dissent, Justice Miller argued
that he knew of “no principle or precedent whereby a court
of law, having before it a plaintiff with a cause of action
of which it has jurisdiction, and a defendant charged with
an act also within the jurisdiction, is bound or is even at
liberty to deny the plaintiff his lawful right to a trial
because the defendant is a receiver appointed by some other
court . . .” Id. at 140. Justice Miller distinguished
between the duty of courts of equity to protect “their
receivers, or funds in their hands,” and the duty of courts
of law to give “suitors properly before them the trial of
their rights . . .” Id. at 140-41 (alteration added).

“[T]he purpose of § 959(a) was to enact Mr. Justice
Miller’s dissent into law.” Diners Club, Inc., 421 F.2d at
399 (alteration added). Section § 959(a) permits a
court of law to exercise its jurisdiction in actions for
damages and yet “prevent interference with the orderly
administration of the estate.” Id. at 400. The court which
appoints the receiver “has the right, while continuing to
exercise its prior jurisdiction, to determine for itself
how far it will permit any other court to interfere with
such possession and jurisdiction.” Field v. Kansas City
Refining Co., 9 F.2d 213, 215 (8th Cir. 1925) (citations
and quotations omitted). “Some suits affecting the res will
place only slight burdens on the reorganization court. Page
17 There may be good reasons for permitting them to
continue in [the other] forum. Other suits, even though
only money damages are demanded, could conceivably so
embarrass administration of the debtor’s corporation, as to
make it proper that they be stayed.” Diners Club, Inc., 421
F.2d at 400-01 (interim citations and quotations omitted)
(alteration added). Thus, § 959(a) permits “actions
redressing torts committed in furtherance of the debtor’s
business, such as the common situation of a negligence
claim in a slip and fall case where a [receiver], for
example, conducted a retail store,” Muratore, 375 F.3d at
144 (quoting Carter v. Rodgers, 220 F.3d 1249, 1254 (11th
Cir. 2000)) (alteration added), but “does not apply to
suits against [receivers] for administering or liquidating
the . . . estate,” Carter, 220 F.3d at 1254 (alterations
added). When the suit relates to the receiver’s tasks
incident to consolidation, preservation and liquidation of
the debtor’s estate, consent of the appointing court must
be obtained. Id. See, e.g., Muratore, 375 F.3d at 145-47
(finding § 959(a) exception not applicable in action
against trustee for improperly liquidating assets of
estate); Carter, 220 F.3d at 1252, 1254 (finding §
959(a) applicable to action against trustee for breach of
fiduciary duties involving the administration and
liquidation of the estate and, therefore, leave under
§ 959 must be obtained).

The Sixth Circuit Court of Appeals in In re DeLorean Motor
Co., 991 F.2d 1236 (6th Cir. 1993), found that the necessity
to obtain leave from an appointing court before filing a
malicious prosecution and abuse of process action against a
bankruptcy trustee arose from the common law and not from
§ 959. Id. at 1240-41. Section 959’s exception did
not apply to suits against the trustee “for actions taken
while administering the estate. Merely Page 18
collecting, taking steps to preserve, and/or holding assets,
as well as other aspects of administering and liquidating
the estate, do not constitute `carrying on business’ as
that term has been judicially interpreted.” Id. at 1241
(interim citation and quotations omitted). Cf. Diners Club,
421 F.2d at 397, 402 (holding that a suit on a contract
entered into by a trustee for the production and sale of
1.5 million cards after the trustee was appointed as
trustee of a business machine company would be permitted
without leave of the appointing court because (a) there was
no showing that the prosecution of the action would
“embarrass the administration” of the debtor’s estate and
(b) the maximum amount of recovery in the action would not
deplete the debtor’s estate).

As the foregoing cases demonstrate, a suit for damages
will often be permitted under § 959(a) without leave
of an appointing court because such suit involves the
receiver’s or trustee’s acts in carrying on the business of
the estate. The Diner’s Club court found an exception to
the § 959(a) exception in actions for damages in
which a recovery could disrupt or deplete the estate; in
such case, leave of the appointing court was required.
Without exception, the above-cited cases found it to be
within the appointing court’s power in matters of equity to
control the case. Thus, actions involving the liquidation,
consolidation, and preservation of the estate require leave
of the appointing court and are not considered actions that
involve the receiver’s acts or transactions in carrying on
the normal business of the property.

In the instant case, Plaintiff’s cause of action for
injunctive relief asks this Court to order Defendant, a
receiver appointed by the United States District Court for
the Southern District of New York, to comply with the terms
and restrictions of the TLA and the Master Page 19
Franchise Agreement when placing Hardee’s restaurants for
sale. Specifically, Plaintiff asks this Court to enjoin
Defendant from selling or disposing of the Hardee’s
restaurants (a) without Plaintiff’s consent and without
providing Plaintiff with the right of first refusal, and
(b) to a competitor of Plaintiff’s. This is the same relief
Plaintiff requested of Judge Daniels. The TLA and the
Master Franchise Agreement do limit Defendant’s ability to
sell the Hardee’s restaurants that are under his control
pursuant to Judge Daniels’ March 2005 Order.

The Court finds that the requested relief would interfere
with the business of liquidating and administering the
estate as ordered by Judge Daniels of the United States
District Court for the Southern District of New York. Judge
Daniels has ordered Defendant to liquidate NCFS’ property
and has already approved of his plan to sell the Hardee’s
restaurants in question — a plan which apparently
translates into more assets for the estate than Plaintiff
has offered. Any order by this Court going to the merits of
Plaintiff’s requests will certainly interfere with and
affect the appointing court’s existing order in equity.

Plaintiff argues, however, that Judge Daniels granted
Plaintiff leave to file this action. This is an over-broad
characterization of Judge Daniels’ rulings.

Judge Daniels denied Plaintiff’s motion requesting that it
be granted leave to file a complaint in intervention
against Defendant — a complaint requesting similar
injunctive relief to that sought in this action. Plaintiff
has appealed the denial of its request to the Second
Circuit Court of Appeals. Judge Daniels did suggest to
Plaintiff that if it, not a party to the BNY action before
him, wanted to assert a claim against Defendant, also not a
party to the BNY action before him, arising from the
operation of its franchises, it do so in another court. He
clearly limited, however, his order to an action by which
Plaintiff could be compensated Page 20 in damages and
which would not interfere with the BNY receivership case, a
case in which he has already approved the liquidation of
various Hardee’s restaurants.

Title 28 U.S.C. § 959(a) limits suits against
trustees and receivers and requires the appointing court’s
approval to file such suits unless the suit falls into the
statute’s one exception. Had Plaintiff sought damages for
Defendant’s handling of the Hardee’s franchises at the 34
locations during his receivership, the suit could arguable
be appropriately filed here. The Court finds, however, that
the injunctive relief Plaintiff seeks herein does not fall
within § 959(a)’s statutory exception.

Accordingly, Defendant’s motion to dismiss pursuant to
Rule 12(b)(1) will be granted.

In his motion to transfer, Defendant alternatively
requests that the Court transfer the action to the Southern
District of New York pursuant to 28 U.S.C. §
1404(a). In addition to this request being moot, Rule
12(h)(3) of the Federal Rules of Civil Procedure provides
that a court shall dismiss an action over which it lacks
subject matter jurisdiction. Fed.R.Civ.P. 12(h)(3)
(emphasis added). See also Muratore, 375 F.3d at 147-48.

For the foregoing reasons,

IT IS HEREBY ORDERED that Defendant’s motion to dismiss is
DENIED insofar as Defendant seeks a dismissal on grounds of
lack of personal jurisdiction and is GRANTED insofar as
Defendant seeks a dismissal for lack of subject matter
jurisdiction. [Doc. 4]

IT IS FURTHER ORDERED that Plaintiff’s motion for a
preliminary injunction is DENIED. [Doc. 6] Page 21

IT IS FINALLY ORDERED that Plaintiff’s motion for a
temporary restraining order and Defendant’s motion to
transfer are each DENIED as moot. [Docs. 35, 6]

An appropriate Order of Dismissal shall accompany this
Memorandum and Order.

[fn1] The case is before the undersigned United States
Magistrate Judge by written consent of the parties. See 28
U.S.C. § 636(c).

[fn2] The extended TLA governed 35 of the original 36
restaurants. The discrepancy is not relevant to the instant
dispute.

[fn3] Missouri’s long arm statute, Mo.Rev.Stat. §
506.500, provides, in relevant part, as follows:

1. Any person or firm, whether or not a citizen or resident
of this state, or any corporation, who in person or through
an agent does any of the acts enumerated in this section,
thereby submits such person, firm, or corporation, and, if
an individual, his personal representative, to the
jurisdiction of the courts of this state as to any cause of
action arising from the doing of any of such acts:

(1) The transaction of any business within this state;

(2) The making of any contract within this state;

(3) The commission of a tortious act within this state; .
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