WILMINGTON, Del. — U.S. District Judge Gregory B. Williams denied a preliminary injunction and dismissed a fraudulent inducement claim in a dispute between U Swirl LLC and the sellers of its frozen yogurt franchise system, ruling the buyer failed to plead damages distinct from its breach of contract allegations.
U Swirl, the current owner of the U-Swirl Frozen Yogurt brand and other self-serve chains, sued U-Swirl International Inc. and its parent, Rocky Mountain Chocolate Factory Inc., after the defendants allegedly failed to transfer administrative control of the franchise's social media accounts.
The dispute centers on an Asset Purchase Agreement signed May 1, 2023, which defined "Purchased Assets" to include "all other Intangible Property of Seller relating to the Business," specifically listing "any social or digital media" and "all passwords and other account information."
Despite the contract language, U Swirl claimed it never received administrative access to the Meta Business Suite accounts hosting the corporate pages for its brands.
U Swirl sought a temporary restraining order and preliminary injunction to force the defendants to cooperate with Meta to restore the pages and transfer full administrative ownership.
Judge Williams denied the injunction, finding U Swirl failed to show a likelihood of success on the merits of its breach of contract claim.
The court noted that while the defendants once exercised administrative control, it was unclear how that access was lost, and the record suggested the defendants were actively working with Meta to resolve the issue.
"The evidence presented is more consistent with efforts to address issues associated with the transfer and administration of the accounts," Williams wrote.
The judge also granted the defendants' partial motion to dismiss U Swirl's fraudulent inducement claim.
While the court found the complaint sufficiently pleaded the elements of fraud under Federal Rule of Civil Procedure 9(b), it ruled the claim failed because U Swirl did not allege damages separate and apart from its breach of contract damages.
"Plaintiff alleges nearly identical damages for each cause of action in vague and conclusory terms, without identifying specific harm," Williams wrote.
The court also dismissed the breach of contract claim to the extent it relied on an implied covenant, ruling that U Swirl failed to identify a specific implied contractual obligation distinct from the express terms of the agreement.
U Swirl's counsel did not immediately respond to a request for comment.