Enlightened Armadillo Incorporated et al v. Freeman

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WO
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
Enlightened Armadillo Incorporated, et al.,
Plaintiffs,
v.
Lance Freeman,
Defendant.
No. CV-25-02663-PHX-JJT
ORDER
At issue is Defendant Lance Freeman’s Motion to Dismiss (Doc. 22), to which
Plaintiffs Enlightened Armadillo, Inc., Mark and Ella Hrubant, and Snug Holding
Company LLC responded (Doc. 24), and Defendant replied (Doc. 26). For the reasons
below, the Court will order the parties to submit simultaneous briefing to address the
questions raised herein.
Defendant, an Arizona resident, served as the President of Franchise Development
of a company that owned Yoga Six Franchise, LLC (“Yoga Six”) (Doc. 19, FAC, ¶¶ 4, 29).
Plaintiffs separately purchased a Yoga Six franchise and each entered into a Yoga Six
Franchise Agreement (“Agreement”). (Id. ¶¶ 9, 64.) According to Plaintiffs, Defendant
made “serious misrepresentations” about the Yoga Six brand to induce them into
purchasing their respective franchises, including average monthly profit, membership
quantity and retention, and success of other Yoga Six franchises. (Id. ¶¶ 10–11, 14–16, 53–
55.) Plaintiffs experienced delays in opening the franchise studios, membership attrition,
and significant monthly losses after opening. (Id. ¶¶ 65–83.) Plaintiffs have since closed
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their franchises. (Id. ¶¶ 11, 21.) Plaintiffs now sue Defendant and bring this action under
the Court’s diversity jurisdiction. They raise nine claims in total, which Defendant now
moves to dismiss. In briefing Defendant’s Motion to Dismiss, both parties cite an
assortment of statutes, case law, and public policy from the States of California and
Arizona, including statutes of limitation, preemption doctrine, nexus requirements, and
contractual waiver.
The Court is not convinced that California law applies to the same extent that the
parties are. When, as here, the Court has jurisdiction based on the diversity of the parties,
it must apply Arizona’s conflict of law rules to decide which state’s law should govern the
issues raised in the case. See Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496
(1941). Arizona has adopted the conflict of law rules of the Restatement (Second) of
Conflict of Laws (“Restatement”). Bryant v. Silverman, 703 P.2d 1190, 1191 (Ariz. 1985).
A conflict of law determination must take place on an issue-by-issue or claim-by-claim
basis and consider whether each claim or issue sounds in tort, in contract, or otherwise.
See, e.g., Restatement § 187(1) (requiring analysis by “particular issue”). The parties have
not grappled with this analysis at all.
As a separate matter, Defendant strongly relies on Section 17.6 of the Agreements
to argue that Plaintiffs waived their right to sue him for claims arising from the sale of the
franchises. Defendant omits1 a portion of Section 17.6 from his argument that states:
. . . [T]o the maximum extent permitted by law, each
Contracting Party hereby waives and releases all such
liabilities, claims, causes of action, and obligations against any
such Nonparty Affiliates, unless such liabilities, claims,
causes of action, and obligations arise from deliberately
fraudulent acts.
1 Neither the laws of California nor Arizona support Defendant’s parsing of Section 17.6.
See Cal. Civ. Code § 1641 (“The whole of a contract is to be taken together, so as to give
effect to every part, if reasonably practicable, each clause helping to interpret the other.”);
Miller Cattle Co. v. Mattice, 298 P. 640, 642–43 (Ariz. 1931) (“[A] particular clause in a
contract cannot be interpreted as if it stood by itself, but the court must take into
consideration the entire contract.”).
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(Doc. 23-3, § 17.6 (emphasis added).) Based on the briefing before the Court, it is unclear
the extent to which the language of Section 17.6 in its entirety—not just the portions cited
by Defendant—applies to Plaintiffs’ claims should the Court agree with Defendant that the
section should be enforced against Plaintiffs.
The parties shall simultaneously file a memorandum answering the following
questions:
1. Under the Restatement, do the claims or issues brought by Plaintiffs in their First
Amended Complaint sound in contract, in tort, a combination thereof, or
otherwise? As the Court must do, the parties shall address this question for each
claim or issue.
2. Under the Restatement, which State’s law controls each of Plaintiffs’ claims or
issues raised in their First Amended Complaint? As the Court must do, the
parties shall address this question for each claim or issue.
3. After applying contractual interpretation if and where necessary, what effect
does the entirety of Section 17.6 have on Plaintiffs’ ability to sue Defendant on
the claims or issues raised in their First Amended Complaint?
The parties’ respective memoranda may not exceed eleven pages and shall be
submitted between 4:30 p.m. and 5:00 p.m. (Arizona time) on December 29, 2025. No
responses are permitted.
IT IS ORDERED that each party shall submit a memorandum answering the
questions set forth above between 4:30 p.m. and 5:00 p.m. (Arizona time) on
December 29, 2025. No responses are permitted.
Dated this 16th day of December, 2025.
Honorable John J. Tuchi
United States District Judge
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