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P & W SUPPLY CO. v. E. I. DU PONT DE NEMOURS & CO.

June 7, 1990

P & W SUPPLY CO., INC. and EPW DISTRIBUTION CENTER, Plaintiffs,
v.
E. I. DU PONT de NEMOURS & CO., INC., Defendant



The opinion of the court was delivered by: ROSZKOWSKI

 STANLEY J. ROSZKOWSKI, UNITED STATES DISTRICT JUDGE

 This action comes before the Court on Defendant's motion to dismiss Plaintiff's complaint for failure to state a cause of action pursuant to Rule 12 (b)(6) of the Federal Rules of Civil Procedure. For the reasons set forth in the opinion below, this Court denies Defendant's motion to dismiss Count I of the complaint but grants Plaintiff thirty days to file an amended complaint relating to the indirect franchise fee issue (for paint mixing machines) as set out below. Further, the Court grants Defendant's motion to dismiss Count II of the complaint without leave to amend for failure to state a cause of action upon which relief can be granted. Finally, the Court denies Defendants motion to dismiss Count III of the complaint.

 BACKGROUND

 Plaintiff, P & W Supply Co., Inc. and its sister company EPW Distribution Center ("P & W Supply"), originally brought this action under the Illinois Franchise Disclosure Act of 1987, Ill. Rev. Stat. ch. 121 1/2, par. 1701 et seq. ("IFDA"). Plaintiff alleges that it was a franchisee of the defendant, E. I. Du Pont de Numours & Co. ("Du Pont"), and that Defendant violated the provisions of the IFDA by unfairly discriminating against them and by terminating the franchise agreement without good cause.

 Accepting Plaintiff's allegations as true for purposes of this motion only, Vaden v. Village of Maywood, 809 F.2d 361, 363 (7th Cir.), cert. denied, 482 U.S. 908, 107 S. Ct. 2489, 96 L. Ed. 2d 381 (1987); Mitchell v. Archibald & Kendall, Inc., 573 F.2d 429, 432 (7th Cir. 1978), the following facts form the basis of this lawsuit.

 On February 29, 1980, Plaintiff entered into an agreement with Defendant in Rockford, Illinois engaging Plaintiff as a seller and distributor or "jobber" *fn1" of Du Pont refinish products for auto body repair shops. The terms of the contract stated, inter alia, that "JOBBERS relationship to DU PONT under this agreement shall be that of an independent contractor, and JOBBER is not authorized to present itself to the public or create in its customer's minds the impression that it is a legal representative or agent of Du Pont." The contract also provided that either party could terminate the agreement with or without cause by sending a thirty day notice of termination.

 Plaintiff and Defendant entered into a revised agreement on August 6, 1984. The terms of this agreement were substantially similar to the first contract. In 1989, Du Pont again revised its "Jobber" agreement and disseminated this agreement to Du Pont Jobbers around the country for their signature. The terms of this contract, however, differed in a number of crucial points from the previous agreements. The proposed agreement provided that Plaintiff would be solely responsible for all claims arising out of its sales to persons other than refinishers, or in systems for uses other than those recommended or approved by Du Pont. The contract also limited Plaintiff's right to transfer ownership of its business to employees or other persons. Plaintiff's president refused to sign this new agreement and continued working under the terms of the 1984 contract. On June 5, 1989, Defendant formally terminated the old "Jobber" agreement.

 In Count I of the complaint, Plaintiff contends that it was a franchisee of Defendant under the provisions of the IFDA. Count II of the complaint alleges that as a result of Plaintiff's refusal to sign the revised contract, Du Pont discriminated against them, in violation of section 18 of the IFDA, by not selling them "a specific Du Pont product" and terminating the agreement without good cause. Finally, Plaintiff alleges in Count III that Defendant terminated their agreement in violation of section 19 of the IFDA which requires a franchiser to show good cause before it can terminate a franchise agreement.

 Defendant moves to dismiss this complaint pursuant to Fed. R. Civ. P. 12 (b)(6) for failure to state a cause of action upon which relief can be granted. Defendant contends that under the express terms of the contract, Plaintiff was an independent contractor and no franchise relationship existed. Defendant also asserts that the type of discrimination alleged does not give rise to a cause of action under the IFDA. Finally, Defendant contends that since Plaintiff was not a franchisee, it was free to terminate the agreement pursuant to the terms of the contract which allow either party to terminate the agreement with or without cause. Consequently, Defendant urges this Court to dismiss the action.

 DISCUSSION

 The Court will not dismiss an action for failure to state a claim under Fed. R. Civ. P. 12 (b)(6) unless it is clear beyond doubt that Plaintiff can prove no set of facts in support of its claim which would entitle it to relief. Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S. Ct. 2229, 2233, 81 L. Ed. 2d 59 (1984); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 101-102, 2 L. Ed. 2d 80 (1957); Vaden v. Village of Maywood, 809 F.2d 361, 363 (7th Cir.), cert. denied, 482 U.S. 908, 107 S. Ct. 2489, 96 L. Ed. 2d 381 (1987). The Court will accept all well-pleaded allegations in the complaint as true. Vaden, 809 F.2d at 363; Doe v. St. Joseph's Hospital of Fort Wayne, 788 F.2d 411, 414 (7th Cir. 1986). Additionally, this Court will view the allegations in a light most favorable to the non-moving party, in this case Plaintiff, P & W Supply. Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984); Wolfolk v. Rivera, 729 F.2d 1114, 1116 (7th Cir. 1984).

 COUNT I

 The first count of the complaint alleges that Plaintiff was a franchisee of Defendant under the Illinois Franchise Disclosure Act. The IFDA regulates the relationship between franchisees and franchisers in the State of Illinois. The statute's primary purpose is to deal with the "perceived losses" suffered by Illinois residents where franchisers fail to disclose full and complete information regarding the franchise relationship. Ill. Rev. Stat. ch. 121 1/2, par. 1701. The Act requires that franchises be registered with the Attorney General prior to sale, prohibits fraudulent or deceptive practices in connection with the sale of franchises, bans certain types of discrimination among franchises and regulates a franchiser's ability to terminate a franchise relationship. Despite the increasing number of franchises in the state, Illinois courts have only rarely discussed or interpreted the IFDA. See, e.g., My Pie Intern. Inc. v. Debould, Inc., 687 F.2d 919, 922 (7th Cir. 1982) ("Although [the IFDA] has been on the books for more than eight years, there has been virtually no judicial interpretation of it, and we must guess how the Illinois ...


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