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BJB Electric, L.P. v. North Continental Enterprises

February 9, 2010

BJB ELECTRIC, L.P., PLAINTIFF/COUNTER-DEFENDANT,
v.
NORTH CONTINENTAL ENTERPRISES, INC. DEFENDANT/COUNTER-PLAINTIFF.



The opinion of the court was delivered by: Judge Joan H. Lefkow

OPINION AND ORDER

The plaintiff, BJB Electric, L.P. ("BJB Electric"), has sued North Continental Enterprises ("NCE"), asserting claims arising from an alleged failure to pay for goods delivered to BJB Electric for sale under two distributorship agreements.*fn1 BJB Electric has filed a three-count counterclaim for breach of the distributorship agreements and, at issue in this document, for violation of the Illinois Franchise Disclosure Act of 1987 ("IFDA"), codified at 815 Ill. Comp. Stat. 705/1 et. seq. (Count III). BJB Electric has moved to dismiss Count III for failure to state a claim upon which relief may be granted. Fed. R. Civ. P. 12(b)(6). For the following reasons, BJB Electric's motion to dismiss [#26] will be granted.

LEGAL STANDARD

A motion to dismiss under Rule 12(b)(6) challenges a complaint for failure to state a claim upon which relief may be granted. See Fed. R. Civ. P. 12(b)(6); Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir.1997). For the purposes of a Rule 12(b)(6) motion, the court takes as true all well-pleaded facts in plaintiff's complaint and draws all reasonable inferences in favor of the plaintiff. Jackson v. E.J. Brach Corp., 176 F.3d 971, 977 (7th Cir.1999). Factual allegations must, however, be "enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed. 2d 929 (2007) (citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, at 235-36 (3d ed.2004)); see also Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 1953, 173 L.Ed. 2d 868 (2009) ("Twombly expounded the pleading standard for all civil actions.") (citations and internal quotation marks omitted). Thus, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citations omitted).

BACKGROUND*fn2

BJB Electric is a business engaged in procuring and selling electrical component parts manufactured in Germany and used in the lighting and appliance industries (referred to as "lighting components" and "appliance components," respectively). Prior to 1985, NCE did consulting work for BJB Electric. In 1985, BJB Electric and NCE entered into a distribution agreement whereby NCE would purchase BJB Electric's appliance components and sell them to customers in North America ("Appliance Components Agreement"). Other than specific customers reserved to BJB Electric, NCE was to have the exclusive right to sell and service BJB's appliance components to customers in North America. Countercl. ¶¶ 7, 9. The parties dealt continually under the agreement for nearly 25 years. NCE contends that beginning in 2003 BJB Electric breached the agreement by selling directly to customers developed by NCE. Id. ¶¶ 10, 22.

In 2005, the parties began negotiating a similar agreement under which NCE would sell BJB Electric's lighting components in North America ("Lighting Components Agreement"). The Lighting Components Agreement was executed on March 28, 2006 and provided that NCE "agreed to distribute [l]ighting [c]omponents provided to NCE by BJB Electric to customers and potential customers throughout North America with the exception of a limited number of specific manufacturers." Id. ¶ 13. NCE alleges that BJB Electric terminated the Lighting Components Agreement without good cause effective December 31, 2007. Id. ¶ 17. A document titled "Distribution Agreement" reflecting an execution of March 28, 2006 is attached to the counterclaim.

NCE alleges that BJB Electric violated three sections of the IFDA by failing to comply with notice requirements, engaging in fraudulent practices, and terminating the agreements without notice.*fn3

ANALYSIS

BJB Electric argues, inter alia, that NCE has failed to allege facts that show the relationship between BJB Electric and NCE is a franchise agreement. NCE responds that it has pled sufficient facts to permit the court to infer the existence of a franchise agreement under notice pleading standards.

The IFDA applies only to franchisees and franchisors as defined within the Act itself. See Vitkauskas v. State Farm Mut. Auto. Ins. Co., 509 N.E.2d 1385, 190, 157 Ill. App. 3d 317, 109 Ill. Dec. 373 (1987). Three elements are necessary to establish a franchise relationship under Section 3 of the IFDA, which provides in pertinent part,

(1) "Franchise" means a contract or agreement, either expressed or implied, whether oral or written, between two or more persons by which:

(a) a franchisee is granted the right to engage in the business of offering, selling, or distributing goods or services, under a marketing plan or system prescribed or suggested in substantial part by a franchisor; and

(b) the operation of the franchisee's business pursuant to such plan or system is substantially associated with the franchisor's trademark, service mark, trade name, or other commercial ...


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