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In re Kentucky Grilled Chicken Coupon Marketing & Sales Practices Litigation

July 8, 2010


The opinion of the court was delivered by: James F. Holderman, Chief Judge

(MDL 2103)


On February 4, 2010, plaintiffs Christine Doering, James Asanuma, Veronica Mora , Kay Ready, and Daleen Brown (together "Plaintiffs"), on behalf of themselves and a purported class of over five million other people, filed a "Master Consolidated Class Action Complaint" in this multidistrict class action lawsuit. (Dkt. No. 18 ("Master Complaint").) Plaintiffs allege claims for breach of contract (Count I), common law fraud (Count VI), and violations of the consumer protection statutes of Illinois, Michigan, and California (Counts II-V & VII) in relation to a free product giveaway in May 2009. Pending before the court is defendant Yum! Brands, Inc. ("Yum!") and defendant KFC Corporation's ("KFC") (together "Defendants") motion to dismiss. (Dkt. No. 24.) For the reasons stated below, Defendants' motion is denied.


For purposes of the pending motion to dismiss, the court accepts as true all well-pleaded allegations set forth in the Master Complaint. Reger Dev., LLC v. Nat'l City Bank, 592 F.3d 759, 763 (7th Cir. 2010).

Defendant KFC is the world's most popular chicken restaurant chain, and is a subsidiary of defendant Yum!. (Master Compl. ¶¶ 1, 15.) In April 2009, Defendants introduced a new product called "Kentucky Grilled Chicken." (Id. ¶ 22.) Defendants promoted "Kentucky Grilled Chicken" as a healthy fast-food menu option and incorporated the new menu item as part of their overall campaign to improve KFC's reputation for healthiness. (Id. ¶¶ 1, 23.) Defendants' campaign included a "Kentucky Grilled Chicken" giveaway, which was announced by Oprah Winfrey on May 5, 2009, on her television talk show. (Id. ¶¶ 2, 25-26.) Pursuant to the terms of the giveaway, any individual could obtain a free meal at KFC by first downloading a coupon from either or from Oprah Winfrey's website and then redeeming the coupon at a participating KFC franchise between May 5, 2009 and May 19, 2009, with the exception of May 10, 2009 (Mother's Day). (Id. ¶¶ 2, 26.) When presented at a KFC restaurant, the coupon entitled the bearer to a free two-piece "Kentucky Grilled Chicken" meal, with two sides and a biscuit. (Id. ¶ 26.)

Defendants "began almost immediately to refuse to honor the coupons." (Id. ¶¶ 3, 29.) At first they did so by "limit[ing] the promotion to the first 100 coupons presented at each KFC restaurant, per day." (Id. ¶ 30.) On May 7, 2009, Defendants "stopped the promotion altogether . . . [and] instructed franchises to stop honoring the coupons." (Id. ¶ 31.) Many of the KFC locations that refused to honor the coupon continued to offer "Kentucky Grilled Chicken" for purchase. (Id. ¶ 33.)From May 5 to May 7, 2009, at least 10.2 million coupons were downloaded from (Id. ¶ 32.) Only 4.5 million coupons were actually redeemed at KFC franchises. (Id.)

After stopping the coupon promotion, Defendants offered consumers the option of applying for a "rain check" for the promised free "Kentucky Grilled Chicken" meal. (Id. ¶ 34.) To apply for a "rain check," the consumer was required to fill out a form with the consumer's name and address, attach his or her coupon to the form, and mail the form to KFC or give it to a KFC team member. (Id. ¶ 35.) Defendants told consumers these procedures were necessary "so that KFC could verify the coupons' validity." (Id. ¶ 34.) Following receipt of the "rain check" application, KFC would then send the consumer a new coupon for a free meal at a later date, as well as an additional complimentary Pepsi product. (Id. ¶ 35.)

Additionally, the Master Complaint alleges that "Kentucky Grilled Chicken" contains rendered beef fat and beef powder, and that these ingredients were not disclosed in Defendants' marketing materials. (Id. ¶¶ 1, 24.)


Under the Federal Rules of Civil Procedure, a complaint generally must include only "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). In other words, the complaint is to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)); see also Reger Dev., LLC, 592 F.3d at 764. While "detailed factual allegations" are not required, a complaint must contain more than "labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555. The complaint "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (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. Additionally, a complaint's allegations of fraud must be pleaded with particularity. Fed. R. Civ. P. 9(b); see Reger Dev., LLC, 592 F.3d at 764. If the allegations in a count of a complaint "fail[ ] to state a claim upon which relief can be granted," that count is to be dismissed. Fed. R. Civ. P. 12(b)(6).


The underlying cases in this multidistrict litigation have been consolidated before this court for coordinated pretrial proceedings pursuant to 28 U.S.C. § 1407. In each case, the court's subject matter-jurisdiction over Plaintiffs' claims is based on 28 U.S.C. § 1332(d), which establishes federal subject-matter jurisdiction over class action lawsuits in which the parties are minimally diverse and the amount in controversy exceeds $5,000,000.00. It is undisputed that the parties to this litigation have diverse citizenship, and Plaintiffs have alleged an amount in controversy that exceeds $22,000,000.00, based on the number of unredeemed coupons (5.7 million) and the retail price of a two-piece "Kentucky Grilled Chicken" meal ($3.99). (Master Compl. ¶¶ 27, 70.)

"When a diversity case is transferred by the multidistrict litigation panel, the law applied is that of the jurisdiction from which the case was transferred." Chang v. Baxter Healthcare Corp., 599 F.3d 728, 732 (7th Cir. 2010); cf. Int'l Mktg., Ltd. v. Archer-Daniels-Midland Co., 192 F.3d 724, 729 (7th Cir. 1999). The federal courts of Illinois, Michigan, and California, in turn, each apply the substantive law of the forum state in which they sit, including that state's choice-of-law rules, when sitting in diversity. Auto-Owners Ins. Co. v. Websolv Computing, Inc., 580 F.3d 543, 547 (7th Cir. 2009); Montgomery v. Wyeth, 580 F.3d 455, 459 (6th Cir. 2009); CRS Recovery, Inc. v. Laxton, 600 F.3d 1138, 1141 (9th Cir. 2010). The parties to this case agree that Plaintiffs' breach of contract claim is governed by the common law of Illinois, Michigan, and California, in accordance with the "most significant contacts" or "governmental interest" choice-of-law rule followed by each of those states. (See Dkt. No. 26-1 ("Defs.' Mem.") at 6 n.5.)*fn1


I. Count I - Breach of Contract

For purposes of the pending motion, Defendants assume that a valid contract existed between Plaintiffs and Defendants for a free meal, including two pieces of Kentucky Grilled Chicken, two individual sides, and a biscuit, in exchange for a properly tendered coupon. (Defs.' Mem. 5.) It is also undisputed that the coupon provided for a two-week redemption period from May 5, 2009 to May 19, 2009, with the exception of May 10, 2009. (Id. at 7, n.6; see also Master Compl. ¶¶ 25-26.) Defendants argue that Count I should be dismissed for failure to state a claim, however, because the "time of performance was not an essential term of the contract." (Defs.' Mem. 5-6.) It is Defendants' position that their "delayed performance" comported with all of the material terms of the contract, and that no actionable breach of contract could have occurred based on the facts alleged by Plaintiffs. (Id. at 6.)

In response to this argument, Plaintiffs stress their allegations that the original contract terms were never honored by the Defendants-either during the contract period or at some later date. Plaintiffs have specifically alleged in their Master Complaint that Defendants breached their contract with Plaintiffs by: "(a) refusing to provide a two-piece 'Kentucky Grilled Chicken' meal upon presentment of the coupon; (b) by announcing [their] intention not to honor the coupons already downloaded; and (c) demanding that the Plaintiffs and the Class members relinquish their coupons to KFC as a condition of any future performance by KFC under the contract." (Master Compl. ¶ 81.) Plaintiffs allege that Defendants, rather than honoring the original contract terms in the coupon, instituted a "rain check" program whereby Defendants agreed to provide the promised "Kentucky Grilled Chicken" meal at a later date. (Id. ¶ 34.) Defendants' "rain check" program additionally required the consumer to fill out a "rain check" application form with the consumer's name and address, attach the coupon to the form, and mail the form to KFC or give the form to a KFC team member. (Id. ¶ 35.) Plaintiffs have alleged that KFC stopped honoring the coupons after Plaintiffs had already performed (by downloading a "Kentucky Grilled Chicken" coupon from a participating website and presenting the coupon in person at a KFC restaurant), despite giving no indications as to a lack of supply. (Id. ¶¶ 29-33, 37-42, 45-50, 53-58, 60-65.)

The court finds that Plaintiffs have alleged sufficient facts to "plausibly suggest an entitlement to relief," Iqbal, 129 S.Ct. at 1951, for Defendants' breach of their contract with Plaintiffs. Defendants' argument that Plaintiffs are not entitled to damages because the alleged breach involved a contract term that was not "essential" misses the mark. The materiality of a breach is generally evaluated for purposes of ascertaining only what remedies are available to the non-breaching party-not for purposes of liability. See Finch v. Ill. Cmty. Coll. Bd., 734 N.E.2d 106, 110 (Ill. App. Ct. 5th Dist. 2000) ("If a party fails to perform his duties under a contract, without a valid excuse, he is liable for a breach of contract, and the remedies for the breach would depend on whether the breach was material or minor."); Woody v. Tamer, 405 N.W.2d 213, 216 (Mich. Ct. App. 1987) ("When performance of a duty under a contract is due any non-performance is a breach.") (quoting Restatement (Second) of Contracts § 235); Brawley v. J.C. Interiors, Inc., 74 Cal. Rptr. 3d 832, 838 (Cal. Ct. App. 5th Dist. 2008) ("A breach of contract may be total or partial. If the breach is total, the injured party has the right to terminate the contract. If the breach is partial, there is no right to terminate. . . . Any breach of contract, whether total or partial, causing measurable injury, gives rise to a claim for damages.") (quoting BAJI No. 10.86). Additionally, a number of the cases cited by Defendants are inapposite insofar as they involve parties seeking to avoid their contractual obligations because of the other party's alleged breach of an essential "timing" term of the contract. See Sahadi v. Cont'l Ill. Nat'l Bank & Trust Co. of Chi., 706 F.2d 193, 196 (7th Cir. 1983); Chariot Holdings, Ltd. v. Eastmet Corp., 505 N.E.2d 1076, 1080 (Ill. App. Ct. 1st Dist. 1987); MacRitchie v. Plumb, 245 N.W.2d 582, 584 (Mich. Ct. App. 1976); Johnson v. Alexander, 134 Cal. Rptr. 101, 105 (Cal. Ct. App. 2d Dist. 1976). That ...

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