The opinion of the court was delivered by: Sue E. Myerscough, U.S. District Judge:
Tuesday, 31 May, 2011 10:50:27 AM Clerk, U.S. District Court, ILCD
This matter is before the Court on a Report and Recommendation (d/e 33) entered on February 18, 2011. Plaintiff, Stuller, Inc. (Stuller), timely filed its Objections to the Report and Recommendation (d/e 35) on March 4, 2011. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b).
The Report and Recommendation recommends allowing Defendant Steak N Shake Enterprises, Inc.'s (SNS Enterprises) Motion to Dismiss Counts II and III of the First Amended Complaint (d/e 21) and allowing in part Defendant Steak N Shake Operations, Inc.'s (SNS Operations) Motion to Dismiss (d/e 23). For the reasons that follow, this Court adopts the Report and Recommendation in part and rejects the Report and Recommendation in part.
This Court reviews de novo any part of the Report and Recommendation to which a proper objection has been made. 28 U.S.C. § 636(b)(1)(C); Fed.R.Civ.P. 72(b). Findings of the Report and Recommendation for which no objection has been made can simply be adopted by this Court. Lewis v. Hollingsworth, 2010 WL 4177442, at*1 (S.D.Ill. 2010). Upon review of the Report and Recommendation, this Court may accept, reject, or modify the recommended disposition, receive further evidence, or recommit the matter to the magistrate judge with instructions. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b)(3).
The parties are familiar with the specific allegations of each count contained in the Complaint, and this information is fully set out in the "Statement of Facts" section of the Report and Recommendation, which this Court adopts. To summarize, Stuller, a Steak N Shake franchisee, alleges Defendants adopted a policy (the "Policy") purporting to require all franchisees to follow set menu and pricing (with the exception of breakfast items) and offer all company promotions as published. According to Stuller, this Policy was contrary to "long-standing custom, practice, policy, agreement, and representation," that franchisees could set their own prices for menu items, maintain "custom menus," and choose whether to follow promotions. Stuller further alleges that when Stuller refused to implement the Policy, Defendants sent default notices threatening to terminate Stuller's franchises.
A. Stuller's First Amended Verified Complaint In November 2010, Stuller filed a Complaint and, in December 2010, filed the First Amended Verified Complaint at issue herein. In Count I, Stuller sought a declaratory judgment that Stuller was not required to comply with the Policy under the terms of the franchise agreements (Agreements) and applicable law. Stuller also asked for injunctive relief to stop Defendants from enforcing the Policy. In Count II, Stuller alleged Defendants breached the implied covenant of good faith and fair dealing by attempting to force Stuller to adopt the Policy. In Count III, pleaded in the alternative, Stuller alleged that, if Defendants can impose the Policy on Stuller, then Defendants violated the Illinois Franchise Disclosure Act (IFDA) (815 ILCS 705/1 et seq.) by:
(1) attempting to force Stuller to implement the Policy despite any language to that effect in the Agreements and despite the representations in the Uniform Franchise Offering Circular (UFOC); and (2) falsely stating in the UFOC that franchisees could set their own prices and that franchisees were not obligated to participate in all marketing promotions.
B. Defendants' Motions to Dismiss Both Defendants filed motions to dismiss. SNS Enterprises moved to dismiss Count II for failure to state a claim because Stuller could not allege actual damages, no termination of the Agreements had occurred, and Illinois does not recognize an independent claim for breach of an implied duty of good faith in the absence of an express contract term that is breached. SNS Enterprises moved to dismiss Count III for failure to state a claim on the basis that Stuller could not allege actual damages, the claim was barred by the three-year statute of limitations set forth in the IFDA, and Stuller failed to adequately allege the elements of fraud.
SNS Operations moved to dismiss Counts II and III on the same grounds asserted by SNS Enterprises. SNS Operations also sought to dismiss the entire complaint on the ground that, although it was the original franchisor on three of the five franchises, SNS Operations assigned those Agreements to SNS Enterprises in 2005.
C. The Report and Recommendation and Stuller's Objections Thereto
The Report and Recommendation recommended denying SNS Operations' motion to dismiss on the ground that SNS Operations had assigned the Agreements to SNS Enterprises. The recommended dismissal of Count II, treated as a breach of contract claim, was based on the failure to allege damages. The Report and Recommendation recommended this Court dismiss Count III because: (1) the claim was barred by the statute of limitations and equitable tolling should not apply under the facts alleged; and (2) Stuller failed to plead damages. Stuller timely filed Objections to the Report and Recommendation challenging the recommendation that Counts II and III be dismissed.
A. Standard of Review on a Motion to Dismiss Under Rule 12(b)(6), dismissal is proper where a complaint fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). To state a claim upon which relief can be granted, a complaint must provide a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). That statement must be sufficient to provide the defendant with "fair notice" of the claim and its basis. Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 1964, 167 L.Ed.2d 929, 940 (2007). This means that: (1) "the complaint must describe the claim in sufficient detail to give the defendant 'fair notice of what the ... claim is and the grounds upon which it rests" and (2) its allegations must plausibly suggest that the plaintiff has a right to relief, raising that possibility above a "speculative level." EEOC v. Concentra Health Services, Inc., 496 F.3d 773, 776 (7th Cir. 2007). While detailed factual allegations are not needed, a "formulaic recitation of a cause of action's elements will not do." Twombly, 550 U.S. at 555, 127 S.Ct. at 1965, 167 L.Ed.2d at 940. Conclusory allegations are "not entitled to be assumed true." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1951, 173 L.Ed.2d 868, 885 (2009) (citing Twombly, 550 U.S. 544 (2007)). "In ruling on Rule 12(b)(6) motions, the court must treat all well-pleaded allegations as true and draw all inferences in favor of the non-moving party." In re marchFIRST Inc., 589 F.3d 901, 904 (7th Cir. 2009) (citing Tamayo, 526 F.3d at 1081).
B. Count II States a Claim for Breach of Contract Stuller did not object to the Report and Recommendation's characterization of Count II as a breach of contract claim. To state a breach of contract claim under Illinois law, a plaintiff must allege the existence of a contract, substantial performance ...