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Korean American Broadcasting Company, Inc v. Korean Broadcasting System and Kbs America

June 9, 2011


The opinion of the court was delivered by: John F. Grady, United States District Judge


Before the court is the motion of KBS America, Inc. to dismiss the Second Amended Complaint. For the following reasons, the motion is granted in part and denied in part.


This is a diversity action brought by KM LPTV of Chicago-28, LLC ("Channel 28"), Korean American Broadcasting Company, Inc., and KM Communications, Inc., against Korean Broadcasting System ("KBS") and KBS America, Inc. ("KBS America"). The facts of this case, as alleged by plaintiffs, are set out in our previous memorandum opinion and will not be repeated here. See Korean Am. Broad. Co. v. Korean Broad. Sys., No. 09 C 6665, 2010 WL 3075566, at *1-3 (N.D. Ill. Aug. 4, 2010). In that opinion, we granted KBS America's motion to dismiss the First Amended Complaint and dismissed all of plaintiffs' claims, some with prejudice and some without. We gave plaintiffs leave to file a Second Amended Complaint, and they did so. The Second Amended Complaint contains four counts: violation of the Illinois Franchise Disclosure Act (Count I); common-law fraud (Count II); negligent misrepresentation (Count III, pled in the alternative); and civil conspiracy (Count IV).

KBS America now moves to dismiss the Second Amended Complaint.


The purpose of a Rule 12(b)(6) motion to dismiss is to test the sufficiency of the complaint, not to resolve the case on the merits. 5B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1356, at 354 (3d ed. 2004). Under federal notice-pleading standards, a complaint need not contain "detailed factual allegations," but it must have more than mere "labels and conclusions." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A plaintiff is obligated to provide the factual grounds of his entitlement to relief, and a "formulaic recitation" of the elements of a claim will not do. Id. The complaint must contain sufficient facts to raise a plaintiff's right to relief above a "speculative" level, id. at 555, and the claim must be "plausible on its face," id. 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." Ashcroft v. Iqbal, --- U.S. ----, ----, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009). When evaluating a motion to dismiss a complaint, we must accept as true all factual allegations in the complaint, but not its legal conclusions. Id. at 1949-50.

A. Illinois Franchise Disclosure Act (Count I)

The Illinois Franchise Disclosure Act (the "Franchise Act") provides a civil cause of action for damages caused by the termination of, or failure to renew, a franchise in violation of the statute. 815 ILCS 705/26. The Franchise Act states in relevant part:

Non-renewal of a franchise. It shall be a violation of this Act for a franchisor to refuse to renew a franchise of a franchised business located in this State without compensating the franchisee either by repurchase or by other means for the diminution in the value of the franchised business caused by the expiration of the franchise where: .

(b) the franchisee has not been sent notice of the franchisor's intent not to renew the franchise at least 6 months prior to the expiration date or any extension thereof of the franchise. 815 ILCS 705/20. The statute defines a "franchise" as a contract or agreement that has certain enumerated characteristics. 815 ILCS 705/3(1).

In our previous opinion, we dismissed Channel 28's Franchise Act claim without prejudice because it failed to adequately specify which agreement or agreements allegedly created a franchise; the allegations that the "agreements between KBS, KBS America and Channel 28, including but not limited to the expired written agreement" granted Channel 28 a franchise and that Channel 28 "is a franchise of KBS and/or KBS America" did not give defendants adequate notice of the claim. We instructed plaintiffs that if they were alleging that there was some other agreement in addition to the written agreement that created a franchise, "they should expressly allege that." 2010 WL 3075566 at *11.

Channel 28's amended allegations are as follows:

61. There had been the agreements between KBS, KBS America and Channel 28, such as the first written agreement, the written agreement attached and the oral agreement upon expiration of the written agreement. Such agreements granted Channel 28 the right to engage in the business of distributing KBS and KBS ...

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