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Steven Bell, Individually and On Behalf of All Similarly Situated v. Bimbo Foods Bakeries Distribution

July 2, 2012

STEVEN BELL, INDIVIDUALLY AND ON BEHALF OF ALL SIMILARLY SITUATED INDIVIDUALS, PLAINTIFF,
v.
BIMBO FOODS BAKERIES DISTRIBUTION, INC., DEFENDANT.



The opinion of the court was delivered by: Judge Edmond E. Chang

MEMORANDUM OPINION AND ORDER

Plaintiff Steven Bell has sued Bimbo Foods Bakeries Distribution, Inc.*fn1 on behalf of himself and a proposed class, alleging that Bimbo has illegally characterized employees as independent contractors and thus has not paid them overtime wages in violation of the Fair Labor Standards Act, 29 U.S.C. § 201, et seq., and Illinois state law, 820 ILCS 115/9. R. 36 ¶ 1. Bell also alleged claims for rescission, unjust enrichment, and breach of contract, as well as wrongful termination under the Illinois Franchise Disclosure Act, 815 ILCS 705/19. Id.*fn2 Bimbo moved to dismiss the claims advancing theories under the Franchise Disclosure Act (Count 5), rescission (Count 3), and unjust enrichment (Count 4). Fed. R. Civ. P. 12(b)(6). R. 37. The parties then stipulated to dismissing with prejudice the rescission and unjust enrichment claims (Counts 3 and 4). R. 73. That leaves the Franchise Disclosure Act (Count 5) claim for a decision. For the reasons discussed below, the claim is dismissed.

I.

At this stage of the litigation, we accept Plaintiff's allegations as true and draw reasonable inferences in his favor. Steven Bell has worked as a distributor for Bimbo and its predecessor since August 1993, selling and delivering Bimbo's bakery products to local retailers, stocking shelves, and removing stale products. R. 36 ¶ 6. Bimbo classifies Bell and others like him as independent contractors, id. ¶ 8, and a "distributor agreement" governs their relationship, id. ¶¶ 21, 23. To operate as a Bimbo distributor, Bell and others purchased the right to serve specified retail outlets within a designated territory. Id. ¶¶ 22, 24. The distributor agreement reserved for Bimbo the right to distribute products to "non-Outlets" in that territory. Id. ¶ 25.

The contracts generally set forth standards the distributors must meet, "but do not dictate specifically how these standards are to be achieved," consistent with Bimbo's characterization of its distributors as independent contractors. Id. ¶ 28. But Bell alleges that Bimbo instead really treats its distributors as employees and has "retained or exercised the right to control the Distributors' work in ways that go beyond the express obligations and responsibilities" laid out in the distributor agreements, listing a range of examples in support. Id. ¶ 30. Bell also takes issue with Bimbo's 2011 acquisition of Sara Lee Corporation's North American bakery business. Id. ¶ 41. Bell alleges that Sara Lee bakery products compete directly with Bimbo products in the specified sales area, and after the acquisition, Bimbo allegedly has been marketing Sara Lee products within Bell's sales area. Id.

II.

In reviewing a complaint's sufficiency, Federal Rule of Civil Procedure 8(a)(2) instructs that a complaint generally need only include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). This short and plain statement must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atl. v. Twombly, 550 U.S. 544, 555 (2007) (quotation and citation omitted).

"A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to state a claim upon which relief may be granted." Hallinan v. Fraternal Order of Police Chicago Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). "[W]hen ruling on a defendant's motion to dismiss, a judge must accept as true all of the factual allegations contained in the complaint." Erickson v. Pardus, 551 U.S. 89, 94 (2007). "[A] complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). These allegations "must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. And the allegations that are entitled to the assumption of truth are those that are factual, rather than mere legal conclusions. Iqbal, 556 U.S. at 678.

III.

A. Choice of Law

The natural first question is which state's law applies to the dispute over the distributor agreement. The distributor agreement itself specifies that New Jersey law will control the "validity, interpretation and performance" of the contract. R. 38-1 ¶ 15.5. Yet neither side has mentioned New Jersey law; both parties have cited Illinois law and federal court cases applying Illinois law, and neither has asked the Court to apply any law other than Illinois's. In the absence of such a request, and because no special circumstances compel otherwise, the Court will abide by the parties' implicit agreement to apply Illinois law in this case. See Faulkenberg v. CB Tax Franchise Sys., LP, 637 F.3d 801, 809 (7th Cir. 2011) (applying Illinois law despite a contract provision specifying Texas law, when the parties briefed and cited Illinois law and did not request that another state's law should apply).

B. Wrongful Termination (Count Five)

Bell alleges that by selling Sara Lee bakery products, specifically breads, Bimbo has "essentially voided, or terminated" his and fellow class members' distribution agreements, "all of which are integrally premised on the assurance of an exclusive Sales Area and the right to sell exclusively particular products to specified Outlets within the designated Sales Area." R. 36 ¶ 41. In response, Bimbo argues that Bell fails to state a claim for wrongful termination under the Illinois Franchise Disclosure Act because (1) the Act does not recognize a "constructive termination claim"; and (2) even if such a claim exists under the Act, Bell's claim would fail because he has not abandoned his franchise. R. 38 at 7-8.

The Illinois Franchise Disclosure Act prohibits a franchisor from terminating a franchise before the expiration of the franchise term except for good cause. 815 ILCS 705/19. Illinois courts have not considered whether termination under the Act includes only actual termination or also encompasses some form of "constructive termination."*fn3 Although Illinois courts have not explicitly addressed this question, one can draw parallels from the Illinois courts' recognition of constructive termination in the employment discrimination context, under the Illinois Human Rights Act, 775 ILCS 5/1-101 et seq. See Stone v. Dep't of Human Rights, 700 N.E.2d 1105, 1112 (Ill. App. Ct. 1998); Steele v. Ill. Human Rights Comm'n, 513 N.E.2d 1177, 1179-80 (Ill. App. Ct. 1987) ("Constructive discharge occurs when an employer deliberately makes an employee's working conditions so intolerable that the employee is forced to resign involuntarily . . . ."). Although the Illinois Human Rights Act does not explicitly prohibit constructive termination based on discrimination, 775 ILCS 5/2-102, Illinois courts approved the cognizability of such claims from the general prohibitions on discrimination. Steele, 513 N.E.2d at 1179. In order to amount to constructive termination, an employer's conduct must have resulted in "working conditions . . . so difficult or unpleasant that a reasonable person in the ...


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