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Jones v. Culver Franchising System, Inc.

United States District Court, N.D. Illinois, Eastern Division

December 20, 2013

Michael L. Jones, MBAJ Group, LLC, Michael Anthony G. Wilbern, and Wilbern Enterprises, LLC, Plaintiffs,
Culver Franchising System, Inc., Defendant

For Michael L. Jones, an individual, MBAJ Group, LLC, an Indiana limited liability company, Michael Anthony G. Wilbern, an individual, Wilbern Enterprises, LLC, an Illinois limited liability company, Plaintiffs: Carmen David Caruso, Jamie Lynn North, LEAD ATTORNEYS, Carmen D. Caruso Law Firm, Chicago, IL; Linda C. Chatman, Chatman Law Offices, LLC, Chicago, IL.

For Culver Franchising System, Inc., a Wisconsin corporation, Defendant: Larry Alan Schechtman, LEAD ATTORNEY, Smith & Amundsen, L.L.C., Chicago, IL; Alan L. Farkas, SmithAmundsen LLC (Chgo), Chicago, IL; Stepfon Rondell Smith, SmithAmundsen LLC, Chicago, IL.


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Thomas M Durkin, United States District Judge.

Plaintiffs Michael Jones and Michael Anthony Wilbern (together the " individual plaintiffs" ) and their respective companies, MBAJ Group, LLC and Wilbern Enterprises, LLC (together the " corporate plaintiffs" ), brought this lawsuit against

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Defendant Culver Franchising System, Inc. (" Culver" ), alleging discrimination on the basis of race in violation of 42 U.S.C. § 1981 and intentional infliction of emotional distress (" IIED" ). Culver moves to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), and also moves pursuant to Rule 21 to sever the claims of Jones and MBAJ Group, LLC from the claims of Wilbern and Wilbern Enterprises, LLC. R. 20, 22. For the reasons explained below, Culver's motion to dismiss is granted in part and denied in part, and its motion to sever is denied without prejudice.


The following relevant and well-pleaded facts, drawn from plaintiffs' complaint, are accepted as true, and are set forth in the light most favorable to them. Gomez v. Randle, 680 F.3d 859, 864 (7th Cir. 2012). In evaluating Culver's motion to dismiss, the court considers both " documents attached to the complaint" and " documents that are critical to the complaint and referred to in it." Geinosky v. City of Chicago, 675 F.3d 743, 745 n. 1 (7th Cir. 2012).

Jones, an African-American, is the creator and sole member of MBAJ Group, LLC. R. 1 ¶ 2. Wilbern, an African-American, is the creator and sole member of Wilbern Enterprises, LLC. Id. ¶ 4. In late 2001 or early 2002, Jones, through his LLC, applied to Culver for a franchise opportunity. Id. ¶ ¶ 24-25. Pursuant to Culver protocol, after providing a down payment on Culver's franchise fee, Wilbern and Jones attended Culver's 16-week training program at Culver's Wisconsin headquarters. Id. ¶ 25. After successfully completing this training program, Jones became eligible to open his first Culver franchise. Id. ¶ ¶ 25-26.

Culver suggested that Jones locate his franchise in the Indianapolis market, and pursuant to that suggestion, Jones opened his franchise in Noblesville, Indiana on January 28, 2003. Id. ¶ ¶ 27-28. Jones hired Wilbern to serve as his general manager. Id. ¶ 28. Three years later, on January 31, 2006, Jones opened a second Culver franchise in Indianapolis, Indiana. Id. ¶ 39.

In May 2004, Culver proposed that Wilbern take a position as manager of a Culvers restaurant franchise in Lansing, Illinois. Id. ¶ 32. Wilbern accepted Culver's proposal but only on the condition that he would soon be approved to own and operate his own Culver restaurant franchise in Chicago. Id. ¶ ¶ 32-33. Wilbern initially proposed two locations in Chicago that he believed to be promising: 95th Street and Stony Island, and 83rd Street and Stewart Avenue. Id. ¶ 34. Both sites would be in African-American communities and available at prices Wilbern considered fair. Id. Moreover, tax-increment financing (" TIF" ) was potentially available for these sites. Id. Culver indicated to Wilbern that it would consider these two locations, but Culver never approved them. Id. Instead, Culver recommended to Wilbern another site in Franklin Park, Illinois for his first franchise. Id. ¶ 35. Wilbern, in turn, proposed a site at 119th Street and Marshfield Avenue, another site that was in an African-American community and for which TIF funds were potentially available. Id. ¶ 36. Despite these site suggestions for franchise locations, Wilbern was never approved to open a Culver's franchise in a predominantly African-American community in Chicago. Id. ¶ 37. In November 2005, Wilbern, through his LLC, opened a Culver's franchised restaurant in Franklin Park, Illinois. Id. ¶ 38.

Plaintiffs initially found success with their franchises; indeed by 2006, " [they] were up and running as the only African-American franchisees in the Culver's system." Id. ¶ ¶ 30, 40, 43, 54. From 2006 to

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2013, both Wilbern and Jones approached Culver to open additional Culver restaurants. Wilbern suggested on numerous occasions that Culver consider restaurants at the three Chicago locations he had previously identified. Id. ¶ 46. Wilbern particularly pushed for the 95th and Stony Island location because he learned that $800,000 in TIF funds may have been available for that location. Id. ¶ 47. Culver, according to Wilbern, refused to allow him to expand into any of the African-American community sites that he identified; nor did it suggest any alternative sites for expansion. Id. ¶ 48.

Beginning in 2006, both plaintiffs experienced a variety of setbacks with their franchises that ultimately led to their closure or sale in 2012 and 2013. Id. ¶ ¶ 44, 58, 62. For Wilbern, the downturn was a result from a combination of several factors: (1) the receipt of " an unusually large tax bill" in 2006 from the Village of Franklin Park; (2) above-average leasing costs for his restaurant franchise; and (3) the opening of another nearby restaurant in 2010, which took customers away from Wilbern's Franklin Park Culver franchise. Id. ¶ 44. According to Wilbern, when he started to experience financial difficulties in 2006, he requested assistance from Culver in challenging the tax bill, renegotiating his lease, and refinancing with a bank, but Culver did not help him. Id. ¶ ¶ 45, 49. In March 2012, due to financial difficulties, Wilbern Enterprises, LLC filed for Chapter 11 bankruptcy. Id. ¶ 50. Despite the filing, Wilbern continued his efforts to secure refinancing so that he could emerge successfully from bankruptcy, but that effort failed, according to Wilbern, " due in substantial part to a lack of support from Culver[ ], which was content to let Wilbern fail." Id. ¶ ¶ 50-51. In November 2012, Wilbern closed the Franklin Park franchise. Id. ¶ 52. After Wilbern closed his franchise, the restaurant was acquired and reopened by two white franchisees, Guy and Kathy Hollis. Id. ¶ 53.

Meanwhile, Jones was running his two Culver franchises in Indiana. Id. ¶ 54. In 2010, Jones received an inquiry from the Indianapolis Colts about a possible joint marketing opportunity, but Culver was not interested in pursuing it. Id. ¶ 55. Nor was Culver interested in Jones's idea to pursue another Culver franchise in Noblesville or five Culver restaurants in Florida with Jones and his prospective partner, Dorian Boyland, an African-Ameircan. Id. ¶ ¶ 56-57. The downturn for Jones began in late 2011 and early 2012 when he learned that the State of Indiana was claiming that he had underpaid a sales tax bill to the State. Id. ¶ 58. From then on, Jones alleges, Culver failed to financially assist him. In February 2012, Culver pressed Jones to sell his franchises to a white franchisee named Jeff Meyer, but Jones resisted, believing that he could resolve the tax dispute with the State of Indiana. Id. ¶ 60. In April 2012, Culver announced that it was expanding into Florida but did not consider Jones and Boyland for that franchise opportunity, despite their prior proposals to pursue franchises there. Id. ¶ 59. Finally, in June, MBAJ Group, LLC filed for Chapter 11 bankruptcy; Culver urged Jones to sell both of his franchises to Meyer, which Jones finally agreed to do in February 2013. Id. ¶ ¶ 60-62.

The corporate and individual plaintiffs filed suit in this Court, bringing two counts. Count I alleges intentional discrimination in violation of 42 U.S.C. § 1981 on behalf of both the individual and corporate plaintiffs. Id. ¶ ¶ 65-66. They allege that Culver intentionally engaged in a pattern and practice of racial discrimination that denied African-American franchisees the same resources, support, and opportunities as non-African-American franchisees.

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Id. ¶ 77. According to plaintiffs, the franchise agreements Culver offered to them constituted contracts within the meaning of § 1981, and under § 1981, plaintiffs were entitled to the same right to the " enjoyment of all benefits, privileges, terms, and conditions of the [franchise] relationship" as white franchisees. Id. ¶ 67. Contained with that franchise agreement, plaintiffs say, was an express and implied contractual obligation by Culver to provide " reasonable assistance" to its franchisees and to allow them to " grow their businesses, expand into multi-unit ownership, and to avoid business failure." Id. ¶ 68. Plaintiffs allege that instead of fulfilling those obligations--which Culver did for numerous white franchisees--Culver reneged on them on account of plaintiffs' race. Id. ¶ ¶ 68, 75.

Specifically, Wilbern and Wilbern Enterprises, LLC claim that Culver violated § 1981 when it refused multiple, reasonable proposals to open Culver restaurant franchises in minority communities in Chicago--refusals that were " unlawfully motivated by considerations of race including the racial composition of the intended market area" and Wilbern's race. Id. ¶ 71. Wilbern contends that Culver further violated § 1981 when on account of his race, it steered him to the less than optimal Franklin Park franchise, subjected the franchise to unreasonably high real estate costs that white franchisees were not subjected to, and allowed the opening of a nearby restaurant over his protests, which Culver knew would cause his franchise to lose customers. Id. ¶ 74. Ultimately, Wilbern alleges that the entire relationship " was tainted by race" as his franchise was " made to feel unwelcome by Culver[ ] at every step of the way in the franchise relationship." Id. ¶ 76.

As for Jones and his company, they allege that Culver violated § 1981 when, on account of Jones's race, Culver refused their proposals to open additional Culver restaurants in Florida and Noblesville, Indiana. Id. ¶ 73. According to Jones, Culver blocked Jones's efforts to partner in marketing efforts with the Indianapolis Colts " for no reason other than race-based animosity to Jones," overreacted to Jones's problems with the State of Indiana regarding his underpaid sales taxes when it had previously ignored or downplayed comparable incidents by white franchisees, and schemed with a white franchisee to allow him to acquire Jones's franchises. Id. ¶ 75.

Count II alleges a state law claim for intentional infliction of emotional distress, a claim again brought on behalf of both the individual and corporate plaintiffs. Id. ¶ ¶ 82-83.

Legal Standard

A Rule 12(b)(6) motion challenges the sufficiency of the complaint . See, e.g., Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). 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), sufficient to provide defendant with " fair notice" of the claim and the basis for it. Bell A. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). This " standard demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). While " detailed factual allegations" are not required, " labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555. The ...

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