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American Kitchen Delights, Inc. v. John Soules Foods, Inc.

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

September 29, 2014

AMERICAN KITCHEN DELIGHTS, INC., Plaintiff,
v.
JOHN SOULES FOODS, INC., and SEAFAX, INC., Defendants.

MEMORANDUM OPINION AND ORDER

MANISH S. SHAH, District Judge.

American Kitchen Delights, Inc. is a food manufacturer and private-label packager. Its meat supplier, John Soules Foods, Inc., refused to sell American Kitchen meat on credit. John Soules relied, at least in part, on negative credit reports concerning American Kitchen. Those reports were produced by Seafax, Inc. American Kitchen brought this suit, alleging that Seafax's reports were defamatory and disparaging, and that John Soules's decision to deny credit was based on the ethnicity of American Kitchen's owner.[1] Both defendants move to dismiss. For the reasons discussed below, the motions to dismiss are granted.

I. Legal Standards

Defendants' motions are brought under Rule 12(b)(6) of the Federal Rules of Civil Procedure. I therefore construe the complaint in the light most favorable to American Kitchen, accept as true all well-pleaded facts, and draw reasonable inferences in its favor. Yeftich v. Navistar, Inc., 722 F.3d 911, 915 (7th Cir. 2013). Statements of law, however, need not be accepted as true. Id. Rule 12(b)(6) limits my consideration to "allegations set forth in the complaint itself, documents that are attached to the complaint, documents that are central to the complaint and are referred to in it, and information that is properly subject to judicial notice." Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013).

To survive defendants' motions, the complaint must "state a claim to relief that is plausible on its face." Yeftich, 722 F.3d at 915 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "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. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

II. Facts[2]

American Kitchen is a food manufacturer and private-label packager. Complaint ¶ 1. American Kitchen's owner, Shahnawaz Hasan, is of Indian descent. Complaint ¶ I.30. Around September 2008, American Kitchen contacted John Soules about buying meat. Complaint ¶ 6. Hasan asked to buy the meat on credit. Complaint ¶ 7. John Soules required American Kitchen to submit a credit application. Complaint ¶ 8. John Soules said it would obtain and review American Kitchen's credit report from Seafax, to determine whether to sell meat on credit. Complaint ¶ 9. After doing so, John Soules refused to sell on credit, saying that its decision was based on negative information in the Seafax report. Complaint ¶¶ 10-11. Hasan told John Soules that any negative credit information was erroneous. Complaint ¶ 12. Allegedly, John Soules promised to sell on credit after American Kitchen paid "cash on delivery" for three to six months. Complaint ¶¶ 10-11.

American Kitchen paid "cash on delivery" for three to six months, and then again requested credit. Complaint ¶ 13. John Soules again reviewed a Seafax report and determined that American Kitchen was not creditworthy. Complaint ¶¶ 14-15. John Soules again said that the report contained negative information, and Hasan again said that any such information was erroneous. Complaint ¶¶ 16-17. Nonetheless, John Soules refused to sell on credit, saying its decision was based on the Seafax report. Complaint ¶ 16. Moreover, John Soules stopped accepting "cash on delivery" from American Kitchen, and instead required prepayment two weeks before delivery. Complaint ¶ 16. Hasan tried to learn what negative information was in the Seafax report, but Seafax would not tell him. Complaint ¶ 18. Hasan therefore asked John Soules to use a different credit reporting firm, but John Soules refused. Complaint ¶¶ 19-20. John Soules said that it would consider selling on credit after American Kitchen prepaid for two years. Complaint ¶ 21.

American Kitchen prepaid for two years, and then again requested credit. Complaint ¶ 22. John Soules again refused, saying that American Kitchen's Seafax report was unacceptable. Complaint ¶ 23. Hasan again said that any negative information was erroneous, and again asked John Soules to use a different reporting firm, but John Soules refused. Complaint ¶¶ 24-25. John Soules did, however, agree to consider selling on credit based on financial documents that Hasan turned over directly to John Soules. Complaint ¶¶ 26-27. American Kitchen alleges that, based on that financial information, John Soules should have agreed to sell on credit, but didn't. Complaint ¶ 28.

American Kitchen alleges that other customers with similar (or worse) creditworthiness are receiving credit from John Soules. Complaint ¶¶ 1, I.33. American Kitchen also alleges that John Soules knew that Hasan is Indian. Complaint ¶ I.32.

As noted above, American Kitchen alleges that the information Seafax provided was erroneous. Specifically, American Kitchen alleges that Seafax provided the following "false and negative credit information":

• American Kitchen's bank reports a heavily utilized line of credit;
• American Kitchen has "slowpays";
• American Kitchen has unsolicited references providing negative, ...

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