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Window World of Chicagoland, LLC v. Window World, Inc.

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

May 7, 2015

Window World of Chicagoland, LLC, et al., Plaintiffs,
v.
Window World, Inc., et al., Defendants.

MEMORANDUM OPINION AND ORDER

JOHN ROBERT BLAKEY, District Judge.

Two sets of Plaintiffs-(1) Window World of Chicagoland, LLC and David Hampton (together, the "Hampton Parties"); and (2) Kenneth Dillingham, Debbie Dillingham and their company, Suntec, Inc. (collectively, the "Dillinghams")-have jointly sued Window World, Inc. and four of its employees (Dana Deem, Marie Whitworth, Ruben Whitworth and Tammy Whitworth) (collectively, "Window World"). Plaintiffs have brought claims for fraud, breach of contract and violation of the Illinois Franchise Disclosure Act ("IFDA").

Defendants filed an amended motion to dismiss [30]. The motion is granted, with all Counts dismissed with prejudice, except for Counts VI (fraudulent inducement) and VII (breach of contract). Counts VI and VII are dismissed without prejudice.

I. Legal Standard

Under Federal Rule of Civil Procedure 12(b)(6), this Court must construe the Complaint [1] in the light most favorable to Plaintiff, accept as true all well-pleaded facts and draw reasonable inferences in their favor. Yeftich v. Navistar, Inc., 722 F.3d 911, 915 (7th Cir. 2013); Long v. Shorebank Development Corp., 182 F.3d 548, 554 (7th Cir. 1999). Statements of law, however, need not be accepted as true. Yeftich, 722 F.3d at 915. Rule 12(b)(6) limits this Court's 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 Defendant's motion under Rule 12(b)(6), the Complaint must "state a claim to relief that is plausible on its face." Yeftich, 722 F.3d at 915. "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.

II. Facts

A. The Hampton Parties

Window World entered into multiple license agreements with Mr. Hampton from 2005 through 2009, allowing the Hampton Parties to sell windows and related products under the "Window World" brand name. Complaint ¶¶ 31, 32, 47. At that time, the relationship between the parties was not formally classified as franchisor/franchisee. Complaint ¶¶ 60, 83.

On October 28, 2011, Window World advised the Hampton Parties that their relationship with Window World was, in fact, as a franchisee. Complaint ¶ 60. Window World gave the Hampton Parties two options: (1) agree to become a Window World franchisee in 35 days; or (2) rescind the License Agreements and cease operating under the Window World name. Complaint ¶ 86. If the Hampton Parties chose to rescind, Window World said it would refund the license fee minus the profits they had earned. Complaint ¶ 86.

On November 29, 2011, Window World entered into a Final Judgment and Consent Decree with the Illinois Attorney General. Complaint ¶ 91. The Decree found that from 2003 to 2011, Window World had entered into at least 14 license agreements in Illinois that were in fact franchise arrangements. Complaint ¶¶ 90-91; Final Judgment and Consent Decree [1-14] ¶ 6.

On January 26, 2012, the Hampton Parties sued Window World (among others) and brought claims of fraud, breach of contract and violation of the IFDA. The case was assigned to Judge Lindberg and was captioned: Window World of Chicagoland, LLC v. Window World, Inc., Case No. 12 C 579 ("Case 579"). In Case 579, attorney Alice Kelly represented the Hampton Parties.

On April 9, 2012, Window World moved to dismiss the Second Amended Complaint. Case 579, DE 30. On May 23, 2012, Judge Lindberg granted in part and denied in part the motion. Case 579, DE 46. In particular, the Court did not dismiss the IFDA and breach of contract claims. On May 29, 2012, the Hampton Parties filed a Third Amended Complaint. Case 579, DE 48.

On June 4, 2012, Window World brought its own suit against the Hampton Parties (among others). The case was initially assigned to Judge Grady and was captioned: Window World, Inc. v. Hampton, Case No. 12 C 4329 ("Case 4329"). Soon thereafter, on June 14, 2012, the case was reassigned to Judge Lindberg and consolidated with Case 579. Case 4329, DE 5. While the docket sheet in Case 579 confirms that it was consolidated with Case 4329, see Case 579, DE 51, the cases apparently remained separate for purposes of notices sent by the Clerk's office.

Although Ms. Kelly never entered an appearance for the Hampton Parties in Case 4329, she accepted waiver of service forms from attorney Scott Walton, counsel for Window World in both cases. Ms. Kelly provided the waiver forms for the Hampton Parties to Mr. Hampton, who signed them on behalf of the Hampton Parties on June 11, 2012. Case 4329, DE 25-1 at 1 ¶ 5; Case 4329, DE 30-1 at 3-4; Case 4329, DE 31 at 3. The waiver forms were returned and filed on June 18, 2012. Case 4329, DE 6; Case 4329, DE 7. The forms state that the signatory understands that a judgment may be entered against them if an answer or Rule 12 motion is not filed within 60 days (which was June 7, 2012).

On June 25, 2012, the Hampton Parties filed a notice of voluntary dismissal without prejudice in Case 579, which Judge Lindberg granted on July 5, 2012. Case 4329, DE 53; Case 4329, DE 55. Also on July 5, 2012, Ms. Kelly informed counsel for Window World that she did not represent the Hampton Parties in Case 4329. Case 4329, DE 30-2 at 4.

By August 8, 2012, more than 60 days had expired without the Hampton Parties having filed an answer or Rule 12 motion in Case 4329. Window World thus made an oral motion for entry of default at the status hearing that day, which was granted. Case 4329, DE 9. Judge Lindberg held additional hearings related to the default, which counsel for Window World attended, but for which Ms. Kelly received no notice because she was no longer representing the Hampton Parties. Case 4329, DE 30 at 1 ¶¶ 2-5.

On October 3, 2012, Window World moved for default judgment under Rule 55(b). Case 4329, DE 12. Mr. Hampton never received a copy of the motion, which counsel for Window World electronically filed but did not mail to him. Nor was Mr. Hampton informed of the August 8, 2012 status hearing or Window World's oral motion for default. Case 4329, DE 25-1 at 3 ¶¶ 19-22.

On October 10, 2012, Judge Lindberg held a hearing on Window World's motion for default judgment which only counsel for Window World attended. Case 4329, DE 13. On December 4, 2012, Judge Lindberg entered a Final Judgment Order in favor of Window World against the Hampton Parties on all counts, ordering the Hampton Parties to pay $107, 959.85 in damages, costs and expenses. Case 4329, DE 19. Mr. Hampton never received a copy of the final judgment order. Case 4329, DE 25-1 at 4 ¶ 23. Case 4329 was reassigned to Judge Durkin on August 7, 2013, when Judge Lindberg retired. Case 4329, DE 24.

On June 24, 2013, the Hampton Parties and the Dillinghams filed the instant lawsuit, with Case No. 13 C 4624 ("Case 4624"). The Hampton Parties again brought IFDA and breach of contract claims, among others, against Window World. The case initially was assigned to Judge St. Eve. Ms. Kelly entered an appearance as local counsel, and attorney Jonathan Fortman, current counsel for the Hampton Parties, also entered an appearance. [2]; [3].

On July 17, 2013, Mr. Hampton, while reviewing a 2013 Window World franchise disclosure document, learned of the default judgment entered in Case 4329. Case 4329, DE 25-1 at 4 ¶ 25. Mr. Hampton contacted his attorney who confirmed that default judgment had been entered. Case 4329, DE 25-1 at 4 ¶ 25.

On July 29, 2013, less than two weeks later but nearly eight months after Judge Lindberg entered default judgment, Mr. Fortman entered an appearance for the Hampton Parties in Case 4329. Case 4329, DE 21. The same day, the Hampton Parties filed a motion to set aside the December 4, 2012 default judgment order. Case 4329, DE 22. This motion was later amended on August 9, 2013. Case 4329, DE 25.

On August 5, 2013, Defendants moved to dismiss this lawsuit (Case 4624). [10]. One week later, on August 12, the Hampton Parties (and the Dillinghams) moved to stay this litigation. [13]. On August 14, 2013, Case 4329 was reassigned to Judge Durkin as related to Case 4624. [19]. On August 15, 2013, Judge Durkin granted Ms. Kelly's motion to withdraw as counsel in Case 4624. [21].

On April 1, 2014, in Case 4329, Judge Durkin granted the motion to vacate the December 4, 2012 default judgment order. Case 4329, DE 38. Judge Durkin also awarded Window World its costs and fees for having to pursue the default judgment in Case 4329. Case 4329, DE 38.

Having successfully had the default judgment order vacated, later that month, on April 25, the Hampton Parties moved in this case to have Case 4329 consolidated with it. [23]. Judge Durkin granted the motion and defined its scope at the April 30, 2014 status and motion hearing. The Court stated that it would:

let the dust settle on whether or not amended complaints and amended counterclaims should - in other words, whether we turn this into a single complaint or we just keep it as two separate complaints but run discovery ...

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