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Rowe v. Checkers Drive-In Restaurant, Inc.

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

April 12, 2017

CURTIS ROWE and ROWE FOOD HOLDINGS, LLC, Plaintiffs,
v.
CHECKERS DRIVE-IN RESTAURANT, INC, Defendant.

          MEMORANDUM OPINION AND ORDER

          Gary Feinerman Judge

         Curtis Rowe and his company (together, “Rowe”) allege in this suit that Checkers Drive-In Restaurant, Inc. discriminated against him in violation of 42 U.S.C. § 1981 when it declined to enter into franchise agreements with him to operate two Checkers restaurants. Doc. 1. Checkers moves under Federal Rule of Civil Procedure 12(b)(6) to dismiss on statute of limitations grounds Rowe's claim as to one of the restaurants. Doc. 22. The motion is granted, but Rowe will have the opportunity to replead that claim.

         Background

         In resolving a Rule 12(b)(6) motion, the court assumes the truth of the operative complaint's well-pleaded factual allegations, though not its legal conclusions. See Zahn v. N. Am. Power & Gas, LLC, 815 F.3d 1082, 1087 (7th Cir. 2016). The court must also consider “documents attached to the complaint, documents that are critical to the complaint and referred to in it, and information that is subject to proper judicial notice, ” along with additional facts set forth in Rowe's brief opposing dismissal, so long as those additional facts “are consistent with the pleadings.” Phillips v. Prudential Ins. Co. of Am., 714 F.3d 1017, 1020 (7th Cir. 2013). The facts are set forth as favorably to Rowe as those materials allow. See Pierce v. Zoetis, 818 F.3d 274, 277 (7th Cir. 2016). In setting forth those facts at the pleading stage, the court does not vouch for their accuracy. See Jay E. Hayden Found. v. First Neighbor Bank, N.A., 610 F.3d 382, 384 (7th Cir. 2010).

         In 2008, Rowe and Checkers entered into a franchise agreement for Rowe to operate a Checkers restaurant in Dixmoor, Illinois. Doc. 1 at ¶¶ 2, 7. The restaurant opened in 2009. Id. at ¶ 7. In 2011, Rowe and Checkers entered into a second franchise agreement for a restaurant on the south side of Chicago. Id. at ¶ 8. Both restaurants have been successful and profitable. Id. at ¶ 9. Rowe is the only African-American Checkers franchisee in the Chicago market, and one of only a few nationwide. Id. at ¶ 10.

         In 2012, Rowe sought to purchase an existing Checkers restaurant at 5451 South Wentworth Avenue in Chicago from a franchisee looking to retire. Id. at ¶ 11. Checkers previously had declined to purchase the restaurant from the franchisee, but after the franchisee sought Checkers's approval to sell to Rowe, Checkers exercised its option to purchase the restaurant rather than allowing Rowe to do so. Ibid. Checkers executed the purchase contract on July 5, 2012. Doc. 22-1. This marked the first time that Checkers exercised its right of first refusal to block a current franchisee from acquiring an existing restaurant. Doc. 1 at ¶ 12. Checkers afterwards promised that it would “make it up to [Rowe]” by helping him expand and by waiving the franchise fee on his next restaurant. Doc. 30 at 4.

         In 2016, Rowe proposed opening a restaurant at 10258 South Halsted Street in Chicago. Doc. 1 at ¶ 13. Local Checkers representatives told him it was a “great site, ” and the franchise was conditionally approved in August 2016. Id. at ¶¶ 15-16. However, Checkers then insisted on conducting a market study because the Halsted site would be less than two miles from an existing Checkers restaurant. Id. at ¶ 18. Checkers insisted on this study even though the Halsted site had previously been a Checkers restaurant and had coexisted with the other nearby site. Id. at ¶ 17. Moreover, Checkers's franchise offering requires impact studies only for locations within one mile (not two miles) of one another. Id. at ¶¶ 19-20. For other recently proposed sites in the Chicago area within two miles of existing restaurants, Checkers did not require an impact study. Id. at ¶ 21. Those sites were not opened by African-Americans or African-American owned entities. Id. at ¶ 22. Checkers ultimately denied approval of Rowe's proposed Halsted site, citing the impact study. Id. at ¶ 23.

         Rowe filed this suit on October 21, 2016. Doc. 1. He alleges that Checkers's purchase of the Wentworth restaurant and denial of his request to open the Halsted site violated his right under 42 U.S.C. § 1981 to make and enforce contracts. Id. at ¶¶ 27-37.

         Discussion

         Checkers argues that Rowe's claim as to the Wentworth location is time-barred. It submits that a two-year statute of limitations applies because the claim rests on Checkers's unwillingness to enter into a new contract, not its discriminatory performance of an existing contract. Doc. 22 at 4. Rowe counters that the Checkers's purchase of the Wentworth location was in fact a deprivation of the “benefits, privileges, terms and conditions of the franchise relationship, ” making it actionable under § 1981(b) and thus subject to a four-year statute of limitations. Doc. 30 at 7 (brackets omitted). The parties also disagree about the date that Rowe's Wentworth claim accrued. Checkers argues that the claim accrued in July 2012, when it purchased the Wentworth location from the existing franchisee. Doc. 22 at 6. Rowe contends that it accrued only when he knew or had reason to know that the harm he suffered (being deprived of the chance to purchase the restaurant) was the product of intentional racial discrimination. Doc. 30 at 4. In his view, that did not occur until the 2016 rejection of his proposed Halsted location prompted him to learn more about Checkers's practices, which in turn alerted him to the deviations from past practice that he believes are evidence of racial discrimination. Id. at 5-6.

         As to the accrual date, Checkers is correct. “A plaintiff's action accrues when he discovers that he has been injured, not when he determines that the injury was unlawful.” Thelen v. Marc's Big Boy Corp., 64 F.3d 264, 267 (7th Cir. 1995); see also Jamison v. Urban, 411 F. App'x 919, 921 (7th Cir. 2011); Stepney v. Naperville Sch. Dist. 203, 392 F.3d 236, 240 (7th Cir. 2004). The injury was the loss of the opportunity to purchase the restaurant at the Wentworth site. That injury occurred on July 5, 2012, when Checkers exercised its option to purchase the restaurant, as shown by the contract attached as an exhibit to the motion to dismiss. Although exhibits to a Rule 12(b)(6) motion ordinarily may not be used to support dismissal, Rowe acknowledges that considering the contract is proper here. Doc. 30 at 2. Furthermore, at the hearing on the motion, Rowe conceded the factual accuracy of the July 2012 date. So Rowe was on notice of his injury in July 2012, thus triggering the limitations period.

         Rowe cites Moskowitz v. Trustees of Purdue University, 5 F.3d 279 (7th Cir. 1993), for the proposition that the “discovery rule” provides that a discrimination claim does not accrue until the plaintiff suspects discrimination. Doc. 30 at 4. This misreads Moskowitz, which speaks not to when a claim accrues, but rather to when the equitable tolling doctrine tolls the statute of limitations due to the plaintiff's inability to know of the wrongful nature of the defendant's act. As Moskowitz explained:

Under the doctrine of equitable tolling … a person injured by an unlawful act need not sue until he knows, or through the exercise of reasonable diligence would have known, not only that he has been injured (for once he discovers that, his cause of action has accrued and the statute of limitations begins to run) but also that he has been injured by a possibly wrongful act of the defendant.

5 F.3d at 281 (emphasis added). In Cada v. Baxter Healthcare Corp., 920 F.2d 446 (7th Cir. 1990), the Seventh Circuit observed that the equitable tolling doctrine “permits a plaintiff to avoid the bar of the statute of limitations if despite all due diligence he is unable to obtain vital information bearing on the existence of his claim.” Id. at 451 (emphasis added). In so doing, the court ...


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