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American Kitchen Delights, Inc v. Signature Foods, LLC

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

March 20, 2018

AMERICAN KITCHEN DELIGHTS, INC., Plaintiff,
v.
SIGNATURE FOODS, LLC Defendant.

          MEMORANDUM OPINION AND ORDER

          John J Tharp, Jr United States District Judge.

         After investing heavily in special equipment and packaging to produce customized frozen pizzas for the defendant Signature Pack, LLC[1] (“Signature”), plaintiff American Kitchen Delights, Inc. (“American Kitchen”) filed this lawsuit alleging that Signature failed to purchase frozen pizzas as it had promised to do so and claiming more than $800, 000 in damages. The complaint alleges breach of contract and other common law claims, all of which Signature moves to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. Although the allegations of the complaint leave many unanswered questions, the Court concludes that American Kitchen has alleged sufficient facts to state a claim against Signature and therefore denies the motion to dismiss.

         BACKGROUND[2]

         American Kitchen is an Illinois corporation with its principal place of business in Harvey, Illinois. Signature is a Georgia limited liability corporation located in North Pendergrass, Georgia.[3] The other players central to this story are Scott Ashby and Mike Zimmer; the nature of their relationship with the parties is a pivotal issue. According to the complaint, Ashby and Zimmer are “third-party brokers” who contacted American Kitchen in 2014 “on behalf of” Signature to discuss the production of frozen pizzas “specifically tailored” for Signature. Am. Compl. ¶ 9, ECF No. 13. Ashby, at least, was affiliated with a company known as “Brand Concessions, ” id. at Ex. 1, though the complaint sheds no light at all on the nature of that entity. Upon Ashby's request, American Kitchen created samples of frozen pizzas for evaluation, first by Ashby, and then by Signature. The complaint alleges that on May 22, 2014, Ashby, acting as an agent for Signature, submitted a formal offer to American Kitchen for the production of frozen pizzas in exchange for payment from Signature. Ashby subsequently requested that American Kitchen provide for Signature certain information about the frozen pizzas, including “specs” for the samples it had produced and a “cost out.” Id. ¶¶ 13-17. In August 2014, Ashby asked American Kitchen to make significant changes to the frozen pizzas produced for Signature.

         On August 26, 2014, Ashby sent American Kitchen, via email, a draft letter of understanding (“LOU”). The email from Ashby is addressed to Shahnawaz Hasan-apparently an employee of American Kitchen, though the complaint does not identify him-at “shasan.akdi@gmail.com” and states, “Please review below and let me know of any concerns. Thanks.” Id. Ex. 1. The draft LOU, which is directed to “Chuck” (presumably Chuck Mcatee, Signature's president), is included in the email. Id. The LOU states that American Kitchen has agreed to sell three different pizza products at specific prices: an eight-pack three-inch pizza at $2.05 per unit, a four-pack five-inch deep dish pizza at $2.05 per unit, and an individually-wrapped five-inch deep dish pizza at $0.52. The LOU also states that American Kitchen “would agree” to a specific production schedule: an initial order within the first 30 days and at least six truckloads during the next 90 days. Id. Thereafter, the document states, American Kitchen “would expect” to ship at least 90, 000 and up to 250, 000 cases of product on an annualized basis, though the LOU contains no term defining the term of the relationship. Id. The LOU also states that American Kitchen will agree not to sell any pizza products to any “Pick 5 competitors” and will agree not to sell the individually wrapped pizza product for use in certain stores and products. Id. It further states that both parties “would agree” that the intention is “to move 100% of the production to American Kitchen.” Id. Hasan responded to Ashby's email with two items to add to the LOU: “specs” for the products and pricing for the meats and cheeses. Id.

         The complaint alleges that American Kitchen and Signature “finalized and agreed up” the LOU. Id. ¶¶ 21-22. The companies then took steps to begin the manufacture and distribution of the frozen pizzas pursuant to the LOU. American Kitchen invested $90, 000 in equipment- including three ovens, a waterfall sauce dispenser, new pipes, a nitrogen tunnel, various sized pizza dies, dough equipment, and other electrical, water, and gas parts-to produce the customized frozen pizzas for Signature. In addition, Signature directed American Kitchen to order customized pizza labels from a specific company. American Kitchen complied with the request and ordered a total of 300, 000 Signature labels for pepperoni and supreme pizzas. Signature also required customized packaging to reflect its brand and provided American Kitchen with the specifications for its special packaging. American Kitchen ordered more than $70, 000 in proprietary packaging, labels, and other raw materials to produce Signature's customized frozen pizzas.

         In October 2014, Ashby provided American Kitchen with Signature's projected sales of frozen pizzas, which Ashby received from Signature. On January 7, 2015, Signature placed an order with American Kitchen for pepperoni and supreme pizzas totaling $42, 301.44. For reasons unexplained, however, Signature's next order came nine months later, in September, when Signature placed another order with American Kitchen for pepperoni pizzas totaling $5, 904.00. A few days later, on September 15, 2015, Zimmer and Signature's president, Chuck Mcatee, visited American Kitchen's facility to observe the pizza production process. Mcatee told American Kitchen “we love the product and everything is great” and stated “orders will be coming in.” Id. ¶ 51. Mcatee also said that Signature would like to continue its business relationship as outlined in the LOU. In November 2015, Ashby told American Kitchen that an order would be placed in December and “then we should be off and running.” Id. ¶ 53. Signature, however, did not place any further orders with American Kitchen.

         American Kitchen says that it expected business profits of more than $650, 000 from its frozen pizza agreement with Signature, which it lost because it did not receive “the exclusive manufacturing business” that Signature agreed to provide. Id. ¶¶ 62-63. It also claims to have lost business opportunities as a result of its agreement not to sell pizza products to certain competitors or stores. Id. ¶ 61. American Kitchen purchased equipment, labels, packaging, and raw materials that were specialized for Signature's requested product that cannot be used for other operations. Id. ¶¶ 55, 60.

         DISCUSSION

         To survive a motion to dismiss, a complaint need only provide a “short and plain statement of the claim” showing that the plaintiff is entitled to relief. Fed.R.Civ.P. 8(a)(2). Detailed factual allegations are not required, but the plaintiff must provide more than “labels and conclusions” or a “formulaic recitation of the elements of a cause of action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The complaint must contain “sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 555 (7th Cir. 2012) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678). “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. When considering a motion to dismiss, the court construes the complaint in the light most favorable to the plaintiff, accepts all well-pleaded facts as true, and draws all inferences in the plaintiff's favor. Berger v. Nat'l Collegiate Athletic Ass'n, 843 F.3d 285, 289-90 (7th Cir. 2016).

         In assessing whether a complaint states a plausible “claim, ” it is important to acknowledge that a claim and a legal theory of liability are not one and the same. A plaintiff is required to plead “claims, ” which are grievances. Rapid Test Prods., Inc. v. Durham Sch. Servs., Inc., 460 F.3d 859, 861 (7th Cir. 2006). A claim is “the aggregate of operative facts which give rise to a right enforceable in the courts.” Sojka v. Bovis Lend Lease, Inc., 686 F.3d 394, 399 (7th Cir. 2012). In setting forth a plausible claim, a plaintiff is not required to plead legal theories. Frank v. Walker, 819 F.3d 384, 387-88 (7th Cir. 2016). “A complaint should limn the grievance and demand relief. It need not identify the law on which the claim rests, and different legal theories therefore do not multiply the number of claims for relief. One set of facts producing one injury creates one claim for relief, no matter how many laws the deeds violate.” NAACP v. Am. Family Mut. Ins. Co., 978 F.2d 287, 292 (7th Cir. 1992). Accordingly, a plaintiff who has multiple legal theories or seeks different kinds of relief based on the same set of facts may, but need not structure his complaint with one count for each theory or type of relief. Frank, 819 F.3d at 387-88; Sojka, 686 F.3d at 399. And because plaintiffs are not required to identify legal theories in their complaint, “it follows that specifying an incorrect theory is not fatal.” Volling v. Antioch Rescue Squad, 999 F.Supp.2d 991, 996 (N.D. Ill. 2013); see also Rabe v. United Air Lines, Inc., 636 F.3d 866, 872 (7th Cir. 2011). In short, the pleadings are not the stage of the litigation when specific legal theories must be identified and their viability established; legal theories may be learned and developed during discovery. Alioto v. Town of Lisbon, 651 F.3d 715, 721 (7th Cir. 2011); Joseph v. Elan Motorsports Techs. Racing Corp., 638 F.3d 555, 561 (7th Cir. 2011). A motion to dismiss a complaint for failure to state a claim should only be granted “when the facts in the plaintiff's complaint, taken as true, do not state a plausible claim under any recognized legal theory.” Volling, 999 F.Supp.2d at 996 (emphasis in original; internal quotation marks omitted).

         It follows from the foregoing that a complaint is not required to allege facts that, if true, definitively establish a defendant's liability, nor need it identify specific legal theories on which liability would be based. A complaint need only allege facts sufficient to give rise to a plausible inference that the defendant caused an injury to the plaintiff for which there is some legal or equitable remedy available. American Kitchen's amended complaint asserts a single claim against Signature arising from the facts pertaining to the pretermitted pizza project. The gist of the claim is simply that American Kitchen invested a great deal of money and effort to produce custom pizzas to Signature's specifications understanding that Signature would order substantial quantities. It did not do so, and American Kitchen assets that Signature is liable for American Kitchen's resulting losses.

         This states a plausible claim for relief, without regard to the identification of a specific legal theory at this juncture. The allegations of the complaint plausibly establish that there was a significant relationship between the companies with respect to this venture that supports a claim that Signature bears some legal responsibility to American Kitchen, whether under a breach of contract theory or some other quasi-contractual theory, for causing American Kitchen's losses. Nevertheless, the complaint alleges four separate and enumerated counts against Signature, each based on a distinct theory of liability-equitable estoppel (count I), quantum meruit (count II), breach of contract (count III), and promissory estoppel (count IV). Signature moves to dismiss each count under Rule 12(b)(6) for failure to state a claim, but the complaint survives if the facts alleged plausibly entitle American Kitchen to legal relief under any theory, even if not one expressly identified in the complaint. See Frank, 819 F.3d at 387-88.; Liston v. King.com, Ltd., 254 F.Supp.3d 989, 1002 (N.D. Ill. 2017). To prevail on its motion, Signature must establish that none of the legal theories American Kitchen has advanced, or any other, plausibly establishes a right to recover damages from Signature for the injuries American Kitchen has allegedly suffered. See Liston, 254 F.Supp.3d at 1002.

         I. ...


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