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Auto Logistics of Atlanta, Inc. v. Auto Driveaway Richmond, LLC

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

July 22, 2019

AUTO LOGISTICS OF ATLANTA, INC., D & J TRANSPORTATION, INC., BELL DRIVEAWAY, INC., HUB AUTO MOVERS, INC., PAUL R. SCHULTZ LLC, RDR TRANSPORT INC., D-CAPS, INC., MWW, LTD., KENVILLE INN, INC., WESTERFIELD AUTO DRIVEAWAY, INC., THE RIZ ENTERPRISES, INC., NATIONAL DRIVE AWAY, LLC, SPA VENTURES, INC., RWC AUTO DRIVEAWAY, LLC, SEATTLE AUTO MOVERS, INC., R.J. DRIVEAWAY CO., INC., AUTO DRIVEAWAY, INC., COPUS BOYS DRIVEAWAY, LLC, and DOROTHY ZETTEL, Plaintiffs,
v.
AUTO DRIVEAWAY RICHMOND, LLC, Defendant.

          MEMORANDUM OPINION AND ORDER

          GARY FEINERMAN, JUDGE

         Nineteen franchisees of non-party Auto Driveaway Franchise Systems, LLC bring this diversity suit against fellow franchisee Auto Driveaway Richmond, LLC (“AD Richmond”) for failing to pay them for various transportation services. Doc. 1. AD Richmond moves for partial dismissal under Civil Rules 12(b)(1) and 12(b)(6) and to sever allegedly misjoined parties under Rule 21. Docs. 15, 18. The Rule 12(b)(6) motion is granted due to the complaint's failure to adequately identify the contract(s) underlying Plaintiffs' breach of express contract claim, that claim is dismissed without prejudice to repleading, and the Rule 12(b)(1) and Rule 21 motions are denied without prejudice to renewal once Plaintiffs replead their express contract claim.

         Background

         In resolving a Rule 12(b)(1) motion asserting a facial challenge to subject matter jurisdiction, as in resolving a Rule 12(b)(6) motion, the court assumes the truth of the operative complaint's well-pleaded factual allegations, but not its legal conclusions. See Zahn v. N. Am. Power & Gas, LLC, 815 F.3d 1082, 1087 (7th Cir. 2016) (Rule 12(b)(6)); Silha v. ACT, Inc., 807 F.3d 169, 173 (7th Cir. 2015) (Rule 12(b)(1)). 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 Plaintiffs' 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) (internal quotation marks omitted). The facts are set forth as favorably to Plaintiffs as those materials permit. See Domanus v. Locke Lord, LLP, 847 F.3d 469, 478-79 (7th Cir. 2017). In setting forth the facts at this stage, the court does not vouch for their “objective truth.” Goldberg v. United States, 881 F.3d 529, 531 (7th Cir. 2018).

         Auto Driveaway is a franchisor with franchisees throughout the United States that work with each other to form a nationwide network of commercial vehicle transportation service providers. Doc. 1 at ¶¶ 37-39, 47; see Auto Driveaway Franchise Sys., LLC v. Auto Driveaway Richmond, LLC, __ F.3d __, 2019 WL 2724564, at *1 (7th Cir. June 28, 2019) (noting that Auto Driveaway “is a franchisor for commercial vehicle transportation services”). The Auto Driveaway franchise agreements require each franchisee to follow Auto Driveaway's Operations Manual, which sets forth how franchisees should work together to fulfill customer orders. Doc. 1 at ¶¶ 35, 40-41.

         When a customer requests transportation services from an Auto Driveaway franchisee, that franchisee-the “Booking Office”-enters the order on AD360, Auto Driveaway's electronic fulfillment program. Id. at ¶¶ 35, 41, 45. If another Auto Driveaway franchisee is closer to the customer's vehicle(s), that franchisee-the “Split Office”-works with the Booking Office to provide the requested service. Id. at ¶¶ 42-43, 45. Once the order is fulfilled, the Split Office invoices the Booking Office for the services it performed and the Booking Office remits to the Split Office a portion of the customer's payment. Id. at ¶¶ 45-46. After taking dozens of customer orders as the Booking Office and arranging for Plaintiffs to serve as the Split Office, AD Richmond failed to remit payment to Plaintiffs after they invoiced it for the services they performed as the Split Office. Id. at ¶¶ 48-50, 53.

         The complaint asserts state law claims for breach of express contract (Count I), breach of implied contract (Count II), account stated (Count III), and unjust enrichment (Count IV). Id. at ¶¶ 54-79. Of the nineteen Plaintiffs, only four-RDR Transport Inc., Kenville Inn, Inc., Westerfield Auto Driveaway, Inc., and National Drive Away LLC-allege that they each suffered more than $75, 000 in damages. Id. at ¶¶ 18, 21-22, 24, 33. The parties call those four the “Diversity Plaintiffs” because their claims exceed the amount-in-controversy requirement for diversity jurisdiction, 28 U.S.C. § 1332(a). The other fifteen Plaintiffs allege that they each suffered $75, 000 or less in damages. Doc. 1 at ¶¶ 33-34. The parties call those fifteen the “Supplemental Plaintiffs” because the complaint (rightly or wrongly) premises subject matter jurisdiction over their claims under the supplemental jurisdiction statute, 28 U.S.C. § 1367(a).

         Discussion

         AD Richmond argues under Rule 12(b)(1) that the court lacks subject matter jurisdiction over the Supplemental Plaintiffs' claims. Doc. 16 at 6-14. AD Richmond also seeks to sever the Diversity Plaintiffs' claims under Rule 21 because they do not arise out of “the same transaction, occurrence, or series of transaction or occurrences.” Id. at 14-15 (emphasis omitted) (quoting Fed.R.Civ.P. 20(a)(1)(A)). Finally, AD Richmond moves under Rule 12(b)(6) to dismiss the express contract claim (Count I) on the ground that Plaintiffs do not adequately allege any express contract(s) between them and AD Richmond. Doc. 19 at 7-12.

         Because “[s]ubject-matter jurisdiction is the first issue in any case, ” the court begins there. Miller v. Sw. Airlines Co., 926 F.3d 898, 902 (7th Cir. 2019). As Plaintiffs recognize, because only the four Diversity Plaintiffs' claims exceed the $75, 000 jurisdictional minimum under § 1332(a), and because “aggregation of different litigants' claims is not allowed” to meet that minimum, Prolite Bldg. Supply, LLC v. MW Mfrs., Inc., 891 F.3d 256, 257 (7th Cir. 2018), the court has subject matter jurisdiction over the Supplemental Plaintiffs' claims only if those claims fall within the § 1367(a) supplemental jurisdiction.

         Section 1367(a) provides that “district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within [the district courts'] original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution, ” and that “[s]uch supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties.” 28 U.S.C. § 1367(a). To determine whether multiple claims form part of the same case or controversy, “[c]ourts often ask whether the claims share a common nucleus of operative facts.” Prolite, 891 F.3d at 258 (“[S]upplemental jurisdiction is appropriate when the supplemental claim[s] involv[e] the same parties, contracts, and course of action as the claim[s] conferring federal jurisdiction.”); see also McCoy v. Iberdrola Renewables, Inc., 760 F.3d 674, 683 (7th Cir. 2014) (“Claims form part of the same case or controversy when they derive from a common nucleus of operative fact. To satisfy this requirement, a loose factual connection between the claims is generally sufficient.”) (alteration, citation, and internal quotation marks omitted). Determining whether to exercise supplemental jurisdiction over a contract claim requires comparing the nature and basis of that claim to the nature and basis of the contract claim(s) over which the court has diversity jurisdiction. See Prolite, 891 F.3d at 258-59 (concluding, after examining the “terms, ” nature, and alleged breaches of various “agreements, ” that “it is impossible to say that [a building supplier's] claim and the homeowners' claims” against a window manufacturer “are just one big controversy”); CNH Indus. Am. LLC v. Jones Lang LaSalle Ams., Inc., 882 F.3d 692, 704 (7th Cir. 2018) (examining a manufacturer's claim and a dealerships' claims based on the same contract before holding that the dealerships' claims fall within the “supplemental jurisdiction”); Stromberg Metal Works, Inc. v. Press Mech., Inc., 77 F.3d 928, 932 (7th Cir. 1996) (considering whether the plaintiffs' contract claims “arose out of the same construction project, ” whether “[t]he same form of purchase order was used for both subcontracts, ” whether the plaintiffs were “affiliated corporations under common control, ” and whether “the defendants pursued a single course of action” in deciding whether supplemental jurisdiction was “appropriate”).

         The problem here is that the nature and basis of Plaintiffs' express contract claims have been, to put it mildly, a moving target. This problem has prevented the court from evaluating whether the Supplemental Plaintiffs' claims share a common nucleus of operative fact with the Diversity Plaintiffs' claims, which in turn has prevented the court from determining whether the Supplemental Plaintiffs' claims fall within the § 1367(a) supplemental jurisdiction.

         In their complaint, Plaintiffs suggested that the contracts underlying their express contract claim are the Operations Manual as well as their and AD Richmond's respective franchise agreements with Auto Driveaway:

56. At all relevant times, all franchisees, including [AD Richmond] and each Plaintiff, were bound by and subject to the Auto Driveaway confidential Operations Manual and ...

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