United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
Johnson Coleman United States District Judge.
matter originates from 7-Eleven, Inc.'s claim against
Defendants/counter-plaintiffs Ketan Patel, Shakti Chicago,
Inc., Shakti BCP 1, Inc., Smita 7, Inc., Shakti7, Inc.,
Shakti 2 Enterprises, Inc., Smita II, Inc., Shakti 1
Enterprises, Inc., and Smita 1 Enterprises, Inc.
(collectively “counter-plaintiffs”) for trademark
infringement, breach of contract, and injunctive relief.
Counter-plaintiffs bring this counterclaim against 7-Eleven
alleging breach of the Illinois Franchise Disclosure Act, 815
ILCS 705/1, et seq., (“IFDA”), breach of
contract, and breach of implied covenant of good faith and
fair dealing. Currently before the Court is 7-Eleven's
motion to dismiss  counter-plaintiffs' complaint
pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure. For the reasons explained below, the motion to
dismiss is granted.
The following facts are taken from the counterclaims and are
accepted as true for the purpose of deciding this motion.
7-Eleven is a franchise corporation with its principal place
of business in Texas. Ketan Patel is the controlling
shareholder of counter-plaintiffs Shakti Chicago, Inc.,
Shakti BCP 1, Inc., Smita 7, Inc., Shakti7, Inc., Shakti 2
Enterprises, Inc., Smita II, Inc., Shakti 1 Enterprises,
Inc., and Smita 1 Enterprises, Inc., all of which are
incorporated in Illinois.
2004 and 2016, 7-Eleven entered into franchise agreements
with the counter-plaintiffs to operate eight 7-Eleven stores,
all located in Illinois. The franchise agreements governing
the parties were substantively identical. On July 27, 2018,
7-Eleven sent each of the counter-plaintiffs four notices
asserting violations of the franchise agreements. These
violations included failures to comply with wage and hour
laws and failures to submit accurate payroll information. On
August 1, 2018, 7-Eleven served the eight stores with a fifth
notice alleging additional violations of the franchise
agreement. The fifth noticed asserted that the franchise
agreements would be terminated immediately because the
parties had already received four previous notices. That same
day, 7-Eleven filed a lawsuit for possession of the stores,
with the exception of the store located in Niles, Illinois,
which 7-Eleven demanded that Patel remove all 7-Eleven
October 18, 2018, counter-plaintiffs filed its answer and
counterclaims. Counter-plaintiffs allege that 7-Eleven
improperly terminated the franchise agreements because of
Ketan Patel's leadership within the Franchise Owners
Association of Chicagoland (“FOAC”) as well as
Patel's criticism of 7-Eleven's business practices.
In Count I, counter-plaintiffs allege that 7-Eleven's
immediate termination of the franchise agreement violated the
IFDA. In Count II, counter-plaintiffs allege that
7-Eleven's immediate termination violated the franchise
agreement. In Count III, counter-plaintiffs allege that
7-Eleven's actions breached the covenant of good faith
and fair dealing.
motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6) tests the legal sufficiency of the complaint, not
the merits of the allegations. To overcome a motion to
dismiss, a complaint must contain sufficient factual
allegations to state a claim for relief that is plausible on
its face, Ashcroft v. Iqbal, 556 U.S. 662, 678, 129
S.Ct. 1937, 173 L.Ed.2d 868 (2009), and raises the right to
relief above a speculative level, Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d
929 (2007). When ruling on a motion to dismiss, the Court
must accept all well-pleaded factual allegations in the
complaint as true and draw all reasonable inferences in the
plaintiff's favor. Park v. Ind. Univ. Sch. of
Dentistry, 692 F.3d 828, 830 (7th Cir. 2012).
of the Illinois Franchise Disclosure Act
mentioned previously, the counter-plaintiffs allege that
7-Eleven terminated the franchise agreements because of
Patel's participation in FOAC, in violation of the IFDA.
Section 17 of the IFDA states that “it shall be an
unfair practice and a violation of this Act for a franchisor
to in any way restrict any franchisee from joining or
participating in any trade association.” 815 ILCS
argues that the counter-plaintiffs fail to state a claim
because 7-Eleven had “good cause” to terminate
the franchise agreements under the IFDA. The IFDA prohibits
terminating a franchise agreement prior to the term's
expiration “except for ‘good cause.'”
815 ILCS 705/19. Under the IFDA, “good cause”
occurs when a franchisee fails to comply with a provision of
the franchise agreement; but is given a reasonable
opportunity to cure the default. 815 ILCS 705/19(b). A
franchise agreement may be terminated “without the
requirement of notice and an opportunity to cure, ”
however, when the franchisee “repeatedly fails to
comply with the lawful provisions of the franchise or other
agreement.” 815 ILCS 705/19(c)(4).
contends that the four violation notices sent on July 27,
2018 followed by the fifth notice sent on August 1, 2018,
constituted repeated failures to comply with the franchise
agreement, thus justifying termination without notice or an
opportunity to cure. Although it denies terminating the
agreement because of Patel's participation in FOAC,
7-Eleven argues that motive is irrelevant because it had good
cause to terminate the franchise agreement.
counter-plaintiffs do not dispute the accuracy of the four
violations sent to each store on July 27, nor the fifth
notice sent on August 1. Without any contention that the
violation notices are inaccurate, the counter-plaintiffs'
claims establish that 7-Eleven had good cause to terminate
the franchise agreements. The counter-plaintiffs do not
provide, and the Court has not found, any legal support for
the argument that a termination for good cause can be
“overcome by the presence of an improper motive.”
See Tuf Racing Products, Inc. v. American Suzuki Motor
Corp., 223 F.3d 585, 589 (7th Cir. 2000) (finding motive
“irrelevant” when franchisor had legal right to