United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
Honorable Edmond E. Chang United States District Judge.
Patel runs a 7-Eleven store under a franchise agreement
between 7-Eleven and a corporation that he owns. In October
2018, Patel sued 7-Eleven under the Illinois Wage Payment and
Collection Act (IWPCA), 820 ILCS § 115, et
seq., alleging that he is in reality a 7-Eleven employee
under the definition of the Act, and that 7-Eleven has been
taking improper deductions from his wages. R. 1,
Compl.Patel also filed a preliminary injunction
motion seeking to prevent 7-Eleven from terminating his
franchise in retaliation for filing this lawsuit. R. 18,
Prelim. Inj. Mot. 7-Eleven filed this motion to dismiss,
arguing first that Patel has failed to adequately plead that
7-Eleven agreed to pay him qualifying “wages”
under the Act, and also that Patel cannot possibly have a
viable claim under the IWPCA because it is Patel's
corporation-not Patel himself-that has the franchise
agreement with 7-Eleven. See generally, R. 24, Mot.
Dismiss; R. 25, Def.'s Br. For the reasons explained below,
7-Eleven's motion to dismiss is granted, and Patel's
motion for a preliminary injunction, R. 18, is denied.
purposes of this motion, the Court accepts as true the
allegations in the Amended Complaint. Erickson v.
Pardus, 551 U.S. 89, 94 (2007). 7-Eleven stores are
operated under a franchise model. Compl. ¶ 11. In around
2010, Patel purchased a 7-Eleven franchise for an up-front
fee and has been running a franchise store in Illinois since
then. Id. ¶¶ 5, 11. According to 7-Eleven,
when Patel first purchased the franchise, he “entered
into an Entity Franchise Amendment” to the franchise
agreement, which made a corporation called Shanti 11 the
franchisee. Def.'s Br. at 3; R. 25-1, Mot. Dismiss Exh.
A, Franchise Agmt. at 90-101. Patel explains that he is the
sole owner, president, secretary, and treasurer of Shanti 11.
R. 27, Pl.'s Resp. at 5 n.2; Mot. Dismiss Exh. A,
Franchise Agmt. at 95-96 (Patel signing the Amendment as
“President/Secretary/Treasurer” and stating that
he owns 100% of the interest in the franchise).
the franchise agreement, Patel argues that he is nothing more
than a glorified manager-and thus an employee under the
Act-of his 7-Eleven store. For example, 7-Eleven controls his
working hours, Compl. ¶ 16, his store workers'
uniforms, id. ¶ 15, the types of payments his
store can accept from customers, id. ¶ 17, and
even the temperature in the store, id. 7-Eleven also
controls the payroll system: store employees log their
working hours in 7-Eleven's system, and 7-Eleven cuts
their paychecks. Id.
own financial arrangement with 7-Eleven works like this:
Patel is required to deposit daily revenues into an account
controlled by 7-Eleven. See Compl. ¶ 18.
7-Eleven requires Patel “to keep a certain amount of
funds in the account at all times or risk getting written up
by 7-Eleven.” Id. 7-Eleven “deducts
payments towards ‘franchise' fees, payments for
store maintenance, credit card fees, advertising fees,
payroll taxes for the store's employees, and the
like” from the account. Id. ¶ 22.
Patel's withdrawals from the account are limited. He is
only allowed to withdraw an “allotted  standard
‘draw, '” and if he wants to withdraw
anything more, he must request permission from 7-Eleven.
Id. ¶ 18. The franchise agreement states that
the default standard draw from the account will be $0.00 per
week. Mot. Dismiss Exh. A, Franchise Agmt. at 58.
also alleges that, in October 2018, shortly after the
complaint in this case was served on 7-Eleven, “a
representative of 7-Eleven visited Patel's store”
and removed a surveillance video recording device from the
store. Mot. Prelim. Inj. at 2. Further, in November 2018, a
7-Eleven representative inspected Patel's store and found
two expired fountain drink syrups being used in the store.
Id. at 3. Patel corrected the issue but received a
“Letter of Notification” from 7-Eleven about it
around one week later. Id.; R. 18-1, Patel Aff. at
6-7 (attaching the November 19, 2018 “Letter of
Notification”). 7-Eleven has pointed out, and Patel
concedes, that Patel had received similar letters before the
filing of the complaint. R. 29, Prelim. Inj. Resp. at 3; R.
32, Prelim. Inj. Reply at 3 n.2.
Federal Rule of Civil Procedure 8(a)(2), a complaint
generally need only include “a short and plain
statement of the claim showing that the pleader is entitled
to relief.” Fed.R.Civ.P. 8(a)(2). This short and plain
statement must “give the defendant fair notice of what
the … claim is and the grounds upon which it
rests.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555 (2007) (alteration in original) cleaned
The Seventh Circuit has explained that this rule
“reflects a liberal notice pleading regime, which is
intended to ‘focus litigation on the merits of a
claim' rather than on technicalities that might keep
plaintiffs out of court.” Brooks v. Ross, 578
F.3d 574, 580 (7th Cir. 2009) (quoting Swierkiewicz v.
Sorema N.A., 534 U.S. 506, 514 (2002)).
motion under Rule 12(b)(6) challenges the sufficiency of the
complaint to state a claim upon which relief may be
granted.” Hallinan v. Fraternal Order of Police of
Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009).
“[A] complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is
plausible on its face.'” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting
Twombly, 550 U.S. at 570). These allegations
“must be enough to raise a right to relief above the
speculative level.” Twombly, 550 U.S. at 555.
The allegations that are entitled to the assumption of truth
are those that are factual, rather than mere legal
conclusions. Iqbal, 556 U.S. at 678-79.
motion to dismiss consists of two main arguments.
7-Eleven's primary argument is that Patel has failed to
adequately plead an agreement by 7-Eleven to pay him
“wages” under the Act. Mot. Dismiss Br. at 6-9.
Pleading a claim under the IWCPA requires a plaintiff to
allege that compensation is due to him “as an employee
from an employer under an employment contract or
agreement.” Landers-Scelfo v. Corp. Office Sys.,
Inc., 827 N.E.2d 1051, 1058 (Ill.App.Ct. 2005). The
IWPCA defines “wages” as “any compensation
owed an employee by an employer pursuant to an employment
contract or agreement between the [two] parties, whether the
amount is determined on a time, task, piece, or any other
basis of calculation.” 820 ILCS § 115/2. An
agreement to pay wages need not amount to a valid written
contract-it can be informal. Zabinsky v. Gelber Grp.,
Inc., 807 N.E.2d 666, 672 (Ill.App.Ct. 2004) (“The
Act provides an employee with remedies more expansive than a
common law breach of contract action when it uses the words
‘employment contract or agreement.' … To
require an employee to have a valid, enforceable contract
before invoking the Act would render the Act
surplusage.”) (cleaned up). Nevertheless, the IWPCA
authorizes claims only for the enforcement of an
already-existing agreement. The Act does not create
new rights and obligations between the parties: it
“provides no substantive relief beyond what the
underlying employment contract requires.” Enger v.
Chi. Carriage Corp., 812 F.3d 565, 570 (7th Cir. 2016).
If there is no agreement to pay wages or compensation, then
there is no valid IWPCA claim. So although Patel's claim
is that 7-Eleven took improper deductions from his wages,
Compl. ¶¶ 3, 22, 28; see also 820 ILCS
§ 115/9, the Act requires that there be
“wages” owed in the first place in order to
pursue a claim under the Act.
complaint in this case does not successfully allege that
7-Eleven agreed to pay wages to Patel. None of Patel's
arguments to the contrary is convincing. First, Patel argues
that the profit-split arrangement in the franchise agreement
constitutes an agreement to pay wages. Pl.'s Resp. at 4-5
(“While the franchise agreement characterizes this as a
charge that Plaintiff must pay to 7-Eleven … the
Complaint alleges, and the franchise agreement confirms, that
it is 7-Eleven that has complete control over all financial
accounts, including over money Plaintiff ‘owes' to
7-Eleven.”). It is not clear whether the complaint ever
refers specifically to the profit-split arrangement, though
Paragraph 22 mentions that 7-Eleven deducts
“‘franchise' fees” from the store
account, Compl. ¶ 22, and the franchise agreement is
central to the allegations in the complaint (so it may be
considered during the dismissal-motion stage). In his
briefing-though not in the complaint itself-Patel explains
that the share of the store profits due to 7-Eleven is called
the “7-Eleven Charge.” Pl.'s Resp. at 4
(citing Mot. Dismiss Exh. A, Franchise Agmt. at 61)
(“Schedule D of the franchise agreement …
explains the profit split between Plaintiff and 7-Eleven,
known as the ‘7-Eleven Charge.' The 7-Eleven Charge
varies depending on the store profits but is generally
approximately 50%.”). 7-Eleven seems to agree with that
characterization of the profit-sharing arrangement.
Def.'s Br. at 4 (“[F]ranchisees like Shanti 11 pay
7-Eleven certain fees, including a royalty fee called the
7-Eleven Charge, which is a graduated percentage of the gross
profits of the store.”).
argument is that the profit he receives from the store
account when he draws on it, as described in Paragraph 18 of
the complaint, constitutes his “wages” from
7-Eleven. The fact that the funds are funneled through an
account controlled by 7-Eleven, Patel reasons, is proof of
this. Pl.'s Resp. at 4-5. But Patel's argument
conflicts with the Seventh Circuit's reasoning in
Enger v. Chicago Carriage Cab Corp. In that case,
the plaintiff taxi drivers alleged that the fares paid by
passengers but “processed by the taxi company's
credit card processing service” were really wages paid
to the drivers. 812 F.3d at 570. The Seventh Circuit
disagreed, in part because even in that scenario, in which
the fares were transferred back to the drivers from the
company's credit card processor, “the obligation to
pay the driver ar[ose] from the passenger, and not
the taxi company.” Id. (emphasis added). The
transfers of the fares back to the taxi driver, the Seventh
Circuit held, did not constitute wages. Id. The same
reasoning applies here. Just as taxi fares originate with the
passengers, Patel's 7-Eleven store's revenues are
paid by its customers. If no one made a purchase at
the store in a given timeframe, then 7-Eleven would not be
obligated to let Patel draw down any amount from the store
account for that period. The default ...