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Noble Roman's, Inc. v. Hattenhauer Distributing Co.

United States District Court, S.D. Indiana, Indianapolis Division

April 3, 2015

NOBLE ROMAN'S, INC., Plaintiff,
v.
HATTENHAUER DISTRIBUTING COMPANY, Defendant.

ENTRY ON PARTIAL MOTION TO DISMISS

WILLIAM T. LAWRENCE, District Judge.

This cause is before the Court on the Defendant's partial Motion to Dismiss (Dkt. No. 20). The motion is fully briefed and the Court, being duly advised, DENIES the motion for the following reasons.[1]

I. APPLICABLE STANDARD

The Defendant moves to dismiss Count II of the Plaintiff's Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing that it fails to state a claim for which relief can be granted. In reviewing a Rule 12(b)(6) motion, the Court "must accept all well pled facts as true and draw all permissible inferences in favor of the plaintiff." Agnew v. National Collegiate Athletic Ass'n, 683 F.3d 328, 334 (7th Cir. 2012). For a claim to survive a motion to dismiss for failure to state a claim, it must provide the defendant with "fair notice of what the... claim is and the grounds upon which it rests." Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009) (quoting Erickson v. Pardus, 551 U.S. 89, 93 (2007)) (omission in original). A complaint must "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Agnew, 683 F.3d at 334 (citations omitted). A complaint's factual allegations are plausible if they "raise the right to relief above the speculative level." Bell Atlantic Corp v. Twombly, 550 U.S. 544, 556 (2007).

II. BACKGROUND

The facts set forth in the Plaintiff's Complaint (Dkt. No. 1) are as follow.

The Plaintiff, Noble Roman's, Inc. ("Noble Roman's") is in the business of franchising pizza outlets and Tuscano's Italian-style submarine sandwiches to franchisees across the United States. Defendant Hattenhauer Distributing Company ("Hattenhauer") owns and operates convenience stores and gas stations in Goldendale, Washington and Wasco, Oregon.

In August 2006, Noble Roman's and Hattenhauer entered into two franchise agreements for the sale of Noble Roman's pizza and Tuscano's sandwiches at Hattenhauer's convenience store in Goldendale, Washington. In April 2005, Noble Roman's and Hattenhauer entered into a franchise agreement for the sale of Noble Roman's pizza at Hattenhauer's convenience store in Wasco, Oregon; this agreement was renewed in March 2011. Under the franchise agreements, Hattenhauer agreed to pay a seven percent weekly royalty fee to Noble Roman's and agreed to only use ingredients that conform to Noble Roman's standards and specifications, among other things.

At some point in 2014, Noble Roman's performed an audit of Hattenhauer's franchises and found that it under-reported sales at both the Washington and Oregon locations from January 2011 through February 2014. Noble Roman's notified Hattenhauer of this in April 2014; Hattenhauer disputed the audits and refused to pay the royalty fees. Expanded audits conducted by Noble Roman's-from the time the locations opened through August 2014-revealed the same.

In addition to the unpaid royalty fees, Noble Roman's also alleges that since January 2011, Hattenhauer has been using an inferior-quality cheese on its pizzas, not the Noble Roman's proprietary pizza cheese.

In October 2014, Noble Roman's filed suit in this Court alleging unfair competition (Count I) and breach of contract (Count II).

III. DISCUSSION

Hattenhauer moves to dismiss Count II, the breach of contract claim. Its arguments are addressed below.

Count II of Noble Roman's Complaint alleges that "Hattenhauer has knowingly breached and continues to breach the Franchise Agreements by (1) under-reporting Gross Sales; [and] (2) refusing to pay the royalty fees that are directly related to the under-reported Gross Sales[.]" Amend. Compl. ΒΆ 35.[2] As explained above, Noble Roman's bases these allegations on the audits it conducted in 2014. The audits were entitled "Sales & Purchase Comparison, " and compared Hattenhauer's "reported sales to [its] potential sales based on its purchases." Dkt. No. 25. The audits multiplied the number of items Hattenhauer purchased-breadsticks, dough, wings, submarine rolls, etc.-by the menu price in order to obtain an "Estimated Sales" figure. Id. This "Estimated Sales" figure was then reduced by a certain percentage, depending on the food item, to account for "Waste." Id. In order to determine if Hattenhauer was over- or under-reporting its sales, Noble Roman's subtracted Hattenhauer's "Reported Sales" figure from the "Total Estimated Sales" figure; this resulted in the amount of "Under-Reported Sales." Id. Noble Roman's alleges it is entitled to seven ...


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