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Fialkoff v. VGM Group, Inc.

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

October 11, 2019

JASON FIALKOFF; and JEFF KNIPE, Plaintiffs,
v.
VGM GROUP, INC.; COMPASS GROUP USA, INC.; and FOODBUY, LLC, Defendants.

          MEMORANDUM OPINION AND ORDER

          C.J. WILLIAMS, UNITED STATES DISTRICT JUDGE

         This matter is before the Court on defendants Compass Group USA, Inc. (“Compass”) and Foodbuy LLC's (“Foodbuy”) Motion to Dismiss.[1] (Doc. 12). Defendants argue this Court should dismiss counts three through eight of plaintiffs Jason Fialkoff and Jeff Knipe's complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. (Id.). Plaintiffs timely filed a resistance to defendants' motion. (Doc. 18). Defendants timely filed a reply brief in response. (Doc. 23). For the following reasons, the motion is granted in part and denied in part.

         I. BACKGROUND

         Plaintiffs allege they were independent contractors employed to facilitate business between VGM, a company that provided rebates and incentive programs to restaurant chains, and the restaurant chains themselves. (Doc. 1, at 2). Plaintiffs were formerly employed as independent contractors for JKI Client Rewards before it was acquired by VGM and rebranded as VGM Client Rewards. (Id., at 1-2). At the time of the acquisition, plaintiffs signed Independent Contractor Agreements with VGM which required plaintiffs to solicit new customers to participate in VGM's incentive programs, maintain relationships with existing clients, meet with clients, and present new opportunities to clients. (Id., at 3). Under the agreements, plaintiffs would be paid a percentage of the rebates VGM received from clients. (Id.). Plaintiffs allege they maintained the Independent Contractor Agreements with VGM from approximately December 17, 2010, through January 1, 2019. (Id., at 4).

         Plaintiffs further allege that VGM began receiving additional money for client purchases sold under private labels. (Id., at 4). These additional payments, however, were not paid to plaintiffs as they claim was required by their Independent Contractor agreements. (Id., at 7). On January 1, 2019, Compass and its subsidiary Foodbuy purchased VGM Client Rewards and all its related assets. (Id., at 4). Following this acquisition, defendants offered plaintiffs an opportunity to continue their work under Consulting Agreements. (Id., at 10). Defendants also offered plaintiffs settlement agreements to resolve the issue of rebates that had not been paid by VGM. (Id.). Plaintiffs did not sign the Consulting Agreements or the settlement agreements. (Id., at 11).

         Plaintiffs brought an eight-count complaint against VGM and defendants alleging: 1) breach of contract; 2) fraud; 3) violation of Florida Deceptive and Unfair Trade Practices Act; 4) defamation; 5) tortious interference with business relationships; 6) a request for injunctive relief; 7) breach of contract; and 8) breach of contract. (Doc. 1). Plaintiffs brought counts one and two only against defendant VGM. (Id., at 15-16). Counts three through six were brought against Compass and Foodbuy jointly. (Id., at 17-20). Counts seven and eight for breach of contract were brought against Compass and Foodbuy individually. (Id., at 20-22). In response, defendants brought this motion to dismiss counts three through eight for failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). (Doc. 12).

         II. APPLICABLE LAW

         Federal Rule of Civil Procedure 8(a) provides that a complaint must contain “a short and plain statement of the grounds for the court's jurisdiction . . . a short and plain statement of the claim showing that the pleader is entitled to relief . . . and a demand for the relief sought.” Rule 12(b)(6) provides that a party may assert the defense of failure to state a claim upon which relief can be granted by motion and that “[a] motion asserting [this] defense[ ] must be made before pleading if a responsive pleading is allowed.” “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations and quotation marks omitted). “Factual allegations must be enough to raise a right to relief above the speculative level, ” but “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that recovery is very remote and unlikely.” Id., at 555-56. Indeed, a theory asserted need only be plausible, which requires “enough fact to raise a reasonable expectation that discovery will reveal evidence of [the conduct alleged].” Id.

         “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but has not shown-that the pleader is entitled to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (emphasis added) (citation and internal quotation marks omitted). “When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Id. When a pleading contains no more than conclusions, however, those conclusions are not entitled to the assumption of truth. Id. “While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.” Id. “[T]here is no justification for dismissing a complaint for insufficiency of statement, except where it appears to a certainty that the plaintiff would be entitled to no relief under any state of facts which could be proved in support of the claim.” Leimer v. State Mut. Life Assur. Co. of Worcester, 108 F.2d 302, 306 (8th Cir. 1940).

         III. DISCUSSION

         Defendant argues the Court should grant its motion to dismiss because “[p]laintiffs fail to allege valid claims that are plausible on their face against [Compass and Foodbuy].” (Doc. 13, at 2). Plaintiffs bring six counts against defendants in their complaint: 1) violation of Florida Deceptive and Unfair Trade Practices Act; 2) defamation; 3) tortious interference with a business relationship; 4) request for injunctive relief; 5) breach of contract claim against Compass; and 6) breach of contract against Foodbuy. For the following reasons, defendants' Rule 12(b)(6) motion to dismiss count three (Florida Deceptive and Unfair Trade Practices Act), and count six (injunctive relief) is granted. Defendants' motion to dismiss count four (defamation), count five (interference with a business relation), and counts seven and eight (breach of contract) is denied.

         Defendants itemize each of the six counts and detail why they allege each count to be deficient. The Court is not prepared to determine which substantive body of law applies to the claims raised, but defendants challenge the complaint primarily based on Iowa law. (Doc. 13). Because Iowa law could be proven to govern the claims at issue, the Court will apply Iowa law for the sole purpose of determining the sufficiency of the complaint under Rule 12(b)(6).

         1. Violation of Florida Deceptive and Unfair Trade Practices Act

         The Court first considers the violation of Florida Deceptive and Unfair Trade Practices Act claim (Count Three). The Court finds the complaint does not provide sufficient factual information “to raise a reasonable expectation that discovery will reveal evidence [of the conduct alleged].” Twombly, 550 U.S. at 555-56.

         The Florida Deceptive and Unfair Trade Practices Act's (“FDUTPA”) purpose is “[t]o protect the consuming public and legitimate business enterprises from those who engage in unfair methods of competition, or unconscionable, deceptive, or unfair acts or practices in the conduct of any trade or commerce.” Fla. Stat. § 501.202(2). “To state a claim under FDUTPA, a party must allege (1) a deceptive act or unfair practice; (2) causation; and (3) actual damages.” CEMEX Constr. Materials Fla., LLC v. Armstrong World Indus., Inc., No. 3:16-cv-186-J-34JRK, 2018 WL 905752, at *14 (M.D. Fla. Feb. 15, 2018). “An unfair practice is one that offends established public policy and one that is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers, while a deceptive act occurs if there is a representation, omission, or practice that is likely to mislead the consumer acting reasonably in the circumstances, to the consumer's detriment.” Sandshaker Lounge & Package Store LLC v. RKR Beverage Inc, No. 3:17-cv-00686-MCR-CJK, 2018 WL 7351689, at *6 (N.D. Fla. Sept. 27, 2018). An entity does not need “to be a consumer to have standing to bring a FDUTPA claim” but a claimant does “have to prove that there was an injury or detriment to consumers in order to satisfy all of the elements of a FDUTPA claim.” Caribbean Cruise Line, Inc. v. Better Bus. Bureau of Palm Beach Cty., Inc., 169 So.3d 164, 170 (Fla. Dist. Ct. App. 2015) (emphasis in original).

         Defendants contend that plaintiffs' FDUTPA claim must fail because plaintiffs did not explain how “the acts that they allege were ‘unfair' or ‘deceptive' caused injuries to customers.” (Doc. 13, at 14). Specifically, defendants claim any alleged deceptive conduct was private and not customer facing, so customers could not have been misled or deceived. (Id., at 14-15). Defendants also claim that allegedly deceptive advertising related to increased rebates could not have injured customers because the customers were actually benefitted by receiving greater rebates. (Id., at 15). In sum, defendants argue customers have not been harmed and thus plaintiffs cannot state a FDUTPA claim. (Id., at 15-16). Plaintiffs, however, allege consumers were harmed when defendants concealed information about misappropriated rebate revenues. (Id., at 15). Specifically, plaintiffs allege this false information “harmed consumers by depriving them of the ability to make informed choices about where to do business and facts that would allow them to pursue VGM for money they are owed.” (Id., at 16).

         Although plaintiffs argue that consumers may have suffered harm, they do not allege any facts supporting a plausible inference that any consumers have or are likely to have suffered actual damages. It is conceivable a customer may have made a different choice about whom they would like to conduct business. But plaintiffs' allegations do not suggest any consumers made a different choice or were actually harmed by their decision to continue conducting business with defendants. Defendants claim consumers actually benefitted from the alleged conduct. The Court does not need to determine whether consumers benefitted from the alleged conduct because it is sufficient that plaintiffs did not show consumers were harmed.

         For the reasons discussed above, defendants' motion to dismiss plaintiffs' FDUTPA claim is granted.

         2. ...


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