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K&F Restaurant Holdings, Ltd. v. Rouse

United States District Court, M.D. Louisiana

July 9, 2018




         On October 26, 2017, Plaintiffs K&F Restaurant Holdings, Ltd. d/b/a Izzo's Illegal Burrito (“Izzo's”); K&F Restaurant Operations, LLC; G&O Pizza Holdings, Ltd. d/b/a LIT Pizza; G&O Restaurant Operations, LLC; Osvaldo Fernandez; and A. Gary Kovacs (collectively “Plaintiffs”) filed the operative Second Amended Complaint in this case. (Doc. 138). Plaintiffs allege, inter alia, that Defendant Donald J. Rouse, Jr. manages the Rouses chain of grocery stores and bribed an Izzo's employee to “defect” to Rouses and bring with him Izzo's secret recipes. (Id. at 3). Plaintiffs claim that Rouses now uses Izzo's recipes in its build-your-own burrito bars. (Id. at 4). Plaintiffs also contend that Donald J. Rouse, Jr.'s conduct in bribing an Izzo's employee, as well as his alleged subsequent interference with Izzo's ability to obtain space in commercial developments, violated several state and federal criminal statutes. (Id. at 4-6).

         Defendants Donald J. Rouse, Jr., Donald J. Rouse, Sr., Thomas B. Rouse, Allison Rouse Royster, and Rouse's Enterprises, L.L.C. (collectively “the Rouse Defendants”) move to strike the aforementioned allegations as false, scandalous, and prejudicial. (“Motion, ” Doc. 141). The Rouse Defendants contend that these allegations were first made in the Second Amended Complaint, and this timing “calls into question Plaintiffs' motivation and basis for the amendment.” (Doc. 141-1 at 2-3). The Rouse Defendants also note that, in November 2017, this lawsuit was the subject of news stories in the Baton Rouge Business Report and The Hayride, and, “[a]bsent the scandalous allegations[, ] . . . it is doubtful that this action would have been considered interesting enough to gain the attention of any journalists.” (Id. at 3).

         The articles are attached as exhibits to the Motion. The Baton Rouge Business Report article states in relevant part:

Izzo's Illegal Burrito and its parent company have upped the ante in their long-running lawsuit against the owners of Rouses Supermarkets.
In court documents filed Oct. 27, the Baton Rouge-based restaurant chain alleges the south Louisiana supermarket chain committed conspiracy under the civil Racketeer Influenced and Corrupt Organizations, or RICO, Act.
RICO cases are serious business, and have brought down mafia dons, corrupt government officials and Major League Baseball teams, and the RICO statute isn't typically used in disputes between two businesses. But in its recent court filing, Izzo's alleges Rouses engaged in the kind of corruption and racketeering that constitute a RICO action.

         Izzo's RICO argument, according to its lawsuit, is threefold:

Rouses, in 2011, allegedly tried to bribe an Izzo's restaurant manager into going to work for Rouses so the supermarket could steal his Izzo's recipe book and establish burrito bars, similar to Izzo's, in their stores.
Rouses conspired to keep Izzo's out of shopping center developments-specifically Juban Crossing-where Rouses was an anchor tenant. The suit claims Rouses' executives told leasing agents for Juban Crossing in phone calls that Izzo's “sold ‘substandard' products and was ‘litigious'” -allegedly, an act of wire fraud-in an effort to keep Izzo's out of the Denham Springs retail development.
Rouses allegedly continues to use Izzo's trademark recipes at its own burrito bars.
“As detailed above, Rouses conspired to commit three RICO violations against Izzo's, ” court documents claim. “These violations began in 2011 and are ongoing … Rouses Enterprises, LLC is a RICO enterprise affecting interstate commerce.”

(Doc. 141-3 at 1 (alterations and quotations in original)). The article on The Hayride, entitled “The Great Izzo's-Rouse's RICO Kerfuffle, ” characterizes this lawsuit and the events giving rise to it as “a rather crazy story of predatory marketing, cutthroat competition and two companies which downright do not like each other.” (Doc. 141-4 at 1-2). The article quotes the first three paragraphs from the Baton Rouge Business Report article and then continues as follows (again, in relevant part):

Izzo's is alleging essentially three things. First, that in 2011 Rouse's attempted to bribe an Izzo's store manager into taking a job with the supermarket chain and bringing along his recipe book so that Rouse's might replicate Izzo's product with burrito bars in its own stores. If you've been in a Whole Foods ...

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