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K&F Restaurant Holdings, Ltd. v. Rouse

United States District Court, M.D. Louisiana

July 24, 2018




         This matter is before the Court on four Motions to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). The first was filed by Donald J. Rouse, Jr. (“Rouse, Jr.”); Donald J. Rouse, Sr.; Thomas B. Rouse; Allison Rouse Royster; and Rouse's Enterprises, LLC (“Rouse's, ” and collectively “the Rouse Defendants”). (Doc. 148). 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 (“LIT Pizza”); G&O Restaurant Operations, LLC; Osvaldo Fernandez; and A. Gary Kovacs (collectively “Plaintiffs”) oppose. (Doc. 164). The Rouse Defendants have filed a Reply in further support of their Motion. (Doc. 172).

         The second Motion was filed by Victory Berryland, LLC (“Berryland”). (Doc. 139). Plaintiffs oppose, (Doc. 168), and Berryland has filed a Reply in further support of its Motion, (Doc. 170).

         The third Motion was filed by Stephen Keller and Creekstone Juban I, LLC (“Creekstone, ” and collectively “the Creekstone Defendants”). (Doc. 140). Plaintiffs oppose. (Doc. 165).

         The fourth Motion was filed by Russell Mosely and Mosely Holdings, LLC (collectively, “the Mosely Defendants”). (Doc. 143). Plaintiffs oppose, (Doc. 163), and the Mosely Defendants have filed a Reply in further support of their Motion, (Doc. 171).

         For reasons discussed below, the Motions will be granted, and this case will be dismissed in its entirety.

         I. BACKGROUND

         A. Plaintiff's Allegations

         In September 2011, Jack Trueting, Rouse's “Director of Perishables, ” called Fernandez to say that Rouse's was “very impressed with Izzo's products” and was interested in franchising Izzo's burrito restaurants in Rouse's grocery stores. (Doc. 138 at 3). Izzo's declined. (Id.). Rouse, Jr., who manages Rouse's, then allegedly formed a “scheme” to steal Izzo's burrito recipes. (Id.). Specifically, in 2011, Rouse, Jr. “directed” some of his store managers in Lafayette, Louisiana to make an offer, “essentially a bribe, ” to Patrick Dartez, manager of an Izzo's in Lafayette, to “defect to Rouse's with Izzo's recipes.” (Id.). Dartez accepted. (Id.). Following the success of the “scheme, ” Rouse's began selling burritos that were “very similar, if not identical, ” to Izzo's burritos in some of its stores. (Id. at 4). Plaintiffs contend that this constitutes illegal use of Izzo's trade secrets. (Id. at 5-6). Plaintiffs also contend that Rouse's uses the phrase “build your own” in connection with its burritos and that this phrase is very similar to “roll your own, ” which Izzo's uses in connection with its burritos. (Id. at 9).

         Additionally, in July 2011, Izzo's sought to “acquire a restaurant” at Juban Crossing, a commercial development in Livingston, Louisiana managed by Keller and developed by Creekstone. (Id. at 4). In 2012, Izzo's, Keller, and Creekstone signed a letter of intent pursuant to which Izzo's was to lease space at Juban Crossing. (Id.). However, in a lease agreement recorded in June 2013, Rouse's agreed to be the anchor tenant at Juban Crossing. (Id.; see also Doc. 138-5 at 1). One of the conditions of the agreement was that no portion of Juban Crossing would be leased or sold to Izzo's, “K&F Restaurant Management, LLC, ” or any affiliate of either. (Doc. 138 at 1; see also Doc. 138-5 at 4). According to Plaintiffs, Rouse, Jr. justified the condition in “interstate phone calls” occurring in 2012, stating that Izzo's sold “substandard” products and was “litigious.” (Doc. 138 at 5). Creekstone refused to lease space to Izzo's, allegedly resulting in “millions of dollars” in lost profits to Izzo's. (Id.).

         The operative Second Amended Complaint alleges seven “counts.” (Id. at 6-20). Count I is against Rouse, Jr. for violating the conspiracy provision of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(d). (Id. at 6). Plaintiffs contends that Rouse, Jr. “conspired to commit three RICO violations against Izzo's, ” i.e., violating the Travel Act via the scheme to steal Izzo's recipes, committing wire fraud by stating in phone calls that Izzo's was litigious and sold substandard products, and illegally stealing and using trade secrets. (Id. at 6).

         Count II is a claim for “Conspiracy To Violate La. Civ. Code Arts. 2324, et seq. as to all Defendants.” (Id. at 6-7). Plaintiffs claim that their factual allegations “set forth a civil conspiracy set forth among the defendants to exclude and group boycott the plaintiffs from highly desirable developments.” (Id. at 7). Plaintiffs also contend that “each of the defendants' name[d] herein are made in act of the furtherance of the conspiracy by rejecting Izzo's[, ] Lit and any other development created by Fernandez and Kovacs.” (Id.).

         Count III alleges “Product Defamation and Disparagement against the Rouse's Defendants.” (Id. at 7). Plaintiffs claim that “Rouse's” made false statements concerning the quality of Izzo's products and its litigiousness to “several third parties but for certain to each of the co-conspirators herein, Juban, Keller, Long Farms, Mosely, and Berryland.” (Id. at 7-8). Plaintiffs assert that these statements were false, as evidenced by Rouse's desire to franchise Izzo's restaurants and Izzo's decision not to assert claims against Rouse's when an Izzo's recipe book was recovered from a Rouse's store. (Id. at 8).

         Count IV[1] alleges “Tortious Interference and Business Relations as to all Defendants.” (Id. at 8). Plaintiffs contend that “[t]he various aforementioned acts and practices by the Rouse Group and co-conspirators have tortiously interfered and continue to tortiously interfere with lawful business relations between Izzo's and its partners and other developers.” (Id.). This count also concerns the statements about Izzo's alleged litigiousness and substandard products. (Id.).

         Count V asserts trademark infringement under La. Rev. Stat. 51:211 et seq. “as to Rouse's Defendants” based on the use of the “trade name” “build your own.” (Id. at 9).

         Count VI asserts a “Conspiracy under Sherman Act and Restraint of Trade in Transportation Market[, ] 15 U.S.C.A. § 1, 35, 36 as to All Defendants.” (Id. at 9-10). Plaintiffs contend that “Defendants have monopolized the Market Area in that it has [sic] power to dictate tenants of its preference and exclude competition in some or all of the Market Area” and have “acquired, exercised, and maintained its monopoly power willfully and intentionally by way of the acts set forth above.” (Id. at 10). Plaintiffs similarly allege that Defendants have attempted to monopolize or conspired to monopolize the “Market Area.” (Id.). Count VI states that “unlawful agreements [among the Defendants] are evidenced by, among other things, the leases, the deed, the economic interests of Defendants Rouse's, Keller, Juban, Mosely, Long Farms, and Berryland; the close relationships among Defendants; Defendants' concerns about the competitive threat that Izzo's application posed to the Defendants; the history and anticompetitive practices of Rouse's; and the timing of various anticompetitive actions taken by Rouse's, Keller, Juban, Mosely, Long Farms, and Berryland.” (Id. at 11). Plaintiffs further contend that “Defendants have engaged in per se anticompetitive behavior, or, alternatively, anticompetitive behavior without procompetitive justification, that has unreasonably retrained trade in violation of Section 1 of the Sherman Act.” (Id.). Plaintiffs contend that the product market for this “count” is the “retail food sale market, ” while the relevant geographic market is the state of Louisiana. (Id.).

         Count VII asserts a “Complaint for Violation of Federal and Louisiana Antitrust Laws, Unfair Practices, and Unfair Competition 15 U.S.C.A. § 1, 2, and 13 as to All Defendants.” (Id. at 14). Plaintiffs define the “many” product markets for “retail food” as “(i) sale of food for cooking; (ii) the sale of partially prepared food which simply requires heating; (iii) the sale of precooked food, ready to eat; (iv) the sale of pre-cooked food concentration on one type of food; (v) the sale of pre-cooked food with a variety of types of food; and (vi) the combination of selling un-cooked food requiring preparation and cooking along with pre-cooked foods, ready to eat.” (Id. at 15). Plaintiffs define the “relevant geographic markets for retail food sales” as “the entire United States” and “the states commonly known as the Southeastern United States, including, but not limited to, Louisiana, Mississippi, Alabama and Florida.” (Id.). Plaintiffs claim that barriers to entry are high given “[t]he high concentration in the Market Area, the sophisticated technology, large expenses, high capital costs, [and] relationship[s] with farmers and wholesalers.” (Id. at 16). Plaintiffs contend that “Defendants” have engaged in refusal to deal and collusion with developers, constituting monopolization, attempt to monopolize, and conspiracy to monopolize; unreasonable restraint of trade; and “unfair competition.” (Id. at 16-19).

         Attached to the Second Amended Complaint are numerous exhibits, including, inter alia, an affidavit by Fernandez stating that, in a March 2016 meeting, Russell Mosely expressed regret that he could not include an Izzo's in a development, but Rouse, Jr. had told Mosely that there had been an “incident” between Izzo's and Rouse's “years ago” and Izzo's would “never make a dollar off of [him]!” (Doc. 138-6 at 1; see also Doc. 138-10 at 7 (Declaration of Covenants excluding “Any Izzo's” from a Mosely property)). Also attached to the Second Amended Complaint is a Notice of Lease between Berryland and Rouse's excluding “[a]ny Izzo's or similar burrito restaurant.” (Doc. 138-12 at 6).

         B. Procedural History

         This case was filed in state court in April 2016 and removed shortly thereafter. (Doc. 1). The initial Petition for Damages named the Rouse Defendants and raised RICO claims and state law claims for violations of Louisiana's Unfair Trade Practices and Consumer Protection Act (“LUTPA”), tortious interference with a contract, product defamation, civil conversion, trademark infringement, and conspiracy. (Doc. 1-1 at 2, 8-13). The Rouse Defendants moved for dismissal of Plaintiffs' state law claims, while Plaintiffs moved to remand. (Docs. 5, 7). The Court denied the Motion to Remand and granted in part and denied in part the Motion to Dismiss. (Docs. 26, 31). Specifically, the Court ruled that the LUTPA claim was untimely and dismissed it with prejudice. (Doc. 31 at 5-7, 14). The Court denied the Motion to Dismiss as to the trademark infringement claim, ruling that Plaintiffs had adequately pled a “protectable right” in the trade name “roll your own” and Rouse's violation of that right. (Id. at 12, 14). The Court dismissed the remaining state law claims with leave to amend as inadequately pled. (Id. at 7-11, 12-14). Plaintiffs moved for reconsideration and to recuse the then-assigned district judge. (Docs. 38-41).

         Plaintiffs later filed an “Amended and Restated Complaint.” (Doc. 70). This pleading named all of the defendants currently named (along with one other person) and raised RICO claims, federal antitrust claims, and state law claims for “wrongful conversion of proprietary information, ” conspiracy, product defamation and disparagement, tortious interference with business relations, trademark infringement, and violation of state antitrust law. (Id.). Several defendants moved to dismiss. (See Docs. 71, 78, 83).

         The Court then denied the outstanding motions for reconsideration and to recuse. (Docs. 102, 117). Five days after reconsideration was denied, Plaintiffs again moved to disqualify the then-assigned district judge. (Doc. 118). Although that judge ruled that the basis upon which disqualification was sought, i.e., a lawsuit brought by Plaintiffs' counsel, was “a transparent attempt to create bias and hostility in an effort to provoke disqualification, ” the Court granted the motion given that “the machinations to which Plaintiffs' counsel ha[d] resorted to poison and impugn the Court's impartiality” might cause a “thoughtful and objective observer” to question the Court's impartiality. (Doc. 133 at 8-9). The case was thereafter reassigned to this section of the Court.

         Following the case's reassignment, the Court held a status conference and granted Plaintiffs' then-pending motion for leave to file a Second Amended Complaint. (Doc. 136; see also Doc. 95). The Court informed Plaintiffs' counsel that “this [was] the last amendment to the complaint that [would] be allowed by the Court.” (Doc. 136 at 1). The outstanding Motions to Dismiss were denied without prejudice to renewal following the filing of the Second Amended Complaint. (Id. at 1-2). The Second Amended Complaint was filed on October 26, 2017.


         In Johnson v. City of Shelby, Miss., __ U.S. __, 135 S.Ct. 346 (2014), the Supreme Court explained that “[f]ederal pleading rules call for a ‘short and plain statement of the claim showing that the pleader is entitled to relief,' Fed.R.Civ.P. 8(a)(2); they do not countenance dismissal of a complaint for imperfect statement of the legal theory supporting the claim asserted.” 135 S.Ct. at 346-47 (citation omitted).

         Interpreting Rule 8(a), the Fifth Circuit has explained:

The complaint (1) on its face (2) must contain enough factual matter (taken as true) (3) to raise a reasonable hope or expectation (4) that discovery will reveal relevant evidence of each element of a claim. “Asking for [such] plausible grounds to infer [the element of a claim] does not impose a probability requirement at the pleading stage; it simply calls for enough facts to raise a reasonable expectation that discovery will reveal [that the elements of the claim existed].”

Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 257 (5th Cir. 2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007) (emphasis in Lormand)).

         Applying the above case law, the Western District of Louisiana has stated:

Therefore, while the court is not to give the “assumption of truth” to conclusions, factual allegations remain so entitled. Once those factual allegations are identified, drawing on the court's judicial experience and common sense, the analysis is whether those facts, which need not be detailed or specific, allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” [Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)]; Twombly, [550] U.S. at 556, 127 S.Ct. at 1965. This analysis is not substantively different from that set forth in Lormand, supra, nor does this jurisprudence foreclose the option that discovery must be undertaken in order to raise relevant information to support an element of the claim. The standard, under the specific language of Fed.R.Civ.P. 8(a)(2), remains that the defendant be given adequate notice of the claim and the grounds upon which it is based. The standard is met by the “reasonable inference” the court must make that, with or without discovery, the facts set forth a plausible claim for relief under a particular theory of law provided that there is a “reasonable expectation” that “discovery will reveal relevant evidence of each element of the claim.” Lormand, 565 F.3d at 257; Twombly, [550] U.S. at 556, 127 S.Ct. at 1965.

Diamond Servs. Corp. v. Oceanografia, S.A. De C.V., No. 10-00177, 2011 WL 938785, at *3 (W.D. La. Feb. 9, 2011) (citation omitted).

         More recently, in Thompson v. City of Waco, Tex., 764 F.3d 500 (5th Cir. 2014), the Fifth Circuit summarized the standard for a Rule 12(b)(6) motion:

We accept all well-pleaded facts as true and view all facts in the light most favorable to the plaintiff . . . To survive dismissal, a plaintiff must plead enough facts to state a claim for relief that is plausible on its face. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Our task, then, is to determine whether the plaintiff state a legally cognizable claim that is plausible, not to evaluate the plaintiff's likelihood of success.

Id. at 502-03 (citations and internal quotations omitted).


         A. The Rouse Defendants

         1. The Motion

         In support of their Motion to Dismiss, the Rouse Defendants first argue that Plaintiffs' claims for “product defamation and disparagement” fail as vaguely pled and because the challenged statements concerning Izzo's alleged “litigiousness” and “substandard product” are non-actionable matters of opinion. (Doc. 148-1 at 5-6). They also note that defamation claims, like other tort claims, are subject to a one-year prescriptive period. (Id. at 5). They similarly argue that Plaintiffs' claim for tortious interference with business relations is conclusorily pled, is prescribed, and does not allege that the Rouse Defendants “acted improperly or with actual malice.” (Id. at 6-8). The Rouse Defendants then argue that Plaintiffs' trademark infringement claim fails, as “build your own” is a common, descriptive, generic phrase unlikely to cause confusion and not subject to trademark protection. (Id. at 8-10). Next, they argue that Plaintiffs' state law conspiracy claims fail because there is no “underlying tort” nor any non-conclusory allegations of a conspiratorial agreement as to a particular unlawful outcome or result. (Id. at 10-11). With respect to Plaintiffs' RICO claim, the Rouse Defendants claim that Plaintiffs have failed to plausibly plead the elements of each predicate act alleged or a “pattern” of racketeering activity. (Id. at 11-12).

         The Rouse Defendants characterize Plaintiffs' antitrust claims as “facially ridiculous” and “lack[ing] each and every component of a plausible claim under either federal or state antitrust law.” (Id. at 13). First, they observe that Plaintiffs complain of being excluded from a few developments in Louisiana but define the relevant market as essentially all food sales throughout Louisiana, throughout the Southeastern United States, or throughout the whole of the United States. (Id. at 13-14). The Rouse Defendants also argue that Plaintiffs fail to adequately plead “antitrust injury, ” i.e., an injury to competition, not just to Izzo's, particularly given that Plaintiffs' competitors were allowed at some of the developments. (Id. at 14-15).

         The Rouse Defendants further argue that Plaintiffs' claims of a vertical price-fixing conspiracy or vertical concerted refusal to deal under Section 1 of the Sherman Act fail for failure to plead market power, particularly given the size of the market. (Id. at 16-18). They also claim that any additional conspiracy claims under 15 U.S.C. §§ 1, 35, or 36 must be dismissed as duplicative or meritless. (Id. at 19). The Rouse Defendants likewise argue that Plaintiffs' claims of monopolization, attempt to monopolize, and conspiracy to monopolize under Section 2 of the Sherman Act fail for failure to adequately allege market power or market share and specific intent to monopolize. (Id. at 19-22). The Rouse Defendants further argue that Plaintiffs fail to allege a “single element” of a claim under 15 U.S.C. § 13. (Id. at 22). The Rouse Defendants also contend that there is no private right of action for “unfair competition” under the Federal Trade Commission Act, and Plaintiffs' LUTPA claims were previously dismissed with prejudice. (Id.). Finally, the Rouse Defendants argue that Plaintiffs' state law antitrust claims are interpreted consistent with federal law and fail for the same reasons. (Id. at 22-23).

         2. The Opposition

         Plaintiffs oppose, arguing throughout that a short, plain statement of their claims is all that is required to survive a Rule 12(b)(6) motion. (Doc. 164 at 3).

         More specifically, Plaintiffs first represent that the Rouse Defendants have stated to co-conspirators that Izzo's “produced substandard product and was extremely litigious, ” giving rise to a claim for product defamation. (Id.). Plaintiffs contend that these statements are false, as Izzo's sole prior lawsuit concerning the recipe book was “100% correct, ” and Rouse's desire to put Izzo's in its stores belies any contention that Rouse's believed Izzo's product to be “substandard.” (Id. at 3-4). ...

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