K&F Rest. Holdings, Ltd. v. Rouse
| Decision Date | 24 July 2018 |
| Docket Number | CIVIL ACTION NO. 16-293-JWD-EWD |
| Parties | K&F RESTAURANT HOLDINGS, LTD., d/b/a IZZO'S ILLEGAL BURRITO, ET AL. v. DONALD J. ROUSE, JR., ET AL. |
| Court | U.S. District Court — Middle District of Louisiana |
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.
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 IV1 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 pre-cooked 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 ()). Also attached to the Second Amended Complaint is aNotice of Lease between Berryland and Rouse's excluding "[a]ny Izzo's or similar burrito restaurant." (Doc. 138-12 at 6).
This case was filed in state court in April 2016 and...
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