Murphy v. White Hen Pantry Co.

• Decision Date: 19 October 1982
• Docket Number: No. 81-2970,81-2970
• Citation: 691 F.2d 350
• Parties: Donald L. MURPHY, et al., Plaintiffs-Appellants, v. WHITE HEN PANTRY COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 350

691 F.2d 350

Donald L. MURPHY, et al., Plaintiffs-Appellants, v. WHITE HEN PANTRY COMPANY, Defendant-Appellee.

No. 81-2970.

United States Court of Appeals, Seventh Circuit.

Argued May 13, 1982.

Decided Oct. 19, 1982.

Allan H. Deutch, Deutch, Hansher & Grodsky, Milwaukee, Wis., for plaintiffs-appellants.

Andrew O. Riteris, Michael, Best & Friedrich, Milwaukee, Wis., for defendant-appellee.

Before PELL, DAVIS, ^* and WOOD, Circuit Judges.

HARLINGTON WOOD, Jr., Circuit Judge.

In this diversity case the plaintiffs, seventeen individuals who own and operate White Hen Pantry convenience food stores in Wisconsin under franchise agreements with the defendant, White Hen Pantry Company, appeal the entry of summary judgment against them. In their complaint, the plaintiffs sought damages, declaratory and injunctive relief, reformation of the franchise contracts, and an accounting. As the basis for obtaining that relief, the plaintiffs raised eleven separate theories of liability under Wisconsin statutory and common law. The district court summarized the plaintiffs' claims in its unpublished memorandum decision.

(T)he plaintiffs in essence are alleging in their complaint that the defendant offered for sale nonnegotiable form franchise agreements; that due to the inequity of the parties' bargaining positions the plaintiffs were compelled to enter into the agreements on a take it-or-leave it basis; that in result certain of the provisions of the agreements are unconscionable and should be reformed or voided and certain of them are unlawful under the Wisconsin statutes; and that the defendant, due to its superior economic position, owes a fiduciary duty to the plaintiffs which it has failed to perform. The major areas of complaint concern the insurance provisions in the agreements, the defendant's provision of accounting services to the plaintiffs, its practices with reference to offering subsidies to various franchisees in an allegedly inequitable manner, and its use of promotional sales allowances and advertising funds.

After two years of extensive discovery by the parties, the district court granted the defendant's motion for summary judgment on all eleven counts and dismissed the complaint. The plaintiffs appeal that decision. We affirm.

I

The plaintiffs first argue that, in granting summary judgment, the district court ignored a claim for breach of the franchise agreement, implicitly alleged in the complaint. ¹ The plaintiffs assert that the liberal pleading policy underlying the Federal Rules of Civil Procedure required the district court to construe the complaint broadly and prohibited dismissal of the action simply because the plaintiffs failed to expressly plead the precise legal theory on which their claim was based. See Oglala Sioux Tribe of Indians v. Andrus, 603 F.2d 707, 714 (8th Cir. 1979); International Distributing Corp. v. American District Telegraph Co., 569 F.2d 136, 139-40 (D.C.Cir.1977); Janke Construction Co., Inc. v. Vulcan Materials Co., 527 F.2d 772, 776-77 (7th Cir. 1976); Sessions v. Chrysler Corp., 517 F.2d 759, 760-61 (9th Cir. 1975).

The plaintiffs' pleading responsibilities under the Federal Rules of Civil Procedure are well-settled. ²

(T)he Federal Rules of Civil Procedure do not require a claimant to set out in detail the facts upon which he bases his claim. To the contrary, all the Rules require is "a short and plain statement of the claim" that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests.... Such simplified "notice pleading" is made possible by the liberal opportunity for discovery and the other pretrial procedures established by the Rules to disclose more precisely the basis of both claim and defense and to define more narrowly the disputed facts and issues.... The Federal Rules reject the approach that pleading is a game of skill in which one misstep by counsel may be decisive to the outcome and accept the principle that the purpose of pleading is to facilitate a proper decision on the merits.

Conley v. Gibson, 355 U.S. 41, 47-48, 78 S.Ct. 99, 102-103, 2 L.Ed.2d 80 (1957). Thus, the question presented is whether the plaintiffs pleaded sufficient facts to notify the defendant of their allegation that the franchise agreement had been violated. The complaint failed to satisfy even this generous standard.

The portions of the complaint which the plaintiffs rely upon to support their argument are too inspecific to allege, even by implication, a breach of contract. Though the plaintiffs alleged White Hen Pantry Company representatives entered their stores and changed prices marked on shelf goods to conform to the franchisor's suggested retail prices, there is no indication in the pleadings that the franchise agreement prohibited these actions. The plaintiffs similarly suggest that the district court should have construed paragraph 67 of the complaint in combination with paragraph 38 to conclude that the franchisor did not use "its best efforts to procure and maintain insurance" for the franchisees, again in violation of the franchise agreement. The plaintiffs alleged in those paragraphs only that the franchisor acted as a "self insurer" and neglected to notify the franchisees of that action. Again, there is no indication in the complaint that the action violated the franchise contract. In fact, the plaintiffs' attorney asserted before the district court that this count in the complaint did not allege a breach of contract. Because counsel expressly disclaimed all reliance on this theory in the court's presence, the district court did not construe the complaint too narrowly. The other references in the complaint which the plaintiffs cite to support their argument are equally unspecific. ³

It is axiomatic that even to arguably allege a claim based on breach of contract, the complaint must make some reference to the written agreement between the parties. The complaint here is nearly devoid of all mention of the specific provisions of that document. The liberal pleading policy in the Rules prevents dismissal of a meritorious action for purely formal or technical reasons. The district court is not required, however, to speculate over the nature of the plaintiffs' claim or to refuse to enter summary judgment for the defendant simply because the plaintiffs may, theoretically, be entitled to recover under a cause of action based on facts never alleged in the complaint. In addition in this case in one instance the theory was disclaimed by plaintiffs' counsel. The Rules do not allow a plaintiff to abdicate the responsibility of alleging the basic facts demonstrating his entitlement to relief. A plaintiff must give the district court some clue as to what his case is about. The plaintiffs here failed to meet their burden.

The plaintiffs also argue that the district court erred in declining to allow amendment of the complaint after it became apparent that a claim for breach of contract arguably existed. The district court's refusal to permit amendment of the complaint may be set aside on appeal only for an abuse of discretion. Zenith Radio Corp. v. Hazeltine, 401 U.S. 321, 330, 91 S.Ct. 795, 802, 28 L.Ed.2d 77 (1971). The exercise of that discretion is guided by Fed.R.Civ.P. 15(a), which provides that leave to amend the pleadings "shall be freely given when justice so requires" and by the Supreme Court's short discussion of Rule 15(a) in Foman v. Davis.

If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits. In the absence of any apparent or declared reason-such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc.-the leave sought should, as the rules require, be "freely given."

371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962).

The district court did not abuse its discretion in refusing to allow the plaintiffs to amend their complaint. The plaintiffs filed the motion six weeks before trial, see Lyons v. Board of Education of Charleston Reorganization School District No. 1, 523 F.2d 340, 348 (8th Cir. 1975), two years after commencing the action, see Rogers v. Valentine, 426 F.2d 1361, 1362 (2d Cir. 1970) (per curiam ), and several months after the parties had completed discovery. Since the motion injected an entirely new theory of liability into the lawsuit, it would have required reopening discovery and further delayed the trial. Amending the complaint at this late stage clearly would have prejudiced the defendant, who, having successfully defended against the initial allegations, may have been forced to duplicate its efforts if discovery were reopened. Troxel Mfg. Co. v. Schwinn Bicycle Co., 489 F.2d 968, 970-71 (6th Cir. 1973), cert. denied, 416 U.S. 939, 94 S.Ct. 1942, 40 L.Ed.2d 290 (1974). The plaintiffs, moreover, offered no explanation for their delay in seeking to amend the complaint. See Douglass v. First National Realty Corp., 437 F.2d 666, 668 n.1 (D.C.Cir.1970) (per curiam ). The theory of liability was not novel and did not depend on facts discovered late in the discovery process. Even though a request to amend the complaint should be freely granted, the district court did not abuse its discretion by denying plaintiffs' motion here.

II

The plaintiffs next argue that the district court erred in granting the defendant's motion for summary judgment on count eleven, which alleged that the franchisor-franchisee relationship imposes a fiduciary obligation on White Hen to account to the plaintiffs for all sums which it had received from them under the agreement (including especially advertising funds, funds collected for insurance, and the franchise fee). In their Reply Brief, plaintiffs...