Nat'l Franchisee Ass'n v. Burger King Corp..

• Decision Date: 20 May 2010
• Docket Number: Case No. 09-23435-CIV.
• Citation: 715 F.Supp.2d 1232
• Parties: NATIONAL FRANCHISEE ASSOCIATION, Plaintiff, v. BURGER KING CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of Florida

715 F.Supp.2d 1232

NATIONAL FRANCHISEE ASSOCIATION, Plaintiff,

v.BURGER KING CORPORATION, Defendant.

Case No. 09-23435-CIV.

United States District Court,S.D. Florida.

May 20, 2010.

COPYRIGHT MATERIAL OMITTED.

Alice Evelyn Meyer, Jeffrey Bruce Crockett, Gabriel Groisman, Coffey Burlington Wright Crockett et al, Miami, FL, Edward J. McIntyre, Norman L. Smith, Paul A. Reynolds, Tanya M. Schierling, Solomon Ward Seidenwurm & Smith LLP, San Diego, CA, for Plaintiff.

Michael D. Joblove, Nina Greene, Francis Massabki, Genovese Joblove & Battista, Miami, FL, for Defendant.

ORDER GRANTING IN PART DEFENDANT'S MOTION TO DISMISS

K. MICHAEL MOORE, District Judge.

THIS CAUSE came before the Court upon Defendant's Motion to Dismiss (dkt. # 17). Plaintiff filed a Response (dkt. # 24) and Defendant filed a Reply (dkt. # 26).

UPON CONSIDERATION of the Motion, the Response, the Reply, the pertinent portions of the record, and being otherwise fully advised in the premises, the Court enters the following Order.

I. BACKGROUND

This case involves a class action concerning the obligations of corporate franchisees under their franchise agreements. Plaintiff National Franchisee Association (“NFA”) is organized and exists for the purpose of protecting and preserving the rights of its Burger King franchisee members (“Franchisees”) and serves as the official voice of the Franchisee community. ¹ Defendant Burger King Corporation (“BKC”) has been in the business of selling food products for decades. BKC grants franchisees permission to operate its restaurants. Each BKC franchisee restaurant is required to execute a Franchise Agreement (“Agreement”) which is materially identical among all BKC franchisees. All BKC franchisees may be members of the NFA and approximately 75% of them are currently NFA members. BKC franchisees may also be members of their respective geographical “regional associations” of franchisees and those regional associations are themselves members of the NFA.

Since at least the late 1960's, BKC had allowed Franchisees to set prices on the various products they sold. In 2002, however, BKC issued its “99 cent BK Value Menu Policy Statement” in which it asserted for the first time that it had the right, under the Agreements, to dictate the maximum price a Franchisee can charge for certain products sold in their restaurants. In the statement, BKC asserted that recent changes in the law allowed it to set maximum prices. BKC put its 2002 Value Menu proposal to a Franchisee-wide vote and it passed with agreement of two-thirds of the Franchisees. In 2005, BKC sought to introduce a new $1.00 Value Menu and sent all Franchisees a “Show of Support Voting Form” (“2005 SOS”). In connection with the 2005 SOS, BKC issued a statement that “[i]f this Show of Support receives 67.7% [sic] yes votes-the six national Value Menu items will be required items at $1.00.” Compl. ¶ 28. The 2005 SOS vote passed and BKC instituted its new $1.00 Value Menu.

In early 2008, BKC announced its intention to place its double cheeseburger product (“DCB”) on the $1.00 Value Menu. The NFA and the Franchisees objected to both BKC's contention that it had the unilateral right, under the Agreements, to add items to the Value Menu and also to the specific proposal to add the DCB to the Value Menu. Due to the Franchisees' objections, BKC abandoned the idea. In 2009, however, BKC again tried to place the DCB on the $1.00 Value Menu. On two occasions, BKC submitted the proposal to a vote by the Franchisees, who twice rejected the proposal. Part of the Franchisees' reason for rejecting the proposal is their claim that it costs the Franchisees more than $1.00 to produce the DCB-something that is not true of any other item previously placed on the Value Menu. Nonetheless, BKC announced that it was requiring all BKC franchisees, starting on October 19, 2009, to offer the DCB on the Value Menu for $1.00. This was the first time that BKC imposed a maximum price on its franchisees without their majority consent.

The NFA filed its Complaint (dkt. # 1) on November 10, 2009, seeking a declaratory judgment that BKC does not have the authority under the Agreement to impose maximum prices, including the $1.00 DCB. On December 11, 2009, BKC filed the instant Motion to Dismiss (dkt. # 17) arguing that: (1) the Eleventh Circuit has already determined that Section 5 of the Agreement gives BKC the authority to impose maximum prices on products sold by the Franchisees; (2) the NFA's claim is barred by the statute of limitations; and (3) the NFA does not have standing to assert its claims on behalf of the Franchisees. On May 6, 2010, this Court held a hearing on the issue of associational standing. Specifically, the Parties addressed the NFA's standing to bring this action in light of: (1) the NFA's argument that the Agreement is ambiguous and its reliance on the intent of the Parties to determine the meaning of Section 5 of the Agreement; and (2) the NFA's argument that BKC violated its duty of good faith by setting the maximum price of the DCB at $1.00.

II. STANDARD OF REVIEW A Motion to Dismiss Pursuant to Rule 12(b)(1) for Lack of Subject Matter Jurisdiction

As the Eleventh Circuit explained in Morrison v. Amway Corp.:

Attacks on subject matter jurisdiction under Rule 12(b)(1) come in two forms, ‘facial’ and ‘factual’ attacks. Facial attacks challenge subject matter jurisdiction based on the allegations in the complaint, and the district court takes the allegations as true in deciding whether to grant the motion. Factual attacks challenge subject matter jurisdiction in fact, irrespective of the pleadings. In resolving a factual attack, the district court may consider extrinsic evidence such as testimony and affidavits.

323 F.3d 920, 925 n. 5 (11th Cir.2003). Here, BKC's Motion to Dismiss is a facial attack because it is based solely upon the NFA's Complaint and the documents referenced therein. Therefore, in determining whether the NFA has sufficiently alleged a basis of subject matter jurisdiction, this Court will take the allegations in the Complaint as true. See also Lawrence v. Dunbar, 919 F.2d 1525, 1529 (11th Cir.1990).

B. Motion to Dismiss Pursuant to Rule 12(b)(6) for Failure to State a Claim

A motion to dismiss for failure to state a claim merely tests the sufficiency of the complaint; it does not decide the merits of the case. Milburn v. United States, 734 F.2d 762, 765 (11th Cir.1984). On a motion to dismiss, the Court must accept the factual allegations as true and construe the complaint in the light most favorable to the plaintiff. SEC v. ESM Group, Inc., 835 F.2d 270, 272 (11th Cir.1988). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face.’ ” Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-57, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). A complaint must contain enough facts to indicate the presence of the required elements. Watts v. Fla. Int'l Univ., 495 F.3d 1289, 1302 (11th Cir.2007). “[C]onclusory allegations, unwarranted deductions of fact or legal conclusions masquerading as facts will not prevent dismissal.”

Oxford Asset Mgmt., Ltd. v. Jaharis, 297 F.3d 1182, 1188 (11th Cir.2002). However, a well-pleaded complaint will survive a motion to dismiss “ ‘even if it appears that a recovery is very remote and unlikely.’ ” Twombly, 550 U.S. at 556, 127 S.Ct. 1955 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)).

III. ANALYSIS

BKC raises three arguments in its Motion to Dismiss: (1) the NFA's claim is barred by the doctrine of stare decisis because the Eleventh Circuit in Burger King Corp. v. E-Z Eating, 41 Corp., 572 F.3d 1306 (11th Cir.2009), has already determined that Section 5 of the Agreement gives BKC the authority to impose maximum prices in its Value Menu; (2) the NFA's claim is barred by the statute of limitations because the alleged breach occurred, if at all, in 2002; and (3) the NFA lacks associational standing because it failed to identify a member that would have standing and its claim requires the participation of individual Franchisees. Because BKC's standing argument contests this Court's subject matter jurisdiction, this Court must address whether the NFA has standing to bring this action before reaching the merits.

A. Standing

Motions challenging standing attack the Court's subject matter jurisdiction and are therefore considered pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure. See Doe v. Pryor, 344 F.3d 1282, 1284 (11th Cir.2003). If a party lacks standing to bring a matter before the court, the court lacks jurisdiction to decide the merits of the underlying case. To determine whether a party has standing, a Court must decide “whether the litigant is entitled to have the court decide the merits of the dispute or of particular issues. This inquiry involves both constitutional limitations on federal-court jurisdiction and prudential limits on its exercise.” See Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975). The threshold question for these constitutional limitations is “whether the plaintiff has made out a ‘case or controversy’ between himself and the defendant within the meaning of Art. III.” Id. at 498-99, 95 S.Ct. 2197. A plaintiff invoking federal jurisdiction must allege “a personal stake in the outcome of the controversy.” Id. (citing Baker v. Carr, 369 U.S. 186, 204, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962)). Pursuant to Article III of the U.S. Constitution, a court's judicial power exists “only to redress or otherwise to protect against injury to the complaining party, even though the court's judgment may benefit others collaterally.” Id. at 499, 95 S.Ct. 2197 (citations omitted). Apart from this minimum constitutional mandate, “a plaintiff generally...