Good Times Restaurants, LLC v. Shindig Hospitality Group, LLC

Background

Good Times Restaurants, LLC, and third-party defendants moved to dismiss some counterclaims and third-party claims brought by Shindig Hospitality Group, LLC. They also moved to strike Shindig’s request for attorneys’ fees under California’s Unfair Competition Law.

Motion to Dismiss

The court applied the pleading-stage standard: it treated well-pleaded factual allegations as true, viewed them favorably to Shindig, and asked whether they plausibly stated claims for relief. The court also considered written agreements attached to the complaint as part of the pleading.

Franchise-law claims

Good Times and Vikram Bhambri moved to dismiss Shindig’s claim under California’s Franchise Investment Law. The court held that the agreement plausibly established a franchise because it appeared to satisfy the statute’s four requirements: association with Good Times’s “Rooh” trade name, the right to operate a Rooh-branded restaurant, a required $75,000 licensing fee, and a marketing plan or system.

The court rejected Good Times’s arguments that the fee was only for intellectual-property rights, that Shindig could have opened a different restaurant without the agreement, that Shindig might not have paid the fee, that the agreement did not require use of the proposed marketing plan, and that the agreement’s title—“Consulting and License Agreement”—prevented it from being treated as a franchise. The court concluded that the CFIL claim was plausible and denied the motion to dismiss that claim.

Shindig also brought claims under California’s Franchise Relations Act, Illinois’s Franchise Disclosure Act, and California’s Unfair Competition Law, based in part on alleged violations of the Federal Trade Commission’s Franchise Rule. Good Times moved to dismiss these claims but did not identify a reason they should be treated differently from the CFIL claim. The court therefore denied the motion to dismiss these franchise-related claims as well.

Fraud claim

Shindig alleged that Good Times, through Vikram Bhambri, represented that Good Times had significant restaurant-industry experience and would provide instruction, but lacked the claimed experience and did not provide promised consultation or guidance. Good Times argued that an integration clause in the agreement made reliance on earlier statements unreasonable. The court held that the clause did not resolve the issue at the pleading stage because a contract induced by fraud may be voidable, and whether Shindig reasonably relied on the statements was a factual question. The court denied the motion to dismiss the fraud claim.

Breach of fiduciary duty claim

Shindig alleged that four fiduciary defendants were members of both Good Times and Shindig and agreed to insert disputed contract terms favoring Good Times. Applying Illinois’s Limited Liability Company Act to Shindig, the court held that these allegations plausibly stated a breach of the duty of loyalty. The court also held that, even if the litigation privilege protected one allegation concerning authorization of the lawsuit, that protection did not eliminate the other allegations. The court denied the motion to dismiss this claim.

Motion to Strike

Good Times and the third-party defendants moved under Federal Rule of Civil Procedure 12(f) to strike Shindig’s request for attorneys’ fees under California’s Unfair Competition Law. Rule 12(f) permits striking an insufficient defense or redundant, immaterial, impertinent, or scandalous material. The court held that an allegedly unsupported request for attorneys’ fees did not fit those categories and denied the motion to strike.

Disposition

The court denied both the motion to dismiss and the motion to strike. It ordered the movants to answer Shindig’s complaint by November 29, 2022.