LG2, LLC v. American Dairy Queen Corporation

Background

LG2, LLC sued American Dairy Queen Corporation over a Dairy Queen franchise restaurant in Johnson County, Oklahoma. LG2 alleged claims for breach of contract and the implied covenant of good faith and fair dealing, and for violation of the Minnesota Franchise Act. The franchise rights had been assigned several times, most recently in 2019 from C & K Cannon Enterprises, LLC to LG2.

American Dairy Queen had previously moved to transfer the case or dismiss the Minnesota Franchise Act claim under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not plausibly state a claim for relief. On January 12, 2023, Judge Wilhelmina M. Wright dismissed that claim. She ruled that American Dairy Queen’s consent to the assignment of the franchise did not constitute a “sale or offer to sell” under the Minnesota Franchise Act. She also declined to consider portions of American Dairy Queen’s franchise manual because LG2 had not included the manual’s contents in its complaint.

LG2 then moved for leave to file a first amended complaint. It sought to add more direct citations to the franchise manual, arguing that this would address a pleading deficiency and revive its Minnesota Franchise Act claim. American Dairy Queen argued that the motion was actually a motion for reconsideration of Judge Wright’s order and that the proposed amendment would be futile.

Analysis

The court held that the substance of a motion, rather than its title, determines how it should be treated. Because LG2’s proposed amendment relied on material already presented to Judge Wright and did not identify new facts, a change in Minnesota franchise law, or another changed circumstance, the court determined that the motion was substantively a motion for reconsideration.

Under District of Minnesota Local Rule 7.1(j), a party must obtain advance permission from the court that issued the decision before filing a motion for reconsideration. LG2 had not requested or received that permission. The court therefore denied the motion as an improperly filed motion for reconsideration.

The court also ruled that the proposed amendments would be futile. An amendment is futile if the amended complaint could not survive a Rule 12(b)(6) motion. The court relied on Judge Wright’s conclusion that a franchisor’s consent to an assignment is not a sale or offer to sell under the Minnesota Franchise Act. It further stated that the proposed amendments did not allege that LG2, C & K Cannon, or their agents were in Minnesota when an offer to purchase or sell the Oklahoma franchise was made. Additional language from the manual could not change the role American Dairy Queen played in the transfer.

Disposition

The court ordered that LG2’s Motion for Leave to File First Amended Complaint was DENIED. The opinion does not state a separate disposition for LG2’s contract claim.