Cohn v. Taco Bell Corp.

147 F.R.D. 154, 1993 U.S. Dist. LEXIS 1732, 1993 WL 46465
CourtDistrict Court, N.D. Illinois
DecidedFebruary 12, 1993
DocketNo. 92 C 5852
StatusPublished
Cited by2 cases

This text of 147 F.R.D. 154 (Cohn v. Taco Bell Corp.) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cohn v. Taco Bell Corp., 147 F.R.D. 154, 1993 U.S. Dist. LEXIS 1732, 1993 WL 46465 (N.D. Ill. 1993).

Opinion

MEMORANDUM OPINION AND ORDER

NORDBERG, District Judge.

Plaintiffs RLC Enterprises, Inc. and its president, Richard L. Cohn, have held a number of restaurant franchises of the defendant, Taco Bell Corp., since 1983. On June 6, 1989 the parties signed a letter of agreement spelling out the conditions under which plaintiffs would be granted two new franchises. Plaintiffs have alleged that defendant has breached implied covenants of good faith in both the letter agreement, and the parties’ franchise agreements first, by acting to see that the conditions of the letter agreement would not be met, and second, by planning to build a new franchise which would cannibalize the market of one of plaintiffs’ existing restaurants. Plaintiffs’ complaint alleges claims of breach of implied covenant of good faith, promissory estoppel and unfair competition.

The court referred this case to Magistrate Judge Bobriek to supervise discovery between the parties. On January 12, 1993, Judge Bobriek issued a memorandum opinion resolving three of the parties’ pending discovery motions. Judge Bobriek granted plaintiffs motion to quash subpoenas and to compel, and denied defendant’s motion to stay discovery pending resolution of its motion to dismiss. Defendant has objected to that portion of the magistrate judge's order granting plaintiffs motions. Under Fed.R.Civ.P. 72(a), the court will only set aside those portions of the magistrate judge’s order found to be clearly erroneous or contrary to law.

I. The Motion to Compel

Defendant first objects to the order granting plaintiffs motion to compel. Since [157]*157that portion of the magistrate judge’s order has already been complied with, defendant must perform some fancy footwork to explain why its objection is not moot. It offers two reasons: it was forced to comply with the tight schedule set by the magistrate judge, and the order provides a future definition of what constitutes relevant evidence in the case. Neither of these reasons is convincing. Defendant could have attempted to temporarily avoid compliance with the order by either objecting to the magistrate judge’s order denying its motion to stay discovery, or independently moving the court for a stay of the order of January 12. It did neither. Further, relevance for discovery purposes is much broader than relevance for evidentiary purposes, and does not bind defendant at all. Compare Fed.R.Civ.P. 26(b)(1) with Fed.R.Evid. 401. .

Be that as it may, the court does not find that this portion of the magistrate judge’s order was clearly erroneous or contrary to law. Defendant’s first objection to this portion of the order is that the magistrate judge erred in not narrowing the scope of discovery to matters after the date of the letter agreement, June 6, 1989. Defendant’s argument is based on a release of prior claims relating to franchise expansion contained in the agreement. First of all, the franchise agreements, which form the basis of plaintiffs claim that defendant is improperly encroaching on the market of its current franchises, contain no such release. Second, plaintiffs claims do not hinge on events occurring before the letter agreement. Event before the date of the letter agreement are discoverable because they may produce evidence leading to an inference of bad faith.

Defendant’s second objection in this regard is in three parts, attacking the relevance for discovery purposes, of plaintiffs document requests. First, defendant contends plaintiff is not entitled to discovery concerning whether defendant legitimately applied its existing requirements to deny plaintiffs operational approval for expansion. Defendant points out that Illinois law is that good cause is a defense to bad faith, Dayan v. McDonalds, 125 Ill.App.3d 972, 81 Ill.Dec. 156, 172, 466 N.E.2d 958, 974 (1 Dist.1984). Obviously though, if defendant did not legitimately give plaintiffs existing franchises poor performance ratings, good cause is not shown.1

Second, defendant argues that they need not treat all their franchisees the same, therefore discovery as to other franchisees is not relevant. Defendant cites Original Great American Chocolate Chip Cookie Co. v. River Valley Cookies, 970 F.2d 273, 279 (7th Cir.1992), for this proposition, but this case presents an entirely different context than the preset circumstances. In Great American, the franchisee committed material violations of its franchise agreement, and the franchisor sought termination of the agreement. The court held that the franchisor’s more lenient treatment of other franchisees who had committed similar breaches of their franchise agreements did not estop the franchisor from relying on its rights under the agreement. Id., at 278-79. Here, the franchisee seeks to use the franchisor’s treatment of other franchisee’s as evidence that the franchisor is in breach of an implied duty under the agreement. In any event, the significance of this discovery is not so much in its direct comparison of plaintiffs relationship with defendant with that of other franchisees as it is a comparison of all franchisee’s relationships with defendant over time. If plaintiffs’ relations changed as alleged after June 1989, but other franchisee’s relations did not, that is evidence of bad faith. Interestingly, if other franchisee’s relations changed the same way as well, that goes to proving plaintiffs' allegation that defendant embarked in a policy of thwarting franchisee expansion. Complaint, at para. 24.

Next, defendant claims that it is under no obligation to follow its own internal policies according to either the letter agreement or its franchise agreements, therefore discovery along those lines is uncalled for. Aside from the fact that the case law cited by defendant show agreement with the magistrate judge’s ruling that evidence of the par[158]*158ties’ reasonable expectations are relevant, Burger King Corp. v. Austin, 805 F.Supp. 1007, 1015, n. 12 (S.D.Fla.1992), both the franchise agreements and the letter agreement are replete with references to defendant’s policies and business judgments. See letter agreement at § 3; franchise agreement at §§ 3.2, 3.3, 5.1, 6.0, 6.3, 14.5, 14.6.

Finally, defendant argues that the magistrate judge’s order should be overturned because its motion to dismiss should be granted. At this time, the court makes no judgments about either the legal sufficiency of plaintiffs’ complaint, or defendant’s arguments for dismissal under rule 12(b)(6). However, the magistrate judge was absolutely correct in ignoring the motion to dismiss in his ruling on the motion to compel. The grounds for limiting the scope of discovery are listed in Rule 26(b)(1)—legal insufficiency of the complaint is not one of them. If defendant believes discovery should be forestalled by a pending dispositive motion, the appropriate course of action is to ask for a stay. Defendant has done so, the magistrate judge denied their request, and defendant has chosen not to object. Therefore, the merits of the motion to dismiss will not be considered now.

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Cite This Page — Counsel Stack

Bluebook (online)
147 F.R.D. 154, 1993 U.S. Dist. LEXIS 1732, 1993 WL 46465, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cohn-v-taco-bell-corp-ilnd-1993.