Dudley Enterprises, Inc. v. Palmer Corporation

822 F. Supp. 496, 26 Fed. R. Serv. 3d 482, 1993 U.S. Dist. LEXIS 1169, 1993 WL 182409
CourtDistrict Court, N.D. Illinois
DecidedFebruary 3, 1993
Docket92 C 2300
StatusPublished
Cited by13 cases

This text of 822 F. Supp. 496 (Dudley Enterprises, Inc. v. Palmer Corporation) 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
Dudley Enterprises, Inc. v. Palmer Corporation, 822 F. Supp. 496, 26 Fed. R. Serv. 3d 482, 1993 U.S. Dist. LEXIS 1169, 1993 WL 182409 (N.D. Ill. 1993).

Opinion

MEMORANDUM AND ORDER

MORAN, Chief Judge.

Plaintiffs Dudley Enterprises, Inc. (Dudley) and Elizabeth Simon (Simon) bring this action under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961, et seq., against defendants Palmer Corporation (Palmer), Palmer Video Corporation (PVC), Peter Balner (Balner), Peter Margaritondo, aka Peter Margo, (Margo), Charles Arrington (Arrington), Joseph Berger (Berger), Calvin Winick (Winick), Harvey Dossick (Dossick), Susan Baar (Baar), Dominick Romano (Romano), Pater Grassi (Grassi), Kathy Passucci (Passucei), Gert Elster (Elster), and Stan Simms (Simms), alleging that defendants sold plaintiffs a franchise program as part of a scheme to defraud (counts I and II). In addition, plaintiffs allege that defendants committed the following state law violations: (1) violation of the Illinois Franchise Disclosure Act of 1987 (the Act) (count III); (2) Intentional Infliction of Emotional Distress (count IV); (3) Malicious Interference with Business or Occupation (count V); (4) Tortious Breach of Duty of Good Faith and Fair Dealing Arising Out of Contract (Count VI); and (5) Fraud (count VII). Before us now is defendants’ motion to dismiss plaintiffs’ complaint. Federal subject matter jurisdiction is based on 28 U.S.C. § 1331 (federal question) and 28 U.S.C. § 1332, the parties being of diverse citizenship and the controversy exceeding $50,000. For the reasons stated below, defendants’ motion is granted in part and denied in part.

FACTS

PVC, a New Jersey Corporation, is a franchisor that grants franchisees the right to operate stores under the name “Palmer Video Stores.” The video stores sell and rent video cassettes and other products associated with the video trade. Some or all of the shares of stock of PVC are owned by Palmer Corporation. The other named defendants are current or former employees of PVC and/or Palmer, who were in some way involved in the PVC franchise operation.

Since 1982, PVC has offered video store franchises to third parties. Although the *499 early franchise offerings were made in New Jersey, in or around 1987 PVC expanded its offerings to other states, including Illinois. In 1988, plaintiffs decided to open a retail video store and they contacted PVC in order to obtain additional information about its franchise opportunities. Over approximately a four-month period plaintiffs explored the possibility of opening a PVC franchise store. During those months, plaintiffs allege, they had several telephone conversations with PVC employees and received several documents from PVC explaining and promoting the' benefits associated with being a PVC franchisee. According to plaintiffs, PVC provided them with a projected income statement estimating the financial operations of a typical Palmer Video franchise in its first year of operations, and assisted plaintiffs in finding potential site locations for their store.

On December 20,1988, Simon entered into an agreement whereby she (and subsequently Dudley) became a franchisee of PVC. Simon opened her video store in Niles, Illinois. Dudley, an Illinois corporation, apparently was formed by Simon for the purpose of operating the Palmer Video franchise. 1 Simon is the principal stockholder and the chief executive officer of Dudley.

In their complaint plaintiffs go into great detail about their contacts with PVC and/or its employees, subsequent to their entering into the franchise agreement (plf. cplt. ¶¶ 38-61). Although we consider each of these allegations when reviewing defendants’ motion, we decline to recount each element of the complaint in this opinion. To summarize, plaintiffs refer to numerous conversations with and/or letters sent by individual defendants that, according to the plaintiffs, constituted misrepresentations regarding PVC’s expertise in operating a national franchise, and programs and other benefits available to a PVC franchisee.

According to defendants, plaintiffs refused to pay the royalties and/or fees that were due the franchisor in accordance with the franchise agreement. PVC terminated plaintiffs’ franchise in or around August 1991; nevertheless, plaintiffs continue to operate the video store.

DISCUSSION

Defendants move this court for dismissal of plaintiffs’ complaint in its entirety and for sanctions under Rule 11 of the Federal Rules of Civil Procedure. Defendants maintain that plaintiffs’ RICO and fraud claims (counts I, II and VII) should be dismissed because (1) plaintiffs have failed to plead those fraud allegations with particularity, as required by Fed.R.Civ.P. 9(b); (2) plaintiffs have named PVC and Palmer as both the “enterprise” and the “person” in violation of § 1962(c) and, therefore, no cause of action can exist as to those corporate defendants; (3) plaintiffs’ allegations as to the predicate RICO offenses are insufficient under § 1962(d); and (4) plaintiffs have failed to allege a “pattern” of racketeering activity. Defendants contend that count III, violation of the Illinois Franchise Disclosure Act, should be dismissed because it is time-barred. As to counts IV and V, defendants maintain that plaintiffs failed to state claims upon which relief can be granted because they did not plead the necessary elements to properly set out the respective causes of action, and further claim that count IV is time-barred. Defendants maintain that because plaintiffs have not sued for breach of contract they cannot state a claim for tortious breach of duty of good faith and fair dealing arising out of contract and, therefore, argue that count VI should be dismissed. Finally, defendants contend that plaintiffs’ complaint should be dismissed since it violates Rule 8 of the Federal Rules of Civil Procedure because it does not contain “a short and plain statement of the claim.”

I. Rule 8 and Rule 9(b)

Rule 8 requires a complaint to contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Plaintiffs’ complaint is by no means short; it contains 111 allegations, with extensive sub- *500 paragraphs, 2 that are spread over 46 pages. More importantly, the complaint is confusing, disjointed, and repetitive. We have read the complaint numerous times and, while we are able to decipher the gist of plaintiffs’ complaint, we have difficulty sorting out the necessary elements and the factual allegations upon which the claims are based.

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822 F. Supp. 496, 26 Fed. R. Serv. 3d 482, 1993 U.S. Dist. LEXIS 1169, 1993 WL 182409, Counsel Stack Legal Research, https://law.counselstack.com/opinion/dudley-enterprises-inc-v-palmer-corporation-ilnd-1993.