Ramada Franchise Systems, Inc. v. Tresprop, Ltd.

188 F.R.D. 610, 1999 U.S. Dist. LEXIS 14807, 1999 WL 760279
CourtDistrict Court, D. Kansas
DecidedAugust 26, 1999
DocketNo. Civ.A. 98-2511-KHV
StatusPublished
Cited by4 cases

This text of 188 F.R.D. 610 (Ramada Franchise Systems, Inc. v. Tresprop, Ltd.) is published on Counsel Stack Legal Research, covering District Court, D. Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ramada Franchise Systems, Inc. v. Tresprop, Ltd., 188 F.R.D. 610, 1999 U.S. Dist. LEXIS 14807, 1999 WL 760279 (D. Kan. 1999).

Opinion

MEMORANDUM AND ORDER

VRATIL, District Judge.

Ramada Franchise Systems, Inc., brings this action against Tresprop, Ltd. and Donald P. Boos, claiming trademark infringement and breach of a license agreement. On February 9,1999, defendants filed a counterclaim which alleged that plaintiff fraudulently induced defendants to enter into the franchise license agreement. See Answer And Counterclaim (Doc. # 10). This matter comes before the Court on plaintiffs Motion To Dismiss Counterclaim (Doc. #21) filed April 1, 1999. Also before the Court is defendants’ Motion For Leave To File An Amended Counterclaim (Doc. # 23) filed April 27,1999.

Plaintiff seeks dismissal under Fed. R.Civ.P. 12(b)(6), on the ground that defendants fail to state a claim upon which relief may be granted. In the alternative, plaintiff seeks dismissal under Fed.R.Civ.P. 9(b), on the ground that defendants fail to plead fraud with sufficient particularity. Defendants seek leave to file an amended counterclaim which attempts to address plaintiffs complaints with regard to specificity. For reasons stated more fully below, both motions are sustained.

[612]*612. Motion to Dismiss Standards

In determining whether a counterclaim should be dismissed, the Court applies the same standards that are applied when considering a motion to dismiss a complaint for failure to state a claim on which relief may be granted. See Federal Deposit Ins. Corp. v. Renda, 692 F.Supp. 128, 133 (D.Kan.1988); Fed.R.Civ.P. 12(b)(6). All relevant statements of fact contained in the counterclaim must be accepted as true, and the benefit of reasonable inferences given to the complainant. See Zinermon v. Burch, 494 U.S. 113, 118, 110 S.Ct. 975, 108 L.Ed.2d 100 (1990) (court must assume as true all well pleaded facts of complaint and view them in light most favorable to plaintiff). The Court must make all reasonable inferences in favor of the complainant, and construe the pleadings liberally. See Fed.R.Civ.P. 8(a); Lafoy v. HMO Colo., 988 F.2d 97, 98 (10th Cir.1993). The issue is not whether the complainant will prevail, but whether the complainant is entitled to offer evidence to support its claims.

The Court may not dismiss a cause of action for failure to state a claim unless it appears beyond a doubt that the complainant can prove no set of facts in support of its theories of recovery that would entitle it to relief. See Jacobs, Visconsi & Jacobs, Co. v. City of Lawrence, 927 F.2d 1111, 1115 (10th Cir.1991). Although the complainant need not precisely state each element of its claims, the complainant must plead minimal factual allegations on those material elements that must be proved. See Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir.1991).

Rule 9(b) of the Federal Rules of Civil Procedure requires that “[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” The purpose of Rule 9(b) is to enable a defending party to prepare an effective response to charges of fraud and to protect the defending party from unfounded charges of wrongdoing which might injure its reputation and goodwill. See N.L. Indus., Inc. v. Gulf & Western Indus., Inc., 650 F.Supp. 1115, 1129-30 (D.Kan.1986). Rule 9(b) is to be read in harmony with the simplified notice pleading provisions of Rule 8. See Cayman Exploration Corp. v. United Gas Pipe Line, 873 F.2d 1357, 1362 (10th Cir.1989). Thus, to plead a fraud claim, the complainant must describe the circumstances of the fraud, i.e., the time, place, and content of the false representation; the identity of the person making the representation; and the harm caused by the complainant’s reliance on the false representation. See Smith v. MCI Telecomms. Corp., 678 F.Supp. 823, 825 (D.Kan.1987). Stated differently, Rule 9(b) requires the complainant to set forth the “who, what, where, and when” of the alleged fraud. Nal II. Ltd. v. Tonkin, 705 F.Supp. 522, 525-26 (D.Kan.1989).

Factual Background1

Ramada Franchise Systems, Inc. is a widely known national guest lodging facility services provider. Through its nationwide franchise system, Ramada markets, promotes and provides services to its franchisees. To identify the origin of their guest lodging services, franchisees are allowed to utilize the Ramada Marks and promote the Ramada brand name. On April 8, 1996, Ramada entered into a license agreement [the “Agreement”] with defendant Tresprop for the operation of a 139-room guest lodging facility in Topeka, Kansas.

Section 1 of the Agreement provides: “We have the exclusive right to license and franchise to you the distinctive ‘Ramada’ System for providing transient guest lodging services. We grant to you and you accept the License....” Section 15.3, entitled “[Proprietary Rights:] Other Locations and Systems,” further provides that

[Ramada Franchise Systems] and our affiliates each reserve the right to own, in whole or in part, and manage, operate, use, lease, finance, sublease, franchise, license (as licensor or licensee), provide services to ... (iii) a Chain Facility at or for any location other than the Location. There [613]*613are no territorial rights or agreements between the parties.

The Agreement defines “Location” as “the parcel of land located at 3802 S. Topeka Boulevard, Topeka, Kansas 66609.”

Ramada demanded liquidated damages from Tresprop under Section 12.1 of the Agreement. That section provides that “[i]f we terminate the License under Section 11.2 or you terminate this Agreement ... you will pay us within 30 days following the date of termination, as Liquidated Damages, an amount equal to the sum of accrued Royalties and RINA Services Assessment Fees during the immediately preceding 24 full calendar months____” Notwithstanding Ramada’s demand, Tresprop has failed to pay Ramada the liquidated damagés required in Section 12.1 of the Agreement.

Defendants entered into the Agreement “based upon plaintiffs representations that it would be the only Ramada Franchise operating in the Topeka market.” Answer And Counterclaim (Doc. # 10) filed February 9, 1999 at 6, H69. Plaintiff knew that this representation “was false or known not to be true.” Id. H70. “The representation was material to defendants’ decision to enter into the Ramada franchise system,” id. 1171, and defendants “justifiably relied upon the representation.” Id. H72. As a direct result of the misrepresentation, defendants sustained damage — including “money spent upon the property required of a Ramada franchisee, lost profits, increased operating overhead, and diminished property value.” Id. 1173.

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Bluebook (online)
188 F.R.D. 610, 1999 U.S. Dist. LEXIS 14807, 1999 WL 760279, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ramada-franchise-systems-inc-v-tresprop-ltd-ksd-1999.