Bell v. Bimbo Foods Bakeries Distribution, Inc.
Filing
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MEMORANDUM Opinion and Order Signed by the Honorable Edmond E. Chang on 7/2/2012:Mailed notice(slb, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
STEVEN BELL, individually and on
behalf of all similarly situated
individuals,
Plaintiff,
v.
BIMBO FOODS BAKERIES
DISTRIBUTION, INC.,
Defendant.
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Case No. 11 C 03343
Judge Edmond E. Chang
MEMORANDUM OPINION AND ORDER
Plaintiff Steven Bell has sued Bimbo Foods Bakeries Distribution, Inc.1 on behalf
of himself and a proposed class, alleging that Bimbo has illegally characterized
employees as independent contractors and thus has not paid them overtime wages in
violation of the Fair Labor Standards Act, 29 U.S.C. § 201, et seq., and Illinois state
law, 820 ILCS 115/9. R. 36 ¶ 1. Bell also alleged claims for rescission, unjust
enrichment, and breach of contract, as well as wrongful termination under the Illinois
Franchise Disclosure Act, 815 ILCS 705/19. Id.2 Bimbo moved to dismiss the claims
advancing theories under the Franchise Disclosure Act (Count 5), rescission (Count 3),
and unjust enrichment (Count 4). Fed. R. Civ. P. 12(b)(6). R. 37. The parties then
1
According to the related company’s website, the company’s name is pronounced
“Beembo.” See bimbobakeriesusa.com/our_brands/bimbo.html (last accessed July 2, 2012).
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This Court has subject matter jurisdiction under 28 U.S.C. § 1331 for the Fair Labor
Standards Act claim, and supplemental jurisdiction under 28 U.S.C. § 1367 for the Illinois
claims.
stipulated to dismissing with prejudice the rescission and unjust enrichment claims
(Counts 3 and 4). R. 73. That leaves the Franchise Disclosure Act (Count 5) claim for
a decision. For the reasons discussed below, the claim is dismissed.
I.
At this stage of the litigation, we accept Plaintiff’s allegations as true and draw
reasonable inferences in his favor. Steven Bell has worked as a distributor for Bimbo
and its predecessor since August 1993, selling and delivering Bimbo’s bakery products
to local retailers, stocking shelves, and removing stale products. R. 36 ¶ 6. Bimbo
classifies Bell and others like him as independent contractors, id. ¶ 8, and a
“distributor agreement” governs their relationship, id. ¶¶ 21, 23. To operate as a Bimbo
distributor, Bell and others purchased the right to serve specified retail outlets within
a designated territory. Id. ¶¶ 22, 24. The distributor agreement reserved for Bimbo the
right to distribute products to “non-Outlets” in that territory. Id. ¶ 25.
The contracts generally set forth standards the distributors must meet, “but do
not dictate specifically how these standards are to be achieved,” consistent with
Bimbo’s characterization of its distributors as independent contractors. Id. ¶ 28. But
Bell alleges that Bimbo instead really treats its distributors as employees and has
“retained or exercised the right to control the Distributors’ work in ways that go
beyond the express obligations and responsibilities” laid out in the distributor
agreements, listing a range of examples in support. Id. ¶ 30. Bell also takes issue with
Bimbo’s 2011 acquisition of Sara Lee Corporation’s North American bakery business.
Id. ¶ 41. Bell alleges that Sara Lee bakery products compete directly with Bimbo
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products in the specified sales area, and after the acquisition, Bimbo allegedly has been
marketing Sara Lee products within Bell’s sales area. Id.
II.
In reviewing a complaint’s sufficiency, Federal Rule of Civil Procedure 8(a)(2)
instructs that a complaint generally need only include “a short and plain statement of
the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). This
short and plain statement must “give the defendant fair notice of what the claim is and
the grounds upon which it rests.” Bell Atl. v. Twombly, 550 U.S. 544, 555 (2007)
(quotation and citation omitted).
“A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to state
a claim upon which relief may be granted.” Hallinan v. Fraternal Order of Police
Chicago Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). “[W]hen ruling on a defendant’s
motion to dismiss, a judge must accept as true all of the factual allegations contained
in the complaint.” Erickson v. Pardus, 551 U.S. 89, 94 (2007). “[A] complaint must
contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly,
550 U.S. at 570). These allegations “must be enough to raise a right to relief above the
speculative level.” Twombly, 550 U.S. at 555. And the allegations that are entitled to
the assumption of truth are those that are factual, rather than mere legal conclusions.
Iqbal, 556 U.S. at 678.
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III.
A.
Choice of Law
The natural first question is which state’s law applies to the dispute over the
distributor agreement. The distributor agreement itself specifies that New Jersey law
will control the “validity, interpretation and performance” of the contract. R. 38-1 ¶
15.5. Yet neither side has mentioned New Jersey law; both parties have cited Illinois
law and federal court cases applying Illinois law, and neither has asked the Court to
apply any law other than Illinois’s. In the absence of such a request, and because no
special circumstances compel otherwise, the Court will abide by the parties’ implicit
agreement to apply Illinois law in this case. See Faulkenberg v. CB Tax Franchise Sys.,
LP, 637 F.3d 801, 809 (7th Cir. 2011) (applying Illinois law despite a contract provision
specifying Texas law, when the parties briefed and cited Illinois law and did not
request that another state’s law should apply).
B.
Wrongful Termination (Count Five)
Bell alleges that by selling Sara Lee bakery products, specifically breads, Bimbo
has “essentially voided, or terminated” his and fellow class members’ distribution
agreements, “all of which are integrally premised on the assurance of an exclusive
Sales Area and the right to sell exclusively particular products to specified Outlets
within the designated Sales Area.” R. 36 ¶ 41. In response, Bimbo argues that Bell fails
to state a claim for wrongful termination under the Illinois Franchise Disclosure Act
because (1) the Act does not recognize a “constructive termination claim”; and (2) even
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if such a claim exists under the Act, Bell’s claim would fail because he has not
abandoned his franchise. R. 38 at 7-8.
The Illinois Franchise Disclosure Act prohibits a franchisor from terminating a
franchise before the expiration of the franchise term except for good cause. 815 ILCS
705/19. Illinois courts have not considered whether termination under the Act includes
only actual termination or also encompasses some form of “constructive termination.”3
Although Illinois courts have not explicitly addressed this question, one can draw
parallels from the Illinois courts’ recognition of constructive termination in the
employment discrimination context, under the Illinois Human Rights Act, 775 ILCS
5/1-101 et seq. See Stone v. Dep’t of Human Rights, 700 N.E.2d 1105, 1112 (Ill. App. Ct.
1998); Steele v. Ill. Human Rights Comm’n, 513 N.E.2d 1177, 1179-80 (Ill. App. Ct.
1987) (“Constructive discharge occurs when an employer deliberately makes an
employee’s working conditions so intolerable that the employee is forced to resign
involuntarily . . . .”). Although the Illinois Human Rights Act does not explicitly
prohibit constructive termination based on discrimination, 775 ILCS 5/2-102, Illinois
courts approved the cognizability of such claims from the general prohibitions on
discrimination. Steele, 513 N.E.2d at 1179. In order to amount to constructive
termination, an employer’s conduct must have resulted in “working conditions . . . so
3
Bimbo cites Healy v. Carlson Travel Network Assocs., 227 F. Supp.2d 1080, 1090 (D.
Minn. 2002), for the proposition that “the IFDA does not recognize de facto termination as a
cause of action.” R. 46 at 2 (italics in original). But because Healy is a district-court opinion,
it is not binding on this Court. Martin v. Snyder, 329 F.3d 919, 922 (7th Cir. 2003). The opinion
could, of course, have persuasive value, but Healy does not explain the basis for the conclusion
that the IFDA does not recognize de facto termination. 227 F. Supp.2d at 1090.
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difficult or unpleasant that a reasonable person in the employee’s shoes would have felt
compelled to resign.” Id. at 1180 (quotation and citation omitted). For example, a single
instance of demotion, unaccompanied by any other discriminatory acts, does not
comprise a constructive discharge where the employee retains the same salary and
benefits in spite of any perceived reduction in responsibility. Id. at 1181.
Courts elsewhere have also recognized constructive termination claims under
similar state franchise protection statutes. See, e.g., Girl Scouts of Manitou Council v.
Girl Scouts of USA, 646 F.3d 983, 989 (7th Cir. 2011) (Wisconsin law); Petereit v. S.B.
Thomas, Inc., 63 F.3d 1169, 1181-82 (2d Cir. 1995) (Connecticut law). The reason for
this, as in the employment context, is to avoid leaving “a big loophole” that would allow
franchisors to force franchisees out without officially terminating them, thus
circumventing the statute. Al’s Serv. Ctr. v. BP Prods. N. Am., Inc., 599 F.3d 720, 726
(7th Cir. 2010). In light of the analogy to the Illinois Human Rights Act, and the
supporting case law interpreting other states’ franchise laws, a constructive
termination should qualify as a “termination” under the Illinois Franchise Disclosure
Act. The Court need not, however, decide that question definitively, because there has
been no termination here, constructive or otherwise.
Assuming, for purposes of this case, that there can be a cause of action for
constructive discharge under the Franchise Disclosure Act, Bell has not alleged that
the distributorship has terminated. That is, there is no allegation that Bell’s actual
distributorship has come to an end. On the contrary, Bell continues to operate the
business under his Distributor Agreement. R. 36 ¶¶ 6, 23. Because Bell’s
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distributorship is ongoing, Bell cannot allege that Bimbo engaged in conduct that
rendered Bell’s situation so untenable that it effectively forced him out of his
distributorship.
In Mac’s Shell Service v. Shell Oil Products Co., the Supreme Court declined to
decide whether the Petroleum Marketing Practices Act—a federal statute that protects
gas station franchisees—created a cause of action for constructive termination. 130 S.
Ct. 1251, 1257 (2010). But if it did create such a claim, the Court held, a necessary
element of the claim would be that the franchisor’s conduct forced an end to the
franchisee’s use of the franchisor’s trademark, purchase of the franchisor’s fuel, or
occupation of the franchisor’s service station. Id. The statute, the Court noted, does not
prohibit “[c]onduct that does not force an end to the franchise.” Id. at 1257-58.
Similarly, in Girl Scouts of Manitou Council, the Seventh Circuit found constructive
termination when the defendant, a national scouting organization, proposed
transferring a local scouting council’s entire territory to other councils, effectively
eliminating the local council. 646 F.3d at 990; see also Remus v. Amoco Oil Co., 794
F.2d 1238, 1240 (7th Cir. 1986) (interpreting Wisconsin franchise law and describing
constructive termination as the franchisor “driv[ing] the dealer out of business” and
“the franchisor’s making the dealer’s competitive circumstances so desperate that the
dealer ‘voluntarily’ gives up the franchise”). Bell does not allege facts that show Bimbo
is driving him out of business. He argues that Bimbo’s decision to market Sara Lee
bakery goods, especially sliced bread, within his sales area “seriously and materially
and directly undermines” his franchise agreement and “abrogates the sine qua non of
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the ‘Distributor Agreement[],’” thus “effectively terminat[ing] the franchise agreement”
without good cause. R. 36 ¶¶ 75, 76. But the complaint contains no allegation that
Bimbo has driven Bell out of business or made his competitive circumstances so
desperate that he feels he must quit; to the contrary, the franchise remains intact.
Bell tries to overcome this hurdle by arguing that Bimbo “terminated an
essential element of [his] franchise by eliminating the exclusivity of [his] sales
territory.” R. 44 at 11. But case law analogous to a potential claim under Illinois’s
Franchise Disclosure Act does not support Bell’s “essential element” argument: as the
Supreme Court noted in Mac’s Shell, “a plaintiff must actually sever a particular legal
relationship in order to maintain a claim for constructive termination.” 130 S. Ct. at
1258. To recover for constructive discharge in the employment context, an employee
generally is required to quit his or her job; to claim constructive eviction in the
landlord-tenant context, the “general rule . . . is that a tenant must actually move out.”
Id. The Supreme Court saw no reason why a different understanding should apply to
constructive termination claims under the federal petroleum marketing statute,
particularly because franchisees could pursue state-law breach of contract remedies
for franchisor actions that did not cause an end to the franchise. Id. at 1259. Indeed,
Bell also alleges breach of contract in his complaint. R. 36 at 21 (Count Six). What Bell
has not alleged is that his distributorship or franchise has actually terminated, and
that is what would be required under the Illinois Franchise Disclosure Act.
Because Bimbo has not actually terminated Bell’s franchise and because Bell
has not alleged facts that support a constructive termination claim, he has failed to
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state a claim for wrongful termination under the Illinois Franchise Disclosure Act.
Count Five is dismissed with prejudice.
IV.
For the reasons stated above, Bimbo’s motion to dismiss [R. 37] is granted.
ENTERED:
___________________________
Honorable Edmond E. Chang
United States District Judge
DATE: July 2, 2012
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