Fialkoff et al v. VGM Group, Inc. et al

Filing 28

MEMORANDUM OPINION AND ORDER granting in part and denying in part #12 Motion to Dismiss for Failure to State a Claim (see text of Order). Signed by Judge CJ Williams on 10/11/2019. (skm)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
EASTERN DIVISION
JASON FIALKOFF; and JEFF KNIPE,
Plaintiffs,

No. 19-CV-2041 CJW

vs.
VGM GROUP, INC.; COMPASS
GROUP USA, INC.; and FOODBUY,
LLC,

MEMORANDUM OPINION
AND ORDER

Defendants.
_____________________

This matter is before the Court on defendants Compass Group USA, Inc.
(“Compass”) and Foodbuy LLC’s (“Foodbuy”) Motion to Dismiss.1

(Doc. 12).

Defendants argue this Court should dismiss counts three through eight of plaintiffs Jason
Fialkoff and Jeff Knipe’s complaint under Federal Rule of Civil Procedure 12(b)(6) for
failure to state a claim upon which relief can be granted. (Id.). Plaintiffs timely filed a
resistance to defendants’ motion. (Doc. 18). Defendants timely filed a reply brief in
response. (Doc. 23). For the following reasons, the motion is granted in part and
denied in part.
I.

BACKGROUND

Plaintiffs allege they were independent contractors employed to facilitate business
between VGM, a company that provided rebates and incentive programs to restaurant
chains, and the restaurant chains themselves. (Doc. 1, at 2). Plaintiffs were formerly

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Defendant VGM Group, Inc. (“VGM”) does not join in the Motion to Dismiss.

employed as independent contractors for JKI Client Rewards before it was acquired by
VGM and rebranded as VGM Client Rewards.

(Id., at 1-2).

At the time of the

acquisition, plaintiffs signed Independent Contractor Agreements with VGM which
required plaintiffs to solicit new customers to participate in VGM’s incentive programs,
maintain relationships with existing clients, meet with clients, and present new
opportunities to clients. (Id., at 3). Under the agreements, plaintiffs would be paid a
percentage of the rebates VGM received from clients. (Id.). Plaintiffs allege they
maintained the Independent Contractor Agreements with VGM from approximately
December 17, 2010, through January 1, 2019. (Id., at 4).
Plaintiffs further allege that VGM began receiving additional money for client
purchases sold under private labels. (Id., at 4). These additional payments, however,
were not paid to plaintiffs as they claim was required by their Independent Contractor
agreements. (Id., at 7). On January 1, 2019, Compass and its subsidiary Foodbuy
purchased VGM Client Rewards and all its related assets. (Id., at 4). Following this
acquisition, defendants offered plaintiffs an opportunity to continue their work under
Consulting Agreements.

(Id., at 10). Defendants also offered plaintiffs settlement

agreements to resolve the issue of rebates that had not been paid by VGM. (Id.).
Plaintiffs did not sign the Consulting Agreements or the settlement agreements. (Id., at
11).
Plaintiffs brought an eight-count complaint against VGM and defendants alleging:
1) breach of contract; 2) fraud; 3) violation of Florida Deceptive and Unfair Trade
Practices Act; 4) defamation; 5) tortious interference with business relationships; 6) a
request for injunctive relief; 7) breach of contract; and 8) breach of contract. (Doc. 1).
Plaintiffs brought counts one and two only against defendant VGM. (Id., at 15-16).
Counts three through six were brought against Compass and Foodbuy jointly. (Id., at
17-20). Counts seven and eight for breach of contract were brought against Compass

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and Foodbuy individually. (Id., at 20-22). In response, defendants brought this motion
to dismiss counts three through eight for failure to state a claim upon which relief can be
granted under Federal Rule of Civil Procedure 12(b)(6). (Doc. 12).
II.

APPLICABLE LAW

Federal Rule of Civil Procedure 8(a) provides that a complaint must contain “a
short and plain statement of the grounds for the court’s jurisdiction . . . a short and plain
statement of the claim showing that the pleader is entitled to relief . . . and a demand for
the relief sought.” Rule 12(b)(6) provides that a party may assert the defense of failure
to state a claim upon which relief can be granted by motion and that “[a] motion asserting
[this] defense[ ] must be made before pleading if a responsive pleading is allowed.”
“While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed
factual allegations, a plaintiff’s obligation to provide the grounds of his entitlement to
relief requires more than labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
555 (2007) (internal citations and quotation marks omitted). “Factual allegations must
be enough to raise a right to relief above the speculative level,” but “a well-pleaded
complaint may proceed even if it strikes a savvy judge that actual proof of those facts is
improbable, and that recovery is very remote and unlikely.” Id., at 555-56. Indeed, a
theory asserted need only be plausible, which requires “enough fact to raise a reasonable
expectation that discovery will reveal evidence of [the conduct alleged].” Id.
“[W]here the well-pleaded facts do not permit the court to infer more than the
mere possibility of misconduct, the complaint has alleged—but has not shown—that the
pleader is entitled to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (emphasis
added) (citation and internal quotation marks omitted). “When there are well-pleaded
factual allegations, a court should assume their veracity and then determine whether they
plausibly give rise to an entitlement to relief.” Id. When a pleading contains no more

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than conclusions, however, those conclusions are not entitled to the assumption of truth.
Id. “While legal conclusions can provide the framework of a complaint, they must be
supported by factual allegations.” Id. “[T]here is no justification for dismissing a
complaint for insufficiency of statement, except where it appears to a certainty that the
plaintiff would be entitled to no relief under any state of facts which could be proved in
support of the claim.” Leimer v. State Mut. Life Assur. Co. of Worcester, 108 F.2d 302,
306 (8th Cir. 1940).
III.

DISCUSSION

Defendant argues the Court should grant its motion to dismiss because “[p]laintiffs
fail to allege valid claims that are plausible on their face against [Compass and
Foodbuy].” (Doc. 13, at 2). Plaintiffs bring six counts against defendants in their
complaint: 1) violation of Florida Deceptive and Unfair Trade Practices Act; 2)
defamation; 3) tortious interference with a business relationship; 4) request for injunctive
relief; 5) breach of contract claim against Compass; and 6) breach of contract against
Foodbuy. For the following reasons, defendants’ Rule 12(b)(6) motion to dismiss count
three (Florida Deceptive and Unfair Trade Practices Act), and count six (injunctive relief)
is granted.

Defendants’ motion to dismiss count four (defamation), count five

(interference with a business relation), and counts seven and eight (breach of contract) is
denied.
Defendants itemize each of the six counts and detail why they allege each count to
be deficient. The Court is not prepared to determine which substantive body of law
applies to the claims raised, but defendants challenge the complaint primarily based on
Iowa law. (Doc. 13). Because Iowa law could be proven to govern the claims at issue,
the Court will apply Iowa law for the sole purpose of determining the sufficiency of the
complaint under Rule 12(b)(6).

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1.

Violation of Florida Deceptive and Unfair Trade Practices Act

The Court first considers the violation of Florida Deceptive and Unfair Trade
Practices Act claim (Count Three). The Court finds the complaint does not provide
sufficient factual information “to raise a reasonable expectation that discovery will reveal
evidence [of the conduct alleged].” Twombly, 550 U.S. at 555-56.
The Florida Deceptive and Unfair Trade Practices Act’s (“FDUTPA”) purpose is
“[t]o protect the consuming public and legitimate business enterprises from those who
engage in unfair methods of competition, or unconscionable, deceptive, or unfair acts or
practices in the conduct of any trade or commerce.” FLA. STAT. § 501.202(2). “To
state a claim under FDUTPA, a party must allege (1) a deceptive act or unfair practice;
(2) causation; and (3) actual damages.”

CEMEX Constr. Materials Fla., LLC v.

Armstrong World Indus., Inc., No. 3:16-cv-186-J-34JRK, 2018 WL 905752, at *14
(M.D. Fla. Feb. 15, 2018). “An unfair practice is one that offends established public
policy and one that is immoral, unethical, oppressive, unscrupulous or substantially
injurious to consumers, while a deceptive act occurs if there is a representation, omission,
or practice that is likely to mislead the consumer acting reasonably in the circumstances,
to the consumer’s detriment.”

Sandshaker Lounge & Package Store LLC v. RKR

Beverage Inc, No. 3:17-cv-00686-MCR-CJK, 2018 WL 7351689, at *6 (N.D. Fla. Sept.
27, 2018). An entity does not need “to be a consumer to have standing to bring a
FDUTPA claim” but a claimant does “have to prove that there was an injury or detriment
to consumers in order to satisfy all of the elements of a FDUTPA claim.” Caribbean
Cruise Line, Inc. v. Better Bus. Bureau of Palm Beach Cty., Inc., 169 So.3d 164, 170
(Fla. Dist. Ct. App. 2015) (emphasis in original).
Defendants contend that plaintiffs’ FDUTPA claim must fail because plaintiffs did
not explain how “the acts that they allege were ‘unfair’ or ‘deceptive’ caused injuries to
customers.” (Doc. 13, at 14). Specifically, defendants claim any alleged deceptive

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conduct was private and not customer facing, so customers could not have been misled
or deceived. (Id., at 14-15). Defendants also claim that allegedly deceptive advertising
related to increased rebates could not have injured customers because the customers were
actually benefitted by receiving greater rebates. (Id., at 15). In sum, defendants argue
customers have not been harmed and thus plaintiffs cannot state a FDUTPA claim. (Id.,
at 15-16).

Plaintiffs, however, allege consumers were harmed when defendants

concealed information about misappropriated rebate revenues. (Id., at 15). Specifically,
plaintiffs allege this false information “harmed consumers by depriving them of the ability
to make informed choices about where to do business and facts that would allow them to
pursue VGM for money they are owed.” (Id., at 16).
Although plaintiffs argue that consumers may have suffered harm, they do not
allege any facts supporting a plausible inference that any consumers have or are likely to
have suffered actual damages. It is conceivable a customer may have made a different
choice about whom they would like to conduct business. But plaintiffs’ allegations do
not suggest any consumers made a different choice or were actually harmed by their
decision to continue conducting business with defendants. Defendants claim consumers
actually benefitted from the alleged conduct. The Court does not need to determine
whether consumers benefitted from the alleged conduct because it is sufficient that
plaintiffs did not show consumers were harmed.
For the reasons discussed above, defendants’ motion to dismiss plaintiffs’
FDUTPA claim is granted.
2.

Defamation

The Court next turns to the defamation claim raised against defendants (Count
Four). The Court finds the complaint provides sufficient facts to “raise a right to relief
above the speculative level.” Twombly, 550 U.S. at 556.

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Iowa defamation law consists of “the twin torts of libel and slander” and involves
“the publication of statements that tend to injure a person’s reputation and good name.”
Theisen v. Covenant Med. Ctr., Inc., 636 N.W.2d 74, 83 (Iowa 2001) (internal citation
and quotation marks omitted). Defamation is a violation of an individual’s right “to enjoy
their reputation unimpaired by false and defamatory attacks.” Schlegel v. Ottumwa
Courier, 585 N.W.2d 217, 221 (Iowa 1998) (quoting 50 Am. Jur.2d Libel and Slader §
2, at 338-39 (1995)). To be successful on a defamation claim “a plaintiff must show the
defendant (1) published a statement that was (2) defamatory (3) of and concerning the
plaintiff.” Taggart v. Drake Univ., 549 N.W. 2d 796, 802 (Iowa 1996).
“Iowa courts recognize ‘two types of [defamation]: [defamation] per se and
[defamation] per quod.’” Accent Media, Inc. v. Young, 12-CV-07-LRR, 2013 WL
12140468, at *9 (N.D. Iowa Sept. 11, 2013) (alterations in original) (quoting Schlegel,
585 N.W.2d at 222).

Plaintiffs allege defendants made untrue written and verbal

statements of fact to their clients that constitutes defamation per se. (Doc. 1, at 18).
Plaintiffs refer specifically to email correspondence from defendants to plaintiffs’ clients
that stated “[t]hose who previously managed your account were highly commissioned
independent contractors. . . . Because no commissions will be paid to employees we
are now able to double your normal rebate checks” and “[w]e will also provide a
dedicated Non-Commissioned Account Manager, to manage your account.” (Doc. 1,
at 12) (emphasis in original). Plaintiffs also refer to phone calls made by defendants to
plaintiffs’ clients during which defendants communicated that rebates would increase
solely because independent contractors were no longer being used and that plaintiffs were
previously responsible for setting high rebates. (Id., at 13-14). Plaintiffs allege these
statements resulted in their clients signing with other partners. (Id., at 15). Alternatively,
if the statements are not defamation per se, plaintiffs allege defendants’ statements are
defamation per quod.

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“A statement is [defamation] per se if it has a natural tendency to provoke the
plaintiff to wrath or expose him to public hatred, contempt, or ridicule, or to deprive him
of the benefit of public confidence or social intercourse.” Johnson v. Nickerson, 542
N.W.2d 506, 510 (Iowa 1996). A plaintiff does not need to prove “the elements of
malice, falsity, or damages” if a statement is defamation per se. Huegerich v. IBP, Inc.,
547 N.W.2d 216, 221 (Iowa 1996). A plaintiff must, however, prove:
(1) the defendant made the statements; (2) the defendant communicated the
statements to someone other than the plaintiff; and (3) the statements would
reasonably be understood to be an expression which would attack a person’s
integrity or moral character, expose the person to public hatred, contempt
or ridicule, deprive the person of the benefits of public confidence and
social dealings or injure the plaintiff in the maintenance of his or her
business.
Accent Media, 2013 WL 12140468, at *9 (citing Iowa Civil Jury Instruction 2100).
“A statement is [defamation] per quod if it is necessary to refer to facts or
circumstances beyond the words actually used to establish the defamation.” Johnson,
542 N.W.2d at 510. To prove defamation per quod under Iowa law, a plaintiff must
show:
(1) the defendant made a written or oral statement concerning the plaintiff;
(2) the statement was false; (3) the defendant made the statement with
malice; (4) the defendant communicated the statement to someone other
than the plaintiff; (5) the statement tended to injure the reputation of the
plaintiff, expose the plaintiff to public hatred, contempt or ridicule or injure
the plaintiff in his or her efforts to maintain his or her business; (6) the
statement caused damage to the plaintiff; and (7) the amount of damage.
Accent Media, 2013 WL 12140468, at *10 (citing Iowa Civil Jury Instruction 2100).
a. Application
In the Motion to Dismiss, defendants argue the emails and messages referring to
plaintiffs as highly commissioned contractors and statements about non-commissioned
managers taking over accounts is not defamation per se.

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Defendants argue these

statements do not “attack [plaintiffs’] integrity or moral character, expose [plaintiffs] to
public hatred, contempt or ridicule, deprive the [plaintiffs] of the benefits of public
confidence and social dealings or injure [plaintiffs] in the maintenance of [their]
business.” (Doc. 13, at 10). In short, the statements do not have a defamatory effect as
a matter of law. (Id.). Defendants also argue the statements are not defamation per quod
because the statements are neither false nor malicious. (Id., at 11-12). Because the
plaintiffs have not provided sufficient facts to prove the necessary elements of falsity and
malice, defendants argue the defamation claim should be dismissed.
Plaintiffs, however, argue the statements were defamation per se because the
statements “injure[d] the plaintiffs in the maintenance of [their] business.” (Doc.18, at
8). Plaintiffs argue the language used, combined with the bolded type in the emails, were
made to provoke a reaction, specifically that the recipient should be appalled by high
commission prices. (Id., at 10). Plaintiffs also allege defendants falsely placed blame
on plaintiffs for misappropriation of rebate revenue, which gives rise to a claim for
defamation per se. (Id., at 14-15). In the alternative, plaintiffs argue the statements are
defamation per quod. Plaintiffs argue the statements were false because there were
several reasons rebates would be increasing unrelated to the removal of independent
contractors. (Id., at 12-13). Plaintiffs also note the comments were malicious because
they were made in the context of trying to deter clients from doing business with plaintiffs
in a competitive industry. (Id., at 13). In short, the statements were false and their
context indicates malice.
The Court will first decide whether the alleged defamatory remarks constitute
defamation per se. The only element at issue is whether the statements “would reasonably
be understood to be an expression which would attack a person’s integrity or moral
character, expose the person to public hatred, contempt or ridicule, deprive the person
of the benefits of public confidence and social dealings or injure the plaintiff in the

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maintenance of his or her business.” Accent Media, 2013 WL 12140468, at *10. The
statements at issue cannot reasonably be understood to be an attack that would injure
plaintiffs in the maintenance of their business. Plaintiffs point to the fact that certain
words were in bold print to support their argument that the statements were intended to
provoke a reaction from the reader but provide no additional facts to support this
allegation. (Doc. 18, at 10). Without further support, the bold print appears to be no
more than an attempt by defendants to highlight to their customers why they will be
getting better deals. Moreover, the statements do not have a “natural tendency to provoke
the plaintiff to wrath” or deprive them of social intercourse. For these reasons, the Court
finds plaintiffs have not alleged facts showing the statements were defamation per se.
On the other hand, the Court finds plaintiffs have alleged facts that, if true, could
show the statements constitute defamation per quod.

The only three elements of

defamation per quod challenged by defendants are the elements of falsity, malice, and
damages. (Doc. 13, at 11-12). First, plaintiffs have alleged sufficient facts to support
their assertion that the statements were false. Specifically, plaintiffs have alleged facts
that, if true, would show that client rebates would increase for reasons other than that
they were using independent contractors. (Doc. 1, at 2-3). Plaintiffs have also pled
sufficient facts to show the statements made by defendants telling clients that plaintiffs
were responsible for high rebate payments was false. Specifically, plaintiffs were not
given any information about the program and would not be able to answer clients’
questions. (Id., at 6). Second, plaintiffs have pled facts sufficient to raise the possibility
of malice above a speculative level. Plaintiffs specifically pled that the bold print and
knowing use of false statements indicates malice. Finally, plaintiffs pled sufficient facts
to show they may have been damaged by defendants’ statements by alleging their
longstanding clients had begun questioning them and caused the clients not to sign with
plaintiffs’ new rebate processing partner. (Id., at 15).

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For the reasons discussed above, defendants’ motion to dismiss plaintiffs’ claim
of defamation is denied.
3.

Tortious Interference with Business Relationships

Considering next plaintiffs’ tortious interference with business relationships claim
(Count Five), the Court finds the complaint provides sufficient factual information “to
raise a reasonable expectation that discovery will reveal evidence” of tortious interference
with a business relationship. Twombly, 550 U.S. at 545.
Under Iowa law, a claim of tortious interference with existing contracts requires:
(1) the plaintiff had a valid contractual relationship with a third party; (2)
the defendant knew of that relationship; (3) the defendant intentionally
interfered with that relationship; (4) the defendant’s action caused the third
party to breach its contractual relationship with the plaintiff or disrupted the
contractual relationship between the third party and the plaintiff by making
performance more burdensome or expensive; and (5) the amount of
damages.
Gen. Elec. Capital Corp. v. Commercial Servs. Grp., Inc., 485 F. Supp. 2d 1015, 1025
(N.D. Iowa 2007). A claim of tortious interference with a prospective business advantage
or contractual relationship requires: “(1) the plaintiff had a prospective contractual or
business relationship; (2) the defendant knew of the prospective relationship; (3) the
defendant intentionally and improperly interfered with the relationship; (4) the
defendant’s interference caused the relationship to fail to materialize; and (5) the amount
of resulting damages.” Id.
Defendants argue that for a tortious interference with a business relationship claim
to succeed, the plaintiff must show the defendant had a purpose that its interference would
financially injure or destroy the plaintiff. (Doc. 13, at 16). Defendants further argue
that even if plaintiffs do not need to show such a purpose, plaintiffs still must allege: “(1)
[plaintiffs] had a contract with a third party; (2) [defendants] knew of the contract; (3)
[defendants] intentionally and improperly interfered with the contract; (4) the interference

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caused the third party not to perform, or made performance burdensome or expensive;
and (5) damages to the [p]laintiffs resulted.” (Doc. 23, at 4). In short, defendants claim
plaintiffs’ complaint is deficient because it does not allege facts supporting any of these
elements and it cannot identify a single client that terminated its relationship with plaintiff
because of defendants’ alleged actions. (Id.). Plaintiffs argue all the elements of tortious
interference with an existing business relationship have been met because plaintiffs had
established business relations with clients, defendants were aware of these relationships,
defendants intentionally interfered, and plaintiffs were damaged as a result.
The Court finds plaintiffs have sufficiently pled facts to establish that they did have
established business relationships and that defendants knew of the relationships. (Doc.
1, at 18). Plaintiffs have also alleged sufficient facts that, if true, would prove that
defendants intentionally and improperly interfered with those business relations.
Plaintiffs allege that defendants’ alleged defamatory and false statements intentionally and
improperly interfered with their business relations by misrepresenting plaintiffs’ and
defendants’ role in setting up DPL rebates so that clients would work with defendants.
(Doc. 1, at 15, ¶¶ 106-107). Likewise, plaintiffs’ alleged facts in the complaint that
defendants’ conduct “damaged relationships between [plaintiffs] and certain of their
clients, and/or have had the effect of causing certain clients to stop doing business with
[plaintiffs].” (Id., at ¶ 108). For purposes of a complaint, this is sufficient to state a
claim without the need to specifically identify the clients. Whether the claim can survive
a motion for summary judgment may be another matter altogether if, in fact, plaintiffs
are unable to identify any clients lost as a result of defendants’ conduct.
For these reasons, the motion to dismiss plaintiffs’ claim for tortious interference
with a business relationship is denied.

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4.

Injunctive Relief

It is well-settled that a “claim for injunctive relief is a request for a remedy, not a
separate cause of action.” Christensen v. PennyMac Loan Servs., LLC, 988 F. Supp. 2d
1036, 1046 (D. Minn. 2013). Standing alone, a claim for injunctive relief would not
survive a 12(b)(6) motion to dismiss. See Henke v. Arco Midcon, LLC, 750 F. Supp. 2d
1052, 1060 (E.D. Mo. 2010). Plaintiffs may, however, “seek injunctive relief as part of
their prayer for relief in another claim.” Id. For a claim for injunctive relief to survive
a Rule 12(b)(6) motion, a plaintiff must sufficiently plead the elements of both a
permanent injunction and the claim upon which the injunction rests. See Doe v. Christie,
33 F. Supp. 3d 518, 522 n.3 (D.N.J. 2014).
Plaintiffs’ request for injunctive relief is based on its claim for defamation. This
is evidenced by plaintiffs’ statements that the “defamation of [plaintiffs] have caused
clients and business relations of [plaintiffs] to question their ability to handle purchasing
accounts and have made it difficult for [plaintiffs] to enjoy their business relationships.”
(Doc. 1, at 19). Plaintiffs then immediately allege they “lack an adequate remedy at law
to prevent [defendants] from continuing to injure their business relations.” (Id.). The
Court has already determined the pleadings provide a sufficient basis for the defamation
per quod claim to survive the 12(b)(6) motion. Plaintiffs have thus established the
elements of the claim underlying their request for injunctive relief.
Although plaintiffs have sufficiently pled the underlying defamation claim,
plaintiffs must still plead the elements for injunctive relief. “The basis of injunctive relief
in the federal courts has always been irreparable harm and inadequacy of legal remedies.”
Grasso Enters., LLC v. Express Scripts, Inc., 809 F.3d 1033, 1039 (8th Cir. 2016).
Further, “a plaintiff seeking a permanent injunction must satisfy a four-factor test before
a court may grant such relief.” eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391
(2006). The four factors a plaintiff must show are:

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(1) that it has suffered an irreparable injury; (2) that remedies available at
law, such as monetary damages, are inadequate to compensate for that
injury; (3) that, considering the balance of hardships between the plaintiff
and defendant, a remedy of equity is warranted; and (4) the public interest
would not be disserved by a permanent injunction.
Id. Plaintiffs do not specifically request a permanent injunction, but their request that
defendants be prohibited from making statements is for an indefinite time, which implies
permanency.
A plaintiff seeking injunctive relief must first show that it has suffered an
irreparable injury. Id. Plaintiffs here alleged defendants’ wrongful acts “have caused
clients and business relations of [plaintiffs] to question their ability to handle their
purchasing accounts” and “result[ed] in those clients’ decisions not to sign with
[plaintiffs’] new rebate processing partner.” (Doc. 1, at 15, 19). Plaintiffs further allege
they “will suffer irreparable harm absent the entry of injunctive relief.” (Id., at 20).
Plaintiffs have sufficiently pled that they have had difficulty retaining clients because of
statements made by defendants, but plaintiffs fail to show how this constitutes irreparable
harm. Plaintiffs do not allege that they will not be able to regain the confidence of former
clients and develop lasting relationships with new clients. This could create additional
expenses and difficulties, but expenses and difficulties are not sufficient on their own to
constitute irreparable harm. See Gen. Motors Corp. v. Harry Brown’s, LLC, 563 F.3d
312, 319 (8th Cir. 2009). In sum, although plaintiffs have demonstrated harm, plaintiffs
have not plausibly alleged that this harm is irreparable.
Second, a plaintiff must show that remedies available at law are inadequate.
Plaintiffs allege that they “lack an adequate remedy at law to prevent [defendants] from
continuing to injure their business relations and correct the harm that has already been
done.” (Doc.1, at 19). Plaintiffs’ conclusory statement, however, is not supported by

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any facts. The Court cannot find any facts in the complaint that would allow it to infer
that a remedy at law, such as damages, would be inadequate.
Third, a plaintiff must show that, after considering the balance of hardships
between the plaintiffs and defendants, an injunctive remedy is necessary. Plaintiffs do
not specifically address this factor in their complaint. The Court, however, can infer
plaintiffs are alleging they will suffer a greater hardship than defendants. Plaintiffs allege
they have lost business and their request for relief only requires defendants to refrain
from making statements to plaintiffs’ clients and to correct prior misstatements. (Doc.
1, at 19-20). Even if the Court can infer this to mean plaintiffs are alleging a greater
hardship, the other factors for injunctive relief have not been met.
Fourth, a plaintiff must show the public interest will not be disserved by an
injunction. Plaintiffs address this factor for injunctive relief by stating “the injunctive
relief . . . will serve the public interest.” (Doc. 1, at 20). Plaintiffs’ conclusory statement
is not supported by any facts and the Court cannot find any facts in the complaint that
would allow it to infer that the public interest will not be disserved by an injunction.
For these reasons, the motion to dismiss plaintiffs’ request for injunctive relief is
granted.
5.

Breach of Contract Claims Against Compass and Foodbuy

Lastly, the Court must consider whether plaintiffs’ claim for breach of contract
against both Compass and Foodbuy survives defendants’ motion to dismiss. Defendants
contend that plaintiffs’ breach of contract claim fails for two reasons. (Doc. 13, at 17).
First, defendants argue “under the terms of the Contractor Agreements, [p]laintiffs are
not entitled to recover any fees because [p]laintiffs . . . terminated [the agreements].”
(Id.).

Second, defendants contend plaintiffs materially breached their Independent

Contractor Agreements by violating the non-compete provision and are not entitled to
recovery for breach of contract. (Id.). Defendants support their contention by citing

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Iowa case law that prohibits parties who have materially breached a contract to recover
under the contract. (Id., at 19) (citing Molo Oil Co. v. River City Ford Truck Sales, Inc.,
578 N.W.2d 222, 224 (Iowa 1998)).
Plaintiffs, however, contend that defendants repudiated the Independent Contactor
Agreements. Plaintiffs allege that defendants’ action were “sufficiently positive to be
reasonably interpreted to mean the party will not or cannot perform.” (Doc. 18, at 4
(quoting Pavone v. Kirke, 807 N.W.2d 828, 833 (Iowa 2011))). Plaintiffs claim that
because defendants repudiated the contracts, plaintiffs are entitled to recovery on the
contracts. Plaintiffs also contend that defendants materially breached the contracts when
defendants did not pay required fees to plaintiffs. Because defendants materially breached
the contracts, plaintiffs assert they were excused from their contractual obligations as
well.
Plaintiffs argue they reasonably believed their contracts with defendants were both
repudiated and breached, causing plaintiffs to move on to different work in the same
field. Defendants, on the other hand, argue they did not believe they had repudiated or
breached the contracts. Defendants instead assert that they were working with plaintiffs
to agree on new terms that would continue their professional relationship. Based on
plaintiffs’ pleadings, it is plausible plaintiffs believed the Independent Contractor
Agreements had been either repudiated or breached. For example, plaintiffs’ allegations
surrounding negotiations for a new contract provide enough support for plaintiffs to have
reasonably concluded their contracts were terminated. (Doc. 1, at 8-10). Taken as true,
these facts are sufficient to raise the possibility that defendants breached the contracts
beyond a speculative level.
For these reasons, the motion to dismiss plaintiffs’ breach of contract claims is
denied.

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IV.

CONCLUSION

For the reasons set forth above, defendants’ Rule 12(b)(6) motion to dismiss count
three (Florida Deceptive and Unfair Trade Practices Act), and count six (injunctive relief)
is granted.

Defendants’ motion to dismiss count four (defamation), count five

(interference with a business relation), and counts seven and eight (breach of contract) is
denied.
IT IS SO ORDERED this 11th day of October, 2019.

________________________
C.J. Williams
United States District Judge
Northern District of Iowa

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