Yummy Yogurt Indy LLC et al v Orange Leaf Licensing LLC et al

Filing 84

ORDER granting in part and denying in part 79 Individual Defendants' Motion to Dismiss. Signed by Honorable Robin J. Cauthron on 10/5/15. (lg)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
YUMMY YOGURT INDY, LLC, et al.,
Plaintiffs/
Counterclaim Defendants,
v.
ORANGE LEAF LICENSING LLC,
et al.,
Defendants,
ORANGE LEAF HOLDINGS, LLC,
Counterclaimant,
v.
YUMMY YOGURT INDY, LLC, et al.,
Counterclaim Defendants.

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

Case No. CIV-15-272-C

MEMORANDUM OPINION AND ORDER
Plaintiffs filed the present action asserting various claims against Defendants related
to franchise agreements between the parties. In their 113-page, 413-paragraph Amended
Complaint, Plaintiffs named as individual Defendants Reece Travis, Arty Straehla, Mike
Liddell, and Wes Straehla. These Defendants now seek dismissal of the claims against them
pursuant to Fed. R. Civ. P. 12(b)(6). According to the individual Defendants, to the extent
Plaintiffs seek to raise common law fraud claims against them, their Complaint fails to plead
with the particularity required by Fed. R. Civ. P. 9. The individual Defendants further argue

that, to the extent Plaintiffs attempt to plead claims under Indiana franchise law for fraud,
they have misapplied the statute and/or again failed to plead with the requisite particularity.
In response, Plaintiffs concede that their common law fraud claim is inadequately pled
and request leave to file an Amended Complaint. As for the claims based on Indiana law,
Plaintiffs point to I.C. § 23-2-2.5-29 of the Indiana Franchise Act, arguing that statute
imposes liability on any person who materially aids or abets in an act or transaction
constituting a violation. Plaintiffs argue this statute authorizes their claims against the
individual Defendants.
Plaintiffs’ reliance on § 23-2-2.5-29 is misplaced. That statute states:
Every person who materially aids or abets in an act or transaction constituting
a violation of this chapter is also liable jointly and severally to the same extent
as the person whom he aided and abetted, unless the person who aided and
abetted had no knowledge of or reasonable grounds to believe in the existence
of the facts by reason of which the liability is alleged to exist.
The statute does not apply to every violation of the Franchise Act; rather, the language of the
statute clearly applies it solely to violations of chapter 2.5 of the Indiana Franchise Act.
Thus, § 23-2-2.5-29 does not provide a basis to create individual liability for the individual
Defendants under the other chapters of the Indiana Franchise Act that Plaintiffs allege were
violated.
Plaintiffs’ reliance on sections 23-2-2.7-1 and 23-2-2.7-2 is likewise unavailing. The
opening sentence of each statute sets forth its application. “It is unlawful for any franchise
agreement entered into between any franchisor and a franchisee . . . .” I.C. § 23-2-2.7-1. “It
is unlawful for any franchisor who has entered into any franchise agreement with a
2

franchisee . . . .” I.C. § 23-2-2.7-2. Thus, these statutes by their plain language do not apply
to the individual Defendants as each statute governs the content and responsibilities of a
franchise agreement and the parties to that agreement. Plaintiffs do not suggest, nor is there
any support for finding, that the individual Defendants were parties to any relevant franchise
agreement. Accordingly, to the extent Plaintiffs pursue claims against the individual
Defendants under I.C. §§ 23-2-2.7-1 or 23-2-2.7-2, their claims are dismissed with prejudice.
Turning to Plaintiffs’ claims under § 23-2-2.5-27, that statute states:
It is unlawful for any person in connection with the offer, sale or
purchase of any franchise, or in any filing made with the commissioner,
directly or indirectly:
(1) to employ any device, scheme or artifice to defraud;
(2) to make any untrue statements of a material fact or to omit to state
a material fact necessary in order to make the statements made, in the
light of circumstances under which they are made, not misleading; or
(3) to engage in any act which operates or would operate as a fraud or
deceit upon any person.
The individual Defendants could theoretically be liable under this statute. However, the
Indiana Supreme Court has held that pleading a claim under this section requires pleading
with particularity. Namely, the plaintiff must include the “the time, the place, [and] the
substance of the false representations, the facts misrepresented, and the identification of what
was procured by fraud.” Cont’l Basketball Ass’n, Inc. v. Ellenstein Enters., Inc., 669 N.E.
2d 134, 138 (Ind. 1996) (internal quotation marks and citation omitted). As Plaintiffs
recognize in their Response, their Complaint simply fails to provide the necessary
information; therefore, the individual Defendants’ Motion to Dismiss Plaintiffs’ fraud claim

3

brought pursuant to § 23-2-2.5-27 will be granted and that claim will be dismissed without
prejudice.
While the Court finds that Plaintiffs should be entitled to amend their Complaint, the
Court is mindful of the length of the current Amended Complaint. Permitting the Plaintiffs
to amend the Complaint to add additional length and complexity seems inconsistent with the
requirements of Fed. R. Civ. P. 8. Given the relatively straightforward nature of the
allegations that Plaintiffs have raised against Defendants, it is difficult to believe that those
allegations cannot be more concisely brought in a manner that would satisfy the governing
pleading standards of both Rule 8 and Rule 9. Accordingly, Plaintiffs are directed to make
every effort to streamline any Amended Complaint filed as result of this Order in a manner
to make it more functional from the standpoint of both the parties and the Court.
As set forth more fully herein, the individual Defendants’ Motion to Dismiss (Dkt.
No. 79) is GRANTED in part and DENIED in part. To the extent Plaintiffs brought claims
pursuant to I.C. § 23-2-2.7-1 and § 23-2-2.7-2, those claims are dismissed with prejudice.
To the extent Plaintiffs brought either common law or Indiana law based fraud claims, those
claims are dismissed without prejudice. Plaintiffs shall file any Amended Complaint within
ten days of the date of this Order.
IT IS SO ORDERED this 5th day of October, 2015.

4