Winterhalter v. Red Mango FC LLC

Filing 21

MEMORANDUM OPINION AND ORDER denying 17 plaintiff/counter-defendant's motion to dismiss the defendant/counter-plaintiff's counterclaim. (Ordered by Senior Judge A. Joe Fish on 8/18/2015) (ran)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION

ELIZABETH WINTERHALTER,
Plaintiff/Counter Defendant,
VS.
RED MANGO FC, LLC,
Defendant/Counter Plaintiff.

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CIVIL ACTION NO.
3:15-CV-0998-G

MEMORANDUM OPINION AND ORDER

Before the court is the plaintiff/counter-defendant’s motion to dismiss the
defendant/counter-plaintiff’s counterclaim (docket entry 17). For the reasons
discussed below, the motion is denied.
I. BACKGROUND
A. Factual Background
On June 5, 2009, the plaintiff/counter-defendant, Elizabeth Winterhalter
(“Winterhalter”), entered into a franchise agreement with the defendant/counterplaintiff, Red Mango FC, LLC (“Red Mango”), to open a frozen yogurt and fruit
smoothie franchise in Virginia. Complaint and Demand for Jury Trial (“Complaint”)

¶¶ 5-6 (docket entry 1). During the more than three years the franchise location was
in business, Red Mango collected approximately $145,000 in royalty fees. Id. ¶ 18.
Winterhalter closed the location in November 2013 and now contends that the terms
of the franchise agreement prohibited Red Mango from collecting these royalty fees.
Id. ¶¶ 7, 18. To support her argument, she emphasizes that “[a]lthough the Summary
Page [of the franchise agreement] provided the option for Defendant to select or
check a box for a Royalty Fee of ‘6% of Gross Revenue derived during the applicable
Accounting Period,’ that box was not marked or otherwise selected.” Id. ¶ 11
(referring to Red Mango Franchising Company Franchise Agreement, attached to
Defendant Red Mango FC, LLC’s Original Answer to Plaintiff’s Complaint (docket
entry 8) as Exhibit A). Winterhalter asserts claims for breach of contract and
payment by mistake in an attempt to recover these payments. Complaint ¶¶ 15-23.
Red Mango responded to Winterhalter’s claims by filing a counterclaim for
breach of contract. See Defendant Red Mango FC, LLC’s Amended Counterclaim
(docket entry 16). According to Red Mango, “Winterhalter breached her obligations
under the Franchise Agreement by wrongfully ceasing to operate the Store, . . .
ceasing to pay Royalty Fees under Section 4.2 of the Franchise Agreement[, and] by
wrongfully refusing to pay the future Royalty Fees due Red Mango under Section
15.6 of the Franchise Agreement.” Id. ¶¶ 31-33. To support its claim that
Winterhalter has always been liable for royalty fees under the franchise agreement,

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Red Mango notes that its Franchise Disclosure Document, which Winterhalter
received prior to entering the franchise agreement, “explicitly described” the royalty
fees and that “Winterhalter voluntarily paid the 6% Royalty Fee approximately 42
times over a four-year period.” Id. ¶¶ 7, 39. Thus, Red Mango claims, the franchise
agreement entitles it to “future royalty fees . . . as a good-faith estimate of Red
Mango’s damages” and attorney’s fees. Id. ¶¶ 36, 45.
B. Procedural Background
Winterhalter filed her complaint on March 31, 2015 (docket entry 1). On
May 14, 2015, Red Mango answered and filed its counterclaim (docket entry 8).
Then Winterhalter filed her initial motion to dismiss the counterclaim (docket entry
11). After Red Mango filed an amended counterclaim (docket entry 16), the court
denied the motion to dismiss as moot. Winterhalter filed a second motion to dismiss
(docket entry 17) directed at the amended counterclaim. Red Mango filed a timely
response (docket entry 19), to which Winterhalter filed a timely reply (docket entry
20). The motion is now ripe for consideration.
II. ANALYSIS
The primary dispute between the parties is whether the franchise agreement
required Winterhalter to pay royalty fees. Brief in Support of Plaintiff/CounterDefendant’s Motion to Dismiss Amended Counterclaim at 4 (docket entry 18);
Defendant/Counter-Plaintiff Red Mango FC, LLC’s Response to Plaintiff/Counter-

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Defendant’s Motion to Dismiss Amended Counterclaim at 7-10 (docket entry 19). If
the court reached a conclusion of law on this issue at the pleading stage, this
interpretation would bind the court’s future decisions. Medical Center Pharmacy v.
Holder, 634 F.3d 830, 834 (5th Cir. 2011) (“The law-of-the-case doctrine posits that
when a court decides upon a rule of law, that decision should continue to govern the
same issue in subsequent stages in the same case.”) (internal quotations and citations
omitted). The court deems it imprudent to reach a legal conclusion on this issue at
the pleading stage when at least one party will have to file a motion for summary
judgment on this same issue. Withholding decision until the summary judgment
stage will provide the parties with a better opportunity to inform the court (1) how
the multiple contractual provisions concerning royalty fees relate to each other and
(2) if Winterhalter is entitled to recover royalty fees already paid, assuming she paid
them in error.
III. CONCLUSION
For the reasons discussed above, the plaintiff’s motion to dismiss is DENIED.
SO ORDERED.

August 18, 2015.

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A. JOE FISH
Senior United States District Judge

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