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Sultan Hameed, Individually and On Behalf of Those Similarly Situated v. Ihop Franchising

February 10, 2011

SULTAN HAMEED, INDIVIDUALLY AND ON BEHALF OF THOSE SIMILARLY SITUATED, PLAINTIFFS,
v.
IHOP FRANCHISING, LLC; IHOP PROPERTIES, LLC; INTERNATIONAL HOUSE OF PANCAKES, INC.;
IHOP RESTAURANTS, INC.; IHOP PROPERTIES, INC.;
DINEEQUITY, INC.; AND DOES 1-1500, DEFENDANTS.



The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge

MEMORANDUM AND ORDER

Plaintiff Sultan Hameed brings suit on behalf of himself and other similarly situated franchisees (hereinafter, "Plaintiff") pursuant to California Code of Civil Procedure § 382. (ECF No. 18.) Plaintiff alleges several violations against Defendants IHOP Franchising, LLC, Dineequity, Inc., IHOP Properties, LLC, and International House of Pancakes, Inc. (collectively, "IHOP" and hereinafter, "Defendants"), including unfair competition, accounting, and breach of contract.

Plaintiff is seeking monetary damages and equitable relief. Defendants removed the case from Sacramento County Superior Court to this Court alleging that all requirements for federal jurisdiction under the Class Action Fairness Act of 2005*fn1 ("CAFA") have been met. (ECF No. 18.) Defendants have filed a Motion to Dismiss Plaintiff's First Amended Complaint for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6)*fn2 and a Motion to Strike Improper Requests For Relief pursuant to Rule 12(f). (ECF No. 21.) Plaintiff has filed a timely opposition. (ECF No. 25.)

For the reasons set forth below, Defendants' Motion to Dismiss is granted. Defendants' Motion to Strike is denied as moot. (ECF No. 28.) Plaintiff's Ex Parte Application to Extend Page Limitation is denied as moot. (ECF No. 31.)*fn3

BACKGROUND*fn4

Plaintiff alleges violations under state-law causes of action relating to Plaintiff's operation of an IHOP franchise restaurant. On or about July 8, 1998, Plaintiff entered into a twenty-five-year Franchise Agreement, Equipment Lease, and Property Sublease with Defendants, whereby Plaintiff agreed to operate an IHOP restaurant in Sacramento. Plaintiff has fulfilled, and continues to fulfill, all obligations under the terms of all three agreements.

Under the terms of the Franchise Agreement, Plaintiff is required to refurbish or remodel the restaurant at his sole cost every five years. Additionally, the terms of the Sublease between Plaintiff and Defendants require Plaintiff to replace, at his sole cost, any equipment as prescribed by a government agency. (First Am. Compl., Ex. B at ¶ 3.1.) Ten years into the agreement, on or about 2008, Plaintiff had replaced virtually all of the equipment initially provided by Defendants. Plaintiff now either owns the restaurant's current equipment outright, or leases it from third parties who are not a party to this suit. Regardless, Defendants have required Plaintiff to continue to pay $740.00 per week as agreed under the terms of the Equipment Lease signed in 1998, and Defendants have refused to renegotiate the lease's terms.

As an IHOP franchisee, Plaintiff is permitted to apply for the Development Impact Assistance Program ("DIAP"). The DIAP provides monetary aid to an affected existing franchisee when a new IHOP restaurant opens within a specified proximity to the existing restaurant. Plaintiff allegedly qualified for, but was denied eligibility in, the DIAP due to discriminatory practices by Defendants, while another nearby IHOP restaurant was granted eligibility.

In July 1998, as part of the franchise transaction, Plaintiff entered into a Property Sublease Agreement for rental of the restaurant premises. Under the Sublease, Plaintiff is obligated to pay the real estate property taxes on the property. In March 2008, the real property upon which the restaurant rests was sold to a third party not a party to this suit, while Defendants remained the sublessor under Plaintiff's sublease ("sale/leaseback"). Due to the sale, real estate taxes on the property more than doubled. Defendants passed-through the increased taxes to Plaintiff, in violation of the implied covenant of good faith and fair dealing.

STANDARD

A. Motion to Dismiss Under Rule 12(b)(6)

A party may seek dismissal of a claim if the pleadings are insufficient because they fail to state a claim upon which relief may be granted.

On a motion to dismiss for failure to state a claim under Rule 12(b)(6), "all allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party." Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Rule 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief," in order to "give the defendant fair notice of what the...claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47 (1957).

Although "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 quotations omitted). "Factual allegations must be enough to raise a right to relief above the speculative level." Id. (citing 5 C. Wright & A. Miller, Federal Practice and Procedure ยง 1216 (3d ed. 2004) ("[T]he pleading must contain something more...than...a statement of facts that merely creates a suspicion [of] a legally ...


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