Mrs. Fields Franchising v. MFGPC
16-4144
| 10th Cir. | Jan 8, 2018Background
- MFGPC (successor to LHF) held an exclusive license to sell popcorn under the "Mrs. Fields" mark; licensee paid running royalties (5% of net sales) and guaranteed royalties for first five years. Mrs. Fields Original Cookies assigned rights to Mrs. Fields Franchising, LLC.
- The license had a five-year initial term and automatic five-year renewals unless guaranteed royalties were unpaid; termination otherwise required specified conditions such as breach.
- In December 2014 Mrs. Fields Franchising sent correspondence terminating the license for alleged failure to pay guaranteed royalties; MFGPC disputed nonpayment and claimed it was owed $26,660.43 for popcorn shipped to Famous Brands.
- MFGPC asserted counterclaims for breach of contract and account stated against Mrs. Fields Franchising and Famous Brands; the district court dismissed MFGPC’s claims and allowed Mrs. Fields Franchising to voluntarily dismiss its declaratory-judgment claim.
- On appeal the Tenth Circuit reviewed only the complaint (not extrinsic declarations) under Rule 12(b)(6) and reversed the dismissal of the breach-of-contract claim, affirmed dismissal of the account-stated claim, affirmed the voluntary dismissal ruling, and vacated the fee award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether complaint plausibly alleged breach of contract | License was valid, MFGPC performed, defendants attempted improper termination and refused to pay for popcorn → damages | Termination was valid; any asserted termination position cannot create damages; license allowed six months continued sales | Reversed dismissal: complaint sufficiently alleged contract, performance, breach (termination/failure to pay), and damages plausible under Twombly/Iqbal standard |
| Whether district court could consider Lindley declaration on 12(b)(6) | Court erred by relying on Lindley declaration without converting to summary judgment or excluding it | Defendants relied on the declaration to show nonpayment admissions | Court: consideration of the declaration at 12(b)(6) was error but MFGPC forfeited objection; regardless, review limited to complaint so declaration not considered |
| Whether account-stated claim was pleaded adequately | MFGPC: invoices approved by Famous Brands and net amount due after offset ($26,660.43) constituted account stated | Defendants: no agreement on net amount (offset disputed) | Affirmed dismissal: plaintiff failed to allege an agreement on the specific amount owed, an essential element of account stated |
| Whether district court abused discretion allowing voluntary dismissal of declaratory-judgment claim | MFGPC: court earlier indicated skepticism about allowing dismissal; dismissal prejudices MFGPC | Mrs. Fields Franchising: dismissal proper after MFGPC claims were dismissed and declaratory relief became moot | Affirmed: district court did not abuse discretion in permitting voluntary dismissal given changed circumstances |
Key Cases Cited
- Albers v. Bd. of Cty. Comm’rs of Jefferson Cty., 771 F.3d 697 (10th Cir. 2014) (standard of review for Rule 12(b)(6) de novo review in Tenth Circuit)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for pleadings)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state plausible claim to relief)
- Nakahata v. N.Y.-Presbyterian Healthcare Sys., 723 F.3d 192 (2d Cir. 2013) (Rule 12(d) conversion/consideration of extrinsic materials)
- Tal v. Hogan, 453 F.3d 1244 (10th Cir. 2006) (limits on courts weighing evidence on Rule 12(b)(6) motions)
- DeMentas v. Estate of Tallas ex rel. First Sec. Bank, 764 P.2d 628 (Utah Ct. App. 1988) (elements of account stated under Utah law)
- Am. W. Bank Members, L.C. v. State, 342 P.3d 224 (Utah 2014) (elements of breach-of-contract claim under Utah law)