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Date: 06-23-2022

Case Style:

IJL Midwest Milwaukee, LLC, et al. v. It's Just Lunch International, LLC

Case Number: 2:19-cv-01006

Judge: Andrew P. Gordon

Court: United States District Court for the District of Nevada (Clark County)

Plaintiff's Attorney:



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Defendant's Attorney:

Description: Las Vegas, Nevada civil litigation lawyer represented Plaintiff seeking injunctive relief and money damages.


This action originated as an action for injunctive relief, and/or money damages, on the part of Plaintiff IJL Midwest Milwaukee (“IJL Milwaukee”), a Milwaukee-based franchisee of the “It's Just Lunch”-brand franchise, and its principal operator, Plaintiff Sara Darling, a resident of Minnesota (“Darling”), to prevent wrongful non-renewal by the franchisor, Defendant It's Just Lunch International, LLC (“IJL”) of IJL Milwaukee's franchise location.

By way of background, IJL Milwaukee proposed to renew its franchise with IJL but received no response from IJL in advance of expiration of the term of IJL Milwaukee's franchise agreement. In the absence of any substantive renewal feedback from IJL (let alone within the 90-day period referenced in Wis.Stat. § 135.04 or the 180-day notice referenced in Minn. Stat. 80C.14, subd. 4), IJL Milwaukee and Darling filed this suit seeking to enjoin IJL from wrongfully non-renewing IJL Milwaukee's franchise in violation of the Minnesota Franchise Act, Minn. Stat. § 80C.14, the Wisconsin Fair Dealership Law, Wis.Stat. § 135.04, and Paragraph 14(B) of the underlying franchise agreement between IJL Milwaukee and IJL.

Defendant IJL responded by bringing counterclaims against Plaintiffs IJL Milwaukee and Sara Darling. Defendant IJL also filed new claims against Darling's affiliated franchise locations: IJL Midwest Holdings, LLC (the Minneapolis location, hereinafter “IJL Minneapolis”), IJL Midwest Denver, LLC (the Denver location, hereinafter “IJL Denver”), IJL Cleveland, LLC (the Cleveland location, hereinafter identified as “IJL Cleveland”), IJL Midwest Chicago (the Chicago location, hereinafter identified as “IJL Chicago”), and IJL DC Holdings, LLC (the Washington, D.C. location, hereinafter identified as IJL DC)[1] (collectively, IJL Milwaukee, IJL Minneapolis,

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IJL Denver, IJL Cleveland, IJL Chicago, and IJL DC are referred to as the “Midwest Parties”).

Defendant IJL contends that the Midwest Parties failed to pay IJL for royalties and marketing fees owed to IJL in the cumulative amount of $1,111,871. The reality is that Defendant

IJL miscalculated the amounts owed to it and never even bothered to invoice the dollar amounts Defendant IJL contends are owed by the various Midwest Parties.

IJL also declined to seek reimbursement for the $1,111,871 dollar amount using the contractual protocol expressly identified in Paragraph 3(C) of each of the Midwest Parties' respective franchise agreements with IJL.

IJL has indicated that IJL does not want to offer any of the Midwest Parties the opportunity to “cure,” either: (a) pursuant to the collection protocol established in Paragraph 3(C) of the

Midwest Parties' respective franchise agreements with IJL; or (b) pursuant to applicable statutes including the Minnesota Franchise Act, Minn. Stat. § 80C.14, subds. 3 and 4, the Wisconsin Fair Dealership Law, Wis.Stat. § 135.04, and the Illinois Franchise Disclosure Law, 815 ILCS § 705/19. Instead, IJL seeks an order the above-described royalty dispute is “incurable” even though the protocol described in Paragraph 3(C) of the Midwest Parties' franchise agreements reflects that such payment dispute is not “incurable.” To the contrary, Paragraph 3(C) of the franchise agreements expressly defines IJL's remedy for any alleged underpayment.

Darling and each of the Midwest Parties seek a judgment that Defendant IJL failed to

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timely renew the Midwest Parties' respective franchise agreements: (a) in breach of the renewal protocol set forth in Paragraph 14(B) of the Midwest Parties' respective franchise agreements; and/or (b) in violation of applicable statutes, including the Minnesota Franchise Act, Minn. Stat. § 80C.14, subd. 4 (as applied to each of the Midwest Parties' franchise agreements), the Wisconsin Fair Dealership Law, Wis.Stat. § 135.04 (as applied to IJL Milwaukee), and the Illinois Franchise Disclosure Law, 815 ILCS § 705/20 (as applied to IJL Chicago).

Finally, Darling and each of the Midwest Parties seek a declaratory judgment that Defendant IJL may not decline to renew any of the Midwest Parties' respective franchises without having, first, complied with both: (a) the contractual protocol for resolving payment disputes under Paragraph 3(C) of each franchise agreement; and (b) the separate statutory renewal protocols set forth in Minnesota Franchise Act, Minn. Stat. § 80C.14, subd. 5 (as applied to each of the Midwest Parties' franchise agreements), the Wisconsin Fair Dealership Law, Wis.Stat. § 135.04 (as applied to IJL Milwaukee), and the Illinois Franchise Disclosure Law, 815 ILCS § 705/20 (as applied to IJL Chicago).

IJL's contention: IJL has six franchise agreements with the Midwest Parties allowing them to use IJL's trademarks and intellectual property to operate dating and matchmaking businesses for single, adult clients in defined territories. These franchise agreements uniformly require the Midwest Parties to report all gross revenue to IJL, and to pay IJL royalties and advertising fees based on a percentage of all gross revenue. The Midwest Parties egregiously failed to do so. For example, over the six-year period from 2012 to 2018, the Midwest Parties charged some of their clients both an initial membership fee and ongoing monthly fees, but reported and paid IJL only for the initial membership fees. Similarly, the Midwest Parties failed to report any of the revenue they derived from non-recurring charges for events, dinner club programs, or coaching services. Even the Midwest Parties' own experts admit that the Midwest

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Parties collectively underpaid IJL to the tune of hundreds of thousands of dollars. The Court has since entered judgment in IJL's favor for $278,211 on IJL's motion for summary judgment. ECF No. 55. And the Midwest Parties' experts' figure is that low only because they rely on a definition of “Gross Revenue” that contradicts the plain terms of the franchise agreements. When the proper, unambiguous definition is applied, and contractual interest is considered, the amount of unpaid royalties and advertising fees totals $1,111,871. Accordingly, still at issue is whether the Midwest Parties owe IJL the difference between the $278,211 judgment entered by this Court and the $1,111,871 that IJL claims is due.

Also, at issue is IJL's claim for a declaratory judgment that the Midwest Parties' egregious breach of trust permits IJL to terminate or elect not to renew the franchise agreements without offering the Midwest Parties a futile opportunity to cure their deficient performance. The only explanation for so extreme and longstanding a pattern of underreporting and underpayment is dishonesty. Because trust is vital to the franchisor-franchisee relationship, courts have recognized that when the franchisee lies to the franchisor about the revenues it generates, the breach is incurable, and the relationship is over. Once the franchisee lies, it cannot entirely cure the breach by simply paying back the money it stole from the franchisor. Rather, courts have long held that when the franchisee lies, it must pay the ultimate price-loss of its franchise. That is the declaration IJL seeks at trial.

Also remaining for trial are all the Midwest Parties' claims except for the claim for tortious interference with the Midwest Parties' contractual relations or prospective economic advantage. The Court ruled against the Midwest parties on that claim. See Order Granting in Part Defendant's Motion for Summary Judgment. ECF No. 55. The Midwest parties' remaining claims, although couched in different ways, amount to the same argument that IJL must provide notice and an opportunity to cure before terminating or refusing to renew the contracts. IJL claims that it is Page 5 of

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under no such obligation. But even if IJL were obliged to provide notice and an opportunity to cure, it has not violated that obligation, because IJL has not yet terminated or refused to renew any of the Franchise Agreements. Rather, it has sought a declaration from the Court that it may terminate or non-renew. To the extent the Court determines notice must be given, the contracts give IJL the discretion to extend the agreements for a period sufficient to provide such notice.
IJL Midwest Milwaukee, LLC v. It's Just Lunch Int'l (D. Nev. 2022)

Outcome: This case is set for court trial on the stacked calendar on November 14, 2022, at 9:00 a.m. In LV Courtroom 6C. Calendar call will be held on November 8, 2022, at 9:00 a.m. in Las Vegas Courtroom 6C

Plaintiff's Experts:

Defendant's Experts:

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