CooLab Foods, LLC v. Creamalicious, Inc.

669 F.Supp.3d 696

COOLAB FOODS, LLC, Plaintiff, v. CREAMALICIOUS, INC., and Elizabeth Rogers, Defendants/Counterclaimants.

No. 22 C 3355

United States District Court, N.D. Illinois, Eastern Division

Signed April 11, 2023

Bryan Thomas Butcher, Cray Huber Horstman Heil & VanAusdal LLC, Chicago, IL, Michael J. Grant, Ashley Crettol Insalaco, Tabet DiVito & Rothstein, LLC, Chicago, IL, for Plaintiff.

Jennifer E. Novoselsky, Reyes Kurson Ltd., Chicago, IL, for Defendants/Counterclaimants.

MEMORANDUM OPINION AND ORDER

GABRIEL A. FUENTES, United States Magistrate Judge

Plaintiff CooLab Foods, LLC ("CooLab") has sued Creamalicious, Inc. and its principal, Elizabeth Rogers (collectively, "Creamalicious"),¹ for breach of a purchase agreement and a subsequent settlement agreement; in the alternative, CooLab alleges unjust enrichment and "promissory fraud." (D.E. 6: Amended Compl. ("AC"), ¶¶ 44-74.) In answer to CooLab's Amended Complaint, Creamalicious asserts affirmative defenses and a counterclaim. (D.E. 18: Answer, Affirm. Defenses and Counterclaim, pp. 18-38.) Currently before the Courtis CooLab's Rule 12(b)(6) motion to dismiss Creamalicious' Counterclaim and strike its affirmative defenses. (D.E. 49: Mot. to Dismiss, ¶¶ 3-5.)

I. Legal Standard

"To survive a motion to dismiss, a plaintiff need allege 'only enough facts to state a claim to relief that is plausible on its face.' " Barwin v. Vill. of Oak Park, 54 F.4th 443, 453 (7th Cir. 2022), quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim satisfies that criterion when 'the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.' " Barwin, 54 F.4th at 453, quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The Court "accept[s] as true all well-pled facts alleged in the complaint," Barwin, 54 F.4th at 453, and "construes all allegations and any reasonable inferences in the light most favorable to the [nonmoving party]." Jauquet v. Green Bay Area Cath. Educ., Inc., 996 F.3d 802, 807 (7th Cir. 2021) (internal citations omitted).

II. Well-Pleaded Facts in Creamalicious' Counterclaim

Creamalicious alleges that CooLab agreed to manufacture and supply Creamalicious ice cream using "designated suppliers for designated ingredients," "in strict compliance with the proprietary recipe and ingredient list provided by Creamalicious," and to package the ice cream into a finished product by "fill[ing] the cups with [the] finished product and attach[ing] and affix[ing] the lids and safety seals." (Countercl. ¶¶ 12, 20-22.)² Creamalicious also alleges that CooLab agreed to manufacture a specified number of pints of Creamalicious ice cream on a weekly basis (the "Capacity Requirement") and to supply the finished product to market in accordance with Creamalicious' purchase orders. (Id. ¶¶ 17-18.) Creamalicious alleges that it entered into this agreement (the "Agreement") with CooLab in or about April 2022, the same month Creamalicious began issuing purchase orders to CooLab. (Id. ¶¶ 16, 24.)

Creamalicious alleges that CooLab did not fulfill the purchase orders on May 5 and May 9, 2022, and "[t]hroughout May and June," and that CooLab did not meet the Capacity Requirement. (Id. ¶¶ 17, 25-27.) In addition, Creamalicious alleges that "[o]n several occasions, CooLab manufactured and produced packaging that failed to conform to the standards required by the Agreement," such that CooLab "released a substantial number of [Creamalicious'] Finished Products in May and June of 2022 that did not contain proper safety seals." (Id. ¶¶ 28-31.) Creamalicious alleges that CooLab also released products to market that did not conform to the manufacturing specifications in the Agreement because they omitted required ingredients, such as omitting pecans from Creamalicious' "Thick As Thieves Pecan Pie" product in at least three "Lot[s]" that were sent to grocery retailers in 29 states. (Id. ¶¶ 32-34.)

Creamalicious also alleges that CooLab "agent" Glennise Humphry represented during a call on June 6, 2022, that "CooLab conducted regular tests on the production line and that they were quality controlled checked every twenty (20) minutes during Creamalicious' production runs to verify that the finished products had a correct weight as a quality control measure;" Creamalicious alleges that these representations were "false, misleading, and calculated to misguide and deceive Creamalicious." (Id. ¶¶ 35-36.) In addition, Creamalicious alleges that on or about June 10, 2022, CooLab delivered a shipment of ice cream products to a Creamalicious replacement manufacturer, but that "the agreed upon ingredients and products amounts were not used," causing "the planned production to be cancelled [and] causing loss and damage to Creamalicious and the Replacement Manufacturer." (Id. ¶ 40.) Creamalicious asserts it "was in compliance with its obligations under the Agreement at all times that the Agreement was complied with and not breached by CooLab." (Id. ¶ 43.) Creamalicious alleges it suffered "lost sales, lost business, injury to reputation and other injury" in the amount of at least $6 million. (Id. ¶ 44.)

III. Analysis

A. A "Settlement Agreement" Does Not Bar Creamalicious' Counterclaim.

In its motion to dismiss, CooLab first argues that it entered into a settlement agreement with Creamalicious which bars Creamalicious' affirmative defenses and counterclaims. (D.E. 50: Mem. at 2.) However, the purported settlement agreement was not attached to CooLab's Amended Complaint and was not mentioned in Creamalicious' Counterclaim. Instead, CooLab attached a document entitled "settlement agreement and release of claims" to its motion to dismiss Creamalicious' Counterclaim. (D.E. 52.) Under Federal Rule of Civil Procedure 12(d), the Court is "obligated to either not consider the extraneous submissions in ruling on the motion [to dismiss] or to convert the motion to one for summary judgment and provide the parties with an opportunity to submit supplementary materials." Jacobs v. City of Chicago, 215 F.3d 758, 765-66 (7th Cir. 2000). The only exception under which a court may consider matters outside the pleadings on a motion to dismiss is when the documents are: "(1) referenced in the plaintiff's complaint, (2) concededly authentic, and (3) central to the plaintiff's claim." Fin. Fiduciaries, LLC v. Gannett Co., 46 F.4th 654, 663 (7th Cir. 2022). Federal civil procedure has no equivalent of Section 2-619 of the Illinois Code of Civil Procedure.

For purposes of CooLab's motion to dismiss, the foregoing exception would only apply if the settlement agreement was referenced in and central to Creamalicious' Counterclaim. However, as explained above, Creamalicious' Counterclaim makes no mention of a settlement agreement, and in its answer to CooLab's Amended Complaint, Creamalicious "denie[d] that it entered into a lawful agreement with CooLab entitled Settlement Agreement and Release of Claims" (Ans. ¶ 31), so the exception does not apply. Whether such a settlement agreement exists is thus a matter of disputed factual proof, with each party pleading different facts. Moreover, at this early stage of the litigation, the Court will not convert CooLab's motion into a motion for summary judgment. Accordingly, the Court does not consider the attachment to CooLab's motion to dismiss or the exhibits Creamalicious attached to its opposition brief to be materials the Court is able to consider on a Rule 12 motion to dismiss the Counterclaim. (D.E. 54: Def.'s Opp'n at 7.)

The same Rule 12(b)(6) standards apply to CooLab's motion to strike Creamalicious' affirmative defenses. See Rosas v. Bd. of Educ. of City of Chicago, No. 19 C 2778, 652 F.Supp.3d 951, 969-71 (N.D. Ill. Jan. 25, 2023). However, unlike Creamalicious' Counterclaim, which CooLab seeks to dismiss on multiple grounds, the only stated basis for CooLab's motion to strike Creamalicious' affirmative defenses is the purportedly "broad and unambiguous release language" in the settlement agreement. (See Mem. at 2-4.) As the Court will not consider the attachment to CooLab's motion at this stage, the Court denies CooLab's motion to strike Creamalicious' affirmative defenses.

B. The Individual Counts of Creamalicious' Counterclaim

CooLab also argues that Creamalicious' Counterclaim should be dismissed because each count fails to state a claim upon which relief can be granted. Like the parties, the Court applies Illinois substantive law because "when neither party raises a conflict of law issue in a diversity case [such as this one], the federal court simply applies the law of the state in which the federal court sits." Kap Holdings, LLC v. Mar-Cone Appliance Parts Co., 55 F.4th 517, 522 (7th Cir. 2022), quoting Citadel Grp. Ltd. v. Wash. Reg'l Med. Ctr., 692 F.3d 580, 587 n.1 (7th Cir. 2012).

1. Count I: Breach of Contract

"Under Illinois law, a plaintiff looking to state a colorable breach of contract claim must allege four elements: (1) the existence of a valid and enforceable contract; (2) substantial performance by the plaintiff; (3) a breach by the defendant; and (4) resultant damages." Sevugan v. Direct Energy Servs., LLC, 931 F.3d 610, 614 (7th Cir. 2019). CooLab contends that Creamalicious' Counterclaim does not adequately allege the third element for breach of contract, because Creamalicious does not specify the capacity requirement or the provisions of the Agreement that were breached. (Mem. at 4-5.)

This is a close call. Although "federal courts require notice pleading, not fact pleading complete with all the minutiae," Auto Driveaway Franchise Sys., LLC v. Auto Driveaway Richmond, LLC, 928 F.3d 670, 675 (7th Cir. 2019), a breach of contract claim "requires an identifiable breach of a contract term." Sevugan, 931 F.3d at 614. In Count I of its Counterclaim, Creamalicious alleges that CooLab breached the...