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Yashi II, LLC v. Yashi Fine Foods LLC

United States District Court, D. Arizona

November 25, 2015

Yashi II, LLC, Plaintiff,
v.
Yashi Fine Foods LLC, Defendant.

ORDER AND OPINION [RE: MOTION AT DOCKET 9]

JOHN W. SEDWICK, SENIOR UNITED STATES DISTRICT JUDGE.

I. MOTION PRESENTED

At docket 9, defendant Yashi Fine Foods LLC (“Yashi Foods”) moves pursuant to Federal Rule of Civil Procedure 12(b)(6) for an order dismissing the complaint of plaintiff Yashi II (“Yashi II”). Yashi II responds at docket 11. Yashi Foods replies at docket 12. Oral argument was heard on November 20, 2015.

II. BACKGROUND

This case presents a dispute over a license to sell gourmet sauces. According to Yashi II’s complaint, Yun Weldon (“Weldon”) is the founder of Yashi Foods, a company that sold a trademarked product known as “Sweet & Tangy Gourmet Wing” sauce until “at least 2013.”[1] In 2014 two investors, Mark H. Tynan (“Tynan”) and Steve C. Froemming (“Froemming”), approached Weldon to form a new company called Yashi II, with Yashi Foods owning 60% and Tynan and Froemming each owning 20%.[2] Yashi II’s operating agreement states that Yashi II was formed for the purpose of developing, selling, marketing, and distributing food products based on Yashi Foods’ recipes.[3]Between January and July 2014, Yashi Foods and Yashi II “jointly developed, at Yashi II’s expense, recipes for at least five additional sauces, including ‘Teriyaki’ sauce; ‘Tangy Orange’ sauce; ‘Korean Style BBQ’ sauce; ‘Hot and Spicy’ sauce; and ‘Green Chili’ sauce.”[4]

In October 2014 Yashi II added an addendum to its operating agreement that states that Yashi II will pay Yashi Foods $2, 000 “and/or up to $6, 000 per month” in exchange for a license to use Yashi Foods’ “Yashi” brand name and recipes.[5] Yashi II did not make any of these license payments, however, and in March 2015 Yashi Foods resigned as a member of Yashi II.[6] The remaining members bought out Yashi Foods’ interest in Yashi II for $2, 500.[7] Yashi Foods then informed Yashi II that it was terminating the license.[8]

Yashi II sued Yashi Foods for breach of contract and tortious interference with business relations. Yashi II also seeks a declaratory judgment that the license remains valid and enforceable. Yashi Foods moves to dismiss Yashi II’s complaint in its entirety.

III. STANDARD OF REVIEW

Rule 12(b)(6) tests the legal sufficiency of a plaintiff’s claims. In reviewing such a motion, “[a]ll allegations of material fact in the complaint are taken as true and construed in the light most favorable to the nonmoving party.”[9] To be assumed true, the allegations “may not simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively.”[10] Dismissal for failure to state a claim can be based on either “the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.”[11] “Conclusory allegations of law . . . are insufficient to defeat a motion to dismiss.”[12]

To avoid dismissal, a plaintiff must plead facts sufficient to “state a claim to relief that is plausible on its face.”[13] “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”[14] “The plausibility standard is not akin to a ‘probability requirement, ’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.”[15] “Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.’”[16] “In sum, for a complaint to survive a motion to dismiss, the non-conclusory ‘factual content, ’ and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.”[17]

IV. DISCUSSION

Yashi Foods argues that Yashi II’s complaint should be dismissed because the at-issue license is of indefinite duration and therefore terminable at will under Arizona law. Because each of Yashi II’s three claims is premised on a finding that Yashi Foods had no right to terminate the license, Yashi Foods argues, Yashi II’s complaint fails to state a claim.[18] Yashi II responds by asserting that the lease has a definite duration of 25 years and, even if not, Yashi Foods is misinterpreting Arizona law.

A. In Arizona, Contracts of Indefinite Duration are Terminable at Will

“[T]he law of some states provides that a license without a stated term is terminable at the will of either party upon reasonable notice.”[19] Yashi Foods argues that Arizona law is in accord, and cites various authorities that establish that contracts of indefinite duration are terminable at will.[20] Yashi II argues that these authorities are not persuasive because they do not involve contracts for the license of intellectual property.[21] But because Yashi II fails to cite any cases in support of this argument ...


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