United States District Court, D. Arizona
Regency Midwest Ventures Limited Partnership, a South Dakota limited partnership, and Tom Biegler, an individual residing in South Dakota, Plaintiffs,
Best Western International, Inc., an Arizona non-profit corporation, Defendant.
Michelle H. Bums United States Magistrate Judge.
before the Court are Defendant Best Western International,
Inc.'s Motion to Dismiss Complaint (Doc. 13), Memorandum
of Law in Opposition to Defendant's Motion to Dismiss
(Doc. 18), and Defendant Best Western International,
Inc.'s Reply in Support of Motion to Dismiss Complaint
(Doc. 21). After considering the arguments raised by the
parties in their briefing, the Court now issues the following
case arises out of Plaintiffs'
(“Ramkota”) allegation that Defendant (“Best
Western”) improperly terminated the Membership
Agreement between the two parties. Ramkota is the owner and
principle of The Ramkota Hotel in Casper, Wyoming (“the
Hotel”). Best Western is a non-profit corporation that
serves as a membership association for Best Western branded
hotel operators in North America. The Hotel became a Best
Western branded property in 2004. In agreeing to become a
Best Western branded property, Ramkota's Membership
Agreement with Best Western required Ramkota to adhere to
Best Western's Bylaws & Articles (the
“Bylaws”), and Rules and Regulations. The Bylaws
provide for membership termination if the Best Western Board
of Directors, after a hearing, finds grounds to cancel the
membership, or, if rather than immediately cancelling the
member, the Board has granted the member a conditional
extension, which sets forth a remedial plan, but the member
fails to satisfy the remedial plan. Under the Rules and
Regulations, one ground for terminating the Membership
Agreement is receiving two failing quality assurance scores
in an 18 month period.
2013, Best Western notified Ramkota that they were
considering terminating Ramkota's Membership Agreement
because the Hotel had received two failing quality assurance
scores during an 18-month period. Ramkota requested and
received a hearing before the Best Western Board. Following
the hearing, the Board concluded that grounds existed to
cancel Ramkota's membership. In lieu of cancellation, as
permitted by the Bylaws, the Board granted Ramkota a
conditional extension listing conditions that must be met in
a timely manner in order for Ramkota to continue their
membership. The conditions included the requirement that
Ramkota complete all items on the Property Improvement Plan
by March 31, 2014. Furthermore, the conditional extension
stated that failure to complete all conditions by the March
31, 2014 deadline would result in termination of the
Membership Agreement. On February 4, 2014 Ramkota asked for
more time to complete the Property Improvement Plan. Best
Western granted an extension to October 1, 2014. In October
2014, Best Western inspected Ramkota's compliance with
the conditions set forth and took note that portions of the
Plan remained unfinished. Instead of terminating the
Membership Agreement, the Board once again granted a
conditional extension with a deadline of February 24, 2015.
Ramkota agreed to the latest extension. On March 4, 2015, a
Best Western inspection confirmed that Ramkota had not
completed all requirements of the Plan.
Hotel was operated as a Best Western member property until
April 21, 2015, when Best Western terminated the Membership
Agreement with Ramkota. Best Western justified the
termination following Ramkota's alleged failure to make
agreed upon improvements in a timely manner. Shortly after
termination of the Membership Agreement, Ramkota began to
remove indications that the Hotel remained affiliated with
Best Western. Although Ramkota made an effort to remove Best
Western trademarks from the Hotel, a Best Western inspection
discovered that some Best Western marks remained at the
Hotel. Additionally, a highway billboard had still wrongly
signified that the Hotel was affiliated with Best Western.
July, 252016, Ramkota filed the Complaint (Doc. 1) against
Best Western. The Complaint sets forth claims under both
state and federal law. Ramkota's Breach of Contract claim
(Count One) and Breach of the Implied Covenant of Good Faith
and Fair Dealing claim (Count Two) are predicated upon
Arizona law. In Count Three, Ramkota requests declaratory
judgment that Ramkota did not violate the Lanham Act or other
applicable federal law for failing to remove Best Western
trademarks from the Hotel in a timely manner.
Federal Rules of Civil Procedure require a “short and
plain statement of the claim showing that the pleader is
entitled to relief.” Fed.R.Civ.P. 8(a)(2); Gilligan
v. Jamco Dev. Corp., 108 F.3d 246, 248-49 (9th Cir.
1997). Thus, dismissal for insufficiency of a complaint is
proper if the complaint fails to state a claim on its face.
See Lucas v. Bechtel Corp., 633 F.2d 757, 759 (9th
Cir. 1980). A Rule 12(b)(6) dismissal for failure to state a
claim can be based on either: (1) the lack of a cognizable
legal theory; or (2) insufficient facts to support a
cognizable legal claim. See Balistreri v. Pacifica Police
Dep't, 901 F.2d 696, 699 (9th Cir. 1990);
Robertson v. Dean Witter Reynolds, Inc., 749 F.2d
530, 534 (9th Cir. 1984).
determining whether an asserted claim can be sustained, all
allegations of material fact are taken as true and construed
in the light most favorable to the non-moving party. See
Clegg v. Cult Awareness Network, 18 F.3d 752, 754 (9th
Cir. 1994). As for the factual allegations, the Supreme Court
has explained that they “must be enough to raise a
right to relief above the speculative level.” Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct.
1955, 1965, 167 L.Ed.2d 929 (2007). However, even though all
allegations of material fact are taken as true, that does not
entail that this Court must also accept legal conclusions
portrayed as factual allegations as true as well.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A
pleading that offers conclusions or a recitation of the
elements of a cause of action will not suffice.
Iqbal, 556 U.S. 662, 677-78. Thus, in ruling on a
motion to dismiss, the issue is not whether the plaintiff
will ultimately prevail, but whether the claimant is entitled
to offer evidence to support the claims. See
Gilligan, 108 F.3d at 249.
a district court may not consider any documents beyond the
pleadings in ruling on a 12(b)(6) motion. Hal Roach
Studios, Inc. V. Richard Feiner & Co., 896 F.2d
1542, 1550 (9th Cir. 1990). However, while ruling upon the
12(b)(6) motion, the Court may consider any documents which
are submitted as part of the complaint. Branch v.
Tunnell, 14 F.3d 449, 453 (9th Cir. 1994), overruled on
other grounds in Galbraith v. County of Santa Clara,
307 F.3d 1119 (9th Cir. 2002). Additionally, the Court may
consider any documents referred to or “whose contents
are alleged in a complaint and whose authenticity no party
questions.” Id. at 454. Even if the complaint
does not explicitly reference the documents at issue, the
district court may still consider a document the parties
agree is authentic. Mason v. Arizona, 260 F.Supp.2d
807, 814 (D. Ariz. 2003). This practice is so plaintiffs will
not purposely leave out “references to documents upon
which their claims are based” upon to survive a Rule
12(b)(6) motion. Id.
Plaintiffs' Claim for Breach of Contract
state a claim for breach of contract under Arizona law, a
plaintiff must allege (1) the existence of a contract between
the parties; (2) defendant's breach of the contract and;
(3) plaintiff's resulting damages. Snyder v. HSBC
Bank, USA, N.A., 873 F.Supp.2d 1139, 1148 (D. Ariz.
2012). Best Western argues that it did not breach the
contract because it was entitled to terminate the Membership
Agreement with Ramkota. Ramkota agreed to Best Western's
Membership Agreement; its Bylaws and Rules and Regulations;
and the conditional extensions. Specifically, Section 13 of
the Membership Agreement states that where grounds for
termination of the Membership Agreement exist, in lieu of
termination, Best Western may impose additional conditions
for continuance of membership. Furthermore, the termination
did not come until after Ramkota first failed two quality
assurance inspections which then made Ramkota eligible for
membership termination. Instead of immediately terminating
the Membership Agreement, Best Western offered Ramkota
conditional extensions which Ramkota accepted. After
acceptance of the ...