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Smith v. Auto Club Services, Inc.

United States District Court, D. Minnesota

October 25, 2017

Leslie L. Smith, Plaintiff,
Auto Club Services, Inc., Defendant.

          L. Kathleen Harrell-Latham, Esq. and Loop Legal PLLC, counsel for plaintiff.

          William Roth Sampson, Esq. and Shook, Hardy, & Bacon LLP, Douglas R. Boettge, Esq. and Stinson Leonard Street, LLP, counsel for defendant.


          David S. Doty, Judge United States District Court

         This matter is before the court on the motion to dismiss by defendant Auto Club Services, Inc. Based on a review of the file, record, and proceedings herein, and for the following reasons, the motion is granted.


         This contract dispute arises out of the parties' June 2014, Entrepreneurial Agent Agreement (Agreement), which authorized plaintiff Leslie Smith to act as Auto Club's agent in connection with the sale of its insurance policies in Minnesota. Compl. ¶ 7; Agreement § I(A). In exchange for sales commissions, Smith was required to represent Auto Club exclusively, devote “sufficient time” to selling its products, and maintain certain quality standards set by Auto Club. Compl. ¶¶ 8-10. The Agreement specified that Smith was “an independent contractor and not an employee of [Auto Club] for any purpose.” Agreement § IV(D).

         Before Smith signed the Agreement, Auto Club gave her projections for anticipated sales revenue. Compl. ¶ 18. According to Smith, Auto Club told her that the projections were “very conservative” and a “bare minimum.” Id. ¶ 19. Smith does not allege the specific sales revenue projected. Relying on those projections and statements, Smith executed the Agreement. Id. ¶ 20.

         Smith alleges that after she signed the Agreement, Auto Club failed to authorize necessary approvals that prohibited her from immediately opening an office and making sales, even though she was already incurring operating expenses. Id. ¶¶ 21-23. When Smith finally began selling Auto Club policies in November 2014, she learned that Auto Club only underwrites policies at a “competitive price” for persons with high credit scores. Id. ¶ 25. Smith alleges that Auto Club knew that the credit-score averages in her territory made it impossible for her to meet the financial projections, but purposefully withheld that information from her so that she would sign the Agreement. Id. ¶¶ 34-36. She also alleges that Auto Club prevented her from using its internal system to generate leads with qualifying credit scores outside of her territory, even though other agents were permitted to do so. Id. ¶¶ 37-41.

         In April 2017, after suffering “substantial losses” due to “disappointing revenue, ” Smith advised Auto Club that she was closing her office and seeking other employment. Id. ¶¶ 42-46. She then commenced this action asserting seven claims: violation of the Minnesota Franchise Act, Minn. Stat. § 80C.01 et seq. (Count I); violation of the Minnesota Deceptive Trade Practices Act, Minn. Stat. § 325D.44 (Count II); violations of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq. (Counts III and IV); fraud (Count V); unjust enrichment (Count VI); and declaratory judgment that she was fraudulently induced to enter into the Agreement (Count VII). Auto Club now moves to dismiss.


         I. Standard of Review

         To survive a motion to dismiss for failure to state a claim, “‘a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'” Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “A claim has facial plausibility when the plaintiff [has pleaded] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). Although a complaint need not contain detailed factual allegations, it must raise a right to relief above the speculative level. Twombly, 550 U.S. at 555. “[L]abels and conclusions or a formulaic recitation of the elements of a cause of action” are not sufficient to state a claim. Iqbal, 556 U.S. at 678 (citation and internal quotation marks omitted).

         The court does not consider matters outside the pleadings under Rule 12(b)(6). Fed.R.Civ.P. 12(d). The court may, however, consider matters of public record and materials that are “necessarily embraced by the pleadings.” Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999) (citation and internal quotation marks omitted). Here, the court properly considers the Agreement, which is referenced throughout the complaint.

         II. The ...

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