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Ted Pauly, On Behalf of Himself, and All Others Similarly Situated v. Houlihan's Restaurants

December 20, 2012


The opinion of the court was delivered by: Honorable Jerome B. Simandle


SIMANDLE, Chief Judge:


Plaintiff Ted Pauly brought this putative class action for unjust enrichment and breach of contract against Defendant Houlihan's Restaurants, Inc. ("Defendant" or "Houlihan's"). Presently this matter is before the Court on Defendant's motion to dismiss both counts for failure to state a claim under Fed. R. Civ. P. Rule 12(b)(6). [Docket Item 17.] For the reasons discussed below, the Court finds Plaintiff has sufficiently stated a breach of contract claim and an unjust enrichment claim. Therefore, the court will deny the Defendant's motion to dismiss.


At an unspecified time and date, Mr. Pauly visited a Houlihan's restaurant in Brick, New Jersey. (Am. Compl. ¶ 13.) While there, he purchased "several beers ... and several mixed drinks" offered on the menu. (Id. ¶ 14.) The prices for the beverages Mr. Pauly ordered and consumed were not listed on the menu. (Id. ¶¶ 9-10.) Mr. Pauly did not learn of the Brick Houlihan's beverage prices until he received a check for these drinks after he had consumed them. (Id. at ¶ 15) After Pauly received the check, he proceeded to pay his bill in full. (Id. at ¶ 16.)

Mr. Pauly now claims Defendant's prices exceeded the reasonable prices for such beverages, and that Defendant engaged in price discrimination by charging him more than other customers in the restaurant for the same items. (Id. at ¶¶ 16, 17, 30.) As a result, Plaintiff commenced a civil action against Defendant Houlihan's Restaurant, Inc., in the Superior Court of New Jersey, Burlington County. (Notice of Removal at ¶

1.) Defendant Houlihan's subsequently removed the action to this Court based on diversity jurisdiction under 28 U.S.C. § 1332(d), as Plaintiff is a citizen of New Jersey and Defendant is incorporated in Delaware with its principal place of business in Kansas. (Id. at ¶ 12.) Plaintiff subsequently filed an Amended Complaint pursuant to Fed. R. Civ. P. Rule 15(a)(1)(A), alleging two causes against Defendant Houlihan's for breach of contract and unjust enrichment. Plaintiff also alleged that this case is appropriate for certification as a class action. [Docket Item 15.] In lieu of filing an answer, Defendants filed the instant motion to dismiss. [Docket Item 17.]

Defendant Houlihan's argues that the Plaintiff has failed to state a claim for breach of contract because he received exactly what he bargained for, and he has not identified a single contractual term that Houlihan's breached. In particular, Defendant argues that the Plaintiff has failed to allege what he actually paid for the drinks he ordered and what he believed to be a good faith reasonable price for these drinks. Further, Defendant Houlihan's argues that Pauly assented to Houlihan's charged price for these drinks when he paid his bill in full without protest. Consequently, Defendant contends that Pauly's Amended Complaint fails to state a claim for breach of contract.

Similarly, Houlihan's maintains that Plaintiff also fails to state a claim for unjust enrichment. Defendant argues that Pauly provided no services or benefit to Houlihan's and did not expect any sort of remuneration from Houlihan's because he received the drinks that he paid for.

Finally, Defendant Houlihan's alternatively argues that Plaintiff's claims should be dismissed because Defendant Houlihan's, Inc., is not a proper party to this litigation. Specifically, Houlihan's argues that it is a franchisor and does not own, operate or control the Houlihan's restaurant in Brick, NJ. Instead, the Brick, NJ Houlihan's is a franchisee which controls its own prices for the items listed on the menu. Defendant argues that it was not a party to any alleged contract or transaction between the Brick, NJ restaurant and the Plaintiff and therefore cannot be sued for breach of contract or unjust enrichment. Defendant Houlihan's relies on the Declaration of Cynthia Parres, the Vice President and Secretary for Defendant Houlihan's Restaurants, Inc., to support this argument.

In opposition, the Plaintiff argues that he has sufficiently stated claims for breach of contract and unjust enrichment against Defendant Houlihan's. The Plaintiff contends that he put Defendant on notice of a facially plausible breach of contract claim by alleging Houlihan's failed to disclose beverage prices until after consumption, charged unreasonable prices for those beverages, and engaged in price discrimination.

In addition, Pauly argues that he is entitled to plead unjust enrichment as an alternative claim for relief in the event a valid contract is found not to exist. Plaintiff argues that he did not waive his right to bring these claims by paying his bill in full because equity would not permit waiver in these circumstances. Specifically, Plaintiff maintains that he had already consumed the drinks at the time he learned of the excessive prices and New Jersey law imposes criminal penalties against patrons who refuse to pay their bill after consuming food at a restaurant. See N.J.S.A. 2C:20-8(a). Consequently, Plaintiff obtains he was not in a position to bargain for a lower price or challenge the bill by refusing to pay.

To the extent Defendant argues it is not a proper party to the litigation, Plaintiff maintains that this argument is not ripe for a motion to dismiss. Plaintiff argues that he properly pled that Defendant Houlihan's owned, operated and controlled the Brick, NJ Houlihan's restaurant. Plaintiff points out that the Defendant refutes this allegation by relying on a declaration which is outside the four corners of the pleading. This is inappropriate for a motion to dismiss, wherein the court is required to take all factual allegations in Plaintiff's complaint as true. To the extent the Court does consider Defendant's argument, the Plaintiff puts forth evidence of a franchise agreement wherein Defendant Houlihan's requires all franchisees to strictly comply with certain menu requirements and retains a percentage of all franchisees' profits. Consequently, Plaintiff argues there is a factual dispute about the amount of control Defendant exercised over the Brick, NJ franchise restaurant and dismissal is not warranted. In reply, Defendant Houlihan's reiterated its arguments in support of its motion to dismiss.*fn1


A.Standard of Review

In deciding a defendant's 12(b)(6) motion to dismiss, the Court must "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief. Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d ...

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