K&F Restaurant Holdings, Ltd., et al v. Donald Rou

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

No. 18-30953

K&F RESTAURANT HOLDINGS, LIMITED, doing business as Izzo’s Illegal
Burrito; K&F RESTAURANT OPERATIONS, L.L.C.; G&O PIZZA
HOLDINGS, LIMITED, doing business as LIT Pizza; G&O RESTAURANT
OPERATIONS, L.L.C.; OSVALDO FERNANDEZ; A. GARY KOVACS,

Plaintiffs-Appellants,

v.

DONALD J. ROUSE, JR.; DONALD J. ROUSE, SR.; THOMAS B. ROUSE;
ALLISON ROUSE ROYSTER; ROUSE'S ENTERPRISES, L.L.C.,

Defendants-Appellees.

Appeal from the United States District Court
for the Middle District of Louisiana
USDC No. 3:16-CV-293

Before WIENER, GRAVES, and OLDHAM, Circuit Judges.
ANDREW S. OLDHAM, Circuit Judge:
*
The question presented is whether a restrictive covenant in a commercial
lease violates the Louisiana Unfair Trade Practices Act (“LUTPA”). The
district court dismissed the claim as time-barred. We affirm but for a different
reason: Plaintiffs failed to state a claim.

*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5
TH
CIR. R. 47.5.4
United States Court of Appeals
Fifth Circuit
FILED
January 30, 2020

Lyle W. Cayce
Clerk
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I.
Plaintiffs are K&F Restaurant Holdings, Ltd., its affiliates, and its
owners. They operate several restaurant chains. One is called Izzo’s Illegal
Burrito.
Defendants own a rival restaurant chain called Rouse’s Market. There’s
bad blood between plaintiffs and defendants. The acrimony evidently arises
from a 2012 incident involving a secret recipe book: A former Izzo’s employee
went to work at Rouse’s; he took an Izzo’s secret recipe book with him; and he
stored the recipe book in the Rouse’s kitchen. When Izzo’s heard about the
stolen recipe book, it obtained a writ of sequestration and had a deputy sheriff
rescue the secret recipe book from the competitor’s kitchen. Rouse’s says it had
no idea the book was in its kitchen and never used the recipes. It fired the
employee who had brought the book. And it contends it cooperated with Izzo’s
to reassure it that Rouse’s Market was not using any secret recipes. Izzo’s
threatened litigation, and the parties’ counsel had numerous contentious
exchanges.
Rouse’s Market was embarrassed by the incident. Rouse’s says it wanted
to “minimize [its] interaction with” Izzo’s and its affiliates. So Rouse’s
negotiated restrictive covenants in three new lease agreements with shopping-
center developers. Those restrictive covenants would bar the developers from
also leasing to Izzo’s or any of K&F’s related restaurants. According to Rouse’s,
its purpose was to prevent another embarrassing recipe-book incident.
Rouse’s executed the three lease agreements on June 5, 2013; June 18,
2013; and February 9, 2015. K&F contends it didn’t know about the restrictive
covenants until “late 2015 and early 2016.”
On April 15, 2016, plaintiffs filed suit against Rouse’s and its owners in
Louisiana state court. Plaintiffs alleged numerous claims arising from the
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lease provisions, including, as relevant here, a claim that the restrictive
covenants violated LUTPA. Their petition also included a claim under the
federal Racketeer Influenced and Corrupt Organizations Act (“RICO”).
Defendants timely removed the case to the Middle District of Louisiana under
28 U.S.C. §§ 1331 and 1441.
The district court dismissed K&F’s complaint under Federal Rule of Civil
Procedure 12(b)(6). As to the only claim relevant to this appeal,
1
the district
court held K&F’s LUTPA claim was time-barred. The district court held such
claims are subject to a one-year peremptive period,
2
and that period started on
the date each contract was executed. Therefore, the district court held, K&F’s
petition was untimely.
II.
Although the district court resolved this case on timeliness grounds, “[i]t
is an elementary proposition, and the supporting cases too numerous to cite,
that this court may ‘affirm the district court’s judgment on any grounds
supported by the record.’” Sobranes Recovery Pool I, LLC v. Todd & Hughes
Constr. Corp., 509 F.3d 216, 221 (5th Cir. 2007) (quoting Sojourner T v.
Edwards, 974 F.2d 27, 30 (5th Cir. 1992)). Here, the record supports affirmance

1
K&F’s opening brief challenges the district court’s dismissal of only its LUTPA
claims. Any other argument K&F might have regarding the dismissal of its other claims is
therefore forfeited. See, e.g., Cantú v. Moody, 933 F.3d 414, 418–19 (5th Cir. 2019).
2
Louisiana law distinguishes between peremption and prescription. See, e.g., Pounds
v. Schori, 377 So. 2d 1195, 1198 (La. 1979) (“Our jurisprudence has long recognized a major
distinction between a statute of limitations (prescription) and a peremption. It has been
repeatedly held that prescription bars the remedy sought to be enforced and terminates the
right of access to the courts for enforcement of the existing right. A peremptive statute,
however, totally destroys the previously existing right with the result that, upon expiration
of the prescribed period, a cause of action or substantive right no longer exists to be
enforced.”); compare L
A. CIV. CODE art. 3458 (“Peremption is a period of time fixed by law for
the existence of a right. Unless timely exercised, the right is extinguished upon the expiration
of the peremptive period.”), with id. arts. 3445–3457 (Prescription).
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on the ground K&F failed to state a claim under LUTPA. We therefore need
not consider any other issue.
LUTPA prohibits “[u]nfair methods of competition and unfair or
deceptive acts or practices in the conduct of any trade or commerce.” L
A. REV.
STAT. § 51:1405(A). LUTPA’s “narrow goal” is “protecting against egregious
actions of fraudulent, deceitful, and unfair business practices to promote and
foster healthy and fair business competition.” Quality Envtl. Processes, Inc. v.
I.P. Petroleum Co., 144 So. 3d 1011, 1026 (La. 2014). The Louisiana Supreme
Court has explained:
Because of the broad sweep of [§ 51:1405’s] language, Louisiana
courts determine what is a LUTPA violation on a case-by-case
basis. . . . [A] plaintiff must show that the alleged conduct offends
established public policy and is immoral, unethical, oppressive,
unscrupulous, or substantially injurious. [T]he range of prohibited
practices under LUTPA is extremely narrow, as LUTPA prohibits
only fraud, misrepresentation, and similar conduct, and not mere
negligence. Moreover, conduct that offends established public
policy and is unethical is not necessarily a violation under LUTPA.
Id. at 1025 (citations and quotations omitted; third set of brackets in original);
see also Cheramie Servs., Inc. v. Shell Deepwater Prod., Inc., 35 So. 3d 1053,
1060 (La. 2010) (“[T]he range of prohibited practices under LUTPA is
extremely narrow,” so “only egregious actions involving elements of fraud,
misrepresentation, deception, or other unethical conduct will be sanctioned
based on LUTPA.”).
Plaintiffs have not pointed to any “established public policy” prohibiting
the restrictive covenants. Quality Envtl. Processes, 144 So. 3d at 1025. To the
contrary, restrictive covenants limiting use of property by one party’s
competitors are lawful and not uncommon in Louisiana. See, e.g., RCC
Properties, L.L.C. v. Wenstar Properties, L.P., 40,996 (La. App. 2 Cir. 6/5/06),
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930 So. 2d 1233, 1235, 1238 (recognizing the validity of a servitude preventing
property adjacent to a Wendy’s from being used for any other fast-food, burger
restaurant). And Rouse’s covenants are reasonable by comparison. For
example, according to an exhibit to plaintiffs’ complaint, one developer offered
a space to Izzo’s across the street from the shopping center with the restrictive
covenant.
It might be true that restrictive covenants generally apply to all
competitors (e.g., “no burrito restaurants”) rather than a specific and named
one (e.g., “no Izzo’s”). But plaintiffs haven’t shown that singling out a certain
business—absent an impermissible classification, such as race—is unlawful or
against “established” Louisiana public policy. Quality Envtl. Processes, 144 So.
3d at 1025. Indeed, Izzo’s would have been just as limited in its ability to open
restaurants in the affected shopping centers if the restrictive covenants
applied to all burrito restaurants. And to the extent LUTPA prohibits
anticompetitive conduct, Rouse’s narrower covenants have less effect on
competition than the broader ones K&F apparently supports. Cf. Omnitech
Int’l, Inc. v. Clorox Co., 11 F.3d 1316, 1331 (5th Cir. 1994) (“The real thrust of
the LUTPA . . . is to deter injury to competition.”).
AFFIRMED.
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