This section contains the nature of the case and procedural background.

D entered into a franchise agreement with D1 to sell ice cream. D1's wholly owned subsidiary, Franchise Stores Realty Corporation (D1), leased retail space from the Doolittles. D1 then assigned its entire interest in the lease to the D as owners of the franchise. The term was for a period of nine years and ten months. D operated the franchise for approximately 3 1/2 years. The franchise lost money, and, ultimately, D was forced to close the business. The Doolittles filed suit against D for breach of the lease agreement. D filed a third-party complaint against D1 seeking to recover, in addition to other damages, all amounts adjudged against them in the Doolittles' suit. D claims that D1's negligent misrepresentations induced them to enter the franchise agreement and that D1 breached the terms of the franchise agreement by failing to provide advertising and necessary supplies on a timely basis. D1 moved to dismiss the third-party complaint on the grounds that it was improper. The district court granted the motion to dismiss, finding that D1's potential liability to D was not dependent on the outcome of the Doolittles' suit. D appealed.

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