Opinion
Civil Action No. 01-10270-GAO
August 15, 2002
MEMORANDUM AND ORDER
The plaintiff, 7-Eleven, Inc. ("7-Eleven"), alleges that the defendant, Mohammad M. Chaudhry, breached three separate franchise agreements, fraudulently conveyed and converted inventory from the three franchise stores, and violated Mass. Gen. Laws ch. 93A ("Chapter 93A"). On October 25, 2001, the Court granted the motion of Robert F. Mills, the defendant's former counsel, to withdraw as an attorney for the defendant. Mills represented in an affidavit that over the span of two and half months Chaudhry would not returns Mills' phone calls or cooperate in coordinating a defense. On February 8, 2002, 7-Eleven served its First Request for Admissions on Chaudhry. On February 11, 2002, the Court held a status conference on this matter and no one appeared on behalf of Chaudhry. On April 29, 2002, 7-Eleven filed a motion for summary judgment (Doc. No. 34) based on the fact that Chaudhry has not responded to its request for admissions, and to date, Chaudhry has filed no opposition. The motion for summary judgment is now GRANTED. Standard of Review
Summary judgment is an appropriate disposition of a case "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is material if its resolution would "affect the outcome of the suit under the governing law," and a dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Discussion
Counts I, II, and III are breach of contract claims alleging that Chaudhry breached three separate franchise agreements with the plaintiff. Count IV alleges that Chaudhry fraudulently conveyed and converted inventory from the three store franchises, and Count V alleges a violation of Chapter 93A.
The plaintiff served Chaudhry with requests for admissions on February 8, 2002, but received no response from Chaudhry. "Each matter of which an admission is requested . . . is admitted unless, within 30 days after service of the request, or within such shorter or longer time as the court may allow . . . the party to whom the request is directed serves upon the party requesting the admission a written answer or objection addressed to the matter. . . ." Fed.R.Civ.P. 36(a). "Any matter admitted under [Rule 36] is conclusively established unless the court on motion permits withdrawal or amendment of the admission." Fed.R.Civ.P. 36(b). See also Farr Mann Co. v. M/V Rozita, 903 F.2d 871, 875 (1st Cir. 1990). Pursuant to Fed.R.Civ.P. 36(b), the Court finds the following fact conclusively established:
At all times material to the complaint, Chaudhry was the 7-Eleven franchisee for three stores located on Cape Cod, Massachusetts. On February 11, 1993, Chaudhry executed a 7-Eleven Store Franchise Agreement for a store in Centerville. The agreement required Chaudhry to maintain a minimum net worth for the store of at least $10,000. Chaudhry failed to maintain the requisite net worth, was provided with an opportunity to cure the breach of the agreement, and failed to do so. On January 19, 2000, 7-Eleven terminated Chaudhry's franchise, conducted a changeover audit, and prepared final financial summaries. Upon termination of the franchise agreement, the balance in the open account for the Centerville store was $106,821.93. Pursuant to the franchise agreement, the franchisee is liable to 7-Eleven for the unpaid balance in the open account including interest at a rate of 9.75% per annum ($9,309.16), costs of collection, and reasonable attorneys' fees ($17,419.66). Accordingly, the plaintiff is entitled to summary judgment on Count I and an award of $133,550.75.
The amount of attorneys' fees requested by the plaintiff in Counts I, II, and III represents 15% of the damages sought. The Court finds that this is a fair and reasonable fee in the circumstances.
On March 17, 1994, Chaudhry executed a franchise agreement for a store in Hyannis. Again, the agreement required Chaudhry to maintain a minimum net worth for the store of at least $10,000. Chaudhry failed to maintain the requisite net worth, was provided with an opportunity to cure the breach of the agreement, and failed to do so. On April 3, 2000, 7-Eleven terminated the franchise, conducted a changeover audit, and prepared final financial summaries. Upon termination of the franchise agreement, the unpaid balance in the open account for the Hyannis store was $157,353.49. Pursuant to the agreement, Chaudhry is liable to 7-Eleven for the unpaid balance in the open account including interest at a rate of 10.5% per annum ($13,701.43), costs of collection, and reasonable attorneys' fees ($25,658.24). Accordingly, the plaintiff is entitled to summary judgment on Count II and an award of $196,713.16.
On May 13, 1996, Chaudhry executed a franchise agreement for a store in Falmouth. Again, the agreement required Chaudhry to maintain a minimum net worth for the store of at least $10,000. Chaudhry failed to maintain the requisite net worth, was provided with an opportunity to cure the breach of the agreement, and failed to do so. On April 3, 2000, 7-Eleven terminated the franchise, conducted a changeover audit and prepared final financial summaries. Upon termination of the agreement, the unpaid balance in the open account for the Falmouth store was $190,112.82. Pursuant to the agreement, Chaudhry is liable for the balance in the open account including interest at a rate of 10.5% per annum ($16,553.91), costs of collection, and reasonable attorneys' fees ($31,000.00). Accordingly, the plaintiff is entitled to summary judgment on Count III and an award of $237,666.73.
Pursuant to the Massachusetts Uniform Fraudulent Transfer Act, a transfer is fraudulent if it was made "(1) with actual intent to hinder, delay, or defraud any creditor of the debtor; or (2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor: . . . (ii) intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due." Mass. Gen. Laws. ch. 109A, § 5(a). Approximately one month prior to the termination of the three franchises, 7-Eleven conducted physical and book inventory audits for each of the three stores. The changeover audits performed by 7-Eleven after terminating the agreements reflected the following differences in inventory value between the two audits: (1) $72,000 at the Centerville store; (2) $173,000 at the Hyannis store; and (3) $168,000 at the Falmouth store. Chaudhry had transferred, conveyed and converted some or all of the combined inventory from the three 7-Eleven stores to other convenience stores owned and operated by Chaudhry individually or jointly with Tammy Cruz and /or New England Business Group, Inc. ("NEBG"). There was no consideration for theses transfers. The transfers were made when Chaudhry was insolvent or rendered him insolvent by leaving him with assets insufficient to satisfy his business debts as they came due, and 7-Eleven had a security interest in the transferred assets. The transfers were in breach of the store franchise agreements and were made to hinder, delay, or defraud Chaudhry's creditors, including 7-Eleven. Accordingly, the plaintiff is entitled to summary judgment on Count IV, but notably, the loss calculated by the plaintiff for Counts I, II, and III includes the losses due to the fraudulent conveyances. There is no reason to make a duplicate award.
At all times relevant to the complaint, Chaudhry was engaged in a trade or business as defined by Chapter 93A and fraudulently conveyed the inventory from his three 7-Eleven stores to other convenience stores owned or operated by him. Chapter 93A, § 11 provides a cause of action for "[a]ny person who engages in the conduct of any trade or commerce and who suffers any loss of money or property, real or personal, as a result of the use or employment by another person who engages in any trade or commerce of an unfair method of competition or an unfair or deceptive act or practice." Mass. Gen. Laws ch. 93A, § 11. Similar to Count IV, the Chapter 93A claim represents an alternative theory for recovering the damages sought in Counts I, II, III. To receive the benefit of the multiple damages provision of Chapter 93A, the plaintiff must prove that the violation was "willful or knowing." Mass. Gen. Law. ch. 93A, § 11. The request for admissions contains no such allegation, and accordingly Chaudhry has not admitted as much. The plaintiff is entitled to summary judgment on Count V but is not awarded damages in addition to those awarded under Counts I, II, and III.
Conclusion
For the foregoing reasons, the plaintiff's motion for summary judgment is GRANTED. Judgment shall enter for the plaintiff in the amount of $567,930.64.