Opinion
CASE NO. 1:06cv312.
May 14, 2009.
ORDER
This matter is before the Court pursuant to Plaintiff's Motion for Summary Judgment (Doc. 24). Defendants' filed a Statement of Disputed Facts (Doc. 38), a Designation of Evidence in Opposition to Summary Judgment (Doc. 39), and an Affidavit of Dena McNamee (Doc. 40). Plaintiff filed a reply brief (Doc. 41).
I. Statement of Facts
A. Background
Pearle Vision, Inc. has developed an optical retail system which includes proprietary rights in certain valuable trade names, service marks and trademarks. Through franchise agreements, Pearle Vision grants franchisees the right to use the Pearle Vision System in the operation of optical retail stores around the country.
The Defendants were signatories to three such Franchise Agreements and are the owners, operators and guarantors of certain franchised Pearle Vision stores located in Newnan, Georgia; Auburn, Alabama; and Fayetteville, Georgia. Specifically, Dena McNamee, Chris McNamee and D C Holdings, Inc. owned, operated and guaranteed the Newnan and Fayetteville locations. Dena McNamee owned and operated the Auburn location.
The Franchise Agreements for the Newnan, Fayetteville and Auburn locations are essentially the same except as indicated herein.
Although the Franchise Agreement only provides for Dena McNamee as the Franchisee, Dena McNamee has asserted that she entered into the Auburn Agreement on behalf of I.C., Inc. (See Doc. 5, ¶ 5, 6) and that she assigned her interest to I.C., Inc. However, the Court can not find any support for Ms. McNamee's assertion aside from her Affidavit in which she states "I.C., Inc. was the corporation created for the purpose of owning the franchise for the Auburn Pearle Vision Store." (Doc. 40, ¶ 1). This is not sufficient evidence of ownership.
As to the Newnan and Fayetteville locations, Dena and Christopher McNamee executed a personal guaranty which acknowledged that "in order to induce [Pearle Vision] to execute the Franchise Agreement," the McNamees "unconditionally, absolutely and irrevocably guarantee the full and prompt payment of Franchisee's obligations and liabilities to [Pearle Vision] under any agreement however created and regardless of origin." (Doc. 24-5, p66)
Under the respective Franchise Agreements (or amendments thereto), the Defendants agreed to pay Pearle Vision a royalty fee equal to 7% of monthly Gross Revenues from the operation of each franchise as calculated by the Defendants in their Monthly Franchise Reports (see Doc. 24-3, ¶ 13) as well as a monthly advertising contribution for National and Local Advertising. Additionally, pursuant to the Agreements between the parties and as part of Pearle Vision's standard practice, the Defendants would order certain products from Pearle Vision, including eyeglasses and contact lenses, and Pearle Vision would ship these products to the locations that had ordered the items. Pearle Vision would then electronically debit the amounts owed for the products that had been shipped from a business account specified by the Defendants. In the event that a purchased item was returned by one of the franchised locations, Pearle Vision would credit the business account for the returned merchandise.
Royalties and transaction fees were due every month with direct payment from the Defendants' business accounts. (Doc. 24-3, ¶ 13(E)).
The Franchise Agreements provided that Pearle Vision, at its option, could assess interest on any overdue amounts. The Auburn Agreement specifically provided that Pearle Vision could impose a $35 fee each time Pearle Vision initiated an electronic transfer that was returned unpaid due to insufficient funds in the defendant's business account. (Doc. 24-7, ¶ 26).
The Franchise Agreements also stated that Defendants would provide to Pearle Vision quarterly profit and loss statements, balance sheets and annual financial statements (Doc. 24-3, ¶ 16) and that Pearle Vision could assess late charges for any failure to timely submit financial statements, in an amount not to exceed $1,000 per month. The Franchise Agreements also stated that if Defendants failed to submit a Monthly Franchise Report to Pearle Vision by the 15th day of the month, Pearle Vision could assess royalties and advertising payments based on the highest monthly amount of Gross Sales reported by Defendants during the preceding 12 month period. (Doc. 24-3, ¶ 13(D) and (E)).
Under the respective Franchise Agreements, the Defendants would be in default under the Agreements if the Defendants "fail[ed] to pay when due any amount owed [Pearle Vision], . . . its Affiliates or any other person or entity in connection with the operation of the Franchise Business." (Doc. 24-3, ¶ 32(A)(3)). The Agreements also set forth that the Defendants would be in default if they "fail[ed] to comply with any other agreement to which [Pearle Vision], or any its Affiliates and Franchisee (or any Owner of Franchisee) are parties, including but not limited to other Franchise Agreements to which Franchisee (or any Owner of Franchisee) is a party with [Pearle Vision]. (Doc. 24-3, ¶ 32(A)(5)). The Agreements go on to state that if the Defendants failed to cure any default within thirty (30) calendar days after receiving notice of such default, the Franchise Agreements would terminate immediately upon expiration of the 30 day period. (Doc. 24-3, ¶ 32(A)(16)). In addition, the agreements provided that Pearle Vision could immediately terminate the franchise agreements, without affording the Defendants an opportunity to cure, if the Defendants were in default on two or more occasions within a 12 month period, regardless of whether the defaults were timely cured. (Doc. 24-3, ¶ 32(B)(13)). Upon the expiration or termination of the Franchise Agreements, the Defendants' right to use the Pearle Vision System and the Marks would cease, and Defendants are to immediately pay all sums due and owing to Pearle Vision and its Affiliates, as well as all sums due and owing to Third Parties. (Doc. 24-3, ¶ 34(A)).
Under the respective Franchise Agreements, when the Agreements expired Pearle Vision would renew the Agreements if the Defendants had complied with certain conditions, including that the Defendants were not then in default or in the process of curing a default under the franchise agreements and had satisfied all monetary obligations of the franchisees or its related entities or those entities controlled by the Franchisees' Owner(s). (Doc. 24-3, ¶ 6(B) and (C)).
B. Breach and Termination of the Auburn Agreement
Plaintiff alleges that Defendant Dena McNamee repeatedly breached her obligations under the Auburn Agreement to remit Royalties, Advertising Contributions and payments for product purchases to Pearle Vision. Plaintiff alleges that as of January 13, 2006, Dena McNamee owed a total of $78,008.98 under the Auburn Agreement. As a result of these breaches, on January 13, 2006, Pearle Vision sent Dena McNamee a Notice of Default under the Auburn Agreement. (The "January 13th Notice," Doc. 24-9). The January 13th Notice advised that Dena McNamee was required to cure the defaults to Pearle Vision's full satisfaction or the Auburn Agreement and all related agreements between Pearle Vision and its affiliates and Dena McNamee would terminate without further notice at the later of 30 days from the date the Notice was delivered to McNamee or 5:00 p.m. EST February 14, 2006. According to Plaintiff, Dena McNamee failed to cure the defaults and Pearle Vision terminated the Auburn Agreement.
C. Non-Renewal of the Newnan Agreement
The Newnan Agreement, executed by D C Holdings, Inc., Dena McNamee, Christopher McNamee and Pearle Vision, was scheduled to expire on November 19, 2005. After attempts to resolve their disputes relating to the Auburn location failed, on January 10, 2006, Pearle Vision sent the Defendants a Notice of Non-Renewal of Franchise Agreement (the "January 10th Notice," Doc. 24-10) regarding the Newnan Agreement. Pearle Vision took the position that since Dena McNamee was in default under the Auburn Agreement, Pearle Vision was not required to renew the Newnan Agreement and was, therefore, allowed to permit the Newnan Agreement to terminate by its own terms on November 19, 2005.
Plaintiff also alleges that Defendants owe money on behalf of the Newnan location for unpaid Royalties and Local and National Advertising fees in the amount of $68,930.47, including interest charges as of August 22, 2007. See Doc. 24-14.
D. Breach and Termination of the Fayetteville Agreement
Plaintiff alleges that D C Holding, Inc., Dena McNamee and Christopher McNamee breached their obligations under the Fayetteville Agreement to remit Royalties, Advertising Contributions and payments for product purchases to Pearle Vision. Plaintiff also alleges that as of May 23, 2006, the Defendants owed at least $18,610.32 under the Fayetteville Franchise Agreement. As a result of these breaches, on May 23, 2006 Pearle Vision provided the defendants with written notice of default under the Fayetteville Agreement. (The "May 23rd Notice," Doc. 24-12). The May 23rd Notice stated that the defendants were in default for failure to pay certain amounts due and owing under the Fayetteville Agreement and for failure to provide Pearle Vision with all required reports and accounting information. The May 23rd Notice advised that if the Defendants failed to cure these material defaults within 30 calendar days of the Defendants' receipt of the notice, the Fayetteville Agreement would terminate immediately without further action on the part of Pearle Vision. The Defendants failed to remedy the defaults under the Fayetteville Agreement as outlined in the May 23rd Notice and Pearle Vision terminated the Fayetteville Agreement.
E. Total Damages Allegedly Due
Plaintiff asserts that Defendants owe Pearle Vision a grand total, as of August 22, 2007, of $239,302.66. (See Doc. 24-13, 24-14, 24-15). Defendants dispute this amount and provided the Court with examples of situations in which Pearle Vision billed Defendants an estimated amount as well as the actual amount owed. The parties agree that Dena McNamee brought this to the attention of Pearle Vision. Pearle Vision then presents evidence showing that it corrected the problem. However, Defendants dispute that the problem was corrected.
II. Law and Analysis
Summary judgment is appropriate "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). A court must view the evidence and draw all reasonable inferences in favor of the nonmoving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, (1986). The moving party bears the initial burden of showing the absence of a genuine issue of material fact, but then the nonmoving party must come forward with specific facts showing that there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317 (1986); Matsushita, 475 U.S. at 587. However, the nonmoving party may not rest on the mere allegations in the pleadings. Fed.R.Civ.P. 56(e); Celotex, 477 U.S. at 324. The mere existence of a scintilla of evidence to support the non-moving party's position will be insufficient; the evidence must be sufficient for a jury to reasonably find in favor of the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).
Plaintiff's Complaint (Doc. 1) alleges the following claims: Breach of Auburn Franchise Agreement against Dena McNamee, Breach of the Newnan and Fayetteville Franchise Agreements against Dena McNamee, Chris McNamee and D C Holdings, Inc., Violations of the Lanham Act; Accounting and Disgorgement of Profits and Unjust Enrichment. Defendants have counterclaimed (Doc. 5) alleging the following claims: Breach of Contract, Tortious Interference with a Contractual or Business Relationship, Fraud, Unjust Enrichment, Accounting, and Punitive Damages. Plaintiff has moved for summary judgment on its claims for breach of the Franchise Agreements, the amounts due and owing as well as all Defendants' counterclaims.
A. Breach of the Franchise Agreements
Plaintiff argues that the Franchise Agreements were breached due to Defendants failure to timely pay monies due to Plaintiff and failure to timely issue certain reports to Plaintiff. Plaintiff alleges that these failures constituted a default of the Franchise Agreements enabling Plaintiff to terminate and/or not renew the Franchise Agreements. Defendants counter that the invoices are inaccurate and that Plaintiff refuses to correct the invoices or explain how Plaintiff arrived at the numbers that it did. However, Defendants have presented no evidence contradicting Plaintiff that they did timely file the reports and that they did timely pay the undisputed amounts due. Thus, the Court finds that Dena McNamee, Chris McNamee and D C Holdings, Inc. did breach the Franchise Agreements for the Newnan and Fayetteville locations and that Dena McNamee did breach the Franchise Agreement for the Auburn location. However, as stated previously, it has not been shown to the Court that Dena McNamee's interest in the Auburn location was transferred to I.C., Inc. Thus, whether any interest was assigned to I.C., Inc. and whether I.C., Inc. breached the Franchise Agreement for the Auburn location is a question of fact for a jury to determine.
B. Amounts Due and Owing
Plaintiff supports its argument that Defendants breached the Franchise Agreements and owe certain monies by providing the Court with unanswered Requests for Admissions. Plaintiff personally served the Requests for Admissions on I.C., Inc. and D C Holding, Inc. in Court on June 1, 2007. To date, neither Defendant has responded to the Requests for Admissions. Under Federal Rule of Civil Procedure 36(A), requests for admissions are deemed admitted if not answered within twenty-eight days of service of such requests. Specifically, Plaintiff asked I.C., Inc. to admit that it failed to pay Plaintiff $93,951.79 in total and asked D C Holding, Inc. to admit that it failed to pay Plaintiff $65,365.64 in total under the Newnan Agreement and that it failed to pay Plaintiff $62,302.73 in total under the Fayetteville Agreement. However, based upon a review of the invoices, as more fully explained below, the Court finds discrepancies in the invoices and will not consider the unanswered Requests for Admissions as evidence for purposes of this motion.
Each side has presented a detailed summary of invoices to the Court to support its position. Plaintiff has provided the Court with the January 13, 2006 Notice of Default and supporting summary of invoices for the Auburn location (Doc. 24-9). Defendants have provided the Court with the October 19, 2005 Notice of Default and support summary of invoice for the Auburn location (Doc. 40-7). Plaintiff has also provided summaries of invoices for the Newnan and Fayetteville locations. (Doc. 24-13, 24-14, 24-15).
Defendants argue that the October, 2005 summary includes both estimated amounts due for National Advertising, Local Advertising and Royalties for certain months as well as the actual amounts due for National Advertising, Local Advertising and Royalties for those same months. Plaintiff conceded this issue and argued that it provided a corrected summary with the January, 2006 Notice of Default. Defendants disagree arguing that Plaintiff refused to correct the problem. The Court has spent significant time reviewing these invoices as well as the others filed in this matter relative to the other locations. The Court agrees with Plaintiff that it, indeed, removed the estimated charges from the summary attached to the January 2006 Notice of Default. However, upon comparison of the actual amounts allegedly due for those same months the January, 2006 invoices are different than the October, 2005 invoices. As these are supposed to be "actual" charges the Court is confused as to how the numbers changed. For example, invoice number PF008496SEP-04A in the October, 2005 summary states that $1289.81 is due for National Advertising. That same invoice number in the January, 2006 summary states that the amount due for National Advertising is $963.12. This example can be repeated for National Advertising, Local Advertising and Royalties for the following months, September, 2004; October, 2004; November, 2004; December, 2004; January, 2005; February, 2005; March 2005; and August, 2005. Although each of the referenced invoices are less in the January, 2006 summary than was stated in the October, 2005 summary, the Court can not determine damages based upon this unexplained discrepancy. Thus, a material issue of fact exists as to the accuracy of the invoices and the damages alleged.
C. Counterclaims
Because the Court found that Defendants did breach the Franchise Agreements, Defendants' counterclaims for improper termination under its breach of contract claim and tortious interference with a contractual or business relationship cannot survive. Plaintiff had a right, based upon Defendants breach, to terminate the Auburn and Fayetteville Agreements and to not renew the Newnan Agreement. However, based upon the above described discrepancies in the October, 2005 Notice of Default and the January, 2006 Notice of Default the Court finds that there is a question of fact that exists as to the remaining counterclaims alleged by Defendants.
III. Conclusion
Plaintiff's motion for summary judgment (Doc. 24) is GRANTED, in part, and DENIED, in part.
IT IS SO ORDERED.