Opinion
Case No. 89-8069-CIV-GRAHAM
March 23, 1994
Douglas S. Lyons, Esq., Lyons Farrar, Tallahassee, FL, for Plaintiffs.
John F. Dienelt, Esq., Reed Smith Shaw McClay, Washington, D.C., for Plaintiffs.
Dean J. Rosenbach, Esq., Marshall J. Osofsky, Esq., Lewis Vergosen Rosenbach, P.A., West Palm Beach, FL., for Defendant.
ORDER AND MEMORANDUM OPINION
THIS CAUSE came before the Court upon (1) Plaintiffs, Hardee's Food Systems, Inc. ("Hardee's"), Fast Food Merchandisers, Inc. ("FFM") and HED, Inc.'s ("HED"), Motion for Summary Judgment on their Complaint against Defendants, Paul Bennett ("Bennett") and Jerry Hawkins ("Hawkins") and (2) Counterdefendant, Hardee's, Motion for Summary Judgment on the Counterclaim of Bennett, Hawkins and John W. Kornahrens (Kornahrens).
I.BACKGROUND
Hawkins and Kornahrens are experienced businessmen. They previously had been American International Rent-A-Car franchisees and subsequently sold the franchise for a profit. Hawkins and Kornahrens also were Goodyear franchisees and they sold that franchise in 1983 for a profit. Moreover, they operated other businesses in South Carolina including a used car lot, windshield company and tire store. The windshield company was known as Auto Glass Company, Inc. and was sold by Hawkins and Kornahrens for a profit.
Hardee's is a North Carolina corporation which operates and franchises others to operate Hardee's restaurants. Fast Food Merchandisers, Inc. ("FFM") is a wholly-owned subsidiary of Hardee's that sells food and other supplies to Hardee's franchises and other businesses. HED, Inc. ("HED"), a wholly-owned subsidiary of Hardee's, sells restaurant equipment and other supplies to Hardee's franchisees as well as other businesses.
In August and October of 1984, Hawkins and Bennett submitted applications to become Hardee's franchisees. On April 1, 1985, Hawkins, Bennett and Kornahrens (hereinafter referred to as "Defendants") entered into a written Purchase Agreement with Hardee's franchisees, Robert Bjurstrom and Dorothy Bjurstrom ("Bjurstrom"), for the purchase of the following: (a) 3,000 shares of common stock of Florida Restaurant Group, Inc. which operated the Hardee's restaurant in Tequesta, Florida; (b) a Hardee's franchise located in Stuart, Florida; (c) a Hardee's franchise located in Jensen Beach, Florida; and (d) the development rights as to four counties of Florida as set forth in certain letters which were attached to the Purchase Agreement as Exhibit F. The consideration for said Purchase Agreement was $70,000.00, plus the assumption of various real estate and equipment leases.
At the same time as the execution of the Purchase Agreement, Bjurstrom, Bennett, Hawkins and Kornahrens executed an Assignment relating to development rights for Hardee's franchisees located in Palm Beach, Martin, St. Lucie, Okeechobee and Indian River Counties. The development rights which were to be assigned from Robert Bjurstrom to Defendants were set forth in the letters attached as Exhibit F to the Purchase Agreement as well as to the Assignment executed in conjunction with the Purchase Agreement.
Defendants wanted to get the development rights in writing from Hardee's before they executed the Purchase Agreement and Assignment with Bjurstrom because they felt Bjurstrom's rights were not sufficiently set forth in the letters. (Hawkins Dep. 6/22/89 at 22, 82-83 and 212-215). Defendants concede that the letters did not constitute a contract and did not confer exclusive territorial rights on Bjurstrom nor on Defendants. (Hawkins Dep. 6/22/89 at 22, 208, 212-215, 217; Hawkins Dep. 3/14/90 at 65).
At the contract closing between Bennett, Hawkins and Kornahrens and Bjurstrom, Hawkins and Bjurstrom telephoned Douglas Kinney ("Kinney"), the then vice-president of Development Planning and Franchising for Hardee's, to confirm that the development rights existed and could be conveyed to Defendants. Hawkins told Kinney that he would not sign the documents at the closing and requested that Kinney send him by Federal Express something in writing saying that Hawkins had the exclusive territorial rights. According to Hawkins, Kinney stated that he could not work that quickly and would have to get it done. (Hawkins Dep. 6/22/89 at 82-83). Hawkins had no expectation of what the document Kinney would send would look like, however, Hawkins assumed the document would spell out that he, Bennett and Kornahrens had exclusive development rights on the four counties. (Hawkins Dep. 6/22/89 at 228). The parties executed the Purchase Agreement after the telephone conversation with Kinney. They never executed a development agreement.
Hardee's provided Bennett and Hawkins with a copy of its Uniform Franchise Offering Circular ("UFOC") prior to the execution of the Purchase Agreement. Bennett and Hawkins reviewed the UFOC. (Bennett Dep. 12/20/89 at 5-6; UFOC, Item XXIII Acknowledgment of Receipt By Prospective Licensee). On April 18, 1985, Bennett and Hawkins entered into License Agreements with Hardee's for the restaurants in Jensen Beach, Stuart and Tequesta, Florida. Kornahrens did not execute the License Agreement.
For each restaurant, Bennett, Hawkins and Bjurstrom executed an Assignment of License Agreement to Third Party whereby Bjurstrom assigned his rights and obligations under the License Agreement for the restaurant to Bennett and Hawkins, and Bennett and Hawkins agreed to perform all of Bjurstrom's obligations under the License Agreement. Hardee's consented to each Assignment.
Hawkins and Kornahrens were the financial backers of the venture. Bennett, who did not contribute any capital, was responsible for the supervision and running of the restaurants. (Hawkins Dep. 6/22/89 at 58, 64-65; Bennett Dep. 6/23/89 at 37; Kornahrens Dep. 6/21/89 at 10). Prior to the execution of the Purchase Agreement, Bennett visited the restaurants and had the opportunity to inspect their condition and the condition of the equipment. (Bennett Dep. 12/20/89 at 25-26). Hawkins and Bennett never requested copies of any inspection reports or certifications from Hardee's that the restaurants' equipment was operational and that the restaurants met Hardee's standards. (Hawkins Dep. 12/20/89 at 91). Hawkins did not feel it necessary to inspect the restaurants outside the presence of the employees. Before entering into the Purchase Agreement, Bennett and Hawkins never talked to anyone at Hardee's about any problems that might exist with the restaurants. (Hawkins Dep. 6/22/89 at 106).
Prior to the execution of the Purchase Agreement, Defendants received profit and loss statements from Bjurstrom for the three restaurants. The statements revealed earnings in the one and a half year prior to the purchase. (Bennett Dep. 6/23/89 at 46; Bennett Dep. 12/20/89 at 28). The statements generally showed losses. Hardee's made no representations to Defendants regarding profitability upon which they relied when they entered into the purchase agreement. (Bennett Dep. 6/23/89 at 150; Bennett Dep. 12/20/89 at 6-9). Hawkins and Kornahrens intended to fix up the restaurants, sell them and make a profit as they had done with other businesses in the past. (Hawkins Dep. 6/22/89 at 19).
Hardee's sent letters to Bennett and Hawkins demanding that they pay their past due royalties and other obligations including amounts owed to FFM and HED. Hardee's terminated the franchise agreements. On February 21, 1989, Hardee's filed the instant lawsuit for damages for breach of contract against Bennett and Hawkins for their failure to pay the amounts due for royalties, food, equipment and other supplies pursuant to the License Agreements. Hardee's did not name Kornahrens as a defendant.
Kornahrens was an investor, not a Hardee's franchisee.
Hardee's contends that Bennett and Hawkins owe Hardee's or its subsidiaries 58,561.72 for royalties, $202,448.50 for food (FFM), $17,595.58 for equipment and other supplies (HED) and $315.30 for miscellaneous items (Hardee's).
Bennett and Hawkins filed a Counterclaim. Kornahrens was brought in as an Intervenor. The Counterclaim consists of five counts as follows: Count One alleges fraudulent misrepresentation; Count Two alleges negligent misrepresentation; Count Three alleges fraud pursuant to Florida Statute § 817.416; Count Four alleges violation of deceptive and unfair trade practices pursuant to Florida Statute §§ 501.201-501.213; and Count Five alleges breach of contract.
Hardee's moves for summary judgment on all counts of the Counterclaim and on its Complaint.
II.DISCUSSION
Summary judgment is appropriate only if it appears through pleadings, depositions, admissions and affidavits 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);Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265, 273 (1986); Real Estate Financing v. Resolution Trust Corp., 950 F.2d 1540, 1542 (11th Cir. 1992); McGahee v. Northern Propane Gas Co., 858 F.2d 1487, 1493 (11th Cir, 1988). Moreover, "[t]he party seeking summary judgment bears the exacting burden of demonstrating that there is no genuine dispute as to any material fact in the case." Clemons v. Dougherty County, 684 F.2d 1365, 1368 (11th Cir. 1982) (citing Adickes v. S.H. Kress Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142, 154 (1970) andEnvironmental Defense Fund v. Marsh, 651 F.2d 983, 990-91 (5th Cir. 1981)).
In order for the court to determine whether the movant has met this burden, the evidence, and all factual inferences therefrom, must be viewed in the light most favorable to the nonmoving party.Clemons, 684 F.2d at 1368, Adickes, 398 U.S. at 157, 90 S.Ct. at 1608, 26 L.Ed.2d at 154. If the court finds that any material factual issue exists, it must deny the motion and proceed to trial.Marsh, 651 F.2d at 991; Cole v. Chevron Chemical Co., 427 F.2d 390, 393 (5th Cir. 1970), cert. denied, 414 U.S. 858, 94 S.Ct. 67, 38 L.Ed.2d 109 (1973). Finally, the nonmoving party need not respond to a motion for summary judgment with affidavits or any other evidence unless and until the moving party has properly supported the motion with sufficient evidence. Clemons v. Dougherty County. Ga., 684 F.2d 1365, 1368 (11th Cir. 1982); Adickes v. S.H. Kress Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142, 154 (1970).
Defendants' Counterclaim A. Counts One and Two — Misrepresentation
Count I of the Counterclaim is for fraudulent misrepresentation while Count II is a claim for negligent misrepresentation. Bennett, Hawkins and Kornahrens allege that they were tortiously induced to purchase the restaurants as they relied upon Kinney's oral promise that they would receive exclusive development rights from Hardee's.
Under Florida law, the elements of misrepresentation include:
(1) a false statement concerning a specific material fact; (2) a showing that the representer knew, or should have known, that the representation was false; (3) an intention that the representation induce another to act on it; and (4) consequent injury to the party acting in justifiable reliance on the representation. Royal Typewriter Co. v. Xerographic Supplies Corp., 719 F.2d 1092, 1003 (11th Cir. 1983) (citations omitted).
Hardee's correctly argues that Defendants' reliance upon Kinney's alleged oral promise is unreasonable as a matter of law. Hawkins testified that Defendants did not want to sign the Purchase Agreement without having the development rights in writing. After speaking with Kinney, Hardee's representative, on April 1, 1985, Defendants executed the Purchase Agreement and Assignment which referred to the rights as those contained in attached letters. Therefore, Defendants executed documents which, they concede, did not clearly enunciate the development rights.
Paragraph 1(d) of the Purchase Agreement provides: Seller's right from Hardee's to develop stores in the four counties of Florida as more fully set forth in Exhibit F attached hereto and made a part hereof by reference.
The Assignment conveys from the Bjurstroms to Defendants "any and all of their right, title and interest . . . as is more particularly set forth in Exhibit "A" attached hereto."
The License Agreements which Bennett and Hawkins subsequently executed with Hardee's on April 18, 1985, were for specific locations and contained the following provision:
XVIII.This Agreement, the documents referred to herein, and the Exhibits attached hereto, if any, constitute the full and complete agreement between LICENSOR and LICENSEE concerning the subject matter hereof, and supersede all prior agreements, no other representation having induced LICENSEE to execute this Assignment, and no representations, inducements, promises or agreements, oral or otherwise, not embodied herein or attached hereto (unless of subsequent date) were made by either party, and none shall be of any force or effect with reference to this Agreement or otherwise. No amendment, change or variance from this Agreement shall be binding on either party unless mutually agreed to by the parties and executed in writing.
Neither the Purchase Agreement and Assignment nor the License Agreements grant Defendants exclusive development rights. These documents were executed subsequent to the alleged oral promise made by Kinney. Reliance upon oral representations, even if false, is unreasonable if the party enters into a subsequent agreement.Schubot v. McDonalds Corp., 757 F. Supp. 1351, 1356 (S.D. Fla. 1990) (citing 3 P.M. Inc. v. Basic Four Corp., 591 F. Supp. 1350, 1367 (E.D.Mich. 1984) (Plaintiff's reliance on an oral statement is unreasonable after the defendants had expressly refused to include a similar provision in the contract)). See also, Saunders Leasing System. Inc. v. Gulf Cent. Distrib. Center. Inc., 513 So.2d 1303, 1306-1307 (Fla. 2d DCA 1987) (reliance on alleged misrepresentations not contained in contract is unreasonable); Flight Concepts Ltd. Partnership v. Boeing Co., 819 F. Supp. 1535, 1549-1550 (D. Kan. 1993) (reliance on alleged misrepresentations is unreasonable as a matter of law where the alleged representations are not contained in agreement).
In the instant case, Defendants' reliance upon Kinney's alleged misrepresentation is unreasonable because the subsequent written agreements executed by Defendants clearly and unequivocally did not provide for exclusive development rights. Therefore, defendants' claims for misrepresentation are insufficient as a matter of law and fact. See, Flight Concepts Ltd. Partnership v. Boeing Co., 819 F. Supp. 1535 (D. Kan. 1993); Saunders Leasing System. Inc. v. Gulf Cent. Distrib. Center. Inc., 513 So.2d 1303 (Fla. 2d DCA 1987).
Count Three — Fraud Pursuant to Fla. Stat. § 817.416
Defendants allege that Hardee's violated Fla. Stat. § 817.416 by making certain misrepresentations and certain omissions of fact regarding the prospects or chances of success of the subject franchises. Hardee's argues that this claim must fail for two reasons: (1) the License Agreements have a choice of law provision under which North Carolina law governs and (2) the statute is inapplicable when the franchisee purchases the stores from another franchisee. Defendants' response is that the misrepresentations and omissions upon which the claim is based were made by Hardee's in relation to the Purchase Agreement and not in relation to the License Agreement.
Paragraph XXI.A. of each License Agreement provides: This Agreement takes effect upon its acceptance and execution by LICENSOR in North Carolina, and shall be interpreted and construed under the laws thereof, which laws shall prevail in the event of any conflict of law.
The Court is not persuaded by Defendants' argument. The relationship between Defendants and Hardee's is based upon the License Agreements and the statute can only be applicable because of the franchise relationship. When the parties to a contract have indicated their intention as to the law which is to govern, it [the contract] will be governed in accordance with the intent of the parties. Forzley v. AVCO Corp. Electronics Div., 826 F.2d 974, 978 (11th Cir. 1987) (citations omitted). The law chosen in the contract itself will be applied so long as there is a reasonable relationship between the contract and the state whose law is selected and the selected law does not conflict with Florida law or confer an advantage on a non-resident party which a Florida resident does not have. Forzley, 826 F.2d at 979. See also, Burger King Core. v. Weaver, 798 F. Supp. 684, 690 (S.D. Fla. 1992) (Franchisee's claim for violation of Montana Unfair Trade Practices Act dismissed where choice of law provision in franchise agreements provided that they would be governed by Florida law); Scheck v. Burger King Corp., 756 F. Supp. 543, 550 (S.D. Fla. 1991) (Franchisee's claim under Massachusetts Consumer Protection Act dismissed where parties' agreement provided that Florida law would govern all suits). The Court finds no evidence of fraud or unequal bargaining power. Therefore, the parties' intention to be governed by North Carolina law will be honored.
In the event that the Court found the choice of law provision did not defeat Defendants' statutory claims, Hardee's cited Schubot v. McDonalds Corp., 757 F. Supp. 1351 (S.D. Fla. 1990), for the proposition that the approval of the franchise transfer from Bjurstrom to Defendants does not constitute a sale under Fla. Stat. § 817.416. In Schubot, the plaintiff, Scott Schubot, purchased two restaurants from his father, Richard Schubot. The plaintiffs alleged that Richard Schubot would not have entered into the transactions with his son if the franchisors had not made certain representations. As in the case at bar, the plaintiffs in Schubot brought a claim for violation of Fla. Stat. § 817.416. The court in Schubot found Florida Statute Chapter 817 to be inapplicable because Scott! Schubot purchased the restaurants from his father, not from the franchisor. The same is true for this case. The restaurants were sold to Defendants by Bjurstrom, not Hardee's, therefore, Fla. Stat. § 817.416 is inapplicable.
Count IV — Violation of Fla. Stat. § 501.201-501.213
Defendants allege that Hardee's violated the Florida Deceptive and Unfair Trade Practices Act ("Florida DPTA") and Fla. Admin. Code Ch. 2-17.004. The choice of law provision discussed above precludes Defendants' statutory claim. However, even if the claim was not precluded, the Florida DPTA is limited to consumer transactions. Fla. Stat. § 501.203 defines "Consumer transaction" as
a sale, lease, assignment, award by chance, or other disposition of an item of goods, a consumer service, or an intangible to an individual for purposes that are primarily personal, family, or household or that relate to a business opportunity that requires both his expenditure of money or property and his personal services on a continuing basis and in which he has not been previously engaged, or a solicitation by a supplier with respect to any of these dispositions.
Bennett did not contribute financially to the purchase of the restaurants so there was no expenditure of money on his part. The purpose of the Florida DPTA is to protect the unwary from being "conned" into investing in unsound, fly-by-night business ventures.Black v. Dept. of Legal Affairs, 353 So.2d 655, 656 (Fla. 2d DCA 1977). Hawkins and Kornahrens are sophisticated businessmen who had previously bought and sold franchises, however, their previous franchises were not restaurants. Defendants argue that since the previous franchises were in the automobile industry as opposed to the restaurant industry, the statute is applicable because the definition of "consumer transaction" limits the business opportunity to one in which the consumer "has, not been previously engaged." Hawkins and Kornahrens are experienced businessmen who were previously engaged in a business opportunity with a franchise. They received the UFOC from Hardee's, reviewed profit and loss statements and inspected the restaurants. The Court finds that Hawkins and Kornahrens are not unwary and inexperienced within the context of the statue. The Court concludes that Defendants' claim cannot stand. See, Golden Needles Knitting Glove Co., Inc. v. Dynamic Marketing Enterprises. Inc., 766 F. Supp. 421, 430 (W.D.N.C. 1991); Bryant Heating Air Conditioning Corp. v. Carrier Corp., 597 F. Supp. 1045, 1053-1054 (S.D. Fla. 1984).
Count V — Breach of Contract
Count V alleges that Hardee's breached its agreement regarding the exclusive territorial rights to the Hardee's franchise in Martin, Indian River and Okeechobee Counties, in Palm Beach County, North of PGA Boulevard, South of the Martin County line, East of the Florida Turnpike and West of the Atlantic Ocean, as well as co-development in St. Lucie County. The alleged agreement is in the form of letters attached to the Purchase Agreement as Exhibit F.
Hardee's argues that there is no enforceable contract pertaining to development rights in the four counties because there was no consideration and the contract does not contain a duration term. It is well settled that no agreement can bind one party and not the other. Columbia County Sheriff's Office v. Florida Dept. of Law Enforcement, 574 So.2d 234, 237 (Fla. 1st DCA 1991) (citing 11 Fla. Jur.2d, Contracts § 15 (1979)). In order for a contract to be binding and enforceable it must be definite and certain as to its terms and obligations. Smith v. Smith, 375 So.2d 1138, 1140 (Fla. 3d DCA 1979). Indefiniteness as to the duration of an agreement can be fatal to its being found enforceable as a binding contract. Id. The letters discussed development rights but did not state that these rights would be exclusive. As asserted by Hardee's, there was no consideration and no statement as to the duration of the contract. The Court finds that there is no enforceable contract. The Court, having found that there is no enforceable agreement, does not reach the issue of Defendants' being third-party beneficiaries or assignees.
Hardee's Complaint
In opposition to Hardee's motion for summary judgment on its Complaint, Defendants contend that Bennett and Hawkins are not liable to FFM or HED as they did not enter into a contract with these entities. Defendants also argue that the invoices from FFM were addressed to the corporate entities and not to Bennett and Hawkins individually. Pursuant to Paragraph IV.A.(2) of the License Agreements, Bennett and Hawkins were required to pay Hardee's a monthly royalty of 3.5% of the gross sales of the restaurants. Paragraphs XII.B.(1) and XII.D.(4) of the License Agreements evidence that Defendants were aware that they were required to pay Hardee's subsidiaries, FFM and HED. Defendants do not dispute that they received supplies from FFH and HED nor do they contest the amount Hardee's alleges is owed. Accordingly, the Court finds that summary judgment is appropriate on Hardee's Complaint.
Paragraph XII.B.(1) provides: If LICENSEE fails, refuses, or neglects promptly to either pay any monies owing to LICENSOR or its subsidiaries or affiliates when due or to submit the financial information required by LICENSOR under this Agreement or makes any false statements in connection therewith;
Paragraph XII.D.(4) provides: LICENSEE shall promptly pay all sums owing to LICENSOR and its subsidiaries and affiliates, in the event of termination for any default by LICENSEE, such sums shall include all damages, costs and expenses . . .
III.CONCLUSION
Based upon the foregoing, it is hereby
ORDERED AND ADJUDGED as follows:
1. Plaintiffs, Hardee's Food Systems, Inc., Fast Food Merchandisers, Inc. and HED, Inc.'s, Motion for Summary Judgment on their Complaint against Defendants, Paul Bennett and Jerry Hawkins is GRANTED.
2. Counterdefendant, Hardee's Food Systems, Inc.'s, Motion for Summary Judgment on the Counterclaim of Paul Keith Bennett, Jerry D. Hawkins and John W. Kornahrens is GRANTED.
3. The Clerk is directed to enter judgment in accordance with the foregoing.
DONE AND ORDERED in Chambers at Miami, Florida.