Jensen v. Taco John's Intern., Inc., 96-3233

• Citation: 110 F.3d 525
• Decision Date: 04 April 1997
• Docket Number: No. 96-3233,96-3233
• Parties: Charles J. JENSEN; George Payne, Plaintiffs/Appellants, v. TACO JOHN'S INTERNATIONAL, INC., Defendant/Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

Page 525

110 F.3d 525

Charles J. JENSEN; George Payne, Plaintiffs/Appellants, v. TACO JOHN'S INTERNATIONAL, INC., Defendant/Appellee.

No. 96-3233.

United States Court of Appeals,Eighth Circuit.

Submitted March 13, 1997.

Decided April 4, 1997.

Terry C. Smith, argued, Oakdale, MN, for plaintiffs/appellants.

JoAnne H. Turner, argued, Minneapolis, MN (Lawrence R. Commers, on the brief), for defendant/appellee.

Before MAGILL and MURPHY, Circuit Judges, and GOLDBERG, ¹ Judge.

MURPHY, Circuit Judge.

Appellants Charles J. Jensen and George Payne hoped to obtain from Taco John's International, Inc. (Taco John's) exclusive franchises in the Rochester, Minnesota area. The parties entered into negotiations, but they disagree as to whether an enforceable agreement was ever reached. After Taco John's turned to another party to develop the Rochester area, appellants sued for breach of contract, misrepresentation, and promissory estoppel. The district court ² granted summary judgment to Taco John's. We affirm.

Taco John's operates a chain of Mexican-style restaurants and offers two kinds of arrangements for franchisees. The standard Franchise Agreement permits a franchisee to operate a single store for twenty years on a non-exclusive basis. Taco John's also uses an Area Development Agreement, which gives a franchisee the exclusive right to operate stores in a designated area in return for a firm commitment to open a set number of stores within a specific period of time.

Appellants contacted Taco John's in February of 1993 and expressed interest in becoming franchisees. After preliminary approval of their financial statements, Taco John's asked them to submit a business plan. In a letter soliciting the business plan, Taco John's indicated that several parties were interested in developing the Rochester market and that it would base its franchisee decision on the ability to operate and finance a multi-unit business.

On April 19, 1993, appellants met with Taco John's officials in Cheyenne, Wyoming. Appellants presented a business plan that primarily discussed the opening of a single store, but they also expressed their belief that Rochester could support three stores. Taco John's stated it would like to see four or five stores in the Rochester area. Appellants assured Taco John's that they were willing to commit to four or five stores and that plans for a second store would be "well underway" within 12 months of the opening of the first store. Appellants stated that they would open all stores within a five year period. At the time of this meeting, appellants were not familiar with the specific terms of a Taco John's Area Development Agreement.

Appellants were informed, by a letter dated April 20, 1993, that they had been approved as franchisees. The letter stated that in order to reach their goal of becoming "active" franchisees, appellants would need to complete the site location process, finalize their scheduled management training program, and begin negotiations for financing. In his deposition, Charles Jensen said appellants understood this letter to mean that they "had been approved and would be granted the franchise." Jensen also testified that "things" still had to be talked about, "details had to be specified," and "there was room for negotiation" concerning the specific terms of the Area Development Agreement. He admitted that he knew they would not become franchisees if they did not obtain a site, pay the franchise fees for a specific number of stores, attend training school, or sign a written agreement.

Over the next two months, appellants attempted unsuccessfully to obtain a site for a store, and Taco John's representatives traveled to Rochester to tour sites with them. Taco John's indicated in a letter reviewing potential sites, dated April 30, 1993, that it looked forward to working with appellants to develop the Rochester market and to the opening of their first store. Appellants' purchase bids on three sites were not accepted, however, and another potential site was rejected by Taco John's as too small. In June of 1993 appellants heard that Taco John's had given preliminary approval to another party to develop the Rochester area. They sued, and the district court granted summary judgment to Taco John's.

Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Kopp v. Samaritan Health Sys., Inc., 13 F.3d 264, 268 (8th Cir.1993). Our review is de novo, applying the same standards as the district court. Unigroup, Inc. v. O'Rourke Storage & Transfer Co., 980 F.2d 1217, 1219 (8th Cir.1992). The moving party is entitled to judgment as a matter of law where the nonmoving party has failed to make a significant showing on an essential element of its claim to which it has the burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986).

Appellants allege their communications with Taco John's gave rise to an enforceable contract granting them the exclusive rights to develop restaurants in the Rochester area. Although no written contract was ever signed, appellants contend the terms of the contract include the standard form Franchise Agreement, the standard form Area Development Agreement, and the oral conversations between the parties. Taco John's, on the other hand, contends that appellants have mistaken preliminary negotiations for an enforceable contract.

Under Minnesota law, an enforceable...