Kms Restaurant Corp. v. Wendy's Intern., Inc.

• Decision Date: 04 March 2004
• Docket Number: No. 03-10759.,03-10759.
• Citation: 361 F.3d 1321
• Parties: KMS RESTAURANT CORP., a Florida corporation, Frederick J. Keitel, III, Plaintiffs-Appellants, v. WENDY'S INTERNATIONAL, INC., an Ohio corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

361 F.3d 1321

KMS RESTAURANT CORP., a Florida corporation, Frederick J. Keitel, III, Plaintiffs-Appellants, v. WENDY'S INTERNATIONAL, INC., an Ohio corporation, Defendant-Appellee.

No. 03-10759.

United States Court of Appeals, Eleventh Circuit.

March 4, 2004.

Edna L. Caruso, Caruso, Burlington, Bohn & Compiani, P.A., West Palm Beach, FL, for Plaintiffs-Appellants.

Chilton Davis Varner, Dwight J. Davis, King & Spalding, Atlanta, GA, Walter J. Tache, Zuckerman, Spaeder, Taylor & Evans, LLP, Miami, FL, Michael J. Canter, William D. Kloss, Jr., Vorys, Sater, Seymour & Pease, LLP, Columbus, OH, for Defendant-Appellee.

Appeal from the United States District Court for the Southern District of Florida.

Before EDMONDSON, Chief Judge, CARNES, Circuit Judge, and MILLS^*, District Judge.

CARNES, Circuit Judge:

More than a decade ago KMS Restaurant Corporation began attempting to purchase 27 Wendy's Old Fashioned Hamburger restaurants in Florida from Citicorp, North America, Inc. Because the restaurants are franchises of Wendy's International, Inc., the purchase contract was contingent on Wendy's approval of KMS as a franchisee. Ultimately Wendy's did not approve KMS, the contract with Citicorp failed and, in keeping with the spirit of the times, litigation followed. This appeal involves KMS' claim that Wendy's tortiously interfered with KMS' contract with Citicorp, which is a part of one of the many lawsuits that resulted.

The essential procedural fact for present purposes is that the district court, in granting summary judgment against KMS on its claim of tortious interference, rejected KMS' theory that Wendy's could be liable because it used improper methods even though its motive was not solely malicious. The district court's ruling was based on a misunderstanding of a statement about Florida law on tortious interference contained in a recent decision of this Court. Because we believe that KMS' theory is viable under Florida law, we will remand to the district court for further proceedings. Before we do that, however, we need to deal with the issue of whether KMS' primary shareholder, Rick Keitel, has standing to continue in this litigation in his personal capacity. We agree with the district court that he does not.

I.

A number of related lawsuits were brought as a result of the events we have just described. The particular lawsuit with which we are concerned was initiated in July 1995, when KMS and Keitel filed suit in a Florida state court against Wendy's and Citicorp. The complaint contained three counts. Count I alleged that Wendy's tortiously interfered with Keitel and KMS' contract to buy Citicorp's 27 restaurants. Count II alleged that Wendy's tortiously interfered with the advantageous business relationship that existed between Keitel and his business partners, Martin J. Abel and Melvin B. Seiden, with whom Keitel had incorporated KMS. Count III alleged that Citicorp breached its duty to act in good faith when it refused to sell the restaurants to Keitel and KMS after Wendy's declined to approve them as franchisees.

The case was removed to federal court based on diversity jurisdiction. Citicorp eventually settled; Count III was dismissed; Citicorp was dropped from the lawsuit. The district court granted summary judgment to Wendy's as to the other two Counts in July 1998. KMS and Keitel appealed.

In February 2000, a panel of this Court issued an unpublished opinion. KMS Rest. v. Wendy's Int'l (KMS I), No. 98-5336, 2000 WL 177629 (11th Cir. Feb. 2, 2000). As to Count I, in KMS I this Court held that the district court had relied too heavily on a single case in interpreting Florida law. We concluded "that a franchisor's privilege [to interfere] is limited and qualified" and remanded for reconsideration in light of several decisions of the Florida courts.

As to Count II, in KMS I we agreed with the district court that Keitel and KMS were essentially seeking compensation on the ground that Wendy's actions had made it more expensive for them to do business with Abel and Seiden. We concluded, as had the district court, that Keitel and KMS were seeking relief under § 776A of the Restatement (Second) of Torts and that, because the Florida courts have not adopted § 766A, their claim failed.

On remand, Wendy's again moved for summary judgment as to Count I, the tortious interference claim. It did so based on this Court's then newly-issued published opinion in Ernie Haire Ford, Inc. v. Ford Motor Co., 260 F.3d 1285 (11th Cir.2001). Interpreting the Ford decision to mean that Wendy's "privilege to interfere is qualified only where malice is the sole basis for interference," the district court again granted summary judgment to Wendy's. It reasoned that Wendy's "sole basis for interference" was not malicious since Wendy's had legitimate business reasons for acting. The district court also suggested, but did not decide, that an affidavit of Keitel relating to the tortious interference claim was probably inadmissible. It simultaneously ruled that because of the demise of Count II Keitel lacked standing to continue the lawsuit in his personal capacity. Keitel and KMS appealed. This is that appeal.

II.

We review de novo the district court's conclusion that Keitel does not have standing to litigate the only claim remaining in this case. London v. Wal-Mart Stores, Inc., 340 F.3d 1246, 1251 (11th Cir.2003). The original complaint named both Keitel and KMS as plaintiffs, and both Wendy's and Citicorp as defendants. As we have mentioned, the claim against Citicorp has been settled. The claim that Wendy's interfered with an advantageous business relationship between Keitel and his business partners has been resolved through a grant of summary judgment in favor of Wendy's, which was affirmed during a prior appeal. KMS I, No. 98-5336 at 12-13, 2000 WL 177629. That leaves only the tortious interference claim under review in this appeal.

The following facts are necessary to understand why we resolve the issue of Keitel's standing against him. On November 21, 1991, Keitel wrote a letter to Citicorp which expressed his intent "on behalf of a venture to-be-formed with Omni Capital Group, Ltd., and/or its principal(s)" to buy the 27 restaurants from Citicorp. Six days later he wrote a second letter which amended the first.¹ These two letters are collectively referred to as the "letter of intent." Next, Keitel formed KMS with a principal of Omni Group and with Abel and Seiden. KMS then signed an Asset Purchase and Sale Agreement with Citicorp. That agreement is the contract with which Wendy's allegedly tortiously interfered. It is undisputed that Keitel is not personally a party to the agreement.

Keitel argues that he has standing because of rights granted to him in the letter of intent and admits that his argument is contingent on the letter of intent not being superseded by the subsequent agreement. We doubt that the letter of intent created any rights at all, but to the extent that it did those rights were created for KMS, i.e., the "venture to-be-formed," not for Keitel individually. In the first two paragraphs of the November 21 letter the parties to the agreement are identified as Citicorp and the venture to-be-formed. Likewise, the agreement itself states that the parties to it are Citicorp and KMS, who it tells us "are parties to that certain letter of intent as dated as of November 21, 1991, as amended by letter dated as of November 27, 1991." The agreement also includes a clause that supersedes "any and all prior agreements and understandings relating to the subject matter of this agreement," including the letter of intent. And it was Keitel, not someone unaware of the letter of intent, who signed the agreement on behalf of KMS in his capacity as its chairman.

Any rights created by the letter of intent belonged to KMS, and it exercised them when Keitel, as its chairman, signed the agreement which superseded the letter of intent. Keitel's position that he obtained individual rights which he retains to this day cannot survive even a cursory reading of the letter of intent and the agreement. Because Keitel has no rights of his own under the letter of intent or the agreement, he lacks standing to pursue on his own behalf the tortious interference claim. Cf. Superior Ins. Co. v. Libert, 776 So.2d 360, 365 (Fla. 5th DCA 2001) ("If a party assigns his rights, he has no standing to file suit."). And, of course, Keitel in his individual capacity cannot pursue a claim on behalf of KMS. See Stevens v. Lowder, 643 F.2d 1078, 1080 (5th Cir. Unit B. Apr.1981)² ("An action to redress injuries to a corporation cannot be maintained by a shareholder in his own name but must be brought in the name of the corporation. The shareholder's rights are merely derivative and can be asserted only through the corporation."). KMS is the proper plaintiff for this claim. Keitel is not. He lacks standing to assert it.

III.

We turn now to KMS' allegation that Wendy's tortiously interfered with KMS' contract with Citicorp to buy the 27 restaurants. Basically, KMS alleges that Wendy's tortiously interfered by taking certain steps to destabilize KMS' corporate structure and then used that lack of stability as grounds for denying KMS franchisee approval, thereby enabling Wendy's to buy the restaurants itself. The basis of the district court's latest rejection of KMS' claim is its interpretation of our decision in Ernie Haire Ford, Inc. v. Ford Motor Co., 260 F.3d 1285 (11th Cir.2001), which involved Florida law.

This is a diversity case in which the parties agree that Florida's substantive law governs. That means we must decide the case the way it appears the Florida Supreme Court would decide it. In the absence of any Florida Supreme Court decisions close enough on point, we look to decisions of the Florida intermediate appellate courts and follow them unless there is some really persuasive indication that the Florida Supreme Court would go the...