R.G. Group, Inc. v. Horn & Hardart Co.
| Decision Date | 11 December 1984 |
| Docket Number | D,No. 48,48 |
| Citation | 751 F.2d 69 |
| Court | U.S. Court of Appeals — Second Circuit |
| Parties | R.G. GROUP, INC., and R.G. Restaurant Associates, Plaintiffs-Appellants, v. The HORN & HARDART COMPANY, and Bojangles' of America, Inc., Defendants-Appellees. ocket 84-7342. |
Jared Specthrie, New York City (Milberg Weiss Bershad Specthrie & Lerach, New York City, of counsel), for defendants-appellees.
Arthur S. Olick, New York City (Anderson, Russell, Kill & Olick, P.C., New York City, of counsel), for plaintiffs-appellants.
Before LUMBARD, OAKES and PRATT, Circuit Judges.
Plaintiffs R.G. Group, Inc. and R.G. Restaurant Associates appeal from a judgment of the United States District Court for the Southern District of New York, Mary Johnson Lowe, Judge, granting defendants' motions for summary judgment in an action based on breach of contract and promissory estoppel. Plaintiffs claim to have made an oral agreement with the defendants, Bojangles' of America, Inc., and its parent corporation, The Horn & Hardart Company, in which plaintiffs gained the exclusive right to develop and operate some twenty "Bojangles' Famous Chicken 'N Biscuits" fast-service restaurants in the southern half of Houston, Texas. Defendants deny that such an agreement was ever concluded. In granting summary judgment for defendants, the district court determined that the parties had intended to be bound only by a written contract, and that no written contract was ever executed; that the alleged oral agreement was, in any event, subject to the statute of frauds, and that the statute of frauds was not satisfied by the writings put forward by the plaintiffs; and that there was nothing to support a claim based on promissory estoppel. We affirm.
Under our law of contracts parties are free, within certain limits, to set the conditions under which their agreements will become binding. Sometimes an oral promise or handshake is all that is needed, but when substantial sums of money are at stake it is neither unreasonable nor unusual for parties to require that their contract be entirely in writing and signed before binding obligations will attach. In the present case the parties set exactly that requirement, and they did so in such a forthright, plain manner that there is no issue left to be tried. The case does not even present much of a cautionary tale: its lesson is simply that when experienced businessmen and lawyers are told explicitly and clearly that a major and complex agreement will be binding only when put in writing, then they should be rather cautious about assuming anything different.
Defendant Bojangles' of America, Inc. ("Bojangles' "), a subsidiary of The Horn & Hardart Company ("Horn & Hardart"), owns or franchises approximately 141 fast-service restaurants. A franchisee has the right to use the trademarks "Bojangles' " and "Bojangles' Famous Chicken 'N Biscuits", and becomes part of a system of restaurants using standardized designs, color schemes, menus, cooking and operating procedures. A Bojangles' development franchisee develops and owns anywhere from five to twenty Bojangles' restaurants, each of which operates under a twenty-year license.
In late May or early June of 1982 the president of Bojangles', Jack Z. Fulk, Sr., met with Richard Gillman to discuss Gillman's interest in obtaining a Bojangles' development franchise. Since the initial discussion and follow-up contacts appeared promising, Gillman formed a limited partnership, R.G. Restaurant Associates ("RG Associates"), in the expectation that it would become a development franchisee, and a corporation, R.G. Group, Inc. ("RG Group"), to serve as its general partner. Gillman is the president and chief executive officer of RG Group.
Either at the first meeting with Gillman or immediately thereafter, Bojangles' gave Gillman a copy of its standard form development franchise agreement and advised him that only slight modifications in it could be made. That form is a twenty-page, single spaced document containing complex provisions. Its second sentence states "This is your Development Franchise Agreement; when duly executed it sets forth your rights and your obligations to BOJANGLES' and BOJANGLES' rights and obligations to you". Its general provisions include requirements that the entire agreement, and any modifications, be in writing and signed by the parties:
This Development Franchise Agreement together with all the Appendices and exhibits annexed hereto contain the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior negotiations and oral understandings between the parties hereto, if any. There are no agreements, representations, or warranties other than those set forth, provided for or referred to herein.
* * *
* * *
Neither this Development Franchise Agreement nor any provisions hereof may be modified, waived, discharged or terminated, in whole or in part, except by a writing signed by the parties hereto * * *.
This standard form agreement has blank spaces where the parties must fill in certain key provisions, including the development schedule specifying the time in which a franchisee would be required to develop the franchise area, and a description of the area itself. The importance of the development schedule is emphasized by the fact that, under the standard agreement, failure to meet the schedule would be a ground for default.
Although Gillman hoped to have the standard form agreement modified in various ways, execution of that agreement was still seen as essential at the time when partnership units in RG Associates were offered. The private placement memorandum for RG Associates, dated September 10, 1982, states:
In the ordinary course of its business (subsequent to the execution of the Development Franchise Agreement), the Partnership shall on an exclusive basis develop, own and operate the number of "Bojangles' Famous Chicken 'N Biscuits" restaurants for the term and within the Houston, Texas, area. The exact geographic limits of the market area are subject to final agreement with Bojangles' of America, Inc., and will be set forth in the Development Franchise Agreement to be executed by the General Partner on behalf of the Partnership.
The exact territory to be developed was a matter of ongoing discussion. In a letter dated September 30, 1982, Bojangles' franchise development director, Ronald Basinger, sent RG Group a proposal for the Houston, Texas area, explaining that "we are basically talking about the Harris County area as representing the territory; however, there is such tremendous growth to the southwest that we would also include in Mr. Gillman's territory the Fort Bend County area." Basinger enclosed what he called "a rough copy of our proposed breakdown for the [territory]." The "rough copy" was a map with two heavy lines drawn on it indicating inner boundaries between three areas of Houston, but not indicating any outer boundaries. The letter closed by asking, "Once you have received this information, please contact me at your convenience and we will review this data."
The record does not indicate whether RG Group responded to this proposal, but in an October 19, 1982, letter Basinger again wrote to RG Group about the "proposed area", referring to it as "the southern half of Harris County" and saying that "we would also give [Gillman] the rights to Fort Bend." Basinger wrote that "it is imperative that we all get together and finalize this territory in order that we may begin our development in the Houston area."
On November 30, 1982, John McNeill, one of RG Group's attorneys, wrote to Bojangles' attorney "confirming in writing the areas of agreement, as well as those items still open for discussion which, hopefully, will be resolved". Still unresolved were the exact territory boundaries and the development schedule. The letter states that "a finalization of both the development schedule and the territory designations" would be taken up at a future meeting with Bojangles' president. The McNeill letter closed by saying,
We hope to be meeting with Mr. Schupak [attorney for Bojangles' and Horn & Hardart] and yourself as soon as possible to resolve all outstanding issues and to reduce our agreement to writing.
On December 2, 1982, Ronald Winarick, the chief operating officer of RG Associates, met with Bojangles' president, Jack Fulk, in an attempt to reach agreement. Winarick testified on deposition:
Q. Was the deal closed on December 2nd?
A. No, it was not.
Q. Were there issues that remained outstanding?
A. Yes, there were.
Q. What issues remained outstanding?
A. Most favored nations clause, franchise fee, there might have been--yes, those are the major--territory. And territory.
Q. The territory?
A. The boundaries, final boundaries.
Q. The boundaries of the territories determined where the individual stores would be, is that correct?
A. Not the exact locations. The boundaries are the square miles, total square miles.
Q. So at the conclusion of that meeting on December 2nd, there was still no agreement as to the scope of the boundaries, is that correct?
A. Not between myself and them, no.
Winarick agreed that the specification of the territory was "an important term of the agreement".
The next day, December 3rd, Winarick telephoned Fulk. Winarick's deposition testimony was the following:
Q. Why did you telephone him?
A. I wanted to discuss with him once more those points.
Q. Were you still attempting to get his agreement on those points?
A. Yes, I was.
Q. Did you get his agreement on those points?
A. No, I did not.
Q. I'm sorry. Maybe I didn't hear your answer. Was it one telephone conversation or two that you had with Mr. Fulk following that meeting of December 2nd?
A. I think it was two.
Q. Can you separate those telephone conversations in your mind?
A. No.
Q....
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