931 F.2d 56 (6th Cir. 1991), 90-3272, Neufer v. Video Greetings, Inc.

Docket Nº:90-3272.
Citation:931 F.2d 56
Party Name:Kenneth E. NEUFER, Plaintiff-Appellant, v. VIDEO GREETINGS, INC., Harmon Cogert, Defendants-Appellees.
Case Date:April 26, 1991
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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Page 56

931 F.2d 56 (6th Cir. 1991)

Kenneth E. NEUFER, Plaintiff-Appellant,

v.

VIDEO GREETINGS, INC., Harmon Cogert, Defendants-Appellees.

No. 90-3272.

United States Court of Appeals, Sixth Circuit

April 26, 1991

         Editorial Note:

         This opinion appears in the Federal reporter in a table titled "Table of Decisions Without Reported Opinions". (See FI CTA6 Rule 28 and FI CTA6 IOP 206 regarding use of unpublished opinions)

        On Appeal from the United States District Court for the Northern District of Ohio, No. 87-00361; Krenzler, J.

        N.D.Ohio

        VACATED AND REMANDED.

        Before KENNEDY and RYAN, Circuit Judges, and FEIKENS, Senior District Judge. [*]

        PER CURIAM:

        Kenneth Neufer ("plaintiff") brought suit against Video Greetings, Inc. ("VGI") and its president, Harmon Cogert, alleging several claims arising out of a breach of a franchise and purchase agreement relating to video booths. VGI counterclaimed to enforce the terms of the parties' agreement. After a bench trial, the court held against plaintiff on its claims and for VGI on its counterclaim. For the following reasons, we VACATE the decision of the District Court and REMAND for further proceedings.

        I.

        A.

        On February 17, 1987, plaintiff filed suit against VGI and Harmon Cogert ("Cogert"), president of VGI, in his personal capacity. Plaintiff made numerous allegations: that VGI breached its contract with plaintiff (counts 1 & 2); that VGI interfered with a business opportunity plan in violation of Ohio law (count 3); that VGI and Cogert fraudulently misrepresented various aspects of the booths and franchises (count 4); that VGI and Cogert violated Ohio's deceptive trade practices law (count 5); and that the contract between VGI and plaintiff is unenforceable because it is an adhesion contract (count 6). Based on these allegations, plaintiff sought recission of the contract and restitution, monetary damages and attorney's fees. Plaintiff thereafter withdrew voluntarily count 3. VGI counterclaimed against plaintiff for the remaining amount owed for one of the booths sold to plaintiff.

        On April 17, 1987, plaintiff moved pursuant to Federal Rules of Civil Procedure 65 for a preliminary injunction against defendants in the nature of an order sequestering $34,900.00, the amount necessary to satisfy plaintiff's requested remedy of restitution. Plaintiff made this motion based upon statements indicating that VGI was having financial difficulties. On September 25, 1987 and in response to this motion, VGI presented to the District Court its balance sheet and statement of income for the financial year ended as of May 31, 1987. These financial documents were compiled by an accounting firm 1 and showed that plaintiff was solvent as of May 31, 1987. On October 30, 1987, the District Court denied plaintiff's motion.

        A trial was conducted on March 22, 1989. Immediately prior to the beginning of trial, Cogert informed the court that VGI was insolvent and therefore judgment-proof. After a bench trial, the District Court dismissed counts 4, 5 and 6 against VGI and all counts against Cogert. The District Court granted judgment in favor of VGI on counts 1 and 2 of plaintiff's complaint, and granted judgment in favor of VGI on its counterclaim. Plaintiff filed this timely appeal.

        B.

        VGI is a corporation which manufactures booths containing specialized video equipment for the purpose of providing an economic and efficient method of correspondence using a video cassette medium. To promote the sale of these booths, VGI assigned "exclusive territories" to its customers. It advertised its product and services in several publications including the Wall Street Journal. Plaintiff, an Ohio resident with little business experience, responded to one of these advertisements and sought to establish a franchise. The parties executed a contract on November 21, 1986. Under the relevant terms of the agreement, VGI granted plaintiff an exclusive operating territory in parts of Ohio in exchange for plaintiff's promise to purchase ten booths at $15,000 per booth over a nine-month period. Plaintiff signed a customer order for two booths at the time this contract was executed.

        The documents constituting the parties' contract contain several warranties made by VGI concerning the booths. On the reverse side of the customer order, VGI warrants the following:

        THE FOREGOING WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

        Joint.App. at 81. A separate document also provides a warranty by VGI that is longer in duration but more limited in scope:

        The quality in the design and manufacture of [VGI's] products is unsurpassed. Consequently, as the only manufacturer in this industry we provide warranty coverage to all our customers.

        VIDEO GREETINGS, INC. warrants its systems to be free from defects in material and workmanship, that affects its functionability, for a period of one year of normal and ordinary use....

        VIDEO GREETINGS, INC. or its authorized representatives will replace or repair (at Video Greeting's option) any defective materials except in cases...

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