Armstrong Business Services v. H & R Block
| Decision Date | 24 December 2002 |
| Docket Number | No. WD 60348.,WD 60348. |
| Citation | 96 S.W.3d 867 |
| Parties | ARMSTRONG BUSINESS SERVICES, INC., et al., Appellants, v. H & R BLOCK, et al., Respondents. |
| Court | Missouri Court of Appeals |
Bernard J. Rhodes, Kansas City, for Appellants.
Karen R. Glickstein, Kansas City, for Respondent H & R Block.
John J. Allan, Clayton, MO; Jack R. Selzer, Kansas City, MO; Phillip A. Kramer and Stephen H. Rovak, St. Louis, for Respondent Amicus Curiae.
Before PAUL M. SPINDEN, P.J., ROBERT G. ULRICH and EDWIN H. SMITH, JJ.
This appeal involves major franchise agreements between Armstrong Business Services, Inc., et al. (Franchisees) and H & R Block, et al. (Block). Franchisees appeal the trial court's grant of summary judgment in favor of Block declaring that the major franchise agreements are contracts of indefinite duration that may be renewed only if both parties consent and that if the contracts are not renewed, they expire at the end of the current term. The judgment of the trial court is reversed in part and affirmed in part, and the case is remanded for further proceedings.
Franchisees are individuals or companies operating income tax preparation businesses in various states, including Alabama, Florida, Illinois, Iowa, Michigan, New York, Oregon, Virginia, and Washington, under major franchise agreements with Block. Presently, 200 major franchise agreements are in effect between Franchisees and Block. The agreements were executed between 1973 and 1998, and all are in a standard form adopted in 1973.
Under the franchise agreements, Block grants to a franchisee the exclusive right to use its H & R Block service mark and related marks in connection with the franchisee's business of preparing income tax returns and performing related services within a specified geographic area. In return, Block collects a franchise royalty of up to 15% of the franchisee's gross receipts. Additionally, the agreements provide that Block will not compete with a franchisee in the preparation of tax returns or performance of related services within the franchise territory. If Block does perform related services within the franchise territories, a franchisee shall be entitled to receive 55% of the gross receipts from Block's performance of such services.
The franchise agreements do not contain a final expiration date. Rather, Paragraph 18 provides:
TERM OF AGREEMENT.
The term of this Agreement shall run for a period of five years from the date hereof, with further provisions that it shall be automatically renewed for successive periods of five years each, unless mutually terminated or terminated pursuant to paragraph 12.
Paragraph 12 permits Block to terminate the agreement at any time for "any material and substantial breach of the terms" by a franchisee. Thus, the franchise agreements provide for an initial term of five years and for automatic five-year renewals, unless terminated with the consent of the parties or for cause. All 200 agreements have consistently been renewed at least once, except for three agreements that are still in their initial terms. Paragraph 24 of the agreements provides that in the event of the termination of the agreement for any reason other than sale to Block, a franchisee shall sell and Block shall pay a fair and equitable price for the franchisee's business.
In April 1999, Franchisees sued Block for breach of contract and various other claims arising out of Block's sale of tax preparation computer software, including sales over the Internet, within the franchise territories. Block filed a counter-claim seeking a declaration that the franchise agreements were contracts of indefinite duration; that their terms may be renewed only with the consent of both parties; and that if not so renewed, the term of each of the agreements will expire at the end of the current term.
As the litigation in this case proceeded, Block notified Franchisees by letters that it would not consent to further renewals of the franchise agreements and that each agreement would, therefore, expire at the end of its current term. Block further explained that it was prepared to purchase the assets of the businesses as provided in paragraph 24 of the agreements. The letters noted the substantial deterioration of the business relationship of the parties "as we have attempted to do business in an environment characterized by rapidly changing technologies and business opportunities under agreements whose form is more than 25 years old."
Thereafter, Block filed its motion for summary judgment on its counterclaim. Franchisees also filed a motion for summary judgment on Block's counterclaim. The trial court entered an order granting summary judgment in favor of Block. It held that the case, Preferred Physicians Mutual Management Group, Inc. v. Preferred Physicians Mutual Risk Retention Group, Inc., 961 S.W.2d 100 (Mo.App. W.D.1998), controlled the issue of renewal of the franchise agreements. The trial court found that franchise agreements are contracts of indefinite term; that they may be renewed only if both parties consent and that if the contracts are not renewed, they expire at the end of the current term. The trial court certified its order for appeal under Rule 74.01(b) finding that there is no just reason for delay. This appeal by Franchisees followed.
On appeal, Franchisees claim that the trial court erred in granting summary judgment in favor of Block on its counterclaim1 finding that the franchise agreements are contracts for indefinite duration and, thus, effectively terminable at will at the end of a five-year term. Franchisees first contend that the franchise agreements are not for an indefinite duration because the agreements expressly state that they will continue unless terminated by mutual agreement or for cause. Secondly, Franchisees contend that the trial court erred in finding the franchise agreements are for an indefinite duration because the trial court excluded extrinsic evidence showing that Block promoted the franchise agreements as agreements granting permanent and assignable franchises and that the parties have renewed the agreements hundreds of times over the past thirty years without requiring an overt expression of mutual agreement to renew. Finally, Franchisees claim that as to the franchisees holding franchises in the states of Arkansas, Illinois, Iowa, Michigan, Virginia, and Washington, the trial court erred in granting summary judgment in favor of Block to the extent that the decision was based on the application of Missouri law. They contend that the statutory laws in those states prohibit termination of the franchise agreements.
Appellate review of the grant of summary judgment is de novo. ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). Summary judgment will be upheld on appeal if the movant is entitled to judgment as a matter of law and no genuine issues of material fact exist. Id. at 377. The record is reviewed in the light most favorable to the party against whom judgment was entered, according that party all reasonable inferences that may be drawn from the record. Id. Facts contained in affidavits or otherwise in support of a party's motion are accepted as true unless contradicted by the non-moving party's response to the summary judgment motion. Id. at 376.
Before deciding whether the trial court erred in declaring that the franchise agreements in this case are contracts for indefinite duration and, thus, terminable at will at the end of any five-year term, the state law that governs this issue must first be decided. The parties in this case chose the law of the State of Missouri to govern their contractual rights and duties. Paragraph 22 of the franchise agreements, entitled "APPLICABLE LAW," provides, "This agreement shall be construed according to the laws of the State of Missouri; provided, however, no violation hereof shall be deemed a breach of contract if occasioned by the laws or public policy (as judicially decreed) of the State or local governing authority of the franchise territory." The trial court applied Missouri law. Franchisees argue that the laws of the states of Arkansas, Illinois, Iowa, Michigan, Virginia, and Washington should have been applied as to the franchises in those states because those states have a materially greater interest in this controversy and have statutory laws prohibiting termination of the franchise agreements. Franchisees do not disagree that Missouri law applies to the remaining franchises not located in those six states.
A fundamental principle of conflicts is that a forum state will always apply forum procedure, but it will choose the applicable substantive law according to its own conflict of law doctrines. Ernst v. Ford Motor Co., 813 S.W.2d 910, 921 (Mo. App. W.D.1991). Missouri follows the Restatement (Second) of Conflicts of Law (1971) in contract actions. Id. Section 187(1) of the Restatement gives effect to the parties' contractual choice of law "if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue." RESTATEMENT (SECOND) CONFLICT OF LAW § 187(1) (1971). Thus, whether Block and Franchisees could have determined the issue of termination of the contracts by explicit agreement must first be determined.
"Whether the parties could have determined a particular issue by explicit agreement directed to that issue is a question to be determined by the local law of the state selected by application of the rule of § 188." RESTATEMENT (SECOND) CONFLICT OF LAW § 187 cmt. c (1971). If the local law of the state selected by application of section 188, therefore, regulates the...
To continue reading
Request your trial
-
Baum v. Helget Gas Products, Inc.
...the parties' intent is determined by the language of the contract alone, not extrinsic or parol evidence. Armstrong Bus. Servs., Inc. v. H & R Block, 96 S.W.3d 867, 874 (Mo.App. 2002). That the parties disagree about the contract's interpretation does not, by itself, create an ambiguity. Se......
-
George K. Baum & Co. v. Twin City Fire Ins. Co.
...S.W.3d 721, 726 (Mo.2009) (en banc); Bauer v. Farmers Ins. Co., 270 S.W.3d 491, 497 (Mo.Ct.App.2008); Armstrong Bus. Servs., Inc. v. H & R Block, 96 S.W.3d 867, 872 (Mo.Ct.App.2002); In re Estate of Brown, 955 S.W.2d 940, 945 (Mo.Ct.App.1997); Ernst v. Ford Motor Co., 813 S.W.2d 910, 921 (M......
-
Milburn v. Zurich Am. Ins. Co.
...factual dispute seems to concern issues involving the "most significant relationship" test. See Generally Armstrong Business Servs., Inc. v. H&R Block , 96 S.W.3d 867, 872 (Mo. App. W.D. 2002). But, because this Court concludes that Missouri public policy decides this case regardless of cho......
-
Lawn Managers, Inc. v. Progressive Lawn Managers, Inc.
...a party demonstrates "unequivocally" that both parties intended it to run perpetually. See, e.g., Armstrong Bus. Servs., Inc. v. H & R Block, 96 S.W.3d 867, 875 (Mo. Ct. App. 2002). Rather than any such indicator of perpetual intent, both the 2012 divorce decree and the 2014 Judgment expres......