Barnes v. Burger King Corp.

• Decision Date: 29 March 1996
• Docket Number: No. 94-0889-CIV.,94-0889-CIV.
• Citation: 932 F. Supp. 1420
• Parties: Zuri BARNES, Plaintiff, v. BURGER KING CORPORATION, a Florida corporation, Defendant.
• Court: U.S. District Court — Southern District of Florida

932 F. Supp. 1420

Zuri BARNES, Plaintiff, v. BURGER KING CORPORATION, a Florida corporation, Defendant.

No. 94-0889-CIV.

United States District Court, S.D. Florida.

March 29, 1996.

COPYRIGHT MATERIAL OMITTED

Zarco & Associates, P.A. by Robert Zarco, and Robert M. Einhorn, Miami, FL, for Plaintiff.

Gallwey, Gillman, Curtis, Vento & Horn, P.A. by Don L. Horn, Miami, Florida, Whitman Breed Abbott & Morgan, New York City, for Burger King Corporation.

ORDER AFFIRMING MAGISTRATE'S REPORT AND RECOMMENDATION

UNGARO-BENAGES, District Judge.

THIS CAUSE came before the Court upon Defendant Burger King Corporation's Motion for Summary Judgment filed August 2, 1995 (D.E.124) and Defendant Burger King Corporation's Motion for Reconsideration filed October 23, 1995. (D.E.172).

THE MATTER was referred to the Honorable Ted E. Bandstra, United States Magistrate Judge. Two Report and Recommendations dated October 13, 1995 (D.E.170) and January 5, 1996 (D.E.195) have been filed, recommending that Defendant's Motion for Summary Judgment be granted as to Counts I, IV, V, VI and VII of the Complaint and denied as to Counts II and III and later recommending that Defendant's Motion for Reconsideration be granted and Count III be dismissed for failure to state a cause of action. The parties have filed Objections to the Magistrate Judge's Reports for this Court's consideration. This matter is ripe for disposition.

THIS COURT has made a de novo review of the entire file and record herein, and being otherwise fully advised in the premises, it is

ORDERED and ADJUDGED that United States Magistrate Judge Bandstra's Report and Recommendation of January 17, 1996 is AFFIRMED as to its recommendations regarding Defendant Burger King's Motions for the reasons set forth below.

I. FACTS

This case arises out of a franchise agreement between Plaintiff Zuri Barnes ("Barnes") and Defendant Burger King Corporation ("Burger King") pursuant to which Barnes opened a Burger King restaurant in downtown Los Angeles, California. The undisputed facts are as follows.

Barnes is a sophisticated businessman who was also the franchisee of two Kentucky Fried Chicken restaurants. In or about September of 1991, Barnes and Burger King entered into negotiations for the opening of a restaurant. Thereafter, on May 13, 1991, Barnes completed a franchise application and received Burger King's Uniform Franchise Offering Circular ("UFOC") which detailed Burger King's policies and procedures. The UFOC provides, in pertinent part:

A franchisee agrees to operate the Burger King franchised restaurant at a specific location. A franchisee receives no radius, area or territorial exclusivity. BKC may, in its discretion, establish additional Burger King restaurants operated by BKC and/or other BKC franchisees in the vicinity of a franchisee's restaurant. A Burger King franchised restaurant competes with other restaurant businesses which may include Burger King restaurants operated by BKC and other Burger King franchisees ...

* * * * * *

BKC has occasionally granted area development agreements in order to generate or expand heretofore undeveloped but potential market areas. Such agreements may only be granted, in writing, by authorization of the President of BKC for a specific term and would usually contain a strict schedule expediting the development of the area. Absent other agreed upon contractual arrangements, exclusivity would preclude the establishment of company owned or other franchisee-owned outlets in the area defined by the written document.

UFOC ¶ 12, p. 12-1 (emphasis added).

After submitting his franchise application and receiving the UFOC, Barnes expressed concerns about the possibility of other Burger King restaurants opening in close proximity to his location. Accordingly, on or about July 21, 1992, Barnes and his real estate broker, Michael G. O'Brien, met with Jeffrey G. Harding, Burger King's sales and service manager for the downtown Los Angeles area, to discuss Barnes' concerns. There is some dispute as to what, exactly, Barnes intended to accomplish at the meeting, but it is undisputed that, after that meeting, on July 21, 1992, Harding sent a letter to (hereinafter "the July 21 letter") O'Brien stating that Burger King had a "good faith policy" within the franchise community of not allowing other franchisees to develop Burger King restaurants within a two mile radius of an existing Burger King restaurant absent "extenuating circumstances." See Exhibit B of the Complaint. Barnes was not copied on the letter, but Barnes received a copy of it from O'Brien before executing the Franchise Agreement.

In or about October of 1992, Charles Dooley, Burger King's Vice President, became aware of Harding's July 21 letter to O'Brien about Burger King's "good faith policy." Dooley immediately contacted Harding and advised him that Burger King had no such "two mile" policy. He then instructed Harding to write a letter to O'Brien "clarifying" Burger King's encroachment policy. On October 7, 1992, Harding wrote a letter (hereinafter "the October 7 letter") advising O'Brien that Burger King's policy did not prevent Burger King from building restaurants "wherever we feel there is a potential customer base to support the viability of all parties concerned," and that Burger King often viewed downtown communities with walking clientele different from areas where customers primarily drove to the restaurants. See Exhibit C of the Complaint. It is undisputed that Barnes was not copied on this letter, although there is some dispute as to whether Harding was specifically instructed not to copy Barnes. Harding has testified that Dooley specifically told him not to send a copy of the October 7 letter to Barnes. Barnes has testified that he did not know about the October 7 letter until after he signed the Franchise Agreement and completed construction of the his Burger King franchise, and he further testified that he would not have proceeded with construction of his franchise if he had known that Burger King had any plans to permit other Burger King franchises in the vicinity of his restaurant.

On December 11, 1992, Barnes signed the Franchise Agreement with Burger King without the assistance of an attorney. The Franchise Agreement provides, in pertinent part:

BKC grants to FRANCHISEE and FRANCHISEE accepts a franchise for a period of Twenty (20) years to use the Burger King System and the Burger King Marks only in the operation of a Burger King Restaurant ("Franchised Restaurant") at 710 South Broadway, Los Angeles, California ... This franchise is for the specified location only and does not in any way grant or imply any area, market or territorial rights proprietary to FRANCHISEE.

* * * * * *

This Agreement, together with the Franchise Application, Management Commitment Form and Capitalization Plan submitted by FRANCHISEE to BKC upon which BKC is relying in granting this franchise, constitute the entire agreement of the parties and supersedes all prior negotiations, commitments, representations and undertakings of the parties with respect to the subject matter of this Agreement.

Franchise Agreement ¶¶ 1, 19(K); see Exhibit A of the Complaint.

During the time that Barnes was in the process of negotiating and finalizing his franchise plans with Burger King, Burger King was negotiating with Jay and Clara Shin. Mr. Shin testified that he and his wife, who already owned one Burger King franchise together, had advised Burger King that they were interested in expanding and that, in approximately August of 1992, they informed David Kautz, a Burger King Development Manager, that they were interested in opening a Burger King restaurant in downtown Los Angeles, approximately five blocks from Barnes' location. In September of 1993, Burger King advised Barnes in writing that it anticipated its approval of the Shin franchise five blocks from his location in downtown Los Angeles. Barnes objected in a letter to Burger King on September 17, 1993 stating that the encroaching restaurant would have an impact of as much as 50% on his business. Burger King eventually informed Barnes in late January of 1994 that, "given all the facts," it believed that Barnes' concerns about the Shin restaurant were not justified. The Shin franchise opened in July, 1994. Subsequently, in June, 1995, Barnes closed his Burger King restaurant claiming he was forced to do so because of substantial losses sustained as a result of the opening of the Shin Burger King.

II. PROCEDURAL BACKGROUND

On May 5, 1994, Barnes filed a Complaint for Preliminary Injunctive Relief, Permanent Injunctive Relief and Damages against Burger King. The Complaint consists of eight counts against Burger King: (1) Fraud in the Inducement; (2) Violation of the Florida Franchise Act; (3) Violation of the Florida Sale of Business Opportunities Act; (4) Breach of the Implied Covenant of Non-Competition; (5) Breach of the Implied Covenant of Good Faith and Fair Dealing; (6) Breach of Contract; (7) Promissory Estoppel; and (8) a Request for Preliminary and Permanent Injunctive Relief. The undersigned entered an Order on Barnes' Motion for Preliminary Injunctive Relief on September 19, 1994, affirming the Magistrate Judge's Report and Recommendation and denying Barnes' motion on the grounds that Barnes had not satisfied the four requisite elements for preliminary injunctive relief, specifically, Barnes had not made a sufficient showing of irreparable harm. See D.E. 57.

Subsequently, on August 2, 1995, Burger King filed the Motion for Summary Judgment now before the Court. The Magistrate Judge issued a Report and Recommendation, dated October 13, 1995, recommending that Burger King's Motion be granted as to Counts I, IV, V, VI and VII and denied as to Counts II and III ("the October 13 Report"). Burger King then moved, on October 13, 1995, for reconsideration as to Counts II and III upon which the Magistrate Judge issued a Supplemental...