Broussard v. Meineke Discount Muffler Shops, Inc.

• Decision Date: 09 October 1996
• Docket Number: No. 3:94-CV255-P.,3:94-CV255-P.
• Citation: 945 F.Supp. 901
• Court: U.S. District Court — Western District of North Carolina
• Parties: Kelly BROUSSARD, Jim Stephens, Mark Zuckerman, Arnold Fischthal, John Hagar, Sal Lobello, Vincent Matera, Denis and Mary Ann Wickham, Ralph Yarusso and Kenex Corp., on Behalf of themselves and all others similarly situated, Plaintiffs, v. MEINEKE DISCOUNT MUFFLER SHOPS, INC., New Horizons Advertising, Inc., GKN Parts Industries Corp., GKN PLC, Ronald Smythe, Gene Zhiss and Ted Pearce, Defendants.

945 F.Supp. 901

Kelly BROUSSARD, Jim Stephens, Mark Zuckerman, Arnold Fischthal, John Hagar, Sal Lobello, Vincent Matera, Denis and Mary Ann Wickham, Ralph Yarusso and Kenex Corp., on Behalf of themselves and all others similarly situated, Plaintiffs, v. MEINEKE DISCOUNT MUFFLER SHOPS, INC., New Horizons Advertising, Inc., GKN Parts Industries Corp., GKN PLC, Ronald Smythe, Gene Zhiss and Ted Pearce, Defendants.

No. 3:94-CV255-P.

United States District Court, W.D. North Carolina, Charlotte Division.

October 9, 1996.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Thomas J. Ashcraft, Charlotte, NC, James J. McCabe, John J. Soroko, Elise E. Singer, Wayne A. Mack, Jr., Duane, Morris & Heckscher, Philadelphia, PA, for Kelly Broussard, Jim Stephens, Mark Zuckerman, Arnold Fischthal, John Hagar, Sal Lobello, Vincent Matera, Dennis Wickham, Mary Ann Wickham, Kenex Corporation.

Catherine E. Thompson, E. Osborne Ayscue, Jr., Smith, Helms, Mulliss & Moore, Charlotte, NC, Fred T. Lowrance, I. Faison Hicks, Parker, Poe, Adams & Bernstein, Charlotte, NC, Erik B. Wulff, Ellen R. Lokker, Reed Smith Shaw & McClay, Washington, DC, Victor S. Friedman, Fried, Frank, Harris, Shriver & Jacobson, New York City, John F. Dienelt, Hogan & Hartson, L.L.P., Washington, DC, for Meineke Discount Muffler Shops, Inc., New Horizon Advertising Inc., GKN Parts Industries.

Catherine E. Thompson, E. Osborne Ayscue, Jr., Smith, Helms, Mulliss & Moore, Charlotte, NC, I. Fasion Hicks, Parker, Poe, Adams & Bernstein, Charlotte, NC, Erik B. Wulff, Ellen R. Lokker, Reed Smith Shaw & McClay, Washington DC, Michael Kuhn, Bracewell & Patterson, Houston, TX, Victor S. Friedman, Fried, Frank, Harris, Shriver & Jacobson, New York City, John F. Dienelt, Hogan & Hartson, L.L.P., Washington, DC, for GKN.

Catherine E. Thompson, E. Osborne Ayscue, Jr., Smith, Helms, Mulliss & Moore, Charlotte, NC, Fred T. Lowrance, Parker, Poe, Adams & Bernstein, Charlotte, NC, Erik B. Wulff, Ellen R. Lokker, Reed Smith Shaw & McClay, Washington DC, Victor S. Friedman, Fried, Frank, Harris, Shriver & Jacobson, New York City, John F. Dienelt, Hogan & Hartson, L.L.P., Washington, DC, for PLC, Ronald Smythe, Gene Zhiss, Ted Pearce.

Catherine E. Thompson, E. Osborne Ayscue, Jr., Smith, Helms, Mulliss & Moore, Charlotte, NC, Charles E. Lyons, DeLaney and Sellers, P.A., Charlotte, NC, for Michigan Franchisees.

Thomas J. Ashcraft, Charlotte, NC, James J. McCabe, Duane, Morris & Heckscher, Philadelphia, PA, for Ralph Yarusso.

MEMORANDUM OF DECISION & ORDER

ROBERT D. POTTER, Senior District Judge.

THIS MATTER arises out of Franchise and Trademark Agreements ("FTAs") between the Plaintiffs and Meineke Discount Muffler Shops, Inc. (hereinafter "Meineke" or "MDMS").

I. BACKGROUND

Sections I and II of the Court's Memorandum of Decision & Order in response to Plaintiffs' Motion for Summary Judgment summarize the background and pertinent facts. Accordingly, the Court incorporates by reference the background and facts contained in sections I and II of the Court's Memorandum of Decision and Order in response to Plaintiffs' Motion for Summary Judgment.

II. FACTS AS PRESENTED BY THE DEFENDANTS

The Court incorporates by reference the Defendants' facts summarized in Defendants Meineke Discount Muffler Shops, Inc., New Horizons Advertising, Inc., GKN Parts Industries Corp., Ronald Smythe, Gene Zhiss, and Ted Pearce in Support of Motion for Summary Judgment [document no. 116-1] ("Defendants' Motion") at 2-7, and Defendant GKN plc's ("GKN") Memorandum of Defendant GKN plc in Support of its Motion for Summary Judgment Memorandum [document no. 113-1] ("GKN's Motion") at 1-9. The Court also incorporates by reference the Plaintiffs' summary of facts in Plaintiffs' Memorandum of Law in Opposition to Defendants' Motions for Summary Judgment (document no. 126-1) ("Plaintiffs' Response") at 6-10.

III. DISCUSSION

A. Standard for Summary Judgment

"Under Rule 56(c), summary judgment is proper `if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 321-22, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986) (citing Fed.R.Civ.Proc. 56(c)). "Once a defendant makes a properly supported motion for summary judgment, the burden shifts to the plaintiff to set forth specific facts showing that there is a genuine issue for trial." Sylvia Development Corp. v. Calvert County, Md., 48 F.3d 810, 817 (4th Cir.1995) citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-49, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202. "[T]here is no issue for trial unless there is sufficient evidence favoring the non-moving party for a jury to return a verdict for that party. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249, 106 S.Ct. at 2511. Put another way, there must be a genuine issue for trial. "The mere scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." Anderson, 477 U.S. at 252, 106 S.Ct. at 2512. "The judge's inquiry, therefore, unavoidably asks whether reasonable jurors could find by a preponderance of the evidence that the plaintiff is entitled to a verdict ..." and "the judge must ask himself ... whether a fair-minded jury could return a verdict for the plaintiff on the evidence presented." Anderson, 477 U.S. at 252, 106 S.Ct. at 2512.

As with any summary judgment motion, "the court must draw any permissible inference from the underlying facts established in the record in the light most favorable to the non-moving party." Austin v. Clark Equipment Co., 48 F.3d 833, 835 (1995). But in order for an inference to be permissible it must be reasonable, and "[w]hether an inference is reasonable cannot be decided in a vacuum; it must be considered in `light of the competing inferences' to the contrary." Sylvia, 48 F.3d at 818 (citing Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986)). As the Fourth Circuit has stated:

[I]t is the province of the jury to resolve conflicting inferences from circumstantial evidence. Permissible inferences must still be within the range of reasonable probability, however, and it is the duty of the court to withdraw the case from the jury when the necessary inference is so tenuous that it rests merely upon speculation and conjecture.

Sylvia, 48 F.3d at 818 (citing Ford Motor Co. v. McDavid, 259 F.2d 261, 266 (1958) (brackets in original)); see also Thompson Everett, Inc. v. National Cable Advert., 57 F.3d 1317, 1323 (4th Cir.1995). In short, "[w]hen the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).

B. The Statute of Limitations.

The Defendants' Motion argues that the "undisputed facts" show: (1) that all of the named Plaintiffs knew or should have known, before December 27, 1989, that New Horizons earned a fee and operated on a for profit basis because the 1986, 1987, and 1988 WAC audits stated that "[a]dvertising commissions paid to ... New Horizons Advertising, Inc. during [1986, 1987, or 1988 respectively] were based on standard industry practice." (See Defendants' Motion at 25 (citing Defendant's exhibit 1-C).); (2) because the suit was filed on December 27, 1993, the longest period for any of Plaintiffs' claims is four years; and (3) the longest period of any of the applicable statute of limitations is four (4) years. Therefore, the Defendants argue, the claims are time barred because the suit was not filed within the longest statute of limitations period (four (4) years). (See Defendants' Motion at 23-27.)

The Plaintiffs allege that the "undisputed facts" show that the first time the Defendants accurately disclosed the extent of the commissions the Defendants were receiving from the WAC fund was in a December 1992 UFOC, which was alleged to have only been provided to franchisees who purchased a franchise subsequent to December 1992. (See Plaintiffs' Response at 11.) The Plaintiffs argue that the UFOCs distributed by the Defendants prior to December 1992 either did not disclose the commissions at all (1986-1989 UFOCs), or misleadingly indicated that the commissions were only a minimal 2% when the commissions on the yellow page advertising were actually 15% (1990-1992 UFOCs). (See Plaintiffs' Response at 11-12.) Thus, without knowing that Meineke was earning a 15% commission through New Horizon on yellow pages, and a lesser commission on media, the Plaintiffs contend that the franchisees could not have known that Meineke had a conflict of interest in making advertising decisions regarding placing advertising in yellow pages on which Meineke earned a higher commission than on other forms of advertising.

Further, the Plaintiffs urge that the one sentence in the Defendants' 1986-1988 UFOCs that "[a]dvertising commissions paid to ... New Horizons Advertising, Inc. during [1986, 1987, or 1988 respectively] were based on standard industry practice" was not sufficient to put Plaintiffs on notice of the true nature of the advertising commissions paid to NH out of the WAC fund.

The Court does not believe that the evidence cited by the Defendants, when viewed in the light most favorable to the Plaintiffs, is sufficient for a reasonable person to find that the Plaintiffs would not have known about Defendants' administration of the WAC account given the amount of information disclosed by the Defendants. Thus, summary judgment on this issue is inappropriate.

C. Releases Executed by Franchisees...