Burger King Corp. v. Austin

• Decision Date: 09 October 1992
• Docket Number: No. 90-0784-CIV.,90-0784-CIV.
• Citation: 805 F. Supp. 1007
• Parties: BURGER KING CORPORATION, Plaintiff/Counter-Defendants, v. James R. AUSTIN, Loretta W. Austin and Austin Food Corp., Defendants/Counter-Plaintiffs.
• Court: U.S. District Court — Southern District of Florida

805 F. Supp. 1007

BURGER KING CORPORATION, Plaintiff/Counter-Defendants, v. James R. AUSTIN, Loretta W. Austin and Austin Food Corp., Defendants/Counter-Plaintiffs.

No. 90-0784-CIV.

United States District Court, S.D. Florida.

October 9, 1992.

COPYRIGHT MATERIAL OMITTED

T. Joan Lawrence, Steel Hector & Davis, Miami, Fla., for plaintiff.

Stephen M. Jampol, Rock & Leits, Atlanta, Ga., Stuart H. Sobel, Sobel & Sobel, Miami, Fla., for defendants.

ORDER

HOEVELER, District Judge.

THIS CAUSE is before the Court on Counter-Defendant Burger King Corporation's ("BKC") Motions: (1) to Dismiss Defendants' ("Austins") First Amended Counterclaim ("Counterclaim"); and (2) to Strike Defendants' Prayer for Damages in the Counterclaim. Also pending is Austins' Appeal from Magistrate Judge Bandstra's Order dated November 30, 1990.

I. BACKGROUND

Austins were franchisees of two Burger King restaurants. As a result of their nonpayment of royalties, advertising and sales promotion expenses, and rents as provided by the Franchise Agreements, BKC terminated the franchise relationships on March 30, 1990. Nevertheless, Defendants continued to operate the restaurants and to use the Burger King trademark. BKC brought this action for damages and injunctive relief for breach of several agreements that Austins had executed in connection with the franchises, under the Lanham Trademark Act, 15 U.S.C. §§ 1114 and 1125(a), and for common law unfair competition and trademark infringement.

Defendants admitted in their Answer that they did not pay the various sums to BKC, but claim that their failure to pay was excused because of the various claims asserted in their counterclaims.

On December 26, 1990, the Court granted BKC's Motion for Preliminary Injunction against Austins' continued use of the BKC trademark. On November 5, 1990, the Court granted BKC's Motion to Dismiss Austins' Counterclaim, however, granted Austins' leave to amend such Counterclaim. Austins filed an Amended Counterclaim, which is the subject of this Order.

II. MOTION TO DISMISS

A. Legal Standard

A court shall not grant a motion to dismiss unless it appears beyond doubt that a claimant can prove no set of facts in support of his claim that would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957). In examining a motion to dismiss, the material allegations of the claims are taken as true and are liberally construed in favor of the plaintiff. See, e.g., Burch v. Apalachee Community Mental Health Serv., Inc., 840 F.2d 797, 798 (11th Cir. 1988), aff'd, 494 U.S. 113, 110 S.Ct. 975, 108 L.Ed.2d 100 (1990); Jackam v. Hospital Corp. of Am. Mideast, 800 F.2d 1577, 1579 (11th Cir.1986) ("The movant sustains a very high burden.") (citations omitted); St. Joseph's Hosp., Inc. v. Hospital Corp. of Am., 795 F.2d 948, 954 (11th Cir.1986); Quality Foods v. Latin Am. Agribusiness Dev. Corp., 711 F.2d 989, 995 (11th Cir. 1983) (Plaintiffs' "threshold of sufficiency ... is exceedingly low.").

B. Analysis

1. Counts I and II: Breach of Express Contract

Counts I and II of the Counterclaim allege "Breach of Express Contract" for Franchise Agreements # 3754 and # 6470,¹ respectively.² Both Counts contain eight allegations of BKC's breach by:

(1) substantially damaging the BKC System and substantially damaging the value of the BKC Marks in 1989; and/or,

(2) depriving the Counterclaim Plaintiffs of the unique benefits of the high reputation and positive image of BKC, in 1989; and/or,

(3) destroying the close personal relationship between BKC, on the one hand, and Austins, on the other hand, and failing to adhere to the principles of the BKC System, in 1989; and/or,

(4) failing to encourage and/or consider suggestions of Franchisees in general, and J. Austin and Austin Food Corp. in particular, for the improvement of the Burger King System, prior to BKC's adoption and/or modification of standards, specifications and procedures for the Burger King System, in 1989; and/or,

(5) discontinuing the periodic advice and consultation with J. Austin and Austin Food Corp., in 1989; and/or

(6) failing to spend the monies contributed by J. Austin and Austin Food Corp. on local advertising, marketing, and promotion for the first seven (7) months of 1989 in the Atlanta ADI; and/or

(7) failing to spend the monies contributed by J. Austin and Austin Food Corp. on direct administrative expenses of advertising, marketing and promotion or on research expenditures directly related to the development and evaluation of the effectiveness of advertising and sales promotion, in 1989; and (8) wrongfully terminating Franchise # 3754 and # 6470 in April, 1990.

The Court finds that Allegations One through Five and Eight can support a claim for breach of express contract. Each of the allegations alleges a breach of a specific clause in the Franchise Agreement. Although some of the clauses that were allegedly breached are in the Introduction to the Agreement, the Agreement specifies that the Introduction is a part of the Agreement. BKC argues that Allegation Five is insufficient because the Franchise Agreement imposes no duty on BKC to encourage, solicit, or implement any Franchisee suggestions. The Court disagrees; Section 4 of the Franchise Agreement states, in relevant part: "Suggestions from franchisees for improving elements of the Burger King System, such as products, equipment, uniforms, restaurant facilities, service format and advertising are encouraged and will be considered by BKC when adopting or modifying standards, specifications and procedures for the Burger King System." This clause requires BKC to encourage and consider franchisee suggestions.³ If BKC refused to do so, it would be in breach of the Agreement. Accordingly, this allegation can support Austins' claim in Counts I and II.

BKC argues that Austins' allegations relating to advertising (Six and Seven) in Counts I and II of their Counterclaim are specifically negated by the express terms of the Franchise Agreement. Section 8(B) of the Franchise Agreement states, in relevant part:

In addition, FRANCHISEE shall pay to BKC an amount equal to 4% of FRANCHISEE's monthly gross sales by the tenth (10th) day of each month based upon FRANCHISEE's gross sales for the preceding month. This sum, less direct administrative expenses, will be used for advertising, sales promotion and public relations both in the market area (A.D.I.) in which the Franchised Restaurant is located and on a national basis.... All such expenditures shall be at the discretion of BKC.

In its Order dated November 5, 1990, the Court dismissed a very similar claim of breach of express contract: "By the unequivocal terms of the contract in this case, BKC was not obligated to spend the advertising monies in any particular way. BKC could choose to spend all on local advertising, all on national advertising, or allocate a portion of the monies to both." The Court finds that this Order continues to be controlling here. The Agreement states that BKC retains discretion over advertising spending; accordingly, BKC could not have breached the express terms of the contract by failing to spend monies on local advertising.⁴ Allegations Six and Seven are therefore STRICKEN.

2. Count III: Conversion

Count III of the Counterclaim for "Conversion of Advertising Monies" alleges that BKC exercised dominion and control over advertising funds paid by Austins and failed to expend said funds on advertising, resulting in an unlawful conversion of said funds.

As a threshold matter, we must first determine which law applies to this tort claim. The Franchise Agreement provides that it "shall be governed and construed under and in accordance with the laws of the State of Florida." However, "claims arising in tort are not ordinarily controlled by a contractual choice of law provision.... Rather, they are decided according to the law of the forum state." Sutter Home Winery, Inc. v. Vintage Selections, Ltd., 971 F.2d 401, 407 (9th Cir. 1992) (citations omitted); see Ritchie Enter. v. Honeywell Bull, Inc., 730 F.Supp. 1041, 1046 (D.Kan.1990). Florida utilizes the "most significant relationship" test to determine which state's law applies to tort claims. Garcia v. Public Health Trust, 841 F.2d 1062, 1064-65 (11th Cir.1988). Here, both Florida and Georgia have significant relationships to the parties. The Court, however, does not at this time determine which of the two has the "most" significant relationship because it appears that the law of conversion is similar in both states.

Conversion is defined as:

An act of dominion wrongfully asserted over another's property inconsistent with his ownership therein. In essence, conversion is an unauthorized act which deprives another of his property permanently or for an indefinite time. It is the disseisin of the owner or an interference with legal rights which are incident to ownership, such as the right to possession. Its essential element is a wrongful deprivation of property of the owner.

12 Fla.Jur.2d Conversion & Replevin § 1 (1979). "A mere obligation to pay money may not be enforced by a conversion action. ... And an action in tort is inappropriate where the basis of the suit is a contract, either express or implied." Belford Trucking Co. v. Zagar, 243 So.2d 646 (Fla.App.Dist.1970) (citations omitted); see Advanced Surgical Technologies, Inc. v. Automated Instruments, Inc., 777 F.2d 1504, 1507 (11th Cir.1985); Futch v. Head, 511 So.2d 314, 320-21 (Fla.App.Dist.1987); Douglas v. Braman Porsche Audi, Inc., 451 So.2d 1038, 1039 (Fla.App.Dist.1984).⁵

Here, Austins' allegations regarding BKC's failure to expend funds it collected from Austins on advertising are based solely on the obligations contained in the Franchise Agreement. Such allegations are properly asserted in a claim for breach of contract (as Austins have asserted in Counts I and II in their claim for breach of express contract and in Counts IV and...