Burger King Corp. v. Weaver

Decision Date09 March 1999
Docket NumberM-W-,I,No. 96-5438,96-5438
Citation169 F.3d 1310
Parties, 50 U.S.P.Q.2d 1102, 12 Fla. L. Weekly Fed. C 605 BURGER KING CORPORATION, Plaintiff-Counter-Defendant-Appellee, v. C.R. WEAVER;nc., Defendants-Counter-Claimants-Appellants.
CourtU.S. Court of Appeals — Eleventh Circuit

Roberto Zarco, Lawrence V. Ashe, Zarco & Pardo, P.A., Miami, FL, for Defendants-Counter-Claimants-Appellants.

Don Horn, Miami, FL, Howard S. Wolfson, Whitman, Breed, et. al., New York City, for Plaintiff-Counter-Defendant-Appellee.

Appeal from the United States District Court for the Southern District of Florida.

Before TJOFLAT and DUBINA, Circuit

Judges, and SMITH, * Senior Circuit Judge.

SMITH, Senior Circuit Judge:

This dispute arises out of a decision by the Burger King Corporation ("BKC") to license the opening of a competing Burger King TM restaurant near two existing Burger King TM restaurants operated by C.R. Weaver ("Weaver"). In response to the perceived encroachment, Weaver stopped making his rent and royalty payments to BKC. After settlement discussions failed, BKC sued to recover the amounts it was due under the franchise agreements and Weaver counterclaimed on a variety of grounds. The District Court for the Southern District of Florida granted summary judgment to BKC on all of Weaver's counterclaims, as well as on BKC's claims for breach of contract and trademark infringement. We affirm.

Facts

In 1976, Weaver entered into an agreement with BKC that allowed Weaver to lease and operate a Burger King TM restaurant owned by BKC in Great Falls, Montana. This restaurant is referred to as the "# 1666 franchise." 1 Weaver and BKC entered into another franchise agreement in 1988, allowing Weaver to operate a second Great Falls Burger King TM restaurant, this one at a site which he owned. This restaurant is referred to as the "# 6158 franchise."

Under the terms of both franchise agreements, Weaver agreed to make monthly royalty payments and advertising contributions to BKC in exchange for, among other things, a license to use the Burger King TM trademarks and franchise system at his restaurants. Weaver also agreed to make monthly rent payments for the leased # 1666 restaurant.

The franchise agreements contain different provisions regarding their geographic scope. The # 1666 agreement states that "[t]he premises at which Franchisee shall operate a Burger King TM Restaurant are fully described in Exhibit 'A'," which describes a specific location in Great Falls, Montana. The # 6158 agreement more explicitly states that "[t]his 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." Neither agreement places any limitations on the location of future Burger King TM franchises.

In 1989, BKC authorized the opening of a Burger King TM restaurant (the "Malmstrom Burger King TM") at Malmstrom Air Force Base in Great Falls. Weaver viewed the new restaurant as encroaching on the business of his existing restaurants. To Weaver, this encroachment made the authorization of the Malmstrom Burger King TM a breach of BKC's obligations under the # 1666 and # 6158 franchise agreements. In November 1989, one month after the Malmstrom Burger King TM opened, Weaver stopped making his rent, royalty, and advertising payments under the # 1666 and # 6158 franchise agreements.

Weaver met with BKC representatives several times over the next months to resolve the parties' disagreement. Ultimately, Weaver rejected BKC's final settlement offer and on September 21, 1990, BKC filed this suit to collect the amounts due under the franchise agreements.

Weaver counterclaimed on a variety of grounds, including (1) breach of the franchise agreements, (2) breach of the implied covenant of good faith and fair dealing, (3) violation of the Montana Unfair Trade Practices Act, and (4) actual and constructive termination of franchise without cause.

Proceedings Below

The case below was marked by extensive motions practice and procedural skirmishing. Among its many rulings on the parties' motions, the district court ruled March 27, 1992 that BKC's policies of compensation for encroachment and set-off were not discoverable because Weaver had not shown the relevancy of the sought-after documents. In addition, the district court denied Weaver's requests to amend his complaint on October 13, 1994, June 27, 1995, and October 2, 1995; the court found all three motions barred by undue delay and the latter two motions further barred by futility.

On May 22, 1992, the district court granted summary judgment to BKC on fourteen of Weaver's sixteen counterclaims but refused summary judgment on Weaver's claims of breach of the implied covenant of good faith and fair dealing. Burger King Corp. v. Weaver, 798 F.Supp. 684 (S.D.Fla.1992). The court held the franchise agreements to be ambiguous on the issue of BKC's freedom to license new Burger King TM franchises in the vicinity of Weaver's restaurants because the language in the agreements, limiting Weaver's rights to a specific site, "cannot be said to affirmatively authorize the placement of a BKC franchise on any site." Id. at 689. In accord with Scheck v. Burger King Corp., 756 F.Supp. 543 (S.D.Fla.1991) ("Scheck I "), the court held that the agreements were ambiguous with regard to territorial rights, and denied summary judgment.

On September 18, 1995, the district court granted BKC's second renewed motion for summary judgment on Weaver's claims of breach of the implied covenant of good faith. 2 The court held that the Florida courts do not recognize a claim for breach of the implied covenant of good faith and fair dealing absent a breach of an express contractual provision. Since Weaver did not allege that BKC's actions violated any express provision of the franchise agreements, the court held that his claim under the implied covenant of good faith and fair dealing failed as a matter of law. The district court therefore entered summary judgment in favor of BKC on Weaver's remaining counterclaims.

On September 3, 1996, the district court granted summary judgment to BKC on its claims for breach of contract and trademark infringement. The court held that Weaver breached the franchise agreements with BKC by withholding payments, that BKC had not caused or acquiesced in the withholding, and that Weaver infringed BKC's trademarks by using the Burger King TM marks after his franchises had been properly terminated. The court entered final judgment for BKC and ordered an accounting of profits.

Weaver timely appealed and asserts five grounds of error. Weaver argues that the district court (1) erred in granting summary judgment to BKC on Weaver's claim for breach of the implied covenant of good faith and fair dealing; (2) erred in granting summary judgment to BKC on Weaver's claim under the Montana Unfair Trade Practices Act without granting leave to amend his complaint to assert a claim under the nearly identical Florida Deceptive and Unfair Trade Practices Act; (3) erred in denying Weaver's motions for leave to amend; (4) erred in ruling that BKC's policies of set-off and compensation for encroachment were not subject to discovery; and (5) erred in granting summary judgment to BKC on its claims for breach of contract and trademark infringement. Weaver also argues that the district court erred in awarding lost profits to BKC.

Standard of Review

Our review of a trial court's grant of summary judgment is plenary. Elan Pharm. Research Corp. v. Employers Ins. of Wausau, 144 F.3d 1372 (11th Cir.1998); Hale v. Tallapoosa County, 50 F.3d 1579, 1581 (11th Cir.1995). We apply the same standard applied by the district court. Rodgers v. Singletary, 142 F.3d 1252 (11th Cir.1998).

Summary judgment is appropriate "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 a judgment as a matter of law." Fed.R.Civ.P. 56(c). "In reviewing a motion for summary judgment, the court must consider all the evidence in the light most favorable to the non-movant. Earley v. Champion Int'l. Corp., 907 F.2d 1077, 1080 (11th Cir.1990). If the record presents factual issues, the court must not decide them; it must deny the motion and proceed to trial. Clemons v. Dougherty County, Ga., 684 F.2d 1365, 1368-69 (11th Cir.1982)." Kopelowitz v. Home Ins. Co., 977 F.Supp. 1179, 1184-1185 (S.D.Fla.1997).

In regard to the asserted errors in the district court's rulings on discovery and leave to amend, our review is limited. These decisions are entrusted to the sound discretion of the trial court and are reviewed only for abuse of discretion. See Fund For Animals, Inc. v. Rice, 85 F.3d 535, 542 (11th Cir.1996) ("The standard of review applicable to the district court's decision regarding discovery is the abuse of discretion standard."); Forbus v. Sears Roebuck & Co., 30 F.3d 1402, 1404 (11th Cir.1994) ("A district court's decision to grant or deny leave to amend is reviewed for abuse of discretion."). To the extent that denial of leave to amend is based on futility, i.e., inadequacy as a matter of law, we review such denial independently. Motorcity of Jacksonville, Ltd. v. Southeast Bank N.A., 83 F.3d 1317, 1323 (11th Cir.1996) (en banc), vacated on other grounds sub nom Hess v. F.D.I.C., 519 U.S. 1087, 117 S.Ct. 760, 136 L.Ed.2d 708 (1997).

The trial court's award of lost profits to BKC is also reviewed for abuse of discretion. "The damage provision of the Lanham Act entitles a trademark holder to recover, among other things, the profits earned by a defendant from infringement of the mark. 15 U.S.C.A. § 1117. The Act confers upon the district court a wide scope of discretion to determine the proper relief due an injured party.... Review of the trial court's exercise of its...

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