CK Franchising, Inc. v. Sas Servs. Inc.
Decision Date | 10 July 2019 |
Docket Number | No. 6:18-CV-94-REW-HAI,6:18-CV-94-REW-HAI |
Citation | 398 F.Supp.3d 163 |
Parties | CK FRANCHISING, INC., Plaintiff, v. SAS SERVICES INC., Defendant. |
Court | U.S. District Court — Eastern District of Kentucky |
Christopher B. Madden, Janet P. Jakubowicz, Bingham Greenebaum Doll LLP, Louisville, KY, for Plaintiff.
Carroll M. Redford, III, Michelle L. Hurley, Miller, Griffin & Marks, P.S.C., Lexington, KY, for Defendant.
The parties filed rival summary judgment motions. Plaintiff CK Franchising, Inc. (CKFI) seeks a declaration that the forum-selection component of the alternative dispute resolution (ADR) provision in its franchise agreement with Defendant SAS Services Inc. (SAS) is valid and enforceable. SAS disagrees. Because the Court finds the ADR forum choice valid and binding on SAS, it grants CKFI's motion and denies Defendant's competing effort.
The material facts of this case are straightforward and not in dispute. CKFI (the "CK" standing for "Comfort Keepers") is a national franchisor of in-home, nonmedical care services. DE #11 ¶¶ 2, 6. Sarah Short and her mother, Mary Perkins, jointly own SAS, which operates a CKFI franchise in the Somerset, Kentucky area. DE #55-1 (Short Dep.) at 11–15.2 Short, who formerly worked for a Lexington CKFI franchisee, purchased the Somerset territory in 2007 with Perkins and, accordingly, entered a franchise agreement with CKFI.3 Id. at 15–16. Before entering the franchise agreement, Short and Perkins reviewed the contract and accompanying Offering Circular (see DE #51-4) and consulted with an attorney about the documents and prospective enterprise.4 DE #55-1 at 25–26. Short and Perkins are both educated and have experience in the in-home care industry. Short has a master's degree in social work and a specialized certificate in gerontology, and she worked with other CKFI franchisees in less formal capacities before purchasing the Somerset territory. See DE #55-1 at 8–20. Similarly, Perkins is college-educated and familiar with the industry. See id.
The 2007 CKFI-SAS franchise contract mandated certain ADR procedures. See DE #51-3 at 24 (§§ 12.7–12.8). Relevant here, it provided that mediation and arbitration would occur "in Dayton, Ohio or, if Comfort Keepers has moved its principal place of business, in the city where Comfort Keepers' principal place of business is located." Id. at 3 (§§ 12.7.3 & 12.8).5 After reviewing the 2007 contract with Short's attorney (Randall Short), she had a few matters she wished to discuss further with CKFI, but did not recall which issues those were, specifically, or whether the ADR portion of the agreement was one of them. DE #55-1 at 25 (); id. at 26–28 ( ). Per SAS, CKFI was unwilling to alter the 2007 agreement. Id. at 25 () . Nevertheless, SAS entered the franchise agreement with CKFI, and, over the next ten years as a CKFI franchisee, grew to employ thirty people and serve approximately seventy-five clients in the Somerset area. Id. at 8–10.
The 2007 franchise agreement, with a ten-year term, became subject to optional renewal in 2017. In March 2016, CKFI contacted SAS to alert it to the upcoming contract expiration and inquire whether SAS wished to renew. See DE #55-5. There is no indication in the record that SAS then responded to the March 2016 inquiry. In October 2016, CKFI again reached out to SAS regarding franchise renewal. See DE #55-6. Similarly, the record divulges no SAS response to the October 2016 letter. In late January 2017, Short emailed her regional director (at the time, Emily Jones), noting that her "10 year franchise agreement [wa]s up at the end of April" and asking how to "go about reviewing and signing a new one[.]" DE #55-1 at 48–49. Around this time, Short also became concerned that the Lexington, Kentucky CKFI franchisee was serving clients in her protected Somerset territory. Id. at 51–52; see id. at 11. Short contacted Jones about the alleged rogue franchisee but states that she received no response. Id. at 51–52 ().
In April 2017, Short and Perkins received a letter regarding franchise renewal (dated April 10), which enclosed the new franchise agreement. DE #55-7. The letter directed SAS (if renewing) to return the executed new agreement to CKFI by April 28, 2017. Id. The 2017 franchise renewal agreement (here referred to as "the Agreement") contained forum-selection clauses within the "Mediation" and "Arbitration" sections (grouped together in the ADR portion of the Agreement) that closely resembled the 2007 language. The Agreement provided that "mediation must take place in the city where CKFI's principal place of business is then located[,]" and further stated that "arbitration must be brought in the city where CKFI's principal place of business is then located." DE #51-7 at 3–4 (§§ 12.7.3 & 12.7.4). SAS did not discuss the 2017 Agreement with an attorney, nor did it seek to negotiate any provision in the Agreement with CKFI. See DE #55-1 at 51 () ; id. at 59 ( ). Regardless, SAS signed the 2017 renewal Agreement and returned the executed copy to CKFI. Id. at 52 (); see also DE #51-7 at 5 (2017 Agreement signatures).
Short, did, however, personally read and review the 2017 Agreement. See DE #55-1 at 50, 56–59.6
In December 2017, after SAS entered the Agreement, CKFI announced that it would be relocating its corporate headquarters from Dayton, Ohio to Irvine, California. DE #51-10 at 1. Thereafter, SAS initiated the ADR process to address the issue of the encroaching CKFI franchisee, and CKFI sought to enforce the forum-selection component within the Agreement's ADR provision. DE #55-1 at 74 () ; id. at 77 ().
Ultimately, the parties failed to reach a consensus on the ADR location issue; this action followed. CKFI requests a declaratory judgment that the ADR forum-selection elements are valid and enforceable as written. DE #11 (Amended Complaint). After limited discovery to place the (undisputed) relevant facts in the record, the parties each sought summary judgment on their respective legal theories. DE ##51 & 52. Both motions are fully briefed and ripe for decision. See DE ## 56, 57, 58, 59.
A court "shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A reviewing court must construe the evidence and draw all reasonable inferences from the underlying facts in favor of the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp. , 475 U.S. 574, 106 S. Ct. 1348, 1356, 89 L.Ed.2d 538 (1986) ; Lindsay v. Yates , 578 F.3d 407, 414 (6th Cir. 2009). Additionally, the court may not "weigh the evidence and determine the truth of the matter" at the summary judgment stage. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 106 S. Ct. 2505, 2511, 91 L.Ed.2d 202 (1986).
The burden of establishing the absence of a genuine dispute of material fact initially rests with the moving party. Celotex Corp. v. Catrett , 477 U.S. 317, 106 S. Ct. 2548, 2553, 91 L.Ed.2d 265 (1986) ( ); Lindsay , 578 F.3d at 414 (). If the moving party meets its burden, the burden then shifts to the nonmoving party to produce "specific facts" showing a "genuine issue" for trial. Celotex Corp. , 106. S. Ct. at 2553 ; Bass v. Robinson , 167 F.3d 1041, 1044 (6th Cir. 1999). However, " Rule 56(c) mandates the entry of summary judgment ... against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. , 106 S. Ct. at 2552 ; see also id. at 2557 (Brennan, J., dissenting) ( .
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