Coldwell Banker Real Estate v. Brian Moses Realty Inc.

• Decision Date: 08 September 2010
• Docket Number: Civil No. 08–cv–50–LM.
• Citation: 752 F.Supp.2d 148
• Court: U.S. District Court — District of New Hampshire
• Parties: COLDWELL BANKER REAL ESTATE, LLCv.BRIAN MOSES REALTY, INC., Brian Moses & Assoc. Realty, Inc., and Brian Moses.

752 F.Supp.2d 148

COLDWELL BANKER REAL ESTATE, LLC

v.BRIAN MOSES REALTY, INC., Brian Moses & Assoc. Realty, Inc., and Brian Moses.

Civil No. 08–cv–50–LM.

United States District Court, D. New Hampshire.

Sept. 8, 2010.

Bethany L. Appleby, Seth L. Huttner, Wiggin & Dana LLP, New Haven, CT, Peter G. Callaghan, Preti Flaherty Beliveau Pachios PLLP, Concord, NH, for Plaintiff.Steven M. Gordon, Charles G. Holoubek, Conrad Wp Cascadden, William E. Christie, Shaheen & Gordon, Concord, NH, for Defendants.

ORDER

LANDYA B. McCAFFERTY, United States Magistrate Judge.

Plaintiff Coldwell Banker Real Estate, LLC (“CB”) is a franchisor of real estate offices across the United States. Defendant Brian Moses (“Moses”), through his businesses, defendants Brian Moses Realty, Inc. and Brian Moses & Associates Realty, Inc. (collectively “BM Realty”), owned two CB franchises from September 1996 until January 2007, one in Nashua and the other in Salem, New Hampshire. This dispute arises out of that franchise relationship and involves both common law and statutory claims and counterclaims, including breach of contract, trademark infringement and dilution, unfair trade practices, unjust enrichment, negligent misrepresentation and fraud.¹ Before the court are cross motions for partial summary judgment. Document nos. 55 and 56. As explained below, both motions are denied in part and granted in part.

Discussion

1. Background Facts

BM Realty entered into two separate franchise agreements with CB. The First Franchise Agreement, effective September 1, 1996, created an independent CB residential real estate office in Nashua, New Hampshire (the “Nashua franchise”). See Pl.'s Mem., Ex. 1, Jacqueline Bertet's November 10, 2009 affidavit (“Bertet Aff.”), attaching Ex. A (the “First Franchise Agreement”). It had a ten-year term which expired on September 1, 2006. See Bertet Aff., Ex. A, ¶ 1.5. BM Realty acquired a second CB residential real estate franchise, in Salem, New Hampshire (the “Salem franchise”), by transfer from another franchisee on January 18, 2001. See Bertet Aff., Ex. F. The Salem franchise was governed by a nearly identical franchise agreement that became effective the date of the transfer and also had a ten-year term, ending January 18, 2011. See Bertet Aff., Ex. G (the “Second Franchise Agreement”), ¶ 1.5. Both franchise agreements provide in prominent, bold letters at the beginning of the contract that:

THE PARTIES AGREE THAT THIS AGREEMENT SHALL GOVERN THEIR RELATIONSHIP IN CONNECTION WITH FRANCHISEE'S OPERATION OF ITS INDEPENDENT RESIDENTIAL REAL ESTATE BUSINESS.

Bertet Aff., Ex. A at CB–3, Ex. G at CB–57. The agreements provide that they cannot be modified except as expressly permitted or by a subsequent written agreement signed by both parties. See id., Exs. A & G, ¶ 17.7. The franchise agreements explicitly state that they constitute “the entire agreement of the parties,” superceding “any and all prior negotiations, agreements or understandings between the parties,” whether oral or written. See id. ¶ 16.5.²

Relevant to this dispute, the franchise agreements contain detailed terms explaining how the franchisee shall maintain the offices, conduct the businesses, and, in particular, use CB's marks. Under the contracts, a franchisee is required to identify itself conspicuously in all commercial dealings as a CB franchise. See id. ¶ 6.7(b).³ A franchisee is required to use its “best efforts” to conduct the business in accordance with the franchise agreements, and to continually strive to develop the business to its greatest potential. Id. ¶ 6.5. The franchisee agrees that throughout the term of the agreement it will meet “System Standards for Office and signage appearance and cleanliness” and make reasonable changes to satisfy those standards. Id. ¶ 6.10. A franchisee retains the right to own and operate other businesses that are not directly competing with the real estate business ⁴; however, none of the CB marks can be used in connection with such other businesses. Id., ¶¶ 6.4 & 6.6. The franchise agreements make detailed provisions for the payment of royalties, performance premium awards and advertising fees, for the maintenance of business records, and for the periodic reporting of business information. See generally id., §§ 7, 8 & 11. Finally, the agreements explicitly state that any unauthorized use of any CB marks constitutes a breach of the contract. See id. § 9.1.

From 1996 through 2000, Moses's relationship with CB was positive; the Nashua franchise was profitable and Moses wanted to grow BM Realty's market share. See Pl.'s Mem., Ex. 3, Seth L. Huttner's November 12, 2009 Affidavit (“Huttner Aff.”), Ex. A (excerpts from the 4/2/09 deposition of Moses (“Moses Dep.”)) at 81:12–17. In the middle of 2000, a CB employee who was Moses's business consultant, Christine Dowd (“Dowd”), told Moses about a Salem franchise being offered for sale. Id. at 81:18–82:11; see also Defs.' Obj. to Pl.'s Mot. for Summ. J. (document no. 60) (“Def.'s Obj.”), Ex. E (excerpts from the 10/23/09 deposition of Christine Dowd (“Dowd Dep.”)) at 27:4–22. Moses discussed the possibility with Dowd ⁵, along with other business advisors outside of CB, and the Salem franchise's prior owner, Nettie Thompson. See generally Moses Dep. at 82–83. Moses understood these people to have told him the Salem franchise was “a good deal and a good opportunity.” Id. at 85:13–18, 86:2–6 & 96:2–16. CB was looking to expand its market share in Salem, a pursuit which interested Moses. See Huttner Aff., Ex. C (excerpts from the 4/30/09 deposition of David Shortsleeve (“Shortsleeve Dep.”)) at 70:11–72:13; see also Huttner Aff., Ex. E, Dowd Dep. at 40:7–41:23.

Within months of opening the Salem franchise, Moses realized it was not a good investment and that the business needed a lot of work to “turn it around.” Moses Dep. at 97:18–23 & 98:7–18. Moses claimed that, prior to his purchase, CB presented him with financials on the Salem franchise that did not accurately reflect its business condition. Moses Dep. at 84:1–13 & 100:1–9. The Salem franchise struggled, and Moses's relationship with CB became strained. Neither Moses nor CB was pleased with the lack of growth at the Salem franchise. See Shortsleeve Dep. at 97:14–98:17

A principal complaint of Moses was that his two franchises were not getting referrals from CB corporate as he had expected. See generally Moses Dep. at 190–95. Cendant Mobility, another company owned by the same parent corporation as CB, handled CB referrals. See id. at 190:6–11. When Moses complained to CB about the lack of referrals, CB informed Moses that he needed a separate contract with Cendant Mobility. Such a contract would have given BM Realty an exclusive referral radius around his Nashua and Salem franchises; without the contract, CB corporate could not provide BM Realty with referrals. Id. at 190–93; see also Shortsleeve Dep. at 110–11. Moses applied for a referral contract with Cendant Mobility but, because two other larger residential real estate brokerages with multiple offices in the area already had contracts with Cendant Mobility, his application was rejected.⁶ See Shortsleeve Dep. at 110:1–20 & 111:8–20. A further complaint of Moses was that he believed CB had been less than forthcoming about several related services it offered, such as mortgage and insurance services, which may have yielded profits for BM Realty had BM Realty been aware of and able to take advantage of them. See Moses Dep. at 197:4–22.

By late 2005, Moses realized he wanted to get out of real estate sales so that he could pursue his teaching, coaching and sales training work. He also wanted to find an alternative company where the BM Realty agents could work. See id. at 199–200; see also Shortsleeve Dep. at 99:1–100:15. The First Franchise Agreement was due to expire September 1, 2006, but the Second Franchise Agreement did not expire until January 18, 2011. See Pl.'s Mem., Bertet Aff., Ex. G, § 1.5. Moses had initially mistakenly believed the Salem franchise ended when the Nashua franchise did, but by September 2005, he realized the two contracts were not coterminous. See Def.'s Obj., Ex. A, Moses Dep. at 126:5–127:14; see also Def.'s Obj., Ex. D (9/19/05 email exchange asking CB to modify the Second Franchise Agreement).⁷ Moses tried unsuccessfully to modify his agreements with CB, so as not “to shruck [sic] any of [his] obligations to CB from Salem,” but CB would not release BM Realty from the Second Franchise Agreement. See id. Though Moses knew that the Second Franchise Agreement did not expire until January 18, 2011, by early 2006 he had decided to close both offices at the same time. See Moses Dep. at 200:4–18; see also Shortsleeve Dep. at 72:14–75:19.

In 2006, Moses contacted Rick and Hank Stoudt, who owned a Re/Max franchise, to discuss a possible acquisition of BM Realty. See Pl.'s Mem., Ex. 4 (Def.'s Answers to Pl.'s First Set of Interrogs. (“Def.'s Ans. to Pl.'s Interrogs.”)), No. 4. On July 28, 2006, Moses signed a Merger Agreement with Re/Max Properties (“Merger Agreement”), but the merger was not effective until September 5, 2006. See Pl.'s Mem., Ex. 2 (Merger Agreement and Addendum to Independent Contractor's Agreement). The parties intended the Merger Agreement to enable Moses to develop his business as a real estate trainer and recruiter and Re/Max to increase its share of the Salem real estate market. As stated in the Merger Agreement:

[Moses] is looking for the best possible arrangement for his associates and staff and one where he personally can better utilize his talents as a real estate trainer and recruiter without the distractions of management responsibilities. [Moses] is also seeking to associate with a reputable, growing firm where he can contribute in a meaningful way to that growth. RE/MAX Properties seeks to continually gain and maintain market share through growth. RE/MAX sees a merger of the two companies as an...