Cook v. Little Caesar Enterprises, Inc.

• Decision Date: 15 March 2000
• Docket Number: No. 99-1163,DEFENDANT-APPELLEE,PLAINTIFFS-APPELLANT,V,99-1163
• Parties: (6th Cir. 2000) KEVIN R. COOK AND K. COOK ENTERPRISES, INC.LITTLE CAESAR ENTERPRISES, INC., Argued:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 653

210 F.3d 653 (6th Cir. 2000)

KEVIN R. COOK AND K. COOK ENTERPRISES, INC. PLAINTIFFS-APPELLANTS,

V.

LITTLE CAESAR ENTERPRISES, INC., DEFENDANT-APPELLEE.

No. 99-1163

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Argued: March 15, 2000

Decided and Filed: April 24, 2000

Appeal from the United States District Court for the Eastern District of Michigan at Flint. No. 95-40234--Paul V. Gadola, District Judge.

Alan D. Penskar, Smith, Harris, Goyette, Winterfield, Penskar & Ferrehi, Flint, Michigan, for Appellants. Irwin Alterman, Kemp, Klein, Umphrey & Endelman, Troy, Michigan, Eileen K. Husband, General Counsel, Office of Little Ceasar Enterprises, Detroit, Michigan, for Defendant-Appellee.

Before: Ryan, Moore, and Farris,^* Circuit Judges.

OPINION

Jerome Farris, Circuit Judge.

Kevin R. Cook and K. Cook Enterprises, Inc., appeal the district court's summary judgment for defendant Little Caesar Enterprises, Inc., in this diversity action arising from the parties' franchise agreements. We have jurisdiction pursuant to 28 U.S.C. § 1291. We affirm.

Background

Cook is a Little Caesar franchisee with three restaurants in Fresno, California. Cook's basic contention is that although he was promised (1)"the entire territory 'east of Blackstone in the City of Fresno,'" and (2) that he would "be allowed to exclusively develop locations in the nearby cities of Clovis and Sanger," Little Caesar Enterprises infringed on his territories by franchising additional restaurants and not allowing him to open additional restaurants. The franchise agreements, however, provide only that Little Caesar Enterprises will not locate other Little Caesar restaurants within one mile of Cook's locations. Each franchise agreement includes an integration clause with respect to any prior agreements or promises.

A threshold issue involves the application of the parole evidence rule to various documents Little Caesar Enterprises provided to Cook prior to his signing the franchise agreements and also oral promises that Little Caesar Enterprises representatives allegedly made. When Cook began investigating franchise opportunities, Little Caesar Enterprises sent him a dear-prospective-franchisee letter and a franchise-offering circular. After meeting with Little Caesar Enterprises real estate representatives, Cook eventually signed a franchise option agreement. Cook alleged that Little Caesar representatives, both orally and in written map outlines, set aside specific territory exclusively for him.

Cook opened his first Little Caesar restaurant in November, 1990, for which he signed a franchise agreement on April 8, 1991. Sometime in January or February of 1992, another franchisee opened a Little Caesar restaurant in Clovis, California, just to the east of Fresno which Cook alleges was part of his exclusive territory. In May of 1992, Cook opened his second Little Caesar restaurant. He signed a franchise agreement for this in July of 1992. In May of 1993, Cook signed the franchise agreement for his third Little Caesar restaurant. He also attended two national franchise conventions where his meetings with Little Caesar Enterprises representatives, in his view, affirmed his expectation of exclusive territories for his restaurants.

In 1994, Cook and Jean Aboujaoude, who is another Fresno-area Little Caesar franchisee, signed a purchase agreement for Cook's three Little Caesar restaurants. Within a month, Little Caesar Enterprises disapproved this purchase agreement, for the alleged reasons that the price was too high and Aboujaoude was not contributing enough capital.

In May of 1996, Cook sought approval from Little Caesar Enterprises to close one of his Little Caesar restaurants. It was losing sales, he alleged, to other Little Caesar franchises. Little Caesar Enterprises rejected Cook's application for closure.

Cook brought this action in district court on July 12, 1995. In a second amended complaint, he alleged seven counts: breach of contract, breach of implied covenant of good faith and fair dealing, fraudulent misrepresentation, violation of the Michigan Franchise Investment Law, tortious interference with contractual and advantageous relationships, innocent misrepresentation, and he sought a declaratory judgment that Little Caesar Enterprises could not deny him the right to permanently close one of his restaurants. The district court granted Little Caesar Enterprises' motion for summary judgment on August 7, 1997.¹ See Cook v. Little Caesar Enterprises, Inc., 972 F. Supp. 400 (E. D. Mich. 1997).² The district court entered judgment on January 7, 1999. Cook filed a timely notice of appeal.

Standard of Review

We review a district court's grant of summary judgment de novo. See Terry Barr Sales Agency, Inc. v. All-Lock Co., Inc., 96 F.3d 174, 178 (6th Cir. 1996). In contract actions, summary judgment may be appropriate when the documents and evidence underlying the contract are undisputed and there is no question as to intent. See P. F. Manley v. Plasti-Line Inc., 808 F.2d 468, 471 (6th Cir. 1987) (citation omitted). Normally, however, disputed issues of contractual intent are considered to be factual issues which preclude an award of summary judgment. See id. (citations omitted); see also Parrett v. American Ship Building Co., 990 F.2d 854, 858 (6th Cir. 1993) (noting that the interpretation of ambiguous contract language is usually a factual issue turning on the intent of the parties).

Discussion

A. Breach of contract

Cook contends that the district court erred by granting summary judgment on his breach of contract claim because, since there are material issues of fact regarding the meaning of the franchise agreements, the court must consider parole evidence and look to the parties' intent. We reject the argument.

Michigan follows the parole evidence rule which does not permit extrinsic evidence to be used to contradict the terms of a written contract that was intended to be the final and complete expression of the parties' agreement.³ See American Anodco, Inc. v. Reynolds Metals Co., 743 F.2d 417, 422 (6th Cir. 1984). The court must first find, however, "that the parties intended the written instrument to be a complete expression of their agreement as to the matters covered. Extrinsic evidence of prior or contemporaneous agreements or negotiations is admissible as it bears on this threshold question of whether the written instrument is such an 'integrated' agreement." NAG Enters., Inc. v. All State Indus., Inc., 407 Mich. 407, 410 (Mich. 1979) (per curiam). Recently, the Michigan Court of Appeal has held "that when the parties include an integration clause in their written contract, it is conclusive and parole evidence is not admissible to show that the agreement is not integrated except in cases of fraud that invalidate the integration clause or where an agreement is obviously incomplete 'on its face' and, therefore, parole evidence is necessary for the 'filling of gaps.'" UAW-GM Human Resources Ctr. v. KSL Recreation Corp, 228 Mich. App. 486, 502 (Mich. Ct. App. 1998) (quoting 3 Corbin, Contracts, § 578, p. 411).

The record supports the conclusion that the franchise agreements were intended to be complete expressions of the parties' agreements and they are not ambiguous. See Cook, 972 F. Supp at 408. Each franchise agreement: (1) provided Cook with only an exclusive territory of the geographical area within a one-mile radius of each restaurant, and (2) included an integration clause and acknowledgment by Cook that he had no knowledge of any representations by Little Caesar representatives that are contrary to the terms of the agreement. Cook could not use parole evidence to elude the clear provisions of the franchise agreements.

Cook's bare allegation that he was promised "the entire territory 'east of Blackstone in the City of Fresno,'" is insufficient to create a genuine issue of material fact since the plain language of the franchise agreements specifically provides otherwise. Cook's allegation is based entirely on documents received prior to his signing the first franchise agreement and oral representations allegedly made by Little Caesar representatives prior to and after his signing of the first franchise agreement⁴. The franchise agreements provide only that Little Caesar Enterprises will not establish other Little Caesar restaurants within one mile of Cook's locations. Each agreement also includes an integration clause with respect to any prior agreements or promises, indicating that the parties intended the written franchise agreements to be complete expressions of their agreements. See NAG, 407 Mich. at 410. There is no evidence of fraud or that the agreements are incomplete. See UAW-GM, 228 Mich. App. at 502.

Cook's contention that the trial court is bound by a previous decision in Eberhardt v. Comerica Bank, 71 B. R. 239 (E. D. Mich. 1994), is of no consequence. In Eberhardt, the court held that the presence of an integration clause was not conclusive "when the contract is a pre-printed form drawn by a sophisticated seller, and presented to the buyer without any negotiations." Eberhardt, 71 B. R. at 243. There, the court looked to all writings and oral statements to ascertain the parties' intentions. See id. at 243-44. Eberhardt, however, involved a situation where both parties agreed that the pre-printed term was not consistent with the essence of the contract. A non-party creditor sought to enforce the provision of the contract. See id. The distinction is pivotal.

Cook's further contention that the district court erred by basing its decision on the "officer approval" requirement of Kovacs v. Electronic Data Sys. Corp., 762 F. Supp. 161 (E. D. Mich. 1990), is without merit. The contract at issue in Kovacs included language that required approval of an EDS officer to modify the contract. See id. at 164. Cook's franchise agreements include language that any change or modification must be "in...