Dunkin' Donuts Inc. v. Taseski
| Decision Date | 26 April 1999 |
| Docket Number | No. Civ.A. 97-40411.,Civ.A. 97-40411. |
| Parties | DUNKIN' DONUTS INCORPORATED, Plaintiff/Counter-Defendant, v. Trpko TASESKI, Bosko Taseski, and TRBO Corporation, Defendants/Counter-Plaintiffs. |
| Court | U.S. District Court — Eastern District of Michigan |
Steven A. Browne, Robert L. Zisk, Schmeltzer, Aptaker & Shepard, Elizabeth Jolliffe Basten, Clark Hill, Detroit, MI, for Dunkin' Donuts, Incorporated, plaintiff.
Kurt R. Thornbladh, Farmington, MI, James T. DeVidts, Evangelista & DeVidts, Warren, MI, for Trpko Taseki, defendant.
Kurt R. Thornbladh, Farmington, MI, James T. DeVidts, Evangelista & DeVidts, Warren, MI, for Bosko Taseki, defendant.
Kurt R. Thornbladh, Farmington, MI, James T. DeVidts, Evangelista & DeVidts, Warren, MI, for Bosko Taseki, defendant.
Kurt R. Thornbladh, Farmington, MI, James T. DeVidts, Evangelista & DeVidts, Warren, MI, for Bosko Taseki, counter-claimant.
Kurt R. Thornbladh, Farmington, MI, James T. DeVidts, Evangelista & DeVidts, Warren, MI, for Bosko Taseki, counter-claimant.
Kurt R. Thornbladh, Farmington, MI, James T. DeVidts, Evangelista & DeVidts, Warren, MI, for Trbo Corporation, counter-claimant.
This is a case involving the turbulent relationship between a franchisor, plaintiff/counter-defendant Dunkin' Donuts Incorporated (hereinafter plaintiff "Dunkin' Donuts"), and its franchisees, defendants/counter-plaintiffs Trpko Taseski, Bosko Taseski, and TRBO Corporation (hereinafter "defendants"). Presently before the Court is plaintiff's motion for summary judgment on all remaining counts in its first amended complaint and on defendants' counterclaims, filed February 25, 1999. At the outset, it is important to note that the parties have stipulated to defendants' liability for breach of contract relating to defendants' intentional underreporting of sales, underpayment of fees, falsification of financial reports, and violation of applicable laws. See joint stipulation and consent judgment entered February 10, 1999. The only remaining issues concern the amount of damages incurred by plaintiff as a result of defendants' breach, as well as any other applicable remedies, and three counterclaims brought by defendants against Dunkin' Donuts. On March 17, 1999, defendants filed their response to plaintiff's motion. A reply brief was filed on April 8, 1999.
For the reasons set forth below, the Court will grant plaintiff's motion for summary judgment.
Defendants Trpko Taseski, Bosko Taseski, and TRBO Corporation are owners and operators of a Dunkin' Donuts franchise located at 37310 South Gratiot Avenue, Mt. Clemens, Michigan pursuant to a franchise agreement entered into on July 5, 1993. In exchange for the right to use Dunkin' Donuts's proprietary marks and the "Dunkin' Donuts System," defendants agreed to pay to plaintiff corporation a franchise fee of 4.9% and an advertising fee of 6% of the sales earned by their franchise. Defendants also agreed to accurately report their sales to the plaintiff on a weekly basis and pay the fees due on those sales at that time.
In addition to the franchise agreement, the parties also executed a lease option agreement dated October 10, 1993 relating to the Dunkin' Donuts franchise. Under the terms of the lease option agreement, Dunkin' Donuts would have 30 days after the termination of defendants' franchise agreement to notify Trpko and Bosko Taseski that it wished to exercise its rights under the lease option agreement. If plaintiff exercised its rights, then defendants agreed that they would then execute and deliver a lease for the premises to plaintiff along with possession of the premises.
In 1997, plaintiff began surveillance of defendants' franchise and uncovered the fact that defendants were making substantial wholesale deliveries. Based on this fact and other evidence of underreporting of sales, on September 13, 1997, plaintiff sent a notice of default and termination to defendants, terminating their franchise agreement. On October 7, 1998, plaintiff sent a notice of election under the lease option agreement to defendants Trpko and Bosko Taseski. To the present date, defendants have not executed a new lease with plaintiff corporation nor have they surrendered possession of their franchise pursuant to the lease option agreement.
As previously mentioned, the parties filed a joint stipulation and consent judgment as to liability on February 10, 1999. In that submission, defendants admitted to breaching the franchise agreement with plaintiff by intentionally underreporting the gross sales earned, by falsifying documents, and by intentionally underpaying their franchise fees and advertising fees to plaintiff. The parties also stipulated that defendants breached the franchise agreement by failing to comply with applicable laws relating to the operation of the Dunkin' Donuts franchise. Defendants also withdrew their demand for trial by jury.
In light of the February 10, 1999 joint stipulation and consent judgment as to liability the only remaining issue contained within plaintiff's complaint is the issue of damages incurred by plaintiff as a result of defendants' breach. In an attempt to calculate these damages, plaintiff has performed an analysis of defendants' franchise. This analysis was accomplished via a computer program, Quick Retail Sales Analysis (QRSA), which uses records of a franchisee's purchases of raw ingredients to calculate the amount of actual historical sales as compared with reported sales.1
According to plaintiff, the QRSA program calculated that defendants' actual historical sales were $4,308.08 more per week than the sales defendants had reported to plaintiff corporation. Based on this calculated weekly variance over a three year period from June 1994 through May 1997, plaintiff maintains that defendants owe it the sum of $73,254.59 in unpaid franchise and advertising fees based on a percentage of the unreported sales. In addition to this amount, plaintiff further alleges that defendants owe expenses relating to the investigation for underreporting and interest, all of which defendants are required to pay under the franchise agreement in the event they are found to have underreported sales. As a consequence, plaintiff contends that the total amount owed to plaintiff by defendants is $97,652.45.
There are three counterclaims remaining against plaintiff, to wit: Counterclaim II, "Breach of Franchise Agreement— Wrongful Collection of Franchise and Advertising Fees on Additional Products," Counterclaim IV, "Wrongful Refusal to Approve Transfer of Defendants/Counter-Plaintiffs' Franchise," and Counterclaim V, "Breach of Implied Covenant of Good Faith and Fair Dealing."2
Counterclaim II is premised upon a rider to the franchise agreement stating that defendants need not pay franchise or advertising fees on "additional products." Such products are defined as convenience store products that are "not the same or substantially similar to any product sold in typical Dunkin' Donuts shops...." See Rider, attached as Exh. 1A to plaintiff's motion for summary judgment, ¶ 2. The "additional products" upon which defendants base their claim that plaintiff wrongfully collected fees consist of items which were contained in a refrigerator or cooler located in the store. The items include juices, milk, and Lipton Ice Tea, but no food products. See Trpko Taseski Depo., attached as Exh. 3B to plaintiff's motion for summary judgment, pp. 63-64, 71-72.
According to plaintiff, other Dunkin' Donuts franchisees do typically sell milk, juice, and soft drinks and are required to report and pay fees on those sales. See Exh. 1 to plaintiff's motion for summary judgment, ¶ 14. Plaintiff also points out that defendant Trpko Taseski admitted during his deposition on October 6, 1998 that other Dunkin' Donuts shops sell soft drinks such as milk, juice or soda. See Trpko Taseski Depo., attached as Exh. 3B to plaintiff's motion for summary judgment, p. 61. Moreover, plaintiff emphasizes that defendant Trpko Taseski testified that he always voluntarily reported and paid fees on these "additional products" and that he never complained to any employee of plaintiff corporation about such payments. See id., p. 70.
Counterclaims IV and V allege that Dunkin' Donuts wrongfully refused to approve a proposed transfer of defendants' franchise agreement to a third-party. However, plaintiff points out that the proposed transfer was submitted for plaintiff's approval only after plaintiff had sent the notice of default and termination of defendants' franchise agreement.
Pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment may be granted "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 judgment as a matter of law." "A fact is `material' and precludes grant of summary judgment if proof of that fact would have [the] effect of establishing or refuting one of the essential elements of the cause of action or defense asserted by the parties, and would necessarily affect [the] application of appropriate principle[s] of law to the rights and obligations of the parties." Kendall v. Hoover Co., 751 F.2d 171, 174 (6th Cir.1984) (citation omitted). In evaluating a motion for summary judgment, the Court must view the evidence in a light most favorable to the nonmovant, as well as draw all reasonable inferences in the nonmovant's favor. See U.S. v. Diebold, 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962); Bender v. Southland Corp., 749 F.2d 1205, 1210-11 (6th Cir.1...
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