Fleming Companies, Inc. v. Thriftway Medford Lakes, Inc.

• Decision Date: 03 March 1995
• Docket Number: Civil Action No. 93-2103 (MLP).
• Citation: 913 F. Supp. 837
• Parties: FLEMING COMPANIES, INC., Plaintiff, v. THRIFTWAY MEDFORD LAKES, INC., d/b/a Murphy's Market, Defendant. Ronald S. MURPHY, Kathleen Murphy, and Thriftway Medford Lakes, Inc., Plaintiffs, v. FLEMING COMPANIES, INC., G. William Watson, John R. Traub and Wayne Pendergast, Defendants.
• Court: U.S. District Court — District of New Jersey

913 F. Supp. 837

FLEMING COMPANIES, INC., Plaintiff, v. THRIFTWAY MEDFORD LAKES, INC., d/b/a Murphy's Market, Defendant.

Ronald S. MURPHY, Kathleen Murphy, and Thriftway Medford Lakes, Inc., Plaintiffs, v. FLEMING COMPANIES, INC., G. William Watson, John R. Traub and Wayne Pendergast, Defendants.

Civil Action No. 93-2103 (MLP).

United States District Court, D. New Jersey.

March 3, 1995.

COPYRIGHT MATERIAL OMITTED

Craig S. Hilliard, Stark & Stark, Princeton, New Jersey, Michael J. McCaney, Jr., Heller, Kapustin, Gershman & Vogel, Plymouth Meeting, Pennsylvania, for Fleming Companies, Inc., G. William Watson, John R. Traub and Wayne Pendergast.

Patrick F. McAndrew, Brandt, Haughey, Penberthy, Lewis & Hyland, P.A., Moorestown, New Jersey, John J. Pribish, North Brunswick, New Jersey, for Ronald S. Murphy, Kathleen Murphy and Thriftway Medford Lakes, Inc.

MEMORANDUM AND ORDER

PARELL, District Judge.

This matter is before the Court on motion for summary judgment by Fleming Companies, Inc., G. William Watson, John R. Traub, and Wayne Pendergast. For the following reasons, the motion is granted.

FACTUAL BACKGROUND

This case involves a business relationship that was formed in the Spring of 1978 for the purpose of opening and operating a supermarket in Medford Lakes, New Jersey. The relevant facts ascertained from the record are as follows:

Ronald Murphy ("Murphy") is an individual with a high school education who has worked in the grocery or supermarket business since he was approximately twelve or thirteen years old. In 1977, while Murphy was employed as a manager at a Shop N' Bag supermarket in Glenn Oaks, New Jersey, he mentioned to a representative from Fleming Companies, Inc. ("Fleming"), who was at the Shop N' Bag store, that he would be interested in becoming an "equity store" owner. Thereafter, Fleming proposed to Murphy that he seek to participate in a program sponsored by Fleming known as the "Equity Plan." The Equity Plan is a program whereby Fleming provides individuals who show promise and who would otherwise be financially unable to do so, with the opportunity to become owners and operators of a supermarket.¹

A store site in Medford Lakes, New Jersey was mutually agreed upon by Fleming and Murphy, and thereafter Fleming provided Murphy with a book (the "Equity Plan Book") explaining in general terms how the Equity Plan works. Murphy states that he read this book but that he did not understand the principles and procedures which are set forth therein. The Equity Plan Book provides:

After you have been approved for an Equity Store, you are expected to enter into a "Participation Agreement," that spells out, in the greatest detail, every single step in the development and operation of both an Equity Corporation and an Equity Store.

Because the Participation Agreement is a lengthy, legal document, we do not expect you to understand it on a single reading. We want you to take it home and study it at your leisure. If you wish, you may discuss it with such people as your attorney, banker, accountant, etc., and, by all means, we urge you to go over it with your wife.

(Defs.' App. at 30a.)

Murphy states that he did not consult with an attorney or seek the advice of any other type of professional regarding the principles and procedures set forth in the Equity Plan Book because he "took for granted that everything was the way it should be" and because he is "an uneducated person" and "didn't want to make a fool of himself asking stupid questions." (Defs.' App. at 218-19a.)

Murphy was approved by Fleming as an Equity Store operator for the Medford Lakes location. On April 24, 1978, Murphy met with a representative from Fleming and, at that time, he signed a number of Equity Plan agreements prepared by Fleming, including a lease agreement whereby Fleming subleased the Medford Lakes property to Thriftway Medford Lakes, Inc. ("TML"), the Equity Corporation which was formed as part of the Equity Plan program. Prior to signing these agreements, Murphy did not consult with an attorney or seek the advice of any other type of professional regarding the nature and the extent of the obligations and the rights set forth in these agreements because he did not feel that it was necessary to do so. (Defs.' App. at 229a.) Murphy concedes that neither Fleming nor any representative of Fleming prevented Murphy from asking questions or from seeking outside counsel or advice.

In April of 1978, the Medford Lakes property was owned by Floharon Properties, Inc. ("Floharon"). On April 24, 1978, Fleming entered into an agreement (the "Build and Lease Agreement") with Floharon to lease the Medford Lakes property. The Build and Lease Agreement provides:

The LESSOR Floharon agrees to, and does hereby, lease the premises to the LESSEE Fleming for an original term of twenty (20) years, commencing on the first day the premises is open for business. ....

. . . . .

It is further agreed that, at the expiration of the original term, the LESSEE shall have the right, exercisable at its sole option to extend this lease for three (3) additional term(s) of five (5) years each, upon the same terms and conditions.

(Defs.' App. at 67-68a.)

The Sublease Agreement between Fleming and TML provides:

SUBLESSOR Fleming hereby leases to SUBLESSEE TML, and SUBLESSEE hires from SUBLESSOR, only for operation of a retail food market, the premises as above described, for an initial term of five (5) years, commencing simultaneously with the term of the ORIGINAL LEASE between Floharon and Fleming.

This Sublease shall be automatically renewed for three (3) additional terms of five (5) years each unless SUBLESSOR terminates this Sublease by giving written notice to SUBLESSEE ninety (90) days prior to the end of the initial term or any additional term. Notwithstanding any such renewal, or any other provision hereof, this Sublease shall terminate on the expiration or termination of the ORIGINAL LEASE. SUBLESSEE shall be subject to all the terms and conditions of the ORIGINAL LEASE. Such ORIGINAL LEASE is for a term of twenty (20) years.

(Defs.' App. at 47-48a.)

In 1983, Murphy paid off Fleming's interest in TML, the Equity Corporation, and Murphy thereby assumed full ownership and control of TML. TML continued to be a sublessee of Fleming under the Sublease Agreement and TML continued to purchase groceries and certain other services from Fleming.

In 1987, TML purchased from Floharon the fee interest in the land upon which the Medford Lakes supermarket is situated. TML secured financing from a bank in order to make this purchase. Fleming provided TML with a bridge loan of $500,000.00 until the permanent financing was in place.²

In 1989, TML terminated its relationship with Fleming as a supplier of groceries and other products. TML also changed the name of the supermarket to "Murphy's Market" and thereafter ceased to use the trade name "Thriftway."³

By letter dated January 18, 1993, Fleming notified TML that it was exercising its right to terminate the Sublease Agreement as of April 30, 1993, the date on which the current term would end, and that it would not renew the Sublease Agreement for an additional five year term. TML refused to vacate the premises and, on May 4, 1993, Fleming filed a diversity action with this Court seeking to eject TML and to recover damages for mesne profits.

On May 24, 1993, Ronald Murphy, Kathleen Murphy, and TML filed an action in New Jersey state court against Fleming Companies, Inc., G. William Watson, John R. Traub and Wayne Pendergast⁴ asserting (1) breach of fiduciary duty, (2) breach of the implied duties of good faith and fair dealing, (3) gross negligence, (4) fraud and conspiracy, (5) general estoppel, and (6) violations of (a) the New Jersey Franchise Act, N.J.Stat. Ann. 56:10-1 et seq., (b) the New Jersey Anti-Trust Act, N.J.Stat.Ann. 56:9-1 et seq., (c) the New Jersey Uniform Securities Law, N.J.Stat.Ann. 49:3-47 et seq., (d) the New Jersey Consumer Fraud Act, N.J.Stat.Ann. 56:8-1 et seq., and (e) the New Jersey Business Corporation Act, N.J.Stat.Ann. 14A:1-1 et seq., On June 17, 1993, the state court action filed by the Murphys and TML was removed to this Court on the basis of diversity jurisdiction and, by Consent Order dated August 17, 1993, was thereafter consolidated with the initial action filed by Fleming.

Fleming Companies, Inc., G. William Watson, John R. Traub and Wayne Pendergast (hereinafter the "Fleming defendants" unless otherwise indicated) move for summary judgment as to all claims asserted against them by the Murphys and TML. Fleming further moves for summary judgment on its claim against TML for ejectment and damages for mesne profits. On September 22, 1994, this Court heard the oral arguments of counsel on this motion for summary judgment.

DISCUSSION

A court shall enter summary judgment under Federal Rule of Civil Procedure 56(c) when the moving party demonstrates that there is no genuine issue of material fact and the evidence establishes the moving party's entitlement to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). In order to defeat a motion for summary judgment, the opposing party must establish that a genuine issue of material fact exists. Jersey Cent. Power & Light Co. v. Lacey Township, 772 F.2d 1103, 1109 (3d Cir.1985), cert. denied, 475 U.S. 1013, 106 S.Ct. 1190, 89 L.Ed.2d 305 (1986). A nonmoving party may not rely on mere allegations; it must present actual evidence that creates a genuine issue of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510-11, 91 L.Ed.2d 202 (1986) (citing First Nat'l Bank of Arizona v. Cities Service Co., 391 U.S. 253, 290, 88 S.Ct. 1575, 1593, 20 L.Ed.2d 569 (1968)); Schoch v. First Fidelity Bancorporation, 912 F.2d 654, 657 (3d Cir.1990). Issues of fact are genuine only "if the evidence is such that a reasonable jury could return a...