Home Instead, Inc. v. Florance

• Decision Date: 16 July 2013
• Docket Number: No. 12–3521.,12–3521.
• Citation: 721 F.3d 494
• Parties: HOME INSTEAD, INC., Plaintiff–Appellee v. David FLORANCE; Michelle Florance; Friend of a Friend, Inc., Defendants–Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

721 F.3d 494

HOME INSTEAD, INC., Plaintiff–Appellee
v.
David FLORANCE; Michelle Florance; Friend of a Friend, Inc., Defendants–Appellants.

No. 12–3521.

United States Court of Appeals,
Eighth Circuit.

Submitted: May 15, 2013.
Filed: July 16, 2013.

[721 F.3d 495]

Kirk E. Goettsch, argued, Omaha, NE, for appellant.

Trenten Patrick Bausch, argued, on the brief, Omaha, NE, for appellee.

Before RILEY, Chief Judge, MELLOY and SHEPHERD, Circuit Judges.

[721 F.3d 496]

SHEPHERD, Circuit Judge.

Home Instead, Inc. (“Home Instead”) filed a declaratory judgment action against Friend of a Friend, Inc., David Florance, and Michelle Florance (collectively “Friend”) after the parties unsuccessfully attempted to negotiate a franchise renewal agreement. Friend moved for a preliminary injunction that would allow it to continue operating as a franchisee of Home Instead during pendency of the litigation. The district court denied Friend's motion, and Friend filed this interlocutory appeal. We have jurisdiction under 28 U.S.C. § 1292(a)(1). Because we conclude the district court based its denial on a legally erroneous conclusion, we vacate and remand for the district court to reconsider Friend's motion.

I.

Home Instead provides senior care services through a franchise system. Home Instead and Friend originally executed franchise agreements in 1997 and 1999 that allowed Friend to open two Home Instead franchises. David and Michelle Florance executed personal guarantees of the agreements The parties renewed these agreements in 2002. In 2012, when the agreements were set to expire, Home Instead and Friend began negotiating another renewal. Home Instead attempted to raise the minimum monthly performance requirement in the renewal agreement, but Friend asserted its 2002 agreements locked in the performance requirement.

Two key provisions of the 2002 renewal franchise agreements are at issue. The first provision is section 2.F, which falls under the heading “GRANT OF FRANCHISE.” ¹ Section 2.F provides:

The exclusive right to operate the Franchised Business within the Exclusive Area is contingent upon Franchisee achieving and maintaining minimum Gross Sales of Five Thousand Dollars ($5,000) in each twice-monthly billing period (Ten Thousand Dollars ($10,000) per month) by the end of the first year of operation of the Franchised Business, achieving and maintaining minimum Gross Sales of Ten Thousand Dollars ($10,000) in each twice-monthly billing period (Twenty Thousand Dollars ($20,000) per month) by the end of the third year of operation of the Franchised Business, and achieving and maintaining minimum Gross Sales of Fifteen Thousand Dollars ($15,000) in each twice-monthly billing period (Thirty Thousand Dollars ($30,000) per month) from the end of the fifth year of operation of the Franchised Business through the end of the term of this Agreement or any renewal term of a renewal Franchise Agreement (the “Performance Standard”).
Appellants' App. 75 & 171 (emphasis added).

The second key provision is section 15.A, which falls under the heading “RENEWAL OF FRANCHISE” and provides:

If, upon expiration of the initial term of the Franchise, Franchisee has during the term of this Agreement substantially complied with all its material provisions and agrees to comply with the specifications and standards then applicable for new franchised businesses, then Franchisee has a right to renew the franchise for an additional term equal to the then-customary initial term granted under Franchisor's then-current form of standard Franchise Agreement.... The

[721 F.3d 497]

franchisee may choose to retain the provisions of this agreement with respect to the amount of royalty fee should the then-current agreement call for a larger royalty fee.

Appellants' App. 98 & 194 (emphasis added).

During the district court proceedings, Home Instead argued that section 15.A unambiguously allows Home Instead to raise the minimum monthly performance requirement in renewal agreements, provided that the new requirement is generally applicable to all new franchises. Friend argued that section 2.F unambiguously sets the minimum monthly performance requirement at $30,000 for all franchise renewals.

The district court did not analyze whether the 2002 franchise agreements were ambiguous, stating only that Friend “concede[s] that there is no ambiguity in the provisions at issue.” Home Instead, Inc. v. Florance, No. 8:12CV264, 2012 WL 4327041, at *4 (D.Neb. Sept. 20, 2012). It concluded, as a matter of law, that the agreements do not fix the minimum performance requirement at $30,000 for renewal agreements, but rather “give Home Instead the right to insist on new terms and conditions each time a franchise is up for renewal.” Id. at *5. The court reasoned:

When read naturally and together with the rest of the Renewal Agreement, § 2.F creates a floor, not a ceiling. For the duration of the Renewal Agreements, and for any subsequent renewal, franchisees must achieve a minimum of $30,000 in monthly gross sales. Nothing in § 2.F prohibits the franchisor from raising the minimum amount.

Id. The district court then denied Friend's motion for a preliminary injunction, holding that because the 2002 franchise agreements unambiguously support Home Instead's position, Friend's probability of success on the merits “is nil.” Id. at *4.

II.

We review a district court's ultimate ruling on a preliminary injunction for abuse of discretion, though we review its underlying legal conclusions de novo. See Barrett v. Claycomb, 705 F.3d 315, 320 (8th Cir.2013). Whether a contract is ambiguous is a legal conclusion that we review de novo. See Neb. Pub. Power Dist. v. MidAmerican Energy Co., 234 F.3d 1032, 1040 (8th Cir.2000). A district court abuses its discretion in denying a preliminary injunction if it “rests its conclusion on clearly erroneous factual findings or erroneous legal conclusions.” Barrett, 705 F.3d at 320.

We have articulated a four-factor test for determining whether to grant a motion for a preliminary injunction: “(1) the threat of irreparable harm to the movant; (2) the state of the balance between this harm and the injury that granting the injunction will inflict on other parties litigant; (3) the probability that movant will succeed on the merits; and (4) the public interest.” Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109, 113 (8th Cir.1981) (en banc). While “no single factor is determinative,” id., the probability of success factor is the most significant, Barrett, 705 F.3d at 320. Here, the district court evaluated only the probability of success factor, denying injunctive relief because it concluded Friend had no chance of succeeding on the merits.² The district court based this ruling on its underlying legal

[721 F.3d 498]

conclusion that the 2002 franchise agreements unambiguously supported Home Instead's position.

Under Nebraska law, which both parties agree applies here, a court faced with a question of contract interpretation must first determine whether the contract is ambiguous. See Bedrosky v. Hiner, 230 Neb. 200, 430 N.W.2d 535, 539 (1988). “A written contract which is expressed in clear and unambiguous language is not subject to interpretation or construction,” and a court simply must give effect to that language. Id. at 540. In contrast, “[w]hen it is established that a contract is ambiguous, the meaning of its terms is a matter of fact to be determined in the same manner as other questions of fact.” Id.

Where both parties claim a contract unambiguously supports their respective positions, the court must determine whether the contract truly is unambiguous.³Cf. C.S.B. Co. v. Isham, 249 Neb. 66, 541 N.W.2d 392, 396 (1996) (evaluating whether contract construction was a question of law when “both parties argue that the contract is clear and unambiguous”). “A determination as to whether ambiguity exists in a contract is to be made on an objective basis, not by the subjective contentions of the parties....” Bedrosky, 430 N.W.2d at 539. In making this determination, a court must look at the contract as a whole. Id. “A provision of a contract is ambiguous when, considered with other pertinent provisions as a whole, it is capable of being understood in more senses than one.” Id.

Here, both Home Instead and Friend...