Matosantos Commercial Corp. v. Applebee's Intern.

• Decision Date: 26 August 1999
• Docket Number: Civ. A. No. 99-2105-KHV.
• Citation: 64 F.Supp.2d 1105
• Parties: MATOSANTOS COMMERCIAL CORPORATION, Plaintiff, v. APPLEBEE'S INTERNATIONAL, INC., Defendant/Third Party Plaintiff, v. Apple Development Associates, II, L.P., Peter W. Feldman and Henry Derooy, Third Party Defendants.
• Court: U.S. District Court — District of Kansas

64 F.Supp.2d 1105

MATOSANTOS COMMERCIAL CORPORATION, Plaintiff, v. APPLEBEE'S INTERNATIONAL, INC., Defendant/Third Party Plaintiff, v. Apple Development Associates, II, L.P., Peter W. Feldman and Henry Derooy, Third Party Defendants.

Civ. A. No. 99-2105-KHV.

United States District Court, D. Kansas.

August 26, 1999.

Bruce Keplinger, Timothy S. Davidson, Norris & Keplinger, L.L.C., Overland Park, KS, Hector Saldana-Egozcue, Saldana & Vallecillo, PSC, Brian D. Martin, Blackwell Sanders Peper Martin LLP, Kansas City, MO, for Matosantos Commercial Corp.

Peter Feldman, Deerfield Beach, FL, pro se.

Michael Thompson, Brian D. Martin, Blackwell Sanders Peper Martin, LLP, Kansas City, MO, for Applebee's Intern., Inc.

MEMORANDUM AND ORDER

VRATIL, District Judge.

This matter comes before the Court on Defendant's Motion For Summary Judgment (Doc. # 25) filed June 8, 1999. Plaintiff brings six claims, all of which revolve around the issue whether defendant Applebee's International, Inc. assumed or promised to assume the contractual obligations of its franchisee. Defendant argues that another district court has already determined that it neither assumed, nor represented that it would assume, duties of the franchisee. Defendant therefore argues that issue preclusion bars plaintiff from relitigating this issue. For the reasons stated below, defendant's motion must be sustained.

Summary Judgment Standard

Summary judgment is appropriate "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 a judgment as a matter of law." Fed.R.Civ.P. 56(c); accord Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Smith v. Midland Brake, Inc., 138 F.3d 1304, 1307 (10th Cir.1998). The moving party bears the initial burden of showing that there is an absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party meets its burden, the burden shifts to the nonmoving party to "set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 256, 106 S.Ct. 2505. A "genuine" factual dispute requires more than a mere scintilla of evidence. Id. at 252, 106 S.Ct. 2505.

In considering a summary judgment motion the Court must view the evidence in the light most favorable to the nonmoving party. Tom v. First Am. Credit Union, 151 F.3d 1289, 1291 (10th Cir.1998). Summary judgment may be granted, however, if the nonmoving party's evidence is merely colorable or is not significantly probative. Anderson, 477 U.S. at 250-51, 106 S.Ct. 2505. Thus, "`[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,' summary judgment in favor of the moving party is proper." Thomas v. IBM, 48 F.3d 478, 484 (10th Cir.1995) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)).

Facts

Plaintiff Matosantos Commercial Corporation is in the business of purchasing products for resale and distribution to national restaurant chains. On April 13, 1995, it entered into a purchase and delivery agreement with Casual Dining Restaurant Management of Puerto Rico, Inc. ("Casual Dining"). Casual Dining was an affiliate of Apple Development Associates II ("Apple Development"), a franchisee of Applebee's International, Inc. ("Applebee's"). Casual Dining operated two Applebee's restaurants in Puerto Rico. In its agreement with Matosantos, Casual Dining agreed to pay for any inventory Matosantos purchased in order to service Casual Dining. The two restaurants which Casual Dining operated, however, were not successful.

On February 13, 1996, Applebee's and Apple Development executed a management agreement which authorized Applebee's or one of its subsidiaries to manage the Casual Dining restaurants until March 8, 1996. The agreement stated that for the duration of the management term, Applebee's or one of its subsidiaries would operate the restaurants subject to existing contracts of Casual Dining, but that Casual Dining was responsible for payment of its suppliers for purchases prior to the time Applebee's or another franchisee took over the restaurants.

On February 14, 1996, Gilbert Simon, Applebee's executive director of international financing, sent Matosantos a letter which stated that as of that date, an Applebee's subsidiary had begun managing the Casual Dining restaurants. Simon stated that under the purchase and delivery agreement between Casual Dining and Matosantos, Casual Dining was responsible for payment of goods and services provided prior to February 14. The next day, Simon again wrote Matosantos and reiterated that neither Applebee's nor any subsequent franchisee of Applebee's for Puerto Rico could assume responsibility for payment of the goods and services provided to Casual Dining prior to February 14 and that Casual Dining was liable for such payment. Matosantos alleges that prior to February 14, 1996, however, Simon orally promised that any subsequent franchisee would assume the obligations of Casual Dining.

A subsidiary of Applebee's operated the Casual Dining restaurants until March 14, 1996, when the restaurants closed.

In July of 1996, Matosantos filed suit against Applebee's in the United States District Court for the District of Puerto Rico. In its complaint, Matosantos alleged that Applebee's had verbally assumed responsibility for the inventory which Matosantos had acquired under its purchase agreement with Casual Dining. Matosantos also alleged that under the management agreement, Applebee's had assumed the obligations of Casual Dining under the purchase and delivery agreement.

Applebee's moved to dismiss the complaint based upon lack of personal jurisdiction. In briefing the issue, both parties attached statements, letters and contracts to the motions, briefs and pleadings. The Honorable Justo Arenas, United States Magistrate Judge for the District of Puerto Rico, recommended dismissal of the complaint. The Honorable Daniel R. Dominguez, United States District Judge for the District of Puerto Rico, adopted this recommendation.

In ordering dismissal, the district court found that Matosantos had failed to make a prima facie showing of personal jurisdiction. It held that on the record before it, Applebee's had made no written agreement or oral representation which obligated it under the purchase agreement between Matosantos and Casual Dining. The court stated:

Plaintiff alleges that, in addition to its obligation to pay for materials served from February 14 to March 8, 1996, defendant also assumed liability for the agreement executed by Matosantos and Casual Dining. Even though defendant clearly stated the contrary through letters sent to Matosantos, as well as by the contract signed between [Applebee's] and [Apple Development], Matosantos alleges that defendant assumed this obligations [sic] through "verbal representation." However, neither the complaint nor the opposition to the Magistrate Judge's determination provides the Court with any evidence that may sustain such allegation.

Exhibits To Defendant Applebee's Motion For Summary Judgment (Doc. # 27), Ex. C at 11. The court found that Matosantos had failed to satisfy the Puerto Rico long-arm statute because although Applebee's had some contacts with Puerto Rico, the cause of action did not arise from those contacts. The court also held that even if Matosantos had shown personal jurisdiction over Applebee's, it would be required to grant summary judgment under Fed. R.Civ.P. 56. It stated that:

[t]he record in the case has letters and contracts clearly establishing non liability by [Applebee's] for materials purchased prior to February 14, 1996. Matosantos relies purely on allegations of "verbal representations" by Defendant purportedly assuming liability. Matosantos, however, failed to provide any evidence to substantiate its allegation. Hence, there is no triable issue because the record in the case is not "sufficiently open-ended to permit a rational fact finder to resolve the liability issue."

Id. at 11 n. 5 (citation omitted).

Matosantos subsequently filed this action, bringing six claims based on Applebee's failure to pay for the inventory which Matosantos held under the purchase agreement with Casual Dining. The claims include breach of contract,¹ contract by estoppel,² intentional misrepresentation,³ and negligent misrepresentation.

Analysis

Issue preclusion prevents relitigation of an issue by a party against whom the issue has been conclusively determined in a prior action. Hall v. Doering, 997 F.Supp. 1445, 1459 (D.Kan.1998). Both parties assume that Kansas law governs issue preclusion in this case. The Tenth Circuit Court of Appeals has not definitively decided whether federal or state rules apply to issue preclusion in cases based upon diversity of citizenship. See Frandsen v. Westinghouse Corp., 46 F.3d 975, 977 (10th Cir.1995). In dicta, the Tenth Circuit has stated that it would probably "apply federal preclusion law except where the matter is distinctively substantive." American Motorists Ins. Co. v. General Host Corp., 946 F.2d 1482, 1485 (10th Cir.), vacated in part on other grounds, 946 F.2d 1489 (10th Cir.1991). The District of Kansas has subsequently determined that federal law governs issue preclusion in diversity cases. Augustine v. Adams, 169 F.R.D. 664, 668 (D.Kan.1996) (citing Scheufler v. General Host Corp., 881 F.Supp. 492, 495 (D.Kan.1995)).

Issue preclusion requires that (1) the issue previously decided is identical with the one presented in the action in question; (2) the prior action has been finally adjudicated on the merits; (3) the party against whom the doctrine is invoked was a party or in privity with a party to...