Piantes v. Pepperidge Farm, Inc.

• Decision Date: 01 February 1995
• Docket Number: Civ. A. No. 93-10167NG.
• Citation: 875 F. Supp. 929
• Parties: Costa H. PIANTES, Plaintiff, v. PEPPERIDGE FARM, INCORPORATED, Defendant.
• Court: U.S. District Court — District of Massachusetts

875 F. Supp. 929

Costa H. PIANTES, Plaintiff, v. PEPPERIDGE FARM, INCORPORATED, Defendant.

Civ. A. No. 93-10167NG.

United States District Court, D. Massachusetts.

February 1, 1995.

George W. Mykulak, Goldstein & Manello, Boston, MA, for plaintiff Costa H. Piantes.

Harrison A. Fitch, Fitch & Tourse, PC, Boston, MA, for defendant Pepperidge Farm, Inc.

CORRECTED MEMORANDUM AND ORDER

GERTNER, District Judge.

I. INTRODUCTION

Plaintiff Costa H. Piantes ("Piantes") brought this action against defendant Pepperidge Farm, Inc. ("PFI"), seeking declaratory and injunctive relief in connection with PFI's unilateral termination of Piantes' distributorship franchise. Piantes also seeks damages under M.G.L. ch. 93A.

Before me is PFI's motion for summary judgment. Also before me is Piantes' motion for leave to amend the complaint to add an additional claim for breach of an implied covenant of good faith and fair dealing.

For the reasons stated below, PFI's motion for summary judgment is ALLOWED and Piantes' motion is DENIED.

II. FACTS

A. The Consignment Agreements

PFI is a well-known producer of baked goods, which it sells in retail food stores throughout the United States. In order to deliver its products, PFI employs a force of independent contractors, to whom it grants geographically exclusive franchises.

On or about June 3, 1968, Piantes and PFI entered into a written "consignment agreement", under which PFI granted Piantes the franchise to deliver PFI products in certain suburbs of Boston. Under the terms of the agreement, Piantes was to receive PFI products on consignment, and was to sell them on a commission basis to chain-stores, at prices set by PFI. He also was permitted to make additional sales to non-chain stores at prices and profit margins which he could negotiate with the individual retailers.

Piantes paid PFI $7,000 for the franchise, of which $2,000 was his own savings, and $5,000 was borrowed from PFI.¹ In addition, he borrowed $2,600 to purchase a used delivery truck.

The consignment agreement gave both PFI and Piantes the right to terminate their franchise relationship. Piantes could terminate by selling all or part of the franchise to a new franchisee (with PFI's approval), or by providing PFI with 30 days notice of his intent to terminate. PFI could terminate the franchise in the event that Piantes violated one of a list of enumerated "for cause" provisions, and it could also terminate the agreement for no reason at all, provided that it paid Piantes 125% of the fair market value of the franchise, as determined by a panel of arbitrators.

Piantes continued as a PFI franchisee for the next 24 years, developing his territory into one of the highest volume PFI franchises in the country. On four occasions during that period, in 1974, 1976, 1977 and 1978, Piantes and PFI agreed to modify the terms of the franchise — by adding new products to be delivered and/or by splitting off part of the territory to another franchisee. In each instance, Piantes and PFI entered into a new consignment agreement with substantially the same language as the prior ones.

B. The Route Restructuring Dispute

In the fall of 1992, PFI was contemplating introducing a new "Crunchy Snacks" product line to retail stores in Massachusetts, and anticipated that this would result in a significant increase in the amount of product which each of its franchisees would be delivering. PFI determined that Piantes' route was already operating at or above its capacity, and so decided to ask him to agree to sell off a portion of his route ("a route split").

On November 23, 1992, PFI's Area Sales Manager, Wayne Eriksen, asked Piantes to attend a meeting at which route splitting would be discussed. Piantes told Eriksen that he was not interested in a route split at that time, and refused to attend the meeting.

On December 3, 1992, James D'Avolio, PFI's Manager of Retail Distribution told Piantes that PFI was committed to restructuring its routes and sought his cooperation. Piantes once again stated that he would not split off any of his route. D'Avolio told Piantes that if he did not agree to split off part of his route, PFI would exercise its rights under the consignment agreement to terminate his distributorship.

On or about January 1, 1993, Piantes spoke with Ralph DeVito, PFI's Vice President of Sales. DeVito reiterated that if Piantes did not agree to split off and sell a portion of his route, PFI would "take him out" without cause.

On or about January 12, 1993, PFI's Regional Sales Manager, Robert Crider, called Piantes. He explained to Piantes why PFI wanted to restructure his route, and asked him once again to consider splitting off part of his route. Piantes once again refused.

On January 23, 1993, Crider, D'Avolio and Eriksen confronted Piantes at the Star Market in Wellesley during a delivery, and told him that they had termination papers in hand. They offered him one last chance to agree to a route split off. Piantes said he would consider it only after they allowed him to deliver the new "Crispy Snacks" product line for a year. At this point, they handed Piantes written notice that his franchise had been terminated, effective that same day.

PFI subsequently offered to pay Piantes the sum of $226,221.50, which it claims to be 125% of the value of his route, in order to settle his claim under the termination clause. Piantes has apparently refused to accept this payment, and has also refused to invoke the contractual arbitration procedure to determine the amount to which he is entitled.

C. PFI's Oral Representation

Piantes acknowledges that all of the consignment agreements he executed with PFI contained clauses permitting PFI to terminate his franchise upon payment to him of 125% of its fair market value. He contends, however, that these provisions were made inoperative by certain statements made by James Carhoff, who was PFI's District Sales Manager at the time Piantes executed the first consignment agreement in 1968.

According to Piantes, he had been interested in entering a franchise agreement with PFI because his brother was already a PFI franchisee on Cape Cod and had recommended the company to him. Accordingly, between February and May, 1968, Piantes completed a franchise application and credit forms, and submitted them to PFI. In May, 1968, Carhoff informed Piantes that his application had been approved.

Piantes then met Carhoff at the PFI depot in Belmont. Carhoff showed him the consignment agreement, reviewing and explaining each of its terms. Piantes read the agreement and, he says, objected to the termination without cause provision described above. He asked why he should buy a franchise if PFI could terminate it without cause. Piantes says that Carhoff told him that "the only way this clause would be executed is if the company decided to go in-house, pull out of the area or distribute the product themselves, which they wouldn't do because it was too costly." Piantes never asked to have this statement put in writing, nor did he ask for an opportunity to review the contract with a lawyer. Rather he signed the contract as it was written.

Although Piantes subsequently signed four revised consignment agreements, Piantes never inquired again about the status of the termination clause. According to Piantes, however, he was told at the time of each signing that, except for certain specified changes, the term and conditions of each new agreement did not represent a change from previous agreements. Piantes also states that he was reassured that his route would not be terminated because DeVito once told him that it was too expensive for PFI to "go in-house" and that PFI was "not in the business of running routes."

III. SUMMARY JUDGMENT STANDARD

A motion for summary judgment will be granted when all the relevant pleadings, viewed in the light most favorable to the nonmoving party, present no genuine issue of material fact such that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Aponte-Santiago v. Lopez-Rivera, 957 F.2d 40, 41 (1st Cir.1992); Medina-Munoz v. R.J. Reynolds Tobacco Co., 896 F.2d 5, 8 (1st Cir.1990); Griggs-Ryan v. Smith, 904 F.2d 112, 115 (1st Cir. 1990). Where the defendant moves for summary judgment, it bears an initial burden of pointing out the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). Thereafter, the burden shifts to the plaintiff to demonstrate that there is evidence sufficient to support his claims at trial. Id. at 322, 106 S.Ct. at 2552.

IV. ANALYSIS

Counts I and II of the Complaint seek a declaration that the termination without cause provision of the consignment agreement is unenforceable against Piantes, and an injunction prohibiting such enforcement. Count III seeks damages under M.G.L. ch. 93A. All three counts rely on the same legal contentions, namely that a) PFI intentionally and fraudulently misrepresented its intentions with respect to the termination without cause provision, b) PFI is estopped from enforcing the provision, and c) that the provision is unconscionable. Accordingly, I will address each of these contentions in turn.

A. Misrepresentation

To recover for misrepresentation or fraud under Massachusetts law, a plaintiff must prove that "the defendant made a false representation of material fact with knowledge of its falsity, that the defendant made the statement for the purpose of inducing the plaintiff to act thereon, and that the plaintiff relied upon that statement to his or her detriment." Bolen v. Paragon Plastics, Inc., 754 F.Supp. 221, 226 (D.Mass.1990). Ordinarily, false statements that concern matters of opinion, conditions to exist in the future, or matters promissory in nature are not actionable. Yerid v. Mason, 341 Mass. 527, 530, 170 N.E.2d 718 (1960); Gerli v. G.K. Hall & Co., 851 F.2d 452, 456 (1st Cir.1988). An exception is...