Planet Fitness Int'l Franchise v. Jeg-United, LLC

• Decision Date: 21 September 2021
• Docket Number: Civil No. 20-cv-693-LM
• Citation: 561 F.Supp.3d 9
• Parties: PLANET FITNESS INTERNATIONAL FRANCHISE v. JEG-UNITED, LLC
• Court: U.S. District Court — District of New Hampshire

561 F.Supp.3d 9

PLANET FITNESS INTERNATIONAL FRANCHISE

v.JEG-UNITED, LLC

Civil No. 20-cv-693-LM

United States District Court, D. New Hampshire.

Signed September 21, 2021

Michael D. Joblove, Brett Michael Halsey, Genovese Joblove & Battista PA, Miami, FL, James P. Harris, Sheehan Phinney Bass & Green PA, Manchester, NH, for Planet Fitness International Franchise.

James Howard Steigerwald, Nicholas M. Centrella, Jr., Duane Morris LLP, Philadelphia, PA, Bryan Harrison, Duane Morris LLP, Boston, MA, for JEG-United, LLC.

ORDER

Landya McCafferty, United States District Judge Planet Fitness International Franchise ("Planet Fitness"),¹ a franchisor of gyms, and JEG-United, LLC, a company that develops Planet Fitness franchises in Mexico, assert claims against one another. Planet Fitness moves for partial summary judgment (doc. no. 24) on JEG-United's counterclaims, arguing that a release of liability bars the counterclaims to the extent they arise from events predating December 26, 2019. JEG-United objects. For the following reasons, Planet Fitness's motion is denied.

STANDARD OF REVIEW

Summary judgment is proper only if the moving party can demonstrate "that there is no evidence in the record to support a judgment for the nonmoving party." Celotex Corp. v. Catrett, 477 U.S. 317, 332, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; see also Fed. R. Civ. P. 56(a). If the moving party succeeds in making that showing, "the burden shifts to the nonmoving party, who must, with respect to each issue on which she would bear the burden of proof at trial, demonstrate that a trier of fact could reasonably resolve that issue in her favor." Borges v. Serrano-Isern, 605 F.3d 1, 5 (1st Cir. 2010). The nonmoving party's failure to meet that burden by reference to "significantly probative" materials "of evidentiary quality" entitles the moving party to summary judgment. Flovac, Inc. v. Airvac, Inc., 817 F.3d 849, 853 (1st Cir. 2016) (citations omitted). In evaluating a motion for summary judgment, the courts must view the evidence in the light most favorable to the nonmoving party, must draw all reasonable inferences in that party's favor, and may neither make credibility determinations nor weigh the evidence. Harris v. Scarcelli, 835 F.3d 24, 29 (1st Cir. 2016) ; Hicks v. Johnson, 755 F.3d 738, 743 (1st Cir. 2014).

BACKGROUND

I. JEG-United and Planet Fitness

Counterclaim defendant Planet Fitness is an international franchisor of gyms. Counterclaim plaintiff JEG-United, a Delaware limited liability company, develops Planet Fitness franchises in Mexico. In March 2019, JEG-United and Planet Fitness entered a contract (the "Side-Letter Agreement") in which they agreed to negotiate about providing exclusive development rights to JEG-United to open and operate Planet Fitness franchises in parts of Mexico. In its counterclaims against Planet Fitness, JEG-United alleges that Planet Fitness breached the Side-Letter Agreement (Count I), breached implied covenants of good faith and fair dealing (Count II), tortiously interfered with contractual and prospective business relationships (Count III), and violated the New Hampshire Consumer Protection Act (Count IV).² In its motion for partial summary judgment, Planet Fitness contends that JEG-United's counterclaims, to the extent they arise from events predating December 26, 2019, are barred by a release of liability. Planet Fitness contends that JEG-United, which is not expressly named in the release, is nonetheless bound to it by virtue of JEG-United's corporate relationship with the release's actual signatories, JEG-Mexico Bueno, S. de R.L. de C.V. and United PF Holdings, LLC, ("PF Holdings") neither of which are parties in the present lawsuit.

II. General Release

The release arose from a transaction unrelated to the present lawsuit. In December 2019, PF Holdings, which owns and operates many United States-based Planet Fitness franchises, was sold to a third party. At the time of the sale, PF Holdings also held interests in Mexico-based Planet Fitness franchises. Specifically, PF Holdings owned an entity called United PF MEX. United PF MEX is one of JEG-United's two members. And JEG-United—through two wholly-owned subsidiaries—holds an interest in JEG-Mexico Bueno, which, in turn, operates five Planet Fitness franchises in Mexico.

Because only PF Holdings's interests in the United States-based franchises were to be included in the sale, the sale was facilitated by transferring PF Holdings's interest in United PF MEX to PF Holdings's parent. All other pertinent corporate relationships, however, remained the same as they were before the sale.

Because the sale affected gyms with which Planet Fitness held franchise agreements, Planet Fitness's approval was required to complete the transaction.³ As a condition of its approval of the sale, Planet Fitness required JEG-Mexico Bueno and PF Holdings to execute a contract entitled "General Release," which, among other terms, contained the following release clause:

Release. Franchisee [JEG-Mexico Bueno] and Transferring Owner [PF Holdings], for themselves and their successors, predecessors, assigns, beneficiaries, executors, trustees, gents, representatives, employees, officers, directors, shareholders, partners, members, subsidiaries and affiliates (jointly and severally, the "Releasors"), irrevocably and absolutely release and forever discharge Franchisor [Planet Fitness] and its successors, predecessors, assigns, beneficiaries, executors, trustees, agents, representatives, employees, officers, directors, shareholders, partners, members, subsidiaries and affiliates (jointly and severally, the "Releasees"), of and from all claims, obligations, actions or causes of action (however denominated), whether in law or in equity, and whether known or unknown, present or contingent, for any injury, damage, or loss whatsoever arising from any acts or occurrences occurring as of or prior to the date of this Release [December 26, 2019] relating to the Franchise Agreements, the businesses operated under the Franchise Agreements, and/or any other previously existing agreement between any of the Releasees and any of the Releasors, including but not limited to, any alleged violations of any deceptive or unfair trade practices laws, franchise laws, or other local, municipal, state, federal, or other laws, statutes, rules or regulations, and any alleged violations of the Franchise Agreements or any other related agreement. The Releasors, and each of them, also covenant not to sue or otherwise bring a claim against any of the Releasees regarding any of the claims being released under this Release.

Doc. no. 24-2 at 180. The General Release later states that "[e]ach party whose signature is affixed hereto in a representative capacity represents and warrants that he or she is authorized to execute this Agreement on behalf of and to bind the entity on whose behalf his or her signature is affixed." Id. at 183. Ray Owen III signed for PF Holdings and JEG-Mexico Bueno.

JEG-United is not identified by name in the General Release, and there is no space on the General Release's signature page for a signature by an agent of JEG-United. JEG-United's board of managers did not review or approve the General Release. Ray Owen III was not an officer or member of JEG-United at the time he executed the General Release, and, as discussed further below, a genuine dispute of fact exists as to whether he was a manager of JEG-United at the time he signed the contract. Of the three signatories to the General Release—PF Holdings, JEG-Mexico Bueno, and Planet Fitness—only Planet Fitness is a party in this suit.

DISCUSSION

Planet Fitness contends that JEG-United is bound by the General Release because JEG-United wholly owns entities that, together, wholly own signatory JEG-Mexico Bueno and because one of JEG-United's two members was, at the time the General Release was signed, wholly owned by signatory PF Holdings. Planet Fitness argues that the General Release therefore extinguishes JEG-United's counterclaims to the extent they arise from events before the effective date of the release, December 26, 2019. JEG-United objects, arguing that Ray Owen III, who signed the General Release for PF Holdings and JEG-Mexico Bueno, did not have actual or apparent authority to sign the General Release for JEG-United and that it cannot be bound to the release merely because a parent of one of its members or a subsidiary of a subsidiary were signatories to the contract.

To invoke the defense of release, the moving party "must establish that the release (1) applied to defendants, (2) encompassed the claims asserted in the present lawsuit, and (3) was legally enforceable." Bourne v. Town of Madison, 494 F. Supp. 2d 80, 96 (D.N.H. 2007) (quoting Nottingham Partners v. Trans-Lux Corp., 925 F.2d 29, 32 (1st Cir. 1991) ) (internal modifications omitted). The party asserting the defense of release—Planet Fitness in this case—bears the burden to show that the release operates to discharge its liability. See Moore v. Grau, 171 N.H. 190, 194, 193 A.3d 272 (2018).

Planet Fitness has failed to demonstrate that the General Release is legally enforceable against JEG-United. A genuine dispute of material fact exists as to whether JEG-United assented to the General Release's terms through an agent acting with actual or apparent authority.

"Ordinary principles of contract formation and interpretation apply to releases." Bourne, 494 F. Supp. 2d at 96 (citing Huguelet v. Allstate Ins. Co., 141 N.H. 777, 779, 693 A.2d 408 (1997) ).⁴ To be enforceable, a contract requires "offer, acceptance, consideration, and a meeting of the minds." Durgin v. Pillsbury Lake Water Dist., 153 N.H. 818, 821, 903 A.2d 1003 (2006). JEG-United is an incorporated entity, which "can act only through its agents." Coach, Inc. v. Sapatis, 27 F. Supp. 3d 239, 245 (D.N.H. 2014) ; see also Daniel Webster Council, Inc. v. St. James Ass'n, Inc., 129 N.H. 681, 683, 533 A.2d 329 (1987) ...