Scheck v. Burger King Corp.

• Decision Date: 06 July 1992
• Docket Number: No. 89-1281-Civ.,89-1281-Civ.
• Citation: 798 F. Supp. 692
• Parties: Steven A. SCHECK, Plaintiff, v. BURGER KING CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of Florida

798 F. Supp. 692

Steven A. SCHECK, Plaintiff, v. BURGER KING CORPORATION, Defendant.

No. 89-1281-Civ.

United States District Court, S.D. Florida.

July 6, 1992.

Robert Zarco, Zarco & Associates, P.A., Miami, Fla. and Douglas M. Brooks, Martland & Brooks, Boston, Mass., for plaintiff.

Douglas G. Moxham, Lane & Altman, Boston, Mass. and T. Joan Lawrence, Steel, Hector & Davis, Miami, Fla., for defendant.

ORDER

HOEVELER, District Judge.

Pending before the Court is the Defendant's Motion to Reconsider Order Denying Summary Judgment.¹ For the reasons enunciated below, this Court is compelled to conclude that the instant motion is without merit, and as such, must be DENIED.²

In its reconsideration motion, Defendant Burger King Corporation asks this Court to reverse its earlier decision denying Burger King's Motion for Summary Judgment as to Count II of the Complaint (breach of the covenant of good faith and fair dealing).³ In denying Burger King's Motion for Summary Judgment, this Court observed that:

It is axiomatic that a contract includes not only its written provisions, but also the terms and matters which, though not actually expressed, are implied by law, and these are as binding as the terms which are actually written or spoken.... One such implied term of a contract, recognized by Florida law, is the implied covenant of good faith and fair dealing. ...

In its motion for summary judgment, Defendant Burger King does not deny the existence of an implied covenant of good faith, but argues, rather, that acts explicitly authorized by the Franchise Agreement cannot constitute bad faith. Burger King relies heavily on the fact that the Franchise Agreement specifically declines to "grant or imply" to Scheck "any area, market or territorial rights".

Yet this court declines to imply that so broad a right springs to Burger King from these words. The express denial of an exclusive territorial interest to Scheck does not necessarily imply a wholly different right to Burger King—the right to open other proximate franchises at will regardless of their effect on the Plaintiff's operations. It is clear that, while Scheck is not entitled to an exclusive territory, he is entitled to expect that Burger King will not act to destroy the right of the franchisee to enjoy the fruits of the contract.... Because issues remain regarding whether Burger King actually breached its covenant of good faith and fair dealing, a summary judgment cannot be granted.

Scheck v. Burger King Corp., 756 F.Supp. 543, 548-49 (S.D.Fla.1991) (citations and footnotes omitted).

After carefully considering the pertinent portions of the record, the relevant case law, and the arguments presented by counsel at the April hearing on this motion, the Court is unable to delineate any sound basis (either in law or policy) upon which to retreat from the above analysis. The Court is unequivocally convinced of the propriety of both the legal propositions articulated and the conclusions reached in the 1991 Order, and accordingly, finds unpersuasive Defendant's Motion to Reconsider.⁴

To begin with, the Court remains certain that Florida contract law recognizes the implied covenant of good faith and fair dealing. See, e.g., First Nationwide Bank v. Florida Software Servs., Inc., 770 F.Supp. 1537, 1542 (M.D.Fla.1991); East Bay Ltd. Partnership v. American General Life & Accident Ins. Co., 744 F.Supp. 1118, 1122 (M.D.Fla.1990), aff'd without opinion, 937 F.2d 619 (11th Cir.1991); Green Cos., Inc. of Florida v. Kendall Racquetball Invs., Ltd., 560 So.2d 1208, 1210 (Fla.Dist.Ct.App.1990); Harrison Land Dev. Inc. v. R and H Holding Co., Inc., 518 So.2d 353, 355 (Fla.Dist.Ct.App. 1987); Brickell Bay Club Condominium Ass'n, Inc. v. Hernstadt, 512 So.2d 994, 997 (Fla.Dist.Ct.App.1987), review denied, 520 So.2d 584 (Fla.1988); Coira v. Florida Medical Ass'n, Inc., 429 So.2d 23, 23 (Fla. Dist.Ct.App.1983); Bowers v. Medina, 418 So.2d 1068, 1069 (Fla.Dist.Ct.App.1982).⁵

In fact, at oral argument, Burger King's counsel confirmed the existence of the implied covenant of good faith under Florida law. At the hearing on the present motion, the following colloquy occurred between the Court and Defendant's counsel:

The Court: Now, do I gather correctly that you do agree there is such a thing as an implied covenant of good faith?

Mr. Moxham: I do.

The Court: All right. Well, that clears that air on the subject.

Mr. Moxham: I have no qualms about their sic being a covenant of good faith applied in this contract.

See Transcript of the April 13, 1992 hearing on the Motion to Reconsider, at 30. The Court also remains confident that Florida law recognizes an independent cause of action for breach of this implied covenant of good faith. See, e.g., Coira, 429 So.2d at 23 (in finding that "there are no material issues of fact concerning the plaintiff's claim that defendant insurer breached" the implied covenant of good faith, court implicitly makes clear that a cause of action for breach of the covenant does exist).

With these issues settled, the Court's attention can next be directed at Defendant's principal argument in support of its Motion to Reconsider. Burger King contends that even if the covenant of good faith can generally be implied under Florida law, it nevertheless should not be implied here since the covenant cannot be invoked to override express contractual language. In effect, Burger King insists that the Franchise Agreement entered into between Plaintiff Scheck and itself expressly gave Burger King the right to undertake the very act complained of—specifically, authorizing the conversion of the Turnpike Howard Johnson's into a Burger King. Therefore, Burger King continues, this Court cannot imply a covenant of good faith into the Franchise Agreement.⁶

Burger King points to the following language in the Franchise Agreement: "This license is for the described location only and does not in any way grant or imply any area, market or territorial rights proprietary to FRANCHISEE."⁷ See Franchise Agreement, at 2. Due to the presence of such language, Burger King maintains, this Court's analysis should be simple and brief: merely apply the Florida rule holding that "the obligation of good faith will not be implied in derogation of the express terms of a contract," Fickling v. Burger King Corp., 843 F.2d 1386 1987-1989 Transfer Binder Bus. Franchise Guide (CCH) para. 9099, at 18,825 (4th Cir.1988) (applying Florida law), and thus enter summary judgment as to Count II.

In the January 1991 Order, however, this Court was entirely unreceptive to Defendant's analytical approach, and the Court remains unmoved by Burger King's position. As the undersigned made clear in the January Order:

This court declines to imply that so broad a right springs to Burger King from these words. The express denial of an exclusive territorial interest to Scheck does not necessarily imply a wholly different right to Burger King—the right to open other proximate franchises at will regardless of their effect on the Plaintiff's operations.

Scheck, 756 F.Supp. at 549. No justification exists for departing from the Court's interpretation of the Franchise Agreement. It is evident that although the language of the Franchise Agreement states that the franchisee cannot expect an exclusive territory, such language does not even mention the franchisor, let alone does the language provide that Burger King retains the unlimited right to establish Burger King franchises at any location desired.

That the Franchise Agreement does not address this subject is quite notable, for it thus becomes apparent that there exists no explicit contractual language that this Court is overriding by virtue of implying a covenant of good faith and fair dealing into the Agreement. Because there is no express language in the Franchise Agreement providing that Burger King can establish Burger King restaurants wherever it so pleases, and because Florida law recognizes the implied covenant of good faith and fair dealing,⁸ this Court properly denied summary judgment. For these exact same reasons, furthermore, the pending reconsideration motion cannot succeed.

Significantly, in denying the reconsideration motion, this Court does not issue a ruling that in any way challenges Defendant's oft-cited rule of law that the covenant of good faith cannot be implied in derogation of the express terms of a contract. Indeed, determining whether such a legal principle actually exists under Florida law is a determination this Court need not and has not made, for this Court has never once found that the express language of the Franchise Agreement gives Burger King the very right which Burger King argues it possesses—that is, the right to franchise other restaurants at any location desired. Clearly, this Court's decision to permit the Plaintiff to present to a jury his claim for breach of the implied covenant of good faith and fair dealing does not run contrary to established law or the Franchise Agreement entered into by the parties.

Also needing emphasis is the fact that this Court's Order does not grant the Plaintiff an exclusive territory in contravention of a contractual provision denying him such a right. Rather, the Court is merely finding that since the Franchise Agreement did not explicitly give Defendant an unfettered right to establish Burger King restaurants at any locale selected—indeed, did not even mention the rights of Burger King with respect to establishing franchises proximate to existing Burger King restaurants—Plaintiff can argue before a jury that Defendant breached the implied covenant of good faith when it sanctioned the Marriott Corporation's conversion of the Howard Johnson's restaurant into a Burger King.⁹

Undoubtedly, it is Burger King's failure to make explicit in the Franchise Agreement the rights Burger King claims it carved out for itself which has created the very situation Burger King now confronts. Had the Defendant...