St. Charles Foods v. Am. Favorite Chicken

• Citation: 198 F.3d 815
• Decision Date: 20 December 1999
• Docket Number: No. 98-8193,98-8193
• Parties: (11th Cir. 1999) ST. CHARLES FOODS, INC., Plaintiff-Appellant, v. AMERICA'S FAVORITE CHICKEN COMPANY, Defendant-Appellee
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 815

198 F.3d 815 (11th Cir. 1999)

ST. CHARLES FOODS, INC., Plaintiff-Appellant, v. AMERICA'S FAVORITE CHICKEN COMPANY, Defendant-Appellee.

No. 98-8193

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

Dec. 20, 1999

Appeal from the United States District Court for the Northern District of Georgia, D. C. Docket No. 1:96-cv-1466-JEC

Before BIRCH and DUBINA, Circuit Judges, and MIDDLEBROOKS^*, District Judge.

BIRCH, Circuit Judge:

St. Charles Foods, Inc. ("SCF") appeals the district court's order granting summary judgment in favor of America's Favorite Chicken Company ("AFC") on SCF's complaint which alleged breach of contract and denying SCF's motion to amend its complaint. SCF argues, first, that summary judgment was improper because the ambiguity in its contract with AFC would allow a reasonable factfinder to draw different inferences from the undisputed facts and that the ambiguity should be construed against AFC as the drafter. Second, SCF argues that the liberal policy of allowing amendments to complaints under Federal Rule of Civil Procedure 15 requires that the district court allow SCF to amend its complaint. For the reasons that follow, we REVERSE the district court's order and REMAND this case for further proceedings consistent with this opinion.

I. BACKGROUND

SCF entered into a franchise agreement with Popeye's Famous Fried Chicken Corporation ("PFFCC") in 1982. See R6-78-Adden. 1- Exh. 1. Under this agreement, SCF built its first Popeye's restaurant, and PFFCC granted SCF the exclusive right to develop Popeye's restaurants within St. Charles Parish, Louisiana, until 2002. In 1987, SCF developed its second Popeye's restaurant, and PFFCC extended SCF's exclusive development rights through 2007. See R6-78-Adden. 2-Exh. 2 at 2.

In 1989, PFFCC acquired the Church's Fried Chicken brand via a leveraged buy-out. Because Church's was a competing restaurant chain, PFFCC assured its Popeye's franchisees that they would be given a right of first refusal for any proposed development within their territory. Al Copeland Enterprises was created as a successor to PFFCC to manage both the Church's and the Popeye's brands. Al Copeland Enterprises filed for Chapter 11 bankruptcy in 1992. AFC emerged from the bankruptcy reorganization plan as the successor to Al Copeland Enterprises and as franchisor of the Popeye's and Church's restaurants.

In 1993, the owners of SCF, Richard and Marilyn Englander, began negotiations to sell SCF and its franchise rights to Edward Carlson, owner of a separate Popeye's franchise. Pursuant to a provision in the SCF franchise agreement granting AFC the right to approve any transfer of ownership, Edward Carlson ("E. Carlson") notified AFC of the proposed sale. As a condition to its approval of the sale, AFC required that SCF execute a new franchise agreement which would eliminate its exclusive right to develop Popeye's franchises within St. Charles Parish.

E. Carlson and his son Charles Carlson ("C. Carlson") (collectively, the "Carlsons") were concerned about the loss of SCF's territorial exclusivity and engaged in discussions with AFC representatives. As a result of these discussions, AFC agreed to replace SCF's territorial exclusivity with a right of first refusal on "any proposed development with St. Charles Parish." 1SR1-101-Exh. 7. The terms of this right of first refusal were detailed in a letter dated October 29, 1993, from AFC's Vice, President of Franchise Administration, Michael Anderson, to E. Carlson. See id. This letter was written on AFC letterhead, which displayed both the Popeye's and Church's logos. See id. On November 2, 1993, Anderson sent another letter to E. Carlson stating that "AFC (`Franchisor') will grant to St. Charles Foods, Inc. (`Franchisee') a right of first refusal for St. Charles Parish, Louisiana through April 10, 2007." R6-78- Adden. 9-Exh. 7-A. The letter explained that "Franchisor will notify [SCF] of any proposed development within St. Charles Parish, Louisiana and will specify the number of stores to be developed and timeframe for development. ... If Franchisee declines to exercise such right [of first refusal], Franchisor has the right to franchise within St. Charles Parish, Louisiana." Id. Again, this letter was written on letterhead displaying both the Church's and Popeye's service marks. See id. The Carlsons interpreted the Letter Agreements¹ as providing SCF a right of first refusal for any proposed development of any AFC brand within St. Charles Parish. See Exh. Dep. of E. Carlson at 71-72. In accordance with the change from territorial exclusivity to a right of first refusal within the territory, the purchase price for SCF was reduced by $100,000. See Exh. Dep. of Richard W. Englander, Jr. at 95-102.

In 1995, AFC began discussions with SCF regarding the development of a Church's restaurant within St. Charles Parish but ultimately granted the Church's franchise to Dugas Oil Company without extending a right of first refusal to SCF. In response, SCF filed a Petition for Injunctive Relief, Declaratory Judgment and Damages in Louisiana state court. See 1SR-101-1. The case was removed to federal court in the Eastern District of Louisiana and then transferred to the Northern District of Georgia, where the court denied SCF's motion to amend its complaint, granted AFC's motion for summary judgment, and dismissed SCF's case in its entirety.

The district court found that the contract between SCF and AFC, as memorialized in the Letter Agreements was "ambiguous as to the scope of the right of first refusal." R7-84-8. Applying Georgia law², the court then attempted to resolve the contract ambiguity using Georgia's rules of construction. See id. The district court determined that the past relationship between SCF and AFC would most likely suggest that the scope of the right of first refusal was limited to the development of new Popeye's restaurants within St. Charles Parish. See id. at 12. Specifically, the district court pointed to the facts that SCF had only dealt with AFC as the franchisor of Popeye's restaurants, that the territorial exclusivity which the right of first refusal replaced was limited to Popeye's restaurants, that SCF lacked evidence indicating that AFC intended to alter SCF's franchise relationship by granting it development rights in the Church's brand, and that the language in the franchise agreement between the parties preserved the right for AFC to compete with SCF through other franchise systems. See id. at 9-11. Finally, the district court denied SCF's motion to amend its complaint because its determination that AFC never offered SCF a right of first refusal for the Church's brand would dispose of the claims SCF sought to add to its complaint. Thus, the district court concluded that SCF's amendment would be futile.

Subsequently, the district court, when considering SCF's motion to vacate, found, even after considering three additional depositions, that SCF had failed to meet the standard required to withstand AFC's motion for summary judgment. See 2SR-103 at 4-5. The court sympathized with SCF and noted that AFC's actions "hardly seem[] to promote the team spirit;" however, the court remained unconvinced that SCF's interpretation of the letters from AFC could be accepted by a reasonable jury. Id. at 10. Therefore, the district court denied SCF's motion to vacate its grant of summary judgment. SCF now appeals.

II. DISCUSSION

On appeal, SCF argues that the district court never made a specific finding that there was no genuine issue of material fact in dispute but instead made a legal determination that the contract between SCF and AFC was ambiguous and then resolved the ambiguity by attempting to ascertain the parties' intent. Second, SCF contends that the district court's weighing of the evidence and the inferences it drew therefrom were inappropriate on summary judgment. Third, SCF claims that the district court incorrectly applied the Georgia Rules of Statutory Construction in its attempt to resolve the contract ambiguity. Finally, SCF argues that because the district court's conclusion that AFC did not extend SCF a right of first refusal for both the Popeye's and Church's brands was inappropriate, the court's conclusion that SCF's amendment of its complaint would be futile was also incorrect.

In opposition, AFC suggests that the district court correctly determined that the contract between AFC and SCF was ambiguous as a matter of law and then, as required by Georgia law, properly ascertained the parties' intentions. Moreover AFC claims that SCF failed to meet its burden of proof by not submitting any evidence supporting its interpretation of the scope of the right of first refusal. Finally, AFC argues that the district court correctly concluded that the amendment would be futile because the district court's entry of summary judgment on SCF's existing complaint was proper and, therefore, AFC's amended complaint would also fail as a matter of law.

A. SUMMARY JUDGMENT

We review de novo the district court's order granting summary judgment. See Williams v. Vitro Services Corp., 144 F.3d 1438, 1441 (11th Cir. 1998). A motion for summary judgment should be granted when "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 judgment as a matter of law." Fed. R. Civ. P. 56 (c). There is no genuine issue for trial "[w]here the record taken as a whole could not lead a rational trier of fact to find for the non- moving party." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986). In making this assessment, we "must `view all the evidence and all factual inferences reasonably drawn from the evidence in the light most favorable to the nonmoving party,'" Maniccia v. Brown, 171 F.3d...