State ex rel. McDonald's Corp. v. Midkiff

• Decision Date: 26 June 2007
• Docket Number: No. SC 87856.,No. SC 87855.,SC 87856.,SC 87855.
• Citation: 226 S.W.3d 119
• Parties: STATE ex rel. McDONALD'S CORPORATION and C & S Marshfield, Inc., Relators, v. The Honorable Sandra C. MIDKIFF, Respondent. State ex rel. McDonald's Corporation and Kris Davison, Inc., Relators, v. The Honorable Ann Mesle, Respondent.
• Court: Missouri Supreme Court

226 S.W.3d 119

STATE ex rel. McDONALD'S CORPORATION and C & S Marshfield, Inc., Relators, v. The Honorable Sandra C. MIDKIFF, Respondent.

State ex rel. McDonald's Corporation and Kris Davison, Inc., Relators, v. The Honorable Ann Mesle, Respondent.

No. SC 87856.

No. SC 87855.

Supreme Court of Missouri, En Banc.

June 26, 2007.

Aaron I. Mandel, Jeffrey J. Brinker, Gary P. Paul, Clayton, for Relators.

Kathleen M. Hagen, Henri J. Watson, Kansas City, for Respondent.

ORIGINAL PROCEEDINGS IN PROHIBITION

LAURA DENVIR STITH, Judge.

Relators McDonald's Corporation and C & S Marshfield, Inc., are defendants in a tort suit pending in Jackson County. Relator McDonald's Corporation and Kris Davison, Inc., are defendants in another tort suit also pending in Jackson County. Neither C & S Marshfield, Inc., nor Kris Davison, Inc., can be found in Jackson County; their offices and operations are in Webster and Taney Counties, respectively.

Relators in both cases filed motions for change of venue that were denied by respondent judges. Relators filed petitions for extraordinary relief, and this Court issued its preliminary writ in both cases. This Court consolidates these cases for purposes of its opinion because they present an identical question of law: do the McDonald's restaurants operated by franchisees in Jackson County constitute an office or an agent for the transaction of the usual and customary business of their franchisor, relator McDonald's Corporation, when McDonald's Corporation itself does not sell McDonald's products or own franchises but is exclusively engaged in licensing franchise rights to entities that wish to become McDonald's franchisees and in leasing or sub-leasing real estate on which they will conduct their McDonald's franchise business.

Because this Court finds that the McDonald's restaurants in Jackson County are not offices or agents for the transaction of McDonald's Corporation's usual and customary business, the preliminary writs are made absolute.

I. FACTUAL & PROCEDURAL BACKGROUND.

In July 2001, both child-plaintiffs became ill with E. coli infections after consuming allegedly tainted food, one child at a McDonald's in Webster County and the other child at a McDonald's in Taney County. Each child-plaintiff developed severe and potentially deadly complications and was treated at Children's Mercy Hospital in Jackson County, where each later developed kidney failure and had to receive dialysis.

The parents in both cases filed multi-count petitions in Jackson County Circuit Court. Each suit named two parties as defendants: the national franchisor, McDonald's Corporation, and the individual franchisee that operates the McDonald's restaurant where the particular child-plaintiff ate—in one case, C & S Marshfield, Inc., in the other case, Kris Davison, Inc. (collectively, "franchisee-defendants"). These two franchisee-defendants are Missouri corporations with all their offices, agents, and operations in Webster and Taney Counties, respectively.

Relator McDonald's Corporation is a Delaware corporation that provides franchisees in Missouri and other states, including the franchisee-defendants and McDonald's franchisees located in Webster, Taney and Jackson Counties, with the right to use the McDonald's name and logo and to sell McDonald's food and other products pursuant to a franchise agreement. McDonald's Corporation often owns or leases the property on which its franchisees operate McDonald's restaurants, and does so in the case of the Jackson County franchisees. McDonald's Corporation does not itself run "company-owned" McDonald's restaurants in Jackson County or elsewhere.¹ Respondents in both cases nonetheless denied relators' motions for change of venue to Webster and Taney Counties, respectively.² Relators now seek writs of prohibition.

II. STANDARD OF REVIEW.

Prohibition is an original proceeding brought to confine a lower court to the proper exercise of its jurisdiction. State ex rel. Linthicum v. Calvin, 57 S.W.3d 855, 856-57 (Mo. banc 2001). It is a discretionary writ that only issues "to prevent an abuse of judicial discretion, to avoid irreparable harm to a party, or to prevent exercise of extra-jurisdictional power." Id. at 857. When venue is improper, prohibition lies to bar the trial court from taking any further action, except to transfer the case to a proper venue. State ex rel. Green v. Neill, 127 S.W.3d 677, 678 (Mo. banc 2004).

III. DISCUSSION

The sole issue presented is whether venue is proper in Jackson County. "Venue in Missouri is determined solely by statute." State ex rel. Rothermich v. Gallagher, 816 S.W.2d 194, 196 (Mo. banc 1991). The applicable statute for suits solely against a corporate defendant or defendants provides two permissible venues— either where the cause of action accrued or where defendant has an office or agent for transaction of its usual and customary business. Sec. 508.040, RSMo 2000.³

A. McDonald's Restaurants in Jackson County Are Not Offices for the "Usual and Customary Business" of McDonald's Corporation.

Plaintiffs acknowledge their causes of action accrued in Webster and Taney Counties, respectively, where they purchased McDonald's food and became ill. They were not customers of any McDonald's franchise in Jackson County. Plaintiffs further acknowledge that the franchisee-defendants have restaurants only in their home counties and have neither an office nor an agent in Jackson County.

Plaintiffs base venue in Jackson County on their contention that the franchisor, McDonald's Corporation, has an office or agent for the transaction of its usual and customary business there. In support, they note that each McDonald's restaurant in Jackson County operates pursuant to a franchise agreement with McDonald's Corporation and that the land on which each McDonald's restaurant in Jackson County operates is either owned or leased by McDonald's Corporation. Plaintiffs contend that such ownership, coupled with the control that McDonald's Corporation, as franchisor, exercises over its franchisees, makes each McDonald's restaurant in Jackson County a separate "office" for transaction of the usual and customary business of McDonald's Corporation even though the franchisees that sold the food to the child-plaintiffs do not do business in Jackson County.

Plaintiffs cite no authority for the proposition that owning and leasing real property in a community makes each piece of land owned an "office" for the purposes of venue, and this Court declines to so hold. The legislature did not make the ownership of real estate a basis for venue in tort cases, although it demonstrated it knew how to do so when it provided that cases involving the title of real estate should be brought where the real estate can be found. Sec. 508.030. The legislature failed similarly to designate real estate ownership as grounds for venue against a corporate defendant under section 508.040.

To accept plaintiffs' argument would mean that any corporate landlord in Missouri would be subject to venue in any county where it owns land regardless of the relationship of the land to the case. For McDonald's Corporation, and any similar franchisor, this would subject them to suit in each county in which they have a franchisee even if the suit has no relationship to that forum. This would not provide a "convenient, logical, and orderly forum for the resolution of disputes," which is the "primary purpose of Missouri's venue statutes." State ex rel. Elson v. Koehr, 856 S.W.2d 57, 59 (Mo. banc 1993). As stated in rejecting a similar claim regarding a Domino's pizza franchise, "[i]t is difficult to find that purpose served by allowing suits with no connection with the forum or the residents of the forum to be brought in the forum." State ex rel. Domino's Pizza, Inc. v. Dowd, 941 S.W.2d 663, 667 (Mo.App.W.D.1997). Such a result would be inconsistent with the logic that adheres in venue determinations.⁴ Ownership of real estate where a franchisee conducts business does not convert that real estate into an "office" of the franchisor.

B. McDonald's Restaurants in Jackson County are Not Agents for the "Usual and Customary Business" of McDonald's Corporation.

Plaintiffs alternatively argue that, even if the individual McDonald's restaurants in Jackson County are not themselves offices of their franchisor, McDonald's Corporation, the individual franchisees are the agents of their franchisor. In State ex rel. Ford Motor Co. v. Bacon, 63 S.W.3d 641, 642 (Mo. banc 2002), this Court reaffirmed that Missouri applies a clear three-part test for determining whether a party is an agent of another. First, the principal must have the right to control the conduct of the agent with respect to matters entrusted to the agent. Id. Second, an agent must be a fiduciary of the principal. Id. Third, the agent must be able to alter legal relationships between the principal and a third party. Id. The absence of any one of these three elements defeats a claim that agency exists. State ex rel. Bunting v. Koehr, 865 S.W.2d 351, 353 (Mo. banc 1993).

The Court will assume, without deciding, that plaintiffs could show that, as a franchisor, McDonald's Corporation has a right to control certain conduct of its franchisees related to the running of their franchises and that these franchisees are in a fiduciary relationship with their franchisor. But there is no evidence of the third critical element of agency: the ability of the franchisees to alter the legal relationship between McDonald's Corporation and a third party. It was the very lack of such an ability to change the legal relationships of the parent that led this Court to conclude that Ford Credit was not an agent under Missouri law in Ford Motor Co., 63 S.W.3d at 644. That same analysis applies here.

Plaintiffs disagree, pointing repeatedly to evidence that the franchisees enter into contracts with third-parties to purchase McDonald's products and speculating...