Ultracuts Ltd. v. Wal-mart Stores

• Decision Date: 14 December 2000
• Docket Number: 00-593
• Citation: Ultracuts Ltd. v. Wal-mart Stores, 33 S.W.3d 128, 343 Ark. 224 (Ark. 2000)
• Parties: ULTRACUTS LTD.; ULTRACUTS FRANCHISES, INC., APPELLANT, V.STORES, INC.;STORES CANADA, INC., APPELLEE, 00-593 14 December 2000 APPEAL FROM THE BENTON COUNTY CIRCUIT COURT, NO. CIV96-691-2, HON. DAVID S. CLINGER, JUDGE, AFFIRMED IN PART; REVERSED AND REMANDED IN PART. Annabelle Clinton Imber, Justice. This appeal arises from an order of the Circuit Court of Benton County granting summary judgment to the appellees, Wal-Mart Stores, Inc., and Wal-Mart Canada, Inc. Appellants, Ultracuts Ltd., and Ultracuts Franchises, Inc., argue on appeal that the trial court improperly granted summary judgment, dismissing their claims of breach of contract and fraud, because questions of fact remained to be decided. Ultracuts further argues that the trial court improperly granted Wal-Mart's motion to strike Ultracuts' second amended complaint. Wal-Mart argues that summary judgment was properly granted and that the second amended complaint was properly dismissed. The Ultracuts appellants are Canadian corporations operating hair salons throughout western Canada and the United States. The Wal-Mart appellees are retail organizations headquartered in Bentonville, Arkansas. In 1994, Wal-Mart acquired all of the assets of Woolworth Canada, Inc., thereby gaining possession of 122 Woolco department stores, forty-three of which were located in western Canada, an area in which Ultracuts was a widely recognized leader in hair salon operations. Ultracuts alleged that its president, Meril Rivard, was contacted in 1995 by a realtor about the possibility of placing Ultracuts salons within Wal-Mart stores throughout western Canada. When Mr. Rivard expressed his interest in such an arrangement, Brad Messer, Wal-Mart's international property manager at that time, forwarded four lease agreements to him. In September 1995, Mr. Rivard signed and returned a lease agreement for Wal-Mart store number 3116 in Grant Park, Winnipeg, Manitoba. Mr. Rivard became concerned, however, when the manager of the Grant Park
• Court: Arkansas Supreme Court

ULTRACUTS LTD.; ULTRACUTS FRANCHISES, INC., APPELLANT,

V.

WAL-MART STORES, INC.; WAL-MART STORES CANADA, INC., APPELLEE

00-593

14 December 2000

APPEAL FROM THE BENTON COUNTY CIRCUIT COURT, NO. CIV96-691-2, HON. DAVID S. CLINGER, JUDGE, AFFIRMED IN PART; REVERSED AND REMANDED IN PART.

Annabelle Clinton Imber, Justice.

This appeal arises from an order of the Circuit Court of Benton County granting summary judgment to the appellees, Wal-Mart Stores, Inc., and Wal-Mart Canada, Inc.Appellants, Ultracuts Ltd., and Ultracuts Franchises, Inc., argue on appeal that the trial court improperly granted summary judgment, dismissing their claims of breach of contract and fraud, because questions of fact remained to be decided.Ultracuts further argues that the trial court improperly granted Wal-Mart's motion to strike Ultracuts' second amended complaint.Wal-Mart argues that summary judgment was properly granted and that the second amended complaint was properly dismissed.

The Ultracuts appellants are Canadian corporations operating hair salons throughout western Canada and the United States.The Wal-Mart appellees are retail organizations headquartered in Bentonville, Arkansas.

In 1994, Wal-Mart acquired all of the assets of Woolworth Canada, Inc., thereby gaining possession of 122 Woolco department stores, forty-three of which were located in western Canada, an area in which Ultracuts was a widely recognized leader in hair salon operations.Ultracuts alleged that its president, Meril Rivard, was contacted in 1995 by a realtor about the possibility of placing Ultracuts salons within Wal-Mart stores throughout western Canada.When Mr. Rivard expressed his interest in such an arrangement, Brad Messer, Wal-Mart's international property manager at that time, forwarded four lease agreements to him.In September 1995, Mr. Rivard signed and returned a lease agreement for Wal-Mart store number 3116 in Grant Park, Winnipeg, Manitoba.Mr. Rivard became concerned, however, when the manager of the Grant Park Wal-Mart indicated that he would not honor the lease.Also within this same time period, Mr. Rivard had a conversation with Brian Luborsky, the president of a rival hair salon business called Magicuts.Mr. Luborsky informed Mr. Rivard that Magicuts was going to be placing salons within Wal-Mart stores in western Canada.

Concerns over these developments prompted Mr. Rivard to travel to Bentonville for a meeting with Mr. Messer on October 12, 1995.Mr. Rivard testified by deposition and affidavit that during this meeting Mr. Messer entered into an oral contract, termed the "Ultracuts Agreement," on behalf of Wal-Mart in order to assuage Mr. Rivard's concerns about doing business with Wal-Mart.In the Ultracuts Agreement, the two parties purportedly agreed that:

1.Ultracuts would occupy certain of the newly acquired Wal-Mart stores in Western Canada as a licensee of the defendants for purposes of operating a hair salon business in such stores;

2.Wal-Mart would not place any other operator of a hair salon business in its stores in western Canada without first granting to Ultracuts the right to enter into a license agreement to occupy such stores; and,

3.Wal-Mart would not enter into a business relationship with any hair salon business other than Ultracuts within any market in which Ultracuts operates a hair salon business within one of the newly acquired Wal-Mart stores.

Because his concerns had been addressed, Mr. Rivard testified that he then signed the three remaining lease agreements and delivered them to Mr. Messer for execution.Ultracuts then began expending large amounts of capital in preparation for entry into several Wal-Mart stores in western Canada.Mr. Messer denied entering into the oral contract described by Mr. Rivard.

On February 8, 1996, Ultracuts and Wal-Mart executed a "License Agreement" to be effective as of January 22, 1996, pertaining to the operation of Ultracuts' hair salons inside stores operated by Wal-Mart Canada, Inc.The terms of the License Agreement specifically set out the rights and responsibilities of each party, including such issues as who will maintain and repair the premises, the right of access to the premises, the hours during which the Ultracuts salons will operate, the amount of insurance coverage to be maintained by Ultracuts, the type of business to be conducted in the licensed premises, the duration of the contract, and the terms of cancellation, renewal, and default.The amount of the monthly license fee to be paid by Ultracuts is specified on a store-by-store basis in the attached License Schedule, which is incorporated into the contract by its terms.Although only four Wal-Mart stores are designated as Licensed Premises in the License Schedule attached as Schedule "A," the License Agreement anticipates other Licensed Premises being added to the agreement in the future.According to the terms of the contract, additional retail premises may be added to the agreement by executing a New Store License Schedule, which is attached to the License Agreement as Schedule "B" and incorporated into the contract by its terms.The License Agreement contains no provision granting Ultracuts the right of first refusal to license any space in Wal-Mart stores in western Canada in the future; nor does it contain any promise by Wal-Mart not to place Ultracuts' competitors in Wal-Marts within the same market.The License Agreement does provide, in paragraph 22.01, that:

This Agreement constitutes the entire agreement between the parties regarding this Licensee's use of the Licensed Premises.It is understood and agreed that there are no agreements, conditions, warranties, terms, representations, oral or written, statutory or otherwise, other than those contained herein, and that all prior conversations, understandings, agreements, statements, communications or agreements, oral or written, with respect to this Agreement are hereby superseded.

Following execution of the License Agreement, Ultracuts continued to prepare for expansion into the western Canada Wal-Mart stores by expanding its staff, obtaining increased financing, enhancing its computer capabilities, and foregoing other development opportunities.Ultracuts communicated regularly with Wal-Mart officials, keeping them informed of the progress made by Ultracuts toward fulfilling its agreement.

On September 18, 1996, Ultracuts filed a complaint against Wal-Mart alleging breach of contract and fraud.Ultracuts amended its complaint on February 27, 1997, again alleging that Wal-Mart was in breach of the October 12, 1995 oral contract and had committed fraud against Ultracuts by concealing information concerning a conflicting agreement between Wal-Mart and Magicuts that prevented Wal-Mart from performing as promised under the Ultracuts Agreement.Ultracuts requested specific performance and damages.Wal-Mart denied the existence of a valid oral contract and denied the allegation of fraud.

Mel Redman, head of Wal-Mart's transition team in Canada, testified by deposition that in 1994he entered into a contract with Magicuts, whereby Wal-Mart promised Magicuts the right of first refusal to license space for hair salons in Canadian Wal-Mart stores.Mr. Messer admitted that he was aware of the Magicuts agreement as early as November 1995, although Ultracuts alleges he knew of the conflicting agreement much earlier.His successor, Scott Robertson, acknowledged that he became aware of the Magicuts agreement as early as March 1996.Ultracuts has alleged that Wal-Mart committed fraud by withholding this information from it until after Ultracuts expended considerable amounts of money in anticipation of obtaining licenses to operate inside Wal-Mart stores in western Canada, even though Wal-Mart was aware of Ultracuts' reliance on the Ultracuts Agreement.

On June 10, 1998, Wal-Mart filed a motion for summary judgment, asserting that there was no genuine issue of material fact before the trial court, and that the License Agreement's integration clause precluded Ultracuts' claim for breach of the alleged October 12, 1995 oral agreement.Subsequently, on October 16, 1998, Ultracuts filed a second amended complaint that again alleged breach of the October 12, 1995 oral agreement and fraud.In its second amended complaint, Ultracuts alleged for the first time that the oral agreement with Wal-Mart promised Ultracuts the right of first refusal to license any available space in Wal-Mart stores in western Canada, not just the right of first refusal to license available hair salon space.On October 29, 1998, Wal-Mart filed a motion to strike Ultracuts' second amended complaint.

In an order entered on March 2, 1999, the trial court granted Wal-Mart's motion for summary judgment and its motion to strike the second amended complaint.Specifically as to the second amended complaint, the trial court held that, although Wal-Mart had notice of and was not surprised by the new allegations, because the allegations were "significantly contradictory to other matter put in the record," the motion to strike was granted.

The trial court granted summary judgment as to the claim for breach of contract because: (1) the alleged contract was missing an essential term, namely the time frame in which Wal-Mart must decide whether to place hair salons in its western Canadian stores; (2) there had been no actual breach of the alleged contract; (3) anticipatory repudiation was not appropriate to the facts of the case; (4) the alleged contract violated the statute of frauds because it created an interest in property and was not reduced to writing; (5)the case was not taken out of the statute of frauds by detrimental reliance or substantial performance; (6) a subsequent written contract was a fully integrated document which subsumed the alleged oral contract; and (7) the alleged agreement violates the rule against perpetuities.

The trial court granted summary judgment...