Opinion
CIVIL ACTION NO. 02-252
September 15, 2003
MEMORANDUM ORDER
Presently pending before this Court is the parties cross motions for summary judgment (Docket #35 and #39) and the oppositions thereto; Plaintiff's Motion for a Determination of the Reasonableness of Costs (Docket #54) and Defendants' opposition; Plaintiff's Motion to Strike the Affidavit of Defendant Benjamin Laster (Docket #62); and Defendants' Motion for Leave to Amend Answer (Docket #64) and Plaintiff's opposition.
This matter arises out of a relationship between the Plaintiff, Checkers Drive-in Restaurants, Inc. and the Defendants Benjamin Laster and related corporate entities. The Plaintiff alleges that the parties entered into a letter agreement in February 2001 (the "Letter Agreement") whereby the Defendant Benjamin Laster would operate and manage seventeen (17) of the Plaintiff's restaurants. The Plaintiff contends Laster defaulted under the terms of the Letter Agreement by failing to make payments required under the agreement. Plaintiff filed suit alleging breach of contract, account stated, unjust enrichment, trademark infringement, trade dress infringement, unfair competition and conduct in violation of the Lanham Act. Defendants filed counter claims for breach of contract, intentional and/or negligent misrepresentation, unjust enrichment, recision of the Letter Agreement and set off.
I. Summary Judgment Motions
Plaintiff is currently seeking summary Judgment on the breach of contract claim or alternatively on its account stated or unjust enrichment claims. Plaintiff also seeks summary Judgment on Defendants' counter claims for breach of contract, misrepresentation, unjust enrichment, recision and set off. Defendants have filed a cross motion for summary Judgment on their breach of contract and unjust enrichment claims. A hearing on the parties' motions was held on August 6, 2003 with all parties represented by counsel.
Pursuant to Rule 56 of the Federal Rules of Civil Procedure, the moving party, to be successful on summary Judgment, must prove that, in considering the "pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any,. . . there is no genuine issue as to any material fact and that they are entitled to a judgment as a matter of law." See Fed.R.Civ.P. 56(c). An issue is "material" if the dispute may affect the outcome of the suit under the governing law and is "genuine" if a reasonable jury could return a verdict for the nonmoving party. See Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 248; 106 S.Ct. 2505 (1986). A court must draw all reasonable inferences in favor of the party against whom judgment is sought. See American Flint Glass Workers, AFL-CIO v. Beaumont Glass Company, 62 F.3d 574, 578 (3d Cir. 1995).
Plaintiff argues it is entitled to summary Judgment as there is no dispute that Defendants breached the terms of the Letter Agreement by failing to make the specified payments, payments that the Plaintiff argues are not in dispute. Defendants however argue that the Plaintiff's failure to provide disclosures required by the Federal Trade Commission franchise rules renders any agreement void and unenforceable. Defendants also argue that the Letter Agreement does not constitute an enforceable contract as the terms are indefinite. Plaintiff disputes the applicability of the FTC franchise rule to this matter but contends it did in fact give the disclosure required by the franchise rule. See Affidavit of Richard Sveum and Deposition of Brian Doster, p. 65 In. 6 through p. 67 ln.9. Defendants submit the conflicting affidavit of Benjamin Laster stating the disclosures were never made. See Amended Affidavit of Benjamin Laster.
Whether and under what terms the Letter Agreement is enforceable may turn on the disputed issue of whether disclosure had been made pursuant to the FTC franchise rules. Whether the proper disclosure occurred is obviously a disputed material fact that prevents a Judgment as a matter of law for either party on any claim that flows from the parties alleged agreement. Therefore, the Plaintiff's motion for summary Judgment on its breach of contract, and account stated claims will be denied. In addition, Plaintiff's motion for summary Judgment on Defendants' counter claims for breach of contract, recision and set off will also be denied. Defendants' motion for summary Judgment on their cross claim for breach of contract will also be denied. As Plaintiff's counsel conceded during oral arguments an unjust enrichment claim is based on factual issues that prevents Judgment as a matter of law. Therefore the parties' motions for summary Judgment on the unjust enrichment claims will also be denied.
Plaintiff also seeks summary Judgment on Defendants' counter claims for intentional and/or negligent misrepresentation arguing the claims are barred under the economic loss doctrine and the gist of the action doctrine. Further Plaintiff argues the representations at issue qualify as opinions and/or are not misrepresentations. In their opposition to summary Judgment Defendants do not dispute or address Plaintiff's contentions.
The economic loss doctrine prohibits plaintiff's from recovering in tort economic losses to which their entitlement flows only from a contract. Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 617 (3rd Cir. 1995). The economic loss doctrine only covers product liability claims involving situations in which "a party in privity of contract with another suffers an injury to a product itself, resulting in purely economic loss." Id. at 620 (citing Grode v. Mutual Fire. Marine, and Inland Ins. Co., 623 A.2d 933, 934 (Pa.Commw. 1993)). Plaintiff has failed to identify any precedential authority that would extend the doctrine beyond product liability actions. Id.
On a proper record it is possible that the economic loss doctrine would apply to a non product injury. It would be inappropriate to extend the doctrine based upon the summary judgment record presently before the Court.
In the alternative, Plaintiff argues Pennsylvania's "gist of the action" doctrine requires this Court to grant its motion regarding the alleged misrepresentations. The "gist of the action" doctrine bars a party from bringing a tort claim that merely replicates a claim for breach of an underlying contract. Werwinski v. Ford Motor Co., 286 F.3d 661, 680 n. 8 (3d Cir. 2002) (citing Phico Insurance Co. v. Presbyterian Medical Services Corp., 663 A.2d 753, 757 (1995)). The misrepresentation allegations however concern statements made by the Plaintiff about the financial condition of the restaurants prior to Defendants' acquisition. Claims based on these statements are not necessarily breach of contract claims as the claims would flow from duties owed Defendants by Plaintiff during the negotiation of the agreement rather than duties owed under the Letter Agreement. As to Plaintiff's argument that the alleged representations made by the Plaintiff are in fact true or opinions are questions of fact that preclude summary Judgment. Therefore, Plaintiff's motion for summary Judgment on Defendants' counter claim n will be denied.
And as noted earlier any claim flowing from the parties alleged duty under the Letter Agreement is not subject to a Judgment as a matter of law.
Finally, Plaintiff seeks summary Judgment on its claim for damages as a result of Defendants' breach of contracts with Northeast Foods d.b.a. Gourmet Bakery (Count VII) and MBM Corporation (Count X). Defendants do not dispute these claims however they contest summary Judgment on the grounds it would be premature in light of the possibility that any damages maybe set off by damages due the Defendants. The Court will grant Plaintiff's motion for summary Judgment on Counts VII and X, however, Fed.R.Civ.P. 54 bars the Court from entering final Judgment for the Plaintiff on Counts VII and
II. Other Pending Motions
Also pending is the Plaintiff's Motion for a Determination of the Reasonableness of Discovery Cost. Plaintiff contends Defendants unnecessarily inflated the cost of discovery by misrepresenting the contents of the document production and including documents Defendants knew were of no interest to the Plaintiff. Plaintiff further contends Defendants unnecessarily label documents and mislabel the boxes for shipping substantially increasing the shipping cost. Plaintiff has offered Defendants what it considers the reasonable costs associated with the discovery request.
Defendants argue this issue is outside the Court's jurisdiction as it is a contract dispute between counsel. Defendants further contend Plaintiff was never misled as to the size or scope of the production. Defendants argue Plaintiff was free to make its own arrangements for the copying and/or review of the documents in question but instead asked Defendants to make the arrangements. This Defendants did as a professional courtesy given Plaintiff's promise it would cover the cost.
The issue is a discovery matter and clearly within the jurisdiction of this Court. There is no question that Plaintiff agreed to pay for copying and freight cost. I will award the full costs of copying and freight to the Defendants. Accordingly, Plaintiff's motion will be granted. Plaintiff has also filed a motion to strike the affidavit of Benjamin Laster. In response to Plaintiff's motion, Defendants have submitted an Amended Affidavit for Benjamin Laster. As a result of the submission of an amended affidavit, the Court will dismiss as moot Plaintiff's motion to strike.
Finally, Defendants seek leave to amend their answer to include an affirmative defense based on Plaintiff's failure to comply with the FTC franchise disclosure rules. Plaintiff objects arguing prejudice and bad faith on the part of the Defendants. The Court however will grant Defendants' motion for leave to amend and notes that Plaintiff has at all times been aware of its obligations under the FTC franchise rules. Further, the Court grants Plaintiff leave to file any additional pleading it deems warranted in light of Defendants' proposed amendment. An appropriate order follows.
AND NOW, this day of September, 2003, IT IS HEREBY ORDERED that:
1. Plaintiff's Motion for Summary Judgment on Counts I through in of its complaint is DENIED;
2. Plaintiff's Motion for Summary Judgment on Counts VII and X is GRANTED, in the amount claimed; entry of judgment is deferred;
3. Plaintiff's Motion for Summary Judgment on Counts VIII, IX, XI and XII is DISMISSED as MOOT, as relief is granted on the contract theories of liability;
4. Plaintiff's Motion for Summary Judgment on Defendants' Counter Claims I through V is DENIED;
5. Defendants' Motion for Summary Judgment on Counter Claims I and III is DENIED;
6. Plaintiff's Motion for a Determination of Reasonableness as to Discovery Cost (Docket #54) is GRANTED;
7. Plaintiff's Motion to Strike the Affidavit of Defendant Benjamin Laster (Docket #62) is DISMISSED as MOOT;
8. Defendants' Motion to Amended Answer (Docket #64) is GRANTED and Defendants have ten (10) days from the date of this Order to amend their answer and Plaintiff is granted leave to file any additional pleading it deems necessary in light of Defendants' amendment; and,
9. Counsel for the parties shall be prepared to proceed to trial on or after October 1, 2003.